Attached files
| file | filename |
|---|---|
| EX-32.1 - FBEC Worldwide Inc. | ex32-1.htm |
| EX-31.1 - FBEC Worldwide Inc. | ex31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended September 30, 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 No. 000-52297
FBEC Worldwide, Inc.
(Exact name of registrant as specified in its charter)
|
Wyoming
|
06-1678089
|
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
|
|
1621 Central Ave, Cheyenne, WY
|
82001
|
|
|
(Address of principal executive offices)
|
(Zip Code)
|
|
800-785-4089
(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 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 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, 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.
|
Large accelerated filer ¨
|
Accelerated filer ¨
|
|
Non-accelerated filer ¨
|
Smaller reporting company x
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The number of shares outstanding of the Registrant’s Common Stock as of December 21, 2015 was 263,817,598.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We urge you to read the following discussion in conjunction with management’s discussion and analysis contained in our Annual Report on Form 10-K for the year ended December 31, 2014, as well as with our unaudited financial statements and the notes thereto included elsewhere herein.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Our prospects are subject to uncertainties and risks. In this Quarterly Report on Form 10-Q, we make forward-looking statements in this Item 2 and elsewhere that also involve substantial uncertainties and risks. These forward-looking statements are based upon our current expectations, estimates and projections about our business and our industry, and reflect our beliefs and assumptions based upon information available to us at the date of this report. In some cases, you can identify these statements by words such as “if,” “may,” “might,” “will, “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” and other similar terms. These forward-looking statements include, among other things, projections of our future financial performance and our anticipated growth, descriptions of our strategies, our product and market development plans, and other objectives, expectations and intentions, the trends we anticipate in our business and the markets in which we operate, and the competitive nature and anticipated growth of those markets.
We caution readers that forward-looking statements are predictions based on our current expectations about future events. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Our actual results, performance or achievements could differ materially from those expressed or implied by the forward-looking statements as a result of a number of factors, including but not limited to the risks and uncertainties discussed in our other filings with the SEC or our sales results or changes in costs associated with ingredients for our products, manufacture of our products, distribution and sales. We undertake no obligation to revise or update any forward-looking statement for any reason.
Overview
FBEC Worldwide, Inc. operates a retail marketing segment of an oil emulsification product, KruudKleen™ and retains the formulation of the beverage products.
In June 2014, the Company entered into a Marketing Agreement which has allowed the company to obtain the exclusive retail marketing rights to a chemical solution that increases the speed of separation of oil and solids from water in existing tanks. The name of the separation product is Kruud Kleen™. The Company will purchase the separation product for 83.33% of the suggested retail price at which the product is customarily sold. The Company plans to sell such separation product to oil production and storage facilities in the United States. The Company will be required to issue 5,000 shares of Series C preferred stock as payment for the exclusive marketing rightswhen available, after filing a designation which will be earned upon issuance. The Company’s gross profit margin is expected to be approximately $200 per barrel at manufacturers suggested reatail price. The material requires temperatures above 40 degrees Fahrenheit to work properly leaving the market during this current season fairly small through March. The Company is actively seeking more customers and retailers for the coming season. We will not continue wth this contract.
FBEC Worldwide, Inc. retains its formulas for its New Age/Alternative Beverages. “New Age/Alternative Beverages” is an industry categorization for a group of products that include energy drinks/infused water, fruit juices and drinks, dairy and dairy substitutes, and bottled/canned teas. Our mission is to supply the highest quality New Age/Alternative Beverages and snack products at the most economical cost to distributors servicing the retail industry and directly to consumers through our website. We believe our service-oriented business model integrates the elements of research, development, product quality assurance, packaging/distribution efficiency, and advanced management systems to generate higher profit margins for our retailers.
2
In June 2015, the Company entered into an Intellectual Property Purchase Agreement, Consulting Agreement, and Royalty Agreement with G. Randall & Sons, Inc. These agreements provide for the asset purchase of the proprietary hemp-based formula used in the Company’s beverage energy shot. G. Randall and Sons will provide ongoing consulting services in blending new formula(s) and working directly with FBEC to improve and blend existing formulas. The Company purchased the asset for $50,000. The purchase includes a $15,000 cash payment and $35,000 8% Convertible Note with a 6 month maturity date and conversion features of 75% of the average closing price 20 days previous to conversion. This represents a 25% discount to the average closing price 20 days previous to conversion.
