ITEM 1. BUSINESS
DESCRIPTION OF BUSINESS
Plan of Operations
We were founded in 2008 as Sweet Spot Games, Inc., a Nevada corporation on June 2, 2008. We changed our name to Green Field Farms Food, Inc. ("Greenfield") on March 31, 2011. We are a consumer and wholesale driven producer of grassfed beef. The Company currently supplies Lowes Food Stores, a North Carolina based grocer with over 100 locations in North and South Carolina on a very limited basis. Greenfield Farms Grassfed Beef and its collective group of producers represent over 2500 acres in pasture under management and approximately 2000 head of cattle.
Greenfield currently utilizes two USDA processors within 150 miles of all of its current producers. Both processors are USDA inspected and have established USDA approved HAACP (Hazard Analysis and Critical Control Point) plans. Greenfield has established its own safety protocol that involves multiple testing points for infectious bacteria and the presence of e-coli contamination. The company utilizes double versus single blind test with robust sampling both prior to and after certain meat processing procedures to ensure the safest product possible.
On March 12, 2013, Greenfield announced that it is beginning a new licensing program for its "Greenfield Farms Grassfed Beef" trademark, which the Company believes will allow it to expand its business and enhance its market and brand presence. With this program, the Company will phase away from its traditional business model of taking cattle from farm to market thus eliminating all of the capital and startup costs required for such operations by expanding its brand presence with capable cattle producers and marketers. The Company also believes that the trademark licensing concept allows for more rapid market penetration with minimal risk and the ability to more easily ascertain assumed returns. Greenfield also announced that is has signed its first licensee, Hill Meadow Foods, Inc., in an exclusive agreement until December 31, 2013, at which time it will become non-exclusive. The management of Hill Meadow Foods is headed by former Greenfield Chief Executive Officer, Mr. Larry Moore.
The Company is also exploring other business opportunities in complementary food related business segments. On February 12, 2013, the Company announced that it had signed a definitive agreement to acquire 100% of the equity interest in Ohio-based Carmela's Pizzeria. Carmela's presently has three Dayton, Ohio area locations offering authentic New York style pizza. In addition, Carmela's offers a full service menu for Dine In, Carry out and Delivery as well as pizza buffets in select stores. Details of the transaction call for all of the equity interests in Carmela's to be acquired by a newly created wholly-owned operating subsidiary of Greenfield in exchange for shares of Greenfield common stock and warrants. Closing of this transaction is subject to, among other things, final due diligence by the parties, completion of audited financial statements, preparation of schedules to the definitive agreement, and any final board of director and/or stockholder approvals as necessary.
Market for Greenfield Farms Products
Greenfield Farms' target end user consumer is health conscious and willing to pay a premium for high-quality, lean, “grassfed” beef products. The beef industry as a whole does not track or segment out as a separate market grassfed beef. As such there are multiple and differing opinions of the current and future growth of the grassfed beef industry. In January of 2012 it was estimated that the market share for grassfed been was 3% of total beef industry sales and growing at 20% annually.
Grassfed Beef and the Environment
Cows burp and expel a lot of gas in many different ways. There are as many differing views on the effects of grassfed beef on the environment as there are different breeds of cattle. Conventional beef producers, feedlots, contend that their economies of scale and abilities to produce an animal ready for slaughter in as little as 14 months versus 18-22 months reduce the number of cattle producing methane. On the other side of the equation are proponents such as Greenfield and other grassfed beef producers. Although our animals may live longer and produce more methane gas than traditional feedlot cattle before slaughter their waste is recycled through a natural process of being raised on pasture.
Benefits of Grassfed Beef
In standard beef operations, steers are fattened on a feed lot, where they are confined and trough-fed a rich diet of grains. They are given hormones to make them grow faster and antibiotics to counter any illnesses caused by the rich diet. Most reach the average slaughter weight of 1,200 pounds in 14 to 16 months. Grass-fed animals are allowed to roam free in pastures. They are not fattened on grains in feed lots, or given growth hormones or antibiotics to speed the process.
In addition to having significantly less fat and cholesterol than regular beef, grass-fed beef has up to twice the amount of omega-3 fatty acids as regular beef, and a more healthful balance between omega-3 and omega-6 fatty acids, according to a review of research by the Grass-Fed Beef project at California State University’s Chico Department of Agriculture and the University of California Cooperative Extension. Omega-3 fatty acids are thought to help lower blood cholesterol levels and blood pressure, and a type of omega-3 present in grass-fed beef may help reduce the risk of cardiovascular disease, dementia and depression. The proper balance between omega-3 and omega-6 fatty acids may help reduce inflammatory disorders, according to the California project. Grass-fed beef also has been found to have up to 10 times more vitamin A than regular beef, and up to three times as much vitamin E, according to a study cited by the California project.
Researchers also indicates grass-fed beef has up to five times the CLA - conjugated linoleic acid - of regular beef. The substance is thought to help prevent cancer and regulate metabolism. Also, according to the California project, most studies base nutrient comparisons on the amount of nutrients found in lipids, or fat. Grass-fed beef may have more of certain nutrients per gram of fat, but overall the beef has much less fat than regular beef. An additional joint study by the USDA and Clemson University achieved similar results and therefore allows grassfed beef producers to legitimately cite the health benefits or our products versus grain fed beef.
Government Regulation
The slaughter of all live animals for resale is governed and regulated by the USDA. All products must be slaughtered and processed in USDA inspected facilities if the product is to be resold and transported across state lines for resale. All processors utilized by Greenfield must be USDA inspected facilities.
Product packaging is regulated by a division of the Food Safety and Inspection Service (FSIS), a division of the USDA. Greenfield has been approved by the FSIS and as such all of our products can be labeled “a Grassfed Beef product, No Antibiotics, No Hormones, 100% USA Beef.”
Competition
From a supply side White Oak Pastures (WOP) in Georgia is the largest competitor in the immediate market. WOP is a 5th generation farm of over 1000 acres and produces grassfed beef for Whole Foods, Bloom Grocery and select Publix grocery stores. WOP has the only on farm processing facility east of the Mississippi and is only one of two such farms in the country, the other located in California.
Grassfed beef consumers are highly educated and as such are not typical consumers of commercial grain fed beef products or organic products that have been fed a diet of corn or corn by products. Our competition really lies in the uneducated consumer and as such our marketing approach is to educate the consumer as to the advantages of grassfed beef.
ITEM 1A.
ITEM 1A. RISK FACTORS
RISKS RELATED TO OUR BUSINESS
The purchase of shares of our common stock is very speculative and involves a very high degree of risk. An investment in our stock is suitable only for the persons who can afford the loss of their entire investment. Accordingly, investors should carefully consider the following risk factors, as well as other information set forth herein, in making an investment decision with respect to securities of Inhibiton.
OUR AUDITORS HAVE NOTED THERE IS CERTAIN DOUBT ABOUT OUR ABILITY TO OPERATE AS A GOING CONCERN
Management has taken steps to revise the Company's operating and financial requirements. The Company is actively pursuing additional funding and a potential merger or acquisition candidate and strategic partners, which would enhance owners' investment. However, there can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company's existing stockholders.
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 the Company be unable to continue as a going concern.
WE ARE NOT CURRENTLY PROFITABLE AND MAY NEVER BECOME PROFITABLE.
