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EX-31 - EXHIBIT 31.1 -- SCOTT SITRA CERTIFICATION - Blue Water Global Group, Inc.ex311.htm
EX-32 - EXHIBIT 32.1 -- SCOTT SITRA CERTIFICATION - Blue Water Global Group, Inc.ex321.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-K

(Mark One)


x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended: December 31, 2013


or


¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from ________ to ________


Commission File Number: 333-174557


                            Blue Water Global Group, Inc.                                

 (Exact name of registrant as specified in its charter)


                    Nevada                    

(State or other jurisdiction of

incorporation or organization)

              45-0611648              

(I.R.S. Employer

Identification Number)


                  202 Osmanthus Way, Canton, GA  30114                   

 (Address of principal executive offices)

 

                   Tel: (949) 264-1475, Fax: (949) 607-4052                  

 (Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:


                        None                         

(Title of class)


Securities registered pursuant to Section 12(g) of the Act:


Common Stock, $0.001 par value

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨      No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ¨      No x


Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x      No ¨


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x      No ¨








Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

¨


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

Large Accelerated Filer ¨                                                                                                        Accelerated Filer    ¨

Non-Accelerated Filer   ¨  (Do not check if a smaller reporting company)            Smaller Reporting Company x 



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ¨      No x


As of June 30, 2013, the aggregate market value of the voting stock held by non-affiliates of the Registrant was $1,500,000, based upon the last closing sale price as reported by the OTC Bulletin Board on that date.


As of March 25, 2014, there were 233,206,213 shares of our common stock, $0.001 par value issued and outstanding; 65,206,213 of these shares were held by non-affiliates of the Registrant.



DOCUMENTS INCORPORATED BY REFERENCE


Exhibits incorporated by reference are referred under Part IV.




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TABLE OF CONTENTS


Item

 

Page

 

 

 

PART I

 

4

 

Item 1

Business

 

4

 

Item 1A

Risk Factors

 

15

 

Item 1B

Unresolved Staff Comments

 

27

 

Item 2

Properties

 

27

 

Item 3

Legal Proceedings

 

27

 

Item 4

Mine Safety Disclosures

 

27

 

 

 

PART II

 

28

 

Item 5

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

28

 

Item 6

Selected Financial Data

 

33

 

Item 7

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

33

 

Item 7A

Quantitative and Qualitative Disclosures About Market Risk

 

42

 

Item 8

Financial Statements and Supplementary Data

 

F-1

 

Item 9

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

43

 

Item 9A

Controls and Procedures

 

43

 

Item 9B

Other Information

 

45

 

 

 

PART III

 

45

 

Item 10

Directors, Executive Officers and Corporate Governance

 

45

 

Item 11

Executive Compensation

 

47

 

Item 12

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

49

 

Item 13

Certain Relationships and Related Transactions and Director Independence

 

50

 

Item 14

Principal Accountant Fees and Services

 

52

PART IV

 

52

 

Item 15

Exhibits, Financial Statement Schedules

 

52

Signatures

 

54




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PART I


Forward-Looking Statements

 

Certain statements made in this Annual Report on Form 10-K are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations.  Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements of the Registrant to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements.  The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties.  The Registrant’s plans and objectives are based, in part, on assumptions involving it continuing as a going concern and executing on its stated business plan and objectives.  Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Registrant.  Although the Registrant believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Annual Report will prove to be accurate.  In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Registrant or any other person that the objectives and plans of the Registrant will be achieved.


As used in this Annual Report, the terms "we", "us", "our", "Blue Water", “Registrant”, and “Issuer” mean Blue Water Global Group, Inc. unless the context clearly requires otherwise.


Item 1.  Business


Overview of Our Business


We were incorporated on March 3, 2011 in the State of Nevada.  We are developer of casual dining restaurant properties and premium distilled spirits.  Blue Water is currently developing a chain of casual dining restaurants in popular tourist destinations throughout the Caribbean region under the Blue Water Bar & Grill™ brand and a line of premium rums which include its flagship rum Blue Water Ultra Premium Rum™.  Additionally, Blue Water is engaged in making strategic equity investments in promising businesses that are in the early stages of obtaining their own listing on the OTC Bulletin Board.


Development Stage Company Status


Based on our financial history since inception on March 3, 2011, our independent registered public accounting firm has issued a going concern opinion in their audit report included in the financial statements that are a part of this Annual Report on Form 10-K.  We are a development stage company that has generated minimal revenue and currently has nominal assets.  Blue Water has a limited operating history and must be considered a development stage company.  Our business operations are subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history and limited capital resources.  No assurances can be given that we will ever be able to implement our business plan or, if implemented, will be successful.  If our business plan is not successful, and we are not able to operate profitably, investors may lose their entire investment in our company.


As of December 31, 2013 we have generated $50,000 in revenue and have incurred ($964,264) in losses since our inception on March 3, 2011.  We have not achieved profitability and expect to continue to incur net losses throughout the fiscal year ending December 31, 2014 and, probably, into subsequent fiscal periods.  We expect to incur significant operating expenses and, as a result, will need to generate significant revenues to achieve profitability, which may never occur.  Even if we do achieve profitability, we may be unable to sustain or increase profitability on an ongoing basis which could cause us to go out of business.


Emerging Growth Company Status


We are an "emerging growth company", as defined in the Jumpstart our Business Startups Act of 2012 (“JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.  We cannot predict if investors will



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find our common stock less attractive because we may rely on these exemptions.  If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.


Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.  In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.   


We could remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.


Notwithstanding the above, we are also currently a “smaller reporting company”, meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million and annual revenues of less than $50 million during the most recently completed fiscal year.  In the event that we are still considered a “smaller reporting company”, at such time are we cease being an “emerging growth company”, the disclosure we will be required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either an “emerging growth company” or a “smaller reporting company”.  Specifically, similar to “emerging growth companies”, “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports.  Decreased disclosures in our SEC filings due to our status as an “emerging growth company” or “smaller reporting company” may make it harder for investors to analyze our results of operations and financial prospects.


Industry Background


There are essentially five basic segments in the restaurant industry:


·

Casual Dining – A restaurant that serves moderately priced food in a casual, often times “themed” environment.  With the exception of buffet-style restaurants, casual dining restaurants provide table service;

 

·

Family Style – A restaurant that normally has a fixed menu and fixed price.  Customers typically sit at communal tables such as large picnic tables with bench seats;


·

Fast Food, also referred to as Quick Service Restaurants (QSR) – The emphasis is on speed.  Food is normally already prepared or can be prepared with little effort.  This class of restaurant ranges from street vendors selling hot dogs to global operators such as McDonald’s Corporation;


·

Fast Casual – A restaurant that does not provide table service, but will usually serve its food on non-disposable plates with actual silverware.  The price point and quality of food are normally a little higher than most fast food restaurants; and


·

Fine Dining – A restaurant that offers full table service with specific meal courses often prepared by highly trained executive chefs.  As can be expected, the restaurant’s décor typically provides for a high-end atmosphere and the wait staff is usually highly trained and better able to provide for a memorable dining experience.


Our planned restaurants will all be within the casual dining category.


St. Maarten, Dutch West Indies


Our initial restaurants will be located on the island of St. Maarten, Dutch West Indies.  Based on the experience and observations of our management, on the island of St. Maarten the majority of the restaurants are independently owned and operated “mom and pop” type restaurants, particularly within the casual dining and fine dining restaurant categories.  Mom and pop restaurants are typically smaller in size, family or individually owned and operated, and non-franchised.  From our



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observations most of the chain and franchised restaurants in St. Maarten are in the fast food category, which we will not be in direct competition against.


In addition to our observations, and because the St. Maarten tourism industry will contribute a significant portion of each restaurant’s overall sales volume, it is important to note that 2013 was a record year for tourism in St. Maarten.  According to the St. Maarten Harbour Group of Companies, St. Maarten received a record 1,785,670 cruise ship passengers on 631 different cruise ships.  This represents a 1.9% increase from 2012, where St. Maarten received 1,753,215 cruise ship passengers on 622 different cruise ships.  We anticipate this trend to continue especially since St. Maarten is one of the few Caribbean ports that can accommodate Royal Caribbean’s Oasis Class Vessel, of which there are currently two in service (Oasis of the Seas and Allure of the Seas) with a third one presently under construction and slated to enter service in 2016.


Competition


The restaurant industry is highly competitive and affected by external changes such as economic conditions, disposable income, consumer tastes, and changing population and demographics.  The success or failure of our future restaurants will depend largely on our ability to attract new and, more importantly, repeat customers.  Restaurants typically prefer repeat, or “regular”, customers because they are a known quantity and enable the restaurant’s management to better forecast sales patterns and cash flows, time inventory purchases, and schedule vacation time for employees.


To this effect our primary marketing efforts will target tourists staying on the island or visiting for the day on a cruise ship.  In the personal experience of our management, many of these visitors return each year at about the same time.  If we can provide them with a memorable dining and drinking experience then we believe that there is a good chance that they will seek out our restaurant again upon their return the following year.


Further, and as a byproduct to these marketing efforts, we will most likely attract some of the “local” ex-patriot community, in particular ex-patriot Americans and Canadians.  It is important that we also provide them with a memorable dining and drinking experience so that they will return again and again in the weeks and months to come.  This will be particularly important during the “low season” (May through October) when many restaurants in St. Maarten, Dutch West Indies typically operate at a loss or close temporarily.    


Factors that are material to a restaurant’s competitive position include brand identity and loyalty, food quality, variety and price of menu items, customer service, location, the number and proximity of competitors, décor and cleanliness, and general public reputation.


Based on our management’s personal experience the Caribbean region where we intend to open our restaurants is primarily dominated by smaller independent restaurant owners.  There are a few well-known brands operated by franchisees in the region, but they are mostly within the fast food restaurant category and are therefore not in direct competition with our proposed restaurants.  We believe we will primarily be competing against “mom and pop” restaurants, which are typically comprised of smaller family or individually owned and operated non-franchised restaurants and some of the destination resort properties that operate on-site restaurants for their guests.


We believe our business plan is highly competitive in this marketplace and, assuming we can secure the necessary financing, will allow us to open one new restaurant per year over the next five years while utilizing our current management’s knowledge and experience within the restaurant industry.


Plan of Operations


We were incorporated on March 3, 2011 in the State of Nevada.  We are developer of casual dining restaurant properties and premium distilled spirits.  Blue Water is currently developing a chain of casual dining restaurants in popular tourist destinations throughout the Caribbean region under the Blue Water Bar & Grill™ brand and a line of premium rums which include its flagship rum Blue Water Ultra Premium Rum™.  Additionally, Blue Water is engaged in making strategic equity investments in promising businesses that are in the early stages of obtaining their own listing on the OTC Bulletin Board.


It is important to note that we remain a development stage business in early stage operations.  As of December 31, 2013, we had nominal assets, early stage business operating activities, did not operate any restaurant properties, and did not have any ownership or leaseholds in any restaurant properties.  No assurances can be given that we will ever be able to implement our business plan or, if implemented, it will be successful.




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The projected costs and other related expenses are estimates made by our management and our actual costs related to opening our proposed restaurant may differ significantly.


In addition to the foregoing, and unless otherwise noted, all of the cost estimates and forecasts throughout our business plan are mere estimates made by our management.  Our actual costs related to opening and operating the proposed restaurants may differ significantly from our estimates, which could have a negative impact on our overall business, cause our business to fail, and result in you losing all of your investment.


Blue Water Structure and Areas of Operation


[bluu_form10k201310001.jpg]



Blue Water Bar & Grill™


The Blue Water Bar & Grill™ restaurant concept features a casual, open air Caribbean themed restaurant designed to offer customers a distinctive and relaxing island dining experience.  Central to each restaurant will be a large covered outside patio area where customers can enjoy their drinks and food while overlooking a beautiful water view.  The patio area will feature an inviting island styled walk up (and in some cases, swim up) bar and a small stage area for live musical performances by local musicians and dancing.  Each restaurant will have an open aired kitchen so customers can see their food being prepared.


Each restaurant will begin serving breakfast at 7am.  On weekends the restaurant will promote an American styled breakfast buffet and feature a do-it-yourself Bloody Mary station.  Lunch service will commence at 11am and will feature handmade burgers, gourmet sandwiches and salads, and Caribbean jerk styled dishes.  Dinner service will start at 5pm and will feature hand-cut aged Certified Angus steaks and prime rib, fresh seafood caught by local fishermen, slow cooked ribs, and specialty homemade desserts.  The restaurant will close at 11pm nightly and the bar will close later at the manager’s discretion.


During weekdays the bar will host a daily happy hour (4pm – 6pm) that will offer reduced priced drinks and appetizer specials.  When the sun sets the patio will be outlined by tiki torches, which will promote a fun nighttime island atmosphere while helping ward off unwanted insects such as mosquitoes.


In addition, each restaurant will offer its customers specialty drinks in souvenir glasses, mugs, and shot glasses that come with the drink.  These items, along with fun and unique t-shirts and other souvenirs, will be available for retail purchase in a separate souvenir hut, which will be a wooden structure approximately 5’ x 5’ in size and covered with an attractive thatched roof.  These souvenir items will be primarily marketed to the tourist customers.  Based on our preliminary discussions with an importer of these types of souvenir items, we estimate selling this merchandise at a 300% - 600% retail markup, depending on the particular item.  Construction of the souvenir hut should take no more than three days and cost us between $1,200 and $1,500.


While the required level of inventory may vary from location to location, we estimate that our initial location in St. Maarten, Dutch West Indies will require an initial inventory of $17,000.  This will be comprised of $10,000 in food and perishables, $4,000 in liquor, and $3,000 in merchandise.  Food and liquor inventory will be replenished once or twice a week, depending on sales volumes, and merchandise every two months due to the longer lead time because it will be imported from China.


We intend to open our first Blue Water Bar & Grill™ in the Simpson Bay area, sometimes referred to as “restaurant row”, in St. Maarten, Dutch West Indies.  We believe the Simpson Bay area is the ideal location for our restaurant concept.  Within walking distance there are six timeshare resorts (Royal Palm, Atrium, Simpson Bay Suites, Simpson Bay Resort, Flamingo and La Vista) and several of the island’s more popular restaurants (Skip Jack’s, Topper’s, Pineapple Pete, Lee’s Roadside



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Grill, Pizza Galley, and Simpson Bay Yacht Club).  Plus, there is the attraction of the draw bridge which attracts a lot of tourists during season (November through April) who wish to watch the megayachts come and go.


Keys for Success


To better achieve our business objectives and successfully compete with other restaurants, we have developed the following focal points and strategies we anticipate implementing in all of our future restaurants:


Create a Fun, Energetic, Destination Drinking and Dining Experience.  We wish to create and promote a fun and socially open atmosphere whereby our customers can, if they choose to do so, openly interact with one another.  Topics of discussion and frequent interest will often center around where each other is from, what activities have they done while on the island, and giving and receiving recommendations for future activities while on the island; sometimes the floor and bar staff will participate in these discussions and offer their own words of advice.  We intend to accomplish this by utilizing sectional floor and foot traffic planning, whereby the bar area will promote social interaction among customers, a stage area will feature local live entertainment performers to create a lively and festive atmosphere, and more intimate dining tables will be located further in the back to provide separation for those who just wish to dine alone and enjoy the island atmosphere.  We believe that if we are successful at achieving this goal, new customers – tourists, “local” ex-patriots and native locals alike – will become repeat, or “regular”, customers and subsequently promote the restaurant by word-of-mouth to their friends and family.


Distinctive Concept.  In each restaurant we wish to create a fun and consistent experience for our customers centered around our full bar service, dining offerings, and daily entertainment.  The restaurant’s concept will be carried throughout our customers’ entire visit and will involve all aspects of the experience, including the exterior design of the building, interior layout and decorum, employee greetings and uniforms, specialty drinks and menu items, and fun and creative souvenirs such as interestingly shaped drink glasses and bright and flamboyant t-shirts that can remind the customer of their vacation or make an excellent gift for someone back home.


Comfortable Adult Atmosphere.  Our restaurants will be primarily adult orientated.  While children will be welcomed during daytime hours as long as they are accompanied by a responsible adult at all times during their visit, no one under 21 years of age (or the minimum legal drinking age as established by statute) will be allowed into our restaurants after 10pm.  We believe that this policy will help maintain a fun and relaxed atmosphere that appeals to adult customers, and will help attract groups such as private parties and business organizations.


High Standard of Customer Service.  Because service is one the key areas restaurants differentiate themselves from one another – and a constant source of either compliments or complaints from customers – we intend to foster a high level of customer service among our employees, ranging from the general manager to the greeters, through intense training (cross training for all manager level employees and a one-week training course, complete with required testing on all food and drink offerings, operational procedures, and computer checkout for all other employees), constant monitoring (from the on-duty manager and surprise visits from “secret shoppers”), and emphasizing consideration of our customers first and foremost in all decisions.  From the moment a customer walks into the front door, we want them to experience a high level of guest service provided by a knowledgeable, energetic staff.  Bar tenders will be required to be able to free pour simultaneously from multiple liquor bottles and perform “flare” techniques (flipping, tossing, and twirling of liquor bottles) for our customers’ entertainment; greeters and servers will be required to introduce customers to the concept, explain the drink and entree menus and daily specials, and generally set the stage for a fun and memorable experience for them.


Provide Dining Value.  We believe that our restaurants should provide our customers with interesting, high quality, and generously portioned (covering the entire plate) menu items that are aesthetically appealing and result in the customer leaving fully satisfied.  Complementing the dining aspect, we intend to offer the customer a unique variety of original drinks, each designed to perpetuate and immerse the customer in the restaurant’s overall concept.  It is our goal to generate at least a US$28 average check per guest, inclusive of food and drinks.  We estimate that our overall gross sales will be comprised of 65% food and 35% drinks.  We anticipate achieving and maintaining a 30% food cost and 18% liquor cost, which relates to our actual cost of the product compared to the gross revenue the product generates.  For example, if we sold a fish entree for $20 our actual cost would be $6 and our gross profit would be $14.  Prices for entrees will start at around $12 for a hamburger and rise to $42 for a prime rib steak dinner; prices for drinks will start at $3 for beer, $6 for basic well mixed drinks, and $8 for specialty drinks.  These price points are competitive with the existing restaurants our management team has scouted in the Simpson Bay area of St. Maarten, Dutch West Indies, where we intend to open our first Blue Water Bar & Grill™ that will cater to the tourist and local ex-patriot alike.




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It is important to note that although we aspire to operate at or below the above food and liquor costs, we cannot guarantee that we will ever achieve such food or liquor costs or, if achieved, will be able to maintain them.


Operations and Management


Our ability to effectively manage an operation including high volume restaurants (annual gross sales of US$1,000,000 or more) with live entertainment offerings is critical to our overall success.  In order to maintain quality and consistency at each of our future restaurants we must carefully train and properly supervise our personnel and the establishment of, and adherence to, high standards relating to personnel performance, food and beverage preparation, entertainment productions and equipment, and maintenance of the restaurant facilities.  We believe our current management is capable of overseeing our planned growth over the next two years.  While staffing levels will vary from restaurant to restaurant depending on actual sales volumes, we anticipate our typical restaurant management staff to be comprised of a general manager, a kitchen manager (who also serves as the head chef) and a bar manager (who also serves as the head bartender); the kitchen manager and bar manager will also act as assistant general managers when the general manager is off-duty and will receive a slightly higher base salary compared to our other chefs and bartenders to compensate for their added responsibilities.


Recruiting.  We will actively recruit and select individuals who share our passion for customer service.  Our selection process includes testing and multiple interviews to aid in the selection of new employees, regardless of their prospective position.  We will offer a competitive compensation plan to our managers that includes a base salary, bonuses for achieving performance objectives, and possibly incentive stock options once they have worked for us for at least one full year.  For example, the general manager in our initial Blue Water Bar & Grill™ restaurant will most likely be offered a base salary of $1,500 a month, plus up to $1,000 a month in additional performance incentives for achieving minimum gross sales and exceeding the minimum targeted food, liquor, and labor costs, as determined by our executive management team.  In addition, all employees are entitled to discount meals at any of our future restaurants.


Training.  We believe that proper training is the key to exceptional customer service.  Each new management hire will go through an extensive training program, which will include cross-training in all management duties.  All non-management new hires will go through a standard training program where they will learn and be tested on all of our food and drink offerings, operational procedures, and our point-of-sale (POS) computer system.


Management Information Systems (MIS).  All of our future restaurants will be equipped with a variety of integrated management information systems.  These systems will include an easy-to-use point-of-sale (POS) computer system which facilitates the movement of customer food and drink orders between the customer areas and kitchen and bar operations, controls cash, handles credit card authorizations, keeps track of sales on a per employee basis for incentive awards purposes, and provides on-site and executive level management with real-time sales and inventory data.  Additionally, we intend to implement a centralized accounting system that will include a food cost program and a labor scheduling and tracking program.  Physical inventories of food and drink items will be performed on a weekly basis.  Further, daily, weekly, and monthly financial information will be provided to executive level management for analysis and comparison to our budget and to comparable restaurants.  By closely monitoring each restaurant’s gross sales, cost of sales, labor, and other cost trends we will be better able to control our costs, inventory levels, and identify problems with individual operations, if any, early on.


Secret Shopper.  Because we believe exceptional customer service is paramount to our success, we intend to implement a “secret shopper” program to monitor the quality control at all of our future restaurants.  Secret shoppers are independent persons who test the quality of our food, drink, and service as paying customers without the knowledge of the restaurant’s management or employees.  Secret shoppers then report their unbiased experiences to our executive level management.


Blue Water Premium Rums


Blue Water is developing a line of privately labeled premium rums with a family owned distillery located on the Caribbean island of Dominica, West Indies.


The initial rum resulting from this collaboration with the distillery is the Blue Water Ultra Premium Rum™.  Blue Water will officially launch its Blue Water Ultra Premium Rum™ and commence sales to the public in Summer 2014 in St. Maarten.


Blue Water will be expanding its line of premium rums and is presently working with the distillery to develop a smooth spiced rum and a seasonal holiday spiced rum.




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Below is the bottle and label design for the Blue Water Ultra Premium Rum™:


[bluu_form10k201310002.jpg]



Strategic Alliances and Investment Holdings


On June 21, 2013 Blue Water entered into a Strategic Alliance Agreement with Taurus Financial Partners, LLC (“Taurus”).  Under this Strategic Alliance Agreement Blue Water was granted the exclusive right to participate in Taurus’s future Registered Spin-Off transactions.


