UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: March 31, 2015

 

or

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission File Number: 00-24723

 

FRESH PROMISE FOODS, INC.

(Exact Name of registrant as specified in its charter)

 

Nevada		88-0393257
(State or other Jurisdiction of  incorporation or organization)		(I.R.S. Employer Identification Number)

 

1111 Alderman Drive, Suite 210

Alpharetta, Georgia 30005

(Address of Principal Executive Offices)

 

(770) 521-9826

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation 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 whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act:

 

[  ]	Large Accelerated Filer	[  ]	Accelerated Filer
[  ]	Non-Accelerated Filer	[X]	Smaller Reporting Company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

As of May 21, 2015, there were 63,236,165 shares outstanding of the registrant’s common stock.

 

 

 

TABLE OF CONTENTS

 

			Page
Part I. Financial Information
Item 1.	Condensed Consolidated Financial Statements		F-1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		3
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		6
Item 4.	Controls and Procedures		6
Part II. Other Information
Item 1.	Legal Proceedings		6
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		7
Item 3.	Defaults Upon Senior Securities		7
Item 4.	Mine Safety Disclosure		7
Item 5.	Other Information		7
Item 6.	Exhibits		8
Signatures			9

 

 

PART I. FINANCIAL STATEMENTS

 

ITEM I. FINANCIAL STATEMENTS

 

Fresh Promise Foods, Inc.

Consolidated Balance Sheet

 

		March 31, 2015				December 31, 2014
		Unaudited
Assets
Current Assets
Cash		$	4,251			$	1,663
Accounts Receivable			211				-
Inventory			68,118				20,935
Other Current Assets			6,266				515
Total Current Assets			78,846				23,112
Property, Plant & Equipment net			87,451				90,559
Website Development & Software Purchased			4,782				4,782
Total Assets		$	171,079			$	118,454
Liabilities and Stockholders Deficit
Liabilities
Current Liabilities
Account payable		$	292,033			$	298,815
Accrued expenses			83,705				69,087
Convertible notes payable			485,484				388,957
Accrued salaries due officers			235,047				330,465
Amounts due former officers under consulting agreements			-				-
Convertible note derivative liability			862,485				584,857
Loan due related parties			38,291				23,600
Capital lease liability-short term			10,557				7,678
Total Current Liabilities			2,007,602				1,703,458
Long Term Liabilities
Capital Lease Liability net of current portion			30,670				35,748
Total Liabilities			2,038,272				1,739,206
Preferred stock series B -  no par value, 10 shares authorized, and 2 and 2 share outstanding, respectively.
Preferred stock series C - par value $0.00001 100,000,000 shares authorized, 308,180 and 341,180 shares outstanding, respectively.			3				3
Common stock - par value $0.00001 2,000,000,000 shares authorized, 26,057,504 and 7,155,532 shares outstanding, respectively			260				71
Additional paid In Capital			7,310,663				7,135,240
Accumulated deficit			(9,178,119	)			(8,756,066	)
Total Stockholders’ Deficit			(1,867,193	)			(1,620,755	)
Total Liabilities and Stockholders’ Deficit		$	171,079			$	118,454

 

See accompanying notes to unaudited consolidated financial statements.

 

 

Fresh Promise Foods

Consolidated Statements of Operations

Three Months Ended

Unaudited

 

		March 31, 2015				March 31, 2014
Revenues		$	7,180			$	-
Cost of Goods Sold			10,383				-
Gross Margin			(3,203	)			-
Operating Expenses
Rent			11,250				-
Professional fees			72,450				59,266
General and administrative expense			66,444				15,364
Payroll and related expense			74,100				95,000
Depreciation			3,109				-
Stock based compensation			-				2,950
Total Operating Expenses			227,353				172,580
Loss from operations			(230,556	)			(172,580	)
Other expenses
Debt forgiveness (Income)			-				(22,000	)
(Gain) on Change in value of derivative liability			(424,583	)			(211,811	)
Derivative liability expense			130,776				233,293
(Gain) Loss on Debt Modification			160,745				-
(Gain) loss on note conversion			3,074				5,321
(Gain) Loss on stock issuance			-				(16,000	)
Interest expense			320,985				101,315
			190,997				90,118
Loss before provision for income tax			(421,553	)			(262,698	)
Provision for income tax			-				-
Net Loss		$	(421,553	)		$	(262,698	)
Net Loss per share: Basic and diluted		$	(0.03	)		$	(0.52	)
Weighted Average Number of Shares Outstanding: Basic and diluted			12,113,871				507,556

 

See accompanying notes to unaudited consolidated financial statements.

 

 

Fresh Promise Foods, Inc.

Consolidated Statements of Cash Flows

Three Months Ended

Unaudited

 

		March 31, 2015				March 31, 2014
OPERATING ACTIVITIES
Net loss from operations		$	(421,553	)		$	(262,698	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount			192,539				62,000
(Gain) on Change in value of derivative liability			(424,583	)			(211,811	)
Derivative liability expense			146,955				233,293
Debt forgiveness			-				(22,000	)
Loss on note conversion			72,433				5,321
Loss on Debt Modification			160,745				-
Loss on stock issuance			-				(16,000	)
Notes issued for professional services			-				20,000
Premium expense			-				32,769
Stock based compensation			-				2,950
Depreciation			3,108				-
Accrued interest on notes converted			-				5,162
Changes in working capital items
Accrued salaries			80,850				72,000
Prepaid expenses and other current assets			(5,750	)			-
Decrease in other liabilities			-				(1,232	)
Amount due current and former officer			-				(3,000	)
Advances from related parties			-				3,600
(Increase) decrease in inventory			(47,184	)			-
(Increase) in account receivable			(212	)			-
Decrease in accounts payable			(6,783	)			5,102
Decrease in accrued interest			14,618				1,384
Cashflow from operating activities			(234,817	)			(73,160	)
INVESTING ACTIVITIES
PP&E			-				-
Website development			-				(2,120	)
			-				(2,120	)
FINANCING ACTIVITIES
Proceeds from convertible notes payable			204,911				84,000
Proceeds from short term loan			34,691				-
Repayment of Capital Lease			(2,197	)			-
Cashflow from financing		$	237,405				84,000
Net change in cash			2,588				8,720
Beginning cash			1,663				33,335
Ending Cash			4,251				42,055
Non-Cash Investing and Financing Activities:
Record derivative liability on notes		$				$	186,427
Conversion of note to common stock		$	175,423			$	46,500
Issuance of promissory note for accrued expenses		$				$
Issuance of shares under stock payable		$				$	56,000

