As filed with the Securities
and Exchange Commission on February 6, 2017
Registration No. 333-___________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
PETRONE WORLDWIDE, INC.
(Exact name of registrant as specified in
its charter)
Nevada
|
|
8742
|
|
87-0652348
|
(State or other jurisdiction of incorporation)
|
|
(Primary Standard Industrial
Classification Code Number)
|
|
(I.R.S. Employer Identification No.)
|
|
|
|
|
2200 N. Commerce Parkway, Weston, FL
|
|
|
33326
|
(Address of principal executive offices)
|
|
|
(Zip Code)
|
Registrant’s telephone number, including
area code:
(855) 297-3876
Victor Petrone
Chief Executive Officer
2200 N. Commerce Parkway
Weston, FL 33326
Telephone: (855) 297-3876
With copies to:
Laura Anthony, Esq.
Legal & Compliance, LLC
330 Clematis Street, Suite 217
West Palm Beach, Florida 33401
Telephone: (800) 341-2684
Telefax: (561) 514-0832
Approximate date of proposed sale to the
public:
From time to time after the effective date of this registration statement.
If any of the securities being registered on
this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following
box.
☒
If this Form is filed to register additional
securities for an offering pursuant top Rule 462(b) under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering.
☐
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
☐
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
Large accelerated filer
|
☐
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
☒
|
(Do not check if a smaller reporting company)
|
|
|
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered
|
|
Amount to be
Registered
|
|
Proposed Maximum
Aggregate Offering Price
Per Share
|
|
Proposed Maximum Aggregate Offering Price (1)
|
|
Amount of Registration Fee
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value per share, by Selling Stockholder
|
|
|
7,506,942
|
(2)
|
|
$
|
0.26
|
(3)
|
|
$
|
1,951,805
|
|
|
$
|
226.21
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Estimated pursuant to Rule 457(a) of
the Securities Act of 1933, as amended (the “Securities Act”) solely for purposes of calculating the registration fee.
(2) Represents shares of common stock offered
for resale by Peak One Opportunity Fund, L.P. (the “Selling Stockholder”), which shares are issuable by the registrant
pursuant to the Equity Purchase Agreement, dated October 24, 2016 (“Equity Line”), between the registrant and the Selling
Stockholder. The Company’s calculation of the maximum number of shares that may be registered for resale under the
Equity Line pursuant to this Registration Statement is as follows: non-affiliate float of 6,506,018 shares multiplied
by $0.90, which represents the average of the high and low prices for the common stock on October 5, 2016, divided by three, which
yields $1,951,805. Based on the average of the high and low prices for the common stock of $0.26 on October 21, 2016, which was
the last business day before the date the Equity Purchase Agreement was executed, we can register up to 7,506,942 shares of common
stock for resale pursuant to the equity line.
(3) This offering price has been estimated
solely for the purpose of calculating the registration fee pursuant to Rule 457(c) of the Securities Act with respect to the shares
of common stock registered hereunder, based upon the price of $0.26, which was the average of the high and low prices for the Company’s
common stock on October 21, 2016, as reported on the OTC Market Group, Inc.’s OTCQB tier.
(4) Computed in accordance with Section
6(b) of the Securities Act as in effect on February 6, 2017.
In accordance with Rule 416(a) under the
Securities Act, the registrant is also registering hereunder an indeterminate number of shares that may be issued and resold resulting
from stock splits, stock dividends or similar transactions.
WE HEREBY AMEND THIS REGISTRATION STATEMENT
ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL WE SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY
STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT,
OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT
TO SAID SECTION 8(a), MAY DETERMINE.
SUBJECT TO COMPLETION, DATED FEBRUARY
6, 2017
PROSPECTUS
7,506,942 SHARES OF COMMON STOCK
PETRONE WORLDWIDE, INC.
This Prospectus (this
“Prospectus”) relates to the offer and sale of up to 7,506,942 shares of common stock, par value $0.001 of Petrone
Worldwide, Inc., a Nevada corporation, by Peak One Opportunity Fund, L.P. (the “Selling Stockholder”). We
are registering the resale of up to 7,506,942 shares of common stock issuable under an equity line in the amount of $5,000,000
(the “Equity Line”) established by the Equity Purchase Agreement, dated October 24, 2016 (“Equity Line”),
between us and the Selling Stockholder, as more fully described in this Prospectus. The resale of such shares by the Selling Stockholder
pursuant to this Prospectus is referred to as the “Offering.”
We are not selling
any securities under this Prospectus and will not receive any of the proceeds from the sale of shares of common stock by the Selling
Stockholder. We will, however, receive proceeds from our sale of our shares of common stock under the Equity Line to the Selling
Stockholder.
The Selling Stockholder
is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act. The Selling Stockholder may sell
the shares of common stock described in this Prospectus in a number of different ways and at varying prices. See “Plan of
Distribution” for more information about how the Selling Stockholder may sell the shares of common stock being registered
pursuant to this Prospectus.
We will pay the expenses
incurred in registering the shares, including legal and accounting fees. See “Plan of Distribution.”
Our common stock is
currently quoted on the OTC Market Group, Inc.’s OTCQB tier under the symbol “PFWI.” On December 20, 2016, the
last reported sale price of our common stock was $0.086.
Our principal executive
offices are located at 2200 N. Commerce Parkway, Weston, Florida 33326.
Investing in our
common stock involves a high degree of risk. See “Risk Factors” beginning on page 7 of this Prospectus.
Neither the Securities
and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities
or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this Prospectus is
.
TABLE OF CONTENTS
|
|
Page
|
|
|
|
|
|
PART I - INFORMATION REQUIRED IN PROSPECTUS
|
|
|
|
|
Prospectus Summary
|
|
|
1
|
|
Summary Historical Financial Data
|
|
|
6
|
|
Risk Factors
|
|
|
7
|
|
Cautionary Note Regarding Forward-Looking Statements
|
|
|
19
|
|
Description of Business
|
|
|
20
|
|
Description of Properties
|
|
|
26
|
|
Legal Proceedings
|
|
|
26
|
|
Use of Proceeds
|
|
|
26
|
|
Quantitative and Qualitative Disclosures About Market Risk
|
|
|
26
|
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
|
26
|
|
Directors and Executive Officers
|
|
|
41
|
|
Executive Compensation
|
|
|
43
|
|
Security Ownership of Certain Beneficial Owners and Management
|
|
|
44
|
|
Certain Relationships and Related Party Transactions and Director Independence
|
|
|
45
|
|
Market for Common Equity and Related Stockholder Matters
|
|
|
46
|
|
Description of Securities
|
|
|
47
|
|
Selling Stockholder
|
|
|
49
|
|
Plan of Distribution
|
|
|
51
|
|
Shares Eligible for Future Sale
|
|
|
52
|
|
Legal Matters
|
|
|
53
|
|
Experts
|
|
|
53
|
|
Interests of Named Experts and Counsel
|
|
|
53
|
|
Disclosure of Commission Position of Indemnification For Securities Act Liabilities
|
|
|
53
|
|
Where You Can Find More Information
|
|
|
54
|
|
Financial Statements
|
|
|
F-1
|
|
|
|
|
|
|
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
|
|
|
|
|
|
Other Expenses of Issuance and Distribution
|
|
|
II-1
|
|
Indemnification of Directors and Officers
|
|
|
II-1
|
|
Recent Sales of Unregistered Securities
|
|
|
II-3
|
|
Exhibit Index
|
|
|
II-6
|
|
Undertakings
|
|
|
II-7
|
|
Signatures
|
|
|
II-9
|
|
You should rely only on the information
contained in this Prospectus. We have not authorized anyone to provide you with information that is different from that contained
in this Prospectus. This Prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted. The information in this Prospectus is complete and accurate only as of the
date on the front cover regardless of the time of delivery of this Prospectus or of any sale of our securities.
PROSPECTUS SUMMARY
This summary highlights material
information concerning our business and this offering. This summary does not contain all of the information that you should consider
before making your investment decision. You should carefully read the entire prospectus and the information incorporated by reference
into this prospectus, including the information presented under the section entitled “Risk Factors” and the financial
data and related notes, before making an investment decision. This summary contains forward-looking statements that involve risks
and uncertainties. Our actual results may differ significantly from future results contemplated in the forward-looking statements
as a result of factors such as those set forth in “Risk Factors” and “Cautionary Note Regarding Forward-Looking
Statements.”
In this prospectus, unless the context
indicates otherwise, the “Company,” “we,” “our,” “ours” or “us” refer
to Petrone Worldwide, Inc., a Nevada corporation, and its subsidiaries.
Business Overview
Petrone Worldwide, Inc. was incorporated
as Sheridan Industries, Inc. on December 14, 1998 in the State of Nevada. On December 31, 1998, the Company changed its name to
Diabetex International Corp. and effective February 18, 2014, the Company changed its name to Petrone Worldwide, Inc.
On January 29, 2014 and effective March 3,
2014, the Company entered into a purchase agreement (the “Purchase Agreement”) with Petrone Food Works, Inc. (“PFW”)
and the shareholder of PFW. Pursuant to the Purchase Agreement, the Company acquired 100% of PFW’s issued and outstanding
common stock from the PFW shareholder in exchange for the issuance of 11,760,542 shares of the Company’s common stock, representing
98.4% of the outstanding common stock, (the “Exchange”), after giving effect to a 1-for-500 reverse stock split (the
“Reverse Stock Split”) which resulted in 195,607 common shares outstanding prior to the Exchange for liabilities of
$30,000. Accordingly, the PFW shareholder became a shareholder of the Company and PFW became a subsidiary of the Company. The Exchange
has been accounted for as a reverse-merger and recapitalization since the stockholder of PFW obtained voting and management control
of the Company. PFW is the acquirer for financial reporting purposes and the Company is the acquired company. Consequently, the
assets and liabilities and the operations reflected in the historical financial statements prior to the Exchange are those of PFW
and was recorded at the historical cost basis of PFW, and the consolidated financial statements after completion of the Exchange
included the assets and liabilities of both the Company and PFW and the Company’s consolidated operations from the closing
date of the Exchange. All share and per share data in the accompanying consolidated financial statements have been retroactively
restated to reflect the effect of the Reverse Stock Split and recapitalization. PFW was formed under the laws of the State of Nevada
in October 2013.
We are an exclusive importer/exporter and distributor
in the hospitality industry of commercial grade tableware products, decorative hotel room amenities, lavatory and bathroom fixtures
and furniture, food and beverage service items, and trendy accessories for the Asian and the European marketplaces. Thru an exclusive
licensing agreement with a leading supplier, our exclusive brands include Front of the House and Room 360 by FOH. Revenues and
related costs of revenues expenses attributable to the sales of these products are included in our Product Segment.
Our founder, Victor Petrone, has spent over
20 years building a significant global network of buyers, comprised of hotels, resorts and restaurants, for premium, chic, environmentally
conscious products and services. We have sales, marketing, and product development expertise primarily in the hospitality business
in Europe and Asia. We currently sell and market products under our own proprietary name and we act as exclusive distributors primarily
to companies to the hospitality trade. The brand portfolio consists of vendor-approved items for key foreign accounts, which include
large hotel groups, such as Marriott Hotel Brands, The Four Seasons Hotel & Resorts, Hilton Worldwide, Hyatt Hotels & Resorts,
Starwood Hotel & Resorts, and Fairmont Hotel & Resorts, and smaller hotel chains and upscale restaurants.
On February 4, 2016 and effective March 15,
2016, we entered into a one-year Warehousing and Logistics Agreement (the “Warehousing Agreement”) with Dewan &
Sons to undertake JIT (Just In Time) distribution to all
Dewan & Sons customers in North America,
which includes direct store delivery of Dewan & Sons’ products to retail store, thereby bypassing a retailer’s
distribution center to increase inventory and reduce margins. Management believes that in light of increasing port delays, planning
for safety stock has become a critical component to reducing fulfillment costs. We expect that our supply chain operational efficiency
will bring optimum results with minimum budget expense for Dewan & Sons. We also believe that the further alliance with Dewan
& Sons will allow for increased real-time communication with purchasing agents and reduction of minimum order quantities so
that smaller, more frequent orders can be placed off-setting long term risks of holding too much inventory. Pursuant to the terms
of the Warehousing Agreement, Dewan & Sons agreed to pay us a flat fee for devanning, palletizing, shrink wrapping, labeling
and storage. In connection with this Warehousing Agreement, on March 8, 2016, we entered into a contract with Evolution Logistics
Corp., a Miami based logistics company (“Evolution Logistics”), pursuant to which Evolution Logistics agreed to manage
all of our transportation, warehousing and distribution from origin throughout the United States. Evolution Logistics is a freight
forwarder company specializing in distribution to big box retailers, roll outs and expedites cargo. Management believes that it
has state of the art operational platform with advanced technology that provides visibility from the purchase order level to the
final distribution.
Financing Transaction Related to the
Offering
The Equity Line
On October 24, 2016 (the “Closing Date”),
the Company entered into an equity purchase agreement (the “Purchase Agreement”) with Peak One Opportunity Fund, L.P.
(“Buyer”), whereby, upon the terms and subject to the conditions thereof, the Buyer is committed to purchase shares
of the Company’s common stock (the “Purchase Shares”) at an aggregate price of up to $5,000,000 (the “Total
Commitment Amount”) over the course of its 24-month term. From time to time over the 24-month term of the Purchase Agreement,
commencing on the date on which a registration statement registering the Purchase Shares (the “Registration Statement”)
becomes effective, the Company may, in its sole discretion, provide the Buyer with a put notice (each a “Put Notice”)
to purchase a specified number of the Purchase Shares (each a “Put Amount Requested”) subject to the limitations discussed
below and contained in the Purchase Agreement. Upon delivery of a Put Notice, the Company must deliver the Put Amount Requested
as Deposit Withdrawal at Custodian (“DWAC”) shares to Buyer within two trading days.
The actual amount of proceeds the Company receives
pursuant to each Put Notice (each, the “Put Amount”) is to be determined by multiplying the Put Amount Requested by
the applicable purchase price. The purchase price for each of the Purchase Shares equals 90% of the “Market Price,”
which is defined as the lesser of the (i) lowest closing bid price of our common stock for any trading day during the ten (10)
trading days immediately preceding the date of the respective Put Notice, or (ii) lowest closing bid price of the common stock
for any trading day during the seven trading days immediately following the clearing date associated with the applicable Put Notice
(the “Valuation Period”). Within three trading days following the end of the Valuation Period, the Buyer will deliver
the Put Amount to the Company via wire transfer.
The Put Amount Requested pursuant to any single
Put Notice must have an aggregate value of at least $15,000, and cannot exceed the lesser of (i) 200% of the average daily trading
value of the common stock in the ten trading days immediately preceding the Put Notice or (ii) such number of shares of common
stock that has an aggregate value of $100,000.
In order to deliver a Put Notice, certain conditions
set forth in the Purchase Agreement must be met, as provided therein. In addition, the Company is prohibited from delivering a
Put Notice if: (i) the sale of Purchase Shares pursuant to such Put Notice would cause the Company to issue and sell to Buyer,
or Buyer to acquire or purchase, a number of shares of the Company’s common stock that, when aggregated with all shares of
common stock purchased by Buyer pursuant to all prior Put Notices issued under the Purchase Agreement, would exceed the Total Commitment
Amount; or (ii) the sale of the Purchase Shares pursuant to the Put Notice would cause the Company to issue and sell to Buyer,
or Buyer to acquire or purchase, an aggregate number of shares of common stock that would result in Buyer beneficially owning more
than 4.99% of the issued and outstanding shares of the Company’s common stock.
Unless earlier terminated, the Purchase Agreement
will terminate automatically on the earlier to occur of: (i) 24 months after the initial effectiveness of the Registration Statement,
(ii) the date on which the Buyer has purchased or acquired all of the Purchase Shares, or (iii) the date on which certain bankruptcy
proceedings are initiated with respect to the Company. In connection with the execution of the Purchase Agreement, the Company
agreed to issue 650,000 shares of its common stock (the “Commitment Shares”) to Buyer or Buyer’s designee as
a commitment fee.
Registration Rights Agreement
On the Closing
Date, and in connection with the Purchase Agreement, the Company also entered into a registration rights agreement (the “Registration
Rights Agreement”) with Buyer whereby the Company is obligated to file the Registration Statement to register the resale
of the Commitment Shares and Purchase Shares. Pursuant to the Registration Rights Agreement, the Company must (i) file the Registration
Statement within thirty calendar days from the Closing Date, (ii) use reasonable efforts to cause the Registration Statement to
be declared effective under the Securities Act of 1933, as amended (the “Securities Act”), as promptly as possible
after the filing thereof, but in any event no later than the 90th calendar day following the Closing Date, and (iii) use its reasonable
efforts to keep such Registration Statement continuously effective under the Securities Act until all of the Commitment Shares
and Purchase Shares have been sold thereunder or pursuant to Rule 144.
Recent Developments
October 2016 Securities Purchase Agreement
and Convertible Debentures
On October 24, 2016 (the “Issuance Date”),
the Company entered into a securities purchase agreement (the “October 2016 SPA”) with Buyer, whereby Buyer agreed
to invest up to $346,500 (the “Convertible Debentures Purchase Price”) in the Company in exchange for the convertible
debentures, upon the terms and subject to the conditions thereof. Pursuant to the October 2016 SPA, the Company issued a convertible
debenture to Buyer on October 26, 2016, in the original principal amount of $85,000, which bears interest at 0% per annum (the
“First Debenture”). The Buyer paid the portion of the Convertible Debentures Purchase Price associated with the First
Debenture, consisting of $76,500 (minus the applicable fees under the October 2016 SPA), to the Company in cash on October 26,
2016. Each convertible debenture issued pursuant to the October 2016 SPA, coupled with the accrued and unpaid interest relating
to each convertible debenture, is due and payable three years from the issuance date of the respective convertible debenture. Any
amount of principal or interest that is due under each convertible debenture, which is not paid by the respective maturity date,
will bear interest at the rate of 18% per annum until it is satisfied in full. Additionally, the Buyer has the right at any time
to convert amounts owed under each convertible debenture into shares of the Company’s common stock at the closing price of
the Common Stock on September 8, 2015. Each debenture shall contain representations, warranties, events of default, beneficial
ownership limitations, and other provisions that are customary of similar instruments.
The Buyer is entitled to, at any time or from
time to time, convert each convertible debenture issued under the October 2016 SPA into shares of the Company’s common stock,
at a conversion price per share (the “Conversion Price”) equal to either: (i) if no event of default has occurred under
the respective convertible debenture and the date of conversion is prior to the date that is one hundred eighty days after the
issuance date of the respective convertible debenture, $0.25, or (ii) if an event of default has occurred under the respective
convertible debenture or the date of conversion is on or after the date that is one hundred eighty days after the issuance date
of the respective convertible debenture, the lesser of (a) $0.25 or (b) 65% of the lowest closing bid price of the common stock
for the twenty trading days immediately preceding the date of the date of conversion (provided, further, that if either the Company
is not DWAC operational at the time of conversion or the common stock is traded on the OTC Pink at the time of conversion, then
65% shall automatically adjust to 60%), subject in each case to equitable adjustments resulting from any stock splits, stock dividends,
recapitalizations or similar events.
We may redeem each convertible debenture issued
under the October 2016 SPA, upon not more than two days written notice, for an amount (the “Redemption Price”) equal
to: (i) if the Redemption Date (as defined below) is ninety days or less from the date of issuance of the respective convertible
debenture, 105% of the sum of the Principal Amount so redeemed plus accrued interest, if any; (ii) if the Redemption Date is greater
than or equal to ninety one days from the date of issuance of the respective convertible debenture and less than or equal to one
hundred twenty days from the date of issuance
of the respective convertible debenture, 110% of the sum of the Principal Amount so redeemed plus accrued interest, if any; (iii)
if the Redemption Date is greater than or equal to one hundred twenty one days from the date of issuance of the respective convertible
debenture and less than or equal to one hundred fifty days from the date of issuance of the respective convertible debenture, 120%
of the sum of the Principal Amount so redeemed plus accrued interest, if any; (iv) if the Redemption Date is greater than or equal
to one hundred fifty one days from the date of issuance of the respective convertible debenture and less than or equal to one hundred
eighty days from the date of issuance of the respective convertible debenture, 130% of the sum of the Principal Amount so redeemed
plus accrued interest, if any; and (v) if either (1) the respective convertible debenture is in default but the Buyer consents
to the redemption notwithstanding such default or (2) the Redemption Date is greater than or equal to one hundred eighty one days
from the date of issuance of the respective convertible debenture, 140% of the sum of the Principal Amount so redeemed plus accrued
interest, if any. The date upon which the respective convertible debenture is redeemed and paid shall be referred to as the “Redemption
Date” (and, in the case of multiple redemptions of less than the entire outstanding Principal Amount, each such date shall
be a Redemption Date with respect to the corresponding redemption).
In connection with the issuance of this
First Debenture, the Company determined that the terms of the First Debenture contain terms that are not fixed monetary amounts
at inception. Accordingly, under the provisions of FASB ASC Topic No. 815-40, “Derivatives and Hedging – Contracts
in an Entity’s Own Stock”, the embedded conversion option contained in the convertible instruments will be accounted
for as derivative liabilities at the date of issuance and shall be adjusted to fair value through earnings at each reporting date.
November 2016 Securities
Purchase Agreement and Convertible Promissory Note
On November 7, 2016, the Company consummated
a transaction with Crown Bridge Partners, LLC (“Investor”), whereby, upon the terms and subject to the conditions
of that certain securities purchase agreement (the “November 2016 SPA”), Investor agreed to invest up to $340,000.00
(the “Convertible Note Purchase Price”) in our Company in exchange for a convertible promissory note in the principal
amount of $400,000.00 (the “Note”). The Note carries a prorated original issue discount of $60,000.00 and bears interest
at the rate of 6% per year. On November 18, 2016, the Investor funded the first tranche under the Note, consisting of $34,000.00
in cash. Each tranche funded under the Note (each a “Tranche”), coupled with the accrued and unpaid interest relating
to that respective Tranche, is due and payable twelve months from the funding date of the respective Tranche. Any amount of principal
or interest that is due under each Tranche, which is not paid by the respective maturity date, will bear interest at the rate
of 22% per annum until it is satisfied in full. The Investor is entitled to, at any time or from time to time, convert each Tranche
under the Note into shares of our common stock, at a conversion price per share equal to fifty five percent (55%) of the lowest
traded price of the common stock for the twenty (20) trading days immediately preceding the date of the date of conversion, upon
the terms and subject to the conditions of the Note. In connection with the issuance of the Note and November 2016 SPA, we agreed
to issue 450,000 shares of our common stock to Investor. On December 21, 2016, the Investor funded the second Tranche under the
Note, pursuant to the terms described above. In connection with the funding of the Second Tranche, we agreed to issue 50,000 shares
of our common stock to Investor. The Note contains representations, warranties, events of default, beneficial ownership limitations,
prepayment options, and other provisions that are customary of similar instruments.
Use of Proceeds
We intend to use the proceeds from the
Equity Line for general corporate purposes and working capital requirements.
We intend to raise additional capital
through equity and debt financing as needed, though there cannot be any assurance that such funds will be available to us on acceptable
terms, on an acceptable schedule, or at all.
Emerging Growth Company and Smaller Reporting
Company Status
Emerging Growth Company
We are an “emerging growth company”
as defined in Section 2(a)(19) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the
Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth
companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section
404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive
compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory
vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We intend to
take advantage of all of these exemptions.
In addition, Section 107 of the JOBS Act also
provides that an “emerging growth company” can take advantage of the extended transition period provided in Section
7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards, and delay compliance with new or revised
accounting standards until those standards are applicable to private companies. We have elected to take advantage of the benefits
of this extended transition period.
We could be an emerging growth company until
the last day of the first fiscal year following the fifth anniversary of our first common equity offering, although circumstances
could cause us to lose that status earlier if our annual revenues exceed $1.0 billion, if we issue more than $1.0 billion in non-convertible
debt in any three-year period or if we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange
Act.
Smaller Reporting
Company
We also qualify as a “smaller reporting
company” under Rule 12b-2 of the Exchange Act, which is defined as a company with a public equity float of less than $75
million. To the extent that we remain a smaller reporting company at such time as are no longer an emerging growth company, we
will still have reduced disclosure requirements for our public filings some of which are similar to those of an emerging growth
company, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act and the reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
Corporate Information
Our
principal executive offices are located at 2200 N. Commerce Parkway, Weston, FL 33326. Our telephone number is (855) 297-3876.
We maintain a corporate website at
www.petroneworldwide.com
.
Transfer Agent
The transfer agent
for our common stock is OTC Stock Transfer, Inc. at
6364 South Highland Drive,
Suite
201,
Salt Lake City, UT 84121
. The transfer agent’s telephone number is
(801)
272-7272
.
The Offering
Securities Offered by the Selling Stockholder
|
7,506,942
|
|
|
Common Stock Outstanding before Offering
|
28,659,897 shares
|
|
|
Common Stock Outstanding after Offering
|
36,166,839 shares, assuming all 7,506,942 shares are sold to the Selling Stockholder under the Equity Line. If we sell less shares of common stock to the Selling Stockholder under the Equity Line, we have substantially less common stock outstanding after the Offering.
|
Use of Proceeds
|
We will not receive any of the proceeds from the sale of the common stock registered hereunder. We will receive proceeds from our sales of Purchase Shares to the Selling Stockholder under the Equity Line. We intend to use such proceeds, if any, as set forth under “Use of Proceeds” beginning on page 25.
|
|
|
Risk Factors
|
An investment in our securities involves a high degree of risk and could result in a loss of your entire investment. Further, the issuance to, or sale by, the Selling Stockholder of a significant amount of shares being registered in this Registration Statement at any given time could cause the market price of our common stock to decline and to be highly volatile and we do not have the right to control the timing and amount of any sales by the Selling Stockholder of such shares. Prior to making an investment decision, you should carefully consider all of the information in this Prospectus and, in particular, you should evaluate the risk factors set forth under the caption “Risk Factors” beginning on page 7.
|
|
|
Symbol on the OTCQB
|
PFWI
|
SUMMARY HISTORICAL FINANCIAL DATA
The following table presents our summary historical financial
data for the periods indicated. The summary historical financial data for the years ended December 31, 2015 and 2014 and the balance
sheet data as of December 31, 2015 and 2014 are derived from the audited financial statements. The summary historical financial
data for the nine months ended September 30, 2016 and 2015 and the balance sheet data as of September 30, 2016 and 2015 are derived
from our unaudited consolidated financial statements.
Historical results are included for illustrative and informational
purposes only and are not necessarily indicative of results we expect in future periods, and results of interim periods are not
necessarily indicative of results for the entire year. You should read the following summary financial data in conjunction with
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated
financial statements and related notes appearing elsewhere in this prospectus.
Balance Sheet Data
|
|
September 30, 2016
|
|
December 31, 2015
|
|
December 31, 2014
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
13,195
|
|
|
$
|
208,064
|
|
|
$
|
77,827
|
|
Working capital (deficit) (1)
|
|
$
|
(21,282
|
)
|
|
$
|
63,936
|
|
|
$
|
133,606
|
|
Current assets
|
|
$
|
247,984
|
|
|
$
|
350,372
|
|
|
$
|
185,140
|
|
Total assets
|
|
$
|
247,984
|
|
|
$
|
350,372
|
|
|
$
|
185,140
|
|
Current liabilities
|
|
$
|
269,266
|
|
|
$
|
286,436
|
|
|
$
|
51,534
|
|
Total Liabilities
|
|
$
|
269,266
|
|
|
$
|
286,436
|
|
|
$
|
51,534
|
|
Stockholders’ equity (deficit)
|
|
$
|
(21,282
|
)
|
|
$
|
63,936
|
|
|
$
|
133,606
|
|
Total liabilities and stockholders’ equity
|
|
$
|
247,984
|
|
|
$
|
350,372
|
|
|
$
|
185,140
|
|
(1) Working
capital represents total current assets less total current liabilities.
Statements of Operations Data:
|
|
Nine Months Ended
September 30, 2016
|
|
Nine Months Ended
September 30, 2015 (1)
|
|
Year Ended
December 31, 2015
|
|
Year Ended December 31, 2014
|
|
|
|
(unaudited)
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
$
|
257,559
|
|
|
$
|
1,373,547
|
|
|
$
|
1,410,080
|
|
|
$
|
—
|
|
Cost of revenues
|
|
$
|
195,943
|
|
|
$
|
1,265,838
|
|
|
$
|
1,308,129
|
|
|
$
|
—
|
|
Gross profit
|
|
$
|
61,616
|
|
|
$
|
107,709
|
|
|
$
|
101,951
|
|
|
$
|
—
|
|
Operating expenses
|
|
$
|
581,698
|
|
|
$
|
311,757
|
|
|
$
|
605,363
|
|
|
$
|
1,272,911
|
|
Other expenses
|
|
$
|
(178,864
|
)
|
|
$
|
(105
|
)
|
|
$
|
(893,683
|
)
|
|
$
|
—
|
|
Net loss
|
|
$
|
(698,946
|
)
|
|
$
|
(204,153
|
)
|
|
$
|
(1,397,095
|
)
|
|
$
|
(1,272,911
|
)
|
Net loss per share attributable to common stockholders, basic and diluted
|
|
$
|
(0.03
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.10
|
)
|
Weighted average shares used to compute net loss per share attributable to common stockholders, basic and diluted
|
|
|
22,601,478
|
|
|
|
15,646,684
|
|
|
|
16,101,743
|
|
|
|
13,035,839
|
|
(1) As restated.
RISK FACTORS
An investment in our securities is
subject to numerous risks, including the risk factors described below. You should carefully consider the risks, uncertainties,
and other factors described below, in addition to the other information set forth in this Prospectus, before making an investment
decision with regard to our securities. Any of these risks, uncertainties, and other factors could materially and adversely affect
our business, financial condition, results of operations, cash flows, or prospects. In that case, the trading price of our common
stock could decline, and you may lose all or part of your investment. See also “Cautionary Note Regarding Forward-Looking
Statements.”
Risks Associated
with Market Conditions
Slowdowns
in the retail, travel, restaurant and bar or entertainment industries may negatively impact demand for our products.
Our business
is dependent on business and personal discretionary spending in the retail, travel, and restaurant and bar or entertainment industries.
Business and personal discretionary spending may decline during general economic downturns or during periods of uncertainty about
economic conditions. In addition, austerity measures adopted by some governments may cause consumers in some markets that we serve
to reduce or postpone spending. Consumers also may reduce or postpone spending in response to tighter credit, negative financial
news, higher fuel and energy costs, higher tax rates and health care costs and/or declines in income or asset values. Additionally,
expenditures in the travel, restaurant and bar or entertainment industries may decline after incidents of terrorism, during periods
of geopolitical conflict in which travelers become concerned about safety issues, during periods of severe weather or during periods
when travel or entertainment might involve health-related risks such as severe outbreaks, epidemics or pandemics of contagious
disease.
We face intense
competition and competitive pressures, which could adversely affect demand for our products and our results of operations and financial
condition.
Our business
is highly competitive, with the principal competitive factors being customer service, price, product quality, new product development,
brand name, delivery time and breadth of product offerings. Advantages or disadvantages in any of these competitive factors may
be sufficient to cause the customer to consider changing providers of the kinds of products that we sell.
Demand
for our products may be adversely impacted by increased competitive pressures caused by the provision of subsidies by foreign countries
to our competitors based in those countries; national and international boycotts and embargoes of other countries' or U.S. imports
and/or exports; the raising of tariff rates on, or increase of non-tariff trade barriers that apply to, imports of our products
to foreign countries; the lowering of tariff rates on imports into the U.S. of our foreign competitors' products; and other changes
to international agreements that improve access to the U.S. market for our competitors.
In addition,
the cost-competitiveness of our products may be adversely affected by inflationary pressures that cause us to increase the prices
of our products in order to maintain their profitability. In that connection, some of our competitors have greater financial and
capital resources than we do and continue to invest heavily to achieve increased production efficiencies. Competitors may have
incorporated more advanced technology in their manufacturing processes, including more advanced automation techniques. Our labor
and energy costs also may be higher than those of some foreign producers of glass tableware.
The cost-competitiveness
of our products, as compared to foreign competition, also may be reduced as a result of major fluctuations in the value of the
euro, the Indian Rupee which we refer to as the “INR” and the Chinese Yuan, which we refer to as the “RMB,”
relative to the U.S. dollar and other major currencies. For example, if the U.S. dollar appreciates against the euro, the INR or
the RMB, the purchasing power of those currencies effectively would be reduced compared to the U.S. dollar, making our U.S.-manufactured
products more expensive in the euro zone, India and China, respectively, compared to the products of local competitors, and making
products manufactured by our foreign competitors in those locations more cost-competitive with our products.
In some countries
in which our suppliers purchase, including China, our ability to put fixed priced contracts in place is limited.
Risks Related to Our Business
We will require additional funds to expand
our operations.
In connection with any expansion projects for
our business, we will incur significant capital and operational expenses. We do not presently have any funding commitments other
than our present credit arrangements which we do not believe are sufficient to enable us to expand our business. If we are unable
to generate cash flow from operations and obtain necessary bank or other financing to pay for significant capital or operational
expenses, we may be unable to finance the growth of our existing business, which may impair our ability to operate profitably. Because
of our stock price and the worldwide economic situation, we may not be able to raise any additional funds that we require on favorable
terms, if any. The failure to obtain necessary financing may impair our ability to expanse or business and remain profitable.
If we are
unable to increase output or achieve operating efficiencies, the profitability of our business may be materially and adversely
affected.
We may not be
successful purchasing at our lower-cost manufacturing facilities or gaining operating efficiencies that may be necessary in order
to ensure that our products and their prices remain competitive.
We are dependent on major customers.
If we are unable to maintain good relationships with our existing customers, our business could suffer.
For the
nine months ended September 30, 2016, two customers accounted for approximately 38.7% of total sales (19.0% and 19.7%, respectively).For
the nine months ended September 30, 2015, five customers accounted for approximately 87.4% of total sales (22.5%, 14.1%, 22.7%,
13.5% and 14.6%, respectively).
We did not have customers in 2014. A reduction in sales
from or loss of such customers would have a material adverse effect on our consolidated results of operations and financial condition.
Unexpected
equipment failures may lead to production curtailments or shutdowns.
Our product supplier’s
processes are dependent upon critical materials-producing equipment, such as furnaces and forming machines. This equipment may
incur downtime as a result of unanticipated failures, accidents, natural disasters or other
force majeure
events. We may
in the future experience facility shutdowns or periods of reduced production as a result of such failures or events. Unexpected
interruptions in the production capabilities would adversely affect our productivity and results of operations for the affected
period.