We have a history of significant losses and expect to incur substantial losses and negative operating cash flow for the foreseeable future, and we may never achieve or maintain profitability. Even if we succeed in further developing and commercializing our products, we expect to incur substantial losses for the foreseeable future and may never become profitable. We also expect to continue to incur significant operating and capital expenditures and anticipate that our expenses will not be offset by our revenues in any substantial way. As a result, we will need to generate significant revenues or raise additional capital in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our stock.
OUR CURRENT SHAREHOLDERS CONTROL OUR BUSINESS AFFAIRS IN WHICH CASE YOU WILL HAVE LITTLE OR NOT PARTICIPATION IN OUR BUSINESS
Our principal stockholders own a majority of our common stock. As a result, they will have control over all matters requiring approval by our stockholders without the approval of minority stockholders. In addition, they will also be able to elect all of the members of our Board of Directors, which will allow them to control our affairs and management. They will also be able to affect most corporate matters requiring stockholder approval by written consent, without the need for a duly noticed and duly-held meeting of stockholders. As a result, they will have significant influence and control over all matters requiring approval by our stockholders. Accordingly, you will be limited in your ability to affect change in how we conduct our business.
WE ARE A DEVELOPMENT STAGE COMPANY WITH NO OPERATING HISTORY FOR YOU TO EVALUATE AND WE HAVE NOT PROVEN OUR ABILITY TO GENERATE PROFITS. WE HAVE HAD LOSSES FROM OPERATIONS AND DUE TO OUR VERY LIMITED SALES, ANTICIPATE WE WILL CONTINUE TO EXPERIENCE LOSSES FOR THE FORESEEABLE FUTURE.
An investor should also consider the uncertainties and difficulties frequently encountered by companies, such as ours, in their early stages of development. Our revenue and income potential is unproven and our business model is still emerging. If our business model does not prove to be profitable, investors may lose all of their investment.
WE MAY INCUR SIGNIFICANT COSTS TO ENSURE COMPLIANCE WITH CORPORATE GOVERNANCE AND ACCOUNTING REQUIREMENTS.
We expect to incur significant costs associated with our public company reporting requirements, costs associated with applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the SEC. We expect all of these applicable rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. While we have extremely limited experience as a public company, we estimate that these additional costs will total approximately $50,000 per year. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
RISKS RELATIING TO OUR SECURITIES
THERE IS CURRENTLY A VERY LIMITED MARKET FOR OUR COMMON STOCK AND NO ASSURANCE THAT A MORE LIQUID MARKET WILL DEVELOP.
There is currently a limited trading market for our shares of Common Stock, under the symbol “GRAS.” Any market price for shares of our Common Stock is likely to be very volatile, and numerous factors beyond our control may have a significant adverse effect. In addition, the stock markets generally have experienced, and continue to experience, extreme price and volume fluctuations which have affected the market price of many small capital companies and which have often been unrelated to the operating performance of these companies. These broad market fluctuations, as well as general economic and political conditions, may also adversely affect the market price of our Common Stock. Further, there is no correlation between the present limited market price of our Common Stock and our revenues, book value, assets or other established criteria of value. The present limited quotations of our Common Stock should not be considered indicative of the actual value of the Company or our Common Stock.
FUTURE SALES OF OUR COMMON STOCK COULD PUT DOWNWARD SELLING PRESSURE ON OUR CHASES AND ADVERSELY AFFECT THE STOCK PRICE. THERE IS A RISK THAT THIS DOWNWARD PRESSURE MAY MAKE ITIMPOSSIBLE FOR AN INVESTOR TO SELL HIS SHARES AT ANY REASONABLE PRICE
Future sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could put downward selling pressure on our shares, and adversely affect the market price of our common stock. Such sales could be made pursuant to Rule 144 under the Securities Act of 1933, as amended, as shares become eligible for sale under the Rule.
Because our shares are deemed high risk “penny stocks,” you may have difficulty selling them in the secondary trading market. The Commission has adopted regulations which generally define a "penny stock" to be any equity security that has a market price (as therein defined) less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. Additionally, if the equity security is not registered or authorized on a national securities exchange, the equity security also constitutes a "penny stock." As our common stock falls within the definition of penny stock, these regulations require the delivery, prior to any transaction involving our common stock, of a risk disclosure schedule explaining the penny stock market and the risks associated with it. These regulations generally require broker-dealers who sell penny stocks to persons other than established customers and accredited investors to deliver a disclosure schedule explaining the penny stock market and the risks associated with that market. Disclosure is also required to be made about compensation payable to both the broker-dealer and the registered representative and current quotations for the securities. These regulations also impose various sales practice requirements on broker-dealers. In addition, monthly statements are required to be sent disclosing recent price information for the penny stocks. The ability of broker/dealers to sell our common stock and the ability of shareholders to sell our common stock in the secondary market is limited. As a result, the market liquidity for our common stock is severely and adversely affected. We can provide no assurance that trading in our common stock will not be subject to these or other regulations in the future, which would negatively affect the market for our common stock.
IF A STEADY MARKET DEVLEOPS FOR OUR SEUCIRITES THERE COULD BE SIGNIFICANT VOLATILITY AND THE SECURITIES MAY NOT APPRECIATE IN VALUE
If a steady market should develop for our securities, of which we have no assurance, the market price is likely to fluctuate significantly. Fluctuations could be rapid and severe and may provide investors little opportunity to react. Factors such as changes in results from our operations, and a variety of other factors, many of which are beyond the control of the Company, could cause the price of our common stock to fluctuate substantially. Also, stock markets in penny stock shares tend to have extreme price and volume volatility. The market prices of shares of many smaller public companies securities are subject to volatility for reasons that frequently unrelated to the actual operating performance, earnings or other recognized measurements of value. This volatility may cause declines including very sudden and sharp declines in the market price of our common stock. We cannot assure investors that the stock price will appreciate in value, that a market will be available to resell your securities or that the shares will retain any value at all.
WE HAVE NEVER PAID DIVIDENDS ON OUR COMMON STOCK AND YOU MAY NEVER RECEIVE DIVIDENDS. THERE IS A RISK THAT AN INVESTOR IN OUR COMPANY WILL NEVER SEE A RETURN ON INVESTMENT AND THE STOCK MAY BECOME WORTHLESS.
We have never paid dividends on our common stock. We intend to retain earnings, if any, to finance the development and expansion of our business. Future dividend policy will be at the discretion of the Board of Directors and will be contingent upon future earnings, if any, our financial condition, capital requirements, general business conditions and other factors. Future dividends may also be affected by covenants contained in loan or other financing documents, which may be executed by us in the future. Therefore, there can be no assurance that cash dividends of any kind will ever be paid.
IF A MARKET DEVELOPS FOR OUR SECURITIES IT COULD BE VOLATILE AND MAY NOT APPRECIATE IN VALUE.
If a market should develop for our securities, of which we have no assurance, the market price is likely to fluctuate significantly. Fluctuations could be rapid and severe and may provide investors little opportunity to react. Factors such as changes in results from our operations, and a variety of other factors, many of which are beyond the control of the Company, could cause the market price of our common stock to fluctuate substantially. Also, stock markets in penny stock shares tend to have extreme price and volume volatility. The market prices of shares of many smaller public companies securities are subject to volatility for reasons that frequently unrelated to the actual operating performance, earnings or other recognized measurements of value. This volatility may cause declines including very sudden and sharp declines in the market price of our common stock. We cannot assure investors that the stock price will appreciate in value, that a market will be available to resell your securities or that the shares will retain any value at all.
