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 June 30, 2016
[__]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Transition Period From                          to                        

 

 

INDEPENDENT FILM DEVELOPMENT CORPORATION

(Name of small business issuer specified in its charter)

 

Nevada	56-2676759
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
2372 Morse Ave., Suite 413 Irvine, CA 92614	92614
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code: (310) 295-1711   (Former address of principle offices)

  

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 (section 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, a non–accelerated filer, or a smaller reporting company.   See definitions of large accelerated filer, accelerated filer and smaller reporting company in Section 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

 

As of October 14, 2016, the issuer had 585,867,360 shares of common stock outstanding.

 

Transitional Small Business Disclosure Format:    Yes    ¨      No   x

 

 

 

 

 

 

 

 

Independent Film Development Corporation

FORM 10-Q

For the Quarterly Period Ended June 30, 2016

INDEX

  

PART I	Financial Information	4
Item 1.	Condensed Consolidated Financial Statements (unaudited)	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	24
Item 4.	Controls and Procedures	24
PART II	Other Information	25
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	26
Signatures		27

  

 

 

  

 

 

 

 

 

 

PART I – FINANCIAL INFORMATION

 

TABLE OF CONTENTS

 

 

Condensed Consolidated Balance Sheets as of June 30, 2016 (unaudited) and September 30, 2015	5
Condensed Consolidated Statements of Operations for the three and nine months ended June 30, 2016 and 2015 (unaudited)	6
Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2016 and 2015 (unaudited)	7
Condensed Notes to the Consolidated Financial Statements (unaudited)	8

 

 

 

 

 

 

 

 

 

 

 

Independent Film Development Corporation
Condensed Consolidated Balance Sheets
			June 30, 2016				September 30, 2015
ASSETS			(unaudited)
Cash		$	24,993			$	80
Inventory			4,750
Total Current Assets			29,743				80
Security deposit			9,630				—
Fixed assets, net of accumulated depreciation of $2,084			10,416				—
Total Assets		$	49,789			$	80
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and other accruals		$	151,471			$	115,677
Deferred rent expense			28,842				—
Accrued officer compensation – related party			746,606				720,875
Accrued interest and penalties			373,325				351,874
Loans payable			54,244				38,493
Loans payable - related party			103,018				12,687
Derivative liability			583,868				127,202
Convertible notes payable, net of discount of $194,051 and $27,637,   respectively			218,216				9,628
Convertible notes payable in default			154,995				168,430
Total Liabilities			2,414,585				1,544,866
Stockholders' Equity (Deficit):
Preferred Stock, $0.0001 par value, 4,980,000 shares authorized, none issued and outstanding			—				—
Series A Preferred Stock, $0.0001 par value, 5,000,000 shares authorized, 5,000,000 and 5,000,000 issued and outstanding, respectively			500				500
Series AA Preferred Stock, $0.0001 par value, 10 shares authorized, 10 and 10 issued and outstanding, respectively			—				—
Series B Preferred Stock, $0.0001 par value, 5,000,000 shares authorized, 83,268 and 57,298 issued and outstanding, respectively			8				6
Series F Preferred Stock, $0.0001 par value, 20,000 shares authorized, 20,000 and 20,000 issued and outstanding, respectively			2				2
Common stock, $0.00001 par value, 6,000,000,000 shares authorized, 323,474,377 and 67,398,079 issued and outstanding, respectively			3,234				674
Additional paid in capital			10,520,016				10,400,286
Common stock payable			38,000				61,470
Series B Preferred Stock payable			—				45,000
Accumulated deficit			(12,926,556	)			(12,052,724	)
Total Stockholders' Equity (Deficit)			(2,364,796	)			(1,544,786	)
Total Liabilities and Stockholders' Equity (Deficit)		$	49,789			$	80
The accompanying notes are an integral part of these condensed consolidated financial statements.

 

Independent Film Development Corporation Statements of Operations (unaudited)
		For the three Months Ended								For the Nine Months Ended
		June 30,								June 30,
		2016				2015				2016				2015
Revenue		$	58,406			$	—			$	101,327			$	—
Cost of sales			(34,087	)			—				(54,556	)			—
Gross margin			24,319				—				46,771				—
Operating Expenses:
Officer compensation			32,500				142,000				105,000				373,001
Professional fees			20,558				6,445				33,033				30,281
General and administrative			193,713				13,067				447,004				27,887
Total operating expenses			246,771				161,512				585,037				431,169
Loss from operations			(222,452	)			(161,512	)			(538,266	)			(431,169	)
Other income and (expense):
Gain (loss) on derivative liability			(54,475	)			10,285				(49,964	)			(12,503	)
Gain on extinguishment of debt			—				45,000				—				45,000
Gain (loss) on settlement of debt			—				134,250				—				(2,973,250	)
Penalty expense			—				—				—				(31,875	)
Interest expense			(165,867	)			(48,308	)			(285,599	)			(144,543	)
Total other income (expense)			(220,342	)			141,227				(335,563	)			(3,117,171	)
Net loss		$	(442,794	)		$	(20,285	)		$	(873,829	)		$	(3,548,340	)
Loss per share:
Basic		$	(0.00	)		$	(0.03	)		$	(0.00	)		$	(11.76	)
Weighted average shares:
Outstanding basic			323,474,377				711,906				302,437,122				301,664

  The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

 

 

Independent Film Development Corporation
Statements of Cash Flows (unaudited)
		For the Nine Months Ended
		June 30,
		2016				2015
Cash flows from operating activities:
Net loss		$	(873,829	)		$	(3,548,340	)
Adjustments to reconcile net (loss) to total cash used in operations:
Preferred stock for compensation			—				167,676
Common stock issued for compensation			—				2,000
Convertible note issued for compensation			217,500				—
Loss on derivative issuance			150,124
(Gain) loss on derivative liability			76,018				12,503
Loss on extinguishment of debt			—				2,973,250
(Gain) from settlement of accounts payable							(45,000	)
Debt discount amortization			107,008				115,979
Depreciation expense			2,084				—
Change in assets and liabilities:
Other assets			(9,630	)			33,375
Inventory			(4,750	)			—
Accounts payable & accruals			86,676				31,295
Increase in accrued compensation			25,731				147,276
Net cash used in operating activities			(223,068	)			(109,986	)
Cash flows from (used in) investing activities:
Cash paid for investment			—				(2,500	)
Purchase of fixed assets			(12,500	)			—
Net cash used by investing activities			(12,500	)			(2,500	)
Cash flows from financing activities:
Cash received from convertible notes			170,150				—
Payment on convertible notes			—				(7,585	)
Cash received from notes payable			—				35,125
Cash received from loans payable, related party			90,331				—
Proceeds from the sale of common stock			—				3,000
Net cash provided by financing activities			260,481				30,540
Net increase (decrease) in cash			24,913				(81,946	)
Cash at beginning of period			80				81,980
Cash at end of period		$	24,993			$	34
Supplemental disclosure of non-cash activities
Common stock issued for accounts payable and accrued interest		$	—			$	39,688
Debt discount on convertible notes payable			—				23,625
Common stock issued for conversion of debt		$	16,978			$	52,855
Settlement of derivative liability		$	16,844			$	58,800
Preferred stock issued for accrued salary			—				101,250
Issuance of derivative on convertible note		$	423,546			$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

Independent Film Development Corporation

Notes to Condensed Consolidated Financial Statements

June 30, 2016

(Unaudited)

 

 

NOTE 1: HISTORY OF OPERATIONS

 

Business Activity

Independent Film Development Corporation (“IFLM”) was incorporated in the State of Nevada on September 14, 2007. The Company’s current plan of operations consists of three parts:

 

To operate the Company’s newly acquired hospitality asset, C2C Restaurant Group, Inc. (“C2C”). The first restaurant to fall under C2C, Chef Eddie G’s Kitchen, was opened in December 2015 in Manhattan’s East Harlem neighborhood in New York City.