The success of our businesses will depend
on our ability to effectively develop and implement strategic business initiatives.
In connection with the development and implementation
of our growth plans, we will incur additional operating expenses and capital expenditures. The development and implementation of
these plans also requires management to divert a portion of its time from day-to-day operations. These expenses and diversions
could have a significant impact on our operations and profitability, particularly if our plans for any new initiative prove to
be unsuccessful. Moreover, if we are unable to implement any of our plans in a timely manner, or if those plans turn out to be
ineffective or are executed improperly, our business and operating results would be adversely affected.
We are highly dependent on Victor Petrone,
Jr., our sole officer and director. The loss of Mr. Petrone, whose knowledge, leadership, and technical expertise upon which we
rely, would harm our ability to execute our business plan.
We are largely dependent on our sole officer
and director, for his knowledge and experience. Our ability to successfully market and distribute our products may be at risk from
an unanticipated accident, injury, illness, incapacitation, or death. Upon such occurrence, unforeseen expenses, delays, losses
and/or difficulties may be encountered. Our success may also depend on our ability to attract and retain other qualified management
and sales and marketing personnel.
We compete for such persons with other companies
and other organizations, some of which have substantially greater capital resources than we do. We cannot give you any assurance
that we will be successful in recruiting or retaining personnel of the requisite caliber or in adequate numbers to enable us to
conduct our business.
If we are unable to attract, train and
retain marketing, technical and financial personnel, our business may be materially and adversely affected.
Our future success depends, to a significant
extent, on our ability to attract, train and retain marketing, technical and financial personnel. Recruiting and retaining capable
personnel, particularly those with expertise in our industries and in the industries to which we market, are vital to our success.
There is substantial competition for qualified marketing, technical and financial personnel, and there can be no assurance that
we will be able to attract or retain our marketing, technical and financial personnel. If we are unable to attract and retain qualified
employees, our business may be materially and adversely affected.
We rely
on increasingly complex information systems for management of our manufacturing, distribution, sales and other functions. If our
information systems fail to perform these functions adequately, or if we experience an interruption in their operation, our business
and results of operations could suffer.
All of our operations,
including the operations of our supplier’s, warehouse and logistic partners, and sales and accounting, are dependent upon
our complex information systems. Our information systems are vulnerable to damage or interruption from: (i) earthquake, fire, flood,
hurricane and other natural disasters; (ii) power loss, computer systems failure, internet and telecommunications or data network
failure; and (iii) hackers, computer viruses or software bugs.
Any damage or
significant disruption in the operation of such systems or the failure of our information systems to perform as expected could
disrupt our business; result in decreased sales, increased overhead costs, excess inventory, and product shortages; and otherwise
adversely affect our operations, financial performance and condition. We take significant steps to mitigate the potential impact
of each of these risks, but there can be no assurance that these procedures would be completely successful.
In addition,
although we take steps to secure our management information systems, including our computer systems, intranet and internet sites,
email and other telecommunications and data networks, the security measures we have implemented may not be effective and our systems
may be vulnerable to theft, loss, damage and interruption from a number of potential sources and events, including unauthorized
access or security breaches and cyber-attacks. Our reputation, brand, and financial condition could be adversely affected if, as
a result of a significant cyber event or otherwise, our operations are disrupted or shutdown; our confidential, proprietary information
is stolen or disclosed; data is manipulated or destroyed; we incur costs or are required to pay fines in connection with stolen
customer, employee, or other confidential information; we must dedicate significant resources to system repairs or increase cyber
security protection; or we otherwise incur significant litigation or other costs.
We may
not be able to effectively integrate future businesses we acquire or joint ventures into which we enter.
Any future acquisitions
that we might make or joint ventures into which we might enter are subject to various risks and uncertainties, including:
•
|
the inability to integrate effectively the operations, products, technologies and personnel of the acquired companies (some of which may be spread out in different geographic regions) and to achieve expected synergies;
|
•
|
the potential disruption of existing business and diversion of management's attention from day-to-day operations;
|
•
|
the inability to maintain uniform standards, controls, procedures and policies or correct deficient standards, controls, procedures and policies, including internal controls and procedures sufficient to satisfy regulatory requirements of a public company in the U.S.;
|
•
|
the incurrence of contingent obligations that were not anticipated at the time of the acquisitions;
|
•
|
the failure to obtain necessary transition services such as management services, information technology services and others;
|
•
|
the need or obligation to divest portions of the acquired companies; and
|
•
|
the potential impairment of relationships with customers.
|
In addition,
we cannot provide assurance that the integration and consolidation of newly acquired businesses or joint ventures will achieve
any anticipated cost savings and operating synergies. The inability to integrate and consolidate operations and improve operating
efficiencies at newly acquired businesses or joint ventures could have a material adverse effect on our business, financial condition
and results of operations.
A decrease in supply or increase in cost
of the materials used in our products could harm our profitability.
Any restrictions on the supply or the increase
in the cost of the materials used by our suppliers in their manufactured products could significantly reduce our profit margins.
Efforts to mitigate restrictions on the supply or price increases of materials by entering into long-term purchase agreements or
by passing cost increases on to our customers may not be successful. Increased competition may affect our ability to pass on to
our customers’ price increases in product. Our profitability depends largely on the price and continuity of supply
of our products, which in many instances are supplied by a limited number of sources.
You may suffer significant dilution if
we raise additional capital.
If we need to raise additional capital to expand
or continue operations, it may be necessary for us to issue additional equity or convertible debt securities. If we issue equity
or convertible debt securities, our net tangible book value per share may decrease, and the percentage ownership of our current
stockholders would be diluted, and any equity securities we may issue may have rights, preferences
or privileges senior or more advantageous to our common stockholders.
Our status as an emerging growth company
may result in reduced disclosure obligations.
We are an “emerging growth company,”
as defined in the Jumpstart Our Business Startups Act (which we refer to as the “JOBS Act”), and we are eligible to
take advantage of certain exemptions from various reporting and financial disclosure requirements that are applicable to other
public companies, that are not emerging growth companies, including, but not limited to, (1) not being required to comply with
the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), (2)
reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and (3) exemptions
from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved. We intend to take advantage of these exemptions. Because of the reduced disclosure and because
our business is conducted in the PRC, investors may find investing in our common shares less attractive as a result, which could
have an adverse effect on our stock price.
In addition, Section 107 of the JOBS Act also
provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of
the Securities Act of 1933, as amended, for complying with new or revised accounting standards. As a result, an emerging growth
company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
We elected to opt out of such extended transition period and acknowledge such election is irrevocable pursuant to Section 107 of
the JOBS Act.
We could remain an emerging growth company
for up to five years, or until the earliest of (1) the last day of the first fiscal year in which our annual gross revenues exceed
$1 billion, (2) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act,
which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last
business day of our most recently completed second fiscal quarter and we have been publicly reporting for at least 12 months, or
(3) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.
Our independent
registered public accounting firm has expressed a risk that there is substantial doubt about our ability to continue in business.
Our
auditors have questioned our ability to continue operations as a “going concern.” Investors may lose all of their investment
if we are unable to continue operations and generate significant revenues
.
In the absence of significant sales and profits,
we may seek to raise additional funds to meet our working capital needs, principally through the additional sales of our securities.
However, we cannot guarantee that we will be able to obtain sufficient additional funds when needed, or that such funds, if available,
will be obtainable on terms satisfactory to us. As a result, substantial doubt exists about our ability to continue as a going
concern.
Our
consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and
the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying unaudited consolidated
financial statements, we had a net loss of $698,946 and $204,153 for the nine-months ended September 30, 2016 and 2015 respectively.
The net cash used in operations were $561,867 and $78,599 for the nine months ended September 30, 2016 and 2015, respectively.
Additionally, we had an accumulated deficit, stockholders’ deficit and working capital deficit of $3,379,052, $ 21,282 and
$ 21,282, respectively, at September 30, 2016. As also reflected in the accompanying consolidated financial statements, we had
a net loss of $1,397,095 and $1,272,911 for the years ended December 31, 2015 and 2014, respectively. The net cash used in operations
were $95,146 and $316,247 for the years ended December 31, 2015 and 2014, respectively. Additionally, we had an accumulated deficit,
stockholders’ equity and working capital of $2,680,106, $63,936 and $63,936, respectively, at December 31, 2015. These factors
raise substantial doubt about our ability to continue as a going concern. Management cannot provide assurance that we will ultimately
achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. During 2015, management
has taken measures to reduce operating expenses. We are seeking to raise capital through additional debt and/or equity
financings to
fund its operations in the future. Although we have historically raised capital from sales of equity and from the issuance of promissory
notes, there is no assurance that it will be able to continue to do so. If we are unable to raise additional capital or secure
additional lending in the near future, management expects that we will need to curtail its operations. These consolidated financial
statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification
of liabilities that might be necessary should we be unable to continue as a going concern.
Our level
of debt may limit our operating and financial flexibility.
As of September
30, 2016 and December 31, 2015, we had $87,834 and $250,000 aggregate principal amount of debt outstanding, respectively.
Our levels of
indebtedness could: (i) limit our ability to withstand business and economic downturns and/or place us at a competitive disadvantage
compared to our competitors that have less debt, because of the high percentage of our operating cash flow that is dedicated to
servicing our debt; (ii) limit our ability to make capital investments in order to expand our business; (iii) limit our ability
to invest operating cash flow in our business and future business opportunities, because we use a substantial portion of these
funds to service debt; (iv) limit our ability to invest operating cash flow in our business and future business opportunities,
because we use a substantial portion of these funds to service debt; (v) limit our ability to obtain additional debt or equity
financing for working capital, capital expenditures, product development, debt service requirements, acquisitions or other purposes;
(vi) make it more difficult for us to satisfy our financial obligations; (vii) limit our ability to pay dividends; and (viii) limit
our ability to attract and retain talent.
If cash generated
from operations is insufficient to satisfy our liquidity requirements, if we cannot service our debt, we could have substantial
liquidity problems. In those circumstances, we might have to sell assets, delay planned investments, obtain additional equity capital
or restructure our debt. Depending on the circumstances at the time, we may not be able to accomplish any of these actions on favorable
terms or at all.
In addition,
our failure to repay our loans could result in an event of default.
If we are
unable to control or pass on to our customers’ increases in key input costs, including the cost of sourced products, utilities,
packaging and freight, the profitability of our business may be materially and adversely affected.
We obtain glass
tableware, ceramic dinnerware, metal flatware and hollowware from third parties. Increases in the costs of these commodities or
products may result from inflationary pressures as well as temporary shortages due to disruptions in supply caused by weather,
transportation, production delays or other factors. If we experience shortages in commodities or sourced products, we may be forced
to procure them from alternative suppliers, and we may not be able to do so on terms as favorable as our current terms or at all.
Our financial
results may be adversely impacted by product liability claims, recalls or other litigation that is determined adversely to us.
We are not involved
in various routine legal proceedings arising in the ordinary course of our business. We do not have any pending legal proceeding
as material. However, our financial results could be adversely affected by monetary judgments and the cost to defend legal proceedings
in the future, including product liability claims related to the products we distribute. We do not maintain product liability insurance
coverage.
We are a relatively young company with
no operating history.
Since we are a young company, it is difficult
to evaluate our business and prospects. At this stage of our business operations, even with our good faith efforts, potential investors
have a high probability of losing their investment. Our future operating results will depend on many factors, including the ability
to generate sustained and increased
demand and acceptance of our products, the
level of our competition, and our ability to attract and maintain key management and employees. While management believes their
estimates of projected occurrences and events are within the timetable of their business plan, there can be no guarantees or assurances
that the results anticipated will occur.
We expect to incur net losses in future
quarters.
If we do not achieve profitability, our business
may not grow or operate. We may not achieve sufficient revenues or profitability in any future period. We will need to generate
revenues from the sales of our products or take steps to reduce operating costs to achieve and maintain profitability. Even if
we are able to generate revenues, we may experience price competition that will lower our gross margins and our profitability.
If we do achieve profitability, we cannot be certain that we can sustain or increase profitability on a quarterly or annual basis.
We will require additional funds to operate
in accordance with our business plan.
We may not be able to obtain additional funds
that we may require. We do not presently have adequate cash from operations or financing activities to meet our short or long-term
needs. If unanticipated expenses, problems, and unforeseen business difficulties occur, which result in material delays, we will
not be able to operate within our budget. If we do not achieve our internally projected sales revenues and earnings, we will not
be able to operate within our budget. If we do not operate within our budget, we will require additional funds to continue our
business. If we are unsuccessful in obtaining those funds, we cannot assure you of our ability to generate positive returns to
the Company. Further, we may not be able to obtain the additional funds that we require on terms acceptable to us, if at all. We
do not currently have any established third-party bank credit arrangements. If the additional funds that we may require are not
available to us, we may be required to curtail significantly or to eliminate some or all of our development, manufacturing, or
sales and marketing programs.
We may seek to obtain them primarily through
equity or debt financings. Such additional financing, if available on terms and schedules acceptable to us, if available at all,
could result in dilution to our current stockholders and to you. We may also attempt to obtain funds through arrangement with corporate
partners or others. Those types of arrangements may require us to relinquish certain rights to our intellectual property or resulting
products.
If capital is not available to us to
expand our business operations, we will not be able to pursue our business plan.
We will require at some point capital to acquire
distribution centers to warehouse and facilitate the shipments of products in a timely and cost effective manner. Cash flows from
operations, to the extent available, will be used to fund these expenditures. We intend to seek additional capital from loans from
current shareholders and from public and private equity offerings. It will also be dependent upon the status of the capital markets
at the time such capital is sought. Should sufficient capital not be available, the development of our business plan could be delayed.
In such event it would not be likely that investors would obtain a profitable return on their investments or a return of their
investments.
Our sole officer and director has the
ability to exercise significant influence over matters submitted for stockholder approval and his interests may differ from other
stockholders.
Our sole executive officer and director may
have significant influence in determining the outcome of any corporate transaction or other matter submitted to our stockholders
for approval, including mergers, acquisitions, consolidations and the sale of all or substantially all of our assets, and also
the power to prevent or cause a change in control. The interests of this executive officer and director may differ from the interests
of the other stockholders.
Our ability
to recognize the benefit of deferred tax assets is dependent upon future taxable income and the timing of temporary difference
reversals.
We recognize
the expected future tax benefit from deferred tax assets when realization of the tax benefit is considered more likely than not.
Otherwise, a valuation allowance is applied against deferred tax assets. Assessing the recoverability of deferred tax assets requires
management to make significant estimates related to expectations of
future taxable
income and the timing of reversals of temporary differences. To the extent that these factors differ significantly from estimates,
our ability to realize the deferred tax assets could be impacted. Additionally, future changes in tax laws could impact our ability
to obtain the future tax benefits represented by our deferred tax assets.
International
Risks
We plan
on operating in foreign countries and are subject to risks associated with operating in foreign countries.
We distribute
our products into Europe, Asia and the Middle East. As a result of our international operations, we are subject to risks associated
with operating in foreign countries, including: (i) difficulties in staffing and managing multinational operations; (ii) changes
in government policies and regulations; (iii) limitations on our ability to enforce legal rights and remedies; (iv) limitations
on our ability to enforce legal rights and remedies; (v) political, social and economic instability; (vi) war, civil disturbance
or acts of terrorism; (vii) disadvantages of competing against companies from countries that are not subject to U.S. laws and regulations
including the U.S. Foreign Corrupt Practices Act (“FCPA”); (viii) potentially adverse tax consequences; (ix) impositions
or increase of investment and other restrictions or requirements by foreign governments; and (x) limitations on our ability to
achieve the international growth contemplated by our strategy.
Foreign country laws and regulations
governing our businesses and the validity of certain of our contractual arrangements are uncertain. If we are found to be in violation,
we could be subject to sanctions. In addition, changes in such foreign country laws and regulations may materially and adversely
affect our business.
There are substantial uncertainties regarding
the interpretation and application of the current or future foreign country laws and regulations, including regulations governing
the validity and enforcement of such contractual arrangements. The foreign country governments have broad discretion in dealing
with violations of laws and regulations, including levying fines, revoking business and other licenses, proscribing remittance
of profits offshore and requiring actions necessary for compliance. In particular, licenses and permits issued or granted to us
by relevant governmental bodies may be revoked at a later time by higher regulatory bodies. We cannot predict the effect of the
interpretation of existing or new laws or regulations on our businesses. As a result, we may be subject to sanctions, including
fines, and could be required to restructure our operations or cease to provide certain services. Any of these or similar actions
could significantly disrupt our business operations or restrict us from conducting a substantial portion of our business operations,
which could materially and adversely affect our business, financial condition and results of operations.
We are
subject to the United States Foreign Corrupt Practices Act.
We are required to comply with the United States
Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments
to foreign officials for the purpose of obtaining or retaining business. In addition, we are required to maintain records that
accurately and fairly represent our transactions and have an adequate system of internal accounting controls. Foreign companies,
including some that may compete with us, are not subject to these prohibitions, and therefore may have a competitive advantage
over us. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in the PRC, particularly
in our industry since it deals with contracts from the Chinese Government, and our executive officers and employees have not been
subject to the United States Foreign Corrupt Practices Act prior to the completion of the Share Exchange. If our competitors engage
in these practices they may receive preferential treatment from personnel of some companies, giving our competitors an advantage
in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at
a disadvantage. We can make no assurance that our employees or other agents will not engage in such conduct for which we might
be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties
and other consequences that may have a material adverse effect on our business, financial condition and results of operations.
Legal and
Regulatory Risks
We are
subject to complex corporate governance, public disclosure and accounting requirements to which most of our competitors are not
subject.
We are subject
to changing rules and regulations of federal and state governments, as well as the Public Company Accounting Oversight Board (“PCAOB”).
The Securities and Exchange Commission (the “SEC”) has issued a significant number of new and increasingly complex
requirements and regulations over the course of the last several years and continues to develop additional regulations and requirements
in response to laws enacted by the U.S. Congress. For example, in 2010, the Dodd-Frank Wall Street Reform and Protection Act (the
“Dodd-Frank Act”) was signed into law. The Dodd-Frank Act includes significant corporate governance and executive compensation-related
provisions that require the SEC to adopt additional rules and regulations in these areas. Our efforts to comply with new requirements
of law and regulation are likely to result in an increase in expenses and a diversion of management's time from other business
activities. Also, those laws, rules and regulations may make it more difficult and expensive for us to attract and retain key employees
and directors and to maintain director and officer liability insurance, and we may be required to accept reduced coverage or incur
substantially higher costs to maintain coverage.
Our competitors
generally are not subject to these rules and regulations because they are not SEC reporting companies. As a result, our competitors
generally are not subject to the risks identified above. In addition, the public disclosures that we are required to provide pursuant
to these rules and regulations may furnish our competitors with greater competitive information regarding our operations and financial
results than we are able to obtain regarding their operations and financial results, thereby placing us at a competitive disadvantage.
Our financial
results and operations may be adversely affected by violations of anti-bribery laws.
The FCPA and
similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments
to non-U.S. officials for the purpose of obtaining or retaining business. Our policies mandate compliance with these anti-bribery
laws. We operate in many parts of the world that have experienced governmental corruption to some degree and, in certain circumstances;
strict compliance with anti-bribery laws may conflict with local customs and practices. We cannot assure you that our internal
controls and procedures always will protect us from the reckless or criminal acts committed by our employees or agents. If we were
found to be liable for FCPA violations (either due to our own acts or our inadvertence or due to the acts or inadvertence of others),
we could be liable for criminal or civil penalties or other sanctions, which could have a material adverse effect on our business.
Risks Related to our Common Stock and this
Offering
The market for our common stock is illiquid.
The market for our common stock is volatile
and illiquid. As a result, this could adversely affect our shareholders' ability to sell our common stock in short time periods,
or possibly at all. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations
which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we
believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition
of the financial markets could cause the price of our common stock to fluctuate substantially. Substantial fluctuations in our
stock price could significantly reduce the price of our stock.
The issuance of a large number of shares
of our common stock could significantly dilute existing stockholders and negatively impact the market price of our common stock.
On October 24, 2016 (the “Issuance Date”),
the Company entered into an equity purchase agreement with Peak One Opportunity Fund, L.P. (“Buyer”) providing that,
upon the terms and subject to the conditions thereof, Buyer is committed to purchase, on an unconditional basis, shares of common
stock at an aggregate price of up to $5,000,000 over the course of its 24-month term. Pursuant to the terms of the equity purchase
agreement, the purchase price for each of the Purchase Shares equals 90% of the “Market Price,” which is defined as
the lesser of the (i) lowest
closing bid price of our common stock for any
trading day during the ten (10) trading days immediately preceding the date of the respective Put Notice, or (ii) lowest closing
bid price of the common stock for any trading day during the seven trading days immediately following the clearing date associated
with the applicable Put Notice (the “Valuation Period”). As a result, if we sell shares of common stock under the equity
purchase agreement, we will be issuing common stock at below market prices, which could cause the market price of our common stock
to decline, and if such issuances are significant in number, the amount of the decline in our market price could also be significant.
In general, we are unlikely to sell shares of common stock under the equity purchase agreement at a time when the additional dilution
to stockholders would be substantial unless we are unable to obtain capital to meet our financial obligations from other sources
on better terms at such time. However, if we do, the dilution that could result from such issuances could have a material adverse
impact on existing stockholders and could cause the price of our common stock to fall rapidly based on the amount of such dilution.
The Selling Stockholder may sell
a large number of shares, resulting in substantial diminution to the value of shares held by existing stockholders.
Pursuant to the Equity Purchase Agreement,
we are prohibited from delivering a Put Notice to the Selling Stockholder to the extent that the issuance of shares would cause
the Selling Stockholder to beneficially own more than 4.99% of our then-outstanding shares of common stock. These restrictions
however, do not prevent the Selling Stockholder from selling shares of common stock received in connection with the Equity Line
and then receiving additional shares of common stock in connection with a subsequent issuance. In this way, the Selling Stockholder
could sell more than 4.99% of the outstanding shares of common stock in a relatively short time frame while never holding more
than 4.99% at any one time. As a result, existing stockholders and new investors could experience substantial diminution in the
value of their shares of common stock. Additionally, we do not have the right to control the timing and amount of any sales by
the Selling Stockholder of the shares issued under the Equity Line.
The penny stock rules cover our stock,
which may make it difficult for a broker to sell investors’ shares. This may make our stock less marketable, and liquid,
and result in a lower market price.
Our common stock is a penny stock, which means
that SEC rules require broker-dealers who make transactions in the stock to comply with additional suitability assessments and
disclosures than they would in stock that were not penny stocks, as follows:
|
·
|
Prior to the transaction, to approve the person's account for transactions in penny stocks by obtaining information from the person regarding his or her financial situation, investment experience and objectives, to reasonably determine based on that information that transactions in penny stocks are suitable for the person, and that the person has sufficient knowledge and experience in financial matters that the person or his or her independent advisor reasonably may be expected to be capable of evaluating the risks of transactions in penny stocks. In addition, the broker or dealer must deliver to the person a written statement setting forth the basis for the determination and advising in highlighted format that it is unlawful for the broker or dealer to effect a transaction in a penny stock unless the broker or dealer has received, prior to the transaction, a written agreement from the person. Further, the broker or dealer must receive a manually signed and dated written agreement from the person in order to effectuate any transactions is a penny stock.
|
|
·
|
Prior to the transaction, the broker or dealer must disclose to the customer the inside bid quotation for the penny stock and, if there is no inside bid quotation or inside offer quotation, he or she must disclose the offer price for the security transacted for a customer on a principal basis unless exempt from doing so under the rules.
|
|
·
|
Prior to the transaction, the broker or dealer must disclose the aggregate amount of compensation received or to be received by the broker or dealer in connection with the transaction, and the aggregate amount of cash compensation received or to be received by any associated person of the broker dealer, other than a person whose function in solely clerical or ministerial.
|
|
·
|
The broker or dealer who has affected sales of penny stock to a customer, unless exempted by the rules, is required to send to the customer a written statement containing the identity and number of shares or units of each such security and the estimated market value of the security. Imposing these reporting and disclosure requirements on a broker or dealer make it unlawful for the broker or dealer to effect transactions in penny stocks on behalf of customers. Brokers or dealers may be discouraged from dealing in penny stocks, due to the additional time, responsibility involved, and, as a result, this may have a deleterious effect on the market for our common stock.
|
Nevada law and our Articles of Incorporation
may protect our directors from certain types of lawsuits.
Nevada law provides that our officers and directors
will not be liable to us or our stockholders for monetary damages for all but certain types of conduct as officers and directors.
Our Bylaws permit us broad indemnification powers to all persons against all damages incurred in connection with our business to
the fullest extent provided or allowed by law. The exculpation provisions may have the effect of preventing stockholders from recovering
damages against our officers and directors caused by their negligence, poor judgment or other circumstances. The indemnification
provisions may require us to use our limited assets to defend our officers and directors against claims, including claims arising
out of their negligence, poor judgment, or other circumstances.
Our amended and restated articles
of incorporation and bylaws could discourage acquisition proposals, delay a change in control or prevent other transactions.
Provisions of our amended and restated
articles of incorporation and bylaws, as well as provisions of Nevada Corporation Law, may discourage, delay or prevent a change
in control of the Company or other transactions that you as a shareholder may consider favorable and may be in your best interest. The
amended and restated articles of incorporation and bylaws contain provisions that: authorize the issuance of shares of “blank
check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares and discourage
a takeover attempt; limit who may call special meetings of shareholders; and require advance notice for business to be conducted
at shareholder meetings, among other anti-takeover provisions.
Our directors have the authority to issue
common and preferred shares without shareholder approval, and preferred shares can be issued with such rights, preferences, and
limitations as may be determined by our board of directors. The rights of the holders of common stock will be subject to, and may
be adversely affected by, the rights of any holders of preferred stock that may be issued in the future. We presently have no commitments
or contracts to issue any shares of preferred stock. Authorized and unissued preferred stock could delay, discourage,
hinder or preclude an unsolicited acquisition of our company, could make it less likely that shareholders receive a premium for
their shares as a result of any such attempt, and could adversely affect the market prices of and the voting and other rights,
of the holders of outstanding shares of our common stock.
Broker-deal requirements may affect trading and liquidity.
Section 15(g) of the Securities Exchange Act
of 1934, as amended, and Rule 15g-2 promulgated thereunder by the SEC require broker-dealers dealing in penny stocks to provide
potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt
of the document before effecting any transaction in a penny stock for the investor's account. Potential investors in our common
stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be "penny stocks."
Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks
before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information
concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on
that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge
and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with
a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a
signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation,
investment experience and investment objectives. Compliance with these requirements may make it more difficult for holders of our
common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.
We have identified material weaknesses
in our internal control over financial reporting, and our business and stock price may be adversely affected if we do not adequately
address those weaknesses or if we have other material weaknesses or significant deficiencies in our internal control over financial
reporting.
Although we intend to take steps to correct
our identified material weaknesses in our internal controls, the existence of these or possibly other material weaknesses or significant
deficiencies raises concerns that the prevention of future errors could require the allocation of scarce financial resources at
times when such resources may not be available to us. As of the date of this Prospectus, we are working to correct any material
weaknesses in our internal controls. If we cannot produce reliable financial reports, investors could lose confidence in our reported
financial information; the market price of our stock could decline significantly; we may be unable to obtain additional financing
to operate and expand our business, and our business and financial condition could be harmed.
We intend to address material weaknesses by
reviewing our accounting and finance processes to identify any improvements thereto that might enhance our disclosure controls
and procedures and our internal control over financial reporting and determine the feasibility of implementing such improvements
and by seeking qualified employees and/or outside consultants who possess the knowledge needed to eliminate this weakness. Our
ability to remediate this weakness may, however, be delayed or limited by resource constraints, a lack of qualified persons in
our market area and/or competition from other employers.
There is
no significant active trading market for our shares, and if an active trading market does not develop, purchasers of our shares
may be unable to sell them publicly.
There is no significant active trading market
for our shares, and we do not know if an active trading market will develop. An active market will not develop unless broker-dealers
develop interest in trading our shares, and we may be unable to generate interest in our shares among broker-dealers until we generate
meaningful revenues and profits from operations. Until that time occurs, if it does at all, purchasers of our shares may be unable
to sell them publicly. In the absence of an active trading market:
|
·
|
Investors may have difficulty buying and selling our shares or obtaining market quotations;
|
|
·
|
Market visibility for our common stock may be limited; and
|
|
·
|
A lack of visibility for our common stock may depress the market price for our shares.
|
Moreover, the market price for our shares is
likely to be highly volatile and subject to wide fluctuations in response to various factors, including the following: (i) actual
or anticipated fluctuations in our quarterly operating results and revisions to our expected results; (ii) changes in financial
estimates by securities research analysts; (iii) conditions in the market for our products; (iv) changes in the economic performance
or market valuations of companies specializing in the defense industries; (v) announcements by us or our competitors of new services,
strategic relationships, joint ventures or capital commitments; (vi) addition or departure of key personnel; (vii) litigation related
to any intellectual property; and (viii) sales or perceived potential sales of our shares.
In addition, the securities market has from
time to time, and to an even greater degree since the last quarter of 2014 experienced significant price and volume fluctuations
that are not related to the operating performance of particular companies. These market fluctuations may also have a material adverse
effect on the market price of our ordinary shares. Furthermore, in the past, following periods of volatility in the market price
of a public company’s securities, shareholders have frequently instituted securities class action litigation against that
company. Litigation of this kind could result in substantial costs and a diversion of our management’s attention and resources.
We have not paid, and do not intend to
pay, cash dividends in the foreseeable future.
We have not paid any cash dividends on our
common stock and do not intend to pay cash dividends in the foreseeable future. We intend to retain future earnings, if any, for
reinvestment in the development and expansion of our business. Dividend payments in the future may also be limited by other loan
agreements or covenants contained in other securities which we may issue. Any future determination to pay cash dividends will be
at the discretion of
our board of directors and depend on our financial
condition, results of operations, capital and legal requirements and such other factors as our board of directors deems relevant.
Sales of our common stock relying upon
Rule 144 may depress prices in the market for our common stock by a material amount when a market is established.
As of the date of this prospectus, certain
of our common stock held by non-affiliates was issued before December 31, 2014 and will have been issued and outstanding beyond
applicable holding periods imposed by Rule 144 under the Securities Act of 1933, as amended. Thus, with certain of our shares of
common stock issued prior to December 31, 2014 to non-affiliates being freely tradeable, there is a significant risk that sales
under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to registration of shares of common
stock of present stockholders, may have a depressive effect upon the price of our common stock in the over-the-counter market,
especially in situations where a large volume of shares is offered for sale at the same time.
Securities saleable pursuant to the Rule 144
exemption from registration may only be resold, however, if all of the requirements of Rule 144 have been met, including, but not
limited to, the requirement that the issuer of the securities have made available all required public information. However, there
is no limit on the amount of restricted securities that may be sold by a non-affiliate (i.e., a stockholder who has not been an
officer, director or control person for at least 90 consecutive days) after the restricted securities have been held by the owner
for a period of at least six months and the other requirements of Rule 144 have been satisfied. Presently shares of restricted
common stock held by our non-affiliates may be sold, subject to compliance with Rule 144, six months after issuance, provided that
our Exchange Act registration remains in effect and we are current in our disclosure reporting obligations.
We have not retained independent
professionals for investors.
We have not retained any independent professionals
to comment on or otherwise protect the interests of potential investors. Although we have retained our own counsel,
neither such counsel nor any other independent professionals have made any examination of any factual matters herein, and potential
investors should not rely on our counsel regarding any matters herein described.
Other Risks
There are other unidentified risks.
The risks set forth
above are not a complete list of the risks facing our potential investors. We acknowledge that there may exist significant
risks yet to be recognized or encountered to which we may not be able to effectively respond. There can be no assurance
that we will succeed in addressing these risks or future potential risks, and any failure to do so could have a material adverse
effect on our business, financial condition and results of operations.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
Except for statements
of historical facts, this Prospectus contains forward-looking statements involving risks and uncertainties. The words “anticipate,”
“believe,” “estimate,” “expect,” “future,” “intend,” “plan,”
or the negative of these terms and similar expressions or variations thereof are intended to identify forward-looking statements.
Such statements reflect our current view with respect to future events and are subject to risks, uncertainties, assumptions, and
other factors (including the risks contained in the section of this Prospectus entitled “Risk Factors”) relating to
our industries, operations, and results of operations and any businesses that may be acquired by us. Should one or more of these
risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly
from those anticipated, believed, estimated, expected,
intended, or planned. You are cautioned
not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated,
as of the date hereof.
Although we believe
that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States,
we do not intend to update any of the forward-looking statements to conform these statements to actual results. The following discussion
should be read in conjunction with our financial statements and the related notes included in this Prospectus.
DESCRIPTION OF BUSINESS
Overview
Petrone Worldwide, Inc. (the “Company”)
was incorporated as Sheridan Industries, Inc. on December 14, 1998 in the State of Nevada. On December 31, 1998, the Company changed
its name to Diabetex International Corp. and effective February 18, 2014, the Company changed its name to Petrone Worldwide, Inc.
During the year ended December 31,
2014, we did not generate revenues and our operations consisted of business development activities and activities related to being
a public company. We did not have sufficient capital to become a buyer and seller of product directly.
In 2015, we transitioned into an exclusive
importer/exporter and distributor in the hospitality industry of commercial grade tableware products, decorative hotel guest room
amenities, lavatory and bathroom fixtures and furniture, food and beverage service items, and trendy accessories for the Asian
and the European marketplaces. Thru an exclusive licensing agreement with a leading supplier, our exclusive brands include Front
of the House and Room 360 by FOH.
Our founder, Victor Petrone, has spent
over 20 years building a significant global network of buyers, comprised of distributors, hotels, resorts, cruise lines, and restaurants,
for premium, chic, environmentally-conscious products and services. We have sales and marketing and product development expertise
primarily in the hospitality business in Europe and Asia. We currently sell and market our product line we act as an exclusive
distributor primarily to companies in the hospitality trade. Our product lines consist of vendor approved items for key accounts,
which include large hotel groups, such as Marriott Hotel Brands, The Four Seasons Hotel& Resorts, Hilton Worldwide, Hyatt Hotels
& Resorts, Starwood Hotel & Resorts, and Fairmont Hotel & Resorts, and smaller hotel chains and upscale restaurants.
In the short term, management plans
to raise funds through sales of our common stock for fulfillment (manufacturing, packaging and shipment), which will set the stage
for future orders becoming self-funding. Then the next phase of our business plan will be to raise additional funds through common
stock offerings to provide working capital to finance several acquisitions. We also intend to continue to strengthen our balance
sheet by paying off debt either through exchange of equity for cancellation of debt obligations or the payment of debt obligations
with cash.