The Company's Common Stock is quoted on the OTC Market Groups, Inc. OTCQB (the “OTCQB”) under the symbol "FBEC."
Basis of presentation and going concern uncertainty
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), which contemplates continuation of the Company as a going concern, which is dependent upon the Company's ability to establish itself as a profitable business. At September 30, 2015, the Company has an accumulated deficit of $2,691,021 and has a working capital deficit of $1,358,379. The Company’s ability to continue in business is dependent upon obtaining sufficient financing or attaining profitable operations; however, there can be no assurance that management will be successful in obtaining additional funding or in attaining profitable operations, therefore these matters raise substantial doubt about the Company's ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties, nor do they include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.
There have been no changes from the Critical Accounting Policies described in the Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 23, 2015.
Liquidity and Capital Resources
We began current operations in February 2014 and have yet to attain a level of operations which allows us to meet our current overhead requirements. We do not contemplate attaining profitable operations prior to 2015 and there is no assurance that such an operating level will ever be achieved. We will be dependent upon obtaining additional financing in order to adequately fund working capital, infrastructure, production expenses and significant marketing related expenditures to gain market recognition, so that we can achieve a level of revenue adequate to support our cost structure, none of which can be assured. These factors raise substantial doubt about our ability to continue as a going concern and the accompanying financial statements do not include any adjustments related to the recoverability or classification of asset carrying amounts or the amounts and classification of liabilities that may result should we be unable to continue as a going concern.
As of September 30, 2015, the Company’s cash balance was $6,616. Outstanding debt as of September 30, 2015 totaled $1,598,060, which is attributable accounts payable and accruals of $108,671, derivative liability $560,837 and loans and advances of $928,552. The Company’s working capital deficit as of September 30, 2015 was $1,591,444.
The Company will need to raise additional capital to expand operations to the point at which the Company can achieve profitability. The terms of financing that may be raised may not be on terms acceptable by the Company. If adequate funds cannot be raised outside of the Company, the Company’s current stockholders may need to contribute funds to sustain operations. The Company does not have any agreements with any of its stockholders to provide any capital and there can be no assurance that any stockholder would be able or willing to fund the Company's continued operations.
3
Results of Operations
For the period from January 13, 2014 (date of inception) through September30, 2014 and January 1, 2015 through September 30, 2015, the Company’s revenue totaled $0, for which its respective cost of revenues totaled $0.
During the from January 13, 2014 (date of inception) through September 30, 2015, the Company reported no sales of its beverage products or from KruudKleen™.
For the period from January 13, 2014 (date of inception) through September 30, 2014 and January 1, 2015 through September 30, 2015, the Company had operating expenses totaling $3,428,852 and $175,123, respectively. These costs were primarily from wages and consulting fees.
For the three months ended September 30, 2014 and three months ended September 30, 2015, the Company’s revenue totaled $0, for which its respective cost of revenues totaled $0.
For the three months ended September 30, 2014 and three months ended September 30, 2015, the Company had operating expenses totaling $2,672,930 and $17,687, respectively. These costs were primarily from wages and consulting fees.
Off Balance Sheet Arrangements
We do not have any off balance sheet arrangements.
Inflation
The Company believes that inflation has not had, and is not expected to have, a material effect on our operations.
Climate Change
We believe that neither climate change, nor governmental regulations related to climate change, have had, or are expected to have, any material effect on our operations.
Recently Issued Accounting Pronouncements
There are no recently issued accounting pronouncements that are expected to have a material impact on the unaudited condensed consolidated financial statements or notes thereto.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our Company is a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information required under this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 ("Exchange Act"), Jason Spatafora, the Company's President and Principal Executive Officer and Treasurer and Principal Accounting Officer ("CFO") (the Company’s principal financial and accounting officer), initially evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report.