 

The development of content creation/distribution projects, both in the form of original theatrical material as well as related and/or derivative programming related to the operations of C2C. IFLM will pursue those projects that align with the company’s strategic vision.

 

The acquisition of real estate assets which present value creation potential due to the complexity or illiquidity of their existing ownership and/or capital structure. In such situations, IFLM will seek to actively work through the complexities, gain control of the asset, actively manage, recapitalize and thereby create value.

 

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission ("SEC") for interim financial information and the SEC instructions to Form 10-Q, accordingly, they do not include all of the information and footnotes required by U.S. GAAP for completed financial statements. In the opinion of management, all adjustments necessary in order for the financial statements to not be misleading have been reflected herein. Operating results for the interim period ended June 30, 2016 are not necessarily indicative of the results that can be expected for the full year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended September 30, 2015.

 

Use of Estimates

In preparing financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of expenses during the reporting period. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. On an ongoing basis, the Company evaluates its estimates and assumptions. These estimates and assumptions include valuing equity securities in share-based payment arrangements, estimating the fair value of equity instruments recorded as derivative liabilities, and estimating the useful lives of amortizable assets and whether impairment charges may apply.

 

Principles of Consolidation

The consolidated financial statements include the accounts of Independent Film Development Corporation and its wholly-owned subsidiary C2C Restaurant Group, Inc. All significant intercompany accounts and transactions have been eliminated.

 

Reclassifications

Certain reclassifications have been made to the prior year financial information to conform to the presentation used in the financial statements for the nine months ended June 30, 2016.

 

Property and equipment

Property and equipment are recorded at cost. Major betterments that extend the useful lives of assets are also capitalized. Normal maintenance and repairs are charged to expense as incurred. When assets are sold or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in operations. Depreciation is computed using the straight-line method over the estimated useful lives of three years.

 

Inventories

Inventory is composed of mostly food products, beverages and paper goods. Inventory is valued at cost. Due to the nature of the Company’s inventory and its quick turn over a valuation allowance is not necessary. As of June 30, 2016 and September 30, 2015 inventory was $4,750 and $0, respectively.

 

Revenue recognition

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition, which has four basic criteria that must be met before revenue is recognized: 1) existence of persuasive evidence that an arrangement exists; 2) delivery has occurred or services have been rendered; 3) the seller’s price to the buyer is fixed and determinable; and 4) collection is reasonably assured. The Company’s revenue is recognized when payment is tendered at the time of sale. The Company presents sales net of sales-related taxes.

 

Segment Reporting

FASB ASC Topic 280, Segment Reporting, requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company determined it has one reportable segments. See Note 9.

 

Fair Value of Financial Instruments

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements.  To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels.  The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3: Pricing inputs that are generally observable inputs and not corroborated by market data.

 

The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments.  The Company’s notes payable approximates the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at June 30, 2016.

 

The following table presents assets and liabilities that are measured and recognized at fair value as of June 30, 2016 and September 30, 2015 on a recurring basis:

 

June 30, 2016

Description		Level 1			Level 2			Level 3			Total Gains and (Losses)
Derivative			-			-			583,868			(49,964)
Total		$	-		$	-		$	583,868		$	(49,964)

September 30, 2015

Description		Level 1			Level 2			Level 3			Total Gains and (Losses)
Derivative			-			-			127,202			(128,079)
Total		$	-		$	-		$	127,202		$	(128,079)

 

Derivative Liabilities

The Company records the fair value of its derivative financial instruments in accordance with ASC815, Derivatives and Hedging. The fair value of the derivatives was calculated using a multi-nomial lattice model performed by an independent qualified business valuator. The fair value of the derivative liability is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statement of operations

 

Derivative financial instruments should be recorded as liabilities in the balance sheet and measured at fair value. For purposes of the Company’s financial statements fair value was used as the basis for formulating an analysis which has been defined by the Financial Accounting Standards Board (“FASB”) as “the amount for which an asset (or liability) could be exchanged in a current transaction between knowledgeable, unrelated willing parties when neither party is acting under compulsion”. The FASB has provided guidance that its definition of fair value is consistent with the definition of fair market value in IRS Rev. Rule 59-60. In determining the fair value of the derivatives it was assumed that the Company’s business would be conducted as a going concern. These derivative liabilities will need to be marked-to-market each quarter with the change in fair value recorded in the income statement.

 

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

NOTE 3: ACQUISITIONS

 

On September 21, 2015, the Company entered into a share purchase agreement, by and among the Company, C2C Restaurant Group, Inc., a New York corporation and a restaurant holding company (“C2C”), and the shareholders of C2C, pursuant to which the Company purchased all of the outstanding common stock of C2C in exchange for 20,000 shares of our Series F preferred stock, par value $0.0001 per. Based upon an independent third party valuation the purchase was fair valued in two parts. First, a value of $5,600 was capitalized as a trade name for Chef Eddie G's Kitchen. Second the Company recorded goodwill in the amount of $117,754. The location for C2C’s first restaurant, Chef Eddie G's Kitchen, opened in December on Park Avenue in Manhattan, New York.

 

Goodwill represents the excess of purchase price over the underlying net assets of businesses acquired. The Company complies with ASC 350, Goodwill and Other Indefinite Lived Intangible Assets, requiring that a test for impairment be performed at least annually. As of September 30, 2015 the Company performed the required impairment analysis which resulted in the impairment of both the goodwill and trade name valuation amounts in their entirety. The Company recorded impairment expense of $122,354. 

 

NOTE 4: PROPERTY AND EQUIPMENT

 

Property and equipment, stated at cost, less accumulated depreciation consisted of the following:

 

		June 30, 2016				September 30, 2015
Furniture		$	12,500			$	—
Less: accumulated depreciation			(2,084	)			—
Fixed assets, net		$	10,416			$	—

 

Depreciation expense for the three months ended June 30, 2016 and 2015 was $2,084 and $0, respectively.

 

NOTE 5: ACCRUED INTEREST AND PENALTIES

 

Following is a summary of the Company’s accrued penalties and interest as of:

 

		June 30, 2016				September 30, 2015
Neil Linder – accrued penalties and interest (refer to Note 5)		$	340,126			$	328,531
Other convertible debt – accrued interest (refer to Note 5)			22,147				17,965
Loans payable – accrued interest (refer to Note 6)			11,052				5,378
		$	373,325			$	351,874

 

NOTE 6: CONVERTIBLE NOTES PAYABLE

 

On April 9, 2012, the Company entered into a $100,000 convertible debenture with Neil Linder. The debenture accrued interest of 12% and matured on April 9, 2013. Mr. Linder has the right to convert all or a portion of the principal into shares of common stock at a conversion price equal to the lesser of fifty percent (50%) of the average of the closing bid price of common stock during the five trading days immediately preceding the conversion date, or fifty percent (50%) of the closing bid price of the Common Stock on the date of issuance as quoted by Bloomberg, LP. Pursuant to the terms of this debenture, the holder shall not be entitled to convert a number of shares that would exceed 4.99% of the outstanding shares of the Company’s common stock. Based on the initial valuation the Company has recorded a debt discount of $49,532, $15,994 of which was amortized in the fiscal year ended September 30, 2012 with the remaining $33,538 amortized the fiscal year ended September 30, 2013. During the fiscal year ending September 30, 2013, $13,950 of the $100,000 debenture was converted into 821 shares of common stock. This conversion was converted within the terms of the agreement. On March 30, 2015, $4,000 of accrued interest was converted into 1,600 shares of common stock. In addition, as a consequence of the triggering of the default provision of the debenture the interest on the debenture has been instated at a rate of 18%, a $1,000 per business day penalty was being imposed for failure to execute a conversion in a timely manner, and an additional accrual of $112,509 was accounted for as a result of a provision requiring additional funds due in the event that a “default payment” is made by the Company. As of September 30, 2015 $86,050 of the principal face value of the Debenture remains outstanding along with $285,509 of accrued penalties and interest. As of June 30, 2016, $86,050 of the principal face value of the Debenture remains outstanding along with $340,126 of accrued penalties and interest. This note is currently in default.