In a typical Registered Spin-Off transaction, Blue Water will acquire between 15 – 20% of an operating business that is in the process of “going public” on the OTC Bulletin Board (“OTCBB”).  Taurus will then register these shares with the Securities and Exchange Commission (“SEC”).  Once Taurus has registered these shares with the SEC, Blue Water will “spin-off” a portion of them to its then stockholders in the form of a special stock dividend.


Blue Water anticipates participating in one or two of these transactions each fiscal year.  It is important to note that Blue Water’s President and Chief Executive Officer, J. Scott Sitra, is concurrently the President and Chief Executive Officer of Taurus.


Stream Flow Media, Inc.


On December 2, 2013 Blue Water entered into the first of these types of transactions under this Strategic Alliance Agreement with Stream Flow Media, Inc., a Colorado corporation (“Stream Flow”).  As per the terms of this transaction, Stream Flow issued 20,000,000 shares of its common stock, $0.001 par value, to Blue Water, which represents approximately 20% of Stream Flow’s issued and outstanding shares of common stock as of March 25, 2014 in return for Blue Water agreeing to pay all of Stream Flow’s expenses related to obtaining a listing on the OTCBB.



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Stream Flow is presently in the process of filing its initial Registration Statement on Form S-1 with the SEC, the first step in obtaining a listing on the OTCBB.  Once Stream Flow obtains its listing on the OTCBB, and upon approval by both the SEC and FINRA, Blue Water will issue a special one-time stock dividend of approximately 25%, or 5,000,000, of its Stream Flow shares to its then shareholders.  The remaining Stream Flow shares will be sold by Blue Water over an 18-24 month period with the net proceeds going towards financing new units of its Blue Water Bar & Grill™ restaurant concept.


Blue Water accounts for its Stream Flow shares as Available-For-Sale (AFS) securities that are valued at fair value.  Changes in fair value are recorded in the financial statements as an unrealized gain (loss) under Other Comprehensive Income (OCI).


As of December 31, 2013, Blue Water had accumulated $-0- in investment costs related to the Stream Flow shares and there were no observable inputs for a fair valuation.  Accordingly, Blue Water carried the Stream Flow shares at a $-0- valuation on the balance sheet for the period.


Investment Agreement and Registration Rights Agreement with Dutchess


We entered an Investment Agreement with Dutchess Opportunity Fund, II, LP (“Dutchess”) on September 16, 2013 (“Investment Agreement”).  Pursuant to the Investment Agreement, Dutchess is irrevocably committed to purchase up to $5,000,000 of our common stock over the course of 36 months (“Equity Line”).  The aggregate number of shares issuable by us and purchasable by Dutchess under the Investment Agreement is limited by the dollar amount sold, in this instance no more than $5,000,000, and will depend upon the trading price of our shares.


We may draw on the Equity Line from time to time, as and when we determine appropriate in accordance with the terms and conditions of the Investment Agreement.  The maximum amount that we are entitled to put in any one notice is the greater of (i) 200% of the average daily volume (U.S. market only) (“ADV”) of the common stock for the three (3) trading days prior to the date of delivery of the applicable put notice, multiplied by the average of the closing prices for such trading days or (ii) $100,000. The purchase price shall be set at 95% of the lowest daily volume weighted average price (“VWAP”) of our common stock during the five (5) consecutive trading days beginning on the date of the put (“Pricing Period”).  However, if, on any trading day during a Pricing Period, the daily volume weighted average price of the common stock is lower than the floor price specified by us in the put notice, then we must withdraw that portion of the put amount for each such trading day during the Pricing Period, with only the balance of such put amount above the minimum acceptable price being put to Dutchess.  There are put restrictions applied on days between the put notice date and the closing date with respect to each particular put.  During such time, we are not entitled to deliver another put notice.


Blue Water paid Dutchess a one-time document preparation fee of $15,000.  There are no fees or commissions due to Dutchess at the time of any puts made under the Equity Line.


Dilutive Effect of the Equity Line


As we draw down on the Equity Line, shares of our common stock will be sold into the market by Dutchess.  The sale of these additional shares could cause our stock price to decline.  In turn, if the stock price declines and we issue more puts, more shares will come into the market, which could cause a further drop in the stock price.  You should be aware that there is an inverse relationship between the market price of our common stock and the number of shares to be issued under the Equity Line.  If our stock price declines, we will be required to issue a greater number of shares under the Equity Line.  We have no obligation to utilize the full amount available under the Equity Line.


Blue Water chose this form of financing facility because of the flexibility it affords in meeting future cash requirements that are difficult to project at this stage of Blue Water’s development.  Blue Water believes it is likely that it will use a significant portion of the Equity Line, but intends to draw on the Equity Line only as needed to meet immediate capital requirements that are not met with other sources of capital.

 

Blue Water has not been involved in any previous transactions with Dutchess.


2014 Planned Capital Expenditures and Milestones


The following planned capital expenditures and milestones are based on estimates made by our management team.  The working capital requirements and the projected milestones are approximations and are subject to adjustments.  Our initial 2014 baseline budget is based on receiving financing of at least $900,000 over the course of the fiscal year ending December 31, 2014, which will enable us to undertake the following planned capital expenditures and achieve the proposed milestones.  



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Presently we only have the Dutchess Equity Line of financing available to us and do not have any alternative sources of financing secured.  Although we believe the Dutchess Equity Line should be able to provide for our planned capital expenditures, we cannot provide any assurances that we will be able to draw a sufficient amount of funding from it to meet the following planned capital expenditures.  As such, we are continuing to have discussions and explore alternative methods and sources of financing.


Planned 2014 Capital Expenditures


Based on generating a minimum of $900,000 in new financing during the fiscal year ending December 31, 2014, we anticipate allocating the capital as follows:


Planned Capital Expenditure

 

Amount ($)

 

 

 

Restaurant Construction and Renovation

 

$500,000

Initial Inventory and Launching of

Blue Water Ultra Premium Rum™

 


200,000

SEC Filing and Compliance

 

75,000

Legal and Consulting

 

35,000

Engineering and Architectural Consulting

 

25,000

Location Scouting and Surveying

 

15,000

General Operations

 

50,000

 

Total

 

$900,000


Proposed 2014 Milestones


During the course of the fiscal year ending December 31, 2014, and provided we are successful at raising sufficient capital to meet our primary objectives, we anticipate achieving the following quarterly milestones:


First Quarter Ending March 31, 2014


·

Finalize the Blue Water Bar & Grill™ Restaurant Location in St. Maarten, Dutch West Indies

 

·

Commence necessary engineering and architectural drawings and approvals for the St. Maarten restaurant

 

·

File a Registration Statement on Form S-1 for Stream Flow Media, Inc. (“Stream Flow”) initiating the “going public” process


Second Quarter Ending June 30, 2014


·

Conclude the necessary engineering and architectural drawings and approvals for the St. Maarten restaurant

 

·

Launch the Blue Water Ultra Premium Rum™ Website (www.bluewaterrum.com)

 

·

Launch the Blue Water Bar & Grill™ Website (www.bluewaterbar.com), Complete with Online Merchandise Store

 

·

File a Form 15c2-11 to Enable Stream Flow’s Common Stock to Trade on the OTC Bulletin Board (“OTCBB”)


·

Open the first Blue Water Bar & Grill™ in St. Maarten, Dutch West Indies

 

·

Secure second spin-off candidate (e.g. Stream Flow Media, Inc.)


Third Quarter Ending September 30, 2014


·

Officially launch the Blue Water Ultra Premium Rum™ brand in St. Maarten, Dutch West Indies




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·

Commence construction on the second Blue Water Bar & Grill™ in St. Maarten, Dutch West Indies

 

·

Obtain FINRA approval for Stream Flow’s OTCBB listing and commence trading


Fourth Quarter Ending December 31, 2014


·

Open the second Blue Water Bar & Grill™ in St. Maarten, D.W.I.

 

·

Market and promote the St. Maarten Blue Water Bar & Grill™ brand during the 2014 “high season”

 

·

Begin scouting for a suitable Blue Water Bar & Grill™ location in Aruba, Dutch West Indies


Long-Term Plan (5 Years)


Over the next five years we plan to focus on a disciplined growth strategy of opening one new Blue Water Bar & Grill™ restaurant each year.  Presently we have identified the following Caribbean islands we intend to eventually open a Blue Water Bar & Grill™ restaurant:


·

Aruba, Dutch West Indies;

·

Barbados;

·

Cozumel, Mexico;

·

Grand Cayman; and

·

Nassau, Bahamas.


We estimate that we will need to raise an aggregate of between $3 - $5 million to open the proposed restaurants on each of the listed Caribbean islands.  This capital will most likely be raised through the sales of additional equity securities, which will have a dilutive effect on existing shareholders.


Sales and Marketing


Our marketing strategy is aimed at attracting new customers through both traditional and creative avenues.  We intend to focus on building a reputation among local customers (those living on the island) while directing our marketing efforts toward tourists staying on the island or visiting for the day on a cruise ship.  We intend to accomplish this through:


·

Grand opening promotions;

 

·

Traditional paid advertising (e.g. radio, television, newspaper, etc.);


·

Free media exposure (e.g. hosting charity events, food reviews, etc.); and


·

Working directly with tourism bureau representatives and transportation representatives (taxi association, bus association, day sail and charter businesses, etc.).


When opening a new Blue Water Bar & Grill™ restaurant we intend to host grand opening parties for local leaders, media personalities, hospitality employees such as resort and hotel staff, and tourism bureau representatives (inclusive of cruise ship industry representatives and hotel/resort industry representatives).  Our goal with courting these groups is to introduce them to our concept and court them to refer new customers to our restaurants and provide us with free future media exposure.


Afterwards we will sustain awareness through more traditional marketing methods, including radio and television spots, newspaper ads, billboards and road signs, and resort and hotel concierge promotional cards and discount coupons.


If our strategy is successful it will lead to “word of mouth” referrals, which is our ultimate goal.  This is accomplished by providing our customers with consistently excellent service and quality food and drinks.


While we do not have a fixed marketing budget, we do anticipate launching each new restaurant with a marketing blitz campaign and tapering it down to less than 5% of the restaurant’s annual gross sales once it is sufficiently established with regular and recurring revenue.

 



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Financing


We estimate that we will need to generate at least $900,000 in additional financing in order to meet our planned 2014 capital expenditures and open our first Blue Water Bar & Grill™.  Further, in order to proceed with our long-term plans, we anticipate that we will need to generate at least between $3 and $5 million in additional long-term financing.


Dutchess Equity Line


On September 16, 2013 we entered into an Investment Agreement (“Investment Agreement”) and Registration Rights Agreement (“Registration Rights Agreement”) with Dutchess Opportunity Fund, II, LP (“Dutchess”).  As per the terms of the Investment Agreement, Dutchess is irrevocably committed to purchase up to $5,000,000 of our common stock over the course of 36 months (“Equity Line”).  The aggregate number of shares issuable by us and purchasable by Dutchess under the Investment Agreement is limited by the dollar amount sold, in this instance no more than $5,000,000, and will depend upon the trading price of our shares.  Due to various factors relating to this type of financing, we can offer no assurances that we will receive sufficient financing, if any, from the Dutchess Equity Line.  For more information see “Investment Agreement and Registration Rights Agreement with Dutchess” on page 10.


While we believe that we will be able to raise sufficient funds from this Dutchess Equity Line meet our projected expenditures during the fiscal year ending December 31, 2014 and to complete the development of our first Blue Water Bar & Grill™ restaurant in St. Maarten, Dutch West Indies, we can provide no assurances that the proceeds from the Dutchess Equity Line, if any, will be sufficient to cover even our minimal ongoing capital requirements.


Additional Sources of Long-Term Financing


Currently we are exploring various sources of additional long-term financing.  However, it is important to note that other than the Dutchess Equity Line we presently do not have any material arrangements for this additional financing.  We have no assurance that future financing will be available to us on acceptable terms.  If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations.  Future equity financing, if ever available, could result in additional and potentially substantial dilution to existing shareholders.


Government Regulation


The restaurant industry is subject to many various laws which directly affect our organization and planned operations.  Each restaurant we open must comply with various licensing requirements and regulations by a number of governmental authorities, which typically include health, safety and fire authorities in the municipality where our restaurant is located.  The development and operation of a successful restaurant depends upon selecting and acquiring a suitable location, which is normally subject to zoning, land use, environmental, traffic, and other regulations.  Further, our operations will also be subject to various laws governing such matters as wages, health insurance requirements, working conditions, citizenship and work permit requirements, and mandatory overtime pay, all of which will directly affect our labor costs.


Additionally, because we anticipate a significant portion of our revenue to be generated from the sale of alcoholic beverages, we must comply with any and all regulations governing their sale.  Typically this requires the proper licensing at each restaurant location (in many cases it needs to be renewed on an annual basis).  Such licenses may be revoked or suspended for cause at any time.  These regulations often relate to many aspects of the restaurant, including the minimum age of patrons and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling, and storage and dispensing of alcoholic beverages.   The failure of any of our future restaurants to obtain and retain such a license would limit its ability to generate sufficient revenues to achieve profitability at that particular location, which could subsequently impact our business’s overall revenues and ability to achieve (and if achieved, maintain) profitability.


Compliance with Environmental Laws


We have not incurred and do not anticipate incurring any expenses associated with environmental laws.


Research and Development Expenditures


We have not incurred any research or development expenditures since our inception on March 3, 2011.




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Patents and Trademarks


Upon securing a leasehold in St. Maarten, Dutch West Indies for our first restaurant we intend to formally register the trademark “Blue Water Bar & Grill™”.  As of March 25, 2014, we have not initiated this process.  We have been advised that such an undertaking will cost us approximately $750, inclusive of legal and filing fees.


Additionally, we will initiate the registration process for the trademark “Blue Water Ultra Premium Rum” during the fiscal period ending June 30, 2014.


Property and Equipment


Our principal executive offices are located at 202 Osmanthus Way, Canton, GA  30114.  This office space is being provided to us by our Vice President, Michael Hume, free of charge.


We do not hold ownership or leasehold interest in any property or equipment.


Executive Offices and Telephone Number


Our executive office and main telephone number is currently:


202 Osmanthus Way

Canton, GA  30114


Tel: (949) 264-1475

Fax: (949) 607-4052

www.bluewaterglobalgroup.com


This space is provided to us free of charge by Michael Hume, our Vice President.  If Mr. Hume decides to no longer allow us access to this office space in the future it would force us to seek outside office space elsewhere, potentially at a very high cost.


Item 1A.  Risk Factors


If any of the following risks actually occur, our business, financial condition and results of operations could be harmed and you may lose your entire investment.


Industry Risk Factors


Our industry is historically seasonal, especially in the Caribbean region where we intend to open all of our restaurants.


Our industry is historically seasonal, especially in the Caribbean region where we intend open all of our restaurants.  Typically the high season spans the months from November through April.  Low season, which typically spans May through October and coincides with hurricane season, often experiences unpredictable and severe weather, storms and other similar conditions which negatively impact overall tourism.  Since our restaurants will primarily cater to tourists, failure to generate sufficient sales volumes during high season could prevent our business from reaching profitability, or if profitability is ever obtained, fail to maintain such profitability.


Our industry is highly competitive and as a smaller reporting company we may be at a disadvantage to our competitors.


The restaurant industry is highly competitive in general.  Although our targeted marketplace is the Caribbean region where we will be competing primarily with “mom and pop” restaurants, which are typically comprised of smaller family or individually owned and operated non-franchised restaurants, we may have to compete in the future against larger competitors that have greater financial resources and name recognition than we have.  We anticipate facing a high level of competition when opening new restaurants for customers (both tourists and locals), securing prime leasehold locations where we wish to open our restaurants, and attracting and retaining qualified employees.  Many aspects of our business model are not proprietary and, if they prove successful, may be replicated by others.  We cannot prevent such competitors from entering the markets in which we seek to open new restaurants.  




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Further, because our industry is particular sensitive to cost increases and consists of mostly non-public reporting companies we may be at a competitive disadvantage because of our reporting obligations.  We face additional expenses, which a non-public restaurant business does not, including:


·

quarterly and annual PCAOB auditor fees;

 

·

EDGAR filing fees; and


·

legal and consulting fees related to our ongoing SEC compliance and reporting obligations.


Our non-public competitors do not incur these costs, which puts us at a competitive disadvantage.  These expenses presently aggregate approximately $75,000 annually.  However, as our business grows and develops our financial statements and our SEC filings will become more complex, which we estimate will cause these compliance expenses to increase, potentially substantially.  If we are unable to effectively compete on a continuing basis or unforeseen competitive pressures arise, such inability to compete could have a material adverse effect on our business, results of operations, and overall financial condition.


Our industry is subject to many various government regulations which could require unexpected expenditures and/or reduce our ability to generate sufficient revenues to obtain profitability.


Our industry is subject to many various laws which directly affect our organization and operations.  Each restaurant we open must comply with various licensing requirements and regulations by a number of governmental authorities, which typically include health, safety and fire authorities in the municipality where our restaurant is located.  The development and operation of a successful restaurant depends upon selecting and acquiring a suitable location, which is normally subject to zoning, land use, environmental, traffic, and other regulations.


Additionally, because we anticipate a significant portion of our revenue to be generated from the sale of alcoholic beverages, we must comply with any and all regulations governing their sale.  Typically this requires the proper licensing at each restaurant location (in many cases it needs to be renewed on an annual basis).  Such licenses may be revoked or suspended for cause at any time.  These regulations often relate to many aspects of the restaurant, including the minimum age of patrons and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling, and storage and dispensing of alcoholic beverages.   The failure of any of our future restaurants to obtain and retain such a license would limit its ability to generate sufficient revenues to achieve profitability at that particular location, which could subsequently impact our business’s overall revenues and ability to achieve (and if achieved, maintain) profitability.


Company Risk Factors


We lack an operating history and have losses which we expect to continue into the future.  There is no assurance our future operations will result in profitable revenues.  If we cannot generate sufficient revenues to operate profitably, our business will fail.


We were incorporated on March 3, 2011, and have generated $50,000 in revenues and incurred ($964,264) in losses through December 31, 2013.  We have very little operating history upon which an evaluation of our future success or failure can be made.  We have not achieved profitability and expect to continue to incur net losses throughout December 31, 2014 and, possibly, into subsequent fiscal periods.  We expect to incur significant operating expenses and, as a result, will need to generate significant revenues to achieve profitability, which may not occur.  Even if we do achieve profitability, we may be unable to sustain or increase profitability on an ongoing basis which could cause us to go out of business.


We need to raise additional capital.  Failure to secure adequate financing may prevent us from generating sufficient levels of revenue which could cause our business to fail.


We have had limited operations to date which have been funded exclusively by our officers, directors, and current stockholders.  We estimate that we will need to generate at least $900,000 in additional financing in order to meet our planned 2014 capital expenditures and open our first Blue Water Bar & Grill™.  Further, in order to proceed with our long-term plans, we anticipate that we will need to generate at least between $3 and $5 million in additional long-term financing


We entered an Investment Agreement with Dutchess on September 16, 2013 (“Investment Agreement”).  Pursuant to the Investment Agreement, Dutchess is irrevocably committed to purchase up to $5,000,000 of our common stock over the course of 36 months (“Equity Line”).  The aggregate number of shares issuable by us and purchasable by Dutchess under the



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Investment Agreement is limited by the dollar amount sold, in this instance no more than $5,000,000, and will depend upon the trading price of our shares.


There are no guarantees that we will be able to sell, or “put”, enough shares of our common stock to Dutchess through the Investment Agreement necessary for us to meet our minimal financing requirements.  In the event we do not generate sufficient financing through the Investment Agreement, we will be forced to seek alternative sources of financing elsewhere before we can fully proceed with our business plan.  We can give no assurances that alternative sources of financing will be available to us, or if available, on terms that are acceptable.  Further, any future sources of financing will most likely be generated through future offerings of our common stock and, in all likelihood, would be dilutive to current investors.


If we are not able to obtain sufficient additional financing, we may have to cease operations and investors will lose their entire investment.


Continued weak economic conditions may hinder our ability to open new restaurants, achieve profitability, and raise the $3 to $5 million in additional financing we need to pursue our long-term business goals.  


The economic conditions starting in late 2008 and continuing through fiscal 2013 in the United States and throughout the rest of the world, particularly the Caribbean region which is essentially an extension of the US economy and where we intend to focus our operations, have contributed, and may continue to contribute to, high unemployment levels, lower consumer spending and reduced credit availability, and has in general impacted business overall and consumer confidence.  If such conditions continue or worsen, they could have a further negative impact on tourism to the Caribbean region where we intend to operate, force us to delay new restaurant opening(s), result in reduced per person food, beverage, and souvenir purchases at our future restaurants, and prevent us from achieving profitability, which could affect our future sales, overall business, and force us to cease operations in which case investors could lose their entire investment.


In addition to our immediate financing needs, we anticipate we will need to raise between $3 and $5 million in additional long-term financing to open additional restaurants on other Caribbean islands.  If weak economic conditions continue, we may not be able to generate this amount of financing and be forced to delay or reevaluate our long-term business plan.  Further, even if we are able to obtain this future financing, it could be on terms that may be substantially dilutive to investors in our business which could affect our future earnings per share (EPS) and result in a loss for anyone purchasing shares of common stock in our business.


There is substantial uncertainty as to whether we will continue operations.  If we discontinue operations, you could lose your entire investment.


Our independent registered public accounting firm has discussed their uncertainty regarding our business operations in their audit report dated March 31, 2014 which is part of the financial statements that are part of this Annual Report on Form 10-K.  This means that there is substantial doubt that we can continue as an ongoing business for the next 12 months.  The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue in business.  As such, we may have to cease operations and you could lose your entire investment.


Focusing all of our business interests entirely on the Caribbean region may result in increased costs and risks.


We intend to open our initial Blue Water Bar & Grill™ restaurant in St. Maarten, Dutch West Indies and eventually expand the concept to other islands throughout the Caribbean region.  Because most islands within the Caribbean region are independent nations or territories of other sovereign nations, operating internationally throughout the Caribbean region will expose us to a number of risks on each island we chose to operate, including:


·

risks of social, political, and economic instability;

 

·

risks of increases in duties and taxes;


·

labor risks, including attracting and retaining qualified local workers, general labor unrest, and complying with different labor laws on each island we operate;


·

risks relating to government corruption and anti-bribery laws;


·

changes in laws and policies governing the operations of foreign-based companies; and




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·

we may be exposed to exchange rate risks if some of our future revenues and expenses are incurred in foreign currencies that fluctuate independently of the US dollar.  