 

See accompanying notes to unaudited consolidated financial statements.

 

 

FRESH PROMISE FOODS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Business

 

Fresh Promise Foods is a consumer products and marketing company focused on the high-margin multi-billion dollar health and wellness food and beverage sectors. Under its wholly owned subsidiary, Harvest Soul Inc., the Company is building a production facility in Atlanta, GA. and has launched two new flavors of Harvest Soul Chewable Juices in the organic all-natural juice category.

 

On March 15, 2013 all officers and directors resigned from the Company and Mr. Joseph C. Canouse was appointed President, Chief Executive Officer, and Director.

 

On April 17, 2013 Mr. Kevin P. Quirk joined the Company and was appointed President, Chief Executive Officer. Mr. Canouse, who continued as a Director, assumed the title of Chief Financial Officer.

 

Effective August 5, 2013 the Company completed a 1 for 100 reverse stock split, which reduced the number of issued and outstanding common shares from 2,903,888,889 to approximately 29,038,889. Fractional shares produced as a result of this reverse stock split were rounded up to the next whole share. The consolidated financial statements have been retroactively adjusted to reflect this reverse stock split.

 

On September 26, 2013 the name of the Company was changed to Fresh Promise Foods, Inc. and the Company also reduced the number of authorized shares of common stock from four billion (4,000,000,000) to four hundred seventy five million (475,000,000).

 

On May 28, 2014, the Company increased the number of authorized shares of common stock to nine hundred seventy five million shares (975,000,000) from four hundred seventy five million (475,000,000).

 

On June 2, 2014, Joseph C. Canouse resigned as Chairman of the Board of Directors (the “Board”) of Fresh Promise Foods, Inc., a Nevada corporation (the “Company”), and as Chief Financial Officer of the Company. Mr. Canouse informed the Company that his decision to resign was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

 

On June 4, 2014, the Board approved by unanimous written consent the appointment of Scott Martin as a member of the Board and Secretary of the Company, effective as of such date.

 

On June 4, 2014, the Board also approved by unanimous written consent the appointment of Mr. Kevin P. Quirk as Chairman of the Board. Mr. Quirk currently serves as Chief Executive Officer & Chief Financial Officer of the Company and a director and will retain his current positions.

 

On September 1, 2014, the Company increased the number of authorized shares of common stock to two billion shares (2,000,000,000) from nine hundred seventy five million shares (975,000,000).

 

In January 1, 2015 the Company completed a 1 for 150 reverse stock split. All share and per share amounts have been presented to give retroactive effective for this reverse stock split.

 

Accounting Basis

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes requires by US GAAP for complete financial statements. The unaudited consolidated financial statements and notes included herein should be read in conjunction with the annual consolidated financial statements and notes for the year ended December 31, 2014 included in our Annual Report on Form 10-K filed with the SEC on April 24, 2015.

 

In the option of management, all adjustments (consisting of normal recurring items) necessary to present fairly the Company’s financial position as of March 31, 2015, and the result of operations and cash flows for the three months ending March 31, 2015 are not necessarily indicative of the results to be expected for a full year.

 

PRINCIPLES OF CONSOLIDATION

 

The consolidated financial statements include the financial statements of Fresh Promise Foods Inc. and its wholly-owned subsidiary Harvest Soul Inc. All significant inter-company balances and transactions within the Company and subsidiary have been eliminated upon consolidation.

 

 

FRESH PROMISE FOODS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

 

CASH AND CASH EQUIVALENTS

 

Fresh Promise Foods Inc. considers all highly liquid investments with maturities of three months or less to be cash equivalents.

 

The Company places its cash with a high credit quality financial institution. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. For the period ended March 31, 2015 and the year ended December 31, 2014, the Company has not reached bank balances exceeding the FDIC insurance limit. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits.

 

CASH FLOWS REPORTING

 

The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net loss to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.

 

 

FRESH PROMISE FOODS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

 

USE OF ESTIMATES

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

INVENTORIES

 

Inventories previously consisted of natural and organic food products, wrappers and boxes, and were stated at the lower of cost or market. Cost was determined on the average cost method. Inventories are reviewed and reconciled periodically. As of March 31, 2015 and December 31, 2014, the Company had inventory of $68,118 and $20,935, respectively. The increase was due to a ramp up of production of Harvest Soul Chewable Juices to meet increased demand.

 

ACCOUNTS RECEIVABLE

 

The Company’s receivables had consisted of billings to customers for products invoiced and shipped. Accounts receivable as of March 31, 2015 was $212 compared to zero for December 31, 2014. The Company charges off receivables if they determine that the amount is no longer collectible. The allowance for doubtful accounts was zero at March 31, 2015 and December 31, 2014. Bad debt expense related to customer receivables for the year ended March 31, 2015 and December 31, 2014 was zero and zero respectively.