 

 

On April 28, 2014, the Company issued a Convertible Promissory Note to KBM Worldwide, Inc. in the amount of $37,500. The note bears interest at a rate of 8% per annum but was increased to 22% on the maturity date, is unsecured and matured on January 30, 2015. The Note is convertible into common stock in whole or in part 180 days after funding at a variable conversion price equal to a 42% discount to the average of the lowest three trading prices in the 10-day trading price prior to the conversion date. As a result of the conversion feature the Company has recorded a debt discount of $37,500, all of which has been amortized to interest expense as of September 30, 2015. The discount was determined by calculating the intrinsic value of the loan based on the stock price on the date of the loan of $0.015 and the conversion price of $0.00406. The intrinsic value was $101,047; however, the discount is limited to the amount of the loan. On September 30, 2015, $22,970 of principal was converted into 49,937,783 shares of common stock. During the nine months ended June 30, 2016, $10,485 of principle was converted into 99,250,000 shares of common stock. On June 30, 2016, the fair value of the derivative was calculated using a multi-nomial lattice model. As of September 30, 2015, there is $14,530 of principal and $7,629 of accrued interest due on this note. As of June 30, 2016, there is $4,045 of principal and $3,000 of accrued interest due on this note. This note is currently past due.

 

On June 25, 2014, the Company issued a Convertible Promissory Note to LG Capital Funding, LLC, in the amount of $47,500. The note bears interest at a rate of 8% per annum, is unsecured and matures on June 25, 2015. The Note is convertible into common stock in whole or in part 180 days after funding at a variable conversion price equal to a 42% discount of the lowest trading price in the 20-day trading price prior to the conversion date. As a result of the conversion feature the Company has recorded a debt discount of $47,500, all of which has been amortized to interest expense as of September 30, 2015. The discount was determined by calculating the intrinsic value of the loan based on the stock price on the date of the loan of $0.011 and the conversion price of $0.0035. The intrinsic value was $102,644; however, the discount is limited to the amount of the loan. On April 16, 2015, $1,500 of principal and $97 of interest was converted into 3,060,000 shares of common stock. On May 28, 2015, $8,000 of principal and $591 of interest was converted into 29,624 shares of common stock. On August 25, 2015, $5,000 of principal and $468 of interest was converted into 897,857 shares of common stock. During the nine months ended June 30, 2016, $5,600 of principle and $592 of interest was converted into 56,892,715 shares of common stock. Due to the conversion within the terms of the agreement, no gain or loss was recognized. On June 30, 2016, the fair value of the derivative was calculated using a multi-nomial lattice model. As of September 30, 2015, there is $33,000 of principal and $4,088 of accrued interest on this note. As of June 30, 2016, there is $27,400 of principal and $6,825 of accrued interest due on this note. This note is currently past due.

 

On July 17, 2014, the Company issued a Convertible Promissory Note to KBM Worldwide, Inc. in the amount of $37,500. The note bears interest at a rate of 8% per annum, is unsecured and matures on April 21, 2015. The Note is convertible into common stock in whole or in part 180 days after funding at a variable conversion price equal to a 42% discount to the average of the lowest three trading prices in the 10-day trading price prior to the conversion date. As a result of the conversion feature the Company has recorded a debt discount of $37,500, all of which has been amortized to interest expense as of September 30, 2015. The discount was determined by calculating the intrinsic value of the loan based on the stock price on the date of the loan of $0.0114 and the conversion price of $0.00518. The intrinsic value was $45,008; however, the discount is limited to the amount of the loan. On June 30, 2016, the fair value of the derivative was calculated using a multi-nomial lattice model. As of September 30, 2015, there is $37,500 of principal and $6,249 of accrued interest on this note. As of June 30, 2016, there is $37,500 of principal and $3,000 of accrued interest due on this note. This note is currently past due.

 

On March 19, 2015, the Company executed a convertible promissory note for $7,500 with John D Thomas in exchange for legal services. The note is unsecured, accrued interest at 10% and is due on demand. The Note is convertible into common stock at $.00001 per share. As a result of the conversion feature the Company has recorded a debt discount of $7,500 all of which has been amortized to interest expense as of June 30, 2016. As of September 30, 2015, there is $7,500 of principal and $401 of accrued interest on this note. As of June 30, 2016 there is $7,500 of principal and $964 of accrued interest due on this note.

 

On May 18, 2015, the Company executed a convertible promissory note for $16,700 with Syndicate Consulting, Inc. The note is unsecured, accrued interest at 10% and is due on demand. The Note is convertible into common stock at $.00005 per share. As a result of the conversion feature the Company has recorded a debt discount of $16,700 all of which has been amortized to interest expense as of June 30, 2016. The discount was determined by calculating the intrinsic value of the loan based on the stock price on the date of the loan of $0.0007 and the conversion price of $0.00005. The intrinsic value was limited to the amount of the loan. As of September 30, 2015, there is $16,700 of principal and $935 of accrued interest on this note. As of June 30, 2016 there is $16,700 of principal and $2,335 of accrued interest due on this note.

 

On May 20, 2015, the Company executed a convertible promissory note for $5,925 with Syndicate Consulting, Inc. The note is unsecured, accrued interest at 10% and is due on demand. The Note is convertible into common stock at $.00005 per share. As a result of the conversion feature the Company has recorded a debt discount of $5,925 all of which has been amortized to interest expense as of June 30, 2016. The discount was determined by calculating the intrinsic value of the loan based on the stock price on the date of the loan of $0.0003 and the conversion price of $0.00005. The intrinsic value was limited to the amount of the loan. As of June 30, 2016 there is $5,925 of principal and $445 of accrued interest due on this note. This loan is due on demand. On August 18, 2015, Syndicate advanced the Company an additional $7,140. The advance in noninterest bearing and due on demand. As of June 30, 2016, $7,140 in still outstanding.

 

 

On July 5, 2015, the Company executed a convertible note with a director for conversion of $40,000 of accrued salary. As a result of the conversion feature the Company has recorded a debt discount of $40,000 all of which has been amortized to interest expense as of September 30, 2015. On July 30, 2015, the note was converted into 22,000 shares of Series B preferred stock. As the conversion occurred within the terms of the note agreement, no gain or loss was recognized.

 

On February 17, 2016, the Company issued a Convertible Promissory Note to T McNeil Advisors, LLC, in the amount of $217,500 for services to be rendered over a minimum three-month period. The note bears interest at a rate of 8% per annum, is unsecured and matures on February 17, 2017. The Note is convertible into common stock in whole or in part at any time at a variable conversion price equal to a 55% of the lowest trading price in the 20-day trading price prior to the conversion date. As a result of the conversion feature, which is due to an embedded derivative, the Company has recorded a debt discount of $111,998, to be amortized to interest expense. As of June 30, 2016, $22,647 was amortized to interest expense and the fair value of the derivative was calculated using a multi-nomial lattice model. As of June 30, 2016, there is $217,500 of principal and $6,388 of accrued interest due on this note.