Organization
On January 29, 2014 and effective March 3,
2014, we entered into a purchase agreement (the “Purchase Agreement”) with Petrone Food Works, Inc. (“PFW”)
and the shareholder of PFW. Pursuant to the Purchase Agreement, we acquired 100% of PFW’s issued and outstanding common stock
from the PFW shareholder in exchange for the issuance of 11,760,542 shares of our common stock, representing 98.4% of the outstanding
common stock, (the “Exchange”), after giving effect to a 1-for-500 reverse stock split (the “Reverse Stock Split”)
which resulted in 195,607 common shares outstanding prior to the Exchange for liabilities of $30,000. Accordingly, the PFW shareholder
became a shareholder of the Company and PFW became a subsidiary of the Company. The Exchange has been accounted for as a reverse-merger
and recapitalization since the stockholder of PFW obtained voting and management control of our Company. PFW is the acquirer for
financial reporting purposes and we are
the acquired company. Consequently, the assets
and liabilities and the operations reflected in the historical financial statements prior to the Exchange are those of PFW and
was recorded at the historical cost basis of PFW, and the consolidated financial statements after completion of the Exchange included
the assets and liabilities of both the Company and PFW and our consolidated operations from the closing date of the Exchange. All
share and per share data in the accompanying consolidated financial statements have been retroactively restated to reflect the
effect of the Reverse Stock Split and recapitalization. PFW was formed under the laws of the State of Nevada in October 2013.
Strategy, Sales, Marketing and Distribution
We continuously seek to extend our network
of customers for the sale and distribution of the products. Our business strategy is to contract exclusively with successful manufacturers
and develop their brand recognition and global sales through our established channels. As an exclusive importer/exporter and distributor,
we believe we will generate increased gross profit margins resulting from fewer trade tariffs and logistics costs by bypassing
the United States and delivering directly to buyers in foreign countries. This effectively eliminates U.S. trade duties and warehousing
costs.
We believe that the overseas hospitality supply
industry is highly diverse but fragmented in terms of manufacturers and distributors. In the markets we serve, there is an extensive
assortment of products offered. However, suppliers and distributors are often out-of-stock and cannot fulfill orders on a timely
basis. We believe that the he most attractive and immediate opportunities exist in the addressable segments of porcelain/tableware,
lavatory fixtures, and utensils and other small equipment. These segments represent a multi-million dollar business in terms of
annual revenues. For the companies that we represent and intend to represent, competition arises from large multi-national manufacturers
and smaller manufacturers in specific countries or regions and in specific product niches. We cater to the mid to high star hospitality
services industry and we believe our value proposition is superior to other competitors when considering depth of product offerings,
quality and reliability, on-demand inventory, pricing and customer service support.
We serve as an exclusive importer/exporter
and distributor and we seek to appoint sub-distributors (the “Sub-distributors”) in each country where we have distribution
agreements with our suppliers. Under our policy and procedure guidelines, our Sub-distributors will act as agents for brands that
we represent as they place lines into their established networks and we can provide the Sub-distributors with the right product
mix at the right price and the right time, rather than relying on their inferior previous offerings.
To date, dealer/distributors have frequently
conducted business by selling common, locally-manufactured products that cannot compete with our product offerings. These sub-distributors
have existing warehouses and personnel (sales and marketing, operational, customer service and administrative) that conduct regional
with procurement agents at hotels and restaurants. Traditionally, international hotel chains and restaurants have primarily purchased
premium products from the United States, which is costly due to higher product costs and freight charges. Through us, hotel chains
will be able to purchase at the local level, at lower prices and with a shorter delivery cycle. By outsourcing important functions
to our sub-distributors, we expect to contain fixed overhead and to reduce costs and management time.
We also have seasoned in-house marketing skill
sets that enable us to attract new customers at low costs. These skill sets include developing and launching new product brands.
We will promote the brand or product with a communication strategy that is tailored strictly towards the customer's goals.
Additionally, on October 21, 2015, we
entered into a memorandum of undertaking with Dewan & Sons (the “Memorandum of Undertaking”). In accordance with
the terms and provisions of the Memorandum of Undertaking, we agreed to: (i) undertake warehousing and logistics on behalf of Dewan
& Sons in the United States, which include customer service, warehousing, and logistics inclusive of drop shipments and corporate
office branch presence; and (ii) stock and sell Dewan & Sons’ products to Mexico and South and Central America markets.
On February 4, 2016 and effective March 15, 2016, in connection with formalizing the Memorandum of Undertaking, we entered into
a Warehousing and Logistics Agreement (the “Warehousing Agreement”) with Dewan & Sons to undertake JIT (Just In
Time) distribution to all Dewan & Sons customers in North America, which includes direct
store delivery of Dewan& Sons’
products to retail store, thereby bypassing a retailer’s distribution center to increase inventory and reduce margins. Management
believes that in light of increasing port delays, planning for safety stock has become a critical component to reducing fulfillment
costs. We expect that our supply chain operational efficiency will bring optimum results with minimum budget expense for Dewan
& Sons. We also believe that the further alliance with Dewan & Sons will allow for increased real-time communication with
purchasing agents and reduction of minimum order quantities so that smaller, more frequent orders can be placed off-setting long
term risks of holding too much inventory. Pursuant to the terms of the Warehousing Agreement, Dewan& Sons agreed to pay us
a flat fee for devanning, palletizing, shrink wrapping, labeling and storage.
For the year ended December 31, 2015, five customers accounted for
approximately 85.3% of total sales (21.9%, 13.7%, 22.1%, 13.3% and 14.3%, respectively). We did not have customers in 2014. A reduction
in sales from or loss of such customers would have a material adverse effect on our consolidated results of operations and financial
condition.
Competition
Our business
is highly competitive, with the principal competitive factors being customer service, price, product quality, new product development,
brand name, delivery time and breadth of product offerings. Advantages or disadvantages in any of these competitive factors may
be sufficient to cause the customer to consider changing providers of the kinds of products that we sell. Our competitors include
large and small domestic and international manufacturers and distributors.
Sources and availability of products
For the year ended December 31, 2015, we purchased all of our product
from one supplier FOH, Inc., a company located in Miami, Florida (“FOH”). We did not purchase any products during 2014.
The loss of this supplier may have a material adverse effect on our consolidated results of operations and financial condition.
We sell the following FOH product lines.
Front of the
House Collection
– FOH’s “front of the house” product offering is comprised of all-encompassing dinnerware,
buffet ware and serve wise collections. Specific items offered are high-quality porcelain dinnerware, kitchen accessories and utensils,
cookware, serve ware, bar ware, display ware, glassware and tumblers, and table mats. All collections are designed to be mixed
and matched as FOH explores the intersection of unique materials, colors, textures and bold shapes with an array of sizes.
The most actively sold line is FOH
Porcelain, which transforms the ordinary into modern elegance. It consists of 11 trendy, complete collections and incorporates
over 200 matching accessories. All collections feature a proprietary super white glaze and are manufactured for high volume commercial
use. In the U.S., FOH is recognized for personalized and unrivaled customer service, high stock levels, same-day order processing
and unparalleled 3-5 day ship time. We intend to replicate this for the international hospitality and restaurant communities.
room360°
by FOH Collection
- The room360° “back of the house” collection includes in-room accessory and amenity products,
including waste baskets, ice buckets, in-room trays, glassware, personal care and coffee service accessories, tissue box covers
and risers, amenity trays and soap dishes. The various collections are easy to clean and maintain, and they offer an array of features
including faux leather, resin, stone, porcelain and all-natural porous materials (rubber wood, sugar cane, coconut wood and bamboo.)
Add-on products consist of turn down trays, toilet paper holders, mugs, glassware, coffee accessory pieces and non-woven material
bags.
Since 2013, Mr.
Petrone has been representing the FOH product lines in international markets. FOH has been successful in designing and manufacturing
smart, savvy and affordable commercial solutions. In the United States, the Front of the House and room360° by FOH collections
customer base includes major U.S. hotel brands (national and independent), restaurant chains and food and beverage management companies.
FOH is an allied member of the Green Hotels Association, which is committed to encouraging, promoting and supporting ecological
consciousness in the hospitality industry.
We hold the exclusive import/export,
distribution and licensing rights for Front of House and room360° by FOH collections in all of the sovereign states of Europe
and India. Like FOH, room360° is also an allied member of the Green Hotels Association.
Distributorship Agreements
FOH, Inc.
On February 28, 2014, we entered into an international
distributor agreement (the "FOH Distributor Agreement") with FOH. In accordance with the terms and provisions of the
FOH Distributor Agreement: (i) FOH granted to us exclusive distribution rights to sell, market and distribute FOH's products (the
"FOH Products") in the 50 internationally recognized sovereign states of Europe, including those that are not part of
the European continent, as well as all of Asia, except for Israel (the "Territories"); (ii) FOH further granted to us
a non-exclusive and non-transferable right and license to use the trademarks, tradenames and/or service marks identified or associated
with the FOH Products or used by FOH in connection with the sale and promotion of the FOH Products; (iii) we are responsible to
purchase the FOH Products directly from FOH for resale marketing and distribution by us to our customers in the Territories; (iv)
the purchase price for the FOH Products we purchase shall be a price equal to a 35% of the then published catalog price for such
FOH Product (the "Purchase Price"); (v) we shall purchase FOH Products in such quantifies as to fill a standard-sized
40 foot shipping container, but in no event shall the Purchase Price for any single order be less than $25,000; (v) we shall use
our best efforts to promote, sell, service, support and otherwise market the FOH Products in the Territories, (vi) we shall pay
the Purchase Price and shall incur further substantial time soliciting customers, advertising the FOH Products, sending direct
mailings of FOH Product literature, demonstrating the FOH Products and participating in trade show representations; and (vii) based
on FOH's reputation and goodwill and our requirement to observe clear standards of conduct, FOH shall have the right to terminate
the FOH Distributor Agreement if: (a) we failure to place and pay for the requisite Minimum Order (defined below), (b) we fail
to achieve the level of market penetration for the Products in the Territories as expected by FOH, (c) our breach of any provision
of the FOH Distributor Agreement, (d) our dissolution, insolvency or bankruptcy, (e) engagement in immoral or misrepresentation
by us.
Minimum Order means (i) during the first
calendar year, purchases by us from FOH with an aggregate Purchase Price of $500,000; (ii) during the second calendar year, purchases
by us from FOH with an aggregate Purchase Price of $750,000; (iii) during third calendar year, purchases by us from FOH with an
aggregate Purchase Price of $1,000,000; (iv) during the fourth calendar year, purchases by us from FOH with an aggregate Purchase
Price of $1,500,000; and (v) during the fifth calendar year, purchases by us from FOH with an aggregate Purchase Price of $2,500,000.
Through December 31, 2015, we have complied with our minimum purchase commitments.
Dewan& Sons
On April
23, 2015, we entered into a one-year exclusive distributorship agreement (the "Dewan Distributorship Agreement") with
Dewan & Sons. Dewan & Sons is engaged in the business of manufacturing and selling stainless steel, copper, brass and aluminum
small ware, buffet ware and tabletop goods under several distinctive trademarks, copyrights and other related intellectual property
rights (the "Goods"). Pursuant to the terms of the Dewan Distributorship Agreement, Dewan & Sons granted us an exclusive
distributorship effective from April 1, 2015 to March 31, 2016 to market, sell and distribute the Goods in the European Union,
and we agreed to purchase the Goods from Dewan & Sons. Under the terms of the Dewan Distributorship Agreement, all customized
and special orders require 100% prepayment and all products will be shipped FOB Moradabad. We are entitled to an incentive rebate,
which shall be calculated and payable on incremental sales volume achieved above $500,000 as follows: (a) a 2% rebate up to $500,000,
and (b) a 2.5% for $500,000 and above. Under the Dewan Distributorship Agreement, we agreed not to promote or offer for sales any
third party's competitive products or services that are in direct or indirect competition to the Goods without prior written authorization
from Dewan & Sons. The Dewan Distributorship Agreement can be terminated by either party by giving two months’ notice
to the other party. Otherwise, the Dewan Distributorship Agreement renews automatically for a one-year periods. As of the date
of this annual report, we did not generate any revenues from the Dewan Distributorship Agreement.
Star Distributors
On April 20, 2015, we entered into a two-year
exclusive distributorship agreement (the "Star Distributorship Agreement") with Star Distributors Inc. ("Star Distributors").
Star Distributors is engaged in the business of manufacturing and selling power banks, blue tooth headphones, ear phones and selfie
sticks under several distinctive trademarks, copyrights and other related intellectual property rights (the "Star Goods").
In accordance with the terms and
provisions of the Star Distributorship Agreement: (i) Star Distributors agreed to grant to us an exclusive distributorship effective
from April 20, 2015 to April 19, 2017 to market, sell and distribute the Star Goods in Europe, the Middle East, South and Central
America and Canada; (ii) we agreed to purchase the Star Goods from Star Distributors pursuant to written purchase orders; (iii)
all customized and special orders require 100% prepayment and all other orders shall require 50% advance pre-payment along with
order and balance payment of 50% before shipment; and (iv) we are entitled to an incentive rebate which shall be calculated and
payable on incremental sales volume achieved above $1,000,000 as follows: (a) a 2% rebate $1,000,000 through $1,250,000; and (b)
a 3% rebate for $1,250,000 and above. In addition, we agreed not to promote or offer for sales any third party's competitive products
or services that are in direct or indirect competition to the Star Goods without prior written authorization from Star Distributors.
As of the date of this annual report, we did not generate any revenues from the Star Distributorship Agreement.
DecoLav, Inc.
During 2015 and part of 2016, we were
an exclusive importer and distributor of DecoLav products within Europe and Asia. As of May 2016, we no longer act as an importer
or distributor of DecoLav products and we did not generate any revenues from this agreement.
Business Plan
Within the next 12 months, we plan
to continue our marketing and sales efforts throughout Europe, Asia and the Middle East, to expand our operations into Central
and South America, Mexico and the Caribbean, and to expand into the consumer electronics distribution business.
We have entered into distributorship
agreements with certain prominent hospitality manufacturers to provide premium hotels and resorts with guest room amenities, lavatory
and bathroom furniture, food and beverage service items, and decorative accessories on an international basis. See “Distributorship
Agreements above.”
By the third quarter of 2017, we also
plan to offer our services to manufacturers who have a desire to sell and market their products abroad. We expect to facilitate
the entire process from manufacturing plant to end-user in North America, Central America, South America, Europe and Asia by utilizing
a process designed to quickly break through the barriers of entry into countries. We believe that our expertise of industry trends,
combined with a deep knowledge of customer preference and trending ingredients, will be invaluable to our clients who are beginning
to develop their proprietary concept and product.
In 2017, we also plan to provide packaging
solutions to our clients in the future. We believe that we can offer our understanding of the complexities of food and beverage
designs to assist clients in the development of successful package design, from simple packaging designs to the most intricate
designs, and from counter displays, design of the package, design of the cap, lid or top, or even a master carton package.
On May 18, 2015 and as amended in
October 2015 and January 2016, we executed a letter of intent (the "Letter of Intent") with Transpower Components (India)
Pvt. Ltd., a company located in New Delhi, India ("Transpower Components") for the acquisition of Transpower Components
who is engaged in the business of manufacturing aluminum foil containers consisting of steam table pans, rounds, squares, oblongs,
ovals with coordinating aluminum board lids.
Pursuant to the amended Letter of Intent, we
agreed to purchase, and Transpower Components agreed to sell, substantially all of its assets used in or necessary for the conduct
of its aluminum foil container manufacturing business, including all related intellectual property, the fixed assets, customer
lists and the goodwill associated therewith (the "Assets"). We agreed to pay an aggregate purchase price of $1,600,000
for the acquisition of Transpower Components to be paid in the form of 2 million shares of Company common stock (valued at $0.40
per share) and the balance in 24 equal installments of $33,333.33 commencing six months from the date on which the definitive sale
agreement is executed. Pursuant to the terms of the October MOU, the parties agreed to enter into a definitive sale agreement by
January 5, 2016. On January 5, 2016, the Company and Transpower amended the October MOU (the “January Amendment”).
Pursuant to the terms of the January Amendment, the parties agreed to extend the date by which a definitive agreement must be executed
by April 30, 2016. Pursuant to the terms of the Acquisition Agreement, substantially all of the employees of Transpower Distributors
would continue their respective employment with Transpower Distributors.
As of the date of this registration statement
on Form S-1, we cannot reasonably determine if we can obtain the necessary funding to close on the Acquisition Agreement and the
timing of such closing cannot be determined. Upon completion, we expect that Transpower Distributors acquisition will expand our
overall capability for disposables through Transpower Components’ low cost Indian location and allow us to significantly
advance out disposable strategy throughout Europe, the United States, South and Central American, and further consolidate the already
established market in India.
Warehousing and Logistics Agreement
On February 4, 2016, we entered into an agreement
(the “Warehousing Agreement”), effective March 15, 2016, with Dewan & Sons (“Dewan & Sons”), a
supply company located in the Moradabad District in the Indian State of Uttar Prodesh in India. In accordance with the terms of
the Warehousing Agreement, we agreed to provide warehousing and logistics services for Dewan & Sons, which designated us as
a warehouseman under Article 7 of the Uniform Commercial Code, as follows: (i) coordinate floor loaded import containers and their
arrival at the facility, unload the merchandise and place on wooden pallets for storage; (ii) prepare each order for ships per
Dewan & Sons instructions and ship nationally to their clients through preferred carriers; and (iii) act as a local liaison
office of Dewan & Sons with direct interface with the logistics team of respective buyers. Pursuant to the terms of the Warehousing
Agreement, Dewan & Sons agreed to pay us a flat fee for devanning, palletizing, shrink wrapping, labeling and storage.
In connection with this Warehousing Agreement,
on March 8, 2016, we entered into a contract with Evolution Logistics Corp., a Miami based logistics company (“Evolution
Logistics”), pursuant to which Evolution Logistics agreed to manage all of our transportation, warehousing and distribution
from origin throughout the United States. Evolution Logistics is a freight forwarder company specializing in distribution to big
box retailers, roll outs and expedites cargo. Management believes that it has state of the art operational platform with advanced
technology that provides visibility from the purchase order level to the final distribution.
In August 2016, we began to generate revenues
pursuant to the Warehousing Agreement and have begun to utilize the services of Evolution Logistics.
Trademark, Licenses and Intellectual Property
In accordance with the terms of our
distributor agreements, we have been granted non-exclusive and non-transferable rights and licenses to use the trademarks, tradenames
and/or service marks identified or associated with the products that we sell or promote.
Employees
Other than Victor Petrone, our chief executive officer, we do not
have any employees. We have established a network of service providers and consultants in an effort to minimize administrative
overhead and maximize efficiency.
DESCRIPTION OF PROPERTIES
We lease office space at 2200 N. Commerce Parkway, Weston, Florida
33326. In May 2015, we entered into an 18-month lease for the office space at a monthly rental of $1,269, which expired in November
2016. In December 2016, we entered into a 12-month lease for the office space at a monthly rental of $253.
We also lease office space in London, England to establish a
presence in the European marketplace in order to service our international distribution areas. During 2015 and until February 29,
2016, we paid $3,400 per month for this space. Beginning March 1, 2016, we entered into a new lease for this space, pursuant to
which we pay approximately $575 per month. The lease expires on February 28, 2017.
LEGAL PROCEEDINGS
As of the date of this prospectus, management
is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties.
As of the date of this prospectus, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii)
has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that
have been threatened against us or our properties.
USE OF PROCEEDS
This Prospectus relates to shares of our
common stock that may be offered and sold from time to time by the Selling Stockholder. We will receive no proceeds
from the sale of shares of common stock by the Selling Stockholder in this Offering. The proceeds from the sales will
belong to the Selling Stockholder. However, we will receive proceeds from the sale of the Purchase Shares to the Selling
Stockholder pursuant to the Equity Purchase Agreement.
We intend to use the proceeds that we may
receive from the sale of Purchase Shares for general corporate purposes and working capital requirements. There can be no assurance
that we will sell any of the Purchase Shares.
We cannot provide any assurance that we
will be able to draw down any or all of the Total Commitment Amount, such that the proceeds received would be a source of financing
for us.
We intend to raise additional capital through
equity and debt financing, as needed, though there cannot be any assurance that such funds will be available to us on acceptable
terms, on an acceptable schedule, or at all.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
We have not utilized any derivative financial
instruments such as futures contracts, options and swaps, forward foreign exchange contracts or interest rate swaps and futures.
We believe that adequate controls are in place to monitor any hedging activities. We do not have any borrowings and, consequently,
we are not affected by changes in market interest rates. We do not currently have any sales or own assets and operate facilities
in countries outside the United States and, consequently, we are not effected by foreign currency fluctuations or exchange rate
changes. Overall, we believe that our exposure to interest rate risk and foreign currency exchange rate changes is not material
to our financial condition or results of operations.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial
condition and results of operations should be read in conjunction with the consolidated financial statements and the notes to those
financial statements that are included elsewhere in this prospectus. Our discussion includes forward-looking statements based upon
current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results
and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number
of factors, including those set forth under the Risk Factors, Cautionary Note Regarding Forward-Looking Statements and Business
sections in this prospectus. We use words such as “anticipate,” “estimate,” “plan,” “project,”
“continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,”
“will,” “should,” “could,” and similar expressions to identify forward-looking statements.
OVERVIEW AND OUTLOOK
Petrone Worldwide, Inc. (the “Company”)
was incorporated as Sheridan Industries, Inc. on December 14, 1998 in the State of Nevada. On December 31, 1998, the Company changed
its name to Diabetex International Corp. and effective February 18, 2014, the Company changed its name to Petrone Worldwide, Inc.
On January 29, 2014 and effective March
3, 2014, the Company entered into a purchase agreement (the “Purchase Agreement”) with Petrone Food Works, Inc. (“PFW”)
and the shareholder of PFW. Pursuant to the Purchase Agreement, the Company acquired 100% of PFW’s issued and outstanding
common stock from the PFW shareholder in exchange for the issuance of 11,760,542 shares of the Company’s common stock, representing
98.4% of the outstanding common stock, (the “Exchange”), after giving effect to a 1-for-500 reverse stock split (the
“Reverse Stock Split”) which resulted in 195,607 common shares outstanding prior to the Exchange for liabilities of
$30,000. Accordingly, the PFW shareholder became a shareholder of the Company and PFW became a subsidiary of the Company. The Exchange
has been accounted for as a reverse-merger and recapitalization since the stockholder of PFW obtained voting and management control
of the Company. PFW is the acquirer for financial reporting purposes and the Company is the acquired company. Consequently, the
assets and liabilities and the operations reflected in the historical financial statements prior to the Exchange are those of PFW
and was recorded at the historical cost basis of PFW, and the consolidated financial statements after completion of the Exchange
included the assets and liabilities of both the Company and PFW and the Company’s consolidated operations from the closing
date of the Exchange. All share and per share data in the accompanying consolidated financial statements have been retroactively
restated to reflect the effect of the Reverse Stock Split and recapitalization. PFW was formed under the laws of the State of Nevada
in October 2013.
We are an exclusive importer/exporter and
distributor in the hospitality industry of commercial grade tableware products, decorative hotel room amenities, lavatory and bathroom
fixtures and furniture, food and beverage service items, and trendy accessories for the Asian and the European marketplaces. Thru
an exclusive licensing agreement with a leading supplier, our exclusive brands include Front of the House and Room 360 by FOH.
Revenues and related costs of revenues expenses attributable to the sales of these products are included in our Product Segment.
Our founder, Victor Petrone, has spent
over 20 years building a significant global network of buyers, comprised of hotels, resorts and restaurants, for premium, chic,
environmentally conscious products and services. We have sales, marketing, and product development expertise primarily in the hospitality
business in Europe and Asia. We currently sell and market products under our own proprietary name and we act as exclusive distributors
primarily to companies to the hospitality trade. The brand portfolio consists of vendor-approved items for key foreign accounts,
which include large hotel groups, such as Marriott Hotel Brands, The Four Seasons Hotel & Resorts, Hilton Worldwide, Hyatt
Hotels & Resorts, Starwood Hotel & Resorts, and Fairmont Hotel & Resorts, and smaller hotel chains and upscale restaurants.
On February 4, 2016 and effective March
15, 2016, we entered into a one-year Warehousing and Logistics Agreement (the “Warehousing Agreement”) with Dewan &
Sons to undertake JIT (Just In Time) distribution to all Dewan & Sons customers in North America, which includes direct store
delivery of Dewan & Sons’ products to retail store, thereby bypassing a retailer’s distribution center to increase
inventory and reduce margins. Management believes that in light of increasing port delays, planning for safety stock has become
a critical component to reducing
fulfillment costs. We expect that our supply
chain operational efficiency will bring optimum results with minimum budget expense for Dewan & Sons. We also believe that
the further alliance with Dewan & Sons will allow for increased real-time communication with purchasing agents and reduction
of minimum order quantities so that smaller, more frequent orders can be placed off-setting long term risks of holding too much
inventory. Pursuant to the terms of the Warehousing Agreement, Dewan & Sons agreed to pay us a flat fee for devanning, palletizing,
shrink wrapping, labeling and storage. In connection with this Warehousing Agreement, on March 8, 2016, we entered into a contract
with Evolution Logistics Corp., a Miami based logistics company (“Evolution Logistics”), pursuant to which Evolution
Logistics agreed to manage all of our transportation, warehousing and distribution from origin throughout the United States. Evolution
Logistics is a freight forwarder company specializing in distribution to big box retailers, roll outs and expedites cargo. Management
believes that it has state of the art operational platform with advanced technology that provides visibility from the purchase
order level to the final distribution.
In August 2016, we began to generate revenues
pursuant to the Warehousing Agreement and have begun to utilize the services of Evolution Logistics. Revenues and related costs
of revenues expenses attributable to these logistic services are included in our Logistics Services Segment.
In
the short term, management plans to raise funds through sales of our common stock for fulfillment (manufacturing, packaging and
shipment), which will set the stage for future orders becoming self-funding. Then the next phase of our business plan will be to
raise additional funds through common stock offerings to provide working capital to finance several acquisitions. We also intend
to continue to strengthen our balance sheet by paying off debt through either exchange of equity for cancellation of debt obligations
or the payment of debt obligations with cash.
When
possible we have conserved our cash by paying employees, consultants, and independent contractors with our common stock.
We had a net loss of $698,946 for the nine
months ended September 30, 2016, resulting in an accumulated deficit as of September 30, 2016 of $3,379,052. We had a net loss
of $1,397,095 for the year ended December 31, 2015, resulting in an accumulated deficit as of December 31, 2015 of $2,680,106.
These conditions raise substantial doubt about our ability to continue as a going concern.
RESULTS OF OPERATIONS
The following comparative analysis of results
of operations are based primarily on the comparative financial statements, footnotes and related information for the periods identified
below and should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere
in this prospectus.
Comparison of Results of Operations for
the Three and Nine months ended September 30, 2016 and 2015
Revenues.
For the three months ended September 30, 2016, total revenues amounted
to $86,130 as compared to $24,457 for the three months ended September 30, 2015, an increase of $61,673 or 252.2%. For the nine
months ended September 30, 2016, total revenues amounted to $257,559 as compared to $1,373,547 for the nine months ended September
30, 2015, a decrease of $1,115,988 or 81.2%. Revenues in our product segment consists of the sale of products including tableware
products, decorative hotel room amenities, lavatory and bathroom fixtures and furniture, food and beverage service items, and trendy
accessories. In August 2016, we began providing logistics services to one customer. For the three and nine months ended September
30, 2016 and 2015, total revenues consisted of the following:
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenues - product segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
28,931
|
|
|
$
|
21,143
|
|
|
$
|
179,000
|
|
|
$
|
1,269,559
|
|
Shipping
|
|
|
6,491
|
|
|
|
3,314
|
|
|
|
27,851
|
|
|
|
103,988
|
|
Total revenues - product segment
|
|
|
35,422
|
|
|
|
24,457
|
|
|
|
206,851
|
|
|
|
1,373,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues – logistics services segment
|
|
|
50,708
|
|
|
|
—
|
|
|
|
50,708
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated revenues
|
|
$
|
86,130
|
|
|
$
|
24,457
|
|
|
$
|
257,559
|
|
|
$
|
1,373,547
|
|
During the nine months ended September 30,
2015, we generated significant revenues from five customers in our product segment that accounted for approximately 87.4% of total
revenues (22.5%, 14.1%, 22.7%, 13.5% and 14.6%, respectively). During the nine months ended September 30, 2015, we did operate
in our logistic services segment. During the nine months ended September 30, 2016, two customers accounted for approximately 38.7%
of total revenues (19.0% from a customer in the product segment and 19.7%, from our only customer in the logistics services segment).
The decrease in revenues in the product segment of $1,166,696 was attributable to a significant decline in larger orders that we
had received in the 2015 period. We did not generate such large orders during the nine months ended September 30, 2016. The decrease
in product segment revenue was offset by an increase in revenues from our logistics services segment that began operating in August
2016.
The increase in revenues during the three months
ended September 30, 2016 as compared the same period in 2015 was primarily attributable to an increase in revenues generated from
our logistics services segment.
Cost of revenues.
Cost of revenues in our product segment includes
cost of products and shipping and handling costs. Cost of revenues in our logistics services segment includes cost of outsourced
logistic services provided. For the three months ended September 30, 2016, cost of revenues amounted to $62,047 as compared to
$22,934 for the three months ended September 30, 2015, an increase of $39,113 or 170.6%. For the nine months ended September 30,
2016, cost of revenues amounted to $195,943 as compared to $1,265,838 for the nine months ended September 30, 2015, a decrease
of $1,069,895 or 84.5%. For the three and nine months ended September 30, 2016 and 2015, total cost of revenues consisted of the
following:
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Cost of revenues - product segment:
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
22,398
|
|
|
$
|
21,167
|
|
|
$
|
128,544
|
|
|
$
|
1,138,053
|
|
Shipping
|
|
|
5,819
|
|
|
|
1,767
|
|
|
|
33,569
|
|
|
|
127,785
|
|
Total cost of revenues - product segment
|
|
|
28,217
|
|
|
|
22,934
|
|
|
|
162,113
|
|
|
|
1,265,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues – logistics services segment
|
|
|
33,830
|
|
|
|
—
|
|
|
|
33,830
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated cost of revenues
|
|
$
|
62,047
|
|
|
$
|
22,934
|
|
|
$
|
195,943
|
|
|
$
|
1,265,838
|
|
Gross profit and gross margin.
For the three months ended September 30, 2016,
gross profit amounted to $24,083 or 28.0% as compared to $1,523 or 6.2% for the three months ended September 30, 2015. For the
nine months ended September 30, 2016, gross profit amounted to $61,616 or 23.9% as compared to $107,709 or 7.8% for the nine months
ended September 30, 2015. For the three and nine months ended September
30, 2016 and 2015, gross profit by segment consisted of the following:
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Gross profit - product segment:
|
|
$
|
7,205
|
|
|
$
|
1,523
|
|
|
$
|
44,738
|
|
|
$
|
107,709
|
|
Gross profit - logistics services segment
|
|
|
16,878
|
|
|
|
—
|
|
|
|
16,878
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated gross profit
|
|
$
|
24,083
|
|
|
$
|
1,523
|
|
|
$
|
61,616
|
|
|
$
|
107,709
|
|
For the three months ended September 30, 2016,
the increase in gross profits was attributable to gross profits earned in our logistics services segment of $16,878 as compared
to zero for the same period in 2015, and an increase in gross profits from our product segment attributable to an increase in sales
of products and a decrease in shipping costs due to an increase in operational and pricing efficiencies.
For the nine months ended September 30, 2016,
the decrease in gross profit was attributable to the decrease in revenues in our product segment as discussed above offset by an
increase in gross profits from our logistics services segment.
Gross margin percentages can fluctuate from
period to periods depending on the mix of product sold. We expect gross profits to increase in future periods as revenues increase
as we develop our logistics services segment and implement operational and pricing efficiencies.
Operating expenses.
For the three months ended September 30, 2016,
operating expenses amounted to $125,722 as compared to $116,393 for the three months ended September 30, 2015, an increase of $9,329
or 8.0%. For the nine months ended September 30, 2016, operating expenses amounted to $581,698 as compared to $311,757 for the
nine months ended September 30, 2015, an increase of $269,941 or 154.9%.
For the three and nine months ended September
30, 2016 and 2015, operating expenses consisted of the following:
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Compensation and related benefits
|
|
$
|
15,000
|
|
|
$
|
—
|
|
|
$
|
48,000
|
|
|
$
|
12,600
|
|
Consulting fees
|
|
|
23,298
|
|
|
|
66,393
|
|
|
|
167,638
|
|
|
|
102,641
|
|
Professional fees
|
|
|
47,821
|
|
|
|
10,973
|
|
|
|
146,625
|
|
|
|
40,682
|
|
Rent expense
|
|
|
7,753
|
|
|
|
14,295
|
|
|
|
42,969
|
|
|
|
62,918
|
|
General and administrative expenses
|
|
|
31,850
|
|
|
|
24,732
|
|
|
|
176,466
|
|
|
|
92,916
|
|
Total operating expenses
|
|
$
|
125,722
|
|
|
$
|
116,393
|
|
|
$
|
581,698
|
|
|
$
|
311,757
|
|
|
·
|
For the three and nine months ended September 30, 2016, compensation and related benefit expensed increased by $15,000, and $35,400 or 281.0% as compared to the three and nine months ended September 30, 2015. The increase was attributable to an increase in compensation paid to our chief executive officer. We expect compensation and related benefit expense to increase in the future as we increase our operations.
|
|
·
|
For the three and nine months ended September 30, 2016, consulting fees (decreased) increased by $(43,095) or 64.9%, and $64,997 or 63.3%, as compared to the three and nine months ended September 30, 2015, respectively. Consulting fees consists of stock-based consulting fees for business development services. The (decrease) increases were attributable to the changes in the amortization of prepaid consulting fees during the 2016 period as compared to the 2015 period.
|
|
·
|
For the three and nine months ended September 30, 2016, professional fees increased by $36,848 or 335.8%, and $105,943 or 260.4% as compared to the three and nine months ended September 30, 2015, respectively. These increases were attributable to an increase in accounting fees of $18,500 and $73,525 related to the re-audit of our 2015 and 2014 financial statements and to the hiring of additional accounting assistance, an increase in legal fees of $16,293 and $28,083, and an increase in other professional fees $2,055 and $4,335, respectively.
|
|
·
|
For the three and nine months ended September 30, 2016, rent expense fees decreased by $6,542 or 45.8%, and $19,949 or 31.7%, as compared to the three and nine months ended September 30, 2015, respectively. These decreases was attributable to a decrease in rent incurred for warehouse expenses of $0 and $25,800, offset by an (decrease) increase in rent expense for office space located in the United Kingdom and United States of $(6,542) and $5,851, respectively.
|
|
·
|
For the three and nine months ended September 30, 2016, general and administrative expenses increased by $7,118 or 28.8%, and $83,550 or 89.9% as compared to the three and nine months ended September 30, 2015, respectively. These increases were primarily attributable to an increase in computer and internet expense of $0 and $46,012 incurred for the upgrade of the our website and logistics capabilities, an increase in travel expenses of $2,042 and $30,202, and a (decrease) increase in other general and administrative expenses of $5,076 and $7,336, respectively.
|
Loss from operations.