WE HAVE RAISED CAPITAL THROUGH THE USE OF CONVERTIBLE DEBT INSTRUMENTS THAT CAUSES SUBSTANTIAL DILUTION TO OUR STOCKHOLDERS.
Because of the size of our Company and its status as a "penny stock" as well as the current economy and difficulties in companies our size finding adequate sources of funding, we have been forced to raise capital through the issuance of convertible notes and other debt instruments. These debt instruments carry favorable conversion terms to their holders of up to 65% discounts to the market price of our common stock on conversion and in many cases provide for the immediate sale of our securities into the open market. Accordingly, this has caused dilution to our stockholders and will continue to do so in 2013 and the foreseeable future. As of December 31, 2012, we had approximately $213,500 in convertible debt outstanding. This convertible debt balance as well as any additional convertible debt we incur in the future could cause substantial dilution to our stockholders.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
ITEM 2. PROPERTIES.
The Company maintains offices 7315 E Peakview Avenue, Englewood, Colorado 80111 in facilities provided by our Chief Executive Officer. During 2012, there were not rents or other amounts paid for these facilities although that will not preclude the company from paying reasonable rental rates or reimbursement for use of these facilities in the future.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
We are not presently involved in any litigation that is material to our business. We are not aware of any pending or threatened legal proceedings. In addition, none of our officers, directors, promoters or control persons has filed or been involved for the past five years:
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in any conviction of a criminal proceeding or involved in a pending criminal proceeding (excluding traffic violations and minor Offenses)
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is subject to any order, judgment or decree enjoining, barring
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Suspending or otherwise limiting their involvement in any type of business, securities, or banking activities,
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or has been found to have violated a federal or state securities or commodities law.
In 2010 the Company’s former Chief Executive Officer and Chairman, Mr. Larry Moore, who is currently the Chief Executive Officer of our operating subsidiary, pleaded guilty to a misdemeanor charge under the securities laws of the State of South Carolina. Mr. Moore agreed to 150 hours of community service and rescission of certain sales of securities in South Carolina, which he performed and discharged in 2010.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Trading Market for Common Equity
There is currently a limited market for the Company's Common Stock, which is traded over-the-counter and quoted under the trading symbol “GRAS". During 2011, trading did not commence until April and was very limited for most of that year.
Future sales of our common stock could put downward selling pressure on our shares, and adversely affect the stock price. There is a risk that this downward pressure may make it impossible for an investor to sell his shares at any reasonable price.
The Company's Common Stock is not listed on any exchange; however, market quotes for the Company’s common stock may be obtained from the OTC Markets "QB" platform (“OTCQB”). The OTCQB is a regulated quotation service that displays real-time quotes, last-sale prices and volume information in over-the-counter (“OTC”) securities. The following table sets forth, for the indicated fiscal periods, the high and low sales prices (as reported by the OTCQB) for the Company’s common stock.
Trading in the common stock in the over-the-counter market has been limited and sporadic and the quotations set forth above are not necessarily indicative of actual market conditions. Further, these prices reflect inter-dealer prices without retail mark-up, mark-down, or commission, and may not necessarily reflect actual transactions.
Dividends
We have never paid a cash dividend on our common stock. The payment of dividends may be made at the discretion of our Board of Directors, and will depend upon, among other things, our operations, capital requirements, and overall financial condition. There are no contractual restrictions on our ability to declare and pay dividends.
Securities Authorized for Issuance under Equity Compensation Plans
As of the date of this Report, we have not authorized any equity compensation plan, nor has our Board of Directors authorized the reservation or issuance of any securities under any equity compensation plan.
Transfer Agent
Our transfer agent is West Coast Stock Transfer, Inc. located at 2010 Hancock Avenue, Suite A, and San Diego, California 92110. Their telephone number is (619) 664-4780.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
As the registrant qualifies as a smaller reporting company under Rule 229.10(f) (1), it is not required to provide this information.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The nature of our business makes predicting the future trends of our revenues, expenses, and net income difficult. Thus, our ability to predict results or the actual effect of our future plans or strategies is inherently uncertain. The risks and uncertainties involved in our business could affect the matters referred to in any forward-looking statements and it is possible that our actual results may differ materially from the anticipated results indicated in these forward-looking statements. Important factors that could cause actual results to differ from those in the forward-looking statements include, without limitation, the factors discussed in the section entitled "Risk Factors" and the following:
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The effect of political, economic, and market conditions and Geopolitical events;
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Legislative and regulatory changes that affect our business;
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The availability of funds and working capital;
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The actions and initiatives of current and potential competitors;
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Investor sentiment; and
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Our reputation.
We do not undertake any responsibility to publicly release any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this report. Additionally, we do not undertake any responsibility to update you on the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by any forward-looking statements.
The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto as filed with the SEC and other financial information contained elsewhere in this Form 10-K.
Overview
Greenfield is a consumer and wholesale driven producer of grassfed beef. The company has USDA-FSIS approval to market and label its product as “Grassfed Beef”. The company distributes our product on a very limited basis to Lowes Foods Stores which has approximately 100 locations throughout North and South Carolina. We are a newly created company with very limited resources and as a result, our deliveries of grassfed beef in 2012 were also very limited. We are hopeful that our change in business plan through a new licensing program will allow us to expand our business and enhance our market and brand presence. With this program, the Company will phase away from our traditional business model of taking cattle from farm to market thus eliminating all of the capital and startup costs required for such operations by expanding our brand presence with capable cattle producers and marketers. The Company also believes that the trademark licensing concept will allow for more rapid market penetration with minimal risk and the ability to more easily ascertain assumed returns. In the first quarter of 2013 we signed our first licensee, Hill Meadow Foods, Inc., in an exclusive agreement until December 31, 2013, at which time it will become non-exclusive. We believe this time will allow us to properly develop the parameters of the licensing program as well as explore other business opportunities, including our potential acquisition of Carmelo's Pizzerias announced in the first quarter of 2013.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
(A COMPARISON OF RESULTS OF OPERATIONS AND LIQUIDITY AND CAPITAL RESOURCES FOR 2012 VERSUS 2011 MAY NOT BE MEANINGFUL BECAUSE THE COMPANY UNDERWENT SIGNIFICANT CHANGES DURING 2011. THE COMPANY COMPLETED A REVERSE MERGER IN MARCH, 2011 AND BECAME ENGAGED IN OUR CURRENT LINE OF BUSINESS AT THAT TIME.)
The Company’s operations were adversely impacted during the year ended December 31, 2012 by the following factors:
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Availability of live animals that meet our USDA requirements is down
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The lack of capital has prevented the Company from acquiring additional facilities and product.
Management has attempted to address each of these adverse factors. We have contacted other producers of live animals to increase availability and continue to try and secure additional capital. Management will continue to address these issues, including moving our business model to a licensing structure, but there can be no assurance that our efforts will prove successful.