We cannot assure you that our business will not be affected by the aforementioned risks, each of which could have a material adverse effect on our business, potentially causing us to cease operations and you to lose your entire investment.


Because all of our future operating activities and profits, if any, will be generated outside of the United States, we may be subjected to restrictions or substantial tax consequences should we try to repatriate our funds to the United States, thereby potentially limiting our ability to conduct future business within the United States.


All of our intended future business operations will be conducted within the Caribbean region.  Presently we deposit all of our cash holdings in accounts held at RBC Bank in St. Maarten, Dutch West Indies.  Although we have not experienced any delays or restrictions, we could be subjected to restrictions and unexpected delays on transferring our cash balances into the United States under the provisions of the Patriot Act or applicable Anti-Money Laundering (AML) laws.  Should our bank or the US government take such precautions to verify the source of our funds, they could suspend transfers of our cash to the United States until such verification procedures are completed, which could delay the transfer of our funds by several business days.  Such verification procedures could be enacted if either our bank or the US government were to suspect any of the funds held in our accounts were linked to:


·

financing terrorism;

 

·

illicit profits from drug trafficking; or


·

proceeds from money laundering activities.


In addition to the foregoing considerations, we will also be subjected to other tax considerations when repatriating our funds in the United States.


Under current tax law profits earned by US corporations abroad may be deferred indefinitely, as long as those profits remain in the country they were earned.  Because the countries in the Caribbean region where we intend to operate levy little to no corporate income taxes, it will be in our interest to maintain our profits, if any, where they are earned.


Should we wish to repatriate our profits to the United States, those profits would be subject to US income taxes, less applicable foreign tax credits.  Because the United States currently has one of the highest corporate tax rates in the world (35%), repatriating funds in the United States could significantly increase our overall effective tax rate which would have a material adverse effect on our results of operations and financial condition and impede our ability to grow and expand our business.


We intend to retain most, if not all, of our profits outside of the United States.  We intend to repatriate only enough funds annually to maintain our US operations, which presently, and will continue to, consist of maintaining reporting and compliance requirements with the Securities and Exchange Commission, which we presently estimate cost us approximately $75,000 annually.  However, as our business grows and develops our financial statements and our SEC filings will become more complex, which we estimate will cause these compliance expenses to increase, potentially substantially.  If these expenses increase substantially, then our effective tax rate will also increase as the amount of funds we are required to repatriate each fiscal year increases.


As a holder of our common stock, a delay in repatriating our funds or an increase in our overall effective tax rate could result in you experiencing:


·

lower per share earnings, if any, relating to our common stock; and

 

·

a decrease in the valuation or loss in your investment in our common stock.




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Our principal officer and sole director, J. Scott Sitra, currently controls approximately 71.6% of our issued and outstanding common stock.  Mr. Sitra is able to exert significant influence and control over all corporate decisions, even if such decisions may not be in the best interest of minority shareholders.


Our principal officer and sole director, J. Scott Sitra, currently controls (through direct ownership and indirectly through his private corporation, Taurus Financial Partners, LLC) an aggregate of 167,000,000 shares of our common stock, or approximately 71.6%, of our issued and outstanding shares of our common stock as of March 25, 2014.  Accordingly, he has significant influence in determining the outcome of all corporate transactions or other matters, including mergers, consolidations and the sale of all or substantially all of our assets.  The interests Mr. Sitra may differ from the interests of the other shareholders and thus result in corporate decisions that are disadvantageous to other shareholders.


The success of our business depends heavily on key personnel, particularly J. Scott Sitra and Michael Hume, and their business experience and understanding of our industry.  Our business would likely fail if we were to lose their services.


The success of our business will depend heavily upon the abilities and experience of our executive officers, J. Scott Sitra and Michael Hume.  The loss of either officer would have a significant and immediate impact on our business, results of operations, and overall financial condition.  Further, the loss of either officer would force us to seek a replacement or replacements who may have less general business experience and, in particular, experience in our industry, fewer industry contacts, and less understanding of our overall business plan.  We can make no assurances that we will be able to find a suitable replacement should either officer depart, which could force us to curtail operations and/or cease operations, whereby you could lose your entire investment.


Neither Mr. Sitra nor Mr. Hume are presently covered by an employment agreement nor is either subject to a non-compete agreement which would survive the termination of their employment.  Both Mr. Sitra and Mr. Hume can terminate their relationship with us at any time without cause.  Further, we do not carry “key person” insurance on any employee, including Messrs. Sitra and Hume.  The departure of Mr. Sitra or Mr. Hume would most likely have a severe and negative impact on our overall business and cause us to cease operations, whereby you could lose your entire investment.


In addition to our dependency on Mr. Sitra’s and Mr. Hume’s continued services, our future success will also depend on our ability to attract and retain additional future key personnel, especially in the areas of restaurant managers.  We face intense competition for these individuals from well-established and better financed competitors.  We may not be able to attract qualified new employees or retain existing employees, which may have a material adverse effect on our results of operations and financial condition.


Because our executive officers, J. Scott Sitra and Michael Hume, devote a limited amount of their time to our operations our business could fail if either is unable or unwilling to devote a sufficient amount of time to our business.


The responsibility of developing our core business, securing the financing necessary to commence full-scale operations, and fulfilling the reporting requirements of a public company all fall upon our executive officers, J. Scott Sitra and Michael Hume.  Mr. Sitra presently dedicates about 80% of his professional time, or between 35 to 45 hours a week, on our business and Mr. Hume presently dedicates about 25% of his professional time, or between 10 to 15 hours a week on our business.


We are dependent upon Mr. Sitra’s knowledge of SEC reporting companies and microcap finance.  We have not formulated a plan to resolve any possible conflict of interest with his other competing business activities, which principally involves his position as President and Chief Executive Officer at Taurus Financial Partners, LLC (“Taurus”), a boutique consulting firm specializing in taking emerging development companies public on the OTCBB.  In addition, it is important to note that as of March 25, 2014 Taurus owned 166,000,000 shares of our common stock, or approximately 71.2%.  Mr. Sitra presently is not under an employment agreement with any of his business interests, including our business as well as Taurus.  If he were to enter into such an agreement with an outside business interest, he could be forced to resign from our business or devote even less time to our business interests than he presently does.


In addition to the foregoing, we also rely especially heavily on Mr. Hume’s knowledge and experience in the restaurant industry to further our business development.  We have not formulated a plan to resolve any possible conflict of interest with his other competing business activities, which principally involves his position as General Manager of Hooter’s in Atlanta, Georgia a sports-themed restaurant he has been operating since November 2013.  Potential conflicts that may arise between his competing business activities include, among others we may not presently foresee:




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·

Mr. Hume presently is not under an employment agreement with any of his business interests, including our business.  If he were to enter into such an agreement with an outside business interest, he could be forced to resign from our business or devote even less time to our business interests than he presently does; and

 

·

Mr. Hume’s contacts, most notably experienced restaurant and bar managers and training personnel that he wishes to eventually employee through our business, could alternatively enter into exclusive employment agreements with his competing business interests.


In the event either executive officer is unable to fulfill any aspect of their duties, we may experience a shortfall or complete lack of revenue resulting in little or no profits and the eventual closure of our business, whereby you may lose your entire investment.


Our principal officer also serves as our sole director on our Board of Directors.  As such, he has the ability to unilaterally decide all non-voting matters, including the ability to establish compensation packages, most notably his own.


Our principal officer, J. Scott Sitra, also serves as our sole director on our Board of Directors.  As such, and in all non-voting matters, he can unilaterally determine corporate actions by issuing a Resolution of the Board of Directors.  The interests of our sole director may differ from the interests of the other shareholders and thus result in corporate decisions that are disadvantageous to other shareholders.  In particular, and at his sole discretion, he may establish his own compensation package, or the compensation package of our other executive officer, Michael Hume, which could be contrary to the interests of other shareholders, and possibly prevent us from ever achieving profitability, have a negative impact on our overall business, and result in you losing all or part of your investment.


The projected costs and other related expenses used in our business plan are estimates made by our management.  Our actual costs related to opening our proposed restaurant may differ significantly.


The projected costs and other related expenses in our business plan and in the Plan of Operation starting on page 6 of this Annual Report on Form 10-K are mere cost estimates and forecasts made by our management.  Our actual costs related to opening and operating our proposed restaurant may differ significantly from these estimates, which could have a negative impact on our overall business, cause our business to fail, and result in you losing all of your investment.


We have agreed to indemnify our officers and directors against lawsuits to the fullest extent of the law.


We are a Nevada corporation.  Nevada law permits the indemnification of officers and directors against expenses incurred in successfully defending against a claim.  Nevada law also authorizes Nevada corporations to indemnify their officers and directors against expenses and liabilities incurred because of their being or having been an officer or director.  Our organizational documents provide for this indemnification to the fullest extent permitted by law.


We currently do not maintain any insurance coverage.  In the event that we are found liable for damages or other losses, we would incur substantial and protracted losses in paying any such claims or judgments.  We have not maintained liability insurance in the past, but intend to acquire such coverage immediately upon resources becoming available.  There is no guarantee that we can secure such coverage or that any insurance coverage, if ever secured, would protect us from any damages or loss claims filed against it.


We may incur additional risks and significant increases in annual costs to be a public company, which requires us to maintain compliance with Securities and Exchange Commission reporting requirements.  We may not be able to absorb such increased annual costs.

 

We may incur additional risks and significant increases in annual costs associated with our public company reporting requirements, which include:


·

compliance with applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the SEC;

 

·

compliance with all applicable SEC rules and regulations, including reporting in a timely manner our quarterly and annual operating results, which will significantly increase our legal and financial compliance costs and make some activities more time consuming; and




20





·

increased exposure to broader shareholder claims and litigation may make it more difficult and more expensive for us to obtain director and officer liability insurance.  Without obtaining such insurance coverage, which we currently do not have, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers.


Presently we estimate these additional reporting and compliance requirements cost us approximately $75,000 annually.  As our business grows and develops our financial statements and our SEC filings will become more complex, we anticipate these annual costs will increase, potentially substantially.  Additionally, we have not obtained quotes for officers and directors insurance and will not do so until we begin generating sufficient cash flows to pay the annual premiums on such a policy.    Further, we may not be able to absorb these costs of being a public company which could negatively affect our business operations and may result in you losing your entire investment.


Risk Factors Relating to Our Common Stock


There is a limited, volatile, and sporadic public trading market for our common stock and we cannot assure you that an active public trading market for our common stock will develop, of if developed, be sustained.  Even if a market further develops, you may not be able to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.


There is presently a limited public trading market for our registered common stock which presently trades on the OTC Bulletin Board (“OTCBB”) under the trading symbol “BLUU”.


An application for quotation on the OTC Bulletin Board was submitted by a market maker who agreed to sponsor the security and who demonstrated compliance with Rule 15c2-11 of the Securities Exchange Act of 1934 (“Exchange Act”).  The application for quotation of our registered common stock on the OTC Bulletin Board was accepted on November 6, 2012.  We also caused a different market maker to submit an application in November 2012 on our behalf to the Depository Trust Corporation (“b”) to become eligible for electronic trading (“DTC Eligible”).  We are currently approved for DTC electronic trading.


Even though our registered common stock is approved for quotation and electronic trading on the OTC Bulletin Board, the number of institutions and/or persons interested in purchasing our registered common stock at or near ask prices at any given time may be relatively small or non-existent.  This situation is attributable to a number of factors, including, among others, the fact that we are a small and unproven company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community responsible for generating or influencing trading volume, and that even if we were to come to the attention of such institutions and/or persons, they tend to be more risk averse and may be reluctant to follow an unproven business such as ours or purchase or recommend the purchase of our shares until such time as we have demonstrated sufficient success with our business plan.  As such, there may be periods of several days or more when trading activity in our shares of common stock is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without adversely affecting their share price.  We cannot assure you that an active public trading market for our registered common stock will develop and, if developed, be sustained.


Even if a sustained active public trading market develops for our registered common stock, the market price of our common stock may also fluctuate significantly in response to the following factors, most of which are beyond our control:


·

variations in our quarterly operating results;

·

changes in general economic conditions and consumer spending habits;

·

announcements by us or our competitors of significant new contracts, acquisitions, strategic partnerships or joint ventures, or capital commitments;

·

loss of a significant distributor, retailer, partner or joint venture participant; and

·

the addition or loss of key managerial and collaborative personnel.

 

The equity markets have, on occasion, experienced significant price and volume fluctuations that have affected the market prices for many companies' securities and that have often been unrelated to the operating performance of these companies.  Any such fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance.  As a result, stockholders may be unable to sell their shares, or may be forced to sell them at a loss.




21





We do not intend to pay any dividends on our common stock, therefore there are limited ways in which you can make a profit on any investment in Blue Water Global Group, Inc.


We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future.  To the extent that we may seek additional funding in the future, our future funding sources may likely prohibit us from paying any dividends.  Because we do not intend to declare dividends, any gain on an investment in our shares of common stock will need to come through the appreciation of our common stock’s share price, for which we can give no assurances that our common stock will ever appreciate in value and, even if it does appreciate in value, that you will be able to sell your shares of our common stock for a profit.


We have certain anti-takeover provisions and may issue additional stock, both common and preferred, without shareholder consent which may make it difficult, if not impossible, to replace or remove our current management and could also result in significant dilution to an investment in our common stock.


Our Articles of Incorporation, as amended, authorizes the issuance of up to 700 million shares of common stock and of up to 5 million shares of preferred stock with such rights and preferences as may be determined from time to time by our Board of Directors.  Our Board of Directors may, without requiring shareholder approval, issue shares of preferred stock with dividends, liquidation, conversion, voting or other rights which could supercede and/or adversely affect the voting power and/or other rights of the holders of our common stock.  The ability of our Board of Directors to issue shares of common stock and/or preferred stock may prevent any shareholder attempt to replace or remove current management and/or could make it extremely difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders.  Additionally, the issuance of additional common stock or preferred stock in the future may significantly reduce your proportionate ownership and voting power.


It is important to note that as of March 25, 2014 we had 233,206,213 shares of common stock issued and outstanding which means we could issue up to an additional 466,793,787 shares of common stock without shareholder consent.  Also, as of March 25, 2014, we had no shares of preferred stock issued or outstanding.


The lower our stock price, the lower the fluctuating, below market price conversion rate for our outstanding convertible notes will be and the greater number of shares of our common stock we will have to issue upon conversion of these convertible notes.


During the fiscal year ended December 31, 2013 we issued a series of convertible notes to Asher Enterprises, Inc. (“Asher”) that are convertible into shares of our common stock based upon a discount to the market price.  The conversion terms of these convertible notes are based upon a discount to the then-prevailing average of the three (3) lowest trading bid prices and, as a result, the lower the stock price at the time Asher converts these convertible notes, the more shares of common stock Asher will receive. It is important that each Asher note cannot be converted into shares of our common stock for a minimum of 180 days from its date of issue.  The number of shares of common stock issuable upon conversion of these convertible notes is indeterminate.  If the trading price of our common stock is low when the conversion price of these convertible notes are determined, we would be required to issue a higher number of shares of our common stock, which could cause substantial dilution to our stockholders.  In addition, if Asher opts to convert these convertible notes into shares of our common stock and sell those shares it could result in an imbalance of supply and demand for our common stock and result in lower trading prices for our common stock as reported by the OTCBB.  The further our stock price declines, the further the adjustment of the conversion price will fall and the greater the number of shares we will have to issue upon conversion.


In addition, the number of shares issuable upon conversion of these convertible notes is potentially limitless.  While the overall ownership of Asher at any one moment may be limited to 9.99% of the issued and outstanding shares of our common stock, Asher may be free to sell any shares into the market that have previously been issued to them, thereby enabling them to convert the remaining portion of these convertible notes.


In addition to the foregoing Asher Notes, on January 31, 2014 Blue Water issued a convertible note to JMJ Financial (“JMJ Financial”) that provides up to an aggregate of $335,000 in gross proceeds through a series of tranche financings after taking into consideration an Original Issued Discount (“OID”) of $35,000.  As of March 26, 2014 Blue Water has received $35,000 in financing through this JMJ Financial Note.  The JMJ Financial Note becomes convertible into shares of our common stock 180 days after consideration is received by Blue Water at the lessor of $0.0185 a share or 60% of the lowest trade price in the 25 trading days prior to the conversion.




22





A key feature of the JMJ Financial Note is that should Blue Water, at its sole discretion, repay all consideration received pursuant to the JMJ Financial Note within 90 days of its effective date, there will be zero percent interest charged.  Otherwise, there will be a one-time interest charge of 12% for all consideration received by Blue Water.


As an example of the potential dilutive effect of these convertible notes the following table shows the resulting fall of the conversion price and the number of shares that we would be required to issue if all of the shares were converted based upon a 0%, 25%, 50%, and 75% fall in the price of our common stock using the closing price of our common stock as of March 25, 2014 as a baseline point.


 

 

 

 

 

 

Potential issuable shares at various conversion prices below the recent market price of $0.0175

Lender/

Origination

 

Conversion

Terms

 

Principal

Borrowed

 

100%

$0.0175

 

75%

$0.0131

 

50%

$0.0088

 

25%

$0.0044

 

 

 

 

 

 

 

 

 

 

 

 

 

Asher Enterprises, Inc.


Note 2

(11/8/13)

 

Convertible into 58% of the average of the three lowest bid prices over the 10 days prior to the conversion request.  Interest rate of 8% with a 22% default rate.

$

37,500

 

2,142,857

 

2,862,595

 

4,261,364

 

8,522,727

Asher Enterprises, Inc.


Note 3

(12/23/13)

 

Convertible into 58% of the average of the three lowest bid prices over the 10 days prior to the conversion request.  Interest rate of 8% with a 22% default rate.

$

27,500

 

1,571,429

 

2,099,237

 

3,125,000

 

6,250,000

JMJ Financial


(1/31/14)

 

Convertible at the lowest of $0.0185 a share or 60% of the lowest trade price in the 25 trading days prior to the conversion.  Interest rate of 12%, unless paid within 90 days of funding which would result in an interest rate of 0%.

$

35,000

 

2,000,000

 

2,671,756

 

3,977,273

 

7,954,545

 

 

 

$

100,000

 

5,714,286

 

7,633,588

 

11,363,637

 

22,727,272


As can be seen from the example above, our existing stockholders will experience substantial dilution to their investment upon the conversion of these convertible notes into shares of our common stock.  As a result, the number of shares issuable could prove to be significantly greater in the event of a decrease in the trading price of our common stock, which decrease would cause substantial dilution and potentially significant losses to our existing stockholders.


The continuously adjustable conversion price feature of the Asher and JMJ Financial convertible notes may encourage other investors to sell short our common stock, which could have a depressive effect on the price of our common stock.


The Asher and JMJ Financial convertible notes are convertible into shares of our common stock at conversion prices as noted in the example table above.  The significant downward pressure on the price of our common stock as the holder of these convertible notes converts and sells material amounts of our common stock could encourage other investors to sell short our common stock.  This could place further downward pressure on the price of our common stock.  In addition, not only the sale



23





of shares issued upon conversion of these convertible notes, but also the mere perception that these sales could occur, may adversely affect the market price of our common stock resulting in significant losses to our existing shareholders.


The issuance of common stock upon conversion of our convertible notes will cause immediate and substantial dilution.


The issuance of common stock upon conversion of our convertible notes will result in immediate and substantial dilution to the interests of other stockholders since the holders of our convertible notes may ultimately receive and sell the full amount of shares issuable in connection with the conversion of our convertible notes.  Although our convertible notes may not be converted if such conversion would cause the holder thereof to own more than 9.99% of our issued and outstanding common stock, this restriction does not prevent the holder of the convertible note from converting some of their holdings, selling those shares, and then converting the rest of its holdings, while still staying below the 9.99% limit.  In this way, the holders of our convertible notes could sell more than this limit while never actually holding more shares than this limit allows.  If the holders of our convertible notes chooses to do this, it will cause substantial dilution to the then holders of our common stock which could result in substantial losses to the other holders of our common stock.


We are presently subject to the "Penny Stock" rules of the SEC which could limit the trading and liquidity of our common stock, adversely affect the market price of our common stock, and increase your transaction costs to sell shares of our common stock.


The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions.  For any transaction involving a penny stock, unless exempt, the rules require:


·

that a broker or dealer approve a person's account for transactions in penny stocks; and

 

·

the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

 

In order to approve a person's account for transactions in penny stocks, the broker or dealer must:


·

obtain financial information, investment experience and investment objectives of the person; and

 

·

make a reasonable determination that the transactions in penny stocks are suitable for that person and that the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.


The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:


·

sets forth the basis on which the broker or dealer made the suitability determination; and

 

·

that the broker or dealer received a signed, written agreement from the investor prior to the transaction.


Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules.  This may make it more difficult for investors to sell shares of our common stock and cause a decline in the market value of our stock.


Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions.  Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.


Our common stock presently trades under $5 a share and is subject to the “penny stock” rules.  The continued application of the “penny stock” rules to our common stock could limit the trading and liquidity of our common stock, adversely affect the market price of our common stock, or cause an increase the transaction costs related to of our common stock.




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The OTC Bulletin Board is a quotation system, not an issuer listing service, market, or exchange.  Therefore, buying and selling stock on the OTC Bulletin Board is not as efficient as buying and selling stock through an exchange.


The OTC Bulletin Board is a regulated quotation service that displays real-time quotes, last sale prices, and volume limitations in over-the-counter securities.  Because trades and quotations on the OTC Bulletin Board involve a manual process, the market information for such securities cannot be guaranteed.  In addition, quote information, or even firm quotes, may not be available.  The manual execution process may delay order processing and intervening price fluctuations may result in the failure of a limit order to execute or the execution of a market order at a significantly different price.  Execution of trades, execution reporting, and the delivery of legal trade confirmation may be delayed significantly.  Consequently, you may not be able to sell shares of our common stock at the optimum trading prices.


When fewer shares of a security are being traded on the OTC Bulletin Board, volatility of prices may increase and price movement may outpace the ability to deliver accurate quote information.  Lower trading volumes in a security may result in a lower likelihood of an individual’s orders being executed, and current prices may differ significantly from the price that was quoted by the OTC Bulletin Board at the time of the order entry.