 

On March 1, 2016, the Company issued a Convertible Promissory Note to LG Capital Funding, LLC, in the amount of $39,375. The note bears interest at a rate of 8% per annum, is unsecured and matures on February 24, 2017. The Note is convertible into common stock in whole or in part at any time at a variable conversion price equal to a 50% discount of the lowest trading price in the 20-day trading price prior to the conversion date. As a result of the conversion feature, which is due to an embedded derivative, the Company has recorded a debt discount of $39,375, to been amortized to interest expense. As of June 30, 2016, $2,293 of the debt discount was amortized to interest expense and the fair value of the derivative was calculated using a multi-nomial lattice model. As of June 30, 2016, there is $39,375 of principal and $1,036 of accrued interest due on this note.

 

On March 1, 2016, the Company issued a Convertible Promissory Note to Cerberus Finance Group, LTD, in the amount of $39,375. The note bears interest at a rate of 8% per annum, is unsecured and matures on March 1, 2017. The Note is convertible into common stock in whole or in part at any time at a variable conversion price equal to a 50% discount of the lowest trading price in the 20-day trading price prior to the conversion date. As a result of the conversion feature, which is due to an embedded derivative, the Company has recorded a debt discount of $39,375, to be amortized to interest expense. As of June 30, 2016, $6,381 of the debt discount was amortized to interest expense the fair value of the derivative was calculated using a multi-nomial lattice model. As of June 30, 2016, there is $39,375 of principal and $1,036 of accrued interest due on this note.

 

On April 6, 2016, the Company issued a Convertible Promissory Note to LG Capital Funding, LLC, in the amount of $19,688. The note bears interest at a rate of 8% per annum, is unsecured and matures on April 6, 2017. The Note is convertible into common stock in whole or in part at any time at a variable conversion price equal to a 50% discount of the lowest trading price in the 20-day trading price prior to the conversion date. As a result of the conversion feature, which is due to an embedded derivative, the Company has recorded a debt discount of $19,688, to been amortized to interest expense. As of June 30, 2016, $2,107 of the debt discount was amortized to interest expense and the fair value of the derivative was calculated using a multi-nomial lattice model. As of June 30, 2016, there is $19,688 of principal and $367 of accrued interest due on this note.

 

On April 6, 2016, the Company issued a Convertible Promissory Note to Cerberus Finance Group, LTD, in the amount of $19,688. The note bears interest at a rate of 8% per annum, is unsecured and matures on April 6, 2017. The Note is convertible into common stock in whole or in part at any time at a variable conversion price equal to a 50% discount of the lowest trading price in the 20-day trading price prior to the conversion date. As a result of the conversion feature, which is due to an embedded derivative, the Company has recorded a debt discount of $19,688, to been amortized to interest expense. As of June 30, 2016, $2,099 of the debt discount was amortized to interest expense the fair value of the derivative was calculated using a multi-nomial lattice model. As of June 30, 2016, there is $19,688 of principal and $367 of accrued interest due on this note.

 

On June 10, 2016, the Company issued a Convertible Promissory Note to LG Capital Funding, LLC, in the amount of $19,688. The note bears interest at a rate of 8% per annum, is unsecured and matures on June 10, 2017. The Note is convertible into common stock in whole or in part at any time at a variable conversion price equal to a 50% discount of the lowest trading price in the 20-day trading price prior to the conversion date. As a result of the conversion feature, which is due to an embedded derivative, the Company has recorded a debt discount of $19,688, to been amortized to interest expense. As of June 30, 2016, $1,079 of the debt discount was amortized to interest expense and the fair value of the derivative was calculated using a multi-nomial lattice model. As of June 30, 2016, there is $19,688 of principal and $86 of accrued interest due on this note.

 

 

On June 14, 2016, the Company issued a Convertible Promissory Note to Cerberus Finance Group, LTD, in the amount of $19,688. The note bears interest at a rate of 8% per annum, is unsecured and matures on June 14, 2017. The Note is convertible into common stock in whole or in part at any time at a variable conversion price equal to a 50% discount of the lowest trading price in the 20-day trading price prior to the conversion date. As a result of the conversion feature, which is due to an embedded derivative, the Company has recorded a debt discount of $19,688, to been amortized to interest expense. As of June 30, 2016, $863 of the debt discount was amortized to interest expense the fair value of the derivative was calculated using a multi-nomial lattice model. As of June 30, 2016, there is $19,688 of principal and $69 of accrued interest due on this note.

 

A summary of outstanding convertible notes as of September 30, 2015 and June 30, 2016 is as follows:

 

Note Holder	Issue Date	Maturity Date	Stated Interest Rate	Principal Balance 9/30/2015	Changes	Principal Balance 6/30/2016
Notes in default
Neil Linder	4/9/2012	4/9/2013	18%	$        86,050	-	$            86,050
Jabro Funding Corp	4/28/2014	1/30/2015	22%	14,530	(10,485) (1)	4,045
LG Capital Funding	6/25/2014	6/25/2015	16%	33,000	(5,600) (2)	27,400
Jabro Funding Corp	7/17/2014	4/21/2015	22%	37,500	-	37,500
Total				171,080		154,995
Less debt discount				(2,650)		-
Total				$        168,430		$          154,995
Notes not in default
John D Thomas	3/19/2015	Demand	10%	$            7,500	-	$              7,500
Syndicate Consulting, Inc.	5/18/2015	Demand	10%	16,700	-	16,700
Syndicate Consulting, Inc.	5/20/2015	Demand	10%	5,925	-	5,925
Syndicate Consulting, Inc.	8/18/2015	Demand	0%	4,490	2,650 (3)	7,140
T McNeil Advisors, LLC	2/17/2016	2/17/2017	8%	-	-	217,500
LG Capital Funding	3/1/2016	2/24/2017	8%	-	-	39,375
Cerberus Finance Group, LTD	3/1/2016	3/1/2017	8%	-	-	39,375
LG Capital Funding	4/6/2016	4/6/2017	8%	-	-	19,688
Cerberus Finance Group, LTD	4/6/2016	4/6/2017	8%	-	-	19,688
LG Capital Funding	6/10/2016	6/10/2017	8%	-	-	19,688
Cerberus Finance Group, LTD	6/14/2016	6/14/2017	8%	-	-	19,688
Total				34,615		412,267
Less debt discount				(24,987)		(194,051)
Total				$          9,628		$         218,216

(1)

$10,485 converted to common stock

(2)

$5,600 converted to common stock

(3)

$2,650 new borrowing

 

 

A summary of the activity of the derivative liability for the notes above is as follows:

Balance at September 30, 2014			183,648
Decrease in derivative due to payment/conversion of debt			(259,649	)
Increase to derivative due to debt discount			75,125
Increase to derivative due to new issuances			1,778,224
Derivative (gain) due to mark to market adjustment			(1,650,146	)
Balance at September 30, 2015			127,203
Decrease in derivative due to conversion of debt			(16,843	)
Increase to derivative due to new issuances			423,544
Derivative loss due to mark to market adjustment			49,964
Balance at June 30, 2016		$	583,868

 

NOTE 7: LOANS PAYABLE – RELATED PARTY AND THIRD PARTY

 

Third Party

 

On September 25, 2015, the Company executed a promissory note with a shareholder for $30,000. The $30,000 was previously credited to additional paid in capital; however, was changed to a promissory note as a result of a mutual agreement between the parties. The note is unsecured, accrues interest at 8% and matures March 25, 2016. As of June 30, 2016, $30,000 of principle and $1,838 of interest remain outstanding. This note is in default.

 

As of June 30, 2016 and September 30, 2015, the Company owed a total of $9,244 and $9,243, respectively to various third parties. All amounts are due on demand. As of June 30, 2016, $9,244 of principle and $3,881 of interest remain outstanding.