We had a net loss of $535,290 for the year ended December 31, 2012 as compared to a loss of $358,844 for the year ended December 31, 2011. Our gross revenues in 2012 were $15,659 with cost of goods sold of $15,601 for a gross profit of $58. This compared to gross revenues of $104,576, costs of goods sold of $119,938 and gross loss of $15,362 for the year ended December 31, 2011. Our sales in 2012 were adversely affected by a lack of working capital as described more fully above.
Total operating expenses were $319,317 for the year ended December 31, 2012 versus $336,865 for the year ended December 31, 2011 resulting in loss from operations of $319,259 and $352,227 in the 2012 and 2011 periods, respectively. We experienced a significant decrease in wages and taxes in 2012 that was partially offset by an increase in consulting fees as well as an increase in general and administrative expenses. The decrease in wages was the result of the resignation of our CEO and Vice President in June 2012. General and administrative expense included $52,500 in management fee expense recorded for our new CEO appointed in June 2012. Generally, most remaining operating expenses were lower in 2012 as compared to 2011 as we scaled back our operations due to lack of working capital.
Other expenses were $216,031 for the year ended December 31, 2012 as compared to $6,617 for the year ended December 31, 2011. This significant increase is due to the addition of convertible promissory notes in 2012 including expense for the corresponding derivative liability, interest expense, amortization of the debt discount as well as loss on the conversion of debt due to difference in the conversion price as compared to the market price at issuance.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL. Overall, we had a net loss of $535,290 for the year ended December 31, 2012 as compared to $358,844 for the year ended December 31, 2011. During the year ended December 31, 2012, we had cash flow used by operations of $147,054, net cash provided by investing activities of $10,097, and cash flows provided by financing activities of $132,600. At the end of the year ended December 31, 2012, our cash balance was $97.
For the year ended December 31, 2011, we had a net loss of $358,844 with cash flow used by operations of $189,759, net cash provided by investing activities of $26,002, and cash flows provided by financing activities of $168,211. At the end of the year ended December 31, 2011, our cash balance was $4,454.
CASH FLOWS FROM OPERATING ACTIVITIES. Net cash flow used in operating activities was $147,054 which was primarily attributable to our net loss of $535,290, offset by non-cash adjustments to derivative liabilities from convertible notes payable totaling $147,665 as well as $73,750 in expense for stock issued for services and 44,629 for loss on conversion of debt. The adjustments to reconcile the net loss to net cash for the period ended December 31, 2012 also included depreciation expense of $5,818 and loss on sale of equipment of $10,845.
CASH FLOWS FROM INVESTING ACTIVITIES. For the year ended December 31, 2012, cash flows provided by investing activities consisted of $10,097 primarily from proceeds on the sale of equipment.
CASH FLOWS FROM FINANCING ACTIVITIES. For the year ended December 31, 2012, cash flows from financing activities were $132,600, which consisted of proceeds from issuance of notes and convertible notes payable.
For the year ended December 31, 2011, we had cash used in operating activities of $189,759 including $6,041 in depreciation expense along with a total of $163,044 from changes in assets and liabilities. Cash flows provided by investing activities was $26,002 and included $75,000 received in the reverse merger that was offset primarily by the purchase of property and equipment of $46,563. Cash flows from financing activities provided $168,211 primarily from proceeds from various notes payable totaling $168,500.
EXTERNAL SOURCES OF LIQUIDITY. We intend to pursue all potential financing options in 2013 as we look to secure additional funds to both stabilize and grow our business operations and begin extraction. Our management will review any financing options at their disposal and will judge each potential source of funds on its individual merits. We cannot assure you that we will be able to secure additional funds from debt or equity financing, as and when we need to or if we can, that the terms of such financing will be favorable to us or our existing shareholders. Additionally, we may need to rely on debt financing that is convertible into shares of our common stock which could result in significant dilution to our stockholders due to the conversion of that debt at significant discounts to the market price of our common stock.
INFLATION. Our management believes that inflation has not had a material effect on our results of operations, and does not expect that it will in fiscal year 2013.
OFF-BALANCE SHEET ARRANGEMENTS. We do not have any off-balance sheet arrangements.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and a decline in the stock market. We do not enter into derivatives or other financial instruments for trading or speculative purposes. We have limited exposure to market risks related to changes in interest rates. We do not currently invest in equity instruments of public or private companies for business or strategic purposes.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA NOTES TO FINANCIAL STATEMENTS
The financial statements and related information required to be filed are indexed and begin on page and are incorporated herein.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
CONTROLS AND PROCEDURES
CEO and CFO Certifications
Attached to this annual report, as Exhibits 31.1 and 32.1, are certain certifications of the CEO and CFO, which are required in accordance with the Exchange Act and the Commission's rules implementing such section (the "Rule 13a- 14(a)/15d-14(a) Certifications"). This section of the annual report contains the information concerning the Evaluation referred to in the Rule 13a- 14(a)/15d-14(a) Certifications. This information should be read in conjunction with the Rule 13a- 14(a)/15d-14(a) Certifications for a more complete understanding of the topic presented.
Evaluation of Disclosure Controls and Procedures
A review and evaluation was performed by the Company's management, including the Company's Chief Executive Officer (the "CEO") who is also the Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that review and evaluation, the CEO /CFO has concluded that as of December 31, 2012, disclosure controls and procedures, were effective at ensuring that the material information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported as required in the application of SEC rules and forms.
Management’s Report on Internal Controls over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a set of processes designed by, or under the supervision of, a company’s principal executive and principal financial officers, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets;
Provide reasonable assurance our transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statement.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of internal control, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our CEO/CFO has evaluated the effectiveness of our internal control over financial reporting as described in Exchange Act Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this report based upon criteria established in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to the extent possible given the limited personnel resources and technological infrastructure in place to perform the evaluation. Based upon our management’s discussions with our auditors and other advisors, our CEO/CFO believe that, during the period covered by this report, such internal controls and procedures were not effective as described below.
Due to the small size and limited financial resources, our chief executive officer is the only individual responsible for the accounting and financial reporting. As a result, there is no segregation of duties in the accounting function, leaving all aspects of financial reporting and physical control of cash in the hands of one individual. This limited segregation of duties represents a material weakness. We will continue periodically review our disclosure controls and procedures and internal control over financial reporting and make modifications from time to time considered necessary or desirable.
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
(a)(b)(c) Identification of directors and executive officers
The following table sets forth the name, age, position and office term of each executive officer and director of the Company.
In June 2012, our then Chief Executive Officer and Director Mr. Larry Moore, our Vice President Mrs. Donna Moore, and each of our then directors Messrs. Walker, Thompson, Killman and Vuncannon resigned their positions as officers or directors of the Company. Mr. Larry Moore continues to serve as Chief Executive Officer of our operation subsidiary, Greenfield Farms Grassfed Beef, Inc.
Significant employees
Not applicable.
Family relationships
None.