Orders for OTC Bulletin Board securities may be cancelled or edited like orders for other securities.  All requests to change or cancel an order must be submitted to, received by, and processed by the OTC Bulletin Board.  Due to the manual order processing involved in handling OTC Bulletin Board trades, order processing and reporting may be delayed, and an individual may not be able to cancel or edit their order in a timely manner.  Consequently, you may not be able to sell shares of our common stock at optimum trading prices.


The dealer’s spread (the difference between the bid and ask prices) may be large and may result in substantial losses to the seller of securities on the OTC Bulletin Board if the common stock or other security must be sold immediately.  Further, purchasers of securities may incur an immediate “paper” loss due to the price spread.  Moreover, dealers trading on the OTC Bulletin Board may not have a bid price for securities bought and sold through the OTC Bulletin Board.  As such, demand for securities that are traded through the OTC Bulletin Board may be decreased or eliminated.


Shares eligible for future sale may adversely affect the market price of our common stock.


As of March 25, 2014 we had 233,206,213 shares of our common stock issued and outstanding, a breakdown of which follows:


·

64,174,963 are freely tradable without restrictions (commonly referred to as the “public float”);

·

166,000,000 are restricted through March 31, 2015 pursuant to a share lock-up agreement.  After this lock-up agreement expires these shares may be publicly sold pursuant to Rule 144; and

·

3,031,250 are currently subject to the restrictions and sale limitations imposed by Rule 144.


From time to time, certain of our stockholders may be eligible to sell some or all of their restricted shares of our common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act, subject to certain volume restrictions and restrictions on the manner of sale.  In general, pursuant to Rule 144, non-affiliate stockholders may sell freely after six months subject only to the current public information requirement (which disappears after one year).  Affiliates may sell after six months subject to the Rule 144 volume, manner of sale, current public information and notice requirements.


The eventual availability for sale of substantial amounts of our common stock under Rule 144 could adversely affect prevailing market prices for our securities and cause you to lose most, if not all, of your investment in our business.


We expect volatility in the price of our common stock, which may subject us to securities litigation and thereby divert our resources which may materially affect our profitability and results of operations or force us to cease operations.


If established, the market for our common stock may be characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will be more volatile than a seasoned issuer for the indefinite future.  In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities.  We may in the future be the target of similar litigation.  Securities litigation could result in substantial costs and liabilities, could divert management's attention and resources, and could ultimately force us to cease operations whereby you could lose your entire investment.




25





We have identified deficiencies in our current internal controls over financial reporting.  Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and operating results.


Our business is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (“Exchange Act”).  We are also required to comply with the internal control evaluation and certification requirements of Section 404 of the Sarbanes-Oxley Act of 2002.  We have, through the participation of our sole officer and director, J. Scott Sitra, assessed the current effectiveness of our internal control over financial reporting.  In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of The Treadway Commission (COSO) in Internal Control-Integrated Framework.  Based on that assessment under such criteria, management concluded that our current internal controls over financial reporting are not effective due to control deficiencies that constituted material weaknesses.

  

We have identified a lack of sufficient personnel in the accounting function due to the limited resources of Blue Water with appropriate skills, training, and experience to perform the review processes to ensure the complete and proper application of generally accepted accounting principles.  To this extent, we have identified specific remedial actions we intend to undertake prior to the end of the current fiscal year ending December 31, 2013 to address the current material weaknesses described above:

 

·

Improve the effectiveness of the accounting group by augmenting our existing resources with additional outside consultants to improve segregation procedures and to assist in the analysis and recording of complex accounting transactions and preparation of tax disclosures; and

 

·

Improve segregation procedures by strengthening cross approval of various functions, particularly quarterly and annual internal audit procedures.


If we are unable to implement the above changes effectively or efficiently, it could harm our operations, financial reporting or financial results.


We are classified as an “emerging growth company” as well as a “smaller reporting company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies will make our common stock less attractive to investors.


We are an "emerging growth company", as defined in the Jumpstart our Business Startups Act of 2012 (“JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.  We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions.  If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.


Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.  In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.   


We could remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.


Notwithstanding the above, we are also currently a “smaller reporting company”, meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million and annual revenues of less than $50 million during the most recently completed fiscal year.  In the event that we are still considered a “smaller reporting company”, at such time are we cease being an “emerging growth company”, the disclosure we will be required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either an “emerging growth company” or a “smaller reporting



26





company”.  Specifically, similar to “emerging growth companies”, “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports.  Decreased disclosures in our SEC filings due to our status as an “emerging growth company” or “smaller reporting company” may make it harder for investors to analyze our results of operations and financial prospects.



Item 1B.  Unresolved Staff Comments


None.



Item 2.  Properties


Our principal executive offices are located at 202 Osmanthus Way, Canton, GA  30114.  This office space is being provided to us by Vice President, Michael Hume, free of charge.


We do not hold ownership or leasehold interest in any property or equipment.



Item 3.  Legal Proceedings


No officer, director, or persons nominated for these positions, and no promoter or significant employee – past or present – of our corporation has been involved in legal proceedings that would be material to an evaluation of our management.  We are not aware of any pending or threatened legal proceedings involving Blue Water Global Group, Inc.

 

During the past ten (10) years neither J. Scott Sitra or Michael Hume has not been the subject of the following events:

 

1)

Any bankruptcy petition filed by or against any business of which Messrs. Sitra and/or Hume was a general partner or executive officer either at the time of the bankruptcy or within two (2) years prior to that time;


2)

Any conviction in a criminal proceeding or being subject to a pending criminal proceeding;


3)

An order, judgment, or decree, not subsequently reversed, suspended or vacated, by any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending, or otherwise limiting either Mr. Sitra’s or Mr. Hume’s involvement in any type of business, securities or banking activities; and


4)

Found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Future Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.


Item 4.  Mine Safety Disclosures


Not applicable.



27





PART II


Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and

Issuer Purchases of Equity Securities


Our common stock trades on the OTC Bulletin Board (“OTCBB”) under the trading symbol “BLUU”.  Currently there is only a limited, sporadic, and volatile market for our stock on the OTCBB.  


The following table sets forth the high and low sales prices of our common stock as reported by the OTCBB for the periods indicated.  These prices represent prices between inter-dealer prices, do not include retail markups, markdowns, or commissions, and do not necessarily reflect actual transactions.


 

 

High

 

Low

Year Ended December 31, 2012

 

 

 

 

4th Quarter (1)

$

-0-

$

-0-

 

 

 

 

 

Year Ending December 31, 2013

 

 

 

 

1st Quarter

$

0.010

$

0.010

2nd Quarter

$

0.036

$

0.010

3rd Quarter

$

0.026

$

0.010

4th Quarter

$

0.024

$

0.001

 

 

 

 

 

Year Ending December 31, 2014

 

 

 

 

1st Quarter (through March 25, 2014)

$

0.033

$

0.008


Note: All prices in the above table are adjusted to reflect a 10-for-1 forward stock split effected September 30, 2013.


(1)

Our common stock received clearance from FINRA to trade on the OTCBB on November 6, 2012.  It did not start trading until February 2013.


The closing price of our common stock on March 25, 2014 was $0.0175 as reported by the OTCBB.


Holders of Record


As of March 25, 2014, we had 233,206,213 shares of our common stock issued and outstand held by approximately 40 stockholders of record; this figure does not include any shareholders electing to beneficially own their shares through nominees such their stock broker or other financial institution.  We had no shares of preferred stock issued and outstanding.


Dividend Policy


We have never declared or paid cash dividends.  We currently intend to retain all future earnings for the operation and expansion of our business and do not anticipate paying cash dividends on the common stock in the foreseeable future.  Any payment of cash dividends in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, earnings, capital requirements, contractual restrictions and other factors deemed relevant by our directors.


Penny Stock Regulations and Restrictions on Marketability


The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks.  Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system.  The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading, (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws, (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price, (d) contains a toll-free telephone number for inquiries on disciplinary actions, (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks, and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.



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The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock, (b) the compensation of the broker-dealer and its salesperson in the transaction, (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock, and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.


In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.


These disclosure requirements may have the effect of reducing the trading activity for our common stock.  Therefore, stockholders may have difficulty selling their shares of our common stock.


Common Stock


Our Articles of Incorporation authorize us to issue up to 700,000,000 shares of common stock, $0.001 par value.  Each holder of our common stock is entitled to one (1) vote for each share held of record on all voting matters we present for a vote of stockholders, including the election of directors.  Holders of common stock have no cumulative voting rights or preemptive rights to purchase or subscribe for any stock or other securities, and there are no conversion rights or redemption or sinking fund provisions with respect to our common stock.  All shares of our common stock are entitled to share equally in dividends from sources legally available when, and if, declared by our Board of Directors.


Our Board of Directors is authorized to issue additional shares of common stock not to exceed the amount authorized by the Articles of Incorporation, on such terms and conditions and for such consideration as the Board may deem appropriate without further stockholder action.


In the event of our liquidation or dissolution, all shares of our common stock are entitled to share equally in our assets available for distribution to stockholders.  However, the rights, preferences and privileges of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of preferred stock that our Board of Directors may decide to issue in the future.


As of March 25, 2014, we had 233,206,213 shares of common stock issued and outstanding.


Preferred Stock


Our Articles of Incorporation authorize us to issue up to 5,000,000 shares of preferred stock, $0.001 par value.  Our Board of Directors is authorized, without further action by the shareholders, to issue shares of preferred stock and to fix the designations, number, rights, preferences, privileges and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and sinking fund terms.  We believe that the Board of Directors’ power to set the terms of, and our ability to issue, preferred stock will provide flexibility in connection with possible financing or acquisition transactions in the future.  The issuance of preferred stock, however, could adversely affect the voting power of holders of common stock and decrease the amount of any liquidation distribution to such holders.  The presence of outstanding preferred stock could also have the effect of delaying, deterring or preventing a change in control of our company.  


As of March 25, 2014, we had no shares of preferred stock issued or outstanding.




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Share Purchase Warrants


On December 15, 2013 we issued an aggregate of 3,000,000 warrants to purchase shares of our common stock to Vitello Capital, Ltd. (“Vitello”).  These share purchase warrants expire on the earliest of: (i) December 15, 2014 or (ii) upon Vitello no longer providing consulting services to Blue Water.  The following table details all of Blue Water’s outstanding share purchase warrants:


Warrant Holder Name

 

Number of Warrants

 

Exercise Price

 

 

 

 

 

Vitello Capital, Ltd. (1)

 

1,000,000

 

$0.005

Vitello Capital, Ltd. (1)

 

1,000,000

 

$0.01

Vitello Capital, Ltd. (1)

 

1,000,000

 

$0.015


(1)

Alejandra G. Diaz has dispositive control over these securities.


As of March 25, 2014, other than the warrants described in the above table we do not have any other outstanding warrants to purchase shares of our stock.

 

Options

 

We have not issued and do not have outstanding any options to purchase shares of our stock.

 

Registration Rights


On September 16, 2013 we entered into a Registration Rights Agreement with Dutchess Opportunity Fund, II, LP (“Dutchess”).  Pursuant to this Registration Rights Agreement, we filed a Registration Statement on Form S-1 with the Securities and Exchange Commission (“SEC”) on October 10, 2013 which was subsequently declared “effective” by the SEC on October 21, 2013.  See “Investment Agreement and Registration Rights Agreement with Dutchess” on page 10.


As of March 25, 2014, there are no other outstanding registration rights or similar agreements.


Convertible Securities


Asher Enterprises, Inc.


On September 16, 2013 we entered into an agreement for the sale of a Convertible Promissory Note (“Asher Note 1”) in the principal amount $32,500 with an interest rate of 8% per annum pursuant to the terms of a Securities Purchase Agreement between Asher Enterprises, Inc. (“Asher”), a Delaware corporation, and Blue Water.  The Asher Note 1 closed on September 18, 2013 and matures on June 18, 2014.  The Asher Note 1 is convertible at 58% of the average of the lowest three trading prices of Blue Water’s common stock during the ten trading day period prior to the conversion date after 180 days.  Blue Water analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as a liability once the conversion option becomes effective after 180 days due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.


Subsequently, on February 7, 2014, Blue Water repaid the Asher Note 1 in full with no conversion.  Per the terms of the Asher Note 1, Blue Water repaid Asher $44,886.51.


On November 8, 2013 we entered into an agreement for the sale of a Convertible Promissory Note (“Asher Note 2”) in the principal amount $37,500 with an interest rate of 8% per annum pursuant to the terms of a Securities Purchase Agreement between Asher and Blue Water.  The Asher Note 2 closed on November 12, 2013 and matures on August 12, 2014.  The Asher Note 2 is convertible at 58% of the average of the lowest three trading prices of Blue Water’s common stock during the ten trading day period prior to the conversion date after 180 days.  Blue Water analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as a liability once the conversion option becomes effective after 180 days due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.


On December 23, 2013 we entered into an agreement for the sale of a Convertible Promissory Note (“Asher Note 3”) in the principal amount $27,500 with an interest rate of 8% per annum pursuant to the terms of a Securities Purchase Agreement



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between Asher and Blue Water.  The Asher Note 3 closed on January 7, 2014 and matures on September 26, 2014.  The Asher Note 3 is convertible at 58% of the average of the lowest three trading prices of Blue Water’s common stock during the ten trading day period prior to the conversion date after 180 days.  Blue Water analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as a liability once the conversion option becomes effective after 180 days due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.


The Asher Note 2, and Asher Note 3 (collectively, “Asher Notes”) are convertible into shares of our common stock based upon a discount to the market price.  The conversion terms of these convertible notes are based upon a discount to the then-prevailing average of the three (3) lowest trading bid prices and, as a result, the lower the stock price at the time Asher converts the convertible notes, the more shares of common stock Asher will receive. The number of shares of common stock issuable upon conversion of these convertible notes is indeterminate.  If the trading price of our common stock is low when the conversion price of these convertible notes is determined, we would be required to issue a higher number of shares of our common stock, which could cause substantial dilution to our stockholders.  In addition, if Asher opts to convert these convertible notes into shares of our common stock and sell those shares it could result in an imbalance of supply and demand for our common stock and result in lower trading prices for our common stock as reported by the OTCBB.  The further our stock price declines, the further the adjustment of the conversion price will fall and the greater the number of shares we will have to issue upon conversion.


In addition, the number of shares issuable upon conversion of the convertible note is potentially limitless.  While the overall ownership of Asher at any one moment may be limited to 9.99% of the issued and outstanding shares of our common stock, Asher may be free to sell any shares into the market that have previously been issued to them, thereby enabling them to convert the remaining portion of these convertible notes.


Mermaid Enterprises, N.V. (Acquisition of St. Maarten, D.W.I. Business Licenses)


On October 9, 2013 we entered into a Purchase Agreement and issued a Convertible Promissory Note (“Mermaid Note”) as payment for the acquisition of three (3) separate business licenses in the country of St. Maarten, Dutch West Indies consisting of one (1) General Business License and two (2) Managing Director’s Licenses.  The value of this transaction was $35,000.  The Mermaid Note carries a principal amount of $35,000 and an interest rate of 10% per annum.  The Mermaid Note is convertible into shares of our common stock at a fixed price of $0.0005 per share beginning no earlier than April 7, 2014.  The Mermaid Note matures on October 9, 2015.


JMJ Financial


On January 31, 2014 (“Effective Date”) we sold to JMJ Financial (“JMJ Financial”) a $335,000 Convertible Promissory Note (“JMJ Note”).  The JMJ Note provides up to an aggregate of $300,000 in gross proceeds after taking into consideration an Original Issued Discount (“OID”) of $35,000.


A key feature of the JMJ Note is that should Blue Water, at its sole discretion, repay all consideration received pursuant to the JMJ Note within 90 days of the Effective Date, there will be zero percent interest charged under the JMJ Note.  Otherwise, there will be a one-time interest charge of 12% for all consideration received by Blue Water pursuant to the JMJ Note.


At any time after 180 days of the Effective Date, the Investor may convert all or part of the JMJ Note into shares of Blue Water’s common stock at the lesser of $0.0185 a share or 60% of the lowest trade price in the 25 trading days prior to the conversion.


The JMJ Financial has agreed to restrict its ability to convert the JMJ Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.  The JMJ Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of Blue Water.  The JMJ Note also provides for penalties and rescission rights if Blue Water does not deliver shares of its common stock upon conversion within the required timeframes.




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Shares Eligible for Future Sale


As of March 25, 2014 we had 233,206,213 shares of our common stock issued and outstanding, a breakdown of which follows:


·

64,174,963 are freely tradable without restrictions (commonly referred to as the “public float”);

·

166,000,000 are restricted through March 31, 2015 pursuant to a share lock-up agreement.  After this lock-up agreement expires these shares may be publicly sold pursuant to Rule 144; and

·

3,031,250 are currently subject to the restrictions and sale limitations imposed by Rule 144.


From time to time, certain of our stockholders may be eligible to sell some or all of their restricted shares of our common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act, subject to certain volume restrictions and restrictions on the manner of sale.  In general, pursuant to Rule 144, non-affiliate stockholders may sell freely after six months subject only to the current public information requirement (which disappears after one year).  Affiliates may sell after six months subject to the Rule 144 volume, manner of sale, current public information and notice requirements.


The eventual availability for sale of substantial amounts of our common stock under Rule 144 could adversely affect prevailing market prices for our securities and cause you to lose most, if not all, of your investment in our business.


Securities Authorized for Issuance Under Equity Compensation Plans


As of March 25, 2014 we did not have any authorized Equity Compensation Plans.


Listing

 

Our common stock is quoted on the OTC Bulletin Board under the symbol “BLUU”.


Transfer Agent

 

VStock Transfer, LLC

77 Spruce Street, Suite 201

Cedarhurst, NY  11516


(212) 828-8436 Phone

(646) 599-1296 Fax

www.VStockTransfer.com


Recent Sales of Unregistered Securities


Set forth below is information regarding the issuance and sales of securities without registration since March 3, 2011 (inception) through March 25, 2014:


On March 3, 2011, we issued 6,000,000 and 5,000,000 shares of common stock, $0.001 par value, to Michael Hume and Christina Harris, respectively, in consideration of their services to us as officers and directors.  We issued these shares as Founder’s Shares.  In connection with this issuance, we relied upon the exemption from the registration requirements pursuant to the provisions of Section 4(2) of the Securities Act as a transaction by an issuer not involving any public offering.  By virtue of Mr. Hume’s and Ms. Harris’s relationships with us, each had access to all relevant information relating to our business and represented that they each had the required investment intent.  In addition, the securities issued bore an appropriate restrictive legend.


On March 3, 2011, we issued 5,000,000 shares of common stock to Arctic Eyes, LLC in consideration of its services related to the development of our website and its future marketing requirements.  We valued these services at $50,000, or $0.01 a share.  In connection with this issuance, we relied upon the exemption from the registration requirements pursuant to the provisions of Section 4(2) of the Securities Act as a transaction by an issuer not involving any public offering.  By virtue of its relationship to us, Arctic Eyes had access to all relevant information relating to our business and represented that it had the required investment intent.  In addition, the securities issued bore an appropriate restrictive legend.




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On March 3, 2011, we issued 5,000,000 shares of common stock to Taurus Financial Partners, LLC in consideration of its services of assisting with the creation and early development of our business.  We valued these services at $50,000, or $0.01 a share.  In connection with this issuance, we relied upon the exemption from the registration requirements pursuant to the provisions of Section 4(2) of the Securities Act as a transaction by an issuer not involving any public offering.  By virtue of its relationship to us, Taurus Financial Partners had access to all relevant information relating to our business and represented that it had the required investment intent.  In addition, the securities issued bore an appropriate restrictive legend.


On March 29, 2011, we issued 2,000,000 shares of common stock to Island Radio, Inc. in exchange for 2,000,000 restricted shares of Island Radio common stock, $0.001 par value.  Island Radio’s common stock trades on the OTC Bulletin Board under the trading symbol “ISLD”.  These shares were valued at $20,000, or $0.01 a share.  In connection with this issuance, we relied upon the exemption from the registration requirements pursuant to the provisions of Section 4(2) of the Securities Act as a transaction by an issuer not involving any public offering.  By virtue of its relationship to us, Island Radio had access to all relevant information relating to our business and represented that it had the required investment intent.  In addition, the securities issued bore an appropriate restrictive legend.


On February 17, 2012, we mutually agreed to rescind our consulting agreement with Arctic Eyes, LLC.  Arctic Eyes returned the 5,000,000 shares it had been holding since March 3, 2011.  These shares were subsequently cancelled and return to Blue Water’s treasury.


On July 15, 2013, we issued an aggregate of 75,000 shares of restricted common stock to Aeson Ventures, LLC (“Aeson”), an independent service provider.  We valued these shares at $18,750, or $0.25 a share, which was the closing price of our common stock as quoted on the OTC Bulletin Board on the same day.  In connection with these issuances, we relied upon the exemption from the registration requirements pursuant to the provisions of Section 4(2) of the Securities Act as a transaction by an issuer not involving any public offering.  By virtue of their relationships with us, Aeson had access to all relevant information relating to our business and represented that it had the required investment intent.  In addition, the securities issued bore an appropriate restrictive legend.


On March 23, 2013, we mutually agreed to rescind our consulting agreement with Aeson.  As part of rescinding the consulting agreement, Aeson returned 71,875 shares of Blue Water’s common stock.  These shares were subsequently cancelled.


On December 15, 2013, we issued an aggregate of 2,000,000 shares of restricted common stock to Vitello Capital, Ltd. (“Vitello”), an independent service provider.  We valued these shares at $10,000, or $0.005 a share, which was the closing price of our common stock as quoted on the OTC Bulletin Board on the subsequent trading day.  In connection with these issuances, we relied upon the exemption from the registration requirements pursuant to the provisions of Section 4(2) of the Securities Act as a transaction by an issuer not involving any public offering.  By virtue of its relationships with us, Vitello had access to all relevant information relating to our business and represented that it had the required investment intent.  In addition, the securities issued bore an appropriate restrictive legend.


Purchases of Equity Securities by the Issuer and Affiliated Purchases


During each month within the fourth quarter of the fiscal year ended December 31, 2013, neither we nor any “affiliated purchaser”, as that term is defined in Rule 10b-18(a)(3) under the Exchange Act, repurchased any of our common stock or other securities.



Item 6.  Selected Financial Data


Not applicable.



Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations


We were incorporated on March 3, 2011 in the State of Nevada.  We are currently developing a chain of casual dining restaurants in popular tourist destinations throughout the Caribbean region under the Blue Water Bar & Grill™ brand.  Additionally, Blue Water is engaged in making strategic equity investments in promising businesses that are in the early stages of obtaining their own listing on the OTC Bulletin Board.




