10-Q 1 wcvc10q_093018apg.htm WCVC 10-Q 09/30/18 WCVC 10-Q 09/30/18


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)

[X]

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

For the quarterly period ended

September 30, 2018

 

or

[  ]

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

 

to

 

Commission File Number

000-54948

 

West Coast Ventures Group Corp.

(Exact name of registrant as specified in its charter)

Nevada

 

99-0377575

(State or other jurisdiction of incorporation or organization)

 

(IRS Employer Identification No.)

15400 W 64th Ave, Unit E1A, Arvada, Colorado

80007

(Address of principal executive offices)

(Zip Code)

(303) 423-1300

(Registrant’s telephone number, including area code)

 

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X]

YES

[  ]

NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

[X]

YES

[ ]

NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

[  ]

Accelerated filer

[  ]

Non-accelerated filer

[  ]

(Do not check if a smaller reporting company)

Smaller reporting company

[X]

 

 

 

Emerging growth company

[X]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[  ]

YES

[X]

NO





APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.

[  ]

 YES

[  ]

 NO

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

30,695,532 common shares issued and outstanding as of November 18, 2018



2



FORM 10-Q

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION

  

  

 

Item 1.

Financial Statements:

F-1

Item 2.

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

4

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

7

Item 4.

Controls and Procedures

7

 

 

 

PART II – OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

9

Item 1A.

Risk Factors

9

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

9

Item 3.

Defaults Upon Senior Securities

9

Item 4.

Mine Safety Disclosures

9

Item 5.

Other Information

9

Item 6.

Exhibits

10

 

 

 

SIGNATURES

11





3




PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Condensed Consolidated Balance Sheets

F-2

Condensed Consolidated Statements of Operations

F-3

Condensed Consolidated Statement of Changes in Stockholders’ Deficit

F-4

Condensed Consolidated Statements of Cash Flows

F-5

Notes to Consolidated Financial Statements

F-6




F-1



WEST COAST VENTURES GROUP CORP.

Condensed Consolidated Balance Sheets

ASSETS

September 30, 2018

 

 December 31, 2017

CURRENT ASSETS

(unaudited)

 

 

  Cash

$

 

$

  Receivables

40,327 

 

32,020 

  Inventory

17,211 

 

17,163 

  Prepaid expenses

18,245 

 

18,245 

  Assets of discontinued operations

2,461 

 

2,461 

          Total current assets

78,244 

 

69,889 

FIXED ASSETS

 

 

 

  Equipment

276,270 

 

235,738 

  Leasehold improvements

205,146 

 

172,587 

          Total fixed assets

481,416 

 

408,325 

  Less: accumulated depreciation

(227,969)

 

(171,267)

          Net total fixed assets

253,447 

 

237,058 

OTHER ASSETS

 

 

 

   Deposits and other assets

45,547 

 

29,347 

   Intangible assets, net

102,365 

 

121,760 

          Total other assets

147,912 

 

151,107 

Total Assets

$

479,603 

 

$

458,054 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

CURRENT LIABILITIES

 

 

 

     Accounts payable and bank overdraft

$

180,080 

 

$

128,312 

     Accrued expenses

630,597 

 

433,534 

     Deferred rent

51,711 

 

50,688 

     Stockholder loan

118,386 

 

90,675 

     Advances by third party

49,000 

 

     Notes payable to third parties

734,852 

 

661,858 

     Settlement agreement payable to third party

185,000 

 

     Convertible notes -variable conversion, net of discounts

47,846 

 

45,231 

     Fair value of derivative liabilities

59,563 

 

251,438 

     Liabilities of discontinued operations

481,558 

 

481,558 

          Total current liabilities

2,538,593 

 

2,143,294 

LONG TERM LIABILITIES

 

 

 

    Convertible notes - fixed conversion

263,462 

 

          Total long-term liabilities

263,462 

 

-

Total Liabilities

2,802,055 

 