Business experience
HENRY FONG
Mr. Fong has been the president and a director of the Company since May 2005. Mr. Fong has been a director of FastFunds Financial Corporation, a publicly traded company with limited business operations, since June 2004. Mr. Fong has been a Director of SurgLine International, Inc. (f/k/a China Nuvo Solar Energy, Inc.) since March 2002 and was its president from March 2002 through September 1, 2011. SurgLine is a publicly traded company that sources and distributes high quality FDA approved medical and surgical products at discount prices. Mr. Fong was the Chief Executive Officer of Techs Loanstar, Inc. (and its predecessor companies), a publicly traded Company that provides software technology solutions to the healthcare market, from April 2008 to July 2011. Since July 2009 Mr. Fong has been the sole director, President and Chief Financial Officer of PB Capital International, Inc. (“PBIC”), a blank check shell company that filed Form 10 registration statement which went effective in October 2009. Since July 2010, Mr. Fong has been President and a director of Green Energy TV, Inc., a privately-held owner of "green" websites, most notably greenenergytv.com. Since December 2008, Mr. Fong has been President and a director of Carbon Capture Corporation, a privately held owner of certain carbon based intellectual property. Since June 2012, Mr. Fong has been President and a director of Greenfield Farms Food, Inc., a publicly-traded purveyor of grass-fed beef. From 1959 to 1982 Mr. Fong served in various accounting, finance and budgeting positions with the Department of the Air Force. During the period from 1972 to 1981 he was assigned to senior supervisory positions at the Department of the Air Force headquarters in the Pentagon. In 1978, he was selected to participate in the Federal Executive Development Program and in 1981, he was appointed to the Senior Executive Service. In 1970 and 1971, he attended the Woodrow Wilson School, Princeton University and was a Princeton Fellow in Public Affairs. Mr. Fong received the Air Force Meritorious Civilian Service Award in 1982. Mr. Fong has passed the uniform certified public accountant exam. In March 1994, Mr. Fong was one of twelve CEOs selected as Silver Award winners in FINANCIAL WORLD magazine's corporate American "Dream Team."
Our Bylaws provide that we shall have that number of directors determined by the majority vote of the board of directors. Currently we have one director. Each director will serve until our next annual shareholder meeting. Directors are elected for one-year terms. Our Board of Directors elects our officers at the regular annual meeting of the Board of Directors following the annual meeting of shareholders. Vacancies may be filled by a majority vote of the remaining directors then in office. Our directors and executive officers are as follows:
Audit committee financial expert
Identification of the audit committee
We do not have a separately designated standing audit committee. Pursuant to Section 3(a) (58) (B) of the Exchange Act, the entire Board of Directors acts as an audit committee for the purpose of overseeing the accounting and financial reporting processes, and audits of our financial statements. The Commission recently adopted new regulations relating to audit committee composition and functions, including disclosure requirements relating to the presence of an "audit committee financial expert" serving on its audit committee. In connection with these new requirements, our Board of Directors examined the Commission's definition of "audit committee financial expert" and concluded that we do not currently have a person that qualifies as such an expert. We have had minimal operations for the past two (2) years. We believe our current director would meet the qualifications of an "audit committee financial expert" were he not an officer of the Company.
Code of Ethics
We have adopted a code of ethic (the "Code of Ethics") that applies to our principal chief executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Ethics is being designed with the intent to deter wrongdoing, and to promote the following:
·
Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships
·
Full, fair, accurate, timely and understandable disclosure in reports and documents that a small business issuer files with, or submits to, the Commission and in other public communications made by the small business issuer
·
Compliance with applicable governmental laws, rules and regulations
·
The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code
·
Accountability for adherence to the code
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table and the accompanying notes provide summary information for each of the last three fiscal years concerning cash and non-cash compensation paid or accrued.
General
We currently have one executive officer, our Chief Executive Officer, Mr. Henry Fong, who is also our principal executive officer and our principal financial officer.
Compensation discussion and analysis
Our executive compensation is determined by our Board of Directors, which has estimated the value of management services provided by our executive officers. Mr. Fong is accruing a management fee of $7,500 per month that is paid from the Company's working capital when available. At December 31, 2012, Mr. Fong was owed $42,250.
Summary Compensation Table
SUMMARY COMPENSATION TABLE
(1)
Unless stated otherwise, the business address for each person named is c/o Greenfield Farms Food, Inc.
(2)
Calculated pursuant to Rule 13d-3(d) (1) of the Securities Exchange Act of 1934
(3)
We believe that each individual or entity named has sole investment and voting power with respect to the shares of common stock indicated as beneficially owned by them (subject to community property laws where applicable) and except where otherwise noted.
(4)
Mr. Fong became our Chief Executive Officer and Sole Director and Mr. and Mrs. Moore resigned their positions as officers and/or directors of the Company in June 2012. Mr. Moore remained as chief executive officer of our operating subsidiary.
(5)
On June 22, 2012, the Company accepted and entered into a Debt Settlement and Release Agreement dated June 18, 2012 with Larry and Donna Moore. The agreement compensated the Moore’s $130,000 with an initial payment of $80,000 and a Promissory Note from the Company for $50,000 due and payable 120 days from said date. In return for the compensation received, the Moore’s agreed to forgive $200,004.70 in deferred compensation and other debt owed by the Company and will assume approximately $30,933.46 in accounts payable by the Company. The $50,000 note remained due and payable at December 31, 2012.
We have not entered into any other employment agreements with our employees, Officers or Directors.
Stock Option Plan
We have not implemented a stock option plan at this time and since inception, have issued no stock options, SARs or other compensation. We may decide, at a later date, and reserve the right to, initiate such a plan as deemed necessary by the Board.
Compensation of directors
During the year ended December 31, 2011, each of our independent directors (four persons) received compensation of common stock awards valued at $5,250 each. During the year ended December 31, 2012, these same persons each received stock awards valued at $5,250 for their services as independent directors for the period from January until their resignations in June. We have no standard arrangements to compensate our directors for their services to us.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCK HOLDER MATTERS
Security ownership of certain beneficial owners.
Security ownership of management.
The following table contains certain information as of March 31, 2013 as to the number of shares of Common Stock beneficially owned by (i) each person known by the Company to own beneficially more than 5% of the Company’s Common Stock, (ii) each person who is a Director of the Company, (iii) all persons as a group who are Directors and Officers of the Company, and as to the percentage of the outstanding shares held by them on such dates and as adjusted to give effect to this Offering.
__________
(1)
As of March 31, 2013, 438,068,808 shares of our common stock were outstanding. Beneficial ownership is determined in accordance with the rules of the SEC, and includes general voting power and/or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable or exercisable within 60 days of the record date are deemed outstanding for computing the beneficial ownership percentage of the person holding such options or warrants but are not deemed outstanding for computing the beneficial ownership percentage of any other person. Except as indicated by footnote, the persons named in the table above have the sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.
(2)
In March 2011, the Company authorized the issuance of up to 100,000 shares of $0.001 par value Series A Convertible Voting Preferred Stock (the "Series A Preferred") of which there were 96,623 shares outstanding as of December 31, 2012. Each share of Series A Preferred is convertible into 7,000 shares of common stock. If all shares of Series A Preferred were to be converted to shares of common stock as of December 31, 2012, a total of 676,361,000 shares would be issued to the holders of the Series B Preferred including 495,005,000 that would be beneficially owned by Mr. Fong. The Series A Preferred also carries voting rights on an "as if converted" basis providing for effective control of the Company by the holders of the Series A Preferred.
(3)
Includes 70,715 shares of Series B Preferred Stock owned by a company controlled by Mr. Fong's spouse.
The directors, executive officers, their affiliates, and related parties own, directly or indirectly, beneficially and in the aggregate, the majority of the voting power of the outstanding capital of the Company. Accordingly, directors, executive officers and their affiliates, if they voted their shares uniformly, would have the ability to control the approval of most corporate actions, including approving significant expenses, increasing the authorized capital and the dissolution, merger or sale of the Company's assets.