Because of the factors described above, for
the three months ended September 30, 2016, loss from operations amounted to $101,639 as compared to a loss from operations of $114,870
for the three months ended September 30, 2015, a decrease of $13,231 or 11.5% and for the nine months ended September 30, 2016,
loss from operations amounted to $520,082 as compared to a loss from operations of $204,048 for the nine months ended September
30, 2015, an increase of $316,034 or 154.9%.
Other expenses
.
Other expenses
includes interest expense and a gain on derivative liability. For the three months ended September 30, 2016, total other expense
amounted to $88,731 as compared to $58 for the three months ended September 30, 2015, an increase of $88,673. For the nine months
ended September 30, 2016, total other expense amounted to $178,864 as compared to $105 for the nine months ended September 30,
2015, an increase of $178,759. For the three and nine months ended September 30, 2016, we incurred interest expense of $90,646
and $236,279, respectively, which includes $62,804 and $115,466, respectively, related to interest bearing debt and stock-based
interest expense incurred due to issuance of common shares for debt modifications, and amortization of debt issuance costs of $27,842
and $120,813, respectively. Additionally, the three and nine months ended September 30, 2016, we recorded a gain on the change
of fair value of derivative liability of $1,915 and $57,415, respectively.
Net loss.
As a result of the foregoing, for the three
months ended September 30, 2016, net loss amounted to $190,370 or $(0.01) per common share (basic and diluted) as compared to a
net loss of $114,928 or $(0.01) per common share (basic and diluted) for the three months ended September 30, 2015, an increase
of $75,442, and for the nine months ended September 30, 2016, net loss amounted to $698,946 or $(0.03) per common share (basic
and diluted) as compared to a net loss of $204,153 or $(0.01) per common share (basic and diluted) for the nine months ended September
30, 2015, an increase of $494,793.
Comparison of Results of Operations for
the Year Ended December 31, 2015 and 2014
Revenues:
For the year ended December 31, 2015, total
revenues amounted to $1,410,080 as compared to zero for the year ended December 31, 2014. We began selling products consisting
of tableware products, decorative hotel guest room amenities, lavatory and bathroom fixtures and furniture, food and beverage service
items, and trendy accessories in January 2015. For the years ended December 31, 2015 and 2014, total revenues consisted of the
following:
|
|
Year Ended December 31,
|
|
|
2015
|
|
2014
|
Revenues:
|
|
|
|
|
Products
|
|
$
|
1,302,679
|
|
|
$
|
—
|
|
Shipping
|
|
|
107,401
|
|
|
|
—
|
|
Total revenues
|
|
$
|
1,410,080
|
|
|
$
|
—
|
|
Cost of revenues.
Cost of revenues includes cost of product and
shipping and handling costs. For the year ended December 31, 2015, cost of revenues amounted to $1,308,129 as compared to zero
for the year ended December 31, 2014. For the years ended December 31, 2015 and 2014, total cost of revenues consisted of the following:
|
|
Year Ended December 31,
|
|
|
2015
|
|
2014
|
Cost of revenues:
|
|
|
|
|
Products
|
|
$
|
1,170,266
|
|
|
$
|
—
|
|
Shipping
|
|
|
137,863
|
|
|
|
—
|
|
Total cost of revenues
|
|
$
|
1,308,129
|
|
|
$
|
—
|
|
Gross profit and gross margin.
For the year ended December 31, 2015, gross
profit amounted to $101,951 or 7.2% as compared to zero for the year ended December 31, 2014. We expect gross profit to increase
in future periods as revenues increase and as we develop operational and pricing efficiencies.
Operating expenses:
For the year
ended December 31, 2015, operating expenses amounted to $605,363 as compared to $1,272,911 for the year ended December 31, 2014,
a decrease of $667,548 or 52.4%. For the years ended December 31, 2015 and 2014, operating expenses consisted of the following:
|
|
Year Ended December 31,
|
|
|
2015
|
|
2014
|
Compensation and related benefits
|
|
$
|
12,600
|
|
|
$
|
46,900
|
|
Consulting fees
|
|
|
314,705
|
|
|
|
1,030,004
|
|
Professional fees
|
|
|
52,943
|
|
|
|
53,546
|
|
Rent expense
|
|
|
77,435
|
|
|
|
41,600
|
|
General and administrative expenses
|
|
|
147,680
|
|
|
|
100,861
|
|
Total
|
|
$
|
605,363
|
|
|
$
|
1,272,911
|
|
|
·
|
For the year ended December 31, 2015, compensation and related benefit expensed decreased by $34,300 or 73.1% as compared to the year ended December 31, 2014. The decrease was attributable to a decrease in compensation paid to our chief executive officer. We expect compensation and related benefit expense to increase in the future as we increase our operations.
|
|
·
|
For the year ended December 31, 2015, consulting fees decreased by $715,299 or 69.5%, as compared to the year ended December 31, 2014. Consulting fees consists of stock-based consulting fees for business development services. The decreases were attributable to a decrease in the use of consultants.
|
|
·
|
For the year ended December 31, 2015, professional fees decreased by a nominal amount of $603 or 1.1% as compared to the year ended December 31, 2014.
|
|
·
|
For the year ended December 31, 2015, rent expense fees increased by $35,835 or 86.1%, as compared to the year ended December 31, 2014. This increase was attributable to the rental of office space in 2015 in the United States and the U.K. of $51,635 offset by a decrease of warehouse expenses of $15,800.
|
|
·
|
For the year ended December 31, 2015, general and administrative expenses increased by $46,819 or 46.4% as compared to the year ended December 31, 2014. This increase was primarily attributable to an increase in travel expenses of $5,088, an increase in trade show expense of $26,653 related to the attendance at a trade show during 2015, and an increase in other general and administrative expenses of $15,078 due to increased activity.
|
Loss from operations.
As a result of the factors described above,
for the year ended December 31, 2015, loss from operations amounted to $503,412 as compared to a loss from operations of $1,272,911
for the year ended December 31, 2014, a decrease of $769,499 or 60.4%.
Other expenses
.
Other expenses includes interest expense and
debt conversion inducement expense. For the year ended December 31, 2015, total other expense amounted to $893,683 as compared
to zero for the year ended December 31, 2014. For the year ended December 31, 21015, we incurred interest expense of $3,683 which
includes $535 related to interest bearing debt and debt issuance costs of $3,148, and we incurred debt conversion inducement expense
of $890,000 related to the conversion of debt into common shares.
Net loss.
As a result of the foregoing, for the year
ended December 31, 2015, net loss amounted to $1,397,095 as compared to a net loss of $1,272,911 for the year ended December 31,
2014, an increase of $124,184 or 9.8%.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is the ability of an enterprise to
generate adequate amounts of cash to meet its needs for cash requirements. We had a working capital deficit of $21,282 and $13,195
of cash as of September 30, 2016 and working capital of $63,936 and $208,064 of cash as of December 31, 2015.
The following table sets forth a summary of
changes in our working capital from December 31, 2015 to September 30, 2016:
|
|
|
|
|
|
December 31, 2015
to September 30, 2016
|
|
|
September 30, 2016
|
|
December 31, 2015
|
|
Change
|
|
Percentage
Change
|
Working capital (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
247,984
|
|
|
$
|
350,372
|
|
|
$
|
(102,388
|
)
|
|
|
(29.2
|
)%
|
Total current liabilities
|
|
|
269,266
|
|
|
|
286,436
|
|
|
|
17,170
|
|
|
|
(6.0
|
)%
|
Working capital (deficit):
|
|
$
|
(21,282
|
)
|
|
$
|
63,936
|
|
|
$
|
(85,218
|
)
|
|
|
(133.3
|
)%
|
The decrease in working capital was primarily
attributable to:
|
·
|
a decrease in cash of $194,869 as discussed below,
|
|
|
|
|
·
|
a decrease in prepaid expenses of $100,448 related to the amortization of prepaid consulting fees,
|
|
|
|
|
·
|
an increase in loans payable of $53,544,
|
|
|
|
|
·
|
an increase in accounts payable of $29,785,
|
|
|
|
|
·
|
an increase in accrued expenses of $6,838, and,
|
|
|
|
|
·
|
an increase in advances from customers of $9,539,
|
Offset by:
|
·
|
an increase in accounts receivable of $66,826 related to amounts due from our logistics services customer,
|
|
|
|
|
·
|
an increase in advances to supplier of $126,103 to secure product for future orders,
|
|
|
|
|
·
|
a decrease in convertible notes of $41,353 due to repayments made,
|
|
|
|
|
·
|
a decrease in due to related party of $4,380, and,
|
|
|
|
|
·
|
a decrease in derivative liability of $71,143 due to a change in fair value and the reclassification of derivative liability to paid in capital upon repayment
|
Cash Flows
Nine Months Ended September 30, 2016 Compared
to Nine Months Ended September 30, 2015
Changes in our cash balance are summarized
as follows:
|
|
Nine Months Ended
September 30, 2016
|
|
Nine Months Ended
September 30, 2015
|
Cash used in operating activities
|
|
$
|
(561,867
|
)
|
|
$
|
(78,599
|
)
|
Cash provided by (used in) investing activities
|
|
|
—
|
|
|
|
—
|
|
Cash provided by financing activities
|
|
|
366,998
|
|
|
|
4,017
|
|
Net decrease in cash
|
|
$
|
(194,869
|
)
|
|
$
|
(74,582
|
)
|
Cash Used in Operating Activities
Net cash flow used in operating activities
was $561,867 for the nine months ended September 30, 2016 as compared to net cash used in operating activities of $78,599 for the
nine months ended September 30, 2015, an increase of $483,268.
|
·
|
Net cash flow used in
operating activities for the nine months ended September 30, 2016 primarily reflected a net loss of $698,946 adjusted for the add-back
of non-cash items consisting of amortization of debt discount to interest expense of $120,813, stock-based compensation expense
of $140,448, stock-based interest expense for debt addendum of $80,000, and a gain on derivative liability of $57,415, and changes
in operating assets and liabilities primarily consisting of an increase in accounts receivable of $66,826, an increase in advances
to supplier of $126,102, offset by an increase in accounts payable of $29,785
|
|
|
|
|
·
|
Net cash flow used in
operating activities for the nine months ended September 30, 2015 primarily reflected a net loss of $204,153 adjusted for the add-back
of non-cash items consisting of stock-based compensation expense of $105,179, and net changes in operating assets and liabilities
of $20,375
|
Cash Provided by Financing Activities
Net cash provided by financing activities was
$366,998 for the nine months ended September 30, 2016 as compared to net cash provided by financing activities $4,017 for the nine
months ended September 30, 2015. During the nine months ended September 30, 2016, we received net proceeds from the sale of common
stock of $480,000, we repaid net related party advances of $4,380 and repaid convertible debt of $162,166. During the nine months
ended September 30, 2015, we received net proceeds from the sale of common stock of $5,000 and we paid related party advances of
$983.
Year Ended December 31, 2015 Compared to
Year Ended December 31, 2014
Changes in our cash balance are summarized
as follows:
|
|
Year Ended December 31, 2015
|
|
Year Ended December 31, 2014
|
Cash used in operating activities
|
|
$
|
(95,146
|
)
|
|
$
|
(316,247
|
)
|
Cash provided by (used in) investing activities
|
|
|
—
|
|
|
|
—
|
|
Cash provided by financing activities
|
|
|
225,383
|
|
|
|
394,074
|
|
Net increase in cash
|
|
$
|
130,237
|
|
|
$
|
77,827
|
|
Cash Used in Operating Activities
Net cash flow used in operating activities
was $95,146 for the year ended December 31, 2015 as compared to net cash used in operating activities of $316,247 for the year
ended December 31, 2014, a decrease of $221,101.
|
·
|
Net cash flow used in operating activities for the year ended December 31, 2015 primarily reflected a net loss of $1,397,095 and the add-back of non-cash items consisting of debt conversion inducement expense of $890,000, stock-based compensation expense of $314,705, and other non-cash items of $11,936, and changes in operating assets and liabilities primarily consisting of a decrease in prepaid expenses and other current assets of $8,262, a decrease in advances to supplier of $53,738, and an increase in accounts payable of $41,727, offset by an increase in accounts receivable of $8,788 and a decrease in accrued expenses of $9,631.
|
|
·
|
Net cash flow used in operating activities for the year ended December 31, 2014 primarily reflected a net loss of $1,272,911 and the add-back of non-cash items consisting of stock-based compensation expense of $1,030,004, and changes in operating assets and liabilities primarily consisting of an increase in prepaid expenses and other current assets of $10,800 related to prepaid consulting fees and an increase in advances to supplier of $65,000.
|
Cash Provided by Financing Activities
Net cash provided by financing activities was
$225,383 for the year ended December 31, 2015 as compared to net cash provided by financing activities $394,074 for the year ended
December 31, 2014. During the year ended December 31, 2015, we received net proceeds from convertible debt of $190,000, net proceeds
from related party advances of $30,383, and received net proceeds from the sale of common stock of $5,000. During the year ended
December 31, 2014, we received net proceeds from convertible debt of $280,000 net proceeds from related party advances of $9,074,
and received net proceeds from the sale of common stock of $105,000.
Future Liquidity and Capital Needs
.
Our principal future uses of cash are for working
capital requirements, including marketing and travel expenses, legal and other professional fees incurred in connection with our
SEC filing requirements, and reduction of accrued liabilities and debt. These uses will depend on numerous factors including our
revenues, and our ability to control costs. We have historically financed our working capital needs primarily through internally
generated funds, from the sale of common stock and from debt financings. We collect cash from our customers based on our sales
to them and their respective payment terms. We expect to require additional funds through public or private debt or equity
financings to be able to increase marketing
for our products and to fully execute our business plan. If we are unable to raise the capital we need, we may need to reduce the
scope of our business in order to continue our operations.
Recent Financings
On December 28, 2015, we entered into a secured
convertible promissory note (the “Convertible Note”) with Firstfire Global Opportunities Fund LLC (the “Lender”),
with a principal amount of $230,000, which amount is the $200,000 purchase price plus a 15% original issue discount equal to $30,000.
Additionally, the lender deducted legal fees of $10,000 and the Company received net proceeds of $190,000. The unpaid principal
and interest is secured by our common stock, bears interest computed at a rate of interest, which is equal to 7.0% per annum, and
is payable in monthly installments of $50,555 commencing April 28, 2016 through August 28, 2016. Any amount of principal or interest
on this Convertible Note, which is not paid by the due dates, shall bear interest at the rate of 15% per annum from the due date
until paid. During the nine months ended September 30, 2016, we repaid Convertible Note principal of $162,166 and on October 31,
2016, we repaid the remaining balance of this Convertible Note.
On February 3, 2016, the Company sold 1,200,000
shares of its common stock at $0.40 per common share for cash of $200,000 and a subscription receivable of $280,000. The subscription
receivable of $280,000 was collected in April 2016.
On September 21, 2016, we entered into a business
loan and security agreement with EBF Partners, LLC (the “EBF Loan”). Pursuant to the EBF Loan, we borrowed $20,000
and received net proceeds of $20,000. We are required to repay the EBF Loan by making daily payments of $204 on each business day
until the purchased amount of $28,200 is paid in full. Each payment is deducted directly from our bank accounts. The EBF Loan has
an effective interest rate of approximately 116%, is secured by our assets and is personally guaranteed by our chief executive
officer. At September 30, 2016, amounts due under the EBF Loan amounted to $19,054.
On September 23, 2016, we entered into a business
loan and security agreement with On Deck Capital, Inc. (the “On Deck Loan”). Pursuant to the On Deck Loan, we borrowed
$35,000 and received net proceeds of $34,125 after paying a loan origination fee of $825. We are required to repay the On Deck
Loan by making 252 daily payments of $190.28 on each business day until the purchased amount of $47,951 is paid in full. Each payment
is deducted directly from our bank accounts. The On Deck Loan has an effective interest rate of approximately 66%, is secured by
the Company’s assets and is personally guaranteed by our chief executive officer. At September 30, 2016, amounts due under
the On Deck Loan amounted to $34,490.
Equity Purchase Agreement and Registration
Rights Agreement
On October 24, 2016 (the “Closing Date”),
the Company entered into an equity purchase agreement (the “Purchase Agreement”) with Peak One Opportunity Fund, L.P.
(“Buyer”), whereby, upon the terms and subject to the conditions thereof, the Buyer is committed to purchase shares
of the Company’s common stock (the “Purchase Shares”) at an aggregate price of up to $5,000,000 (the “Total
Commitment Amount”) over the course of its 24-month term. From time to time over the 24-month term of the Purchase Agreement,
commencing on the date on which a registration statement registering the Purchase Shares (the “Registration Statement”)
becomes effective, the Company may, in its sole discretion, provide the Buyer with a put notice (each a “Put Notice”)
to purchase a specified number of the Purchase Shares (each a “Put Amount Requested”) subject to the limitations discussed
below and contained in the Purchase Agreement. Upon delivery of a Put Notice, the Company must deliver the Put Amount Requested
as Deposit Withdrawal at Custodian (“DWAC”) shares to Buyer within two trading days.
The actual amount of proceeds the Company receives
pursuant to each Put Notice (each, the “Put Amount”) is to be determined by multiplying the Put Amount Requested by
the applicable purchase price. The purchase price for each of the Purchase Shares equals 90% of the “Market Price,”
which is defined as the lesser of the (i) lowest closing bid price of our common stock for any trading day during the ten (10)
trading days immediately preceding the date of the respective Put Notice, or (ii) lowest closing bid price of the common stock
for any trading day during the seven trading days immediately following the clearing date associated with the applicable Put Notice
(the “Valuation Period”). Within three trading days following the end of the Valuation Period, the Buyer will deliver
the Put Amount to the Company via wire transfer.
The Put Amount Requested pursuant to any single
Put Notice must have an aggregate value of at least $15,000, and cannot exceed the lesser of (i) 200% of the average daily trading
value of the common stock in the ten trading days immediately preceding the Put Notice or (ii) such number of shares of common
stock that has an aggregate value of $100,000.
In order to deliver a Put Notice, certain conditions
set forth in the Purchase Agreement must be met, as provided therein. In addition, the Company is prohibited from delivering a
Put Notice if: (i) the sale of Purchase Shares pursuant to such Put Notice would cause the Company to issue and sell to Buyer,
or Buyer to acquire or purchase, a number of shares of the Company’s common stock that, when aggregated with all shares of
common stock purchased by Buyer pursuant to all prior Put Notices issued under the Purchase Agreement, would exceed the Total Commitment
Amount; or (ii) the sale of the Purchase Shares pursuant to the Put Notice would cause the Company to issue and sell to Buyer,
or Buyer to acquire or purchase, an aggregate number of shares of common stock that would result in Buyer beneficially owning more
than 4.99% of the issued and outstanding shares of the Company’s common stock.
Unless earlier terminated, the Purchase Agreement
will terminate automatically on the earlier to occur of: (i) 24 months after the initial effectiveness of the Registration Statement,
(ii) the date on which the Buyer has purchased or acquired all of the Purchase Shares, or (iii) the date on which certain bankruptcy
proceedings are initiated with respect to the Company. In connection with the execution of the Purchase Agreement, the Company
agreed to issue 650,000 shares of its common stock (the “Commitment Shares”) to Buyer or Buyer’s designee as
a commitment fee.
On the Closing
Date, and in connection with the Purchase Agreement, the Company also entered into a registration rights agreement (the “Registration
Rights Agreement”) with Buyer whereby the Company is obligated to file the Registration Statement to register the resale
of the Commitment Shares and Purchase Shares. Pursuant to the Registration Rights Agreement, the Company must (i) file the Registration
Statement within thirty calendar days from the Closing Date, (ii) use reasonable efforts to cause the Registration Statement to
be declared effective under the Securities Act of 1933, as amended (the “Securities Act”), as promptly as possible
after the filing thereof, but in any event no later than the 90th calendar day following the Closing Date, and (iii) use its reasonable
efforts to keep such Registration Statement continuously effective under the Securities Act until all of the Commitment Shares
and Purchase Shares have been sold thereunder or pursuant to Rule 144.
October 2016 Securities Purchase Agreement
and Convertible Debentures
On October 24, 2016 (the “Issuance Date”),
the Company entered into a securities purchase agreement (the “October 2016 SPA”) with Buyer, whereby Buyer agreed
to invest up to $346,500 (the “Convertible Debentures Purchase Price”) in the Company in exchange for the convertible
debentures, upon the terms and subject to the conditions thereof. Pursuant to the October 2016 SPA, the Company issued a convertible
debenture to Buyer on October 26, 2016, in the original principal amount of $85,000, which bears interest at 0% per annum (the
“First Debenture”). The Buyer paid the portion of the Convertible Debentures Purchase Price associated with the First
Debenture, consisting of $76,500 (minus the applicable fees under the October 2016 SPA), to the Company in cash on October 26,
2016. Each convertible debenture issued pursuant to the October 2016 SPA, coupled with the accrued and unpaid interest relating
to each convertible debenture, is due and payable three years from the issuance date of the respective convertible debenture. Any
amount of principal or interest that is due under each convertible debenture, which is not paid by the respective maturity date,
will bear interest at the rate of 18% per annum until it is satisfied in full. Additionally, the Buyer has the right at any time
to convert amounts owed under each convertible debenture into shares of the Company’s common stock at the closing price of
the Common Stock on September 8, 2015. Each debenture shall contain representations, warranties, events of default, beneficial
ownership limitations, and other provisions that are customary of similar instruments.
The Buyer is entitled to, at any time or from
time to time, convert each convertible debenture issued under the October 2016 SPA into shares of the Company’s common stock,
at a conversion price per share (the “Conversion Price”) equal to either: (i) if no event of default has occurred under
the respective convertible debenture and the date of conversion is prior to the date that is one hundred eighty days after the
issuance date of the respective convertible debenture, $0.25, or (ii) if an event of default has occurred under the respective
convertible debenture or the date of conversion is on or after the date that is one hundred eighty days after the issuance date
of the respective convertible
debenture, the lesser of (a) $0.25 or (b) 65%
of the lowest closing bid price of the common stock for the twenty trading days immediately preceding the date of the date of conversion
(provided, further, that if either the Company is not DWAC operational at the time of conversion or the common stock is traded
on the OTC Pink at the time of conversion, then 65% shall automatically adjust to 60%), subject in each case to equitable adjustments
resulting from any stock splits, stock dividends, recapitalizations or similar events.
We may redeem each convertible debenture issued
under the October 2016 SPA, upon not more than two days written notice, for an amount (the “Redemption Price”) equal
to: (i) if the Redemption Date (as defined below) is ninety days or less from the date of issuance of the respective convertible
debenture, 105% of the sum of the Principal Amount so redeemed plus accrued interest, if any; (ii) if the Redemption Date is greater
than or equal to ninety one days from the date of issuance of the respective convertible debenture and less than or equal to one
hundred twenty days from the date of issuance of the respective convertible debenture, 110% of the sum of the Principal Amount
so redeemed plus accrued interest, if any; (iii) if the Redemption Date is greater than or equal to one hundred twenty one days
from the date of issuance of the respective convertible debenture and less than or equal to one hundred fifty days from the date
of issuance of the respective convertible debenture, 120% of the sum of the Principal Amount so redeemed plus accrued interest,
if any; (iv) if the Redemption Date is greater than or equal to one hundred fifty one days from the date of issuance of the respective
convertible debenture and less than or equal to one hundred eighty days from the date of issuance of the respective convertible
debenture, 130% of the sum of the Principal Amount so redeemed plus accrued interest, if any; and (v) if either (1) the respective
convertible debenture is in default but the Buyer consents to the redemption notwithstanding such default or (2) the Redemption
Date is greater than or equal to one hundred eighty one days from the date of issuance of the respective convertible debenture,
140% of the sum of the Principal Amount so redeemed plus accrued interest, if any. The date upon which the respective convertible
debenture is redeemed and paid shall be referred to as the “Redemption Date” (and, in the case of multiple redemptions
of less than the entire outstanding Principal Amount, each such date shall be a Redemption Date with respect to the corresponding
redemption).
In connection with the issuance of this
First Debenture, the Company determined that the terms of the First Debenture contain terms that are not fixed monetary amounts
at inception. Accordingly, under the provisions of FASB ASC Topic No. 815-40, “Derivatives and Hedging – Contracts
in an Entity’s Own Stock”, the embedded conversion option contained in the convertible instruments will be accounted
for as derivative liabilities at the date of issuance and shall be adjusted to fair value through earnings at each reporting date.
November 2016 Securities
Purchase Agreement and Convertible Promissory Note
On November 7, 2016, the Company consummated
a transaction with an Investor, whereby, upon the terms and subject to the conditions of that certain securities purchase agreement
(the “November 2016 SPA”), Investor agreed to invest up to $340,000.00 (the “Convertible Note Purchase Price”)
in our Company in exchange for a convertible promissory note in the principal amount of $400,000.00 (the “Note”). The
Note carries a prorated original issue discount of $60,000.00 and bears interest at the rate of 6% per year. On November 18, 2016,
the Investor funded the first tranche under the Note, consisting of $34,000.00 in cash. Each tranche funded under the Note (each
a “Tranche”), coupled with the accrued and unpaid interest relating to that respective Tranche, is due and payable
twelve months from the funding date of the respective Tranche. Any amount of principal or interest that is due under each Tranche,
which is not paid by the respective maturity date, will bear interest at the rate of 22% per annum until it is satisfied in full.
The Investor is entitled to, at any time or from time to time, convert each Tranche under the Note into shares of our common stock,
at a conversion price per share equal to fifty five percent (55%) of the lowest traded price of the common stock for the twenty
(20) trading days immediately preceding the date of the date of conversion, upon the terms and subject to the conditions of the
Note. In connection with the issuance of the Note and November 2016 SPA, we agreed to issue 450,000 shares of our common stock
to Investor. On December 21, 2016, the Investor funded the second Tranche under the Note, pursuant to the terms described above.
In connection with the funding of the Second Tranche, we agreed to issue 50,000 shares of our common stock to Investor. The Note
contains representations, warranties, events of default, beneficial ownership limitations, prepayment options, and other provisions
that are customary of similar instruments.
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial
condition and results of operations are based upon our unaudited consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States. The preparation of these unaudited consolidated
financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues
and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those
related to income taxes, and the valuation of equity transactions. We base our estimates on historical experience and on various
other assumptions that we believed to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily apparent from other sources. Any future changes to these
estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities.
Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting
policies affect our more significant judgments and estimates used in the preparation of the consolidated financial statements.
Derivative liabilities
We have certain financial instruments that
are embedded derivatives associated with capital raises. We evaluate all its financial instruments to determine if those contracts
or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with
FASB ASC 810-10-05-4 and 815-40. This accounting treatment requires that the carrying amount of any embedded derivatives
be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value
is recorded as a liability, as is the case with us, the change in the fair value during the period is recorded as either income
or expense. Upon conversion or exercise, the derivative liability is marked to fair value at the conversion date and then the related
fair value is reclassified to equity.
Revenue recognition
Pursuant to the guidance of ASC Topic 605, we recognize
revenues when persuasive evidence of an arrangement exists, delivery has occurred or services have been provided, the purchase
price is fixed or determinable and collectability is reasonably assured. For product sale, the Company’s standard terms are
“ex works”, with title transferring to its customer at the Company suppliers’ loading docks or upon embarkation
with risk of loss being assumed by the customer at the shipping point. The Company has a small percentage of sales with other terms,
and revenue is recognized in accordance with the terms of the related customer purchase order. Shipping and handling costs billed
to customers are recognized in revenue. For logistics services performed, we recognize revenues upon performance and completion
of services rendered.
Stock-based compensation
Stock-based compensation is accounted for based
on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost
of employee and director services received in exchange for an award of equity instruments over the period the employee or director
is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement
of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
Pursuant to ASC Topic 505-50, for share-based
payments to consultants and other third parties, compensation expense is determined at the “measurement date.” The
expense is recognized over the service period of the award. Common stock awards issued to consultants represent common stock granted
to non-employees in exchange for services at fair value. The measurement dates for such awards are set at the dates that the contracts
are entered into, as the awards are non-forfeitable and vest immediately. The measurement date fair value is then recognized over
the service period as if we had paid cash for such service.
RECENT ACCOUNTING PRONOUNCEMENTS
In May 2014, the FASB issued an update ("ASU
2014-09")
Revenue from Contracts with Customers.
ASU 2014-09 establishes a single comprehensive model for entities
to use in accounting for revenue arising from contracts with
customers and supersedes most of the existing
revenue recognition guidance. ASU 2014-09 requires an entity to recognize revenue when it transfers promised goods or services
to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services and also requires certain additional disclosures. ASU 2014-09 is effective for interim and annual reporting periods
in fiscal years that begin after December 15, 2016. We are currently evaluating the impact of the adoption of ASU 2014-09
on our consolidated financial statements.
In June 2014,
the FASB issued an update (“ASU 2014-12”) to ASC Topic 718,
Compensation – Stock Compensation
. ASU
2014-12 requires an entity to treat performance targets that can be met after the requisite service period of a share based award
has ended, as a performance condition that affects vesting. ASU 2014-12 is effective for interim and annual reporting periods
in fiscal years that begin after December 15, 2015. The adoption of ASU 2014-12 is not expected to have a material effect
on our financial position, results of operations and cash flows.
In August 2014, the FASB issued ASU 2014-15,
Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern,
that will require management
to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances.
In connection with each annual and interim period, management will assess if there is substantial doubt about an entity’s
ability to continue as a going concern within one year after the issuance date. Substantial doubt exists if it is probable that
the entity will be unable to meet its obligations within one year after the issuance date. The new standard defines substantial
doubt and provides example indicators. Disclosures will be required if conditions give rise to substantial doubt. However, management
will need to assess if its plans will alleviate substantial doubt to determine the specific disclosures. This standard is effective
for public entities for annual periods ending after December 15, 2016. Earlier application of this standard is permitted. This
standard is not expected to have a material effect on our financial position, results of operations and cash flows.
In February 2015, the FASB issued ASU 2015-02,
Consolidation
(Topic 810) (“ASU 2015-02”), to address financial reporting considerations for the evaluation
as to the requirement to consolidate certain legal entities. ASU 2015-02 is effective for fiscal years and for interim periods
within those fiscal years beginning after December 15, 2015. This standard is not expected to have a material effect on our
financial position, results of operations and cash flows.
In April 2015, the FASB issued ASU 2015-03,
Interest—Imputation of Interest (Subtopic 835-30)
(“ASU 2015-03”), as part of the initiative to reduce
complexity in accounting standards. The update requires that debt issuance costs related to a recognized debt liability be presented
in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU
2015-03 is effective for annual periods beginning after December 15, 2015 and for interim periods within those fiscal years.
In November 2015, the FASB issued ASU 2015-17,
Balance Sheet Classification of Deferred Taxes
(“ASU 2015-17”), which requires entities to present deferred
tax assets and deferred tax liabilities as noncurrent in a classified balance sheet. The ASU simplifies the current guidance in
ASC Topic 740,
Income Taxes
, which requires entities to separately present deferred tax assets and liabilities as current
and noncurrent in a classified balance sheet. ASU 2015-17 is effective for fiscal years beginning after December 15, 2016,
and interim periods within those annual periods. Early adoption is permitted for all entities as of the beginning of an interim
or annual reporting period. We do not expect the impact of ASU 2015-17 to be material to our consolidated financial statements.
There are no other recently issued accounting standards that apply
to us or that are expected to have a material impact on our results of operations, financial condition, or cash flows.
CONTRACTUAL OBLIGATIONS AND OFF-BALANCE
SHEET ARRANGEMENTS
Contractual Obligations
We have certain fixed contractual obligations
and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest
rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the
timing and amounts of payments. We have
presented below a summary of the most significant
assumptions used in our determination of amounts presented in the tables, in order to assist in the review of this information
within the context of our consolidated financial position, results of operations, and cash flows.
The following tables summarize our contractual
obligations as of September 30, 2016, and the effect these obligations are expected to have on our liquidity and cash flows in
future periods.
|
|
Payments Due by Period
|
Contractual obligations:
|
|
Total
|
|
Less than 1
year
|
|
1-3 years
|
|
3-5 years
|
|
5
+
years
|
Convertible notes payable
|
|
$
|
87,834
|
|
|
$
|
87,834
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Loans payable
|
|
|
53,544
|
|
|
|
53,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease
|
|
|
5,470
|
|
|
|
5,470
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
146,848
|
|
|
$
|
146,848
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Off-Balance
Sheet Arrangements
We have not entered into any other financial
guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative
contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated
financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated
entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated
entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development
services with us.
DIRECTORS AND EXECUTIVE OFFICERS
Directors and Executive Officers
The following
table sets forth the names, positions and ages of our directors and executive officers as of the date of this prospectus.
|
|
|
|
|
|
|
|
NAME
|
|
AGE
|
|
POSITION
|
|
DIRECTOR SINCE
|
|
Victor Petrone
|
|
46
|
|
President/Chief Executive Officer, Secretary, Treasurer/Chief Financial Officer and Director
|
|
2014
|
|
Victor Petrone.
Mr. Petrone has more than 20 years of experience in the hospitality business sector. From 2009 to 2010, Mr. Petrone was an
independent hospitality consultant in Europe. During 2010, Mr. Petrone was appointed the chief operating officer of Diamond Ranch
Foods, a publicly traded U.S. corporation. Mr. Petrone held this position until 2011 when he returned to being a consultant in
the hospitality industry. This subsequently let to Mr. Petrone being appointed as the President/Chief Executive Officer, Secretary,
Treasurer/Chief Financial Officer of Petrone Worldwide, Inc. on March 3, 2014. Mr. Petrone is a graduate of the Wharton School
of Business, University of Pennsylvania.
During his career, Mr. Petrone was general
manager and vice president of Performance Food Group/ Roma Foods, now a publicly traded company, then director of Specialty Markets
and International Markets Sysco Foodservice, also a publicly traded company. Subsequently, Mr. Petrone became president of Nascent
Wine Company, Inc. and chief operating officer of Diamond Ranch Foods, Ltd. all of which are publicly traded companies.