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Our independent registered public accounting firm has issued a going concern opinion in their audit report included in the financial statements that are a part of this Annual Report on Form 10-K.  This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next 12 months.  Although we have begun executing on our business plan, we are not presently generating sufficient annual revenue to meet our financial obligations, particularly our ongoing reporting requirements with the SEC.  We do not anticipate generating revenues sufficient to meet our financial obligations until we are able to open first restaurant.  Accordingly, we must raise additional cash from sources other than operations.

 

To meet our need for cash we presently are exploring other such sources of funding, including raising funds through a second public offering, a private placement of securities and/or loans.  If we are unable to raise this additional funding, we may have to suspend operations until we do raise the cash or cease operations entirely.


The following discussion should be read in conjunction with our financial statements and the notes thereto and the other information included in this Annual Report as filed with the SEC on Form 10-K.


Limited Operating History; Need for Additional Capital


There is limited historical financial information about us upon which to base an evaluation of our performance.  We are in the early stages of developing operations.  We cannot guarantee that we will be successful in our business operations.  Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns, such as increases in marketing costs, increases in administration expenditures associated with daily operations, increases in accounting and audit fees, and increases in legal fees related to filings and regulatory compliance.

 

To become profitable and competitive, we have to successfully open operating restaurant properties.  We anticipate relying on equity sales of our common stock in order to continue to fund our business operations until we are able to generate sufficient revenues to cover our operating expenses, which may never happen.  Issuances of additional shares will result in dilution to our then existing stockholders.  There is no assurance that we will be able to make any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.  We may also rely on loans from our directors.  However, there are no assurances that our directors will provide us with any additional funds.

 

Currently, we do not have any arrangements for additional financing.  We have no assurance that future financing will be available to us on acceptable terms.  If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations.  Equity financing could result in additional dilution to existing shareholders.


Results of Operations


For the ease of reference, we refer to the fiscal year ended December 31, 2013 as fiscal 2013 or the fiscal year ended December 31, 2013 and the fiscal year ended December 31, 2012 as fiscal 2012 or the fiscal year ended December 31, 2012.


Fiscal Year Ended December 31, 2013 and 2012


Revenues.  We generated $10,000 in revenue during the fiscal year ended December 31, 2013 compared to $40,000 in revenue for the same period a year ago.  The reason for the decrease in revenue during fiscal 2013 compared to fiscal 2012 was the consulting project responsible for generating the revenue was completed during the three months ended March 31, 2013.  Since the completion of that project we have not generated any revenue and have focused our efforts on completing the development of the St. Maarten, Dutch West Indies based Blue Water Bar & Grill™ restaurants.  As such, we do not anticipate generating any new revenue until we successfully open these restaurants.

 

Operating Expenses.  Our total operating expenses for the fiscal year ended December 31, 2013 were $305,634, which is a $189,083, or 162.2%, increase compared to operating expenses of $116,551 for the same period a year ago.  Our increase in operating expenses was primarily attributable to increased expenses from implementing an investor relations program.  Additionally, due to expanded operating activities, we experienced higher general operating expenses and higher costs related to our ongoing SEC reporting requirements, which have consisted primarily of legal, accounting and outside consulting fees.


Other Income (Expenses).  During the fiscal year ended December 31, 2013 we incurred an aggregate of ($445,064) in other expenses compared to $-0- for the same period a year ago.  These other expenses were comprised of ($420,000) in a one-time impairment charge against subscriptions for common stock and ($25,064) in interest expense.  This interest expense was comprised of ($1,973) in accrued interest relating to outstanding convertible promissory notes and ($23,091) in amortized debt discounts resulting from Beneficial Convertible Features (BCF) relating to outstanding convertible promissory notes.



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Net Income (Loss).  We had a net loss of ($740,698) for the fiscal year ended December 31, 2013 compared to a net loss of ($76,551) for the same period a year ago, which represented a $664,147, or 867.6%, increase in net loss.  The increase in net loss was the result of (i) a one-time impairment charge against subscriptions for common stock, (ii) the expense of implementing an investor relations program, and (iii) increased general operating expenses and higher ongoing SEC compliance and reporting requirements, which consisted primarily of legal, accounting and outside consulting fees.


Cumulative During the Development Stage – March 3, 2011 (inception) through December 31, 2013


For ease of reading we refer to the period of March 3, 2011 (inception) through December 31, 2013 as the “Developmental Period”.


Revenues.  We have generated $50,000 in revenue during the Development Period.  This revenue was the result of us being retained to develop a sports themed restaurant concept, inclusive of financials, 5-year projections, feasibility studies, and floor and traffic planning.  We completed work on this project during the three months ended March 31, 2013.

 

Operating Expenses.  Our total operating expenses for the Developmental Period were $549,200.  These operating expenses were primarily attributable to organizational costs related to our formation, offerings of our common stock, implementing an investor relations program, and complying with our ongoing SEC reporting requirements.  These expenses have consisted primarily of legal, accounting, and outside consulting fees.


Other Income (Expenses).  During the Development Period we experienced ($465,000) in other expenses consisting of (i) a realized loss of ($20,000) on our investment in 2,000,000 shares of Island Radio, Inc. (OTCBB: ISLD) common stock, $0.001 par value, (ii) a one-time impairment charge against subscriptions for common stock, and (iii) incurred ($25,064) in interest expenses related to outstanding convertible promissory notes.


Net Loss.  We have incurred a net loss of ($964,264) during the Developmental Period.  The net loss net loss was primarily attributable to (i) organizational costs related to our formation, offerings of our common stock, (ii) implementing an investor relations program, (iii) a one-time impairment charge against subscriptions for common stock, and (iv) complying with our ongoing SEC reporting requirements, which consists primarily of legal, accounting and outside consulting fees.


Total Stockholders’ Deficit.  Our stockholders’ deficit was ($248,081) as of December 31, 2013.


Liquidity and Capital Resources


As of December 31, 2013, we had total assets of $7,357, which consisted of cash and 20,000,000 shares of Stream Flow Media, Inc. which were valued at $-0- a share.  


As of December 31, 2013, our total liabilities were $255,438, which consisted of $192,907 in accounts payable to a related party, Taurus Financial Partners, LLC (“Taurus”), $33,000 to non-related parties, $27,558 in convertible promissory notes (net of unamortized debt discounts of $77,442), and $1,973 in accrued interest.  It is important to note that as of March 25, 2014 Taurus owned 71.2% of Blue Water’s issued and outstanding common stock and that our President and Chief Executive Officer, J. Scott Sitra, is concurrently the President and Chief Executive Officer at Taurus.  Further, we had no external credit facilities (i.e. bank loans, revolving lines of credit, etc.).


We expect to incur continued losses over the next 12 months, probably even longer.  As of December 31, 2013, we had nominal assets and anticipate that we need at least $900,000 in additional financing to open our Blue Water Bar & Grill™ restaurants in St. Maarten, Dutch West Indies and meet our minimal working capital requirements over the next 12 months.


Dutchess Equity Line


On September 16, 2013 we entered into an Investment Agreement and a Registration Rights Agreement with Dutchess Opportunity Fund, II, LP requiring Dutchess to purchase up to $5,000,000 worth of our common stock over a 36 month period and for us to register 20,000,000 (after taking into consideration our recent 10-for-1 forward stock split) shares of our common stock for resale with the SEC, respectively.  Due to various factors relating to this type of financing, we can offer no assurances that we will receive sufficient financing, if any, from the Dutchess Equity Line.




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Asher Enterprises Convertible Note 1


On September 16, 2013 we entered into an agreement for the sale of a Convertible Promissory Note (“Asher Note 1”) in the principal amount $32,500 with an interest rate of 8% per annum pursuant to the terms of a Securities Purchase Agreement between Asher Enterprises, Inc. (“Asher”), a Delaware corporation, and Blue Water.  The Asher Note 1 closed on September 18, 2013 and matures on June 18, 2014.  The Asher Note 1 is convertible at 58% of the average of the lowest three trading prices of Blue Water’s common stock during the ten trading day period prior to the conversion date after 180 days.  


Blue Water analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as a liability once the conversion option becomes effective after 180 days due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.  


This note is measured at fair value at the end of each reporting period or termination of the instrument with the change in fair value recorded to earnings.  The fair value of the embedded beneficial conversion feature resulted in a full discount of $32,500 to the note on the debt issuance date.  The discount will be amortized over the term of the note to interest expense using the straight line method which approximates the effective interest method.


As of December 31, 2013, the outstanding balance due on the Asher Note 1 was $33,241, which includes $741 in accrued interest.  Further, as of December 31, 2013, the remaining unamortized debt discount was $19,788.


Subsequently, on February 7, 2014, Blue Water repaid the Asher Note 1 in full with no conversion.  Per the terms of the agreement, Blue Water repaid the Asher Note 1 at $44,886.51.


Asher Enterprises Convertible Note 2


On November 8, 2013 we entered into an agreement for the sale of a Convertible Promissory Note (“Asher Note 2”) in the principal amount $37,500 with an interest rate of 8% per annum pursuant to the terms of a Securities Purchase Agreement between Asher Enterprises, Inc. (“Asher”), a Delaware corporation, and Blue Water.  The Asher Note 2 closed on November 12, 2013 and matures on May 7, 2014.  The Asher Note 2 is convertible at 58% of the average of the lowest three trading prices of Blue Water’s common stock during the ten trading day period prior to the conversion date after 180 days.  


Blue Water analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as a liability once the conversion option becomes effective after 180 days due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.  


This note is measured at fair value at the end of each reporting period or termination of the instrument with the change in fair value recorded to earnings.  The fair value of the embedded beneficial conversion feature resulted in a partial discount of $33,033 to the note on the debt issuance date.  The discount will be amortized over the term of the note to interest expense using the straight line method which approximates the effective interest method.


As of December 31, 2013, the outstanding balance due on the Asher Note 2 was $37,936, which includes $436 in accrued interest.  Further, as of December 31, 2013, the remaining unamortized debt discount was $26,713.


Mermaid Enterprises, N.V.


On October 9, 2013 we entered into a Purchase Agreement and issued a Convertible Promissory Note (“Mermaid Note”) as payment for the acquisition of three (3) separate business licenses in the country of St. Maarten, Dutch West Indies consisting of one (1) General Business License and two (2) Managing Director’s Licenses.  The value of this transaction was $35,000.


The Mermaid Note carries a principal amount of $35,000 and an interest rate of 10% per annum.  The Mermaid Note is convertible into shares of our common stock at a fixed price of $0.0005 per share beginning no earlier than April 7, 2014.  The Mermaid Note matures on October 9, 2015.


As of December 31, 2013, the outstanding balance due on the Mermaid Note was $35,796, which includes $796 in accrued interest.  Further, as of December 31, 2013, the remaining unamortized debt discount was $30,625.



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JMJ Financial


On January 31, 2014 (“Effective Date”) we sold to JMJ Financial (“JMJ Financial”) a $335,000 Convertible Promissory Note (“JMJ Note”).  The JMJ Note provides up to an aggregate of $300,000 in gross proceeds after taking into consideration an Original Issued Discount (“OID”) of $35,000.


A key feature of the JMJ Note is that should Blue Water, at its sole discretion, repay all consideration received pursuant to the JMJ Note within 90 days of the Effective Date, there will be zero percent interest charged under the JMJ Note.  Otherwise, there will be a one-time interest charge of 12% for all consideration received by Blue Water pursuant to the JMJ Note.


At any time after 180 days of the Effective Date, the Investor may convert all or part of the JMJ Note into shares of Blue Water’s common stock at the lesser of $0.0185 a share or 60% of the lowest trade price in the 25 trading days prior to the conversion.


The JMJ Financial has agreed to restrict its ability to convert the JMJ Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.  The JMJ Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of Blue Water.  The JMJ Note also provides for penalties and rescission rights if Blue Water does not deliver shares of its common stock upon conversion within the required timeframes.


Additional Need and Sources of Financing


Currently we are exploring various sources of additional financing.  However, it is important to note that other than the Dutchess Equity Line we presently do not have any material arrangements for additional financing.  We have no assurance that future financing will be available to us on acceptable terms.  If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations.  Future equity financing, if ever available, could result in additional and potentially substantial dilution to existing shareholders.


Going Concern Consideration


Our independent auditors included an explanatory paragraph in their report on the accompanying financial statements regarding concerns about our ability to continue as a going concern.  Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.


Off-Balance Sheet Transactions


We do not engage in off-balance sheet transactions.


Contractual Obligations


The following table summarizes Blue Water’s contractual obligations as of December 31, 2013:


 

 

 

 

Due Within

Description

 

Total

 

2014

 

2015

 

 

 

 

 

 

 

Convertible promissory notes

$

105,000

  $

70,000

  $

35,000

 

Total

$

105,000

  $

70,000

  $

35,000




CRITICAL ACCOUNTING POLICIES


The accompanying financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (US GAAP) for financial information and in accordance with the Securities and Exchange Commission’s (SEC) Regulation S-X.  They reflect all adjustments which are, in the opinion of Blue Water’s management, necessary for a fair presentation of the financial position and operating results as of and for the fiscal years ended December 31, 2013 and 2012, and cumulative from March 3, 2011 (inception) to December 31, 2013.



37






Use of Estimates


The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Because of the use of estimates inherent in the financial reporting process, actual results may differ significantly from those estimates.


Cash and Cash Equivalents


For purposes of the statement of cash flows, Blue Water considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.  As of December 31, 2013 and 2012, Blue Water had no cash equivalents.


Revenue Recognition


Blue Water follows the guidance of FASB ASC Topic 605 for revenue recognition.  In general, Blue Water recognizes revenue when (1) the price is fixed and determinable, (2) persuasive evidence of an arrangement exists, (3) the service has been provided, and (4) collectability is reasonably assured.


Blue Water generates and anticipates generating future revenue from two sources: (i) food, beverage and souvenir sales from its Blue Water Bar & Grill™ restaurant concept presently under development and (ii) sales of its of distilled spirits, which includes its Blue Water Ultra Premium Rum™.  Revenue from both sources will be recognized at the time of the sale.


Accounts Receivable


Accounts receivable are stated at net invoice amount.  An allowance for doubtful accounts is based on management’s best estimate of uncollectible receivable balances based on the creditworthiness of the customer and prior collection history.  As of December 31, 2013 and 2012 the allowance for doubtful accounts was $-0-.


Short-Term Investments


Blue Water accounts for its short-term investments, which are classified as trading securities, in accordance with US GAAP for certain investments in debt and equity securities, which requires that trading securities be carried at fair value.  Unrealized gains and losses due to changes in fair value as well as realized gains and losses resulting from sales of securities are reported as Other Income/Expenses in the statement of operations.  Fair value of the securities is based upon quoted market prices in active markets or estimated fair value when quoted market prices are not available.  The cost basis for realized gains and losses is determined on a specific identification basis.  As of December 31, 2013, Blue Water had no short-term investments.


Long-Term Investments


Blue Water accounts for its long-term investments, which are designated as available-for-sale securities, in accordance with US GAAP for certain investments in debt and equity securities, which requires that available-for-sale securities be carried at fair value with unrealized gains and losses, net of tax, included in stockholders' equity under accumulated other comprehensive income (loss).  Fair value of the securities is based upon quoted market prices in active markets or estimated fair value when quoted market prices are not available.  As of December 31, 2013, Blue Water had long-term investments consisting of 20,000,000 shares of Stream Flow Media, Inc. which were valued at $-0- a share


Fair Value of Financial Instruments


ASC 820, “Fair Value Measurements” and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value.  A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  It prioritizes the inputs into three levels that may be used to measure fair value:



38






Level

 

Description

 

 

 

Level 1

 

Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

 

Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

 

Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.


The estimated fair values of Blue Water’s financial instruments are as follows:


 

Fair Value Measurement at December 31, 2013 Using:

 

 

 

 

 

 

 

 

 






Description

 






12/31/13

 

Quoted Prices In Active Markets For Identical Assets

(Level 1)

 


Significant Other Observable Inputs

(Level 2)

 



Significant Unobservable Inputs

(Level 3)

Assets

 

 

 

 

 

 

 

 

 

Short-term

 

 

 

 

 

 

 

 

 

 

Cash and equivalents

$

7,357

$

7,357

$

-

$

-

 

 

 

 

 

 

 

 

 

 

 

Long-term

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

-

$

-

$

-

$

-

Total assets measured at fair value

$

7,357

$

7,357

$

-

$

-

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Accounts payable (related party)

$

192,907

$

192,907

$

-

$

-

 

Accounts payable (non-related)

 

33,000

 

33,000

 

 

 

 

 

Convertible notes payable, net of unamortized debt discount of $77,442

 



27,558

 



 

 

 



27,558

 

Accrued Interest

 

1,973

 

1,973

 

 

 

 

Total liabilities measured at fair value

$

255,438

$

227,880

$

-

$

27,558




39





The estimated fair values of Blue Water’s financial instruments are as follows:


 

Fair Value Measurement at December 31, 2012 Using:

 

 

 

 

 

 

 

 

 






Description

 






12/31/12

 

Quoted Prices In Active Markets For Identical Assets

(Level 1)

 


Significant Other Observable Inputs

(Level 2)

 



Significant Unobservable Inputs

(Level 3)

Assets

 

 

 

 

 

 

 

 

 

Cash and equivalents

$

30,299

$

30,299

$

-

$

-

Total assets measured at fair value

$

30,299

$

30,299

$

-

$

-

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Accounts payable (related party)

$

133,865

$

133,865

$

-

$

-

Total liabilities measured at fair value

$

133,865

$

133,865

$

-

$

-


Net Loss per Share Calculation


Basic net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period.   Diluted earnings per shares is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.  During the fiscal year ended December 31, 2012 Blue Water had no dilutive financial instruments issued or outstanding.  However, as of December 15, 2013 which includes the fiscal year ended December 31, 2013 and cumulative from March 3, 2011 (inception) to December 31, 2013 Blue Water had dilutive financial instruments consisting of an aggregate of 3,000,000 share purchase warrants which enable the holder to purchase 1,000,000 shares of Blue Water’s common stock at $.005 a share, $0.01 a share, and $0.015 a share, respectively.


Beneficial Conversion Feature


From time to time, Blue Water may issue convertible notes that may have conversion prices that create an embedded beneficial conversion feature pursuant to the Emerging Issues Task Force guidance on beneficial conversion features.  A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of any attached equity instruments, if any related equity instruments were granted with the debt.  In accordance with this guidance, the intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital.  The debt discount is amortized to interest expense over the life of the note using either the straight line method or the effective interest method.


Income Taxes


We account for income taxes pursuant to FASB ASC 740, Income Taxes.  Under FASB ASC 740-10-25, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes.  The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.

 

We maintain a valuation allowance with respect to deferred tax assets.  Blue Water establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration Blue Water’s financial position and results of operations for the current period.  Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carryforward period under the Federal tax laws.

 

Changes in circumstances, such as Blue Water generating taxable income, could cause a change in judgment about its ability to realize the related deferred tax asset.  Any change in the valuation allowance will be included in income in the year of the change in estimate.




40





Recently Issued Accounting Pronouncements


In July 2012, the FASB issued ASU 2012-02, “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” in Accounting Standards Update No. 2012-02.  This update amends ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles - Goodwill and Other - General Intangibles Other than Goodwill.  The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012.  Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.  The adoption of ASU 2012-02 has not had a material impact on Blue Water’s financial position or results of operations.


In August 2012, the FASB issued ASU 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03.  This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114.  The adoption of ASU 2012-03 has not had a material impact on Blue Water’s financial position or results of operations.


In October 2012, the FASB issued Accounting Standards Update ASU 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04.  The amendments in this update cover a wide range of Topics in the Accounting Standards Codification.  These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements.  The amendments in this update will be effective for fiscal periods beginning after December 15, 2012.  The adoption of ASU 2012-04 has not had a material impact on Blue Water’s financial position or results of operations.


In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11.  The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users.  In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs.  Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013.  The adoption of ASU 2013-01 has not had a material impact on Blue Water’s financial position or results of operations.


In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications.  Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period.  Those gains and losses are later reclassified out of accumulated other comprehensive income into net income.  The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements.  All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP.  The new amendments will require an organization to:


·

Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and

 

·

Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period.  This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.




41





The amendments apply to all public and private companies that report items of other comprehensive income.  Public companies are required to comply with these amendments for all reporting periods (interim and annual).  The amendments are effective for reporting periods beginning after December 15, 2012, for public companies.  Early adoption is permitted.  The adoption of ASU No. 2013-02 has not had a material impact on Blue Water’s financial position or results of operations.


In July 2013, FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists."  The provisions of ASU No. 2013-11 require an entity to present an unrecognized tax benefit, or portion thereof, in the statement of financial position as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward, with certain exceptions related to availability. ASU No. 2013-11 is effective for interim and annual reporting periods beginning after December 15, 2013.  The adoption of ASU No. 2013-11 is not expected to have a material impact on Blue Water's Consolidated Financial Statements.


Blue Water has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial statements.



Item 7A.  Quantitative and Qualitative Disclosures About Market Risk


Not applicable.




42





Item 8.  Financial Statements and Supplementary Data



Table of Contents


Item

Page

 

 

Report of Independent Registered Public Accounting Firm

F-2

 

 

Balance Sheets

F-3

 

 

Statements of Operations

F-4

 

 

Statement of Stockholders’ (Deficit)

F-5

 

 

Statements of Cash Flows

F-7

 

 

Notes to the Financial Statements

F-8





F - 1





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors

Blue Water Global Group, Inc. (A Development Stage Company)


We have audited the accompanying balance sheets of Blue Water Global Group, Inc. (A Development Stage Company) as of December 31, 2013 and 2012 and the related statement of operations, stockholders’ deficit and cash flows for the fiscal years then ended and the period from March 3, 2011 (inception) through December 31, 2013.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.


We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Blue Water Global Group, Inc. as of December 31, 2013 and 2012, and the results of its operations, changes in stockholders’ deficit and cash flows for the period described above in conformity with accounting principles generally accepted in the United States of America.


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 2 to the financial statements, the Company suffered a net loss from operations since inception and had negative working capital as of December 31, 2013, which raises substantial doubt about its ability to continue as a going concern.  Management’s plans regarding those matters are also described in Note 2.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


 /s/ M&K CPAS, PLLC

 www.mkacpas.com

Houston, Texas

March 27, 2014






F - 2





BLUE WATER GLOBAL GROUP, INC.