Changes in control
We experienced a change in control in June 2012 when our then Chief Executive Officer, Mr. Larry Moore, sold 85,000 shares of Series A Preferred Stock owned by him to two investors including an affiliate of our current Chief Executive Officer, Mr. Henry Fong. We are currently not aware of any other arrangements that could result in a change in control of the Company.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Transactions with Related Persons
On June 22, 2012, the Company accepted and entered into a Debt Settlement and Release Agreement dated June 18, 2012 with Larry and Donna Moore. The agreement compensated the Moore’s $130,000 with an initial payment of $80,000 and a Promissory Note from the Company for $50,000 due and payable 120 days from said date. In return for the compensation received, the Moore’s agreed to forgive $200,004.70 in deferred compensation and other debt owed by the Company and will assume approximately $30,933.46 in accounts payable by the Company. Additionally Larry C. Moore was appointed President of the Greenfield Farms Grassfed Beef, Inc. the Company's operating subsidiary and assumed all operational control of the subsidiary.
Review, approval or ratification of transactions with related persons
Our entire board of directors is responsible for the review, approval or ratification of transactions with related persons. The board routinely reviews material related party transactions to ensure such transactions are reasonable, appropriate, and in the best interests of the Corporation. We have no written policies with respect to the review and approval of related party transactions and records of such reviews are contained in the minutes and/or reports of the board of directors as appropriate.
Director Independence
Our board of directors has one director and has no standing sub-committees at this time due to the associated expenses and the small size of our board. We are not currently listed on a national securities exchange that has requirements that a majority of the board of directors be independent and have no members of our board considered “independent” under the definition set forth in the listing standards of the NASDAQ Stock Market, Inc., which is the definition that our board has chosen to use for the purposes of the determining independence.
In performing the functions of the audit committee, our board oversees our accounting and financial reporting process. In this function, our board performs several functions. Our board, among other duties, evaluates and assesses the qualifications of the Company’s independent auditors; determines whether to retain or terminate the existing independent auditors; meets with the independent auditors and financial management of the Company to review the scope of the proposed audit and audit procedures on an annual basis; reviews and approves the retention of independent auditors for any non-audit services; reviews the independence of the independent auditors; reviews with the independent auditors and with the Company’s financial accounting personnel the adequacy and effectiveness of accounting and financial controls and considers recommendations for improvement of such controls; reviews the financial statements to be included in our annual and quarterly reports filed with the Securities and Exchange Commission; and discusses with the Company’s management and the independent auditors the results of the annual audit and the results of our quarterly financial statements.
We do not currently have a standing compensation committee or non-employee directors. When we have non-employee directors on our board, those non-employee directors consider executive officer compensation, and our entire board participates in the consideration of director compensation. Non-employee board members would oversee would compensation policies, plans and programs. Our non-employee board members would further review and approve corporate performance goals and objectives relevant to the compensation of our executive officers; review the compensation and other terms of employment of our Chief Executive Officer and our other executive officers; and administer our equity incentive and stock option plans.
Each of our directors participates in the consideration of director nominees. In addition to nominees recommended by directors, our board will consider nominees recommended by shareholders if submitted in writing to our secretary. Our board believes that any candidate for director, whether recommended by shareholders or by the board, should be considered on the basis of all factors relevant to our needs and the credentials of the candidate at the time the candidate is proposed. Such factors include relevant business and industry experience and demonstrated character and judgment.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Fees Billed For Audit and Non-Audit Services
The following table represents the aggregate fees billed for professional audit services rendered to the independent auditor, Silberstein Ungar, PLLC for our audit of the annual financial statements for the years ended December 31, 2012 and 2011. Audit fees and other fees of auditors are listed as follows:
(1)
Audit Fees. These are fees for professional services for the audit of our annual financial statements, and for services that are normally provided in connection with statutory and regulatory filings or engagements including review of our quarterly financial statements.
(2)
The amounts shown in 2011 and 2012 relate to (i) the audit of our annual financial statements for the fiscal years ended December 31, 2011 and 2012 and (ii) reviews of our quarterly financial statements.
(3)
Audit-Related Fees. These are fees for the assurance and related services reasonably related to the performance of the audit or the review of our financial statements.
(4)
Tax Fees. These are fees for professional services with respect to tax compliance, tax advice, and tax planning.
(5)
All Other Fees. These are fees for permissible work that does not fall within any of the other fee categories, i.e., Audit Fees, Audit-Related Fees, or Tax Fees.
Pre-Approval Policy for Audit and Non-Audit Services
We do not have a standing audit committee, and the full Board performs all functions of an audit committee, including the pre-approval of all audit and non-audit services before we engage an accountant. All of the services rendered to us by Silberstein Ungar, PLLC were pre-approved by our Board of Directors.
The new policies and procedures will be detailed as to the particular service, will require that the Board or an audit committee thereof be informed of each service, and will prohibit the delegation of pre-approval responsibilities to management. It is currently anticipated that our new policy will provide (i) for an annual pre-approval, by the Board or audit committee, of all audit, audit-related and non-audit services proposed to be rendered by the independent auditor for the fiscal year, as specifically described in the auditor's engagement letter, and (ii) that additional engagements of the auditor, which were not approved in the annual pre-approval process, and engagements that are anticipated to exceed previously approved thresholds, will be presented on a case-by-case basis, by the President or Controller, for pre-approval by the Board or audit committee, before management engages the auditors for any such purposes. The new policy and procedures may authorize the Board or audit committee to delegate, to one or more of its members, the authority to pre-approve certain permitted services, provided that the estimated fee for any such service does not exceed a specified dollar amount (to be determined). All pre-approvals shall be contingent on a finding, by the Board, audit committee, or delegate, as the case may be, that the provision of the proposed services is compatible with the maintenance of the auditor's independence in the conduct of its auditing functions. In no event shall any non-audit related service be approved that would result in the independent auditor no longer being considered independent under the applicable rules and regulations of the Securities and Exchange Commission.
PART IV
ITEM 15.
ITEM 15. EXHIBITS
Exhibits
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GREENFIELD FARMS FOOD, INC.
(Registrant)
Date: April 15, 2013
By:
/s/ Henry Fong
Henry Fong
President, Principal Executive Officer and Principal Financial Officer
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: April 15, 2013
/s/ Henry Fong
Henry Fong
Director
GREENFIELD FARMS FOOD, INC.
Index to Consolidated Financial Statements
Silberstein Ungar, PLLC CPAs and Business Advisors
Phone (248) 203-0080
Fax (248) 281-0940
30600 Telegraph Road, Suite 2175
Bingham Farms, MI 48025-4586
www.sucpas.com
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
Greenfield Farms Food, Inc.
Charlotte, North Carolina
We have audited the accompanying consolidated balance sheets of Greenfield Farms Food, Inc. (the “Company”) as of December 31, 2012 and 2011 and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Greenfield Farms Food, Inc. as of December 31, 2012 and 2011 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 11 to the consolidated financial statements, the Company has not yet realized significant revenues from operations, has recognized significant losses in 2012 and 2011 and is in need of working capital in order to grow its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are described in Note 11. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Silberstein Ungar, PLLC
Bingham Farms, Michigan
April 11, 2013
The accompanying notes are an integral part of the consolidated financial staements.