Involvement in Certain Legal Proceedings
To our knowledge, none of our directors and
executive officers have been involved in any of the following events during the past ten years:
|
1.
|
any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
|
|
|
|
|
2.
|
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
|
|
|
|
|
3.
|
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities;
|
|
|
|
|
4.
|
being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
|
|
|
|
|
5.
|
being subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
|
|
|
|
|
6.
|
being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
|
Corporate Governance Matters
Committees
Our Board of Directors does not currently have
any committees, including an audit committee, a compensation committee or nominating and corporate governance committee. The functions
of those committees are being undertaken by our sole director. Because we only have one director, we believe that the establishment
of these committees would be more form over substance.
Audit Committee
and Financial Expert
Presently, the Board of Directors acts as the
audit committee. The Board of Directors does not have an audit committee financial expert. The Board of Directors has not yet recruited
an audit committee financial expert to join the Board of Directors because we have only recently commenced a significant level
of financial operations.
Code of Ethics
We have not yet adopted a Code of Ethics and
Business Conduct.
Board Leadership Structure and Role in
Risk Oversight
Mr. Victor Petrone serves as Chairman and sole
member of our Board of Directors. Our Board of Directors is primarily responsible for overseeing our risk management processes.
The Board of Directors receives and reviews
periodic reports from management, auditors,
legal counsel, and others, as considered appropriate regarding our assessment of risks. The Board of Directors focuses on the
most significant risks facing us and our general risk management strategy, and also ensures that risks undertaken by our Company
are consistent with the board’s appetite for risk. While the Board of Directors oversees our risk management, management
is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach
for addressing the risks facing us and that our board leadership structure supports this approach.
EXECUTIVE COMPENSATION
As a smaller reporting company, we are
required to disclose the executive compensation of our named executive officers, which consist of the following individuals, for
the fiscal years ended December 31, 2014 and December 31, 2015, respectively: (i) any individual serving as our principal executive
officer or acting in a similar capacity during such fiscal years; (ii) the two other most highly compensated executive officers
of the Company serving as executive officers at the end of the most recently completed fiscal year; and (iii) any additional individuals
for whom disclosure would have been provided but for the fact that the individual was not serving as an executive officer at the
end of the most recently completed fiscal year.
Summary Compensation Table
The table set forth below summarizes the annual
and long-term compensation for services in all capacities to us payable to our named executive officers during the fiscal years
ended December 31, 2015 and December 31, 2014.
2015 Summary Compensation Table
Name and
Principal Position
|
|
Fiscal
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($)
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
Non-Qualified
Deferred
Compensation
($)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Victor Petrone,
|
|
|
2015
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
12,600 (1)
|
|
|
12,600
|
|
sole director, President/CEO, Secretary, Treasurer/CFO
|
|
|
2014
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
46,900 (2)
|
|
|
46,900
|
|
1
|
Represents amounts paid to Mr. Petrone not reflected as salary on Form W-2.
|
2
|
Represents amounts paid to Mr. Petrone not reflected as salary on Form W-2. This amounts differs from amounts previously reported due to errors.
|
Employment Agreement
Currently, we have no employment agreements
with any officer or director.
Outstanding Equity Awards at December
31, 2015
The following table
provides information with respect to outstanding stock options and restricted stock held by our named executive officers at December
31, 2015:
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
|
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#)
|
|
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#)
|
|
|
Equity
Incentive
Plan
Awards:
Market
Value or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)
|
|
Victor Petrone, sole director, President/CEO, Secretary, Treasurer/CFO)
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
N/A
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director Compensation
No director received compensation for services
rendered to us in his capacity as a director during the fiscal years ended December 31, 2015 and December 31, 2014.
Indemnification of Directors and Officers
Our Articles of Incorporation, as amended and
restated, and our Bylaws provide for mandatory indemnification of our officers and directors, except where such person has been
adjudicated liable by reason of his negligence or willful misconduct toward us or such other corporation in the performance of
his duties as such officer or director. Our Bylaws also authorize the purchase of director and officer liability insurance to insure
them against any liability asserted against or incurred by such person in that capacity or arising from such person's status as
a director, officer, employee, fiduciary, or agent, whether or not the corporation would have the power to indemnify such person
under the applicable law.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following tables set forth information
as of February 6, 2017 regarding the beneficial ownership of our common shares by:
|
·
|
each stockholder who is known by us to own beneficially in excess of 5% of our outstanding common stock;
|
|
·
|
each executive officer; and
|
|
·
|
the executive officers and directors as a group.
|
Except as otherwise indicated, all persons
listed below have (i) sole voting power and investment power with respect to their shares of stock, except to the extent that authority
is shared by spouses under applicable law, and (ii) record and beneficial ownership with respect to their shares of stock. The
percentage of beneficial ownership of common stock is based upon 28,659,897 shares of common stock outstanding as of February 6,
2017.
|
|
|
|
NUMBER OF
SHARES
|
|
PERCENT OF
SHARES
|
NAME AND ADDRESS OF
|
|
TITLE
|
|
BENEFICIALLY
|
|
BENEFICIALLY
|
BENEFICIAL OWNER
|
|
OF CLASS
|
|
OWNED
|
|
OWNED
|
Victor Petrone
|
|
|
Common
|
|
|
|
14,260,542
|
(1)
|
|
|
49.75
|
%
|
2200 N. Commerce Parkway
Weston, Florida 33326
|
|
|
|
|
|
|
|
|
|
|
|
|
All Directors and officers as a group (1 member)
|
|
|
Common
|
|
|
|
14,260,542
|
|
|
|
49.75
|
%
|
____________
|
(1)
|
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided.
|
Series A Preferred
Stock
Name and Address of Beneficial Owner
|
|
Amount and
Nature of
Beneficial
Ownership
|
|
|
Percent of
Class
(1)
|
|
Victor Petrone
|
|
|
1,000,000
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
(1) Calculated
on the basis of 1,000,000 issued and outstanding shares of Series A preferred stock as of February 6, 2017. Holders of our Series
A preferred stock are entitled to 50 votes per share; provided, however, that in the event that the votes by the holders of the
Series A preferred stock do not total at least 51% of the votes of all classes of the Company’s authorized capital stock
entitled to vote, then in any such case, the votes cast by a majority of the holders of the Series A preferred stock shall be deemed
to equal 51% of all votes cast at any meeting of stockholders, or any issue put to the stockholders for voting.
Changes in Control
Our management is not aware of any arrangements
which may result in “changes in control” as that term is defined by the provisions of Item 403(c) of Regulation S-K.
CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS AND DIRECTOR INDEPENDENCE
Related Party Transactions
We do not have
a specific policy or procedure for the review, approval, or ratification of any transaction involving related persons. We historically
have sought and obtained funding from officers, directors, and family members as these categories of persons are familiar with
our management and often provide better terms and conditions than we can obtain from unassociated sources. Also, we are so small
that having specific policies or procedures of this type would be unworkable.
From time to time, we receive advances from our chief executive
officer for working capital purposes. The advances are non-interest bearing and are payable on demand. For the years ended December
31, 2016 and 2015, due to related party activity consisted of the following:
|
|
For the Year ended
December 31,
2016
|
|
For the Year ended
December 31,
2015
|
Balance due to related party at beginning of year
|
|
$
|
38,434
|
|
|
$
|
8,051
|
|
Working capital advances received
|
|
|
38,000
|
|
|
|
800
|
|
Repayments and conversion made
|
|
|
(42,380
|
)
|
|
|
(983
|
)
|
Balance due to related party at end of year
|
|
$
|
34,054
|
|
|
$
|
7,868
|
|
Except as otherwise indicated herein, there
have been no related party transactions, or any other transactions or relationships required to be disclosed pursuant to Item 404
of Regulation S-K.
Director Independence
At this time we do not have a policy that
our directors or a majority be independent of management as we have at this time only one director. It is our intention to implement
a policy that a majority of the Board member be independent of our management as the members of the board of director’s
increases. A Director is considered independent if the Board affirmatively determines that the Director (or an immediate family
member) does not have any direct or indirect material relationship with us or our affiliates or any member of our senior management
or his or her affiliates. The term “affiliate” means any corporation or other entity that controls, is controlled
by, or under common control with us, evidenced by the power to elect a majority of the Board of Directors or comparable governing
body of such entity. The term “immediate family member” means spouse, parents, children, siblings, mothers- and fathers-in-law,
sons- and daughters-in law, brothers- and sisters-in-laws and anyone (other than domestic employees) sharing the Director’s
home.
MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
From March 2014 until December 7, 2016, our
common stock had been quoted on the OTC Market Pink Sheets under the symbol "PFWI". On December 7, 2016, our common stock
opened for trading on the OTCQB Market under the symbol “PFWI”. The following table sets forth the high and low price
information of our common stock for the periods indicated. Over-the-counter market quotations reflect inter-dealer prices without
retail mark-up, mark-down or commission, and may not represent actual transactions.
Quarter Ended
|
|
High
|
|
Low
|
September 30, 2016
|
$
|
0.3161
|
$
|
0.2800
|
June 30, 2016
|
$
|
0.8999
|
$
|
0.25
|
March 31, 2016
|
$
|
9.39
|
$
|
0.3000
|
|
|
|
|
|
December 31, 2015
|
$
|
6.35
|
$
|
0.13
|
September 30, 2015
|
$
|
0.99
|
$
|
0.111
|
June 30, 2015
|
$
|
1.00
|
$
|
0.111
|
March 31, 2015
|
$
|
1.00
|
$
|
1.00
|
|
|
|
|
|
December 31, 2014
|
$
|
2.25
|
$
|
1.00
|
September 30, 2014
|
$
|
2.25
|
$
|
0.129
|
June 30, 2014
|
$
|
2.55
|
$
|
0.865
|
March 31, 2014
|
$
|
1.30
|
$
|
0.90
|
SHAREHOLDERS OF RECORD
As of February 6, 2017, we had 28,659,897 outstanding
shares of common stock and there were approximately 420 holders of record of our common stock, not including holders who hold their
shares in street name.
DIVIDENDS
We have never declared or paid a cash dividend.
At this time, we do not anticipate paying dividends in the future. We are under no legal or contractual obligation to declare or
to pay dividends, and the timing and amount of any future cash dividends and distributions is at the discretion of our Board of
Directors and will depend, among other things, on our future after-tax earnings, operations, capital requirements, borrowing capacity,
financial condition and general business conditions. We plan to retain any earnings for use in the operation of our business and
to fund future growth. You should not purchase our Shares on the expectation of future dividends.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
PLANS
Equity Compensation Plan Information
Plan Category
|
|
Number of
securities to be issued
upon exercise
of outstanding
options,
warrants and rights
|
|
Weighted-
average exercise
price of
outstanding
options, warrants
and rights
|
|
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
|
Equity compensation plans approved by security holders
|
|
|
-0-
|
|
|
|
N/A
|
|
|
N/A
|
Equity compensation plans not approved by security holders
|
|
|
-0-
|
|
|
|
N/A
|
|
|
N/A
|
Total
|
|
|
-0-
|
|
|
|
|
|
|
|
As of the date of this prospectus, we do not have a stock option
plan.
DESCRIPTION OF SECURITIES
The following description
of our capital stock is based upon our articles of incorporation, as amended, our bylaws and applicable provisions of law, in each
case as currently in effect. This discussion does not purport to be complete and is qualified in its entirety by reference to our
amended and restated articles of incorporation, as amended, and our bylaws, copies of which are filed with the SEC as exhibits
to the registration statement of which this prospectus is a part.
Authorized Capital Stock
As of the date of this prospectus, our authorized
capital stock consists of (i) 900,000,000 shares of common stock, par value $0.001 per share (“Common Stock”), and
(ii) 10,000,000 shares of preferred stock, par value $0.001 per share (“Preferred Stock”). At February 6, 2017, we
had 28,659,897 shares of Common Stock issued and outstanding and 1,000,000 shares of Series A Preferred Stock which were designated
from the Preferred Stock and were issued and outstanding. The following summarized the important provisions of the Company’s
capital stock.
Common Stock
As of February 6, 2017, there were 28,659,897
shares of our common stock issued and outstanding. We have reserved an aggregate of 5,000,000 shares of common stock pertaining
to that certain convertible promissory note
dated December 29, 2015. No other shares for
issuance upon exercise of common stock purchase warrants or stock options.
Of our total issued and outstanding common
shares, 14,260,542 shares are owned by our sole officer and director, Mr. Petrone. All of our shares of common stock issued and
outstanding were issued in private placement offerings or otherwise have been held a period in excess of six months and are eligible
to be resold pursuant to Rule 144 promulgated under the Securities Act.
Holders of shares of common stock are entitled
to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock do not have cumulative voting
rights. Holders of common stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the
Board of Directors in its discretion from funds legally available. In the event of a liquidation, dissolution or winding up of
the company, the holders of common stock are entitled to share pro rata all assets remaining after payment in full of all liabilities.
All of the outstanding shares of common stock are fully paid and non-assessable.
Holders of common stock have no preemptive rights to purchase the
Company’s common stock. There are no conversion or redemption rights or sinking fund provisions with respect to the common
stock.
The resale of our shares of common stock owned
by officers, directors and affiliates is subject to the volume limitations of Rule 144. In general, Rule 144 permits our affiliate
shareholders who have beneficially-owned restricted shares of common stock for at least six months to sell without registration,
within a three-month period, a number of shares not exceeding one percent of the then outstanding shares of common stock. Furthermore,
if such shares are held for at least six months by a person not affiliated with us (in general, a person who is not one of our
executive officers, directors or principal shareholders during the three month period prior to resale), such restricted shares
can be sold without any volume limitation, provided all of the other requirements for resale under Rule 144 are applicable.
Preferred Stock
The Board of Directors is authorized to provide
for the issuance of shares of preferred stock in series and, by filing a certificate pursuant to the applicable law of Nevada,
to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences
and rights of the shares of each such series and the qualifications, limitations or restrictions thereof without any further vote
or action by the shareholders. Any shares of preferred stock so issued would have priority over the common stock with respect to
dividend or liquidation rights. Any future issuance of preferred stock may have the effect of delaying, deferring or preventing
a change in control of our Company without further action by the shareholders and may adversely affect the voting and other rights
of the holders of common stock. At present, we have no plans to neither issue any preferred stock nor adopt any series, preferences
or other classification of preferred stock.
On February 19, 2016, the Board of Directors
of the Company authorized and approved to create a new class of voting preferred stock called “Series A Preferred Stock”,
consisting of 1,000,000 shares authorized, $.001 par value. The preferred stock is not convertible into any other class or series
of stock. On all matters to come before the shareholders of the Company, the holders of Series A Preferred shall have that number
of votes per share (rounded to the nearest whole share) equal to the product of (x) the number of shares of Series A Preferred
held on the record date for the determination of the holders of the shares entitled to vote (the “Record Date”), or,
if no record date is established, at the date such vote is taken or any written consent of shareholders is first solicited, and
(y) 50. In the event that the votes by the holders of the Series A Preferred Stock do not total at least 51% of the votes of all
classes of the Company’s authorized capital stock entitled to vote, then regardless of the provisions of this paragraph,
in any such case, the votes cast by a majority of the holders of the Series A Preferred Stock shall be deemed to equal 51% of all
votes cast at any meeting of stockholders, or any issue put to the stockholders for voting and the Company may state that any such
action approved by at least a majority of the holders of the Series A Preferred Stock was had by majority vote of the holders of
all classes of the Company’s capital stock. On February 19, 2016, we issued 1,000,000 shares of Series A Preferred Stock
to our chief executive officer.
The issuance of shares of preferred stock,
or the issuance of rights to purchase such shares, could be used to discourage an unsolicited acquisition proposal. For instance,
the issuance of a series of preferred stock might impede a business combination by including class voting rights that would enable
the holder to block such a transaction, or facilitate a business combination by including voting rights that would provide a required
percentage vote of the stockholders. In addition, under certain circumstances, the issuance of preferred stock could adversely
affect the voting power of the holders of the common stock. Although the Board of Directors is required to make any determination
to issue such stock based on its judgment as to the best interests of our stockholders, the Board of Directors could act in a manner
that would discourage an acquisition attempt or other transaction that some, or a majority, of the stockholders might believe to
be in their best interests or in which stockholders might receive a premium for their stock over the then market price of such
stock. The Board of Directors does not at present intend to seek stockholder approval prior to any issuance of currently authorized
stock, unless otherwise required by law or stock exchange rules. We have no present plans to issue any preferred stock.
Registration Rights
In accordance with that certain Registration
Rights Agreement, dated October 24, 2016, between the Company and Peak One Opportunity Fund, L.P. (the “Selling Stockholder”),
the Selling Stockholder is entitled to certain rights with respect to the registration of the shares of common stock issued in
connection with the Equity Purchase Agreement (the “Selling Stockholder Registrable Securities”).
Pursuant to the
Registration Rights Agreement, the Company must (i) file the Registration Statement within thirty calendar days from the Closing
Date, (ii) use reasonable efforts to cause the Registration Statement to be declared effective under the Securities Act of 1933,
as amended (the “Securities Act”), as promptly as possible after the filing thereof, but in any event no later than
the 90th calendar day following the Closing Date, and (iii) use its reasonable efforts to keep such Registration Statement continuously
effective under the Securities Act until all of the Commitment Shares and Purchase Shares have been sold thereunder or pursuant
to Rule 144.
We must also take such action as is necessary to register and/or qualify
the Selling Stockholder Registrable Securities under such other securities or blue sky laws of all applicable jurisdictions in
the United States.
We will pay all reasonable expenses incurred
in connection with the registrations described above. However, we will not be responsible for any broker or similar concessions
or any legal fees or other costs of the Selling Stockholder.
Dividends
We have not paid any dividends on our common
stock and do not presently intend to pay cash dividends prior to the consummation of a business combination. The payment of cash
dividends in the future, if any, will be contingent upon our revenues and earnings, if any, capital requirements and general financial
condition subsequent to consummation of a business combination, if any. The payment of any dividends subsequent to a business combination,
if any, will be within the discretion of our then existing board of directors. It is the present intention of our board of directors
to retain all earnings, if any, for use in our business operations and, accordingly, the board of directors does not anticipate
paying any cash dividends in the foreseeable future.
SELLING STOCKHOLDER
This Prospectus relates to the possible
resale from time to time by the Selling Stockholder named in the table below of any or all of the shares of common stock that has
been or may be issued by us to the Selling Stockholder under the Equity Purchase Agreement. For additional information regarding
the transaction relating to the issuance of common stock covered by this Prospectus, see “Management’s Discussion and
Analysis of Results of Operation and Financial Condition – Liquidity and Capital Resources – Equity Purchase Agreement
and Registration Rights Agreement” above. We are registering the shares of common stock pursuant to the provisions of the
Registration Rights Agreement in order to permit the Selling Stockholder to offer the shares for resale from time to time.
The table below presents information regarding
the Selling Stockholder and the shares of common stock that it may offer from time to time under the Equity Purchase Plan under
this Prospectus. This table is prepared based on information supplied to us by the Selling Stockholder, and reflects holdings as
of February 6, 2017. As used in this Prospectus, the term “Selling Stockholder” includes the Selling Stockholder, and
any donees, pledgees, transferees, or other successors-in-interest selling shares received after the date of this Prospectus from
the Selling Stockholder as a gift, pledge, or other non-sale related transfer. The number of shares in the column “Maximum
Number of Shares of Common Stock to be Offered Pursuant to this Prospectus” represents all of the shares of common stock
that the Selling Stockholder may offer under this Prospectus. The Selling Stockholder may sell some, all or none of its shares
offered by this Prospectus. We do not know how long the Selling Stockholder will hold the shares before selling them, and we currently
have no agreements, arrangements, or understandings with the Selling Stockholder regarding the sale of any of the shares.
Beneficial ownership is determined in accordance
with Rule 13d-3(d) promulgated by the SEC under the Exchange Act, and includes shares of common stock with respect to which the
Selling Stockholder has voting and investment power. With respect to the Equity Line with the Selling Stockholder, because the
purchase price of the shares of common stock issuable under the Equity Purchase Agreement is determined on each settlement date,
the number of shares that may actually be sold by us under the Equity Purchase Agreement may be fewer than the number of shares
being offered by this Prospectus. The fourth column assumes the sale of all of the shares offered by the Selling Stockholder pursuant
to this Prospectus.
|
|
Number of Shares of Common Stock
Owned Prior to Offering
|
|
|
Maximum Number of Shares of
Common Stock to be Offered
|
|
|
Number of Shares of Common Stock
Owned after Offering
|
|
Name of Selling Stockholder
|
|
Number
|
|
|
Percent
|
|
|
Pursuant to this Prospectus
|
|
|
Number (1)
|
|
|
Percent
|
|
Peak One Opportunity Fund, L.P. (2)
|
|
|
990,000
|
(3)
|
|
|
3.45
|
%
|
|
|
7,506,942
|
|
|
|
990,000
|
(3)(4)
|
|
|
2.74
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Assumes the sale of all shares being
offered pursuant to this Prospectus.
(2) The Selling Stockholder’s principal
business is that of a private investment firm. We have been advised that the Selling Stockholder is not a member of FINRA, or an
independent broker-dealer, and that neither the Selling Stockholder nor any of its affiliates is an affiliate or an associated
person of any FINRA member or independent broker-dealer. We have been further advised that Jason Goldstein of Peak One Investments
LLC, the general partner of the Selling Stockholder, has sole voting and dispositive powers with respect to the shares of common
stock being registered for sale by the Selling Stockholder.
(3) Represents 650,000 shares
of common stock (“Commitment Shares”) issued to Selling Stockholder as a commitment fee in connection with the Equity
Purchase Agreement and 340,000 shares of common stock issuable upon conversion of the convertible debentures (“Convertible
Debentures”) held by the Selling Stockholder issued under the Securities Purchase Agreement (assuming no event of default
has occurred under the convertible debentures). In accordance with Rule 13d-3(d) under the Exchange Act, we have excluded from
the number of shares beneficially owned prior to the Offering all of the shares that the Selling Stockholder may be required to
purchase under the Equity Purchase Agreement (“Purchase Shares”) because the issuance of such shares is solely at our
discretion and is subject to certain conditions, the satisfaction of all of which are outside of the Selling Stockholder’s
control, including, but not limited to, the Registration Statement of which this Prospectus is a part becoming and remaining effective.
Furthermore, the maximum dollar value of each Put of common stock to the Selling Stockholder under the Equity Purchase Agreement
is subject to certain agreed upon threshold limitations set forth therein. Also, under the terms of the Equity Purchase Agreement,
as amended, we may not issue shares of our
common stock to the Selling Stockholder
to the extent that the Selling Stockholder or any of its affiliates would, at any time, beneficially own more than 4.99% of our
outstanding common stock.
(4) Assumes shares owned directly (Commitment Shares as
well as shares underlying Convertible Debentures) after conversion of the Convertible Debentures or reflects shares underlying
unconverted Convertible Debentures, or both.
PLAN OF DISTRIBUTION
The Selling Stockholder, including any
of its pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby
which were acquired under the Equity Purchase Agreement on the OTC Bulletin Board or any other stock exchange, market or trading
facility on which the securities are traded or in private transactions. These sales may be at market prices prevailing
at the time of sale, prices related to prevailing market prices, fixed prices or negotiated prices. A Selling Stockholder
may use any one or more of the following methods when selling securities:
|
·
|
ordinary brokerage transactions
and transactions in which the broker-dealer solicits purchasers;
|
|
·
|
block trades in which
the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal
to facilitate the transaction;
|
|
·
|
purchases by a broker-dealer
as principal and resale by the broker-dealer for its account;
|
|
·
|
exchange distributions
in accordance with the rules of the applicable exchange;
|
|
·
|
privately negotiated
transactions;
|
|
·
|
settlements of short
sales;
|
|
·
|
transactions through
broker-dealers that agree with the Selling Stockholders to sell a specified number of such securities at a stipulated price per
security;
|
|
·
|
writings or settlements
of options or other hedging transactions, whether through an options exchange or otherwise;
|
|
·
|
combinations of any such
methods of sale; or
|
|
·
|
any other methods permitted
pursuant to applicable law.
|
The Selling Stockholder may also sell
securities under Rule 144 under the Securities Act, if available, rather than under this Prospectus.
Broker-dealers engaged by the Selling
Stockholder may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or
discounts from the Selling Stockholder (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser)
in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction
not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction
a markup or markdown in compliance with FINRA IM-2440.
In connection with the sale of the securities
or interests therein, the Selling Stockholder may enter into hedging transactions with broker-dealers or other financial institutions,
which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling
Stockholder may also enter into option or other transactions with broker-dealers or other financial institutions or create one
or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered
by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this Prospectus (as
supplemented or amended to reflect such transaction).
The Selling Stockholder and any broker-dealers
or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents
and any profit on the resale of the securities purchased by
them may be deemed to be underwriting commissions
or discounts under the Securities Act. The Selling Stockholder has informed the Company that it does not have any written
or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.
The Company is required to pay certain
fees and expenses incurred by the Company incident to the registration of the securities. The Company has agreed to
indemnify the Selling Stockholder against certain losses, claims, damages and liabilities, including liabilities under the Securities
Act.
Because the Selling Stockholder may be
deemed to be an “underwriter” within the meaning of the Securities Act, it will be subject to the prospectus delivery
requirements of the Securities Act including Rule 172 thereunder. In addition, any securities covered by this Prospectus
which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this Prospectus.
The Selling Stockholder has advised us that there is no underwriter or coordinating broker acting in connection with the proposed
sale of the resale securities by the Selling Stockholder.
We have agreed to keep this Prospectus
effective until the earlier of (i) the date on which the securities may be resold by the Selling Stockholder without registration
and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company
to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect
or (ii) the sale of all of the securities pursuant to this Prospectus or Rule 144 under the Securities Act or any other rule of
similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required
under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless
they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person engaged
in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the common
stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In
addition, the Selling Stockholder will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder,
including Regulation M, which may limit the timing of purchases and sales of securities of the common stock by the Selling Stockholder
or any other person. We will make copies of this Prospectus available to the Selling Stockholder and have informed
it of the need to deliver a copy of this Prospectus to each purchaser at or prior to the time of the sale (including by compliance
with Rule 172 under the Securities Act).
SHARES ELIGIBLE FOR FUTURE SALE
We cannot predict the effect, if any,
that market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market
price of our common stock prevailing from time to time. Future sales of our common stock in the public market, or the availability
of such shares for sale in the public market, could adversely affect market prices prevailing from time to time. The availability
for sale of a substantial number of shares of our common stock acquired through the exercise of outstanding warrants could materially
adversely affect the market price of our common stock. In addition, sales of our common stock in the public market after the restrictions
lapse as described below, or the perception that those sales may occur, could cause the prevailing market price to decrease or
to be lower than it might be in the absence of those sales or perceptions.
Sale of Restricted Shares
As of February 6, 2017, there were 28,659,897
shares of common stock outstanding. The 7,506,942 shares of common stock being offered by this Prospectus will be freely tradable,
other than by any of our “affiliates,” as defined in Rule 144(a) under the Securities Act, without restriction or registration
under the Securities Act. In addition, 28,659,897 outstanding shares were issued and sold by us in private transactions and
those shares, as well as shares issuable on exercise of currently outstanding convertible notes are, or will be, eligible for public
sale if
registered under the Securities Act or
sold in accordance with Rule 144 under the Securities Act. These remaining shares are “restricted securities” within
the meaning of Rule 144 under the Securities Act.
Rule 144
In general, under Rule 144, as currently in effect, a person (or persons whose shares are required to be aggregated), including
a person who may be deemed an “affiliate” of a company, who has beneficially owned restricted securities for at least
six months may sell, within any three-month period, a number of shares that does not exceed the greater of: (1) 1% of the then-outstanding
shares of common stock, or (2) if and when the common stock is listed on a national securities exchange, the average weekly trading
volume of the common stock during the four calendar weeks preceding the date on which notice of such sale was filed under Rule
144. Sales under Rule 144 are also subject to certain requirements as to the manner of sale, notice, and availability of current
public information about our company. A person who is not deemed to have been an affiliate of us at any time during the 90 days
preceding a sale by such person, and who has beneficially owned the restricted shares for at least one year, is entitled to sell
such shares under Rule 144 without regard to any of the restrictions described above.
We cannot estimate the number of shares
of our common stock that our existing stockholders will elect to sell under Rule 144.
Transfer Agent
The transfer agent for our common stock
is OTC Stock Transfer, Inc. at 6364 South Highland Drive, Suite 201, Salt Lake City, UT 84121. OTC Stock Transfer,
Inc.’s telephone number is (801) 272-7272.
LEGAL MATTERS
The law firm of Legal & Compliance,
LLC has provided opinions regarding the validity of the shares of our common stock offered pursuant to this Prospectus.
EXPERTS
The consolidated financial statements of
the Company and its subsidiaries as of December 31, 2015 and December 31, 2014 and for the year and period then ended, respectively,
have been audited by MaloneBailey, LLP, an independent registered public accounting firm, and upon the authority of said firm
as experts in accounting and auditing.
INTERESTS OF NAMED EXPERTS AND COUNSEL
None.
DISCLOSURE OF THE SEC POSITION OF INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Sections 78.7502 and 78.751 of the Nevada
Revised Statutes authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and
officers in terms sufficiently broad to permit indemnification, including reimbursement of expenses incurred, under certain circumstances
for liabilities arising under the Securities Act. Our Articles of Incorporation, as amended, provide that that the Company may
indemnify its officers, directors, agents and other persons to the fullest extent permitted by the laws of the State of Nevada
as the Board of Directors may from time to time provide in the Bylaws or by resolution.
Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers, or persons controlling us pursuant to the foregoing provisions,
or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other
than the payment by us of expenses incurred or paid by a director, officer, or controlling person in the successful defense of
any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities
being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed hereby
in the Securities Act and we will be governed by the final adjudication of such issue.
WHERE YOU CAN FIND MORE INFORMATION
We have filed the Registration Statement,
together with all amendments and exhibits, with the SEC. This Prospectus, which forms a part of the Registration Statement, does
not contain all information included in the Registration Statement. Certain information is omitted and you should refer to the
Registration Statement and its exhibits. With respect to references made in this Prospectus to any of our contracts or other documents,
the references are not necessarily complete and you should refer to the exhibits attached to the Registration Statement for copies
of the actual contracts or documents. You may read and copy any document that we file at the SEC’s Public Reference Room
at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of
the public reference rooms. Our filings and the Registration Statement, of which this Prospectus is a part, can also be reviewed
by accessing the SEC’s website at
www.sec.gov
.
We file periodic reports and other information
with the SEC. Such periodic reports and other information are available for inspection and copying at the public reference room
and website of the SEC referred to above. We maintain a website at www.clsholdingsinc.com. You may access our annual reports
on Form 10-K and quarterly reports on Form 10-Q free of charge at our website as soon as reasonably practicable after such material
is electronically filed with, or furnished to, the SEC. The information and other content contained on any of our websites are
not part of this Prospectus.
Notwithstanding anything herein to the contrary, all documents subsequently
filed by Petrone Worldwide, Inc. pursuant to Section 13(a), 14, or 15(d) of the Securities Exchange Act of 1934, as amended, prior
to the termination of the offering shall be deemed to be incorporated by reference into this Prospectus.
INDEX TO FINANCIAL STATEMENTS
As of September 30, 2016 and December
31, 2015 and for the Three and Nine Months Ended
September 30, 2016 and September 30,
2015 (Unaudited)
|
Page
|
|
|
Consolidated Balance Sheets—September 30, 2016 and December 31, 2015 (unaudited)
|
F-2
|
|
|
Consolidated Statements of Operations–Three and Nine Months Ended September 30, 2016 and 2015 (unaudited)
|
F-3
|
|
|
Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2016 and 2015 (unaudited)
|
F-4
|
|
|
Notes to Unaudited Consolidated Financial Statements
|
F-6
|
As of December 31, 2015 and 2014 and
for the Year Ended December 31, 2015 and 2014 (Audited)
|
Page
|
Report of Independent Registered Public Accounting Firm
|
F-20
|
|
|
Consolidated Balance Sheets - As of December 31, 2015 and 2014
|
F-21
|
|
|
Consolidated Statements of Operations - For the Years Ended December 31, 2015 and 2014
|
F-22
|
|
|
Consolidated Statements of Changes in Stockholders’ Equity - For the Years Ended December 31, 2015 and 2014
|
F-23
|
|
|
Consolidated Statements of Cash Flows - For the Years Ended December 31, 2015 and 2014
|
F-24
|
|
|
Notes to Consolidated Financial Statements
|
F-26
|
PETRONE WORLDWIDE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
September 30,
|
|
December 31,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
13,195
|
|
|
$
|
208,064
|
|
Accounts receivable
|
|
|
66,826
|
|
|
|
—
|
|
Prepaid expenses and other current assets
|
|
|
30,598
|
|
|
|
131,046
|
|
Advances to supplier
|
|
|
137,365
|
|
|
|
11,262
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
247,984
|
|
|
|
350,372
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
247,984
|
|
|
$
|
350,372
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Convertible notes payable, net
|
|
$
|
87,834
|
|
|
$
|
129,187
|
|
Loans payable
|
|
|
53,544
|
|
|
|
—
|
|
Accounts payable
|
|
|
74,959
|
|
|
|
45,174
|
|
Accrued expenses
|
|
|
7,243
|
|
|
|
405
|
|
Advances from customers
|
|
|
9,539
|
|
|
|
—
|
|
Due to related party
|
|
|
34,054
|
|
|
|
38,434
|
|
Derivative liability
|
|
|
2,093
|
|
|
|
73,236
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
269,266
|
|
|
|
286,436
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
269,266
|
|
|
|
286,436
|
|
|
|
|
|
|
|
|
|
|
Commitments (See Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY (DEFICIT):
|
|
|
|
|
|
|
|
|
Preferred stock, $.001 par value, 10,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
Series A preferred stock: $.001 par value; 1,000,000 shares authorized; 1,000,000 and
|
|
|
|
|
|
|
|
|
0 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively
|
|
|
1,000
|
|
|
|
—
|
|
Common stock: $.001 par value, 100,000,000 shares authorized; 22,959,897 and 21,483,230 issued and outstanding at September 30, 2016 and December 31, 2015, respectively
|
|
|
22,960
|
|
|
|
21,483
|
|
Additional paid-in capital
|
|
|
3,333,810
|
|
|
|
2,722,559
|
|
Accumulated deficit
|
|
|
(3,379,052
|
)
|
|
|
(2,680,106
|
)
|
|
|
|
|
|
|
|
|
|
Total Stockholders' Equity (Deficit)
|
|
|
(21,282
|
)
|
|
|
63,936
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity (Deficit)
|
|
$
|
247,984
|
|
|
$
|
350,372
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated financial statements.
|
|
|
PETRONE
WORLDWIDE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
For the Three Months Ended
|
|
For the Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
(As Restated)
|
|
|
|
(As Restated)
|
REVENUES:
|
|
|
|
|
|
|
|
|
Product segment
|
|
$
|
35,422
|
|
|
$
|
24,457
|
|
|
$
|
206,851
|
|
|
$
|
1,373,547
|
|
Logistic services segment
|
|
|
50,708
|
|
|
|
—
|
|
|
|
50,708
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
|
86,130
|
|
|
|
24,457
|
|
|
|
257,559
|
|
|
|
1,373,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product segment
|
|
|
28,217
|
|
|
|
22,934
|
|
|
|
162,113
|
|
|
|
1,265,838
|
|
Logistic services segment
|
|
|
33,830
|
|
|
|
—
|
|
|
|
33,830
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cost of Revenues
|
|
|
62,047
|
|
|
|
22,934
|
|
|
|
195,943
|
|
|
|
1,265,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
24,083
|
|
|
|
1,523
|
|
|
|
61,616
|
|
|
|
107,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and related benefits
|
|
|
15,000
|
|
|
|
—
|
|
|
|
48,000
|
|
|
|
12,600
|
|
Consulting fees
|
|
|
23,298
|
|
|
|
66,393
|
|
|
|
167,638
|
|
|
|
102,641
|
|
Professional fees
|
|
|
47,821
|
|
|
|
10,973
|
|
|
|
146,625
|
|
|
|
40,682
|
|
Rent expense
|
|
|
7,753
|
|
|
|
14,295
|
|
|
|
42,969
|
|
|
|
62,918
|
|
General and administrative expenses
|
|
|
31,850
|
|
|
|
24,732
|
|
|
|
176,466
|
|
|
|
92,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
125,722
|
|
|
|
116,393
|
|
|
|
581,698
|
|
|
|
311,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(101,639
|
)
|
|
|
(114,870
|
)
|
|
|
(520,082
|
)
|
|
|
(204,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expenses
|
|
|
(90,646
|
)
|
|
|
(58
|
)
|
|
|
(236,279
|
)
|
|
|
(105
|
)
|
Gain on derivative liability
|
|
|
1,915
|
|
|
|
—
|
|
|
|
57,415
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Expense
|
|
|
(88,731
|
)
|
|
|
(58
|
)
|
|
|
(178,864
|
)
|
|
|
(105
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(190,370
|
)
|
|
$
|
(114,928
|
)
|
|
$
|
(698,946
|
)
|
|
$
|
(204,153
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER COMMON SHARE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
22,830,441
|
|
|
|
16,014,085
|
|
|
|
22,601,478
|
|
|
|
15,646,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated
financial statements.