 

NET INCOME (LOSS) PER COMMON SHARE

 

Net income (loss) per share is calculated in accordance with FASB ASC 260, “Earnings per Share.” Basic net income (loss) per common share is based on the weighted average number of shares of common stock outstanding at March 31, 2015 and 2014. Diluted earnings per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. At March 31, 2015, the Company had convertible notes and warrants outstanding that could be converted into approximately 111,666,797 and 126,836,204 at December 31, 2014, common shares based up the closing bid price of the company’s common stock at March 31, 2015 and December 31, 2014 respectively.

 

REVENUE RECOGNITION

 

The Company derives revenue from the sale of its products. The Company follows paragraph ASC 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

 

 

FRESH PROMISE FOODS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

 

SHARE-BASED EXPENSE

 

ASC 718, Compensation – Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

 

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, Equity – Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.

 

WEBSITE DEVELOPMENT COSTS

 

The Company accounts for website development costs in accordance with Accounting Standards Codification 350-50 “Website Development Costs”. Accordingly, all costs incurred in the planning stage are expensed as incurred, costs incurred in the website application and infrastructure development stage that meet specific criteria are capitalized and costs incurred in the day to day operation of the website are expensed as incurred.

 

The Company placed into service its main website (www.freshpromisefoods.com) in 2013. All costs associated with these websites are subject to straight-line amortization over there expected useful life, a five year period.

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the FASB Accounting Standards Codification™ (“ASC”) is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company. Management has reviewed the aforementioned rules and releases and believes any effect will not have a material impact on the Company’s present or future financial statements.

 

INCOME TAXES

 

The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities

 

A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.

 

The Company follows the provisions of the ASC 740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions will be highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.

 

The Company has adopted ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. Management has not filed tax returns for the year ended December 31, 2014. Tax years 2013, 2012 and 2011 remain open for examination.

 

 

FRESH PROMISE FOODS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

 

NOTE 2 – PROPERTY AND EQUIPMENT

 

Property and equipment is recorded at cost. The Company depreciates the equipment using the straight-line method over the useful lives of the equipment. The useful lives are estimated to be between 3 and 7 years. Depreciation expense was $3,109 and $8,844 for the quarter ended March 31, 2015 and year ended December 31, 2014, respectively. Property and equipment consisted of the following at March 31, 2015 and December 31, 2014:

 

		March 31, 2015				December 31, 2014
Furniture and fixtures		$	3,389			$	3,389
Production equipment			96,692				97,342
Total property and equipment			100,081				100,731
Less: Accumulated depreciation			(12,630	)			(10,172	)
Property and equipment, net.		$	87,451			$	90,559

 

 

FRESH PROMISE FOODS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

 

NOTE 3 – RELATED PARTY TRANSACTIONS

 

At the time of his appointment Mr. Canouse received the 1 share of convertible Preferred B stock previously issued to a director. Also, during the three months ended June 30, 2013, the Company issued 1 additional shares of convertible preferred B stock to Mr. Quirk when he joined the Company. The stock has no par value and is not traded publicly.

 

On January 28, 2014, the Company converted $11,000 of a $22,000 convertible note to 24,445 common shares from a related party. The note had been purchased from a former officer of the Company based on the contractual conversions terms per agreement.

 

During the three months ending March 31, 2015, the company received proceeds from a third party that increased the amount due to related parties to $38,291 from $23,600.

 

NOTE 4 – FAIR VALUE MEASUREMENTS

 

The Company has adopted the guidance under ASC Topic 820 for financial instruments measured on a fair value on a recurring basis. ASC Topic 820 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data and requires disclosures for assets and liabilities measured at fair value based on their level in the hierarchy. Further authoritative accounting guidance (ASU No. 2009-05) under ASC Topic 820, provides clarification that in circumstances in which a quoted price in an active market for the identical liabilities is not available, a reporting entity is required to measure fair value using one or more of the techniques provided for in this update.

 

The standard describes a fair value hierarchy based on three levels of input, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

 

Level 1 – Quoted prices in active markets for identical assets and liabilities.

 

Level 2 – Input other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets of liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liabilities.

 

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

 

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging”. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the over- all fair value of the financial instruments. In addition, the fair value of free standing derivative instruments such as warrant and option derivatives are valued using the Black-Scholes modes.

 

The Company uses Level 3 inputs for its valuation methodology for the embedded conversion option liabilities as their fair value were determined by using the Black Scholes option-pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.

 

The following table sets forth the liabilities at March 31, 2015, which is recorded on the balance sheet at fair value on a recurring basis by level within the fair value hierarchy. As required, these are classified based on the lowest level of input that is significant to the fair value measurement:

 

						Fair Value Measurements at Reporting Date Using
						Quoted prices in				Significant				Significant
						Active Markets for				Other Observable				Unobservable
						Identical Assets				Inputs				Inputs
Description		3/31/2015				(Level 1)				(Level 2)				(Level 3)
Convertible promissory notes with embedded conversion option		$	862,485				-0-				-0-			$	862,485
Total		$	862,485				-0-				-0-			$	862,485

 

The following table sets forth a summary of change in fair value of our derivative liabilities for the period ended March 31, 2015:

 

Beginning balance		$	584,856
Change in fair value of embedded conversion features of convertible promissory notes and warrants included in earnings		$	(348,995	)
Embedded conversion option & warrant liability recorded in connection with the issuance of convertible promissory notes		$	626,624
Change in fair value of embedded conversion features of convertible promissory notes due to conversion		$	-
Ending balance		$	862,485

  

 

FRESH PROMISE FOODS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

 

NOTE 5 – NOTES AND CONVERTIBLE NOTES PAYABLE

 

Convertible notes payable consist of the following at March 31, 2015 and December 31, 2014:

 

All common share data in this table have been adjusted for the reverse stock split.