 

On January 15, 2016, the Company executed a promissory note with a third party for $15,000. The note is unsecured, bears interest at 10% and is due within eighteen months. In connection with and for consideration of loaning the funds to the Company. The Company issued 2,000 shares of Series B preferred stock. The shares were fair valued at $20,000, which was credited to additional paid in capital and debited $3,921 to debt discount. As of June 30, 2016, $2,085 of the debt discount was amortized to interest expense. As of June 30, 2016, $15,000 of principle and $625 of interest remain outstanding.

 

Related Party

 

On May 8, 2015, the Company executed a promissory note for $4,000 with Pat Ritchie, the mother of CEO, Jeff Ritchie. The loan is unsecured, accrues interest at 10% and is due within one year. As of June 30, 2015, $4,000 of principle and $555 of interest remain outstanding.

 

As of June 30, 2016 and September 30, 2015, the Company owed a total of $8,687 and $8,687, respectively to a former officer for advances made to the Company to pay for general operating expenses. The advances are unsecured, accrue no interest and are due on demand.

 

On November 3, 2015 and November 24, 2015, the Company executed a promissory note for $4,100 and $4,000, respectively with the sister of CEO, Jeff Ritchie. The loans are unsecured, accrue interest at 10% and are due within one year. As of June 30, 2015, $8,100 of principle and $705 of interest remain outstanding.

 

During the nine months ended June 30, 2016, Edward Gallagher, owner/operator of C2C restaurant Group, Inc. used $82,231 of his personal funds to pay for expenses related to the setup and opening of the restaurant. The advance is unsecured, non-interest bearing and due on demand. As of June 30, 2016, $82,231 remains outstanding.

 

 

A summary of the related party loans as of September 30, 2015 and June 30, 2016 is as follows.

 

Note Holder	Issue Date	Maturity Date	Stated Interest Rate	Principal Balance 9/30/2015	Changes	Principal Balance 6/30/2016
Related Party Loans
Pat Ritchie	5/8/2015	5/8/2016	10%	$          4,000	-	$            4,000
Former Officer	n/a	demand	0%	8,687	-	8,687
Other Related Party	11/3/2015	11/3/2016	10%	-	-	4,100
Other Related Party	11/24/2015	11/24/2016	10%	-	-	4,000
Edward Gallagher	n/a	demand	0%	-	-	82,231
Total				$         12,687		$         103,018
Third Party Loans
Loan #1 (in default)	9/25/2015	3/25/2016	8%	$          30,000	-	$           30,000
Loan #2	various	demand	0%	8,493	751	9,244
Loan #3	1/15/2016	7/15/2017	10%	-	$       15,000	15,000
Total				$          38,493		$           54,244

 

NOTE 8: COMMON STOCK TRANSACTIONS

 

Fiscal year 2015

 

On October 29, 2014, the Company issued 1,820 shares of common stock to Asher Enterprises, Inc. in conversion of $5,915 of principal due to them. Due to the conversion within the terms of the agreement, no gain or loss was recognized.

 

On November 11, 2014, the Company issued 1,820 shares of common stock to Asher Enterprises, Inc. for conversion of $5,915 of principal due to them. Due to the conversion within the terms of the agreement, no gain or loss was recognized.

 

On November 12, 2014, the Company issued 2,800 shares of common stock to a service provider in conversion of $35,000 of accounts payable for services rendered in a prior period. The shares were valued based on the closing price of the common stock on the date of grant.

 

On November 25, 2014, the Company sold 1,200 shares of common stock for total proceeds of $3,000.

 

Effective February 11, 2015, the Company restated its Articles of Incorporation in which it changed the par value of the Company’s common stock from $0.0001 to $0.00001 and increased the authorized shares of common stock to 2,000,000,000. The value of the common stock and additional paid in capital accounts have been retroactively adjusted for the change in par value.

 

On March 2, 2015, the Company issued 400 shares of common stock to Rachel Boulds, the former CFO for services. The shares were valued based on the closing price of the common stock on the date of grant for a total non-cash expense of $2,000.

 

On March 2, 2015, the Company issued 600,000 shares of common stock to Jeff Ritchie, Interim CEO for conversion of $15,000 of accrued salary. The shares were valued based on the closing price of the common stock on the date of grant which resulted in a loss on conversion of $2,985,000. June 4, 2015. Mr. Ritchie returned 40,000 shares to the Company. The Company credited loss on conversion of debt $200,000 due to the return of shares which resulted in a net issuance of 560,000 shares and a net loss on conversion of $2,785,000.

 

On March 2, 2015, the Company issued 25,000 shares of common stock to DTS Partners, LLC, for conversion of $2,500 of principal due to them. The shares were valued based on the closing price of the common stock on the date of conversion which resulted in a loss on conversion of $122,500.

 

On March 30, 2015, the Company issued 1,600 shares of common stock to Neil Linder, for conversion of $4,000 of accrued interest due to him. Due to the conversion within the terms of the agreement, no gain or loss was recognized.

 

On April 16, 2015, the Company issued 1,224 shares of common stock to LG Capital Funding in conversion of $1,500 of principal and $97 of interest due to them. Due to the conversion within the terms of the agreement, no gain or loss was recognized.

 

On May 13, 2015, the Company issued 25,000 shares of common stock to DTS Partners, LLC for conversion of $2,500 of principal due to them. The shares were valued based on the closing price of the common stock on the date of conversion which resulted in a loss on conversion of $28,750.

 

On May 20, 2015, the Company issued 34,852 shares of common stock to Jabro Funding Corp in conversion of $23,525 of principal due to them. Due to the conversion within the terms of the agreement, no gain or loss was recognized.

 

On May 21, 2015, the Company issued 26,667 shares of common stock to JT Sands Corp. for conversion of $2,000 of principal due to them. The shares were valued based on the closing price of the common stock on the date of conversion which resulted in a loss on conversion of $18,000.

 

On May 28, 2015, the Company issued 29,624 shares of common stock to LG Capital Funding in conversion of $8,000 of principal and $591 of interest due to them. Due to the conversion within the terms of the agreement, no gain or loss was recognized.

 

On June 2, 2015, the Company issued 40,000 shares of common stock to an individual for conversion of $1,000 of principal due to them. The shares were valued based on the closing price of the common stock on the date of conversion which resulted in a loss on conversion of $19,000.

 

Effective July 1, 2015, the Company approved a 2,500 for 1 reverse stock split. All shares throughout these financial statements and Form 10-Q have been retroactively restated for the reverse.

 

On August 15, 2015, the Company issued 50,000,000 shares of common stock to Syndicate Consulting, Inc., for conversion of $2,500 of principal due to them. The shares were valued based on the closing price of the common stock on the date of conversion which resulted in a loss on conversion of $1,247,500.

 

On August 15, 2015, the Company issued 10,000,000 shares of common stock to VanCal Partners, LLC, for conversion of $500 of principal due to them. Due to the conversion within the terms of the agreement, no gain or loss was recognized.

 

On August 25, 2015, the Company issued 897,857 shares of common stock to LG Capital Funding in conversion of $5,000 of principal and $468 of interest due to them. Due to the conversion within the terms of the agreement, no gain or loss was recognized.

 

On September 8, 2015, the Company issued 5,676,923 shares of common stock to Jabro Funding Corp in conversion of $13,060 of principal and $1,700 of interest due to them. Due to the conversion within the terms of the agreement, no gain or loss was recognized.

 

On September 25, 2015, the Company authorized 10,000,000 shares of common stock to VanCal Partners, LLC, for conversion of $500 of principal due to them. Due to the conversion within the terms of the agreement, no gain or loss was recognized. As of September 30, 2015, the shares have not yet been issued by the transfer agent; therefore, the $500 has been credited to common stock payable.