2,143,294 

STOCKHOLDERS' DEFICIT

 

 

 

  Series A Preferred stock, $0.001 par value, 10,000,000 shares authorized,

     500,000 shares issued and outstanding

500 

 

500 

  Common stock, $0.001 par value, authorized 250,000,000 shares; 19,281,532

       and 30,556,544 shares issued and outstanding

19,282 

 

30,557 

  Additional paid-in capital

1,686,645 

 

189,029 

  Accumulated deficit

(4,028,879)

 

(1,905,326)

          Total stockholders’ deficit

(2,322,452)

 

(1,685,240)

Total Liabilities and Stockholders’ Deficit

$

479,603 

 

$

458,054 



The accompanying notes are an integral part of the unaudited condensed consolidated financial statements




F-2



WEST COAST VENTURES GROUP CORP.

Condensed Consolidated Statements of Operations

(Unaudited)


 

Three months ended September 30,

 

Nine months ended September 30,

 

2018

 

2017

 

2018

 

2017

REVENUES

 

 

 

 

 

 

 

  Restaurant revenue, net of discounts

$

806,989 

 

$

712,470 

 

$

2,244,075 

 

$

2,079,349 

 

 

 

 

 

 

 

 

COST AND EXPENSES

 

 

 

 

 

 

 

  Restaurant operating costs:

 

 

 

 

 

 

 

    Cost of sales - food and beverage

259,005 

 

214,962 

 

723,828 

 

710,142 

    Wages and payroll taxes

144,250 

 

213,780 

 

599,355 

 

594,819 

    Occupancy

134,962 

 

131,988 

 

385,027 

 

391,529 

    Other restaurant costs

110,403 

 

90,107 

 

297,345 

 

201,962 

Depreciation and amortization

32,310 

 

15,340 

 

76,097 

 

44,513 

General and administrative expenses

281,893 

 

126,722 

 

834,174 

 

355,394 

 

 

 

 

 

 

 

 

         Total costs and expenses

962,823 

 

792,899 

 

2,915,826 

 

2,298,359 

 

 

 

 

 

 

 

 

Loss from operations

(155,834)

 

(80,429)

 

(671,751)

 

(219,010)

 

 

 

 

 

 

 

 

Other expenses

 

 

 

 

 

 

 

   Pre-opening expenses

9,550 

 

 

9,550 

 

   Initial and change in fair value of

        derivative

(408,469)

 


-

 

223,480 

 

   Loss on debt conversion

417,088 

 

 

417,088 

 

   Interest expense

312,467 

 

30,710 

 

801,684 

 

104,511 

 

 

 

 

 

 

 

 

         Total other expenses

330,636 

 

30,710 

 

1,451,802 

 

104,511 

 

 

 

 

 

 

 

 

Loss from continuing operations before income taxes

(486,470)

 

(111,139)

 

(2,123,553)

 

(323,521)

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations

(486,470)

 

(111,139)

 

(2,123,553)

 

(323,521)

 

 

 

 

 

 

 

 

Loss from discontinued operations, net of tax of $0

 

(486,932)

 

 

 

(486,932)

 

 

 

 

 

 

 

 

Net loss

$

(486,470)

 

$

(598,071)

 

$

(2,123,553)

 

$

(810,453)

 

 

 

 

 

 

 

 

Basic and diluted net loss per share - continuing operations

$

(0.03)

 

$

0.00 

 

$

(0.09)

 

$

(0.02)

 

 

 

 

 

 

 

 

Basic and diluted net loss per share - discontinued operations

$

0.00 

 

$

(0.02)

 

$

0.00 

 

$

(0.04)

 

 

 

 

 

 

 

 

Weighted average shares outstanding

17,800,808 

 

28,060,892 

 

22,720,442 

 

19,460,178 


The accompanying notes are an integral part of the unaudited condensed consolidated financial statements



F-3




WEST COAST VENTURES GROUP CORP.