 

		Balance Due at
		March 31, 2015				December 31, 2014
On January 16, 2012 the Company executed a promissory note for $50,000. The note bears interest at 10 % and is secured by common stock of the Company. The note is convertible into common stock of the Company at $0.05 per share. In 2012, $30,000 of the note was converted to 17,595 shares of common stock of the Company. In 2013 the note maturity date was extended to September 30, 2014. Due to the features in this note, the Company could not determine if sufficient shares in the Company stock would be available to fulfill all conversion obligations .Accordingly a derivative liability was recorded for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 882%, and an assumed dividend rate of 0%.			20,000				20,000
On March 5, 2013 the Company executed a promissory note for $45,000. In 2014 the note was modified into three notes of $15,000 each. The notes bear interest at 8 % are unsecured. The notes matured March 5, 2014 but were extended to June 30, 2014. One of the notes was sold to a third party and amended. Due to the amended features the Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 765%, and an assumed dividend rate of 0%. The remaining two $15,000 notes are also convertible into common stock at the market price but no derivative liability was recorded. In February 2014, the third party converted $5,000 of note into 16,955 shares of common stock of the Company. During the first quarter of 2015, the third party converted $1,764 of the note into 352,941 shares of common stock of the Company.			8,251				10,015
On March 5, 2013 the Company executed a promissory note for $45,000. In 2014 the note was modified into three notes of $15,000 each. The notes bear interest at 8 % are unsecured. The notes matured March 5, 2014 but were extended to June 30, 2014. One of the notes was sold to a third party and amended. Due to the amended features the Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 765%, and an assumed dividend rate of 0%. The remaining two $15,000 notes are also convertible into common stock at the market price but no derivative liability was recorded. On February 10, 2015, the note was purchased and the terms were changed. The new terms beared a 12% interest rate. The note can be converted into common stock at a discount of 55% off the conversion price. The conversion price is the average 3 day lowest closing sales price during a 10 day period prior to conversion, but no less that $0.0001. A gain of $29,745 was recorded due to the change in terms, in accordance with debt modification guidance.			15,000				15,000
On September 11, 2013 the Company executed a promissory note for $15,000 as payment to a service provider. The note is convertible into common stock of the Company at a discount of 35% off the average one day bid price the day prior to conversion. Due to the discount feature we have recorded a liability of $8,077, or put premium, as part of the carrying value of this note. The note is convertible at any time prior to maturity and bears interest at 6% per annum.			15,000				15,000

 

 

FRESH PROMISE FOODS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

 

NOTE 5 – NOTES AND CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

On October 29, 2013 the Company executed a promissory note for $2,500. The note bears interest at 6% and is secured by common stock of the Company. The loan matures April 29, 2014. The note is convertible at the lower of a discount of 35% off the prior day’s closing bid price or $0.01. The note also provided for purchase of 133,334 shares by execution of a warrant agreement. The agreement expires two years from the date of the note. Under this agreement shares can be purchased for $0.02 unless the Company sells stock at a price below that level. Should this occur the conversion price is reduced to that lower price. The Company used the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 599%, and an assumed dividend rate of 0%.			2,500				2,500
On January 01, 2014 the Company executed a promissory note for $20,000 as payment to a service provider. The note is convertible into common stock of the Company at a discount of 35% off the average one day bid price the day prior to conversion. Due to the discount feature we have recorded a liability of $10,769, or put premium, as part of the carrying value of this note. The note is convertible at any time prior to maturity and bears interest at 6% per annum.			20,000				20,000
In February 2014, a note notes with a face value of $22,000 was sold to a third party. In February 2014, the third party converted $11,000 of note into 24,445 shares of common stock of the Company. During the first quarter of 2015, the third party converted $2,738 of the note into 730,000 shares of common stock of the company.			8,263				11,000
On January 23, 2014 the Company executed a promissory note for $6,000. The note bears interest at 9.875 % and is secured by common stock of the Company. The note can be converted into common stock at a discount of 30% off the conversion price. The conversion price is the average 3 day lowest closing sales price during a 10 day period prior to conversion, but no less that $0.0001. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 321%, and an assumed dividend rate of 0%.			6,000				6,000
On March 17, 2014 the Company executed a promissory note for $25,000. The note bears interest at 12 % and is secured by common stock of the Company. The note can be converted into common stock at a discount of 40% off the conversion price. The conversion price is the average of the lowest 3 day trading price during a 10 day period prior to conversion, unless the Company sells or issues stock at a price lower than the conversion price. Should this occur the conversion price is reduced to that lower price. The Company has recorded a derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk Free Interest rate of .025, volatility of 296%, and an assumed dividend rate of 0%. In November 2014, the third party converted $7,135 of note into 366,598 shares of common stock of the Company. During the first quarter of 2015, the third party converted $6,612 of the note into 1,569,580 shares of common stock of the company.			11,253				17,865

 

 

FRESH PROMISE FOODS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

 