 

On September 30, 2015, the Company authorized 49,934,783 shares of common stock to Jabro Funding Corp in conversion of $22,970 of principal due to them. Due to the conversion within the terms of the agreement, no gain or loss was recognized. As of September 30, 2015, the shares have not yet been issued by the transfer agent; therefore, the $22,970 has been credited to common stock payable.

 

Fiscal year 2016

 

On October 1, 2015, the transfer agent issued 49,934,783 shares of common stock to Jabro Funding Corp valued at $22,970. The shares had been issued for conversion of debt in the prior year and credited to common stock payable.

 

On October 1, 2015, the Company issued 7,123,060 shares of common stock to LG Capital Funding in conversion of $3,000 of principal and $305 of interest due to them. Due to the conversion within the terms of the agreement, no gain or loss was recognized.

 

 

On October 6, 2015, the transfer agent issued 10,000,000 shares of common stock to VanCal Partners, LLC valued at $500. The shares had been issued for conversion of debt in the prior year and credited to common stock payable.

 

On October 13, 2015, the Company issued 40,000,000 shares of common stock to VanCal Partners, LLC in conversion of $2,000 of principal due to them. Due to the conversion within the terms of the agreement, no gain or loss was recognized.

 

On October 14, 2015, the Company issued 49,333,333 shares of common stock to Jabro Funding Corp in conversion of $7,490 of principal due to them. Due to the conversion within the terms of the agreement, no gain or loss was recognized.

 

On November 9, 2015, the Company issued 49,769,655 shares of common stock to LG Capital Funding in conversion of $2,600 of principal and $287 of interest due to them. Due to the conversion within the terms of the agreement, no gain or loss was recognized.

 

On November 18, 2015, the Company issued 49,916,667 shares of common stock to Jabro Funding Corp in conversion of $2,995 of principal due to them. Due to the conversion within the terms of the agreement, no gain or loss was recognized.

 

NOTE 9: PREFERRED STOCK

 

The Company is authorized to issue 15,000,010 preferred shares with a par value of $0.0001 per share.

 

Series A Preferred Stock

On June 17, 2013, the Board of Directors designated a series of preferred stock titled Series A Preferred Stock consisting of 5,000,000 shares. There is currently no market for the shares of Series A Preferred Stock and they cannot be converted into shares of common stock of the Company. The shares have super voting rights of 100 common shares for every one share of Series A. The Preferred Series A do not contain any rights to dividends; have no liquidation preference; are not to be amended without the holders approval.

 

On December 1, 2014, the Company issued 5,000,000 shares of Series A Preferred stock to Jeff Ritchie, CEO for services rendered. The company had a valuation completed, by an independent third party, and as a result expensed the value of the Preferred A during the quarter at a value of $79,000.

 

Series B Preferred Stock

On March 26, 2015, the Board of Directors designated a series of preferred stock titled Series B Preferred Stock consisting of 10,000,000 shares. There is currently no market for the shares of Series B Preferred Stock. They can be converted into shares of common stock of the Company at par value ($.00001) and are priced at $2.50 per share. The Series B have voting rights of 10 votes per share, are entitled to dividends if declared and have liquidation preference to stock below it.

 

On April 1, 2015, the Company declared a preferred stock dividend of one share of Series B preferred stock for every 100,000 shares of common stock, resulting in the issuance of 16,768 (net of 30 shares canceled that were issued in error) of Series B preferred stock.

 

On June 11, 2015, the Company issued 40,500 shares of Series B preferred stock to officers in conversion of $101,246 of accrued compensation. The shares were valued based on the closing price of the common stock on the date of conversion which resulted in no loss on conversion as the value of the shares, which have no special voting rights, were the same as the $101,246 of accrued compensation.

 

On July 30, 2015, the Company authorized 22,000 shares of Series B preferred stock to a director in conversion of a $40,000 promissory note that was issued for conversion of accrued salary. As of September 30, 2015, the shares had not yet been issued resulting in a $40,000 credit to preferred stock payable. The shares were issued on March 7, 2016. Due to the conversion within the terms of the agreement, no gain or loss was recognized.

 

On September 14, 2015, the Company sold 2,000 shares of Series B preferred stock for total cash proceeds of $5,000. As of September 30, 2015, the shares had not yet been issued resulting in a $5,000 credit to preferred stock payable. The shares were issued on March 7, 2016.

 

On January 15, 2016, the Company issued 2,000 shares of Series B preferred stock as consideration for a loan to the Company. The shares were fair valued at $20,000, which was credited to additional paid in capital and debited to debt discount. As of June 30, 2016, $2,084 of the debt discount was amortized to interest expense.

 

 

Series AA Preferred Stock

On February 18, 2015, the Board of Directors designated a series of preferred stock titled Series AA Preferred Stock consisting of 10 shares. The shares are convertible into the number of shares of common stock equal to four times the sum of the total number of common stock issued and the total number of Series B issued. The Preferred Series AA do not contain any rights to dividends; have no liquidation preference and are not to be amended without the holders approval.

 

On June 30, 2015, the Company issued 10 shares of Series AA preferred stock to its Jeff Ritchie, CEO. The company had a valuation completed resulting in non-cash compensation expense of $88,676.

 

Series F Preferred Stock

On September 25, 2015, the Board of Directors designated a series of preferred stock titled Series F Preferred Stock consisting of 20,000 shares. There is currently no market for the shares of Series F Preferred Stock. They can be converted into shares of common stock of the Company at par value ($.00001) and are priced at $2.50 per share. The Series F have voting rights of 1 vote per share, are entitled to dividends if declared and have liquidation preference to stock below it.

 

On September 21, 2015, the Company entered into a share purchase agreement, by and among the Company, C2C Restaurant Group, Inc., a New York corporation and a restaurant holding company (“C2C”), and the shareholders of C2C, pursuant to which the Company purchased all of the outstanding common stock of C2C in exchange for 20,000 shares of our Series F preferred stock, par value $0.0001. Based upon a third party valuation the purchase was fair valued in two parts. First, a value of $5,600 was capitalized as a trade name for Chef Eddie G's Kitchen. This will be amortized over fifteen years, and is shown net of $8 amortization expense as of September 30, 2015. Second the Company recorded goodwill in the amount of $117,754. Refer to Note 3.

 

NOTE 10 – SEGMENT REPORTING

 

Segment Reporting

ASC Topic 280, Segment Reporting, requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company has one reportable segments: C2C Restaurant Group, Inc. C2C currently has one restaurant open and operating in New York City.

 

 

The following tables summarize the Company’s segment information for the nine months ended June 30, 2016. There was no segment activity during the nine months ended June 30, 2015.

		Nine Months Ended June 30, 2016
Sales
C2C Restaurant Group, Inc.		$	101,327
Corporate			—
		$	101,327
Cost of sales
C2C Restaurant Group, Inc.		$	54,556
Corporate			—
		$	54,556
Gross margin
C2C Restaurant Group, Inc.		$	46,771
Corporate			—
		$	46,771
Operating expenses
C2C Restaurant Group, Inc.		$	164,771
Corporate			420,266
		$	585,037
Loss from operations
C2C Restaurant Group, Inc.		$	(118,000	)
Corporate			(420,266	)
		$	(538,266	)
Other expense
C2C Restaurant Group, Inc.		$	(6,424	)
Corporate			(329,139	)
		$	(335,563	)
Net income (loss)
C2C Restaurant Group, Inc.		$	(124,424	)
Corporate			(749,205	)
		$	(873,829	)
			As of
			June 30,
			2016
Total Assets
C2C Restaurant Group, Inc.		$	26,983
Corporate			22,806
		$	49,789
Total Liabilities
C2C Restaurant Group, Inc.		$	136,959
Corporate			2,277,626
		$	2,414,585

NOTE 11 – RELATED PARTIES

 

Fiscal year 2015

 

Loans payable:

 

On May 8, 2015, the Company executed a promissory note for $4,000 with Pat Ritchie, the mother of CEO, Jeff Ritchie. The loan is unsecured, accrues interest at 10% and is due within one year.