The accompanying notes are an integral part of the consolidated financial staements.
GREENFIELD FARMS FOOD, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
AS OF DECEMBER 31, 2012
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the consolidated financial staements.
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 1 - NATURE OF BUSINESS
Greenfield Farms Food, Inc. (the “Company”) was incorporated under the laws of the State of North Carolina on December 30, 2010. We are a marketer of grass fed beef products to a variety of grocery chains, retailers, and others, primarily in the region of Charlotte, NC.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.
Accounting Basis
The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted a December 31 fiscal year end.
Consolidation
The Company has one wholly owned subsidiary, Greenfield Farms Grassfed Beef, Inc. There are no significant intercompany transactions between the company and its subsidiary.
Fair Value of Financial Instruments
The carrying value of cash, deferred charges, accounts payable, accrued expenses, accrued interest and notes payable approximate their fair value due to the short period of these instruments.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.
Inventory
The inventory is comprised of grass fed beef parts (i.e. primarily steaks and ground beef). The inventory cost includes the purchase price of the live cattle, slaughtering costs, processing and packaging cost. The Company uses the first-in, first-out inventory method to determine costs.
Property and Equipment
Property and equipment is stated at historical cost less accumulated depreciation. Depreciation is provided using the straight-line method over the three to five year estimated useful lives of the assets.
Revenue Recognition
The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Reclassifications
Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements.
Income Taxes
The Company utilizes the asset and liability method of accounting for income taxes. Under the asset and liability method deferred tax assets and liabilities are determined based on the differences between financial reporting basis and the tax basis of the assets and liabilities and are measured using enacted tax rates and laws that will be in effect, when the differences are expected to reverse. An allowance against deferred tax assets is recognized, when it is more likely than not, that such tax benefits will not be realized.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC 718. To date, the Company has not adopted a stock option plan and has not granted any stock options. As of December 31, 2012, the Company has not issued any stock-based payments to its employees.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of December 31, 2012.
Derivative financial instruments
The Company follows ASC 815-40, Derivatives and Hedging, Contracts in Entity’s own Equity. The Company’s convertible debt has conversion provisions based on a discount of the market price of the Company’s common stock.
The Company had derivative liabilities resulting from the issuance of convertible debt, which were measured at fair value on a recurring basis using an option pricing model. Consequently, the Company has adjusted the fair value of the derivative liabilities at December 31, 2012 and recorded a gain related to the change in the value of the derivative liability of $147,643 in the statement of operations that were attributable to the change in unrealized gains or losses relating to the derivative liabilities still held at the reporting date for the year ended December 31, 2012. There were no derivative liabilities at December 31, 2011, nor a gain or loss reported for the year ended December 31, 2011.
Dividends
The Company has not adopted any policy regarding payment of dividends. No dividends have been paid during any of the periods shown.
Advertising Costs
The Company’s policy regarding advertising is to expense advertising when incurred. The Company incurred advertising expense of $0 and $15,628 during the years ended December 31, 2012 and 2011, respectively.
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of Long-Lived Assets
The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.
Recent Accounting Pronouncements
There were various accounting standards and interpretations issued during 2012, none of which are expected to have a material impact on the Company’s financial position, operations or cash flows upon adoption.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and consisted of the following at December 31:
Depreciation expense was $5,818 and $6,041 for the periods ended December 31, 2012 and 2011.
NOTE 4 - NOTE PAYABLE
On July 26, 2011, the Company issued a promissory note for $50,000. The note is secured by the Company’s common stock, bears 8% interest, and was due on January 26, 2012. The note is currently in default. Total interest expense was $4,000 and $1,742 for the years ended December 31, 2012 and 2011, respectively.
NOTE 5 - NOTES PAYABLE - RELATED PARTIES
During the year ended December 31, 2011, several board members and shareholders loaned the company money to help fund operations. The loans are all secured by the Company’s common stock, bear 8% interest and were due during the year ended December 31, 2011.
In 2012, the Company issued a promissory note for $50,000 to a former officer. The Note is secured by the Company’s stock and bears 8% interest. All other debts have been settled with the former owner.
In September 2012, an officer and shareholder loaned $100 to the Company. The loan is unsecured, bears 8% interest and is due on demand.
Total interest expense on the related party loans was $4,479 and $1,530 for the years ended December 31, 2012 and 2011, respectively.
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 6 - CONVERTIBLE NOTES PAYABLE
In September and November 2011, the Company borrowed $50,000 and $32,500 respectively, from Asher Enterprises, Inc. The convertible promissory notes accrue interest at the rate of 8% per annum. They were due on September 7, 2012 and November 16, 2012, respectively. These notes are convertible by the holder after 180 days at 45% of the average of the lowest three closing bid prices in the ten trading day period before the conversion. The notes are currently in default.
On May 25, 2012 Asher Enterprises issued a notice of conversion to convert $10,000 of the September 2011 note for 4,347,826 shares at a price of $0.0023 per share. The remaining balance of the note after the conversion was $40,000.
On November 2, 2012 Asher Enterprises issued a notice of conversion to convert $8,800 of the September 2011 note for 15,714,286 shares at a price of $0.00056 per share. The remaining balance of the note after the conversion was $31,200. A $44,629 loss on the conversion of the shares was recorded as the note was in default and a derivative liability was no longer recorded at the point of conversion.
On February 13, 2012 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $27,500 with an interest rate of 8% per annum due on November 13, 2012. The note is convertible by the holder after 180 days at 45% of the average of the lowest three closing bid prices in the ten trading day period before the conversion. The note is currently in default.
On June 15, 2012 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $83,500 with an interest rate of 8% per annum that is due on March 9, 2013. The note is convertible by the holder after 180 days at 35% of the lowest trading price in the sixty trading days before the conversion.
On August 1, 2012 the Company issued a convertible promissory note to Asher Enterprises in the principal amount of $20,000 with an interest rate of 8% per annum due on August 3, 2013. The note is convertible by the holder after 180 days at 35% of the lowest trading price in the thirty trading days before the conversion. The note was not yet convertible as of December 31, 2012.
On August 21, 2012, the Company issued a convertible promissory note in the amount of $1,500. The note is unsecured, due on demand and bears interest at 8% per annum. The note is convertible into shares of common stock at the market price.
Total interest expense on these notes was $15,260 and $3,345 for the years ended December 31, 2012 and 2011, respectively.
NOTE 7 - DERIVATIVE LIABILITY
The Company has determined that the conversion features of the Asher Notes represent an embedded derivative since the notes are convertible into a variable number of shares upon conversion. Accordingly, they are not considered to be conventional debt under EITF 00-19 and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. The fair value of this derivative instrument has been recorded as a liability on the balance sheet with the corresponding amount recorded as a discount to the notes. Such discount will be accreted from the commencing date of conversion period to the maturity date of the notes. The change in the fair value of the derivative liability will be recorded in other income or expenses in the statement of operations at the end of each period, with the offset to the derivative liability on the balance sheet.