NOTE 5 – NOTES AND CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

On June 9, 2014 the Company executed a promissory note for $30,000. The note bears interest at 8% and is secured by common stock of the company. The note can be converted into common stock at a discount of 42% off of the conversion price. The conversion price is the average lowest 3 day trading price during a 10 day period prior to conversion. The Company has recorded the derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk free interest rate of .025, volatility of 276% and an assumed dividend of 0%. During the first quarter of 2015, the third party converted $12,098 of the note into 2,656,309 shares of common stock of the company.			17,902				30,000
On June 11, 2014 the Company executed a promissory note for $86,500. The note bears interest at 12% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 45% off of the conversion price. The conversion price is the average lowest 3 day trading price during a 10 day period prior to conversion. The conversion price is the average lowest 3 day trading price during a 10 day period prior to conversion, or $0.0135 whichever is greater. The Company has recorded the derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk free interest rate of .025, volatility of 276% and an assumed dividend of 0%. During the first quarter of 2015, the third party converted $40,040 of the note into 6,860,160 shares of common stock of the Company.			46,460				86,500
On June 11, 2014 the Company executed a promissory note for $86,291 for the note plus interest on the note executed March 13, 2013. The note bears interest at 12% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 45% off of the conversion price. The conversion price is the average lowest 3 day trading price during a 10 day period prior to conversion, or $0.0135 whichever is greater. The Company has recorded the derivative liability for this note using the Black Scholes Method to value the derivitive liabiltiy with the following assumptions: Risk free interest rate of .025, volitility of 276% and an assumed dividend of 0%. In June 2014, the third party converted $13,319 of note into 56,000 shares of common stock of the Company. In July 2014, the third party converted $4,510 of note into 40,000 shares of common stock of the Company. In August 2014, the third party converted $5,077 of note into 93,334 shares of common stock of the Company. In September 2014, the third party converted $12,311 of note into 420,000 shares of common stock of the Company. In October 2014, the third party converted $14,111 of note into 655,334 shares of common stock of the Company. In November 2014, the third party converted $13,816 of note into 753,334 shares of common stock of the Company. In December 2014, the third party converted $4,670 of note into 626,667 shares of common stock of the Company. During the first quarter of 2015, the third party fully converted the remaining balance of the note into 1,170,667 shares of common stock of the company.			-				5,542

 

 

FRESH PROMISE FOODS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

 

NOTE 5 – NOTES AND CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

On June 30, 2014 the company executed a promissory note for $88,500. The note bears interest at 6% and is secured by common stock of the company. The note can be converted into common stock at the bid price on day prior to conversion. On February 10, 2015, the note was purchased and the terms were changed. The new terms beared a 8% interest rate. The note can be converted into common stock at a discount of 55% off the conversion price. The conversion price is the average 3 day lowest closing sales price during a 10 day period prior to conversion, but no less that $0.0001. A loss of $190,490 was recorded due to the change in terms, in accordance with debt modification guidance. During the first quarter of 2015, the third party converted $9,382 of the note into 1,834,300 shares of common stock of the company.			79,118				88,500
On August 8, 2014 the Company executed a promissory note for $50,000. The note bears interest at 6% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 35% off of the conversion price. The conversion price is the average bid price on the 3 days prior to the date of conversion. Or the closing price of the issuer on the date of this note of $.001, whichever is lower.			50,000				50,000
On April 3, 2014 the Company executed a promissory note for $42,500. The note bears interest at 22% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 45% off of the conversion price. The conversion price is the average lowest 3 day trading price during a 10 day period prior to conversion, unless the Company sells or issues stock at a lower price than the conversion price. Should this occur the conversion prices is reduced to the lower price. The Company has recorded the derivitive liability for this note using the Black Scholes Method to value the derivitive liabiltiy with the following assumptions: Risk free interest rate of .025, volitility of 292% and an assumed dividend of 0%. During the first quarter of 2015, the third party converted $17,525 of the note into 3,728,015 shares of common stock of the company.			24,975				42,500
On July 8, 2014 the Company executed a promissory note for $42,500. The note bears interest at 22% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 45% off of the conversion price. The conversion price is the average lowest 3 day trading price during a 10 day period prior to conversion, unless the Company sells or issues stock at a lower price than the conversion price. Should this occur the conversion prices is reduced to the lower price. The Company has recorded the derivative liability for this note using the Black Scholes Method to value the derivative liability with the following assumptions: Risk free interest rate of .025, volatility of 270% and an assumed dividend of 0%.			42,500				42,500
On September 5, 2014 the Company executed a promissory note for $52,500. The note bears interest at 12% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 55% off of the conversion price. The conversion price is the average lowest 3 day trading price during a 10 day period prior to conversion, or the stock can be converted at $0.0135, whichever is greater.			52,500				52,500

 

 

FRESH PROMISE FOODS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

 

NOTE 5 – NOTES AND CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

On October 27, 2014 the Company executed a promissory note for $52,500. The note bears interest at 12% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 55% off of the conversion price. The conversion price is the average lowest 3 day trading price during a 10 day period prior to conversion, or the stock can be converted at $0.0135, whichever is greater.			52,500				52,500
On December 11, 2014 the Company executed a promissory note for $40,000. The note bears interest at 6% and is secured by common stock of the Company. The note can be converted into common stock at the lower of (i) a discount of 35% off of the conversion price. The conversion price is the average bid price on the 3 days prior to the date of conversion, or (ii) $.001.			40,000				40,000
On January 5, 2015 the Company executed a promissory note for $20,000. The note bears interest at 6% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 30% off of the conversion price. The conversion price is the average of the three lowest bid prices in the 10 days prior to conversion.			20,000				-
On January 31, 2015 the Company executed a promissory note for $176,267. The note bears interest at 6% and is secured by common stock of the Company. The conversion price is the bid price on the day prior to the date of conversion.			176,268				-
On February 10, 2015 the Company executed a promissory note for $52,500. The note bears interest at 8% and is secured by common stock of the Company. The note can be converted into common stock at the greater of (i) a discount of 45% off of the conversion price. The conversion price is the average bid price on the 3 days prior to the date of conversion, or (ii) $.001.			52,500				-
On February 13, 2015 the Company executed a promissory note for $30,000. The note bears interest at 8% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 42% off of the conversion price. The conversion price is the average bid price on the 3 days prior to the date of conversion, or (ii) $.001.			30,000				-
On February 13, 2015 the Company executed a promissory note for $50,000. The note bears interest at 8% and is secured by common stock of the Company. The note can be converted into common stock at a discount of 30% off of the conversion price. The conversion price is the average of the three lowest bid prices in the 10 days prior to conversion.			50,000				-
On January 26, 2015 the Company executed a promissory note for $28,000. The note bears interest at 12% and is secured by common stock of the Company. The note can be converted into common stock at 50% of the average 3 lowest prices in 10 days prior.			28,000				-
On March 17, 2015 the Company executed a promissory note for $28,000. The note bears interest at 12% and is secured by common stock of the Company. The note can be converted into common stock at 50% of the average 3 lowest prices in 10 days prior.			28,000				-
Premium liability			29,846				29,846
Unamortized debt discount on derivative liabilities			(441,349	)			(248,811	)
Total convertible notes outstanding, net of unamortized discounts			485,484				388,957