 Condensed Consolidated Statement of Stockholders’ Deficit

(Unaudited)


 

Number of Shares

 

Par Value

 

Additional

Paid-in

 


Accumulated

 

Total

Stockholders’

 

Common

 

Preferred

 

Common

 

Preferred

 

Capital

 

Deficit

 

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, January 1, 2018

30,556,544 

 

500,000

 

$

30,556 

 

$

500

 

$

189,029 

 

$

(1,905,326)

 

$

(1,685,241)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued as debt inducement

340,000 

 

-

 

340 

 

-

 

84,660 

 

 

85,000 

Shares issued upon conversion of

    convertible debt

5,269,817 

 

-

 

5,270 

 

-

 

497,469 

 

 

502,739 

Shares issued upon exercise of

    warrant

50,898 

 

-

 

51 

 

-

 

9,467 

 

 

9,518 

Shares issued for services

1,500,000 

 

-

 

1,500 

 

-

 

98,850 

 

 

100,350 

Shares issued for cash

5,111,000 

 

-

 

5,111 

 

-

 

22,109 

 

 

27,220 

Shares repurchased and cancelled

(1,546,727)

 

-

 

(1,546)

 

-

 

(26,295)

 

 

(27,841)

Shares contributed and cancelled

(22,000,000)

 

-

 

(22,000)

 

-

 

22,000 

 

 

Reclassification of beneficial

    conversion derivative

 

-

 

 

-

 

789,356 

 

 

789,355 

Net loss

 

-

 

 

-

 

 

(2,123,553)

 

(2,123,553)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, September 30, 2018

19,281,532 

 

500,000

 

$

19,282 

 

$

500

 

$

1,686,645 

 

$

(4,028,879)

 

$

(2,322,452)

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The accompanying notes are an integral part of the unaudited condensed consolidated financial statements



F-4



WEST COAST VENTURES GROUP CORP.

Condensed Consolidated Statements of Cash Flows

Nine months ended September 30,

(Unaudited)

 

2018

 

2017

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

  Net loss

$

(2,123,553)

 

$

(323,521)

  Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

     Share based compensation for services

100,350 

 

     Depreciation and amortization

76,097 

 

44,513 

     Amortization of debt discounts

505,131 

 

     Prepayment and settlement penalties

118,728 

 

 

     Loss on debt conversion

417,088 

 

     Initial and change in fair value of derivative

223,480 

 

  Changes in operating assets:

 

 

 

     Decrease increase in receivables

(8,307)

 

     Increase in inventory

(48)

 

(495)

     Increase in deposits and other assets

(16,200)

 

(4,131)

  Changes in operating liabilities:

 

 

 

     Increase in accounts payable

51,768 

 

71,932 

     Increase in accrued expenses

197,063 

 

114,222 

     Increase in deferred rent

1,023 

 

2,960 

                  Net cash used in operating activities

(457,380) 

 

(94,520)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

  Purchase of fixed assets

(73,091)

 

(13,801)

                  Net cash used in investing activities

(73,091)

 

(13,801)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

  Proceeds from the issuance of common stock for cash

27,220 

 

  Payment for repurchase of common stock

(34,000)

 

  Proceeds from issuance of convertible notes payable for cash

348,000 

 

30,000 

  Payments on settlement agreement

(15,000)

 

  Proceeds from stockholder loan payable

12,296 

 

69,049 

  Payments on stockholder loan payable

(9,980)

 

  Proceeds from third party advances

49,000 

 

  Proceeds from bank overdraft liability

79,968 

 

  Proceeds from third party notes payable

181,998 

 

180,488 

  Payments on third party notes payable

(109,031)

 

(209,376)

                  Net cash provided by financing activities

530,471

 

70,161 

Net change in cash

 

(38,160)

CASH, beginning of period

 

76,487 

CASH, end of period

$

 

$

38,327 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

  Cash paid for interest

$

83,291 

 

$

75,049 

  Cash paid for income taxes

$

 

$

Non-Cash Financing Activities:

 

 

 

  Issuance of common stock as debt inducement

$

85,000 

 

$

  Issuance of common stock upon conversion of debt

$

502,739 

 

$

  Issuance of common stock upon warrant exercise

$

9,518 

 

$


The accompanying notes are an integral part of the unaudited condensed consolidated financial statements



F-5



WEST COAST VENTURES GROUP CORP.