PETRONE WORLDWIDE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For the Nine Months Ended
|
|
|
September 30,
|
|
|
2016
|
|
2015
|
|
|
|
|
(As Restated)
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(698,946
|
)
|
|
$
|
(204,153
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Amortization of debt discount to interest expense
|
|
|
120,813
|
|
|
|
—
|
|
Stock-based compensation
|
|
|
140,448
|
|
|
|
105,179
|
|
Gain on derivative liability
|
|
|
(57,415
|
)
|
|
|
—
|
|
Stock-based interest expense for debt modification
|
|
|
80,000
|
|
|
|
—
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(66,826
|
)
|
|
|
(812
|
)
|
Prepaid expenses and other current assets
|
|
|
—
|
|
|
|
5,724
|
|
Advances to supplier
|
|
|
(126,103
|
)
|
|
|
12,782
|
|
Accounts payable
|
|
|
29,785
|
|
|
|
(685
|
)
|
Accrued expenses
|
|
|
6,838
|
|
|
|
(6,288
|
)
|
Advances from customers
|
|
|
9,539
|
|
|
|
9,654
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
|
(561,867
|
)
|
|
|
(78,599
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from related party advances
|
|
|
38,000
|
|
|
|
—
|
|
Repayment of related party advances
|
|
|
(42,380
|
)
|
|
|
(983
|
)
|
Repayment of convertible debt
|
|
|
(162,166
|
)
|
|
|
—
|
|
Proceeds from loans payable
|
|
|
55,000
|
|
|
|
—
|
|
Repayment of loans payable
|
|
|
(1,456
|
)
|
|
|
—
|
|
Proceeds from sale of common stock
|
|
|
480,000
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
366,998
|
|
|
|
4,017
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH
|
|
|
(194,869
|
)
|
|
|
(74,582
|
)
|
|
|
|
|
|
|
|
|
|
CASH, beginning of period
|
|
|
208,064
|
|
|
|
77,827
|
|
|
|
|
|
|
|
|
|
|
CASH, end of period
|
|
$
|
13,195
|
|
|
$
|
3,245
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
35,466
|
|
|
$
|
105
|
|
Income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Reclassification of derivative liability to equity
|
|
$
|
13,728
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for future services and reflected in prepaid expenses
|
|
$
|
24,000
|
|
|
$
|
164,250
|
|
Exchange of related party advances for accounts payable
|
|
$
|
—
|
|
|
$
|
800
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated financial statements.
|
|
PETRONE WORLDWIDE, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2016
NOTE 1 –
ORGANIZATION AND BASIS
OF PRESENTATION
Organization
Petrone Worldwide, Inc. (the “Company”)
was incorporated as Sheridan Industries, Inc. on December 14, 1998 in the State of Nevada. On December 31, 1998, the Company changed
its name to Diabetex International Corp. and effective February 18, 2014, the Company changed its name to Petrone Worldwide, Inc.
On January 29, 2014 and effective March 3,
2014, the Company entered into a purchase agreement (the “Purchase Agreement”) with Petrone Food Works, Inc. (“PFW”)
and the shareholder of PFW. Pursuant to the Purchase Agreement, the Company acquired 100% of PFW’s issued and outstanding
common stock from the PFW shareholder in exchange for the issuance of 11,760,542 shares of the Company’s common stock, representing
98.4% of the outstanding common stock, (the “Exchange”), after giving effect to a 1-for-500 reverse stock split (the
“Reverse Stock Split”) which resulted in 195,607 common shares outstanding prior to the Exchange for liabilities of
$30,000. Accordingly, the PFW shareholder became a shareholder of the Company and PFW became a subsidiary of the Company. The Exchange
has been accounted for as a reverse-merger and recapitalization since the stockholder of PFW obtained voting and management control
of the Company. PFW is the acquirer for financial reporting purposes and the Company is the acquired company. Consequently, the
assets and liabilities and the operations reflected in the historical financial statements prior to the Exchange are those of PFW
and was recorded at the historical cost basis of PFW, and the consolidated financial statements after completion of the Exchange
included the assets and liabilities of both the Company and PFW and the Company’s consolidated operations from the closing
date of the Exchange. All share and per share data in the accompanying consolidated financial statements have been retroactively
restated to reflect the effect of the Reverse Stock Split and recapitalization. PFW was formed under the laws of the State of Nevada
in October 2013.
The Company is in the hospitality industry
and is a supplier of tabletop kitchenware and hotel room products thru an exclusive licensing agreement with a leading supplier.
Additionally, in August 2016, the Company began providing logistic services to one customer.
Basis of Presentation and Principles of
Consolidation
The Company’s unaudited consolidated
financial statements include the financial statements of its wholly-owned subsidiary, Petrone Food Works, Inc. (inactive). All
significant intercompany accounts and transactions have been eliminated in consolidation.
The consolidated financial statements for the
three and nine months ended September 30, 2016 and 2015 have been prepared by us without audit pursuant to the rules and regulations
of the Securities and Exchange Commission. In the opinion of management, all adjustments necessary to present fairly our financial
position, results of operations, and cash flows as of September 30, 2016 and 2015, and for the periods then ended, have been made.
Those adjustments consist of normal and recurring adjustments. Certain information and note disclosures normally included in our
annual financial statements prepared in accordance with generally accepted accounting principles have been or omitted. The unaudited
consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for
the year ended December 31, 2015 and footnotes thereto included in the Company’s Annual Report on Form 10-K filed with the
SEC on September 9, 2016. The results of operations for the nine months ended September 30, 2016 are not necessarily indicative
of the results to be expected for the full year.
Going concern
These unaudited consolidated financial statements
have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and
commitments in the normal course of business. As
reflected in the accompanying unaudited consolidated
financial statements, for the nine months ended September 30, 2016, the Company had a net loss of $698,946 and net cash used in
operations of $561,867. Additionally, the Company had an accumulated deficit, stockholders’ deficit and a working capital
deficit of $3,379,052, $21,282 and $21,282, respectively, at September 30, 2016. These factors raise substantial doubt about the
Company’s ability to continue as a going concern. Management cannot provide assurance that the Company will ultimately achieve
profitable operations or become cash flow positive, or raise additional debt and/or equity capital. The Company is seeking to raise
capital through additional debt and/or equity financings to fund its operations in the future. Although the Company has historically
raised capital from sales of equity and from the issuance of promissory notes, there is no assurance that it will be able to continue
to do so. If the Company is unable to raise additional capital or secure additional lending in the near future, management expects
that the Company will need to curtail its operations. These consolidated financial statements do not include any adjustments related
to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.
NOTE 2 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
The preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates. Significant estimates for the nine months ended September 30, 2016 and 2015 include estimates
of current and deferred income taxes and deferred tax valuation allowances, the fair value of derivative liabilities, and the fair
value of non-cash equity transactions.
Fair value of financial instruments and fair value measurements
FASB ASC 820 —
Fair Value
Measurements and Disclosures,
defines fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures about
the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the
fair value of financial instruments are based on pertinent information available to the Company on September 30, 2016. Accordingly,
the estimates presented in these financial statements are not necessarily indicative of the amounts that could be realized on disposition
of the financial instruments. FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation
techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable
inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels
of the fair value hierarchy are as follows:
Level 1- Inputs are unadjusted quoted prices
in active markets for identical assets or liabilities available at the measurement date.
Level 2- Inputs are quoted prices for similar
assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not
active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3- Inputs are unobservable inputs that
reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset
or liability based on the best available information.
The carrying amounts reported in the consolidated
balance sheets for cash and cash equivalents, accounts receivable, loans, accounts payable, accrued expenses, and other payables
approximate their fair market value based on the short-term maturity of these instruments.
The Company analyzes all financial and non-financial
instruments with features of both liabilities and equity under the FASB’s accounting standard for such instruments. Under
this standard, financial and non-financial assets and liabilities are classified in their entirety based on the lowest level of
input that is significant to the fair value measurement. The Company accounts for one instrument at fair value using level 3 valuation.
|
|
At September 30, 2016
|
|
At December 31, 2015
|
Description
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Derivative liability
|
|
|
—
|
|
|
|
—
|
|
|
$
|
2,093
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
73,236
|
|
A roll forward of the level 3 valuation
financial instruments is as follows:
|
|
|
Derivative
Liability
|
|
|
Balance at December 31, 2015
|
|
$
|
73,236
|
|
Reclassification of derivative liability to equity
|
|
|
(13,728
|
)
|
Change in fair value included in net loss
|
|
|
(57,415
|
)
|
Balance at September 30, 2016
|
|
$
|
2,093
|
|
ASC
825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities
at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable,
unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that
instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value
option to any outstanding instruments.
Cash and cash equivalents
For purposes of the consolidated statements
of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date
and money market accounts to be cash equivalents.
Accounts receivable
The Company recognizes an allowance for losses
on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis
of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific
identifiable customer accounts considered at risk or uncollectible. The expense associated with the allowance for doubtful accounts
is recognized as general and administrative expense.
Advances to Supplier
Advances to supplier represent the advance
payments for the purchase of product from supplier.
Impairment of long-lived assets
In accordance with ASC Topic 360, the Company
reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets
may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted
future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between
the asset’s estimated fair value and its book value.
Derivative liabilities
The Company has certain financial instruments
that are embedded derivatives associated with capital raises. The Company evaluates all its financial instruments to determine
if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for
in accordance with FASB ASC 810-10-05-4 and 815-40. This accounting treatment requires that the carrying amount of any
embedded derivatives
be recorded at fair value at issuance and marked-to-market
at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company,
the change in the fair value during the period is recorded as either income or expense. Upon conversion or exercise, the derivative
liability is marked to fair value at the conversion date and then the related fair value is reclassified to equity.
Revenue recognition
Pursuant to the guidance of ASC Topic 605,
the Company recognizes sales when persuasive evidence of an arrangement exists, delivery has occurred or services have been provided,
the purchase price is fixed or determinable and collectability is reasonably assured. For product sale, the Company’s standard
terms are “ex works”, with title transferring to its customer at the Company suppliers’ loading docks or upon
embarkation with risk of loss being assumed by the customer at the shipping point. The Company has a small percentage of sales
with other terms, and revenue is recognized in accordance with the terms of the related customer purchase order. Shipping and handling
costs billed to customers are recognized in revenue. For logistics services performed, the Company recognizes revenue upon performance
and completion of services rendered.
Cost of sales
Cost of sales includes inventory costs, materials
and supplies costs, and shipping and handling costs incurred.
Shipping and handling costs
For the nine
months ended September 30, 2016 and 2015, shipping and handling costs incurred for product shipped to customers are included in
cost of sales and amounted to $33,569 and $127,785, respectively. Shipping and handling costs charged to customers are included
in sales.
Advertising costs
All costs related to advertising of the Company’s
products are expensed in the period incurred.
Income taxes
The Company accounts for income tax using the
liability method prescribed by ASC 740, “
Income Taxes
”. Under this method, deferred tax assets and liabilities
are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax
rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance
to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all,
of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income
or loss in the period that includes the enactment date.
The Company follows the accounting guidance
for uncertainty in income taxes using the provisions of Accounting Standards Codification (ASC) 740
“Income Taxes
”.
Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not
the position will be sustained upon examination by the tax authorities. As of September 30, 2016 and December 31, 2015, the Company
had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company recognizes
interest and penalties related to uncertain income tax positions in other expense. The Company did not record such interest or
penalties for the nine months ended September 30, 2016 and 2015.
Stock-based compensation
Stock-based compensation is accounted for based
on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost
of employee and director services received in exchange for an award of equity instruments over the period the employee or director
is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement
of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
Pursuant to ASC Topic 505-50, for share-based
payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The
expense is recognized over the service period of the award. Common stock awards issued to consultants represent common stock granted
to non-employees in exchange for services at fair value. The measurement dates for such awards are set at the dates that the contracts
are entered into as the awards are non-forfeitable and vest immediately. The measurement date fair value is then recognized over
the service period as if the Company has paid cash for such service.
Loss per share of common stock
ASC 260 “Earnings Per Share”, requires
dual presentation of basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator and denominator
of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted
EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Basic net loss per
common share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common
shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average
number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.
Additionally, potentially dilutive common shares consist of common stock issuable upon conversion of convertible debt. These common
stock equivalents may be dilutive in the future
.
Potentially dilutive common shares were excluded from the computation of
diluted shares outstanding as they would have an anti-dilutive impact on the Company’s net losses and consisted of the following:
|
|
September 30,
2016
|
|
September 30,
2015
|
Convertible notes
|
|
|
207,097
|
|
|
|
230,769
|
|
|
|
|
|
|
|
|
|
|
Segment reporting
The Company uses “the management
approach” in determining reportable operating segments. The management approach considers the internal organization and reporting
used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source
for determining the Company’s reportable segments. The Company’s chief operating decision maker is the Chairman and
chief executive officer (“CEO”) of the Company, who reviews operating results to make decisions about allocating resources
and assessing performance for the entire Company. The Company classified the reportable operating segments into (i) the sale and
distribution of products to the hospitality industry segment, and (ii) logistics services segment.
Recent accounting pronouncements
In May 2014, the FASB
issued an update ("ASU 2014-09")
Revenue from Contracts with Customers.
ASU 2014-09 establishes a single
comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of
the existing revenue recognition guidance. ASU 2014-09 requires an entity to recognize revenue when it transfers promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services and requires certain additional disclosures. ASU 2014-09 is effective for interim and annual
reporting periods in fiscal years that begin after December 15, 2016. The Company is currently evaluating the impact of the
adoption of ASU 2014-09 on its consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15,
Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern,
that will require management
to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances.
In connection with each annual and interim period, management will assess if there is substantial doubt about an entity’s
ability to continue as a going concern within one year after the issuance date. Substantial doubt exists if it is probable that
the entity will be unable to meet its obligations within one year after the issuance date. The new standard defines substantial
doubt and provides
example indicators. Disclosures will be required
if conditions give rise to substantial doubt. However, management will need to assess if its plans will alleviate substantial doubt
to determine the specific disclosures. This standard is effective for public entities for annual periods ending after December
15, 2016. Earlier application of this standard is permitted. This standard is not expected to have a material effect on our financial
position, results of operations and cash flows.
In November 2015, the FASB issued ASU 2015-17,
Balance Sheet Classification of Deferred Taxes
(“ASU 2015-17”), which requires entities to present deferred
tax assets and deferred tax liabilities as noncurrent in a classified balance sheet. The ASU simplifies the current guidance in
ASC Topic 740,
Income Taxes
, which requires entities to separately present deferred tax assets and liabilities as current
and noncurrent in a classified balance sheet. ASU 2015-17 is effective for fiscal years beginning after December 15, 2016,
and interim periods within those annual periods. Early adoption is permitted for all entities as of the beginning of an interim
or annual reporting period. The Company does not expect the impact of ASU 2015-17 to be material to our consolidated financial
statements.
In February 2016, the FASB issued its new lease
accounting guidance in ASU No. 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize
for all leases (with the exception of short-term leases) a lease liability, which is a lessee’s obligation to make lease
payments arising from a lease, measured on a discounted basis and a right-of-use asset, which is an asset that represents the lessee’s
right to use, or control the use of, a specified asset for the lease term. The new standard is effective for annual periods beginning
after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact
of the adoption of this ASU to the Company’s consolidated financial statements and related disclosures.
In March 2016,
the FASB issued its new stock compensation guidance in ASU No. 2016-09 (Topic 718). First, under the new guidance, companies will
be required to recognize the income tax effects of share-based awards in the income statement when the awards vest or are settled
(i.e., additional paid-in capital (“APIC”) or APIC pools will be eliminated). In addition, the new guidance allows
a withholding amount of awarded shares with a fair value up to the amount of tax owed using the maximum, instead of the minimum,
statutory tax rate without triggering liability classification for the award. Lastly, the new guidance allows companies to elect
whether to account for forfeitures of share-based payments by (1) recognizing forfeitures of awards as they occur or (2) estimating
the number of awards expected to be forfeited and adjusting the estimate when it is likely to change, as is currently required.
The new standard is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal
years. Early adoption is permitted. The result of adopting this guidance is not expected to have a material impact on the Company’s
consolidated financial statements.
There are no other recently issued accounting
standards that apply to us or that are expected to have a material impact on our results of operations, financial condition, or
cash flows
NOTE 3 –
CONVERTIBLE NOTES
In 2013 and on July 1, 2014, the Company entered
into two convertible promissory note agreements with individuals in the amount of $20,000 and $10,000, respectively. The notes
were non-interest bearing, unsecured and were due on demand. The notes are convertible into shares of stock of the Company at the
market price on the date of conversion. Pursuant to ASC Topic 470-20 (Debt with conversion and other options), since these convertible
notes had fixed conversion price at market, the Company determined it had a fixed monetary amounts that can be settled for the
debt. Accordingly, no derivative liability was calculated. On December 22, 2015, the Company entered into a debt purchase and assignment
agreement with one of the debt holders whereby a convertible note in the principal amount of $10,000 became convertible at $.0025
per common share and the note was converted into 4,000,000 shares of the Company’s common stock. At September 30, 2016, one
note remains due in the principal amount of $20,000.
On December 28, 2015, the Company entered into
a secured convertible promissory note (the “Convertible Note”) with Firstfire Global Opportunities Fund LLC (the “Lender”),
with a principal amount of $230,000, which amount is the $200,000 purchase price plus a 15% original issue discount equal to $30,000.
Additionally, the lender deducted legal fees of $10,000 and the Company received net proceeds of $190,000. The unpaid principal
and interest is secured by the Company’s common stock, bears interest computed at a rate of interest that is equal to 7.0%
per annum, and is payable in monthly installments of $50,555 commencing April 28, 2016 through August 28, 2016.
Any amount of principal or interest on this
Convertible Note, which is not paid by the due dates, shall bear interest at the rate of 15% per annum from the due date until
paid. During the nine months ended September 30, 2016, the Company repaid Convertible Note principal of $162,166.
The Lender is entitled, at their option, at
any time after the eighth month anniversary of this Convertible Note, to convert all or any lesser portion of the outstanding principal
amount and accrued but unpaid interest into the Company’s common stock. The conversion price shall equal $0.50 per share
(the "Fixed Conversion Price") provided, however that from and after the occurrence of any event of default, as defined,
the conversion price shall be the lower of: (i) the Fixed Conversion Price or (ii) 50% multiplied by the lowest sales price of
the common stock in a public market during the ten consecutive Trading Day period immediately preceding the Trading Day that the
Company receives a notice of conversion. In connection with the issuance of this Convertible Note, the Company determined that
the terms of the Convertible Note include a down-round provision under which the conversion price and exercise price could be affected
by future equity offerings undertaken by the Company or contain terms that are not fixed monetary amounts at inception. Accordingly,
under the provisions of FASB ASC Topic No. 815-40, “Derivatives and Hedging – Contracts in an Entity’s Own Stock”,
the embedded conversion option contained in the convertible instruments were accounted for as derivative liabilities at the date
of issuance and shall be adjusted to fair value through earnings at each reporting date. The fair value of the embedded conversion
option derivatives was determined using the Black- Scholes Option Pricing Model. On the initial measurement date, the fair values
of the embedded conversion option derivative of $73,236 was recorded as a derivative liability and was allocated as a debt discount
to the Convertible Note of $73,236. At December 28, 2015, the Company valued the embedded conversion option derivative liabilities
resulting in no gain or loss from change in fair value of derivative liabilities. Additionally, in connection with this Convertible
Note, in December 2015, the Company paid Lender debt issuance costs of $10,000 and issued 50,000 shares of its common stock. These
common shares were valued at $0.225 per share based on recent sales of the Company’s stock and in December 2015, the Company
recorded a debt discount of $10,725, which is the relative fair value of such shares.
During the nine
months ended September 30, 2016, the Company entered into agreements for the addendum of the Convertible Note which waived all
rights to enforce any event of default, which may have been triggered by the Company’s failure to file it reports with the
SEC. In connection with these agreements, the Company issued an aggregate of 200,000 shares of common stock that were valued on
the date of grant at $0.40 per share or $80,000 based on recent sales of the Company’s common stock and paid cash penalties
of $10,000. The value of these shares and the cash penalties paid have been included in interest expense on the accompanying consolidated
statement of operations.
For the nine months ended September 30, 2016
and 2015, amortization of debt discounts related to this convertible note amounted to $120,813 and $0, which has been included
in interest expenses on the accompanying unaudited consolidated statements of operations, respectively.
At September 30, 2016, and December
31, 2015, the fair value of the derivative liabilities was estimated using the Black-scholes option-pricing model with the following
assumptions:
|
|
September 30,
2016
|
|
December 31,
2015
|
Dividend rate
|
|
|
0
|
|
|
|
0
|
|
Term (in years)
|
|
|
0.41 to 0.08 years
|
|
|
|
0.67 years
|
|
Volatility
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Risk-free interest rate
|
|
|
0.20% to 0.39%
|
|
|
|
0.66
|
%
|
At September 30, 2016 and December 31, 2015, convertible promissory
notes consisted of the following:
|
|
September 30,
2016
|
|
December 31,
2015
|
Principal amount
|
|
$
|
87,834
|
|
|
$
|
250,000
|
|
Less: unamortized debt discount
|
|
|
—
|
|
|
|
(120,813
|
)
|
Convertible notes payable, net
|
|
$
|
87,834
|
|
|
$
|
129,187
|
|
NOTE 4 –
LOANS PAYABLE
On September 23, 2016, the Company entered into a business loan
and security agreement with EBF Partners, LLC (the “EBF Loan”). Pursuant to the EBF Loan, the Company borrowed $20,000.
The Company is required to repay the EBF Loan by making daily payments of $204 on each business day until the purchased amount
of $28,200 is paid in full. Each payment is deducted directly from the Company’s bank accounts. The EBF Loan has an effective
interest rate of approximately 116%, is secured by the Company’s assets and is personally guaranteed by the Company’s
chief executive officer. At September 30, 2016, amounts due under the EBF Loan amounted to $19,054.
On September 26, 2016, the Company entered into a business loan
and security agreement with On Deck Capital, Inc. (the “On Deck Loan”). Pursuant to the On Deck Loan, the Company borrowed
$35,000 and received net proceeds of $34,125 after paying a loan origination fee of $825. The Company is required to repay the
On Deck Loan by making 252 daily payments of $190 on each business day until the purchased amount of $47,951 is paid in full. Each
payment is deducted directly from the Company’s bank accounts. The On Deck Loan has an effective interest rate of approximately
66%, is secured by the Company’s assets and is personally guaranteed by the Company’s chief executive officer. At September
30, 2016, amounts due under the On Deck Loan amounted to $34,490.
NOTE 5 –
RELATED PARTY TRANSACTIONS
From time to time, the Company receives advances
from the Company’s chief executive officer for working capital purposes. The advances are non-interest bearing and
are payable on demand. For the nine months ended September 30, 2016 and 2015, due to related party activity consisted of the following:
|
|
Nine Months ended
September 30,
2016
|
|
Nine Months ended
September 30,
2015
|
Balance due to related party at beginning of period
|
|
$
|
38,434
|
|
|
$
|
8,051
|
|
Working capital advances received
|
|
|
38,000
|
|
|
|
800
|
|
Repayments made and conversions
|
|
|
(42,380
|
)
|
|
|
(983
|
)
|
Balance due to related party at end of period
|
|
$
|
34,054
|
|
|
$
|
7,868
|
|
NOTE 6 -
STOCKHOLDERS’ EQUITY
Preferred stock
The preferred stock
may be issued in one or more series. The Company’s board of directors are authorized to issue the shares of preferred stock
in such series and to fix from time to time before issuance thereof the number of shares to be included in any such series and
the designation, powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations
or restrictions thereof, of such series.
On February 19, 2016, the Board of Directors
of the Company authorized and approved to create a new class of voting preferred stock called “Series A Preferred Stock”,
consisting of 1,000,000 shares authorized, $.001 par value. The preferred stock is not convertible into any other class or series
of stock and has no liquidation preference value. The Series A Preferred Stock was issued to ensure perpetual control of at least
51% is provided to the holder of the Series A Preferred Stock. On all matters to come before the shareholders of the Company, the
holders of Series A Preferred shall have that number of votes per share (rounded to the nearest whole share) equal to the product
of (x)
the number of shares of Series A Preferred
held on the record date for the determination of the holders of the shares entitled to vote (the “Record Date”), or,
if no record date is established, at the date such vote is taken or any written consent of shareholders is first solicited, and
(y) 50.
In the event that the votes by the holders
of the Series A Preferred Stock do not total at least 51% of the votes of all classes of the Company’s authorized capital
stock entitled to vote, then regardless of the provisions of this paragraph, in any such case, the votes cast by a majority of
the holders of the Series A Preferred Stock shall be deemed to equal 51% of all votes cast at any meeting of stockholders, or any
issue put to the stockholders for voting and the Company may state that any such action approved by at least a majority of the
holders of the Series A Preferred Stock was had by majority vote of the holders of all classes of the Company’s capital stock.
On February 19, 2016, the Company issued 1,000,000
shares of Series A Preferred Stock to its chief executive officer. In connection with the issuance of Series A preferred shares,
the Company recorded a nominal amount of stock-based compensation of $1,000 since the shares had no economic value, on the date
of the issuance of such shares, the Company’s chief executive officer was the majority owner of the Company’s common
shares, and the value of such voting rights were not readily and objectively measurable.
Common stock issued for services
On March 16, 2016, pursuant to a consulting
agreement, the Company issued 16,667 shares of common stock to a consultant for investor relations services rendered. These shares
were valued on the date of grant at $0.90 per share or $15,000 based on the fair value of services performed. In March 2016, in
connection with the issuance of these shares, the Company recorded stock-based consulting expense of $15,000.
On September 13, 2016, pursuant to a one-year
consulting agreement, the Company issued 60,000 shares of common stock to a consultant for business development services rendered
and to be rendered. These shares were valued on the date of grant at $0.40 per share or $24,000 based on recent sales of the Company’s
common stock. In connection with this agreement, the Company recorded stock-based consulting fees, of $1,043 and a prepaid expense
of $22,957 that will be amortized over the remaining one-year service period.,
Additionally, for the nine months ended September
30, 2016 and 2015, amortization of other prepaid stock-based consulting fees amounted to $123,405 and $105,179, respectively.
Common shares issued in connection with
debt addendum
On April 20, 2016, June 6, 2016 and August
26, 2016, the Company entered into agreements for the addendum of the Convertible Note (see Note 3) which waived all rights to
enforce any event of default, which may have been triggered by the Company’s failure to file it reports with the SEC. In
connection with these agreements, the Company issued of 30,000, 40,000 and 130,000 shares of common stock, respectively, for an
aggregate of 200,000 shares of common stock. These shares were valued on the date of grant at $0.40 per share or $80,000 based
on recent sales of the Company’s common stock.
Common stock issued for cash
On February 3,
2016, the Company sold 1,200,000 shares of its common stock at $0.40 per common share for cash of $200,000 and a subscription receivable
of $280,000. The subscription receivable of $280,000 was collected in April 2016.
NOTE 7 –
COMMITMENTS
International distribution agreement
On February 28, 2014, the Company entered into
an International Distribution Agreement (the “International Distribution Agreement”) with its major supplier. Through
September 30, 2016, the Company has complied with its
minimum purchase commitments. Future minimum
purchase amounts under the International Distribution Agreement at December 31, 2015 are as follows:
Years ending December 31,
|
|
Amount
|
|
2016
|
|
|
$
|
1,000,000
|
|
|
2017
|
|
|
|
1,500,000
|
|
|
2018
|
|
|
|
2,500,000
|
|
|
Total minimum purchase amounts
|
|
|
$
|
5,000,000
|
|
NOTE 8 –
CONCENTRATIONS
Concentrations of credit risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist primarily of and cash deposits. The Company places its cash in banks at levels
that, at times, may exceed federally insured limits. There were no balances in excess of FDIC insured levels as of September 30,
2016 and December 31, 2015. The Company has not experienced any losses in such accounts through September 30, 2016.
Geographic concentrations of sales
For the nine
months ended September 30, 2016 and 2015, substantially all of the Company’s revenues was to customers located outside the
United States. No other geographical area accounted for more than 10% of total sales during the nine months ended September 30,
2016 and 2015.
Customer concentrations
For the nine months ended September 30, 2016, two customers accounted
for approximately 38.7% of total sales (19.0% and 19.7%, respectively). These two customers consist of one customer from the Company’s
product segment and its only customer in the logistics services segment, respectively. For the nine months ended September 30,
2015, five customers accounted for approximately 87.4% of total sales (22.5%, 14.1%, 22.7%, 13.5% and 14.6%, respectively). A reduction
in sales from or loss of such customers would have a material adverse effect on the Company’s consolidated results of operations
and financial condition.
Vendor concentrations
For the nine months ended September 30, 2016 and 2015, the Company
purchased all of its products from one supplier. The loss of this supplier may have a material adverse effect on the Company’s
consolidated results of operations and financial condition.
NOTE 9 –
RESTATEMENT OF 2015 PERIODS
The Company’s unaudited consolidated financial statements
have been restated for the three and nine months ended September 30, 2015 to properly reflect certain transactions for revenues,
costs of revenues and operating expenses in the proper period.
The effect of correcting these errors in the Company’s unaudited
consolidated financial statements for the three and nine months ended September 30, 2015 are shown in the table as follows:
Consolidated Statement of operations
|
|
For the Nine Months Ended
September 30, 2015 (Unaudited)
|
|
|
As previously reported
|
|
Adjustments to Restate
|
|
As Restated
|
Revenues
|
|
$
|
1,437,117
|
|
|
$
|
(63,570
|
)
|
|
$
|
1,373,547
|
|
Cost of revenues
|
|
|
1,224,575
|
|
|
|
41,263
|
|
|
|
1,265,838
|
|
Gross profit
|
|
|
212,542
|
|
|
|
(104,833
|
)
|
|
|
107,709
|
|
Operating expenses
|
|
|
360,308
|
|
|
|
(48,551
|
)
|
|
|
311,757
|
|
Loss from operations
|
|
|
(147,766
|
)
|
|
|
(56,282
|
)
|
|
|
(204,048
|
)
|
Other expenses
|
|
|
—
|
|
|
|
(105
|
)
|
|
|
(105
|
)
|
Net loss
|
|
$
|
(147,766
|
)
|
|
$
|
(56,387
|
)
|
|
$
|
(204,153
|
)
|
Net loss per common share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
Consolidated Statement of operations
|
|
For the Three Months Ended
September 30, 2015 (Unaudited)
|
|
|
As previously reported
|
|
Adjustments to Restate
|
|
As Restated
|
Revenues
|
|
$
|
95,227
|
|
|
$
|
(70,770
|
)
|
|
$
|
24,457
|
|
Cost of revenues
|
|
|
39,235
|
|
|
|
(16,301
|
)
|
|
|
22,934
|
|
Gross profit
|
|
|
55,992
|
|
|
|
(54,469
|
)
|
|
|
1,523
|
|
Operating expenses
|
|
|
142,597
|
|
|
|
(26,204
|
)
|
|
|
116,393
|
|
Loss from operations
|
|
|
(86,605
|
)
|
|
|
(28,265
|
)
|
|
|
(114,870
|
)
|
Other expenses
|
|
|
—
|
|
|
|
(58
|
)
|
|
|
(58
|
)
|
Net loss
|
|
$
|
(86,605
|
)
|
|
$
|
(28,323
|
)
|
|
$
|
(114,928
|
)
|
Net loss per common share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
NOTE 10 –
SEGMENT REPORTING
The Company’s principal operating segments
coincide with the types of products or services to be sold. The Company’s two reportable segments for the three and nine
months ended September 30, 2016 were (i) the Product Segment and (ii) the Logistics Services Segment. For the three and nine months
ended September 30, 2015, the Company only operated in the Product Segment. The Company’s chief operating decision-maker
has been identified as the Chairman and CEO, who reviews operating results to make decisions about allocating resources and assessing
performance for the entire Company. Segment information is presented based upon the Company’s management organization structure
as of September 30, 2016 and the distinctive nature of each segment. Future changes to this internal financial structure may result
in changes to the reportable segments disclosed. There are no inter-segment revenue transactions and, therefore, revenues are only
to external customers.