 

As of June 30, 2016, the Company owed a total of $8,687 to a former officer for advances made to the Company to pay for general operating expenses. The advances are unsecured, accrue no interest and are due on demand.

 

On November 3, 2015 and November 24, 2015, the Company executed a promissory note for $4,100 and $4,000, respectively with the sister of CEO, Jeff Ritchie. The loans are unsecured, accrue interest at 10% and are due within one year.

 

During the nine months ended June 30, 2016, Edward Gallagher, owner/operator of C2C restaurant Group, Inc. advanced the Company $82,231 to pay for expenses related to the setup and opening of the restaurant. The advance is unsecured, non-interest bearing and due on demand. As of June 30, 2016, $82,231 remains outstanding.

 

Stock transactions:

 

On December 1, 2014, the Company issued 5,000,000 shares of Series A Preferred stock to Jeff Ritchie, CEO for services rendered. The company had a valuation completed, by an independent third party, and as a result expensed the value of the Preferred A during the quarter at a value of $79,000.

 

On March 2, 2015, the Company issued 400 shares of common stock to Rachel Boulds, the former CFO for services. The shares were valued based on the closing price of the common stock on the date of grant for a total non-cash expense of $2,000.

 

On March 2, 2015, the Company issued 600,000 shares of common stock to Jeff Ritchie, Interim CEO for conversion of $15,000 of accrued salary. The shares were valued based on the closing price of the common stock on the date of grant which resulted in a loss on conversion of $2,985,000. June 4, 2015. Mr. Ritchie returned 40,000 shares to the Company. The Company credited loss on conversion of debt $200,000 due to the return of shares which resulted in a net issuance of 560,000 shares.

 

On June 11, 2015, the Company issued 40,500 shares of Series B preferred stock to officers in conversion of $101,246 of accrued compensation. The shares were valued based on the closing price of the common stock on the date of conversion which resulted in no loss on conversion as the value of the shares, which have no special voting rights, were the same as the $101,246 of accrued compensation.

 

On June 30, 2015, the Company issued 10 shares of Series AA preferred stock to its Jeff Ritchie, CEO. The company had a valuation completed resulting in non-cash compensation expense of $88,676.

 

On July 5, 2015, the Company executed a convertible note with a director for conversion of $40,000 of accrued salary. On July 30, 2015, the note was converted into 22,000 shares of Series B preferred stock. As the conversion occurred within the terms of the note agreement, no gain or loss was recognized.

 

On July 30, 2015, the Company authorized 22,000 shares of Series B preferred stock to a director in conversion of a $40,000 promissory note that was issued for conversion of accrued salary. As of September 30, 2015, the shares had not yet been issued resulting in a $40,000 credit to preferred stock payable. The shares were issued on March 7, 2016. Due to the conversion within the terms of the agreement, no gain or loss was recognized.

Fiscal year 2016

 

Loans payable:

 

During the nine months ended June 30, 2016, Edward Gallagher, owner/operator of C2C restaurant Group, Inc. advanced the Company $82,231 to pay for expenses related to the setup and opening of the restaurant. The advance is unsecured, non-interest bearing and due on demand.

 

NOTE 12: COMMITMENTS AND CONTINGENCIES

 

Various lawsuits, claims and other contingencies arise in the ordinary course of the Company's business activities. As of the date of these financial statements, we know of no threatened or pending lawsuits, claims or other similar contingencies.

 

NOTE 13: GOING CONCERN

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has generated minimal revenue and has an accumulated deficit of $12,926,556 and has funded its operations primarily through the issuance of short term debt and equity. This matter raises substantial doubt about the Company's ability to continue as a going concern.

These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Accordingly, the Company’s ability to accomplish its business strategy and to ultimately achieve profitable operations is dependent upon its ability to obtain additional debt or equity financing. Management plans to take the following steps that it believes will be sufficient to provide the Company with the ability to continue in existence.

 

Management intends to raise financing through private equity financing or other means and interests that it deems necessary. There can be no assurance that the Company will be successful in its endeavor.

 

NOTE 14: SUBSEQUENT EVENTS

 

The Company has performed an evaluation of subsequent events in accordance with ASC Topic 855. The Company is not aware of any subsequent events which would require recognition or disclosure in the financial statements except for the following.

 

On September 16, 2016, the Company issued a Convertible Promissory Note to LG Capital Funding, LLC, in the amount of $42,000. The note bears interest at a rate of 8% per annum, is unsecured and matures on September 16, 2017. The Note is convertible into common stock in whole or in part at any time after funding at a variable conversion price equal to a 50% discount of the lowest trading price in the 20-day trading price prior to the conversion date.

 

On September 16, 2016, LG Capital Funding, LLC converted $1,530 of principle and $60 of accrued interest, due on the convertible promissory note dated February 24, 2016, into 31,921,200 shares of common stock.

 

On September 19, 2016, Cerberus Finance Group, LTD converted $775 of principle and $33 of accrued interest, due on the convertible promissory note dated March 3, 2016, into 309,136 shares of common stock.

 

On October 5, 2016, a related party converted $4,100 of principle and $709 of accrued interest into 24,045,000 shares of common stock.

 

On October 6, 2016, Jabro Funding Corp. converted $1,305 of principle, due on the convertible promissory note dated April 28, 2014, into 16,117,647 shares of common stock.

 

Subsequent to June 30, 2016, officers and directors of the company converted 1,900 shares of Series B Preferred Stock into 190,000,000 million shares of common stock.

 

Effective October 6, 2016, the Company increased its authorized common stock from 2,000,000,000 (2 billion) shares to 6,000,000,000 (6 billion) shares.

 

Item 2:  Management’s Discussion and Analysis or Plan of Operation

 

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes to the financial statements included elsewhere in this filing as well as with Management’s Discussion and Analysis or Plan of Operations contained in the Company’s Report on Form 10-K, for the year ended September 30, 2015, filed with the Securities and Exchange Commission.  

 

Forward Looking Statements

 

Certain matters discussed herein are forward-looking statements. Such forward-looking statements contained in this Form 10-Q involve risks and uncertainties, including statements as to:

 

·

our future operating results;

·

our business prospects;

·

our contractual arrangements and relationships with third parties;

·

the dependence of our future success on the general economy;

·

our possible future financings; and

·

the adequacy of our cash resources and working capital.

 

These forward-looking statements can generally be identified as such because the context of the statement will include words such as we “believe,” “anticipate,” “expect,” “estimate” or words of similar meaning. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this Form 10-Q, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

 

Plan of Operations

 

The Company’s current plan of operations consists of three parts:

 

To begin operations of IFLM’s newly acquired hospitality asset, C2C Restaurant Group (“C2C”). The first restaurant to fall under C2C, Chef Eddie G’s Kitchen, was opened in December 2015 in Manhattan’s East Harlem neighborhood in New York City.

 

The development of content creation/distribution projects, both in the form of original theatrical material as well as related and/or derivative programming related to the operations of C2C. IFLM will pursue those projects that align with the company’s strategic vision.

 

The acquisition of real estate assets which present value creation potential due to the complexity or illiquidity of their existing ownership and/or capital structure. In such situations, IFLM will seek to actively work through the complexities, gain control of the asset, actively manage, recapitalize and thereby create value.

 

IFLM possesses a small video and film library.