Notes to Unaudited Condensed Consolidated Financial Statements


(1) NATURE OF OPERATIONS


West Coast Ventures Group Corp. (“our”, “us”, “we”, “WCVC” or the “Company”) was originally incorporated as Energizer Tennis, Corp. on June 16, 2011 in the State of Nevada. On October 4, 2017, effective for accounting purposes on June 30, 2017, WCVC entered into an agreement to acquire Nixon Restaurant Group, Inc. in a transaction accounted for as a reverse acquisition.  Nixon Restaurant Group, Inc. (“NRG”) was formed on October 12, 2015, under the laws of the State of Florida.  On October 19, 2015, NRG issued 20 million shares of common stock to acquire 100% of the ownership interests in J&F Restaurants, LLC, Illegal Burger, LLC and Illegal Burger Writer Square LLC, Colorado Limited Liability Companies, under common ownership. The transaction was accounted for as a corporate reorganization between entities under common control. These consolidated financial statements reflect the reorganized capital structure retrospectively for all periods presented.


The Company operates 6 restaurants in the Denver, Colorado metro area. El Senor Sol - Evergreen is a Mexican restaurant which has been in operation for in excess of 7 (seven) full years. The Company opened the first Illegal Burger restaurant in August 2013. It is co-located with the El Senor Sol restaurant. The second Illegal Burger was opened in Arvada in April 2014. The third Illegal Burger is located in Writer Square in downtown Denver and opened in late January 2016. The fourth Illegal Burger is located in the Capital Hill area of Denver and opened in late June 2016. The fifth Illegal Burger is located in Glendale, CO and opened in October 2018.


The Company plans to continue opening Illegal Burger restaurants, a quick casual high-end restaurant with full liquor licenses. The Company expects to locate in other areas of the country over time.


The accompanying consolidated financial statements include the activities of Nixon Restaurant Group, Inc., J&F Restaurant, LLC (El Senor and Illegal Burger Evergreen), Illegal Burger, LLC (Arvada), Illegal Burger Writer Square, LLC, Illegal Burger Capitol Hill, LLC and Illegal Burger CitiSet, LLC, its wholly owned subsidiaries.


(2) BASIS OF PRESENTATION AND USE OF ESTIMATES


a) Basis of Presentation

The comparative amounts presented in these condensed consolidated financial statements are the historical results of West Coast Ventures Group, Corp. inclusive of its wholly owned subsidiaries Nixon Restaurant Group, Inc.; J&F Restaurant, LLC; Illegal Burger, LLC; Illegal Burger Writer Square, LLC, Illegal Burger Capit0l Hill, LLC and Illegal Burger CitiSet, LLC. The Company has reflected the pre-acquisition results on a consolidated basis for all periods presented. All intercompany balances and transactions have been eliminated in consolidation


The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with Generally Accepted Accounting Principles ("GAAP") in the United States of America ("U.S.") as promulgated by the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") and with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). In our opinion, the accompanying unaudited interim financial statements contain all adjustments (which are of a normal recurring nature) necessary for a fair presentation. Operating results for the nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.


b) Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates in the accompanying condensed consolidated financial statements involved the valuation of share-based compensation and inputs used in the valuation of beneficial conversion feature derivatives associated with convertible notes.



F-6



WEST COAST VENTURES GROUP CORP.