 

 

FRESH PROMISE FOODS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

 

NOTE 6 – STOCKHOLDERS’ EQUITY (DEFICIT)

 

The authorized common stock of the Company consist of 2,000,000,000 shares with a par value $0.00001. The Company also has 100,000,000 shares of par value $0.00001 Preferred C stock authorized and 10 shares of par value $0.00001 Preferred B stock authorized and 30,000,000 par value $0.00001 par value Preferred C stock authorized.

 

Series A Preferred stock has been cancelled.

 

Series B Preferred

 

Each one share of Series B Preferred has voting rights equal to four times the sum of all shares of common stock issued and outstanding at time of voting, plus all shares of Series C Preferred Stock issued and outstanding at time of voting, divided by the number of shares of Series B Preferred Stock issued and outstanding at the time of voting.

 

By unanimous written consent of the Board, the Board issued an aggregate of two (2) shares of Series B Preferred, to two individuals (the “Series B Stockholders”). As a result of the voting rights granted to the Series B Preferred, the Series B Stockholders together hold in the aggregate approximately 80% of the total voting power of all issued and outstanding voting capital of the Company.

 

Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any distribution or payment. shall be made to the holders of any stock ranking junior to the Series B Preferred Stock, the holders of the Series B Preferred Stock shall be entitled to be paid out of the assets of the Corporation an amount equal to $1.00 per share or, in the event of an aggregate subscription by a single subscriber for Series B Preferred Stock in excess of $100,000, $0.997 per share (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares) (the “Preference Value”), plus all declared but unpaid dividends, for each share of Series B Preferred Stock held by them. After the payment of the full applicable Preference Value of each share of the Series B Preferred Stock as set forth herein, the remaining assets of the Corporation legally available for distribution, if any, shall be distributed ratably to the holders of the Corporation’s Common Stock.

 

Series C Preferred

 

Series C Preferred Stock has voting rights of one vote per share owned. The Preferred C stock is convertible into common stock of the Company at the rate of 0.10 per common share for each share of Preferred C stock. The holders of Series C Preferred stock are entitled to receive any dividend declared by the Board of Directors.

 

Common Stock

 

During the three months ending March 31, 2015, the company issued 372,000 shares of common stock with the partial conversion of promissory note with a face value of $42,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 372,581 shares of common stock with the partial conversion of promissory note with a face value of $42,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 373,256 shares of common stock with the partial conversion of promissory note with a face value of $42,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 372,807 shares of common stock with the partial conversion of promissory note with a face value of $42,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 373,387 shares of common stock with the partial conversion of promissory note with a face value of $42,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 372,881 shares of common stock with the partial conversion of promissory note with a face value of $42,500. This was exempt from registration under rule 144.

 

 

FRESH PROMISE FOODS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

 

During the three months ending March 31, 2015, the company issued 373,077 shares of common stock with the partial conversion of promissory note with a face value of $42,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 373,077 shares of common stock with the partial conversion of promissory note with a face value of $42,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 372,449 shares of common stock with the partial conversion of promissory note with a face value of $42,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 372,500 shares of common stock with the partial conversion of promissory note with a face value of $42,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 352,941 shares of common stock with the partial conversion of promissory note with a face value of $15,000. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 730,000 shares of common stock with the partial conversion of promissory note with a face value of $22,000. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 466,610 shares of common stock with the partial conversion of promissory note with a face value of $88,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 1,003,097 shares of common stock with the partial conversion of promissory note with a face value of $88,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 364,593 shares of common stock with the partial conversion of promissory note with a face value of $88,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 500,000 shares of common stock with the partial conversion of promissory note with a face value of $86,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 592,000 shares of common stock with the partial conversion of promissory note with a face value of $86,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 639,000 shares of common stock with the partial conversion of promissory note with a face value of $86,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 686,000 shares of common stock with the partial conversion of promissory note with a face value of $86,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 689,160 shares of common stock with the partial conversion of promissory note with a face value of $86,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 844,000 shares of common stock with the partial conversion of promissory note with a face value of $86,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 855,000 shares of common stock with the partial conversion of promissory note with a face value of $86,500. This was exempt from registration under rule 144.

 

 

FRESH PROMISE FOODS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

 

During the three months ending March 31, 2015, the company issued 990,000 shares of common stock with the partial conversion of promissory note with a face value of $86,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 1,065,000 shares of common stock with the partial conversion of promissory note with a face value of $86,500. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 326,667 shares of common stock with the partial conversion of promissory note with a face value of $86,292. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 384,000 shares of common stock with the partial conversion of promissory note with a face value of $86,292. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 460,000 shares of common stock with the partial conversion of promissory note with a face value of $86,292. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 384,178 shares of common stock with the partial conversion of promissory note with a face value of $30,000. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 506,438 shares of common stock with the partial conversion of promissory note with a face value of $30,000. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 696,075 shares of common stock with the partial conversion of promissory note with a face value of $30,000. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 1,069,618 shares of common stock with the partial conversion of promissory note with a face value of $30,000. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 412,500 shares of common stock with the partial conversion of promissory note with a face value of $25,000. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 418,400 shares of common stock with the partial conversion of promissory note with a face value of $25,000. This was exempt from registration under rule 144.