(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS



ASSETS


 

 

December 31,

 

 

2013

 

2012

Current assets:

 

 

 

 

 

Cash and equivalents

$

7,357

$

30,299

 

 

 

7,357

 

30,299

 

 

 

 

 

Total assets:

$

7,357

$

30,299



LIABILITIES AND STOCKHOLDERS’ (DEFICIT)


Current liabilities:

 

 

 

 

 

Accounts payable (related party)

$

192,907

$

133,865

 

Accounts payable (non-related)

 

33,000

 

-

 

Convertible notes payable, net of unamortized debt discounts of

     $77,442 and $-0-, respectively

 


27,558

 

-

 

Accrued interest

 

1,973

 

-

 

Total current liabilities

 

255,438

 

133,865

 

 

 

 

 

 

 

Total liabilities

$

255,438

$

133,865

 

 

 

 

 

Commitments and contingencies

 

-

 

-

 

 

 

 

 

 

Stockholders’ (deficit):

 

 

 

 

 

Preferred stock, $0.001 par value, 5,000,000 shares authorized;

     no shares issued and outstanding

 


-

 


-

 

Common stock, $0.001 par value, 700,000,000 shares authorized;

     229,331,250 and 180,000,000 shares issued and outstanding, respectively

 


229,331

 


180,000

 

Additional paid-in capital

 

486,852

 

(60,000)

 

Accumulated other comprehensive income (loss)

 

-

 

-

 

(Deficit) accumulated during the development stage

 

(964,264)

 

(223,566)

 

 

 

 

 

 

 

Total stockholders’ (deficit)

$

(248,081)

$

(103,566)

 

 

 

 

 

Total liabilities and stockholders’ (deficit)

$

7,357

$

30,299













The accompanying notes to the financial statements are an integral part of these statements.



F - 3





BLUE WATER GLOBAL GROUP, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS



 

 

 

For the fiscal year ended

December 31,

 

Cumulative from

March 3, 2011 (inception) to 12/31/13

 

 

 


2013



2012

 

 

 

 

 

 

 

 

 

Revenues, net

$

10,000

$

40,000

$

50,000

 

 

 

 

 

 

 

 

Cost of revenues

 

-

 

-

 

-

 

 

 

 

 

 

 

 

Gross profit

 

10,000

 

40,000

 

50,000

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

General and administrative

 

4,595

 

1,066

 

5,821

 

Accounting fees

 

7,750

 

5,000

 

18,750

 

Advertising and marketing fees

 

6,711

 

-

 

57,065

 

Consulting fees

 

64,109

 

9,000

 

73,109

 

Legal fees

 

145,950

 

99,458

 

315,908

 

Investor relations

 

71,581

 

-

 

71,581

 

Transfer agent fees

 

4,938

 

2,027

 

6,966

 

Total expenses

 

305,634

 

116,551

 

549,200

 

 

 

 

 

 

 

 

(Loss) from operations

 

(295,634)

 

(76,551)

 

(499,200)

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

Interest expense

 

(1,973)

 

-

 

(1,973)

 

Amortization of convertible notes

 

(23,091)

 

-

 

(23,091)

 

Bad Debt Charge

 

(420,000)

 

-

 

(420,000)

 

Realized loss on investment

 

-

 

-

 

(20,000)

 

Total other income (expense)

 

(445,064)

 

-

 

(465,064)

 

 

 

 

 

 

 

 

Provision for income taxes

 

-

 

-

 

-

 

 

 

 

 

 

 

 

Net (loss)

$

(740,698)

$

(76,551)

$

(964,264)

 

 

 

 

 

 

 

 

(Loss) per common share,

     basic and diluted


$


(0.00)


$


(0.00)



 

 

 

 

 

 

 

 

Weighted average number of
    common shares outstanding,

     basic and diluted

 



211,686,387

 



186,284,150

 













The accompanying notes to the financial statements are an integral part of these statements.



F - 4





BLUE WATER GLOBAL GROUP, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF STOCKHOLDERS’ (DEFICIT)

For the period from March 3, 2011 (inception) to December 31, 2013







Description

 




Common Stock

 



Additional

Paid-In

Capital

 



Common

Stock

 

(Deficit)

Accumulated

During the

Development

Stage

 





Total

 

Shares

 

Amount

 

 

Subscribed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance,

March 3, 2011 (inception)

 



-



$



-



$



-



$



-



$



-



$



-

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares to directors (founder’s shares)

 





110,000,000

 





110,000

 





(110,000)

 





-

 





-

 





-

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares to consultants

 



100,000,000

 



100,000

 



-

 



-

 



-

 



100,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares for restricted securities

 




20,000,000

 




20,000

 




-

 




-

 




-

 




20,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) for the period

 


-

 


-

 


-

 


-

 


(147,015)

 


(147,015)

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance,

December 31, 2011

 



230,000,000



$



230,000



$



(110,000)



$



-



$



(147,015)



$



(27,015)

 

 

 

 

 

 

 

 

 

 

 

 

 

Rescinding of consulting agreement

 



(50,000,000)

 



(50,000)

 



50,000

 



-

 



-

 



-

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) for the period

 


-

 


-

 


-

 


-

 


(76,551)

 


(76,551)

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance,

December 31, 2012

 



180,000,000



$



180,000



$



(60,000)



$



-



$



(223,566)



$



(103,566)







The accompanying notes to the financial statements are an integral part of these statements.



F - 5





BLUE WATER GLOBAL GROUP, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF STOCKHOLDERS’ (DEFICIT)

For the period from March 3, 2011 (inception) to December 31, 2013

 (continued)




Balance,

December 31, 2012

 



180,000,000



$



180,000



$



(60,000)



$



-



$



(223,566)



$



(103,566)

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares for cash

 



47,300,000

 



47,300

 



424,460

 



(470,000)

 



-

 



1,760

 

 

 

 

 

 

 

 

 

 

 

 

 

Receipt of payment for common shares subscribed

 

 

 

 

 

 

 




50,000

 

 

 




50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairment of common shares subscribed

 

 

 

 

 

 

 



420,000

 

 

 



420,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares to consultants

 



2,750,000

 



2,750

 



26,000

 



-

 



-

 



28,750

 

 

 

 

 

 

 

 

 

 

 

 

 

Rescinding of consulting agreement

 



(718,750)

 



(719)

 



(17,250)

 



-

 



-

 



(17,969)

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount on convertible notes with a Beneficial Conversion Feature (BCF)

 





-

 





-

 





100,533

 





-

 





-

 





100,533

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of warrants to consultants

 



-

 



-

 



13,109

 



-

 



-

 



13,109

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) for the period

 


-

 


-

 


-

 


-

 


(740,698)

 


(740,698)

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance,

December 31, 2013

 



229,331,250



$



229,331



$



486,852



$



-



$



(964,264)



$



(248,081)






The accompanying notes to the financial statements are an integral part of these statements.



F - 6





BLUE WATER GLOBAL GROUP, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS



 

 

 

For the fiscal year ended

December 31,

 

Cumulative from 3/3/11 (inception) to 12/31/13

 

 

 


2013

 


2012

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income (loss)

$

(740,698)

$

(76,551)

$

(964,264)

 

Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities

 

 

 

 

 

 

 

 

Realized loss on investment

 

-

 

-

 

20,000

 

 

Common stock issued in connection with services provided by consultants

 


10,781

 


-

 


110,781

 

 

Warrants issued in connection with services provided by consultants

 


13,109

 


-

 


13,109

 

 

Impairment of subscribed common stock

 

420,000

 

-

 

420,000

 

 

Common stock issued in connection with services associated with subscription receivable

 


50,000

 


-

 


50,000

 

 

Amortization of discount on convertible debt

 

23,091

 

-

 

23,091

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Increase (decrease) in accounts payable (related party)

 


59,042

 


106,850

 


192,907

 

 

Increase (decrease) in accounts payable (non-related)

 

33,000

 

-

 

33,000

 

 

Increase (decrease) in accrued interest

 

1,973

 

-

 

1,973

 

 

 

 

 

 

 

 

 

 

Net cash provided (used) by operating activities

 

(129,702)

 

30,299

 

(99,403)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Net proceeds from convertible promissory notes

$

105,000

$

-

$

105,000

 

Net proceeds from sale of common stock

 

1,760

 

 

 

1,760

 

 

 

 

 

 

 

 

 

Net cash provided (used) by financing activities

 

106,760

 

-

 

106,760

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

(22,942)

 

30,299

 

7,357

 

 

 

 

 

 

 

 

 

Cash – beginning of period

 

30,299

 

-

 

-

 

 

 

 

 

 

 

 

 

Cash – end of period

$

7,357

$

30,299

$

7,357

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

Issuance of common shares to directors (founder’s stock)

$

-

$

-

$

11,000

 

Issuance of common shares to Island Radio, Inc. (share exchange)

 


-



-

 


20,000

 

Beneficial Conversion Feature (BCF) of convertible notes

 

105,000

 

-

 

105,000

 

Rescinding of shares

 

-

 

5,000

 

5,000

 

Issuance of common shares for common stock subscribed

 

420,000

 

-

 

420,000

 

 

 

$

525,000

$

5,000

$

550,000

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

Interest

$

-

$

-

$

-

 

Income taxes

$

-

$

-

$

-



The accompanying notes to the financial statements are an integral part of these statements.



F - 7





BLUE WATER GLOBAL GROUP, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2013



NOTE 1 – Summary of Significant Accounting Policies


Organization


Blue Water Global Group, Inc. (“Company” or “Blue Water”) is a development stage company that was incorporated under the laws of the State of Nevada on March 3, 2011 under the name Blue Water Restaurant Group, Inc.  Blue Water amended its Articles of Incorporation on June 13, 2013 to change its name to Blue Water Global Group, Inc.  The Company is currently developing a chain of casual dining restaurants in popular tourist destinations throughout the Caribbean region under the Blue Water Bar & Grill™ brand and is preparing to launch a line of premium rums which include its flagship rum Blue Water Ultra Premium Rum™.  Additionally, Blue Water is engaged in making strategic equity investments in promising businesses that are in the early stages of obtaining their own listing on the OTC Bulletin Board (“OTCBB”).


Basis of Presentation


The accompanying financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“US GAAP”) for financial information and in accordance with the Securities and Exchange Commission’s (“SEC”) Regulation S-X.  They reflect all adjustments which are, in the opinion of the Company’s management, necessary for a fair presentation of the financial position and operating results as of and for the fiscal years ended December 31, 2013 and 2012, and for the period March 3, 2011 (inception) to December 31, 2013.


Use of Estimates


The accompanying financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America.  Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment.  Actual results may vary from these estimates.


Cash and Cash Equivalents


For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.  As of December 31, 2013 and 2012, the Company had no cash equivalents.


Revenue Recognition


The Company follows the guidance of FASB ASC Topic 605 for revenue recognition.  In general, the Company recognizes revenue when (1) the price is fixed and determinable, (2) persuasive evidence of an arrangement exists, (3) the service has been provided, and (4) collectability is reasonably assured.


The Company generates and anticipates generating future revenue from two sources: (i) food, beverage and souvenir sales from its Blue Water Bar & Grill™ restaurant concept presently under development and (ii) sales of its of distilled spirits, which includes its Blue Water Ultra Premium Rum™.  Revenue from both sources will be recognized at the time of the sale.


Accounts Receivable


Accounts receivable are stated at net invoice amount.  An allowance for doubtful accounts is based on management’s best estimate of uncollectible receivable balances based on the creditworthiness of the customer and prior collection history.  As of December 31, 2013 and 2012 the allowance for doubtful accounts was $-0-.




F - 8





Short-Term Investments


The Company accounts for its short-term investments, which are classified as trading securities, in accordance with US GAAP for certain investments in debt and equity securities, which requires that trading securities be carried at fair value.  Unrealized gains and losses due to changes in fair value as well as realized gains and losses resulting from sales of securities are reported as Other Income/Expenses in the statement of operations.  Fair value of the securities is based upon quoted market prices in active markets or estimated fair value when quoted market prices are not available.  The cost basis for realized gains and losses is determined on a specific identification basis.  As of December 31, 2013, the Company had no short-term investments.


Long-Term Investments


The Company accounts for its long-term investments, which are designated as available-for-sale securities, in accordance with US GAAP for certain investments in debt and equity securities, which requires that available-for-sale securities be carried at fair value with unrealized gains and losses, net of tax, included in stockholders' equity under accumulated other comprehensive income (loss).  Fair value of the securities is based upon quoted market prices in active markets or estimated fair value when quoted market prices are not available.  As of December 31, 2013, the Company had long-term investments consisting of 20 million shares of Stream Flow Media, Inc. which were valued at $-0-.


Fair Value of Financial Instruments


ASC 820, “Fair Value Measurements” and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value.  A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  It prioritizes the inputs into three levels that may be used to measure fair value:


Level

 

Description

 

 

 

Level 1

 

Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

 

Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

 

Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.




F - 9





The estimated fair values of the Company’s financial instruments are as follows:


 

Fair Value Measurement at December 31, 2013 Using:

 

 

 

 

 

 

 

 

 






Description

 






12/31/13

 

Quoted Prices In Active Markets For Identical Assets

(Level 1)

 


Significant Other Observable Inputs

(Level 2)

 



Significant Unobservable Inputs

(Level 3)

Assets

 

 

 

 

 

 

 

 

 

Short-term

 

 

 

 

 

 

 

 

 

 

Cash and equivalents

$

7,357

$

7,357

$

-

$

-

 

 

 

 

 

 

 

 

 

 

 

Long-term

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

-

$

-

$

-

$

-

Total assets measured at fair value

$

7,357

$

7,357

$

-

$

-

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Accounts payable (related party)

$

192,907

$

192,907

$

-

$

-

 

Accounts payable (non-related)

 

33,000

 

33,000

 

 

 

 

 

Convertible notes payable, net of unamortized debt discount of $77,442

 



27,558

 



 

 

 



27,558

 

Accrued Interest

 

1,973

 

1,973

 

 

 

 

Total liabilities measured at fair value

$

255,438

$

227,880

$

-

$

27,558


The estimated fair values of the Company’s financial instruments are as follows:


 

Fair Value Measurement at December 31, 2012 Using:

 

 

 

 

 

 

 

 

 






Description

 






12/31/12

 

Quoted Prices In Active Markets For Identical Assets

(Level 1)

 


Significant Other Observable Inputs

(Level 2)

 



Significant Unobservable Inputs

(Level 3)

Assets

 

 

 

 

 

 

 

 

 

Cash and equivalents

$

30,299

$

30,299

$

-

$

-

Total assets measured at fair value

$

30,299

$

30,299

$

-

$

-

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Accounts payable (related party)

$

133,865

$

133,865

$

-

$

-

Total liabilities measured at fair value

$

133,865

$

133,865

$

-

$

-


Net Loss per Share Calculation


Basic net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period.   Diluted earnings per shares is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.  During the fiscal year ended December 31, 2012 the Company had no dilutive financial instruments issued or outstanding.  However, as of December 15, 2013 which includes the fiscal year ended December 31, 2013 and cumulative from March 3, 2011 (inception) to December 31, 2013 the Company had dilutive financial instruments consisting of an aggregate of 3,000,000 share purchase warrants which enable the holder to purchase 1,000,000 shares of the Company’s common stock at $.005 a share, $0.01 a share, and $0.015 a share, respectively.





F - 10





Beneficial Conversion Feature


From time to time, the Company may issue convertible notes that may have conversion prices that create an embedded beneficial conversion feature pursuant to the Emerging Issues Task Force guidance on beneficial conversion features.  A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of any attached equity instruments, if any related equity instruments were granted with the debt.  In accordance with this guidance, the intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital.  The debt discount is amortized to interest expense over the life of the note using either the straight line method or the effective interest method.


Income Taxes


The Company accounts for income taxes pursuant to FASB ASC 740, Income Taxes.  Under FASB ASC 740-10-25, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes.  The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.

 

The Company maintains a valuation allowance with respect to deferred tax assets.  Blue Water establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period.  Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carryforward period under the Federal tax laws.

 

Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about its ability to realize the related deferred tax asset.  Any change in the valuation allowance will be included in income in the year of the change in estimate.


Fiscal Year


The Company elected December 31st for its fiscal year end.


NOTE 2 – Development Stage Activities and Going Concern


The Company is a development stage business that is currently developing a chain of casual dining restaurants in popular tourist destinations throughout the Caribbean region under the Blue Water Bar & Grill™ brand.  Additionally, Blue Water is engaged in making strategic equity investments in promising businesses that are in the early stages of obtaining their own listing on the OTCBB.

 

While management of the Company believes that it will be successful with its business plan and capital formation activities, there can be no assurance that it will be able to successfully execute on either of these or that it will be able to generate adequate revenues to earn a profit or sustain its operations.

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United State of America, which contemplate continuation of the Company as a going concern.  The Company has not established a source of revenues sufficient to cover its operating costs, and as such, has incurred an operating loss since its inception.  Further, as of December 31, 2013, the Company had an accumulated net loss of ($964,264).  These and other factors raise substantial doubt about the Company’s ability to continue as a going concern.  The accompanying financial statements do not include any adjustments or classifications that may result from the possible inability of the Company to continue as a going concern.


NOTE 3 – Convertible Promissory Notes


Asher Note 1


On September 16, 2013 we entered into an agreement for the sale of a Convertible Promissory Note (“Asher Note 1”) in the principal amount $32,500 with an interest rate of 8% per annum pursuant to the terms of a Securities Purchase Agreement between Asher Enterprises, Inc. (“Asher”), a Delaware corporation, and Blue Water.  The Asher Note 1 closed on September



F - 11





18, 2013 and matures on June 18, 2014.  The Asher Note 1 is convertible at 58% of the average of the lowest three trading prices of Blue Water’s common stock during the ten trading day period prior to the conversion date after 180 days.  


The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as a liability once the conversion option becomes effective after 180 days due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.  


This note is measured at fair value at the end of each reporting period or termination of the instrument with the change in fair value recorded to earnings.  The fair value of the embedded beneficial conversion feature resulted in a full discount of $32,500 to the note on the debt issuance date.  The discount will be amortized over the term of the note to interest expense using the straight line method which approximates the effective interest method.


As of December 31, 2013, the outstanding balance due on the Asher Note 1 was $33,241, which includes $741 in accrued interest.  Further, as of December 31, 2013, the remaining unamortized debt discount was $19,788.


Asher Note 2


On November 8, 2013 we entered into an agreement for the sale of a Convertible Promissory Note (“Asher Note 2”) in the principal amount $37,500 with an interest rate of 8% per annum pursuant to the terms of a Securities Purchase Agreement between Asher Enterprises, Inc. (“Asher”), a Delaware corporation, and Blue Water.  The Asher Note 2 closed on November 12, 2013 and matures on May 7, 2014.  The Asher Note 2 is convertible at 58% of the average of the lowest three trading prices of Blue Water’s common stock during the ten trading day period prior to the conversion date after 180 days.  


The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as a liability once the conversion option becomes effective after 180 days due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.  


This note is measured at fair value at the end of each reporting period or termination of the instrument with the change in fair value recorded to earnings.  The fair value of the embedded beneficial conversion feature resulted in a partial discount of $33,033 to the note on the debt issuance date.  The discount will be amortized over the term of the note to interest expense using the straight line method which approximates the effective interest method.


As of December 31, 2013, the outstanding balance due on the Asher Note 2 was $37,936, which includes $436 in accrued interest.  Further, as of December 31, 2013, the remaining unamortized debt discount was $26,713.


Mermaid Enterprises, N.V.


On October 9, 2013 we entered into a Purchase Agreement and issued a Convertible Promissory Note (“Mermaid Note”) as payment for the acquisition of three (3) separate business licenses in the country of St. Maarten, Dutch West Indies consisting of one (1) General Business License and two (2) Managing Director’s Licenses.  The value of this transaction was $35,000.


The Mermaid Note carries a principal amount of $35,000 and an interest rate of 10% per annum.  The Mermaid Note is convertible into shares of our common stock at a fixed price of $0.0005 per share beginning no earlier than April 7, 2014.  The Mermaid Note matures on October 9, 2015.


As of December 31, 2013, the outstanding balance due on the Mermaid Note was $35,796, which includes $796 in accrued interest.  Further, as of December 31, 2013, the remaining unamortized debt discount was $30,625.


The table below provides a summary of the convertible promissory notes as of December 31, 2013:


Description-

 

Amount ($)

 

 

 

Asher Note 1

$

32,500

Asher Note 2

 

37,500

Mermaid Note

 

35,000

 

Less unamortized debt discount

 

(77,442)

Net

$

27,558


NOTE 4 – Investment Agreement with Dutchess Opportunity Fund II, LP


On September 16, 2013, the Company entered into an Investment Agreement (“Investment Agreement”) with Dutchess Opportunity Fund, II, LP, a Delaware limited partnership (“Dutchess”).  Pursuant to the terms of the Investment Agreement, Dutchess committed to purchase, in a series of purchase transactions (“Puts”), up to five million ($5,000,000) dollars of the Company’s common stock over a period of up to thirty-six (36) months.


The amount that the Company is entitled to request with each Put delivered to Dutchess is equal to, at its option, either (i) two hundred (200%) percent of the average daily volume (U.S. market only) of its common stock for three (3) trading days prior to the applicable Put Notice Date, multiplied by the average of the three (3) daily closing prices immediately preceding the Put Date or (ii) one-hundred thousand ($100,000) dollars.  The purchase price to be paid by Dutchess for the shares of the Company’s common stock covered by each Put will be equal to ninety-five (95%) percent of the lowest daily volume weighted average price (“VWAP”) of the Company’s common stock during the period beginning on the Put Notice Date and ending on and including the date that is five (5) trading days after such Put Notice Date (“Pricing Period”).  The “Put Notice Date” is the trading day immediately following the day on which Dutchess receives a Put Notice from the Company.


In conjunction with the Investment Agreement, the Company also entered into a registration rights agreement (“Registration Rights Agreement”) with Dutchess.  Pursuant to the Registration Rights Agreement, the Company filed a registration statement on Form S-1 with the Securities and Exchange Commission (“SEC”) on October 10, 2013 covering 20,000,000 shares of the Company’s common stock underlying a portion of the Investment Agreement.  In addition, during the term of the Registration Rights Agreement, the Company is obligated to maintain the effectiveness of this registration statement, as well as any subsequent registration statements that may be associated with the Investment Agreement and/or Registration Rights Agreement.


For the fiscal year ended December 31, 2013 we received net proceeds of $1,760 from the sale of 300,000 registered shares of our common stock under the Dutchess Investment Agreement.