Segment operating
profits or loss is determined based upon internal performance measures used by the chief operating decision-maker. The Company
derives the segment results from its internal management reporting system. The accounting policies the Company uses to derive reportable
segment results are the same as those used for external reporting purposes. Management measures the performance of each reportable
segment based upon several metrics, including net revenues, gross profit and operating income (loss). Management uses these results
to evaluate the performance of, and to assign resources to, each of the reportable segments. The Company manages certain operating
expenses separately at the corporate level and does not allocate such expenses to the segments. Segment income (loss) from operations
excludes interest income/expense and other income or expenses and income taxes according to how a particular reportable segment’s
management is measured. Management does not consider impairment charges, and unallocated costs in measuring the performance of
the reportable segments.
Segment information available with respect
to these reportable business segments for the three and nine months ended September 30, 2016 and 2015 was as follows:
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
|
2016
|
|
|
2015
|
|
2016
|
|
2015
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product segment
|
|
$
|
35,422
|
|
|
$
|
24,457
|
$
|
206,851
|
$
|
1,373,547
|
|
|
Logistics services segment
|
|
|
50,708
|
|
|
|
-
|
|
50,708
|
|
-
|
|
|
Total segment and consolidated revenues
|
|
|
86,130
|
|
|
|
24,457
|
|
257,559
|
|
1,373,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product segment
|
|
|
7,205
|
|
|
|
1,523
|
|
44,738
|
|
107,709
|
|
|
Logistics services segment
|
|
|
16,878
|
|
|
|
-
|
|
16,878
|
|
-
|
|
|
Total segment and consolidated gross profit
|
|
|
24,083
|
|
|
|
1,523
|
|
61,616
|
|
107,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product segment
|
|
$
|
(70,696
|
)
|
|
$
|
(103,897)
|
$
|
(390,335
|
) $
|
(163,366)
|
|
|
Logistics services segment
|
|
|
16,878
|
|
|
|
-
|
|
16,878
|
|
-
|
|
|
Total segment income (loss)
|
|
|
(53,818
|
)
|
|
|
(103,897)
|
|
(373,457
|
)
|
(163,366)
|
|
|
Unallocated costs
|
|
|
(47,821
|
)
|
|
|
(10,973)
|
|
(146,625
|
)
|
(40,682)
|
|
|
Total consolidated loss from operations
|
|
$
|
(101,639
|
)
|
|
$
|
(114,870)
|
$
|
(520,082
|
) $
|
(204,048)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
December 31, 2015
|
Total assets:
|
|
|
|
|
|
|
|
|
Product segment
|
|
$
|
184,081
|
|
|
$
|
350,372
|
|
Logistics services segment
|
|
|
50,708
|
|
|
|
—
|
|
Total segment and consolidated assets
|
|
$
|
247,984
|
|
|
$
|
350,372
|
|
NOTE 11 -
SUBSEQUENT EVENTS
Equity Purchase Agreement and Registration Rights Agreement
On October 24, 2016 (the “Closing Date”), the Company
entered into an equity purchase agreement (the “Purchase Agreement”) with Peak One Opportunity Fund, L.P. (“Buyer”),
whereby, upon the terms and subject to the conditions thereof, the Buyer is committed to purchase shares of the Company’s
common stock (the “Purchase Shares”) at an aggregate price of up to $5,000,000 (the “Total Commitment Amount”)
over the course of its 24-month term. From time to time over the 24-month term of the Purchase Agreement, commencing on the date
on which a registration statement registering the Purchase Shares (the “Registration Statement”) becomes effective,
the Company may, in its sole discretion, provide the Buyer with a put notice (each a “Put Notice”) to purchase a specified
number of the Purchase Shares (each a “Put Amount Requested”) subject to the limitations discussed below and contained
in the Purchase Agreement. Upon delivery of a Put Notice, the Company must deliver the Put Amount Requested as Deposit Withdrawal
at Custodian (“DWAC”) shares to Buyer within two trading days.
The actual amount of proceeds the Company receives pursuant to each
Put Notice (each, the “Put Amount”) is to be determined by multiplying the Put Amount Requested by the applicable purchase
price. The purchase price for each of the Purchase Shares equals 90% of the “Market Price,” which is defined as the
lesser of the (i) lowest closing bid price of our common stock for any trading day during the ten (10) trading days immediately
preceding the date of the respective Put Notice, or (ii) lowest closing bid price of the common stock for any trading day during
the seven trading days immediately following the clearing date associated
with the applicable Put Notice (the “Valuation Period”). Within three trading days following the end of the Valuation
Period, the Buyer will deliver the Put Amount to the Company via wire transfer.
The Put Amount Requested pursuant to any single Put Notice must
have an aggregate value of at least $15,000, and cannot exceed the lesser of (i) 200% of the average daily trading value of the
common stock in the ten trading days immediately preceding the Put Notice or (ii) such number of shares of common stock that has
an aggregate value of $100,000.
In order to deliver a Put Notice, certain conditions set forth in
the Purchase Agreement must be met, as provided therein. In addition, the Company is prohibited from delivering a Put Notice if:
(i) the sale of Purchase Shares pursuant to such Put Notice would cause the Company to issue and sell to Buyer, or Buyer to acquire
or purchase, a number of shares of the Company’s common stock that, when aggregated with all shares of common
stock purchased by Buyer pursuant to all prior Put Notices issued under the Purchase Agreement, would exceed the Total Commitment
Amount; or (ii) the sale of the Commitment Shares pursuant to the Put Notice would cause the Company to issue and sell to Buyer,
or Buyer to acquire or purchase, an aggregate number of shares of common stock that would result in Buyer beneficially owning more
than 4.99% of the issued and outstanding shares of the Company’s common stock.
Unless earlier terminated, the Purchase Agreement will terminate
automatically on the earlier to occur of: (i) 24 months after the initial effectiveness of the Registration Statement, (ii) the
date on which the Buyer has purchased or acquired all of the Purchase Shares, or (iii) the date on which certain bankruptcy proceedings
are initiated with respect to the Company. In connection with the execution of the Purchase Agreement, the Company agreed to issue
650,000 shares of its common stock (the “Commitment Shares”) to Buyer or Buyer’s designee as a commitment fee.
On the Closing Date, and in connection with the Purchase Agreement,
the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with Buyer whereby
the Company is obligated to file the Registration Statement to register the resale of the Commitment Shares and Purchase Shares.
Pursuant to the Registration Rights Agreement, the Company must (i) file the Registration Statement within thirty calendar days
from the Closing Date, (ii) use reasonable efforts to cause the Registration Statement to be declared effective under the Securities
Act of 1933, as amended (the “Securities Act”), as promptly as possible after the filing thereof, but in any event
no later than the 90th calendar day following the Closing Date, and (iii) use its reasonable efforts to keep such Registration
Statement continuously effective under the Securities Act until all of the Commitment Shares and Purchase Shares have been sold
thereunder or pursuant to Rule 144.
Securities Purchase Agreement and Debenture
On October 24, 2016 (the “Issuance Date”), the Company
entered into a securities purchase agreement (the “SPA”) with Buyer, whereby Buyer agreed to invest up to $346,500
(the “Purchase Price”) in the Company in exchange for the convertible debentures, upon the terms and subject to the
conditions thereof. Pursuant to the SPA, the Company issued a convertible debenture to Buyer on October 26, 2016, in the original
principal amount of $85,000, which bears interest at 0% per annum (the “First Debenture”). The Buyer paid the portion
of the Purchase Price associated with the First Debenture, consisting of $76,500 (minus the applicable fees under the SPA), to
the Company in cash on October 26, 2016. Each convertible debenture issued pursuant to the SPA, coupled with the accrued and unpaid
interest relating to each convertible debenture, is due and payable three years from the issuance date of the respective convertible
debenture. Any amount of principal or interest that is due under each convertible debenture, which is not paid by the respective
maturity date, will bear interest at the rate of 18% per annum until it is satisfied in full. Additionally, the Buyer has the right
at any time to convert amounts owed under each convertible debenture into shares of the Company’s common stock at the closing
price of the Common Stock on September 8, 2015. Each debenture shall contain representations, warranties, events of default, beneficial
ownership limitations, and other provisions that are customary of similar instruments.
The Buyer is entitled to, at any time or from time to time, convert
each convertible debenture issued under the SPA into shares of the Company’s common stock, at a conversion price per share
(the “Conversion Price”) equal to either: (i) if no event of default has occurred under the respective convertible
debenture and the date of conversion is prior to the date that is one hundred eighty days after the issuance date of the respective
convertible debenture,
$0.25, or (ii) if an event of default has occurred under the respective
convertible debenture or the date of conversion is on or after the date that is one hundred eighty days after the issuance date
of the respective convertible debenture, the lesser of (a) $0.25 or (b) 65% of the lowest closing bid price of the common stock
for the twenty trading days immediately preceding the date of the date of conversion (provided, further, that if either the Company
is not DWAC operational at the time of conversion or the common stock is traded on the OTC Pink at the time of conversion, then
65% shall automatically adjust to 60%), subject in each case to equitable adjustments resulting from any stock splits, stock dividends,
recapitalizations or similar events.
We may redeem each convertible debenture issued under the SPA, upon
not more than two days written notice, for an amount (the “Redemption Price”) equal to: (i) if the Redemption Date
(as defined below) is ninety days or less from the date of issuance of the respective convertible debenture, 105% of the sum of
the Principal Amount so redeemed plus accrued interest, if any; (ii) if the Redemption Date is greater than or equal to ninety
one days from the date of issuance of the respective convertible debenture and less than or equal to one hundred twenty days from
the date of issuance of the respective convertible debenture, 110% of the sum of the Principal Amount so redeemed plus accrued
interest, if any; (iii) if the Redemption Date is greater than or equal to one hundred twenty one days from the date of issuance
of the respective convertible debenture and less than or equal to one hundred fifty days from the date of issuance of the respective
convertible debenture, 120% of the sum of the Principal Amount so redeemed plus accrued interest, if any; (iv) if the Redemption
Date is greater than or equal to one hundred fifty one days from the date of issuance of the respective convertible debenture and
less than or equal to one hundred eighty days from the date of issuance of the respective convertible debenture, 130% of the sum
of the Principal Amount so redeemed plus accrued interest, if any; and (v) if either (1) the respective convertible debenture is
in default but the Buyer consents to the redemption notwithstanding such default or (2) the Redemption Date is greater than or
equal to one hundred eighty one days from the date of issuance of the respective convertible debenture, 140% of the sum of the
Principal Amount so redeemed plus accrued interest, if any. The date upon which the respective convertible debenture is redeemed
and paid shall be referred to as the “Redemption Date” (and, in the case of multiple redemptions of less than the entire
outstanding Principal Amount, each such date shall be a Redemption Date with respect to the corresponding redemption).
In connection with the issuance of this First
Debenture, the Company determined that the terms of the First Debenture contain terms that are not fixed monetary amounts at inception.
Accordingly, under the provisions of FASB ASC Topic No. 815-40, “Derivatives and Hedging – Contracts in an Entity’s
Own Stock”, the embedded conversion option contained in the convertible instruments will be accounted for as derivative liabilities
at the date of issuance and shall be adjusted to fair value through earnings at each reporting date.
Other
On October 31, 2016, we repaid all remaining
principal and interest of the Convertible Note with Firstfire Global Opportunities Fund LLC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and Stockholders of
Petrone Worldwide, Inc.
Weston, Florida
We have audited the accompanying consolidated
balance sheets of Petrone Worldwide, Inc. and Subsidiary (collectively, “the Company”) as of December 31, 2015 and
2014 and the related consolidated statements of operations, changes in stockholders' equity, 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 consolidated financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the consolidated financial position of Petrone Worldwide,
Inc. and Subsidiary as of December 31, 2015 and 2014 and the consolidated results of their operations and their 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 1 to the consolidated financial
statements, the Company has an accumulated deficit at December 31, 2015 and 2014 and net losses and negative cash flows for the
years then ended. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management’s
plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ MaloneBailey, LLP
Houston, Texas
September 9, 2016
PETRONE WORDWIDE, INC. AND SUBSIDIARY
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
2015
|
|
2014
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
208,064
|
|
|
$
|
77,827
|
|
Subscription receivable
|
|
|
—
|
|
|
|
5,000
|
|
Prepaid expenses and other current assets
|
|
|
131,046
|
|
|
|
37,313
|
|
Advances to supplier
|
|
|
11,262
|
|
|
|
65,000
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
350,372
|
|
|
|
185,140
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
350,372
|
|
|
$
|
185,140
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Convertible notes payable, net
|
|
$
|
129,187
|
|
|
$
|
30,000
|
|
Accounts payable
|
|
|
45,174
|
|
|
|
3,447
|
|
Accrued expenses
|
|
|
405
|
|
|
|
10,036
|
|
Due to related party
|
|
|
38,434
|
|
|
|
8,051
|
|
Derivative liability
|
|
|
73,236
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
286,436
|
|
|
|
51,534
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
286,436
|
|
|
|
51,534
|
|
|
|
|
|
|
|
|
|
|
Commitments (See Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY:
|
|
|
|
|
|
|
|
|
Preferred stock, $.001 par value, 10,000,000 shares authorized; No shares issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Common stock: $.001 par value, 100,000,000 shares authorized; 21,483,230 and
|
|
|
|
|
|
|
|
|
15,274,303 issued and outstanding at December 31, 2015 and 2014, respectively
|
|
|
21,483
|
|
|
|
15,274
|
|
Additional paid-in capital
|
|
|
2,722,559
|
|
|
|
1,401,343
|
|
Accumulated deficit
|
|
|
(2,680,106
|
)
|
|
|
(1,283,011
|
)
|
|
|
|
|
|
|
|
|
|
Total Stockholders' Equity
|
|
|
63,936
|
|
|
|
133,606
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
350,372
|
|
|
$
|
185,140
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
|
|
PETRONE WOLDWIDE, INC. AND SUBSIDIARY
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
For the Years Ended
|
|
|
December 31,
|
|
|
2015
|
|
2014
|
|
|
|
|
|
REVENUES
|
|
$
|
1,410,080
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUES
|
|
|
1,308,129
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
101,951
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
Compensation and related benefits
|
|
|
12,600
|
|
|
|
46,900
|
|
Consulting fees
|
|
|
314,705
|
|
|
|
1,030,004
|
|
Professional fees
|
|
|
52,943
|
|
|
|
53,546
|
|
Rent expense
|
|
|
77,435
|
|
|
|
41,600
|
|
General and administrative expenses
|
|
|
147,680
|
|
|
|
100,861
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
605,363
|
|
|
|
1,272,911
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(503,412
|
)
|
|
|
(1,272,911
|
)
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSES:
|
|
|
|
|
|
|
|
|
Interest expenses
|
|
|
(3,683
|
)
|
|
|
—
|
|
Debt conversion inducement expense
|
|
|
(890,000
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total Other Expense
|
|
|
(893,683
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES
|
|
|
(1,397,095
|
)
|
|
|
(1,272,911
|
)
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(1,397,095
|
)
|
|
$
|
(1,272,911
|
)
|
|
|
|
|
|
|
|
|
|
NET LOSS PER COMMON SHARE:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.09
|
)
|
|
$
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
16,101,743
|
|
|
|
13,035,839
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
|
|
PETRONE WORLDWIDE, INC. AND SUBSIDIARY
|
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
|
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Preferred Stock
|
|
|
|
Common Stock
|
|
|
|
Additional
|
|
|
|
Accumulated
|
|
|
|
Stockholders'
|
|
|
|
|
# of Shares
|
|
|
|
Amount
|
|
|
|
# of Shares
|
|
|
|
Amount
|
|
|
|
Paid-in Capital
|
|
|
|
Deficit
|
|
|
|
Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2013
|
|
|
—
|
|
|
$
|
—
|
|
|
|
11,760,542
|
|
|
$
|
11,760
|
|
|
$
|
(31,660
|
)
|
|
$
|
(10,100
|
)
|
|
$
|
(30,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares deemed issued in recapitalization
|
|
|
—
|
|
|
|
—
|
|
|
|
195,607
|
|
|
|
196
|
|
|
|
(196
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
|
—
|
|
|
|
—
|
|
|
|
2,380,936
|
|
|
|
2,381
|
|
|
|
1,054,136
|
|
|
|
—
|
|
|
|
1,056,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for conversion of convertible debt
|
|
|
—
|
|
|
|
—
|
|
|
|
675,000
|
|
|
|
675
|
|
|
|
269,325
|
|
|
|
—
|
|
|
|
270,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash and subscription receivable
|
|
|
—
|
|
|
|
—
|
|
|
|
262,218
|
|
|
|
262
|
|
|
|
109,738
|
|
|
|
—
|
|
|
|
110,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
(1,272,911
|
)
|
|
|
(1,272,911
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2014
|
|
|
—
|
|
|
|
—
|
|
|
|
15,274,303
|
|
|
|
15,274
|
|
|
|
1,401,343
|
|
|
|
(1,283,011
|
)
|
|
|
133,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
|
—
|
|
|
|
—
|
|
|
|
2,158,927
|
|
|
|
2,159
|
|
|
|
414,541
|
|
|
|
—
|
|
|
|
416,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for conversion of convertible debt
|
|
|
—
|
|
|
|
—
|
|
|
|
4,000,000
|
|
|
|
4,000
|
|
|
|
6,000
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for convertible debt issuance costs
|
|
|
—
|
|
|
|
—
|
|
|
|
50,000
|
|
|
|
50
|
|
|
|
10,675
|
|
|
|
—
|
|
|
|
10,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt conversion inducement expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
890,000
|
|
|
|
—
|
|
|
|
890,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
(1,397,095
|
)
|
|
|
(1,397,095
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015
|
|
|
—
|
|
|
$
|
—
|
|
|
|
21,483,230
|
|
|
$
|
21,483
|
|
|
$
|
2,722,559
|
|
|
$
|
(2,680,106
|
)
|
|
$
|
63,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
|
PETRONE WORLDWIDE, INC. AND SUBSIDIARY
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
For the Years Ended
December 31,
|
|
|
2015
|
|
2014
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,397,095
|
)
|
|
$
|
(1,272,911
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Debt conversion inducement expense
|
|
|
890,000
|
|
|
|
—
|
|
Amortization of debt discount to interest expense
|
|
|
3,148
|
|
|
|
—
|
|
Stock-based compensation
|
|
|
314,705
|
|
|
|
1,030,004
|
|
Bad debt
|
|
|
8,788
|
|
|
|
—
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(8,788
|
)
|
|
|
—
|
|
Prepaid expenses and other current assets
|
|
|
8,262
|
|
|
|
(10,800
|
)
|
Advances to supplier
|
|
|
53,738
|
|
|
|
(65,000
|
)
|
Accounts payable
|
|
|
41,727
|
|
|
|
3,447
|
|
Accrued expenses
|
|
|
(9,631
|
)
|
|
|
(987
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
|
(95,146
|
)
|
|
|
(316,247
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from related party advances
|
|
|
31,366
|
|
|
|
128,561
|
|
Repayment of related party advances
|
|
|
(983
|
)
|
|
|
(119,487
|
)
|
Proceeds from convertible debt
|
|
|
190,000
|
|
|
|
280,000
|
|
Proceeds from sale of common stock and subscription receivable
|
|
|
5,000
|
|
|
|
105,000
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
225,383
|
|
|
|
394,074
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH
|
|
|
130,237
|
|
|
|
77,827
|
|
|
|
|
|
|
|
|
|
|
CASH, beginning of year
|
|
|
77,827
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
CASH, end of year
|
|
$
|
208,064
|
|
|
$
|
77,827
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
175
|
|
|
$
|
—
|
|
Income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Shares deemed issued in recapitalization
|
|
$
|
—
|
|
|
$
|
195
|
|
Exchange of related party advances for accrued expenses
|
|
$
|
—
|
|
|
$
|
1,023
|
|
Common stock issued for subscription receivable
|
|
$
|
—
|
|
|
$
|
5,000
|
|
Common stock issued for convertible notes
|
|
$
|
10,000
|
|
|
$
|
270,000
|
|
Unearned common stock issued for services
|
|
$
|
101,995
|
|
|
$
|
26,513
|
|
Common stock issued for debt issuance costs
|
|
$
|
10,725
|
|
|
$
|
—
|
|
Increase in derivative liability and debt discount
|
|
$
|
73,236
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
|
PETRONE WORLDWIDE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 1 –
ORGANIZATION AND BASIS
OF PRESENTATION
Organization
Petrone Worldwide, Inc. (the “Company”)
was incorporated as Sheridan Industries, Inc. on December 14, 1998 in the State of Nevada. On December 31, 1998, the Company changed
its name to Diabetex International Corp. and effective February 18, 2014, the Company changed its name to Petrone Worldwide, Inc.
On January 29, 2014 and effective March 3,
2014, the Company entered into a purchase agreement (the “Purchase Agreement”) with Petrone Food Works, Inc. (“PFW”)
and the shareholder of PFW. Pursuant to the Purchase Agreement, the Company acquired 100% of PFW’s issued and outstanding
common stock from the PFW shareholder in exchange for the issuance of 11,760,542 shares of the Company’s common stock, representing
98.4% of the outstanding common stock, (the “Exchange”), after giving effect to a 1-for-500 reverse stock split (the
“Reverse Stock Split”) which resulted in 195,607 common shares outstanding prior to the Exchange for liabilities of
$30,000. Accordingly, the PFW shareholder became a shareholder of the Company and PFW became a subsidiary of the Company. The Exchange
has been accounted for as a reverse-merger and recapitalization since the stockholder of PFW obtained voting and management control
of the Company. PFW is the acquirer for financial reporting purposes and the Company is the acquired company. Consequently, the
assets and liabilities and the operations reflected in the historical financial statements prior to the Exchange are those of PFW
and was recorded at the historical cost basis of PFW, and the consolidated financial statements after completion of the Exchange
included the assets and liabilities of both the Company and PFW and the Company’s consolidated operations from the closing
date of the Exchange. All share and per share data in the accompanying consolidated financial statements have been retroactively
restated to reflect the effect of the Reverse Stock Split and recapitalization. PFW was formed under the laws of the State of Nevada
in October 2013.
The Company is in the hospitality industry
and is a supplier of table top kitchenware and hotel room products thru an exclusive licensing agreement with a leading supplier.
Basis of Presentation and Principles of
Consolidation
The Company’s consolidated financial
statements include the financial statements of its wholly-owned subsidiary, Petrone Food Works, Inc. (inactive). All significant
intercompany accounts and transactions have been eliminated in consolidation.
In February 2014, the Company effectuated
a 1 to 500 reverse stock split. All share and per share data in the accompanying consolidated financial statements have been retroactively
restated to reflect the effect of the reverse stock split
Going concern
These consolidated financial statements have
been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments
in the normal course of business. As reflected in the accompanying consolidated financial statements, the Company had a net loss
of $1,397,095 and $1,272,911 for the years ended December 31, 2015 and 2014, respectively. The net cash used in operations were
$95,146 and $316,247 for the years ended December 31, 2015 and 2014, respectively. Additionally, the Company had an accumulated
deficit, stockholders’ equity and working capital of $2,680,106, $63,936 and $63,936, respectively, at December 31, 2015.
These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management cannot provide
assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt
and/or equity capital. During 2015, management has taken
measures to reduce operating expenses. The
Company is seeking to raise capital through additional debt and/or equity financings to fund its operations in the future. Although
the Company has historically raised capital from sales of equity and from the issuance of promissory notes, there is no assurance
that it will be able to continue to do so. If the Company is unable to raise additional capital or secure additional lending in
the near future, management expects that the Company will need to curtail its operations. These consolidated financial statements
do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 2 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
The preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates. Significant estimates for the years ended December 31, 2015 and 2014 include estimates of current
and deferred income taxes and deferred tax valuation allowances, the fair value of derivative liabilities, and the fair value of
non-cash equity transactions.
Fair value of financial instruments and fair value measurements
The Company adopted the guidance of Accounting
Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair value, prescribes
methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as
follows:
Level 1- Inputs are unadjusted quoted prices
in active markets for identical assets or liabilities available at the measurement date.
Level 2- Inputs are quoted prices for similar
assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not
active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3- Inputs are unobservable inputs which
reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset
or liability based on the best available information.
The carrying amounts reported in the consolidated
balance sheets for cash and cash equivalents, accounts receivable, loans, accounts payable, accrued expenses, and other payables
approximate their fair market value based on the short-term maturity of these instruments.
The Company analyzes all financial and non-financial
instruments with features of both liabilities and equity under the FASB’s accounting standard for such instruments. Under
this standard, financial and non-financial assets and liabilities are classified in their entirety based on the lowest level of
input that is significant to the fair value measurement. The Company accounts for one instrument at fair value using level 3 valuation.
|
|
At December 31, 2015
|
|
At December 31, 2014
|
Description
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Derivative liability
|
|
|
—
|
|
|
|
—
|
|
|
$
|
73,236
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
A roll forward of the level 3 valuation
financial instruments is as follows:
|
|
|
Derivative
Liability
|
|
|
Balance at December 31, 2013
|
|
$
|
—
|
|
Change in fair value included in net loss
|
|
|
—
|
|
Balance at December 31, 2014
|
|
|
—
|
|
Initial valuation of derivative liability
|
|
|
73,236
|
|
Change in fair value included in net loss
|
|
|
—
|
|
Balance at December 31, 2015
|
|
$
|
73,236
|
|
ASC 825-10 “Financial
Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair
value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election
date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported
in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.
Cash and cash equivalents
For purposes of the consolidated statements
of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date
and money market accounts to be cash equivalents.
Accounts receivable
The Company recognizes an allowance for losses
on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis
of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific
identifiable customer accounts considered at risk or uncollectible. The expense associated with the allowance for doubtful accounts
is recognized as general and administrative expense.
Advances to Supplier
Advances to supplier represent the advance
payments for the purchase of product from supplier.
Impairment of long-lived assets
In accordance with ASC Topic 360, the Company
reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets
may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted
future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between
the asset’s estimated fair value and its book value.
Derivative liabilities
The Company has certain financial instruments
that are embedded derivatives associated with capital raises. The Company evaluates all its financial instruments to determine
if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for
in accordance with FASB ASC 810-10-05-4 and 815-40. This accounting treatment requires that the carrying amount of any
embedded derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event
that the fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period
is recorded as either income or expense. Upon conversion or exercise, the derivative liability is marked to fair value at the conversion
date and then the related fair value is reclassified to equity.
Revenue recognition
Pursuant to the guidance of ASC Topic
605, the Company recognizes sales when persuasive evidence of an arrangement exists, delivery has occurred or services have been
provided, the purchase price is fixed or determinable and collectability is reasonably assured. The Company’s standard terms
are “ex works”, with title transferring to its customer at the Company suppliers’ loading docks or upon embarkation
with risk of loss being assumed by the customer at the shipping point. The Company has a small percentage of sales with other terms,
and revenue is recognized in accordance with the terms of the related customer purchase order. Shipping and handling costs billed
to customers are recognized in revenue.
Cost of sales
Cost of sales includes inventory costs, materials
and supplies costs, and shipping and handling costs incurred.
Shipping and handling costs
For the years
ended December 31, 2015 and 2014, shipping and handling costs incurred for product shipped to customers are included in cost of
sales and amounted to $137,863 and $0, respectively. Shipping and handling costs charged to customers are included in sales.
Advertising costs
All costs related to advertising of the Company’s
products are expensed in the period incurred. For the years ended December 31, 2015 and 2014, advertising costs charged to operations
were $2,153 and $0, respectively, and are included in general and administrative expenses on the accompanying consolidated statements
of operations.
Income taxes
The Company accounts for income tax using the
liability method prescribed by ASC 740, “
Income Taxes
”. Under this method, deferred tax assets and liabilities
are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax
rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance
to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all,
of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income
or loss in the period that includes the enactment date.
The Company follows the accounting guidance
for uncertainty in income taxes using the provisions of Accounting Standards Codification (ASC) 740
“Income Taxes
”.
Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not
the position will be sustained upon examination by the tax authorities. As of December 31, 2015 and 2014, the Company had no uncertain
tax positions that qualify for either recognition or disclosure in the financial statements. The Company recognizes interest and
penalties related to uncertain income tax positions in other expense. However, no such interest and penalties were recorded for
the years ended December 31, 2015 and 2014.
Stock-based compensation
Stock-based compensation is accounted for based
on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost
of employee and director services received in exchange for an award of equity instruments over the period the employee or director
is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement
of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
Pursuant to ASC Topic 505-50, for share-based
payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The
expense is recognized over the service period of the award. Common stock awards issued to consultants represent common stock granted
to non-employees in exchange for
services at fair value. The measurement dates
for such awards are set at the dates that the contracts are entered into as the awards are non-forfeitable and vest immediately.
The measurement date fair value is then recognized over the service period as if the Company has paid cash for such service.
Loss per share of common stock
ASC 260 “Earnings Per Share”, requires
dual presentation of basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator and denominator
of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted
EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Basic net loss per
common share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common
shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average
number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.
Additionally, potentially dilutive common shares consist of common stock issuable upon conversion of convertible debt. These common
stock equivalents may be dilutive in the future
.
Potentially dilutive common shares were excluded from the computation of
diluted shares outstanding as they would have an anti-dilutive impact on the Company’s net losses and consisted of the following:
|
|
December 31, 2015
|
|
December 31, 2014
|
Convertible notes
|
|
|
463,200
|
|
|
|
120,000
|
|
|
|
|
|
|
|
|
|
|
Recent accounting pronouncements
In May 2014, the FASB
issued an update ("ASU 2014-09")
Revenue from Contracts with Customers.
ASU 2014-09 establishes a single
comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of
the existing revenue recognition guidance. ASU 2014-09 requires an entity to recognize revenue when it transfers promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services and also requires certain additional disclosures. ASU 2014-09 is effective for interim and annual
reporting periods in fiscal years that begin after December 15, 2016. The Company is currently evaluating the impact of the
adoption of ASU 2014-09 on its consolidated financial statements.
In June 2014, the FASB issued an update (“ASU
2014-12”) to ASC Topic 718,
Compensation – Stock Compensation
. ASU 2014-12 requires an entity to treat
performance targets that can be met after the requisite service period of a share based award has ended, as a performance condition
that affects vesting. ASU 2014-12 is effective for interim and annual reporting periods in fiscal years that begin after
December 15, 2015. The adoption of ASU 2014-12 is not expected to have a material effect on the Company’s financial
position, results of operations and cash flows.
In August 2014, the FASB issued ASU 2014-15,
Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern,
that will require management
to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances.
In connection with each annual and interim period, management will assess if there is substantial doubt about an entity’s
ability to continue as a going concern within one year after the issuance date. Substantial doubt exists if it is probable that
the entity will be unable to meet its obligations within one year after the issuance date. The new standard defines substantial
doubt and provides example indicators. Disclosures will be required if conditions give rise to substantial doubt. However, management
will need to assess if its plans will alleviate substantial doubt to determine the specific disclosures. This standard is effective
for public entities for annual periods ending after December 15, 2016. Earlier application of this standard is permitted. This
standard is not expected to have a material effect on our financial position, results of operations and cash flows.
In February 2015, the FASB issued ASU 2015-02,
Consolidation
(Topic 810) (“ASU 2015-02”), to address financial reporting considerations for the evaluation
as to the requirement to consolidate certain legal entities. ASU
2015-02 is effective for fiscal years and for
interim periods within those fiscal years beginning after December 15, 2015. This standard is not expected to have a material
effect on our financial position, results of operations and cash flows.
In April 2015, the FASB issued ASU 2015-03,
Interest—Imputation of Interest (Subtopic 835-30)
(“ASU 2015-03”), as part of the initiative to reduce
complexity in accounting standards. The update requires that debt issuance costs related to a recognized debt liability be presented
in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU
2015-03 is effective for annual periods beginning after December 15, 2015 and for interim periods within those fiscal years.
In November 2015, the FASB issued ASU 2015-17,
Balance Sheet Classification of Deferred Taxes
(“ASU 2015-17”), which requires entities to present deferred
tax assets and deferred tax liabilities as noncurrent in a classified balance sheet. The ASU simplifies the current guidance in
ASC Topic 740,
Income Taxes
, which requires entities to separately present deferred tax assets and liabilities as current
and noncurrent in a classified balance sheet. ASU 2015-17 is effective for fiscal years beginning after December 15, 2016,
and interim periods within those annual periods. Early adoption is permitted for all entities as of the beginning of an interim
or annual reporting period. The Company does not expect the impact of ASU 2015-17 to be material to our consolidated financial
statements.
There are no
other recently issued accounting standards that apply to us or that are expected to have a material impact on our results of operations,
financial condition, or cash flows.
NOTE 3 –
CONVERTIBLE NOTES
In 2013 and on July 1, 2014, the Company entered
into two convertible promissory two note agreements with individuals in the amount of $20,000 and $10,000, respectively. The notes
were non-interest bearing, unsecured and were due on demand. The notes are convertible into shares of stock of the Company at the
market price on the date of conversion. Pursuant to ASC Topic 470-20 (Debt with conversion and other options), since these convertible
notes had fixed conversion price at market, the Company determined it had a fixed monetary amounts that can be settled for the
debt. Accordingly, no derivative liability was calculated. On December 22, 2015, the Company entered into a debt purchase and assignment
agreement with one of the debt holders whereby a convertible note in the principal amount of $10,000 became convertible at $.0025
per common share and the note was converted into 4,000,000 shares of the Company’s common stock (see Note 5). At December
31, 2015, one note remains due in the principal amount of $20,000.
In September 2014, the Company entered into
two promissory note agreements with individuals in the amount of $170,000 and $100,000, respectively. The notes bear interest at
6.0% per annum, were unsecured and were due in September 2015. These convertible notes were convertible into the Company’s
common stock at a conversion price of $0.40 per common share. On November 14, 2014, the convertible notes were converted into 675,000
shares of the Company’s common stock.
On December 28, 2015, the Company entered into
a secured convertible promissory note (the “Convertible Note”) with Firstfire Global Opportunities Fund LLC (the “Lender”),
with a principal amount of $230,000, which amount is the $200,000 purchase price plus a 15% original issue discount equal to $30,000.