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 7 - DERIVATIVE LIABILITY (continued)
The beneficial conversion feature included in notes resulted in initial debt discounts of $193,500 and an initial loss on the valuation of the derivative liabilities of $168,950 based on the initial fair value of the derivative liabilities of $362,450. The fair value of the embedded derivative liabilities were calculated at the conversion commencing dates utilizing the following assumptions:
At December 31, 2012, only one note remained convertible and not in default. All convertible notes in default no longer were valued for the derivative liability and a loss on the conversion of stock will be recorded at the time of any future conversion. The fair value of the embedded derivative liability was calculated at December 31, 2012 utilizing the following assumptions:
NOTE 8 - CAPITAL STOCK
The authorized capital of Company is 950,000,000 common shares with a par value of $0.001 per share of which the Company has issued 345,494,891 shares. The Company has also authorized 50,000,000 shares of preferred stock par value $0.001 and designated 100,000 of these shares as Series A Convertible Preferred Stock of which 96,623 are currently issued and outstanding. Each preferred Series A share is entitled to vote the equivalent of 7,000 shares of common stock.
On December 30, 2010, the Company issued 40,000 shares of common stock in exchange for a stock subscription receivable of $3,000. The receivable was paid in full in cash to the Company on January 18, 2011.
On February 18, 2011, Sweet Spot Games, Inc. (“Sweet Spot”) entered into a Letter of Intent with Greenfield Farms Grassfed Beef, Inc. (“Greenfield”), a North Carolina corporation. On March 1, 2011 Sweet Spot executed a “Plan of Exchange and Merger” and acquired all of the issued and outstanding shares of Greenfield Farms Grassfed Beef, Inc., a North Carolina corporation.
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 8 - CAPITAL STOCK (continued)
The exchange was made by the majority shareholders of Sweet Spot transferring control by transferring 903,300,000 shares of Sweet Spot in exchange for 100% of the outstanding shares of Greenfield, effectively conveying 75% of the voting control of the Company. The Sweet Spot shareholders did not receive consideration other than the acquisition by the Company of the shares of Sweet Spot. The Sweet Spot shares were issued to Greenfield shareholders of record as of the date of the agreement. On March 18, 2011 Articles of Exchange were filed with the Nevada Secretary of State and March 15, 2011 Articles of Exchange were filed with the North Carolina Secretary of State. As a result Greenfield has become a wholly owned subsidiary of Sweet Spot Games, Inc. Subsequently Sweet Spot changed its name to Greenfield Farms Food, Inc.
On April 1, 2011 four shareholders of the Company, all of whom were current or former affiliates, converted a total of 881,351,480 shares of Common stock in 96,623 shares of Series A Preferred stock as follows:
Charles W. Barkley Esq. (Company Counsel) canceled 31,351,480 shares of common stock and converted those shares into 4,479 Series A preferred shares; Ms. Ginna Romero canceled 12,000,000 shares of common stock and converted those shares in 1,714 Series A preferred shares; Mr. Gregory Galanis (formerly CEO of Sweet Spot Games) has canceled 38,000,000 shares of common stock and converted those shares into 5,430 Series A preferred shares; and Mr. Larry Moore (former President of the Company) has canceled 800,000,000 shares of common stock and converted those shares into 85,000 Series A preferred shares
The Company, therefore reduced the 1,204,400,000 outstanding shares of common stock by 881,351,480 (approximately 73%), resulting in 323,048,520 outstanding shares of common stock.
The Company executed a 40:1 forward stock split on March 22, 2011.
On March 1, 2012 the Company issued 750,000 common shares for the purpose of compensating directors at a value of $0.035, and 925,926 shares for consulting services provided at a value of $0.027.
On March 8, 2012 and April 24, 2012 the Company issued 333,333 shares at a value of $0.045 and 375,000 shares at a value of $0.02, respectively, for consulting services rendered.
On May 25, 2012 and November 2, 2012 the Company issued 4,347,826 shares and 15,714,286 shares, respectively, to Asher Enterprises for the partial conversions of a convertible note payable.
All share information presented in these financial statements and accompanying footnotes have been retroactively adjusted to reflect the increased number of shares resulting from these actions.
NOTE 9 - COMMITMENTS
In April 2011, the Company entered into an office lease agreement for a period of twenty four (24) months at a rate of $1,950 per month. A security deposit of $1,950 was paid upon executing the lease. However, lease payments ceased in May 2012, when the lease was terminated with the only penalty being the forfeiture of the $1,950 security deposit. Rent expense was $10,206 and $18,330 for the year ended December 31, 2012 and 2011.
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 10 - RELATED PARTY TRANSACTIONS
In 2011, the Company’s former President was advanced $63,851 which has been reflected as compensation in the accompanying statement of operations for the year ended December 31, 2011.
During the year ended December 31, 2011, several board members and shareholders loaned the company money to help fund operations. The loans are all secured by the Company’s common stock, bear 8% interest and are due during the year ended December 31, 2011. Total interest expense on the related party loans was $4,479 for the year ended December 31, 2012.
NOTE 11 - GOING CONCERN
The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has not yet realized significant revenues from operations, recognized a significant loss in 2012 and is in need of working capital in order to grow its operations. This raises substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with loans from directors and or private placements of common stock and by obtaining extended payment terms from certain vendors.
NOTE 12 - INCOME TAXES
As of December 31, 2012 and 2011 the Company had net operating loss carry-forwards of approximately $700,012 and $359,243 respectively, which will expire beginning in 2030. A valuation allowance has been provided for the deferred tax asset as it is uncertain whether the Company will have future taxable income. A reconciliation of the benefit for income taxes with amounts determined by applying the statutory federal income rate of (34%) to the loss before income taxes is as follows:
Significant components of the Company's deferred tax liabilities and assets at December 31, 2012 and 2011 are as follows:
GREENFIELD FARMS FOOD, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 13 - SUBSEQUENT EVENTS
On February 12, 2013, the Company announced that it had signed a definitive agreement to acquire 100% of the equity interest in Ohio-based Carmela's Pizzeria. Carmela's presently has three Dayton, Ohio area locations offering authentic New York style pizza. In addition, Carmela's offers a full service menu for Dine In, Carry out and Delivery as well as pizza buffets in select stores. Details of the transaction call for all of the equity interests in Carmela's to be acquired by a newly created wholly-owned operating subsidiary of Greenfield in exchange for shares of Greenfield common stock and warrants. Closing of this transaction is subject to, among other things, final due diligence by the parties, completion of audited financial statements, preparation of schedules to the definitive agreement, and any final board of director and/or stockholder approvals as necessary.
On March 12, 2013, the Company announced that it is beginning a new licensing program for its "Greenfield Farms Grassfed Beef" trademark, which the Company believes will allow it to expand its business and enhance its market and brand presence. With this program, the Company will phase away from its traditional business model of taking cattle from farm to market thus eliminating all of the capital and startup costs required for such operations by expanding its brand presence with capable cattle producers and marketers. The Company also believes that the trademark licensing concept allows for more rapid market penetration with minimal risk and the ability to more easily ascertain assumed returns. Greenfield also announced that is has signed its first licensee, Hill Meadow Foods, Inc., in an exclusive agreement until December 31, 2013, at which time it will become non-exclusive. The management of Hill Meadow Foods is headed by former Greenfield Chief Executive Officer, Mr. Larry Moore.
In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to December 31, 2012 to the date these financial statements were issued, and has determined that there are no further material subsequent events to disclose in these financial statements other than the events described above.