NOTE 5 – Common Stock


On September 9, 2013, the Company filed a Certificate of Change to effect a forward stock split on the basis of 10 new shares for each one old share.  This corporate action resulted in the total number of authorized shares of common stock to increase from 70,000,000 to 700,000,000 (shares of preferred stock were not affected by this corporate action) and the total number of issued and outstanding shares of common stock increased from 22,703,125 to 227,031,250; par value for the Company’s shares of common stock remained unchanged at $0.001 par value.  The weighted average shares outstanding in the Statements of Operations have been adjusted for all periods to take this forward stock split into consideration.


During the period March 3, 2011 (inception) to December 31, 2013 the Company issued an aggregate of 280,050,000 split adjusted shares of its common stock as follows (note: all share and per share amounts in the following table are adjusted for the 10-for-1 forward stock split):


Date of Issue

 

Description of Issuance

 

Shares Issued

 

 

 

 

 

3/3/11

 

Issuance of Founder’s Shares to original officers and directors

 

110,000,000

3/3/11

 

Taurus Financial Partners, LLC for assisting with the creation and early development of our business, including incorporation and formation assistance, preparation of an offering prospectus and related registration statement on Form S-1, and continued EDGAR filing support and services.  These shares were valued at $50,000, or $0.01 per share, based on the value of the services provided

 






50,000,000

3/3/11

 

Arctic Eyes, LLC for assisting with the initial development and future hosting of our website (www.bluewaterbar.com) and marketing efforts aimed at building the Blue Water brand on various Caribbean travel websites and local radio stations.  These shares were valued at $50,000, or $0.01 per share, based on the previously established value

 





50,000,000

3/29/11

 

Island Radio, Inc. (OTCBB: ISLD) in a stock exchange where the Company received 2,000,000 restricted shares of Island Radio’s common stock.  These shares were valued at $20,000, or $0.001 per share, based on the previously established value

 




20,000,000

4/30/13

 

Subscribed to by five investors in a registered offering of the Company’s common shares.  These shares were priced at $0.01 per share, or an aggregate of $470,000.

 



47,000,000

7/15/13

 

Aeson Ventures, LLC for assisting creating an Internet “Landing Page” and drafting corporate awareness articles for dissemination via the Internet.  These shares were valued at $18,750, or $0.025 per share, based on the then market closing price of our common stock.

 




750,000

12/6/13

 

The Company sold registered shares to Dutchess Opportunity Fund, II, LP for cash pursuant to an Investment Agreement dated September 16, 2013.  These shares were valued at $1,760, or approximately $0.0059 a share.

 



300,000

12/15/13

 

Vitello Capital, Ltd. for investor relations consulting services.  These shares were issued valued at $10,000, or $0.005 a share, based on the then market closing price of our common stock.

 



2,000,000

 

 

Aggregate shares issued

 

280,050,000


During the period March 3, 2011 (inception) to December 31, 2013 the Company cancelled an aggregate of 50,718,750 split adjusted shares of its common stock as follows (note: all share and per share amounts in the following table are adjusted for the 10-for-1 forward stock split):


Date of Cancellation

 


Description of Cancellation

 


Shares Cancelled

 

 

 

 

 

2/17/12

 

The Company and Arctic Eyes, LLC mutually agreed to rescind their March 3, 2011 Consulting Agreement.  Arctic Eyes returned the shares it was holding which were subsequently cancelled by the Company.

 

50,000,000

7/23/13

 

The Company and Aeson Ventures, LLC mutually agreed to rescind their September 15, 2013 Consulting Agreement.  Aeson Ventures returned a pro-rated amount of shares it was holding which were subsequently cancelled by the Company.

 




718,750

 

 

Aggregate shares cancelled

 

50,718,750


As of December 31, 2013, the total number of common shares authorized that may be issued by the Company was 700,000,000 shares, $0.001 per share, and it had 229,331,250 shares of its common stock issued and outstanding.


NOTE 6 – Preferred Stock


The total number of preferred shares authorized that may be issued by the Company is 5,000,000 shares with a par value of $0.001 per share.


As of December 31, 2013, the Company had no shares of its preferred stock issued and outstanding.


NOTE 7 – Share Purchase Warrants


In conjunction with retaining a consultant, Vitello Capital, Ltd., the Company issued an aggregate of 3,000,000 share purchase warrants enabling the consultant to purchase 1,000,000 shares of the Company’s common stock at a price of $0.005 a share, $0.01 a share, and $0.015 a share, respectively.  The fair value of the warrants was estimated to be $13,109 on the date of the grant using the Black-Scholes option-pricing model.  Expected volatility was determined through the average of a peer group of public companies.  The risk-free rate for periods within the contractual life of the warrants is based on the U.S. Treasury yield in effect at the time of the grant.  The Company has never declared or paid cash dividends and has no plans to do so in the foreseeable future.  The following weighted-average assumptions were utilized for the calculations:


Expected life (in years)

 

1.0

Weighted average volatility

 

167.82%

Weighted average risk-free interest rate

 

0.13%

Expected dividend rate

 

-0-





F - 14





The following table summarizes the number of warrants, weighted average exercise price, and weighted average life (in years) by price for both total outstanding warrants and total exercisable warrants as of December 31, 2013:


 

 

Total Outstanding Warrants


Exercise Price

 


Warrants

 

Weighted Average

Exercise Price

 

Life

(in years)

 

 

 

 

 

 

 

$0.005

 

1,000,000

 

$0.005

 

1.0

$0.01

 

1,000,000

 

$0.01

 

1.0

$0.015

 

1,000,000

 

$0.015

 

1.0



NOTE 8 – Contractual Obligations


The following table summarizes the Company’s contractual obligations as of December 31, 2013:


 

 

 

 

Due Within

Description

 

Total

 

2014

 

2015

 

 

 

 

 

 

 

Convertible promissory notes

$

105,000

  $

70,000

  $

35,000

 

Total

$

105,000

  $

70,000

  $

35,000


NOTE 9 – Income Taxes


The provision (benefit) for income taxes for the period from March 3, 2011 (inception) to December 31, 2013 was as follows, assuming a 35 percent effective tax rate:


 

 


For the fiscal year ended December 31,

2013

 

For the period from

March 3, 2011

(inception) to

12/31/13

Current tax provision:

 

 

 

 

 

Federal

 

 

 

 

 

Taxable income

$

-

$

 

 

 

 

 

 

 

 

Total current tax provision

$

-

$

 

 

 

 

 

 

Deferred tax provision:

 

 

 

 

 

Federal

 

 

 

 

 

Loss carryforwards

$

287,131

$

133,929

 

Change in valuation allowance

 

(287,131)

 

(133,929)

 

 

 

 

 

 

 

Total deferred tax provision

$

-

$

-


As of December 31, 2013, the Company had approximately $820,374 in tax loss carryforwards that can be utilized in future periods to reduce taxable income through 2032.


The Company provided a valuation allowance equal to the deferred income tax assets for the period from March 3, 2011 (inception) to December 31, 2013 because it is not presently known whether future taxable income will be sufficient to utilize the tax loss carryforwards.


The Company has no uncertain tax positions.




F - 15





NOTE 10 – Investments


Long-Term Investments; Available-For-Sale Securities


The following table summarizes the Company’s long-term Available-For-Sale (AFS) Securities as of December 31, 2013:


 

As of December 31, 2013

 

 



Cost

 

Gross Unrealized Gains

 

Gross Unrealized Losses

 


Estimated Fair Value

 

 

 

 

 

 

 

 

 

Equity securities

$

-

$

-

$

-

$

-

 

 

 

 

 

 

 

 

 

Total

$

-

$

-

$

-

$

-


As of December 31, 2013, the Company’s long-term AFS securities consisted solely of 20,000,000 shares of Stream Flow Media, Inc. which were valued at $-0-.  More details in Note 12.


All of our investments, excluding trading securities, are subject to periodic impairment review.  The impairment analysis requires significant judgment to identify events or circumstances that would likely have significant adverse effect on the future value of the investment.  We consider various factors in determining whether an impairment is other-than-temporary, including the severity and duration of the impairment, forecasted recovery, the financial condition and near-term prospects of the investee, and our ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.


NOTE 11 – Strategic Alliance Agreement with Taurus Financial Partners, LLC


On June 21, 2013 the Company entered into a Strategic Alliance Agreement with Taurus Financial Partners, LLC (“Taurus”).  Under this Strategic Alliance Agreement the Company was granted the exclusive right to participate in Taurus’s future Registered Spin-Off transactions.


In a typical Registered Spin-Off transaction, the Company will acquire between 10 – 15% of an operating business that is in the process of “going public” on the OTC Bulletin Board.  Taurus will then register these shares with the Securities and Exchange Commission (“SEC”).  Once Taurus has registered these shares with the SEC, the Company will “spin-off” approximately one-third of them to its then stockholders in the form of a special stock dividend.


NOTE 12 – Stream Flow Media, Inc.


On December 2, 2013 the Company entered into its first Registered Spin-Off transaction pursuant to the Strategic Alliance Agreement described in Note 11 with Stream Flow Media, Inc., a Colorado corporation (“Stream Flow”).  As per the terms of this transaction, Stream Flow issued 20,000,000 shares of its common stock, $0.001 par value, to Blue Water, which represents approximately 20% of Stream Flow’s issued and outstanding shares of common stock as of March 25, 2014 in return for the Company agreeing to pay all of Stream Flow’s expenses related to obtaining a listing on the OTCBB.

 

Stream Flow is presently in the process of filing its initial Registration Statement on Form S-1 with the SEC, the first step in obtaining a listing on the OTCBB.  Once Stream Flow obtains its listing on the OTCBB, and upon approval by both the SEC and FINRA, the Company will issue a special one-time stock dividend of approximately 25%, or 5,000,000, of its Stream Flow shares to its shareholders.  The remaining Stream Flow shares will be sold by the Company over an 18-24 month period with the net proceeds going towards financing new units of its Blue Water Bar & Grill™ restaurant concept.


The Company accounts for its Stream Flow asset as Available-For-Sale (AFS) securities that are carried in the financial statements at fair value.  Changes in fair value are recorded in the financial statements as an unrealized gain (loss) in Other Comprehensive Income (OCI).


As of December 31, 2013, the Company had accumulated $-0- in costs related to the Stream Flow shares and there were no observable inputs for a fair valuation.  Accordingly, the Company carried the Stream Flow shares at a $-0- valuation on the balance sheet for the period.




F - 16





NOTE 13 – Subsidiaries


As of December 31, 2013, the Company had the following wholly-owned subsidiaries:


Name of Subsidiary

 

Place of Incorporation

 

 

 

Blue Water Bar & Grill, N.V. (1)

 

St. Maarten, Dutch West Indies


(1)

As of December 31, 2013, Blue Water Bar & Grill, N.V. was (i) in good standing with the government of St. Maarten, D.W.I., (ii) had no assets or liabilities, (iii) maintained an operating Business License, and (iv) maintained two Managing Director’s Licenses.


NOTE 14 – Related Party Transactions


As of December 31, 2013, the Company operated out of office space that is being provided to us by our Vice President, Michael Hume, free of charge.  There is no written agreement or other material terms relating to this arrangement.


Additionally, for the period of March 3, 2011 (inception) to December 31, 2013 the majority of the Company’s expenses were paid by Taurus Financial Partners, LLC (“Taurus”), an independent service provider that currently provides SEC EDGAR compliance and filing services to the Company, and have been accounted for under the accounts payable to a related party line item; as of December 31, 2013, Taurus owned 71.2% of the Company’s issued and outstanding common stock.  Further, our President and Chief Executive Officer, J. Scott Sitra, is concurrently the President and Chief Executive Officer at Taurus and has voting disposition over the controlling block of Taurus shares.


NOTE 15 – Recent Accounting Pronouncements


In July 2012, the FASB issued ASU 2012-02, “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” in Accounting Standards Update No. 2012-02.  This update amends ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles - Goodwill and Other - General Intangibles Other than Goodwill.  The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012.  Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.  The adoption of ASU 2012-02 has not had a material impact on the Company’s financial position or results of operations.


In August 2012, the FASB issued ASU 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03.  This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114.  The adoption of ASU 2012-03 has not had a material impact on the Company’s financial position or results of operations.


In October 2012, the FASB issued Accounting Standards Update ASU 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04.  The amendments in this update cover a wide range of Topics in the Accounting Standards Codification.  These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements.  The amendments in this update will be effective for fiscal periods beginning after December 15, 2012.  The adoption of ASU 2012-04 has not had a material impact on the Company’s financial position or results of operations.


In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11.  The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users.  In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in



F - 17





accordance with U.S. GAAP and those prepared under IFRSs.  Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013.  The adoption of ASU 2013-01 has not had a material impact on the Company’s financial position or results of operations.


In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications.  Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period.  Those gains and losses are later reclassified out of accumulated other comprehensive income into net income.  The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements.  All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP.  The new amendments will require an organization to:


·

Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and

 

·

Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period.  This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.


The amendments apply to all public and private companies that report items of other comprehensive income.  Public companies are required to comply with these amendments for all reporting periods (interim and annual).  The amendments are effective for reporting periods beginning after December 15, 2012, for public companies.  Early adoption is permitted.  The adoption of ASU No. 2013-02 has not had a material impact on the Company’s financial position or results of operations.


In July 2013, FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists."  The provisions of ASU No. 2013-11 require an entity to present an unrecognized tax benefit, or portion thereof, in the statement of financial position as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward, with certain exceptions related to availability. ASU No. 2013-11 is effective for interim and annual reporting periods beginning after December 15, 2013.  The adoption of ASU No. 2013-11 is not expected to have a material impact on the Company's Consolidated Financial Statements.


The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial statements.


NOTE 15 – Subsequent Events


On January 17, 2014, the Company issued 3,581,500 registered shares of its common stock under the Dutchess Investment Agreement described in Note 4 in exchange for gross proceeds of $35,815, or $0.01 a share.  After DWAC/wire fees of $250 and settling the outstanding accounts payable of $10,000 to Dutchess Capital, the Company received net proceeds of $25,565.


On January 31, 2014, the Company issued a Convertible Promissory Note to JMJ Financial that allows it to draw total proceeds of $335,000 at the discretion of the lender.  The principal and interest is convertible into shares of common stock at the discretion of the note holder at the lower of $0.0185 a share or 60% of the lowest trading price of the Company’s common stock over the 25 trading days prior to the conversion request date.  The note carries a one-time 12% of principal interest charge unless any consideration advanced to the Company is paid in full within 90 days in which event the interest rate is 0%.  The Company received $35,000 in consideration from JMJ Financial on January 31, 2014.


On February 7, 2014, the Company repaid the Asher Note 1 described in Note 3 in full with no conversion.  Per the terms of the agreement, the Company repaid the Asher Note 1 at $44,886.51.




F - 18





On February 14, 2014, the Company issued 293,463 registered shares of its common stock under the Dutchess Investment Agreement described in Note 4 in exchange for gross proceeds of $4,989, or $0.0177 a share.  After DWAC/wire fees of $250, the Company received net proceeds of $4,739.


On March 24, 2014, the Company incorporated a new wholly owned subsidiary, Blue Water Beverage Brands, Ltd.  Blue Water Beverage Brands, Ltd. is a British Virgin Islands (“BVI”) Business Corporation (“BC”) that will be the operating entity for the Company’s line of distilled spirits.








F - 19





Item 9.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure


None.



Item 9A.  Controls and Procedures


Disclosure Controls and Procedures


Under the supervision and with the participation of our principal officer and sole director, J. Scott Sitra, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act as of a date ("Evaluation Date") within ninety (90) days prior to the filing of our December 31, 2013 Annual Report with the SEC on Form 10-K.


Based upon that evaluation, Mr. Sitra has concluded that, as of December 31, 2013, our disclosure controls and procedures were not effective in timely alerting management to the material information relating to us required to be included in our periodic filings with the SEC.


Mr. Sitra has concluded that our disclosure controls and procedures had the following material weaknesses:


·

We were unable to maintain any segregation of duties within our financial operations due to our reliance on limited personnel in the finance function.  While this control deficiency did not result in any audit adjustments to our 2013 interim or annual financial statements, it could have resulted in a material misstatement that might have been prevented or detected by a segregation of duties;

 

·

Blue Water lacks sufficient resources to perform the internal audit function and does not have an Audit Committee;


·

We do not have an independent Board of Directors, nor do we have a board member designated as an independent financial expert to Blue Water.  The Board of Directors is comprised of one (1) member who also serves as Blue Water’s principal executive officer.  As a result, there is a lack of independent oversight of the management team, lack of independent review of our operating and financial results, and lack of independent review of disclosures made by Blue Water; and


·

Documentation of all proper accounting procedures is not yet complete.


To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned material weaknesses, including, but not limited to, the following:


·

Considering the engagement of consultants to assist in ensuring that accounting policies and procedures are consistent across the organization and that we have adequate control over financial statement disclosures;

 

·

Hiring additional qualified financial personnel, including a Chief Financial Officer, on a full-time basis;


·

Expanding our current board of directors to include additional independent individuals willing to perform directorial functions; and


·

Increasing our workforce in preparation for exiting the development stage and commencing revenue producing operations.


Since the recited remedial actions will require that we hire or engage additional personnel, these material weaknesses may not be overcome in the near-term due to our limited financial resources.  Until such remedial actions can be realized, we will continue to rely on the limited advice of outside professionals and consultants.


We anticipate that these initiatives will be at least partially, if not fully, implemented by December 31, 2014, subject to our ability to obtain sufficient future financing and subject to our ability to start generating revenue.




43






Internal Control over Financial Reporting


(a) Management’s Annual Report on Internal Control Over Financial Reporting


Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.  Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements will not be prevented or detected on a timely basis.

 

Our principal officer and sole director, J. Scott Sitra, assessed the effectiveness of our internal control over financial reporting as of December 31, 2013.  In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of The Treadway Commission (COSO) in Internal Control-Integrated Framework.  Based on that assessment under such criteria, management concluded that our internal controls over financial reporting were not effective as of December 31, 2013 due to control deficiencies that constituted material weaknesses.

  

Management has identified a lack of sufficient personnel in the accounting function due to the limited resources of Blue Water with appropriate skills, training and experience to perform the review processes to ensure the complete and proper application of generally accepted accounting principles.

  

We are in the process of developing and implementing remediation plans to address our material weaknesses in our internal controls.


Management has identified specific remedial actions to address the material weaknesses described above:

 

·

Improve the effectiveness of the accounting group by augmenting our existing resources with additional consultants or employees to improve segregation procedures and to assist in the analysis and recording of complex accounting transactions and preparation of tax disclosures.  We plan to mitigate the segregation of duties issue by hiring additional personnel in the accounting department once we have achieved positive cash flow from operations and/or have raised significant additional working capital; and

 

·

Improve segregation procedures by strengthening cross approval of various functions including cash disbursements and quarterly internal audit procedures where appropriate.


Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.


(b) Attestation Report of the Registered Public Accounting Firm


This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.  Management's report was not subject to attestation by Blue Water's independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit Blue Water to provide only management's report in this Annual Report.  We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Commission that permit us to provide only management’s report in this Annual Report.




44





(c) Changes in Controls and Procedures


There were no significant changes made in our internal controls over financial reporting during the year ended December 31, 2013 that have materially affected or are reasonably likely to materially affect these controls.  Thus, no corrective actions with regard to significant deficiencies or material weaknesses were necessary.



Item 9B.  Other Information


None.



PART III


Item 10.  Directors, Executive Officers and Corporate Governance


Our executive officers and directors and their respective ages as of the date of March 25, 2014 are as follows:


Name

Age

Position

 

 

 

J. Scott Sitra

41

President, Chief Executive Officer, Treasurer, Secretary, and Director (Principal Executive Officer and  Sole Director)

Michael Hume

42

Vice President


Our Board of Directors is comprised of only one class of director.  Each director is elected to hold office until the next annual meeting of shareholders and until his successor has been elected and qualified.  Officers are elected annually by the Board of Directors and hold office until successors are duly elected and qualified.  There are no arrangements, agreements, or understandings between non-management shareholders and management under which non-management shareholders may, directly or indirectly, participate in or influence the management of our business affairs.  The following is a brief account of the business experience of each of our directors and executive officers.  There is no family relationship between any director or executive officer.


J. Scott Sitra, has served as our President, Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary, and member of our Board of Directors since June 2013.  He concurrently serves as the President and Chief Executive Officer of Taurus Financial Partners, LLC (“Taurus”), an international management and financial consulting firm specializing in assisting small and promising businesses with obtaining and maintaining a public listing on the OTC Bulletin Board (OTCBB).  Mr. Sitra founded Taurus in February 2010.


Before starting Taurus, Mr. Sitra worked as an independent consultant advising development stage businesses on various matters relating to business finance and how to obtain a public listing on a US exchange.  Prior to being an independent consultant, Mr. Sitra served in varying capacities, including as an executive officer and a member of the board of directors, to several private and public entities.  He has actively participated in the successful growth and development of several private and public entities within a multitude of industries, including high technology, oil and gas exploration, marketing and retailing, food and beverage, and publishing.


Mr. Sitra is not currently an officer or director of any other reporting company.  Mr. Sitra presently devotes approximately 80%, or 35 to 45 hours per week, of his business time to our affairs.


Michael Hume, is one of our co-founders and has served as our President, Chief Executive Officer and as a Director since our inception on March 3, 2011 and has served as our Treasurer and Secretary since January 2013, when he became our sole officer and director.  Mr. Hume brings to us over 18 years of sales, management, and promotional experience within the restaurant industry.  Concurrently with his duties at Blue Water, Mr. Hume is the General Manager of Hooter’s Restaurant in Atlanta, Georgia, a position he has held since October 2013.  Prior to joining Hooter’s, Mr. Hume was the General Manager of The Arena Tavern in Duluth, Georgia, a restaurant he helped develop and launch in April 2009.  Prior to opening The Arena Tavern and starting in August 2007 Mr. Hume was involved in the opening and development of The Hudson Grille chain of restaurants in the Atlanta, Georgia area which was comprised of 14 restaurants companywide.  Between August 2005 and April 2007 Mr. Hume served as the Treasurer and Secretary of Premier Development & Investment, Inc., a publicly traded company, and was the General Manager of its wholly-owned Player’s Grille, Inc. subsidiary starting in August 2004.  Mr. Hume attended the University of South Florida in Tampa, Florida between 1993 and 1997.