4
Based upon that initial evaluation, Mr. Spatafora concluded, upon consultation with prior management,that the Company’s disclosure controls and procedures were not effective as of September 30, 2015 to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s President/CFO, as appropriate, to allow timely decisions regarding required disclosure, due to the material weaknesses described below. These weaknesses are being addressed with the inclusion of additional board of director members and the intention to hire a Chief Financial Officer with requisite experience and knowledge of the requirements. When this is complete the Company will have an audit committee task with addressing and correcting all material weaknesses.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.
The Company believes its weaknesses in internal controls and procedures is due to the Company's lack of sufficient personnel with expertise in the area of SEC, GAAP and tax accounting procedures. In addition, the Company lacks the personnel structure, size and complexity to segregate duties sufficiently for proper controls. The Company has not implemented a formal system of internal control that provides for multiple levels of supervision and review.
The Company is currently without sufficient funds to hire additional personnel with expertise in these areas and to segregate duties for proper controls and until such time as additional personnel are hired, the Company believes that it will continue to recognize a weakness in its internal controls and procedures. The Company currently engages outside consultants to assist in the areas of tax and accounting procedures. This will be addressed for correction during the period ending September 30, 2015.
The Company plans to hire additional personnel to properly implement a control structure during the quarter ending December 31, 2015. In the meantime, the Chief Executive Officer/Financial Officer will continue to perform or supervise the performance of additional accounting and financial analyses and other post-closing procedures including detailed validation work with regard to balance sheet account balances, additional analysis on income statement amounts and managerial review of all significant account balances and disclosures, to ensure that the Company's Annual Report and the financial statements forming part thereof are in accordance with GAAP.
Changes in Internal Control Over Financial Reporting
During the three months ended September 30, 2015, there were no changes in our internal control over financial reporting that occurred during 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Our disclosure controls and procedures provide our principal executive and financial officer with reasonable assurances that our disclosure controls and procedures will achieve their objectives. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting can or will prevent all human error. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Furthermore, the design of a control system must reflect the fact that there are internal resource constraints, and the benefit of controls must be weighed relative to their corresponding costs. Because of the limitations in all control systems, no evaluation of controls can provide complete assurance that all control issues and instances of error, if any, within our company are detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur due to human error or mistake. Additionally, controls, no matter how well designed, could be circumvented by the individual acts of specific persons within the organization. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all potential future conditions.
5
Management is aware that there is a lack of segregation of duties at the Company due to the fact that the Company has only one director and executive officer dealing with general administrative and financial matters. This constitutes a significant deficiency in the internal controls. Management has decided that considering the officer/director involved, the control procedures in place, and the outsourcing of certain financial functions, the risks associated with such lack of segregation were low and the potential benefits of adding additional employees to clearly segregate duties did not justify the expenses associated with such increases. Management plans to re-evaluate this situation periodically. In light of the Company’s current cash flow situation, the Company does not intend to increase staffing to mitigate the current lack of segregation of duties within the general administrative and financial functions.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEDINGS
A previous director of the Company, Darren Hamans, has initiated arbitration proceedings against the Company for unpaid wages and unissued shares of common stock of the Company, stemming from an employment agreement, dated May 8, 2015. The Company believes the claim has no merit as Mr. Hamans was paid fair consideration for the services provided. The Company has attempted to reach an amicable settlement with Mr. Hamans without harming its shareholders. However, such settlement has not been reached and the Company intends to dispute the claim vigorously.
ITEM 1A. RISK FACTORS
Our Company is a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information required under this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEEDS
There are no unreported sales of unregistered securities during the six months ended September 30, 2015.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following exhibits are filed with this Quarterly Report on Form 10-Q or are incorporated by reference as described below.
|
Exhibit
|
Description
|
|
|
31.1
|
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14a/Rule 14d-14(a)*
|
|
|
32.1
|
Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350*
|
|
|
101.1
|
Interactive data files pursuant to Rule 405 of Regulation S-T*
|
* Filed herewith.
6
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.
|
December 28, 2015
|
FBEC WORLDWIDE, INC.
|
|
|
By:
|
/s/ Jason Spatafora
|
|
|
Jason Spatafora
|
||
|
President and Treasurer
(Principal Executive Officer, Principal Financial and Accounting Officer and Authorized Signatory)
|
||
7