 

Results of Operations – Three Months Ended June 30, 2016 as Compared to the Three Months Ended June 30, 2015

 

Sales and cost of sales

During the three months ended June 30, 2016, sales from our new subsidiary C2C Restaurant Group, Inc. (“C2C”), which opened its first location in December 2015 in New York City, were $58,406. Cost of sales was $34,087 for a gross margin of $24,319.

 

Operating Expenses

Professional fees for the three months ended June 30, 2016 were $20,558, as compared to $6,445 for the three months ended June 30, 2015, an increase of $14,113 or 219%.  Professional fees mainly consist of legal, auditor and other fees associated with the Company’s quarterly filings and year-end audit.

 

Officer compensation expense for the three months ended June 30, 2016 decreased $109,500 to $32,500 as compared to $142,000 for the three months ended June 30, 2015.  The expense consists of cash payments, accrued salary and stock. The decrease in compensation is due to no stock issued for compensation in the current period as well as a decrease in officer compensation in an effort to reduce liabilities.

 

General and administrative expense increased $180,646 to $193,713 for the three months ended June 30, 2016 from $13,067 for the three months ended June 30, 2015. The increase in the current period can be attributed to expenses incurred with the setup, opening and operating the restaurant.

 

Other Expense

Total other expense decreased from other income of $141,227 for the three months ended June 30, 2015 to other expense of $220,342 for the three months ended June 30, 2016. In the prior year we recognized a gain on settlement of debt of $134,250 and a $45,000 gain on extinguishment of debt. In the current period we had a $54,475 loss on derivative and $165,867 of interest expense.

 

Net Loss

We recorded a net loss of $442,794 for the three months ended June 30, 2016, as compared to $20,285 for the three months ended June 30, 2015.

 

Results of Operations – Nine Months Ended June 30, 2016 as Compared to the Nine Months Ended June 30, 2015

 

Sales and cost of sales

During the nine months ended June 30, 2016, sales from our new subsidiary C2C Restaurant Group, Inc. (“C2C”), which opened its first location in December 2015 in New York City, were $101,327. Cost of sales was $54,556 for a gross margin of $46,771.

 

Operating Expenses

Professional fees for the nine months ended June 30, 2016 were $33,033, as compared to $30,281 for the nine months ended June 30, 2015, an increase of $2,752 or .09%.  Professional fees mainly consist of legal, auditor and other fees associated with the Company’s quarterly filings and year-end audit.

 

Officer compensation expense for the nine months ended June 30, 2016 decreased $268,001 or 71.8% to $105,000 as compared to $373,001 for the nine months ended June 30, 2015.  The expense consists of cash payments, accrued salary and stock. The decrease in compensation is due to no stock issued for compensation in the current period as well as a decrease in officer compensation in an effort to reduce liabilities.

 

General and administrative expense increased $419,117 to $447,004 for the nine months ended June 30, 2016 from $27,887 for the nine months ended June 30, 2015. The increase in the current period can be attributed to expenses incurred with the setup, opening and operating the restaurant as well as $235,000 of consulting expense.

 

Other Expense

Total other expense decreased from $3,117,171 for the nine months ended June 30, 2015 to $335,563 for the nine months ended June 30, 2016. In the prior year we recognized a loss on settlement of debt of $2,973,250 as well as a $12,503 loss on derivative, a $31,875 penalty expense and $144,543 of interest expense. In the current period we had a $49,964 loss on derivative and $285,599 of interest expense.

 

Net Loss

We recorded a net loss of $873,829 for the nine months ended June 30, 2016, as compared to $3,548,340 for the nine months ended June 30, 2015.

 

Liquidity and Capital Resources

At June 30, 2016, we had an accumulated deficit of $12,926,556 and a working capital deficit of $2,384,842. For the nine months ended June 30, 2016, net cash used in operating activities was $223,068 and we received $260,481 from financing activities.

 

While we are attempting to increase operations and revenues, our cash position may not be significant enough to support the Company’s daily operations. Management intends to raise additional funds by way of debt and equity financing.  We believe that the actions presently being taken to further implement our business plan and generate increased revenues provide the

opportunity for the Company to continue as a going concern.   While we believe in the viability of our strategy to generate increased revenues and in our ability to raise additional funds, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate increased revenues.

 

Critical Accounting Estimates and Policies

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Note 1 to the Financial Statements describes the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited to, contingencies and taxes.  Actual results could differ materially from those estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Financial Statements.

 

FASB ASC Topic 280, Segment Reporting, requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company determined it has one reportable segments. See Note 7.

 

We recognize deferred tax assets (future tax benefits) and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities.  The deferred tax assets and liabilities represent the expected future tax return consequences of those differences, which are expected to be either deductible or taxable when the assets and liabilities are recovered or settled.  Future tax benefits have been fully offset by a 100% valuation allowance as management is unable to determine that it is more likely than not that this deferred tax asset will be realized.

 

Off-Balance Sheet Arrangements 

 

We have not entered into 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 and would be considered material to investors.

 

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable to smaller reporting companies.

 

Item 4: Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, they concluded that our disclosure controls and procedures were not effective for the quarterly period ended June 30, 2016.

 

In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.

 

Changes in Internal Controls

 

Our management, with the participation our Chief Executive Officer and Chief Financial Officer, performed an evaluation to determine whether any change in our internal controls over financial reporting occurred during the quarter ended June 30, 2016.  Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that no change occurred in the Company's internal controls over financial reporting during the quarter ended June 30, 2016 that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

There are not presently any material pending legal proceedings to which the Company is a party or as to which any of our property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.

 

 

Item 1A Risk Factors

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.

 

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

 

 

On September 16, 2016, LG Capital Funding, LLC converted $1,530 of principle and $60 of accrued interest, due on the convertible promissory note dated February 24, 2016, into 31,921,200 shares of common stock.

 

On September 19, 2016, Cerberus Finance Group, LTD converted $775 of principle and $33 of accrued interest, due on the convertible promissory note dated March 3, 2016, into 309,136 shares of common stock.

 

On October 6, 2016, Jabro Funding Corp. converted $1,305 of principle, due on the convertible promissory note dated April 28, 2015, into 16,117,647 shares of common stock.

 

On October 5, 2016, a related party converted $4,100 of principle and $709 of accrued interest into 24,045,000 shares of common stock.

 

Subsequent to June 30, 2016, officers and directors of the company converted 1,900 shares of Series B Preferred Stock into 190,000,000 million shares of common stock.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

None.

 

Item 5. Other Information

 

None.

 

 

Item 6. Exhibits

 

 

			Incorporated by reference
Exhibit	Exhibit Description	Filed herewith	Form	Period ending	Exhibit	Filing date
3.1	Certificate of Amendment to Articles of Incorporation dated October 6, 2016	X
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
10.1	Convertible Promissory Note for $19,688 with Cerberus Finance Group, LTD, April 6, 2016	X
10.2	Convertible Promissory Note for $19,688 with LG Capital Funding, LLC, April 6, 2016	X
10.3	Convertible Promissory Note for $19,688 with Cerberus Finance Group, LTD, June 14, 2016	X
10.4	Convertible Promissory Note for $19,688 with LG Capital Funding, LLC, June 10, 2016	X
10.5	Convertible Promissory Note for $42,000 with LG Capital Funding, LLC, September 16, 2016	X
101.INS	XBRL Instance Document	X
101.SCH	XBRL Taxonomy Extension Schema Document	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Definition	X

 

 

 

 

 

 

 

 

SIGNATURES

 

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

 

Date: October 14, 2016		INDEPENDENT FILM DEVELOPMENT CORPORATION   BY:      Jeff Ritchie     /s/ Jeff Ritchie Jeff Ritchie Chief Executive Officer, Chief Financial Officer & Director