 

During the three months ending March 31, 2015, the company issued 738,680 shares of common stock with the partial conversion of promissory note with a face value of $25,000. This was exempt from registration under rule 144.

 

All conversion were generally done based on the contractual terms of the agreement. In instances where conversions were not done at the contractual terms a gain a loss was recorded on conversion.

 

Common Stock Warrants

 

The Company did not issue any warrants during the quarter ending March 31, 2015.

 

The following table sets forth common share purchase warrants outstanding as of March 31, 2015 and December 31, 2014:

 

		Exercise Price
Outstanding warrants December 31, 2014			4,533,334				0.02
Outstanding warrants March 31, 2015			4,533,334				0.02
Common stock issuable upon exercise of warrants			4,533,334				0.02

 

Outstanding warrants at March 31, 2015 have a weighted average remaining contractual life of 7 months. All warrants have an average weighted exercise price of $0.02. The warrants had an intrinsic value of $0 at March 31, 2015 and December 31, 2014.

 

 

FRESH PROMISE FOODS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

 

NOTE 7 – GOING CONCERN

 

The Company’s consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating cost and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

 

The Company has incurred a net loss of $421,553 for the quarter ending March 31, 2015 and the Company had an accumulated deficit of $9,178,119 and a working capital deficit of $1,976,060 at March 31, 2015. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan to obtain such resources for the Company include, obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.

 

There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern

 

NOTE 8 – SUBSEQUENT EVENTS

 

On May 8, 2015, the company enter an agreement with Optimum Sales out of El Dorado Hills, CA to become the west coast broker of Harvest Soul Chewable Juices.

 

The Company had conversions of notes payable into 37,178,661 shares of common stock. The total principal converted was $96,690. The conversions were done at the contractual terms per the agreements.

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

This quarterly report on Form 10-Q and other reports filed by Fresh Promise Foods, Inc. formally StaKool, Inc. (“we,” “us,” “our,” or the “Company”) from time to time with the U.S. Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements (collectively the “Filings”) and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan”, or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

 

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

 

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

 

Plan of Operations

 

Under the direction of Kevin Quirk, the Company’s Chief Executive Officer, the Company’s primary goal continues to be the leveraging of management’s experience and knowledge of the natural food and beverage industry to better deploy the Company’s “Natural plus Energy” product line and to allow for a more comprehensive understanding of the distribution channels and retail positioning. In addition, the natural food and beverage market continues to grow at a relatively substantial pace, and allows for the introduction of many functional food and beverage products.

 

The Company plans to continue to initiate growth measures for the Harvest Soul brand by introducing two new flavors of Harvest Soul chewable juices in the next quarter. In addition to the planned launch of these new products, the Company is exploring options to expand its productivity by moving into a new state-of-the-art production facility located in the metro-Atlanta area. The new facility is expected to increase the production capacity of the Company and this initiative is extremely important to our ability to meet increased demand for our product.

 

Our management team feels confident that its understanding of the market will allow for the addition of several functional food and beverage products within the next 24-36 months that could effectively capitalize on our knowledge and experience, and are capable of developing velocity throughout the all-natural retail market space.

 

In 2015 the Company is focused on finding additional capital to fund expansion to additional markets in the United States.

 

 

Current developments include the following:

 

●	We have USDA Organic and Non GMO certifications for all Harvest Soul products.
●	We have developed and had certified two new flavors of Harvest Soul Chewable juices.
●	We have partnered with a brokerage firm out of California to represent Harvest Soul in the west.
●	We continue to seek companies that would be viable acquisition candidate.

 

Results of Operations

 

For the Three Months Ended March 31, 2015 Compared to the Three Months Ended March 31 2014

 

Revenue

 

Total revenue for the three months ended March 31, 2015 was $7,180 compared to zero for the same period in 2014. Total revenues were from the result of orders sold both through the Harvest Soul e-commerce website and to the UNFI distribution.

 

Gross Margin

 

Gross margin for the three months ended March 31, 2015 was ($3,203) due to an increase in expenses. Revenue increased from $0 to $7,180 for the three month period ending March 31, 2014 and 2015 respectively, due to a shortage of working capital which caused the Company slow production and decrease selling operations.

 

Operating Expenses

 

For the three month periods ending March 31, 2015 operating expenses increased $54,773, from $172,580 in 2014, to $227,353 in 2015. Of this increase, $51,080, represented an increase in general and administrative expenses. This expense was partially offset by a decrease in payroll of $20,900.

 

Loss from Operations

 

Loss from operations for the three months ended March 31, 2015 was $230,556 a increase from $172,580 for the same period in 2014. The loss was primarily attributable to a lack of revenue.

 

Other Income (Expense)

 

For the three month periods ended March 31, 2015 Other Expenses increased $100,879, from $90,118 in 2014 to $190,997 in 2015. In 2015 Other Expense included $130,776 in derivative liability expense, $320,985 in interest expense, and $160,745 in losses on note extinguishment. These expenses were offset by a gain on change in value of our derivative liabilities of $424,583.

 

Net Loss

 

Net Loss for the three months ended March 31, 2015, was $421,553. The net loss was primarily attributable to a lack of revenue and the operating expenses and other expenses as described above.