Additionally, the lender deducted legal fees of $10,000 and the Company received net proceeds of $190,000. The unpaid principal
and interest is secured by the Company’s common stock, bears interest computed at a rate of interest which is equal to 7.0%
per annum, and is payable in monthly installments of $50,555 commencing April 28, 2016 through August 28, 2016. Any amount of principal
or interest on this Convertible Note, which is not paid by the due dates, shall bear interest at the rate of 15% per annum from
the due date until paid.
The Lender is entitled, at their option, at
any time after the eighth month anniversary of these Convertible Note, to convert all or any lesser portion of the outstanding
principal amount and accrued but unpaid interest into the Company’s common stock. The conversion price shall equal $0.50
per share (the "Fixed Conversion Price") provided, however that from and after the occurrence of any event of default,
as defined, the conversion price shall be the lower of: (i) the Fixed Conversion Price or (ii) 50% multiplied by the lowest sales
price of the common stock in a public market during the ten consecutive Trading Day period immediately preceding the Trading Day
that the Company receives a notice of conversion. In connection with the issuance of this Convertible Note, the Company
determined that the terms of the Convertible
Note include a down-round provision under which the conversion price and exercise price could be affected by future equity offerings
undertaken by the Company or contain terms that are not fixed monetary amounts at inception. Accordingly, under the provisions
of FASB ASC Topic No. 815-40, “Derivatives and Hedging – Contracts in an Entity’s Own Stock”, the embedded
conversion option contained in the convertible instruments were accounted for as derivative liabilities at the date of issuance
and shall be adjusted to fair value through earnings at each reporting date. The fair value of the embedded conversion option derivatives
was determined using the Black- Scholes Option Pricing Model. On the initial measurement date, the fair values of the embedded
conversion option derivative of $73,236 was recorded as a derivative liability and was allocated as a debt discount to the Convertible
Note of $73,236. At December 28, 2015, the Company valued the embedded conversion option derivative liabilities resulting in no
gain or loss from change in fair value of derivative liabilities. Additionally, in connection with this Convertible Note, the Company
paid Lender debt issuance costs of $10,000 and issued 50,000 shares of its common stock.
These common shares were valued at $0.225 per
share based on recent sales of the Company’s stock and the Company recorded a debt discount of $10,725 which is the relative
fair value of such shares.
At December 31, 2015 and December 28, 2015,
the fair value of the derivative liabilities were estimated using the Black-scholes option-pricing model with the following assumptions:
Dividend rate
|
|
|
0
|
|
Term (in years)
|
|
|
0.67 years
|
|
Volatility
|
|
|
100.0
|
%
|
Risk-free interest rate
|
|
|
0.66
|
%
|
For the year ended December 31, 2015, amortization
of debt discounts related to this convertible note amounted to $3,148, which has been included in interest expenses on the accompanying
consolidated statements of operations.
At December 31, 2015 and 2014, convertible
promissory notes consisted of the following:
|
|
December 31,
2015
|
|
December 31,
2014
|
Principal amount
|
|
$
|
250,000
|
|
|
$
|
30,000
|
|
Less: unamortized debt discount
|
|
|
(120,813
|
)
|
|
|
—
|
|
Convertible note payable, net
|
|
$
|
129,187
|
|
|
$
|
30,000
|
|
NOTE 4 –
RELATED PARTY TRANSACTIONS
From time to time, the Company receives advances
from the Company’s chief executive officer for working capital purposes. The advances are non-interest bearing and
are payable on demand. For the year ended December 31, 2015 and 2014, due to related party activity consisted of the following:
|
|
For the Year
ended
December 31,
2015
|
|
For the Year
ended
December 31,
2014
|
Balance due to related party at beginning of year
|
|
$
|
8,051
|
|
|
$
|
—
|
|
Working capital advances received
|
|
|
31,366
|
|
|
|
128,561
|
|
Repayments made and conversions
|
|
|
(983
|
)
|
|
|
(120,510
|
)
|
Balance due to related party at end of year
|
|
$
|
38,434
|
|
|
$
|
8,051
|
|
NOTE 5 -
STOCKHOLDERS’ EQUITY
Preferred stock
The preferred stock
may be issued in one or more series. The Company’s board of directors are authorized to issue the shares of preferred stock
in such series and to fix from time to time before issuance thereof the number of shares to be included in any such series and
the designation, powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations
or restrictions thereof, of such series. On February 19, 2016, the Company’s board of director designated 1,000,000 shares
of preferred stock as Series A Preferred Stock (See Note 9).
Common stock deemed issued in reverse
merger
Immediately prior the Purchase Agreement as
discussed in Note 1, the Company had 195,607 common shares outstanding. These 195,607 common shares are reflected as shares deemed
issued as part of reverse merger in the accompanying consolidated financial statements in exchange for liabilities of $30,000.
Common stock issued for services
During the year ended December 31, 2014, pursuant
to consulting agreements, the Company issued 2,380,936 shares of common stock to consultants for business development and other
services rendered and to be rendered. These shares were valued on the date of grant at per share prices ranging from $0.4545 to
$0.225 based on recent sales of the Company’s common stock for an aggregate value of $1,056,517. For the year ended December
31, 2014, in connection with the issuance of these shares, the Company recorded stock-based consulting expense of $1,030,004 and
a prepaid expense of $26,513 which will be amortized into consulting expense during the year ended December 31, 2015.
During the year ended December 31, 2015, pursuant
to consulting agreements, the Company issued 2,158,927 shares of common stock to consultants for business development and other
services rendered and to be rendered. These shares were valued on the date of grant at per share prices ranging from $0.13 to $0.225
based on recent sales of the Company’s common stock or based on the fair value of services rendered for an aggregate value
of $416,700. For the year ended December 31, 2015, in connection with the issuance of these shares, the Company recorded stock-based
consulting expense of $288,192 and a prepaid expense of $128,508 which will be amortized into consulting expense over the remaining
service period.
Common stock issued for cash
During 2014, the Company issued 262,218 shares
of common stock for cash of $105,000 and a subscription receivable of $5,000 at per share prices ranging from $0.4545 per share
to $0.225 per share. In January 2015, the subscription receivable amount due of $5,000 was received.
Common stock issued in connections with
convertible debt
On November 14, 2014, the Company issued 675,000 shares of its common
stock upon conversion of two convertible notes in the amount of $270,000 (see Note 3).
On December 22, 2015, the Company entered into a debt purchase and
assignment agreement with one of its debt holders whereby a convertible note in the principal amount of $10,000 became convertible
at $.0025 per common share and the note was converted into 4,000,000 shares of the Company’s common stock. Pursuant to ASC
470-20-40, since the convertible note was immediately converted into common shares of the Company pursuant to the debt purchase
and assignment agreements, the Company recognized a debt conversion inducement expense of $890,000 equal to the fair value of the
common stock transferred in the transaction in excess of the fair value of securities issuable pursuant to the original conversion
terms (see Note 3).
On December 28, 2015, in connection with a Convertible Note, the
Company issued 50,000 shares of its common stock. These common shares were valued at $0.225 per share based on recent sales of
the Company’s stock and the Company recorded a debt discount of $10,725 which is the relative fair value of such shares (see
Note 3).
NOTE 6 –
INCOME TAXES
The Company maintains deferred tax assets and
liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. The net deferred tax asset has been fully offset by
a valuation allowance because of the uncertainty of the attainment of future taxable income.
The items accounting for the difference between
income taxes at the effective statutory rate and the provision for income taxes for the years ended December 31, 2015 and 2014
were as follows:
|
|
Years Ended December 31,
|
|
|
2015
|
|
2014
|
Income tax benefit at U.S. statutory rate of 34%
|
|
$
|
(475,012
|
)
|
|
$
|
(432,790
|
)
|
State income taxes
|
|
|
(69,854
|
)
|
|
|
(63,645
|
)
|
Non-deductible expenses
|
|
|
469,834
|
|
|
|
401,701
|
|
Change in valuation allowance
|
|
|
75,032
|
|
|
|
94,734
|
|
Total provision for income tax
|
|
$
|
—
|
|
|
$
|
—
|
|
The Company’s approximate net deferred tax assets as of December 31, 2015 and 2014 were as follows:
|
|
December 31,
2015
|
|
December 31,
2014
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
173,705
|
|
|
$
|
98,673
|
|
Total deferred tax assets before valuation allowance
|
|
|
173,705
|
|
|
|
98,673
|
|
Valuation allowance
|
|
|
(173,705
|
)
|
|
|
(98,673
|
)
|
Net deferred tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
The estimated net operating loss carryforward
was approximately $445,397 at December 31, 2015 which may be limited on the usage of such net operating loss carryforwards due
to a change in ownership in accordance with Section 382 of the Internal Revenue Code. The Company provided a valuation allowance
equal to the net deferred income tax asset for the year ended December 31, 2015 because it was not known whether future taxable
income will be sufficient to utilize the loss carryforward. The increase in the valuation allowance was $75,032 from the year ended
December 31, 2014. The potential tax benefit arising from tax loss carryforwards will expire in 2035.
The Company does not have any uncertain tax
positions or events leading to uncertainty in a tax position. The Company’s 2013, 2014 and 2015 Corporate Income Tax Returns
are subject to Internal Revenue Service examination.
NOTE 7 –
COMMITMENTS
International distribution agreement
On February 28, 2014, the Company entered
into an International Distribution Agreement (the “International Distribution Agreement”) with its major supplier.
Through December 31, 2015, the Company has complied with its minimum purchase commitments. Future minimum purchase amounts under
the International Distribution Agreement at December 31, 2015 are as follows:
Years ending December 31,
|
|
Amount
|
|
2016
|
|
|
$
|
1,000,000
|
|
|
2017
|
|
|
|
1,500,000
|
|
|
2018
|
|
|
|
2,500,000
|
|
|
Total minimum purchase amounts
|
|
|
$
|
5,000,000
|
|
Leases
The Company leases its facilities under non-cancelable
operating leases. Rent expense for operating leases was $77,435 and $41,600 for the years ended December 31, 2015 and 2014, respectively.
Future minimum lease payments under non-cancelable operating lease at December 31, 2015 are as follows:
Years ending December 31,
|
|
Amount
|
|
2016
|
|
|
$
|
19,709
|
|
|
2017
|
|
|
|
1,150
|
|
|
Total minimum non-cancelable operating lease payments
|
|
|
$
|
20,859
|
|
NOTE 8 –
CONCENTRATIONS
Concentrations of credit risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist primarily of and cash deposits. The Company places its cash in banks at levels
that, at times, may exceed federally insured limits. There were no balances in excess of FDIC insured levels as of December 31,
2015 and 2014. The Company has not experienced any losses in such accounts through December 31, 2015.
Geographic concentrations of sales
For the years ended December 31, 2015 and 2014,
total sales in the United States represent approximately 73% and 89% of total consolidated revenues, respectively. No other geographical
area accounted for more than 10% of total sales during the years ended December 31, 2015 and 2014.
Customer concentrations
For the year ended December 31, 2015, five customers accounted for
approximately 85.3% of total sales (21.9%, 13.7%, 22.1%, 13.3% and 14.3%, respectively). The Company did not have customers in
2014. A reduction in sales from or loss of such customers would have a material adverse effect on the Company’s consolidated
results of operations and financial condition.
Vendor concentrations
For the years ended December 31, 2015, the Company purchased all
of its product from one supplier. The Company did not purchase any products during 2014. The loss of this supplier may have a material
adverse effect on the Company’s consolidated results of operations and financial condition.
NOTE 9 -
SUBSEQUENT EVENTS
On February 3, 2016, the Company sold 1,200,000
shares of its common stock for cash of $480,000 or $0.40 per share.
On February 19, 2016, the Board of Directors
of the Company authorized and approved to create a new class of voting preferred stock called “Series A Preferred Stock”,
consisting of 1,000,000 shares authorized, $.001 par value. The preferred stock is not convertible into any other class or series
of stock. On all matters to come before the shareholders of the Company, the holders of Series A Preferred shall have that number
of votes per share (rounded to the nearest whole share) equal to the product of (x) the number of shares of Series A Preferred
held on the record date for the determination of the holders of the shares entitled to vote (the “Record Date”), or,
if no record date is established, at the date such vote is taken or any written consent of shareholders is first solicited, and
(y) 50. In the event that the votes by the holders of the Series A Preferred Stock do not total at least 51% of the votes of all
classes of the Company’s authorized capital stock entitled to vote, then regardless of the provisions of this paragraph,
in any such case, the votes cast by a majority of the holders of the Series A Preferred Stock shall be deemed to equal 51% of all
votes cast at any meeting of stockholders, or any issue put to the stockholders for voting and the Company
may state that any such action approved by
at least a majority of the holders of the Series A Preferred Stock was had by majority vote of the holders of all classes of the
Company’s capital stock. On February 19, 2016, the Company issued 1,000,000 shares of Series A Preferred Stock to its chief
executive officer.
On March 16, 2016, pursuant to a consulting
agreement, the Company issued 16,667 shares of common stock to a consultant for investor relations services rendered. These shares
were valued on the date of grant at $0.90 per share or $15,000 based on the fair value of services performed. In March 2016, in
connection with the issuance of these shares, the Company recorded stock-based consulting expense of $15,000.
On April 20, 2016 and June 6, 2016, the Company
entered into agreements for the addendum of the Convertible Note (see Note 5) which waived all rights to enforce any event of default
which may have been triggered by the Company’s failure to file it reports with the SEC. In connection with these agreements,
the Company issued 30,000 and 40,000 shares of common stock, respectively, for an aggregate of 70,000 shares of common stock. These
shares were valued on the date of grant at $0.40 per share or $28,000 based on recent sales of the Company’s common stock.
Additionally, on August 26, 2016, the Company entered into an agreement for the addendum of the Convertible Note (see Note 5) which
waived all rights to enforce any event of default which may have been triggered by the Company’s failure to file it reports
with the SEC. In connection with this agreement, the Company issued 130,000 shares of common stock and paid a cash penalty of $5,000.
These shares were valued on the date of grant at $0.40 per share or $52,000 based on recent sales of the Company’s common
stock.
PETRONE WORLDWIDE, INC.
7,506,942 Shares of
Common Stock
PROSPECTUS
____________, 2016
Until ____________,
2016, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required
to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
PART II - INFORMATION NOT REQUIRED IN
PROSPECTUS
Item 13. Other Expenses of
Issuance and Distribution
The following table
sets forth the costs and expenses payable by us in connection with the issuance and distribution of the securities being registered
hereunder. No expenses will be borne by the Selling Stockholder. All of the amounts shown are estimates, except for the SEC registration
fee.
SEC registration fee
|
|
$
|
226.21
|
|
Accounting fees and expenses*
|
|
$
|
2,000
|
|
Legal fees and expenses*
|
|
$
|
15,000
|
|
Printing expenses*
|
|
$
|
1,000
|
|
Miscellaneous fees and expenses*
|
|
$
|
800
|
|
Total*
|
|
$
|
19,026.21
|
|
* Estimated
Item 14. Indemnification
of Officers and Directors
Nevada Law
Section 78.7502 of
the Nevada Revised Statutes permits a corporation to indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except
an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee, or agent
of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another
corporation, partnership joint venture, trust, or other enterprise, against expenses, including attorneys’ fees, judgments,
fines, and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding
if he:
(a) is not liable
pursuant to Nevada Revised Statute 78.138, or
(b) acted in good
faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
In addition, Section
78.7502 of the Nevada Revised Statutes permits a corporation to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably
incurred by him in connection with the defense or settlement of the action or suit if he:
(a) is not liable pursuant
to Nevada Revised Statute 78.138; or
(b) acted in good faith
and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation.
To the extent that
a director, officer, employee, or agent of a corporation has been successful on the merits or otherwise in defense of any action,
suit, or proceeding referred to above, or in defense of any claim, issue, or matter, the corporation is required to indemnify him
against expenses, including attorneys’ fees, actually and reasonably incurred by him in connection with the defense.
Section 78.751 of
the Nevada Revised Statutes provides that such indemnification may also include payment by the Company of expenses incurred in
defending a civil or criminal action or proceeding in advance of the final disposition of such action or proceeding upon receipt
of an undertaking by the person indemnified to repay such payment if he shall be ultimately found not to be entitled to indemnification
under Section 78.751 of the Nevada Revised Statutes. Indemnification may be provided even though the person to be indemnified
is no longer a director, officer, employee, or agent of the Company or such other entities.
Section 78.752 of the
Nevada Revised Statutes allows a corporation to purchase and maintain insurance or make other financial arrangements on behalf
of any person who is or was a director, officer, employee, or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise
for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee,
or agent, or arising out of his status as such, whether or not the corporation has the authority to indemnify him against such
liability and expenses.
Other financial arrangements
made by the corporation pursuant to Section 78.752 of the Nevada Revised Statutes may include the following:
(a) the creation
of a trust fund;
(b) the establishment
of a program of self-insurance;
(c) the securing
of its obligations of indemnification by granting a security interest or other lien on any assets of the corporation; and
(d) the establishment
of a letter of credit, guaranty or surety.
No financial arrangement
made pursuant to Section 78.752 may provide protection for a person adjudged by a court of competent jurisdiction, after exhaustion
of all appeals, to be liable for intentional misconduct, fraud or a knowing violation of law, except with respect to the advancement
of expenses of indemnification ordered by a court.
Any discretionary indemnification
pursuant to Section 78.7502 of the Nevada Revised Statutes, unless ordered by a court or advanced pursuant to an undertaking to
repay the amount if it is determined by a court that the indemnified party is not entitled to be indemnified by the corporation,
may be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director,
officer, employee, or agent is proper in the circumstances. The determination must be made:
(a) by the stockholders;
(b) by the board
of directors by a majority vote of a quorum consisting of directors who were not parties to the action, suit, or proceeding;
(c) if a majority
vote of a quorum consisting of directors who were not parties to the action, suit, or proceeding so orders, by independent legal
counsel in a written opinion, or
(d) if a quorum
consisting of directors who were not parties to the action, suit, or proceeding cannot be obtained, by independent legal counsel
in a written opinion.
Subsection 7 of Section
78.138 of the Nevada Revised Statutes provides that, subject to certain very limited statutory exceptions, a director or officer
is not individually liable to the corporation or its stockholders or creditors for any damages as a result of any act or failure
to act in his or her capacity as a director or officer, unless it is proven that the act or failure to act constituted a breach
of his or her fiduciary duties as a director or officer and such breach of those duties involved intentional misconduct, fraud
or a knowing violation of law. The statutory standard of liability established by Section 78.138 controls even if there is a provision
in the corporation’s articles of incorporation unless a provision in the corporation’s articles of incorporation provides
for greater individual liability.
Charter Provisions
Our Articles of Incorporation, as amended, and our Bylaws provide
for mandatory indemnification of our officers and directors, except where such person has been adjudicated liable by reason of
his negligence or willful misconduct toward us or such other corporation in the performance of his duties as such officer or director.
Our Bylaws also authorize the purchase of director and officer liability insurance to insure them against any liability asserted
against or incurred by such person in that capacity or arising from such person's status as a director, officer, employee, fiduciary,
or agent, whether or not the corporation would have the power to indemnify such person under the applicable law.
Item 15. Recent Sales of Unregistered
Securities
During the past
three years, the following securities were sold or otherwise issued by the Company and were not registered under the Securities
Act:
During fiscal year ended December 31, 2014, we issued shares
of unregistered common stock as follows
:
Reverse Merger
On March 3, 2014, we completed a merger with
Petrone Worldwide, Inc., a private corporation, which for accounting purposes was treated as a reverse, whereby we issued 1,760,542
shares of stock to Victor Petrone as the former owner of a private company. The shares were valued at $0.50. The shares were issued
in a private transaction to one United States resident in reliance on Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"). The shares of common stock have not been registered under the Securities Act or under any state securities
laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable
exemption from the registration requirements. The shareholder acknowledged that the securities to be issued have not been registered
under the Securities Act, that he understood the economic risk of an investment in the securities, and that he had the opportunity
to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities.
Services
On February 3, 2014, August 1, 2014, November
18, 2014 and December 11, 2014, we issued an aggregate of 2,480,936 shares to three separate consultants for services rendered.
Of the 2,480,936 shares issued: (i) 100,000 shares were issued to our former officer for services on February 3, 2014 at a per
share price of $0.50; (ii) 2,255,664 shares were issued on August 1, 2014 at a per share price of $0.45; and (iii) 31,108 shares
were issued on November 18, 2014 at a per share price of $0.40.and 94,164 on December 11, 2014 @,40 per share. The shares were
issued in a private transaction to three United States residents in reliance on Rule 506 of Regulation D of the Securities Act.
The shares of common stock have not been registered
under the Securities Act or under any state securities laws and may not be offered or sold without registration with the United
States Securities and Exchange Commission or an applicable exemption from the registration requirements. The shareholders acknowledged
that the securities to be issued have not been registered under the Securities Act, that they understood the economic risk of an
investment in the securities, and that they had the opportunity to ask questions of and receive answers from our management concerning
any and all matters related to acquisition of the securities.
Private Placement
On August 1, 2014, November 18, 2014 and December
8, 2014, we issued an aggregate of 895,000 shares to three investors for aggregate proceeds of $375,000. Of the 895,000 shares
issued: (i) 100,000 shares were issued at a per share price of $0.50; (ii) 220,000 shares were issued at a per share price of $0.4545;
and (iii) 425,000 shares were issued at a per share price of $0.40. We also issued 22,220 on December 8, 2014 for cash to be received
of $5,000. The shares were issued in a private transaction to three United States residents in reliance on Rule 506 of Regulation
D of the Securities Act. The shares of common stock have not been registered under the Securities Act or under any state securities
laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable
exemption from the registration requirements. The shareholders acknowledged that the securities to be issued have not been registered
under the Securities Act, that they understood the economic risk of an investment in the securities, and that they had the opportunity
to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities.
Founder Shares
On August 1, 2014, we issued 10,000,000 shares
of stock to Victor Petrone, our sole officer and director, at a per share price of $0.001 for founder shares of $10,000. The shares
were issued in a private transaction to three United States residents in reliance on Regulation D promulgated under the Securities
Act of 1933, as amended. The shares of common stock have not been registered under the Securities Act or under any state securities
laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable
exemption from the registration requirements. The shareholder acknowledged that the securities to be issued have not been registered
under the Securities Act, that he understood the economic risk of an investment in the securities, and that he had the opportunity
to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities.
See "Item 12. Executive Compensation."
During fiscal year ended December 31, 2015, we issued shares
of unregistered common stock as follows
:
Common stock
issued in connections with convertible debt
On December 22, 2015, we entered into a debt purchase and assignment
agreement with one of our debt holders pursuant to which a convertible note in the principal amount of $10,000 became convertible
at $.0025 per common share and the note was converted into 4,000,000 shares of our common stock. The securities were issued in
a private transaction to one creditor in the United States in reliance on Regulation D promulgated under of the Securities Act.
On December 28, 2015, in connection with a
Convertible Note, we issued 50,000 shares of our common stock. These common shares were valued at $0.225 per share based on recent
sales of our stock and we recorded a debt discount of $10,725 which is the relative fair value of such shares. The shares were
issued in a private transaction to one creditor in the United States in reliance on Regulation D promulgated under the Securities
Act of 1933, as amended. The shareholder acknowledged that the securities to be issued have not been registered under the Securities
Act, that he understood the economic risk of an investment in the securities, and that it had the opportunity to ask questions
of and receive answers from our management concerning any and all matters related to acquisition of the securities.
Common stock issued for services
During the year ended December 31, 2015, pursuant
to consulting agreements, we issued 2,158,927 shares of common stock to consultants for business development and other services
rendered and to be rendered. These shares were valued on the date of grant at per share prices ranging from $0.13 to $0.225 based
on recent sales of our common stock or based on the fair value of services rendered for an aggregate value of $416,700. For the
year ended December 31, 2015, in connection with the issuance of these shares, we recorded stock-based consulting expense of $288,192
and a prepaid expense of $128,508 which was amortized into consulting expense over the remaining service period.
These shares were issued in a private transaction
to approximately nine United States residents and three non-U.S. residents in reliance on Rule 506 of Regulation D and Regulation
S promulgated under the Securities Act.
Since January 1, 2016, we issued shares of unregistered
common stock as follows
:
On February 19, 2016, the Board of Directors
of the Company authorized and approved to create a new class of voting preferred stock called “Series A Preferred Stock”,
consisting of 1,000,000 shares authorized, $.001 par value. The preferred stock is not convertible into any other class or series
of stock and has no liquidation preference value. The Series A Preferred Stock was issued to ensure perpetual control of at least
51% is provided to the holder of the Series A Preferred Stock. On all matters to come before the shareholders of the Company, the
holders of Series A Preferred shall have that number of votes per share (rounded to the nearest whole share) equal to the product
of (x) the number of shares of Series A Preferred held on the record date for the determination of the holders of the shares entitled
to vote (the “Record Date”), or, if no record date is established, at the date such vote is taken or any written consent
of shareholders is first solicited, and (y) 50. In the event that the votes by the holders of the Series A Preferred Stock do not
total at least 51% of the votes of all classes of the Company’s authorized capital stock entitled to vote, then regardless
of the provisions of this paragraph, in any such case, the votes cast by a majority of the holders of the Series A Preferred Stock
shall be deemed to equal 51% of all votes cast at any meeting of stockholders, or any issue put to the stockholders for voting
and the Company may state that any such action approved by at least a majority of the holders of the Series A Preferred Stock was
had by majority vote of the holders of all classes of the Company’s capital stock.
On February 19, 2016, we issued 1,000,000 shares
of Series A Preferred Stock to our chief executive officer. In connection with the issuance of Series A preferred shares, we recorded
a nominal amount of stock-based compensation of $1,000 since the shares had no economic value, on the date of the issuance of such
shares, the Company’s chief executive officer was the majority owner of the our common shares, and the value of such voting
rights were not readily and objectively measurable.
Common stock issued for services
On March 16, 2016, pursuant to a consulting
agreement, the Company issued 16,667 shares of common stock to a consultant for investor relations services rendered. These shares
were valued on the date of grant at $0.90 per share or $15,000 based on the fair value of services performed. In March 2016, in
connection with the issuance of these shares, the Company recorded stock-based consulting expense of $15,000. These shares were
issued in a private transaction to one consultant in reliance on Rule 506 of Regulation D promulgated under the Securities Act.
Common stock issued for cash
On February 3, 2016, the Company sold 1,200,000
shares of its common stock at $0.40 per share for cash of $200,000 and a subscription receivable of $280,000. The subscription
receivable of $280,000 was collected in April 2016. The shares were issued in a private transaction to two foreign investors in
reliance on Regulation D and Regulation S promulgated under the Securities Act of 1933, as amended. The shareholder acknowledged
that the securities to be issued have not been registered under the Securities Act, that he understood the economic risk of an
investment in the securities, and that it had the opportunity to ask questions of and receive answers from our management concerning
any and all matters related to acquisition of the securities.
On April 20, 2016, June 6, 2016 and August
26, 2016, we entered into agreements for the addendum of the Convertible Note with Firstfire Global Opportunities Fund LLC (see
Note 3) which waived all rights to enforce any event of default, which may have been triggered by our failure to file it reports
with the SEC. In connection with
these agreements, we issued 30,000, 40,000
and 130,000 shares of common stock, respectively, for an aggregate of 200,000 shares of common stock. These shares were valued
on the date of grant at $0.40 per share or $80,000 based on recent sales of our common stock. These shares were issued in a private
transaction to one consultant in reliance on Rule 506 of Regulation D promulgated under the Securities Act.
Common stock issued for commitment fees
On October 24, 2016, in connection with the
execution of the Equity Purchase Agreement, the Company issued 650,000 shares of its common stock to Selling Stockholder as a commitment
fee. These shares were issued in a private transaction to Selling Stockholder in reliance on Rule 506 of Regulation D promulgated
under the Securities Act
On November 7, 2016, the Company consummated
a transaction with Crown Bridge Partners, LLC (“Investor”), whereby, upon the terms and subject to the conditions
of that certain securities purchase agreement (the “November 2016 SPA”), Investor agreed to invest up to $340,000.00
in our Company in exchange for a convertible promissory note in the principal amount of $400,000.00 (the “Note”).
In connection with the issuance of the Note and November 2016 SPA, we issued 450,000 shares of our common stock to Investor, as
a commitment fee. These shares were issued in a private transaction to an accredited investor in reliance on Rule 506 of Regulation
D promulgated under the Securities Act.
Item 16. Exhibit Index
The following exhibits are included as
part of this Registration Statement by reference:
Exhibit Number
|
Description of Exhibits
|
3.1
|
Articles of Incorporation dated December 14, 1998 (incorporated by reference to Exhibit 3.1 to the registrant’s registration statement on Form 10-12G filed with the Securities and Exchange Commission on June 13, 2014).
|
3.2
|
Articles of Merger dated December 21, 1998 (incorporated by reference to Exhibit 3.2 to the registrant’s registration statement on Form 10-12G filed with the Securities and Exchange Commission on June 13, 2014).
|
3.3
|
Articles of Amendment to the Articles of Incorporation dated December 22, 1998 (incorporated by reference to Exhibit 3.3 to the registrant’s registration statement on Form 10-12G filed with the Securities and Exchange Commission on June 13, 2014).
|
3.4
|
Certificate of Amendment to the Articles of Incorporation dated January 31, 2014 (incorporated by reference to Exhibit 3.4 to the registrant’s registration statement on Form 10-12G filed with the Securities and Exchange Commission on June 13, 2014).
|
3.5
|
Certificate of Designation dated February 24, 2016 (incorporated by reference to Exhibit 3.1 to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on February 24, 2016).
|
3.6
|
Amendment to Articles of Incorporation, as filed with the Secretary of State of Nevada on December 1, 2016 (incorporated by reference to Exhibit 3.1 to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on December 2, 2016)
|
3.7
|
Bylaws of the registrant dated March 7, 2014 (incorporated by reference to Exhibit 3.6 to the registrant’s annual report on Form 10-K filed with the Securities and Exchange Commission on September 9, 2016).
|
4.1
|
Convertible Debenture dated October 26, 2016, by and between the registrant and Peak One Opportunity Fund, L.P. (incorporated by reference to Exhibit 4.1 to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on October 28, 2016).
|
4.2
|
Form of Convertible Promissory Note (incorporated by reference to Exhibit 4.1 to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on December 2, 2016).
|
5.1
|
Opinion of the Law Office of Legal & Compliance, LLC.
|
10.1
|
Exclusive Distributorship Agreement between Star Distributors Inc. and the registrant dated April 20, 2015 (incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on April 27, 2015).
|
10.2
|
Exclusive Distributorship Agreement between M/s Dewan & Sons and the registrant dated April 23, 2015 (incorporated by reference to Exhibit 10.2 to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on April 27, 2015).
|
10.3
|
Memorandum of Undertaking dated October 21, 2015 between the registrant and Transpower Components (India) Pvt. Ltd. (incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on March 14, 2016).
|
10.4
|
Amendment to Memorandum of Undertaking dated January 5, 2016 between the registrant and Transpower Components (India) Pvt. Ltd. (incorporated by reference to Exhibit 10.2 to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on March 14, 2016).
|
10.5
|
Exclusive Distributorship Agreement between FOH, Inc. and the registrant dated February 28, 2014 (incorporated by reference to Exhibit 10.5 to the registrant’s annual report on Form 10-K filed with the Securities and Exchange Commission on September 9, 2016).
|
10.6
|
Secured Convertible Promissory Note issued by the Registrant in favor of FirstFire Global Opportunities Fund LLC dated December 28, 2015 (incorporated by reference to Exhibit 10.6 to the registrant’s annual report on Form 10-K filed with the Securities and Exchange Commission on September 9, 2016).
|
10.7
|
Equity Purchase Agreement dated October 24, 2016, by and between the registrant and Peak One Opportunity Fund, L.P. (incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on October 28, 2016).
|
10.8
|
Registration Rights Agreement dated October 24, 2016, by and between the registrant and Peak One Opportunity Fund, L.P. (incorporated by reference to Exhibit 10.2 to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on October 28, 2016).
|
10.9
|
Securities Purchase Agreement dated October 24, 2016, by and between the registrant and Peak One Opportunity Fund, L.P. (incorporated by reference to Exhibit 10.3 to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on October 28, 2016).
|
10.10
|
Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on December 2, 2016)
|
21.1
|
Subsidiaries of the registrant.*
|
23.1
|
Consent of Independent Registered Public Accounting Firm.*
|
23.2
|
Consent of the Law Office of Legal & Compliance, LLC (included in Exhibit 5.1).*
|
101.INS
|
XBRL Instance Document*
|
101.SCH
|
XBRL Taxonomy Extension Schema*
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase*
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase*
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase*
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase*
|
*Filed or furnished herewith.
Item 17. Undertakings
(a) The undersigned
registrant hereby undertakes:
(1) To file, during
any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any
prospectus required by Section 10(a)(3) of the Securities Act;
(ii) To reflect in
the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this
registration statement;
(iii) To include any
material information with respect to the plan of distribution not previously disclosed in the registration statement or any material
change to such information in the registration statement.
(2) That, for the purpose
of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from
registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination
of the offering.
(4) That, for purposes
of determining liability under the Securities Act to any purchaser:
(i) If the registrant
is relying on Rule 430B:
(A) Each prospectus
filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the
filed prospectus was deemed part of and included in the registration statement; and
(B) Each prospectus
required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) (§ 230.424(b)(2), (b)(5), or (b)(7) of this chapter) as
part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or
(x) (§ 230.415(a)(1)(i), (vii), or (x) of this chapter) for the purpose of providing the information required by section 10(a)
of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the
date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering
described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date
an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in
the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior
to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part
of the registration statement or made in any such document immediately prior to such effective date.
(b) Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
(c) The undersigned
registrant hereby undertakes that:
(1) For the purposes
of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule
424(b) or under the securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose
of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities as that
time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Weston, State of Florida, on February 6, 2017.
|
PETRONE WORLDWIDE, INC.
|
|
By:
/s/ Victor Petrone
Victor Petrone
President, Chief Executive Officer and Chief Financial Officer
(principal executive officer and principal financial officer)
|
Pursuant to the requirements of the Securities
Act of 1933, this Form S-1 has been signed by the following persons in the capacities and on the date indicated.
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Victor Petrone
|
|
President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director
|
|
February 6, 2017
|
Victor Petrone
|
|
(principal executive officer and principal financial officer)
|
|
|
Petrone Worldwide (CE) (USOTC:PFWIQ)
과거 데이터 주식 차트
부터 4월(4) 2024 으로 5월(5) 2024
Petrone Worldwide (CE) (USOTC:PFWIQ)
과거 데이터 주식 차트
부터 5월(5) 2023 으로 5월(5) 2024