45






Mr. Hume is not currently an officer or director of any other reporting company.  Mr. Hume presently devotes approximately 25%, or 10 to 15 hours per week, of his business time to our affairs.


Committees of the Board of Directors


We do not presently have a separately constituted audit committee, compensation committee, nominating committee, executive committee or any other committee of our Board of Directors.  As such, our entire Board of Directors acts as our audit committee.


Audit Committee Financial Expert


Our Board of Directors does not currently have any member who qualifies as an audit committee financial expert.  We believe that the cost of retaining such a financial expert at this time is prohibitive.  Further, because we are in the start-up stage of our business operations, we believe the services of an audit committee financial expert are not necessary at this time.


Involvement in Legal Proceedings


None of our officers or directors – past or present – have appeared as a party during the past ten (10) years in any legal proceedings that may bear on their ability or integrity to serve as an officer or director of Blue Water.


Information Concerning Non-Director Executive Officers

 

Michael Hume is not a director of Blue Water.  Mr. Hume did serve as a director for Blue Water from its inception on March 3, 2011 through June 2013 when he voluntarily resigned.  Mr. Hume continues to work in an executive officer capacity and presently is Blue Water’s Vice President.  In the future, when Blue Water has secured sufficient financing and Mr. Hume can devote more time to Blue Water’s business, he may consider rejoining Blue Water’s Board of Directors.


Code of Ethics


We do not currently have a Code of Ethics applicable to our principal executive, financial and accounting officers.


Potential Conflict of Interest


Since we do not have an audit or compensation committee comprised of independent directors, the functions that would have been performed by such committees are performed by our Board of Directors.  Thus, there is a potential conflict of interest in that our directors have the authority to determine issues concerning management compensation, including their own, and audit issues that may affect management decisions.  We are not aware of any other conflicts of interest with any of our officers or directors.


Board of Director’s Role in Risk Oversight


The Board of Directors assesses on an ongoing basis the risks faced by Blue Water.  These risks include financial, technological, competitive, and operational risks.  The Board dedicates time at each of its meetings to review and consider the relevant risks faced at that time.  In addition, since Blue Water does not have an Audit Committee, the Board of Directors is also responsible for the assessment and oversight of Blue Water’s financial risk exposures.


Compliance with Section 16(A) of the Securities Exchange Act of 1934


Section 16(a) of the Securities Exchange Act of 1934, as amended, require Blue Water's executive officers, directors and persons who own more than 10% of a registered class of Blue Water's equity securities, to file with the SEC initial statements of beneficial ownership, reports of changes in ownership, and annual reports concerning their ownership of common stock and other equity securities of Blue Water on Form(s) 3, 4, and 5, respectively.  Executive officers, directors and greater than 10% shareholders are required by SEC regulations to furnish Blue Water with copies of all Section 16(a) reports they file.


Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that for the fiscal year ended December 31, 2013, all filing requirements applicable to our officers, directors and greater than 10% percent beneficial owners were complied with and that there were no deficiencies.




46





Item 11.  Executive Compensation


The following table sets forth information with respect to compensation paid by us to our officers from inception on March 3, 2011 through December 31, 2013.  Our fiscal year end is December 31.  No cash compensation has been paid to our officers from inception on March 3, 2011 through December 31, 2013.  We have no plans to begin paying our officers any cash compensation during the current fiscal year ending December 31, 2014.


Summary Compensation Table


(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)










Name and Principal

Position











Year










Salary

($)










Bonus

($)









Stock

Awards

($)









Option

Awards

($)





Non-Equity Incentive Plan Compen-sation

($)

Change in Pension Value & Nonqual-ified Deferred Compen-sation Earnings ($)








All Other Compen-sation

($)










Totals

($)

 

 

 

 

 

 

 

 

 

 

J. Scott Sitra,

President, CEO,

Treasurer, Secretary,

Director (1)




2013




-0-




-0-




-0-




-0-




-0-




-0-




-0-




-0-




Michael Hume,

Vice President (2)



2013

2012

2011



-0-

-0-

-0-



-0-

-0-

-0-



-0-

-0-

-0-



-0-

-0-

-0-



-0-

-0-

-0-



-0-

-0-

-0-



-0-

-0-

-0-



-0-

-0-

-0-


Christina Harris,

Former Treasurer and Secretary (3)



2012

2011



-0-

-0-



-0-

-0-



-0-

-0-



-0-

-0-



-0-

-0-



-0-

-0-



-0-

-0-



-0-

-0-


(1)

Mr. Sitra joined Blue Water on June 14, 2013 and has not received any form of compensation as of the date of this Annual Report on Form 10-K.


(2)

Michael Hume received 6,000,000 shares of our common stock on March 3, 2011.  These shares were issued as Founder’s Shares, which are recorded with a net valuation of $-0-.

 

(3)

Christina Harris received 5,000,000 shares of our common stock on March 3, 2011.  These shares were issued as Founder’s Shares, which are recorded with a net valuation of $-0-.  Ms. Harris has received no other compensation.  Ms. Harris gifted these shares to Michael Hume on July 9, 2012 and resigned from all of her positions with Blue Water on January 11, 2013.




47





The following table sets forth information with respect to compensation paid by us to our directors from inception on March 3, 2011 through December 31, 2013.  Our fiscal year end is December 31.


Director Compensation Table


(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)










Name





Fees

Earned

or

Paid in

Cash

($)








Stock

Awards

($)








Option

Awards

($)







Non-Equity Incentive Plan Compensation

($)



Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

($)







All Other

Compen-sation

($)









Total

($)

 

 

 

 

 

 

 

 

J. Scott Sitra (1)

-0-

-0-

-0-

-0-

-0-

-0-

-0-

Michael Hume (2)

-0-

-0-

-0-

-0-

-0-

-0-

-0-

Christina Harris (3)

-0-

-0-

-0-

-0-

-0-

-0-

-0-


(1)

J. Scott Sitra joined Blue Water’s Board of Directors on June 14, 2013.  As of the date of this Annual Report on Form 10-K Mr. Sitra has not received any form of compensation for serving on the Board of Directors.

 

(2)

Michael Hume joined Blue Water’s Board of Directors on March 3, 2011 (inception) and served as a director until June 2013.  Mr. Hume continues serving Blue Water in an executive officer capacity as a Vice President.


(3)

Christina Harris joined Blue Water’s Board of Directors on March 3, 2011 (inception) and served as a director until July 2012.


All compensation received by our officers and directors has been disclosed.  There are no stock option, retirement, pension, or profit sharing plans for the benefit of our officers and directors, past or present.


Employment Agreements


We have not entered into any employment agreements with any of our officers or directors.  As of March 25, 2014 we had no employees other than those listed above.  All future employment arrangements are subject to the discretion of our Board of Directors.


Long-Term Incentive Plan Awards


We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.


Officer Compensation


Michael Hume and Christina Harris received 6,000,000 and 5,000,000 shares, respectively, of our shares of our common stock as compensation for their services.  These shares were issued on March 3, 2011 and were issued as Founder’s Shares, which are recorded with a net valuation of $-0-.  We have no plans to begin paying our current officer any cash compensation during the current fiscal year ending December 31, 2014.


Director Compensation


We have no plans to begin paying our directors any cash compensation until our business becomes operationally profitable.  We may, however, reimburse our directors for any out-of-pocket travel and lodging expenses associated with their attendance of Board meetings.




48





Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


The following table sets forth information regarding beneficial ownership as of March 25, 2014 by (i) each named executive officer, (ii) each member of our Board of Directors, (iii) each person deemed to be the beneficial owner of more than five percent (5%) of any class of our common stock, and (iv) all of our executive officers and directors as a group.  Unless otherwise indicated, each person named in the following table is assumed to have sole voting power and investment power with respect to all shares of our common stock listed as owned by such person.


As of March 25, 2014, we had 233,206,213 shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding.



Name of

Beneficial Owner


Shares of

Common Stock

Percentage of

Class

(Common)


Shares of

Preferred Stock

Percentage of

Class

(Preferred)

 

 

 

 

 

Officers and Directors

 

 

 

 


J. Scott Sitra,

President, CEO, Treasurer,

Secretary, and Director (1)




1,000,000




*




-0-




0%


Michael Hume,

Vice President



1,000,000



*

 

 

 

 

 

 

 

All officers and directors as a group (2 persons)


2,000,000


*


-0-


0%

 

 

 

 

 

Five Percent Stockholders

 

 

 

 


Taurus Financial Partners, LLC (2)


166,000,000


71.2%


-0-


0%


* Less than 1%


(1)

Does not include 166,000,000 shares of our common stock held by Taurus Financial Partners, LLC (“Taurus”), a company Mr. Sitra concurrently serves as its President and Chief Executive Officer.  Mr. Sitra has dispositive control over Taurus’s shares of our common stock.

 

(2)

Taurus received 5,000,000 shares of our common stock valued at $50,000, or $0.01 a share, on March 3, 2011 in consideration of its services of assisting with the creation and early development of our business, including incorporation and formation assistance, preparation of a prospectus and related registration statement on Form S-1, and continued EDGAR filing support and services.  Further, on September 28, 2011, Taurus purchased an additional 700,000 shares of our common stock from Island Radio, Inc.  J. Scott Sitra is the sole owner and control person of Taurus.  On July 25, 2013 Michael Hume transferred 10,900,000 shares of his holdings to Taurus as a gift.  Taking into consideration Blue Water’s forward stock split on September 30, 2013, Taurus’s shares aggregate 166,000,000 shares of our common stock as of March 25, 2014.  On March 21, 2014, Taurus voluntarily entered into a Share Lock-Up Agreement which prevents Taurus from selling any of its shares through March 31, 2015


Securities Authorized for Issuance Under Equity Compensation Plans


As of March 25, 2014 we did not have any authorized Equity Compensation Plans.


Changes in Control


We are unaware of any contract or other arrangement that could result in a change of control of Blue Water.





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Item 13.  Certain Relationships and Related Transactions, and Director Independence


We are currently operating out of office space provided by our Vice President, Michael Hume.  This arrangement was agreed upon by Mr. Hume on a rent-free basis for an indeterminate period of time.  There is no written agreement or other material terms or arrangements relating to this arrangement.  Should Mr. Hume become uninvolved in our business this arrangement would certainly come to an end and we would be required to seek office space elsewhere, potentially at great expense to us.


Other than the foregoing, we do not currently have any conflicts of interest.  We have not yet formulated a policy for handling conflicts of interest.  However, we intend to do so prior to hiring our first employee.


Share Issuances to Promoters


On March 3, 2011 we issued an aggregate of 11,000,000 restricted shares of our common stock, par value $0.001, to our officers, Michael Hume and Christina Harris, as Founder’s Stock, which was recorded with a net valuation of $-0-.  Mr. Hume and Ms. Harris received 6,000,000 and 5,000,000 shares, respectively.


On July 9, 2012 Ms. Harris transferred her shares to Mr. Hume as a gift.  Ms. Harris no longer owns any shares of our common stock.


On July 25, 2013 Mr. Hume transferred 10,900,000 of his shares to Taurus Financial Partners, LLC (“Taurus”) as a gift.  As of March 25, 2014 Mr. Hume owned 1,000,000 shares of our common stock.


On March 3, 2011 we issued 5,000,000 restricted shares of our common stock to Taurus for:


·

assisting with the creation and early development of our business, including incorporation and formation assistance;

 

·

preparation of a stock offering prospectus and related registration statement on Form S-1 (and subsequent amendments); and


·

continued and ongoing EDGAR filing support and services.


The market value of these services provided to us by Taurus was valued at $50,000.  Hence, we valued the shares we issued Taurus at $50,000, or $0.01 per share.  


Additionally, and as of December 31, 2013, we had $192,907 in accounts payable to Taurus.


Further, and as of March 25, 2014, Taurus is considered a promoter and an affiliate shareholder and presently owns 166,000,000 shares, or 71.2%, of our issued and outstanding shares of common stock.  J. Scott Sitra, our President and Chief Executive Officer, is concurrently the President and Chief Executive Officer at Taurus.


On March 21, 2014, Taurus voluntarily entered into a Share Lock-Up Agreement whereby it cannot sell any of its shares of our common stock through March 31, 2015.


On March 3, 2011 we issued 5,000,000 restricted shares of our common stock to Arctic Eyes, LLC (“Arctic Eyes”) for:


·

assisting with the initial development and future hosting of our website (www.bluewaterbar.com); and

 

·

future marketing efforts aimed at building the Blue Water Bar & Grill™ brand, including (i) advertising and blogging on various Caribbean travel websites such as Travel Talk Online – St. Maarten/St. Martin (www.traveltalkonline.com), (ii) developing spot advertisements and regular promotional interviews on local radio and television stations, and (iii) through print media outlets such as newspapers and free tourist pamphlets.  


The market value of the services at the time of the share issuance was valued at $50,000.  Hence, we valued the shares we issued Arctic Eyes at $50,000, or $0.01 per share.


Subsequently, on February 17, 2012, Blue Water and Arctic Eyes, LLC mutually agreed to rescind their consulting agreement.  Arctic Eyes returned the 5,000,000 shares it was holding which were subsequently cancelled by Blue Water.  Arctic Eyes went out of business shortly after this event.



50






As of March 25, 2014, and because of their positions and involvement in our business organization and development, the following table summarizes our current promoters as defined by Rule 405 of Regulation C and the nature and amount of their compensation:


Promoter Name

Nature of Compensation

Aggregate Valuation ($)

 

 

 

J. Scott Sitra,

President, CEO and Chairman


None (1)


$-0- (1)

Michael Hume,

Vice President


6,000,000 shares of restricted common stock (2)


$ -0- (2)

Taurus Financial Partners, LLC (3)

5,000,000 shares of restricted common stock

$50,000


(1)

As of the date of this Annual Report on Form 10-K, Mr. Sitra had not received any compensation for his services to Blue Water.  Mr. Sitra presently owns 1,000,000 shares of our common stock that he privately purchased on August 2, 2012.

 

(2)

Issued as Founder’s Shares, which are recorded with a net valuation of $-0-.


(3)

J. Scott Sitra, our President and Chief Executive Officer, is concurrently the President and Chief Executive Officer of Taurus.  As of the date of this Annual Report on Form 10-K, Taurus owned 166,000,000 shares of our common stock.


As of March 25, 2014, we had no agreements in place to provide additional compensation to any of the above promoters.


Indemnification


Under our Articles of Incorporation and Bylaws, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his/her position, if he/she acted in good faith and in a manner he/she reasonably believed to be in our best interest.  We may advance expenses incurred in defending a proceeding.  To the extent that the officer or director is successful on the merits in a proceeding as to which he/she is to be indemnified, we must indemnify him/her against all expenses incurred, including reasonable attorney's fees.  With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order.  The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada.


Regarding indemnification for liabilities arising under the Securities Act of 1933, which may be permitted to officers or directors under Nevada law, we are informed that, in the opinion of the Securities and Exchange Commission, indemnification is against public policy, as expressed in the Act and is, therefore, unenforceable.


Director Independence


The OTC Bulletin Board, where our shares of common stock are quoted under the symbol “BLUU”, does not have any director independence requirements.  In determining whether our directors are independent, we refer to NASDAQ Stock Market Rule 4200(a)(15).  Based on these widely-accepted criteria, we have determined that none of our directors are independent at this time.


No member of management is or will be required by us to work on a full time basis.  Accordingly, certain conflicts of interest may arise between us and our officer(s) and director(s) in that they may have other business interests in the future to which they devote their attention, and they may be expected to continue to do so although management time must also be devoted to our business.  As a result, conflicts of interest may arise that can be resolved only through their exercise of such judgment as is consistent with each officer's understanding of his/her fiduciary duties to us.


The Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the SEC, New York Stock Exchange (NYSE), American Stock Exchange (AMEX), and NASDAQ Stock Market, as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance.  These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities that are listed on those exchanges or the NASDAQ Stock Market.  Because we are not presently required to comply with many of the corporate governance



51





provisions and because we chose to avoid incurring the substantial additional costs associated with such compliance any sooner than legally required, we have not yet adopted these measures.


Because none of our directors are independent directors, we do not currently have independent audit or compensation committees.  As a result, these directors have the ability, among other things, to determine their own level of compensation.  Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested director transactions, conflicts of interest, if any, and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations.


We intend to comply with all corporate governance measures relating to director independence as and when required.  However, we may find it very difficult or be unable to attract and retain qualified officers, directors and members of board committees required to provide for our effective management as a result of Sarbanes-Oxley Act of 2002.  The enactment of the Sarbanes-Oxley Act of 2002 has resulted in a series of rules and regulations by the SEC that increase responsibilities and liabilities of directors and executive officers.  The perceived increased personal risk associated with these recent changes may make it more costly or deter qualified individuals from accepting these roles.


Item 14.  Principal Accounting Fees and Services


Audit Fees


The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the annual audit of our financial statements and review of financial statements included in our quarterly reports and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:


 

 

For the Fiscal Year Ended

 

 


December 31, 2013

 


December 31, 2012

 

 

 

 

 

Audit Fees

$

7,750

$

5,000

Audit Related Fees

 

-0-

 

-0-

Tax Fees

 

-0-

 

-0-

All Other Fees

 

-0-

 

-0-


Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

 

Given the small size of our Board of Directors, as well as the limited financial resources and minimal operations of Blue Water, our Board acts as our Audit Committee.  Our Board pre-approves all audit and permissible non-audit services.  These services may include audit services, audit-related services, tax services and other services.  Our Board approves these services on a case-by-case basis.


PART IV


Item 15.  Exhibits, Financial Statements Schedules


The following documents are filed as a part of this Annual Report:


(1)

Financial Statements

 

The financial statements required to be filed as part of this report are set forth in Item 8 of Part II of this Annual Report.


(2)

Financial Statement Schedules


All schedules are omitted for the reason that the information is included in the financial statements or the notes thereto or that they are not required or are not applicable.



52






(3)

Exhibits


Exhibit

Number

 


Title of Document

 


Location

 

 

 

 

 

3.1

 

Articles of Incorporation

 

Incorporated by reference to registration statement on Form S-1 (File No. 333-174557) filed on May 27, 2011

3.2

 

Bylaws

 

Incorporated by reference to registration statement on Form S-1 (File No. 333-174557) filed on May 27, 2011

3.3

 

Amendment to Articles of Incorporation dated June 13, 2013

 

Incorporated by reference to current report on Form 8-K filed on July 11, 2013

3.4

 

Certificate of Change dated September 9, 2013

 

Incorporated by reference to current report on Form 8-K filed on September 23, 2013

4.1

 

Convertible Promissory Note between Blue Water Global Group, Inc. and Asher Enterprises, Inc. dated September 16, 2013

 

Incorporated by reference to current report on Form 8-K filed on September 19, 2013

4.2

 

Convertible Promissory Note between Blue Water Global Group, Inc. and Asher Enterprises, Inc. dated November 8, 2013

 

Incorporated by reference to current report on Form 8-K filed on November 14, 2013

4.3

 

Convertible Promissory Note between Blue Water Global Group, Inc. and Asher Enterprises, Inc. dated December 23, 2013

 

Incorporated by reference to current report on Form 8-K filed on January 8, 2014

4.4

 

Convertible Promissory Note and Amendment between Blue Water Global Group, Inc. and JMJ Financial dated January 29, 2014

 

Incorporated by reference to current report on Form 8-K filed on February 5, 2014

10.1

 

Share Exchange Agreement with Island Radio, Inc. dated March 29, 2011

 

Incorporated by reference to registration statement on Form S-1 (Amendment No. 1, File No. 333-174557) filed on July 7, 2011

10.2

 

Service Agreement with Taurus Financial Partners, LLC dated March 3, 2011

 

Incorporated by reference to registration statement on Form S-1 (Amendment No. 1, File No. 333-174557) filed on July 7, 2011

10.3

 

Service Agreement with Arctic Eyes, LLC dated March 3, 2011

 

Incorporated by reference to registration statement on Form S-1 (Amendment No. 1, File No. 333-174557) filed on July 7, 2011

10.5

 

First Amendment to Service Agreement with Taurus Financial Partners, LLC dated August 4, 2011

 

Incorporated by reference to registration statement on Form S-1 (Amendment No. 3, File No. 333-174557) filed on August 5, 2011

10.6

 

Consulting Agreement with Long Yard Restaurants dated August 1, 2012

 

Incorporated by reference to registration statement on Form S-1 (Amendment No. 1, File No. 333-186571) filed on March 18, 2013

10.7

 

Securities Purchase Agreement between Blue Water Global Group, Inc. and Asher Enterprises, Inc. dated September 16, 2013

 

Incorporated by reference to current report on Form 8-K filed on September 19, 2013

10.8

 

Investment Agreement between Blue Water Global Group, Inc. and Dutchess Opportunity Fund II, LP dated September 16, 2013

 

Incorporated by reference to registration statement on Form S-1 (File No. 333-191654) filed on October 10, 2013

10.9

 

Registration Rights Agreement between Blue Water Global Group, Inc. and Dutchess Opportunity Fund II, LP dated September 16, 2013

 

Incorporated by reference to registration statement on Form S-1 (File No. 333-191654) filed on October 10, 2013

10.10

 

Securities Purchase Agreement between Blue Water Global Group, Inc. and Asher Enterprises, Inc. dated November 8, 2013

 

Incorporated by reference to current report on Form 8-K filed on November 14, 2013

10.11

 

Consulting Agreement between Blue Water Global Group, Inc. and Stream Flow Media, Inc. dated December 2, 2013

 

Incorporated by reference to current report on Form 8-K filed on December 4, 2013

10.12

 

Securities Purchase Agreement between Blue Water Global Group, Inc. and Asher Enterprises, Inc. dated December 23, 2013

 

Incorporated by reference to current report on Form 8-K filed on January 8, 2014

10.13

 

Share Lock-Up Agreement dated March 21, 2014 between Blue Water Global Group, Inc. and Taurus Financial Partners, LLC

 

Incorporated by reference to current report on Form 8-K filed on March 24, 2014

31.1

 

Section 302 Certifications under Sarbanes-Oxley Act of 2002

 

Filed herewith

32.1

 

Section 906 Certification under Sarbanes Oxley Act of 2002

 

Filed herewith



SIGNATURES


Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned, thereto duly authorized on this 27th day of March, 2014.



BLUE WATER GLOBAL GROUP, INC.




By:

/s/ J. Scott Sitra                                                      

J. Scott Sitra

President, Chief Executive Officer,

Principal Executive Officer, Principal

Accounting Officer, Treasurer, Secretary, and

Sole Director





54