 

Inflation did not have a material impact on the Company’s operations for the period. Other than the foregoing, management knows of no trends, demands, or uncertainties that are reasonably likely to have a material impact on the Company’s results of operations.

 

 

Liquidity & Capital Resources

 

The following table summarizes total current assets, liabilities and working capital at March 31, 2015 and December 31, 2014.

 

		March 31,2015				December 31, 2014
Current assets		$	78,846			$	23,112
Current liabilities		$	1,997,044			$	1,695,780
Working capital deficit		$	(1,918,198	)		$	(1,672,668	)

 

At March 31, 2015, we had a working capital deficit of $1,918,198 as compared to a working capital deficit of $1,672,668, at December 31, 2014, an increase in the deficit of $303,392. The increase is primarily related to an increase in convertible notes payable issued in order to fund operating activities.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business.

 

The Company sustained a net loss of $421,553 for the three months ended March 31, 2015. Because of the absence of positive cash flows from operations, the Company requires additional funding for continuing the development and marketing of products. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this ncertainty.

 

At March 31, 2015 we had minimal assets and a working capital deficit of $1,918,198. Our working capital deficit is due to the results of operations. However we are presently able to meet our short term obligations through the sale of convertible notes.

 

Net cash used in operating activities for the three months ended March 31, 2015 was ($234,817). Net cash provided by financing activities for the three months ended March 31, 2015 was $237,405. Net cash provided by financing activities for this period consists primarily of the issuance of a convertible notes. Net cash used in investing activities was $0, which represented funds used to develop a new website for the Company.

 

We anticipate that our future liquidity requirements will arise from the need to fund operations, pay current obligations and future capital expenditures. The primary sources of funding for such requirements are expected to be cash generated raising additional funds from the private equity sources and debt financing. However, we can provide no assurances that we will be able to generate sufficient cash flow from operations and obtain additional financing on terms satisfactory to us, if at all, to remain a going concern. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis and ultimately to attain profitability. In addition, our Plan of Operation for the next twelve months is to raise capital to continue to expand our operations. We are presently engaged in capital raising activities through several private offerings of our company’s securities. See “Note 7 – Going Concern” in our financial statements for additional information as to the possibility that we may not be able to continue as a “going concern.”

 

Off-Balance Sheet Arrangements

 

As of March 31, 2015, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

We do not hold any derivative instruments and do not engage in any hedging activities.

 

Item 4. Controls and Procedures.

 

(a) Evaluation of Disclosure Controls and Procedures.

 

In connection with the preparation of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, our Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”) evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our PEO and PFO concluded that our disclosure controls and procedures as of the end of the period covered by this report were not effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

 

(b) Changes in Internal Control over Financial Reporting.

 

No significant changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting were made in our internal control over financial reporting during the three month period ended March 31, 2015, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

We, together with certain other parties (collectively, the “Defendants”), are currently involved in litigation against Kyle Gotshalk, Leonard Gotshalk, Clinton Hall, LLC, Richard Maher and Patrick O’Loughlin (collectively, the “Plaintiffs”). On April 25, 2013, the Plaintiffs filed a complaint with the United States District Court for the District of Nevada alleging claims including securities fraud and breach of contract. The Company believes these claims to be unfounded and the Company is prepared to file an answer with the United States District Court for the District of Nevada, together with counterclaims against the Plaintiffs. The Company is continuing to vigorously defend itself against this lawsuit. On September 9, 2014, the Court granted the Defendants’ motion to set aside any entry of default judgment.

 

Except as set forth above, we are not currently involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. Except as set forth above, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 1A. Risk Factors.

 

Our business is subject to numerous risks. We caution you that the following important factors, among others, could cause our actual results to differ materially from those expressed in forward-looking statements made by us or on our behalf in filings with the SEC, press releases, communications with investors and oral statements. Any or all of our forward-looking statements in this and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in the discussion below will be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially from those anticipated in forward-looking statements. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosure we make in our reports filed with the SEC.

 

An investment in our Company involves a substantial risk of loss. You should carefully consider the risks described below, before you make any investment decision regarding our Company. Additional risks and uncertainties, including those generally affecting the market in which we operate or that we currently deem immaterial, may also impair our business. If any such risks actually materialize, our business, financial condition and operating results could be adversely affected. In such case, the trading price of our common stock could decline.

 

The following risk factors are not exhaustive and the risks discussed herein do not purport to be inclusive of all possible risks but are intended only as examples of possible investment risks. To facilitate understanding of the various business risks applicable to our Company and the strategic alliance companies through which we intend to operate our business during the foreseeable future, the risk factors discussed herein address our Company together with the risks applicable to our operations that we intend to conduct with our strategic alliance partners.

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

  

Item 3. Defaults upon Senior Securities.

 

There were no defaults upon senior securities during the quarter ended March 31, 2015.

 

Item 4. Mine Safety Disclosure.

 

Not applicable

 

Item 5. Other Information.

 

There is no other information required to be disclosed under this item which was not previously disclosed.

 

 

Item 6. Exhibits.

 

Exhibit No.		Description
31.1		Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).*
31.2		Certification by the Principal Accounting Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).*
32.1		Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2		Certification by the Principal Accounting Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS		XBRL Instance Document*
101.SCH		XBRL Taxonomy Extension Schema*
101.CAL		XBRL Taxonomy Extension Calculation Linkbase*
101.DEF		XBRL Taxonomy Extension Definition Linkbase*
101.LAB		XBRL Taxonomy Extension Label Linkbase*
101.PRE		XBRL Taxonomy Extension Presentation Linkbase*

 

* Filed Herewith.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Dated: May 22, 2015	FRESH PROMISE FOODS, INC.
	/s/ Kevin P. Quirk
	Kevin P. Quirk
	Principal Executive Officer