Notes to Unaudited Condensed Consolidated Financial Statements


(2) BASIS OF PRESENTATION AND USE OF ESTIMATES, continued


c) Property and Equipment

All property and equipment are recorded at cost and depreciated over their estimated useful lives, generally three, five or seven years, using the straight-line method. Upon sale or retirement, the cost and related accumulated depreciation are eliminated from their respective accounts, and the resulting gain or loss is included in the results of operations. Repairs and maintenance charges, which do not increase the useful lives of the assets, are charged to operations as incurred.


d) Pre-opening Expenses

The Company accumulates the non-capitalizable expenses, such as rent, staffing and training, prior to opening a new location and reports them on a separate line item in the Consolidated Statement of Operations such that these costs do not skew results from ongoing restaurant operations. In the month in which a new location opens all ongoing expenses are then included with ongoing restaurant operations.


e) Rent

The Company’s leases generally contain escalating rent payments over the lease term as well as optional renewal periods. The Company accounts for its leases by recognizing rent expense on a straight-line basis over the lease term, which includes reasonably assured renewal periods. The lease term begins when the Company has the right to control the use of the property, which is typically before rent payments are due under the lease agreement. The difference between the rent expense and rent paid is recorded as deferred rent in the consolidated balance sheet. Rent expense for the period prior to the restaurant opening is expensed in pre-opening costs.


f) Net Loss Per Share

Basic loss per share excludes dilution and is computed by dividing the loss attributable to stockholders by the weighted-average number of shares outstanding for the period.  Diluted loss per share 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 shared in the earnings of the Company.  Diluted loss per share is computed by dividing the loss available to stockholders by the weighted average number of shares outstanding for the period and dilutive potential shares outstanding unless consideration of such dilutive potential shares would result in anti-dilution. There were no dilutive common stock equivalents for the periods ended September 30, 2018 and 2017.


g) Income Taxes

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


The tax years 2017, 2016, 2015 and 2014 for the Company remain open for IRS audit. The Company has received no notice of audit or any notifications from the IRS for any of the open tax years.




F-7



WEST COAST VENTURES GROUP CORP.

Notes to Unaudited Condensed Consolidated Financial Statements


(2) BASIS OF PRESENTATION AND USE OF ESTIMATES, continued


h) Cash and Cash Equivalents

The Company considers all highly liquid securities with original maturities of three months or less when acquired, to be cash equivalents. We had no financial instruments that qualified as cash equivalents.


i) Financial Instruments and Fair Value Measurements

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.


ASC 825 also requires disclosures of the fair value of financial instruments. The carrying value of the Company’s current financial instruments, which include cash and cash equivalents, accounts payable and accrued liabilities approximates their fair values because of the short-term maturities of these instruments.


FASB ASC 820 “Fair Value Measurement” clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:


Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability.

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.


The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.


The following is the Company’s assets and liabilities measured at fair value on a recurring and nonrecurring basis at September 30, 2018 and December 31, 2017, using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3):


 

 September 30, 2018

 

December 31, 2017

Level 3 - Embedded Derivative Liability

$

59,563

 

$       

251,438


Changes in Level 3 assets measured at fair value for the six months ended June 30, 2018 were as follows:


Balance, December 31, 2017

$

251,438 

Portion of initial valuation recorded as debt discount

 

855,924 

Reduction upon conversion, assignment or settlement

 

(791,226)

Change in fair value of derivative

 

(256,573)

Balance, September 30, 2018

$

59,563 




F-8



WEST COAST VENTURES GROUP CORP.

Notes to Unaudited Condensed Consolidated Financial Statements


(2) BASIS OF PRESENTATION AND USE OF ESTIMATES, continued


j) Derivatives

The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion, payment or exercise of a convertible note containing an embedded derivative instrument, the instrument is marked to fair value at the conversion date and the debt and derivative are removed from the balance sheet, The shares issued upon conversion of the note are recorded at their fair value and a gain or loss on extinguishment is recognized, as applicable.


Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date.


k) Impairment of Long-Lived Assets

A long-lived asset is tested for impairment whenever events or changes in circumstances indicate that its carrying value amount may not be recoverable. An impairment loss is recognized when the carrying amount of the asset exceeds the sum of the undiscounted cash flows resulting from its use and eventual disposition. The impairment loss is measured as the amount by which the carrying amount of the long-lived assets exceeds its fair value.


l) Related Party Transactions

All transactions with related parties are in the normal course of operations and are measured at the exchange amount


m) Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, “Leases” which, for operating leases, requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. The ASU is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The adoption of ASU 2016-02 is expected to result in the recognition of right to use assets and associated obligations on the Company’s balance sheet.


n) Revenue Recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) 606, Revenue From Contracts With Customers, effective for public business entities with annual reporting periods beginning after December 15, 2017.  This new revenue recognition standard (new guidance)has a five step process: a) Determine whether a contract exists; b) Identify the performance obligations; c) Determine the transaction price; d) Allocate the transaction price; and e) Recognize revenue when (or as) performance obligations are satisfied. The impact of the Company’s initial application of ASC 606 did not have a material impact on its financial statements and disclosures.


The Company’s financial statements are prepared under the accrual method of accounting. Revenues are recognized when persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured. This occurs only when the product is ordered and subsequently delivered.



F-9



WEST COAST VENTURES GROUP CORP.

Notes to Unaudited Condensed Consolidated Financial Statements


(2) BASIS OF PRESENTATION AND USE OF ESTIMATES, continued


o) Inventories

Inventories consist of food, beverages, and supplies valued at the lower of cost (first-in, first-out method) or market.


(3) LIQUIDITY AND GOING CONCERN CONSIDERATIONS


Our condensed 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. We sustained a net loss of approximately $2.1 million for the nine months ended September 30, 2018 and have an accumulated deficit of approximately $4.0 million and a negative working capital of approximately $2.4 million at September 30, 2018, inclusive of current indebtedness. These conditions raise substantial doubt about our ability to continue as a going concern.


Failure to successfully continue to grow restaurant operation revenues could harm our profitability and materially adversely affect our financial condition and results of operations. We face all of the risks inherent in a new business, including the need for significant additional capital, management’s potential underestimation of initial and ongoing costs, and potential delays and other problems in connection with establishing and opening restaurant operations.


We are continuing our plan to further grow and expand restaurant operations and seek sources of capital to pay our contractual obligations as they come due. Management believes that its current operating strategy will provide the opportunity for us to continue as a going concern as long as we are able to obtain additional financing; however, there is no assurance this will occur. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.


The independent auditors’ report on our consolidated financial statements for the years ended December 31, 2017 contained an explanatory paragraph expressing substantial doubt as to our ability to continue as a going concern.


(4) FIXED ASSETS


Fixed assets consisted of the following:


 

 

 September 30, 2018

 

December 31, 2017

Beginning balance

 

$

408,325 

 

$

408,325 

Additions: Equipment

 

73,091 

 

Depreciation

 

(227,969)

 

(171,267)

 

 

 

 

 

Ending Balance

 

$

253,447 

 

$

237,058 



Depreciation expense was $56,702 and $43,868 for the nine months ended September 30, 2018 and 2017, respectively.





F-10



WEST COAST VENTURES GROUP CORP.

Notes to Unaudited Condensed Consolidated Financial Statements


(5) INTANGIBLE ASSETS


In March 2015, as part of the acquisition of the Writer Square downtown location, the Company purchased the rights to negotiate a lease from the landlord for $125,000 in cash. The Company is amortizing this value over the remaining term of the lease.


In March 2016, as part of the acquisition of the Capital Hill location, the Company purchased the existing liquor license for $4,300 in cash. The Company is amortizing this value of the remaining term of the lease.


Amortization expense was $19,395 and $645 for the nine months ended September 30, 2018 and 2017, respectively.


(6) NET ACQUIRED LIABILITIES OF DISCONTINUED OPERATIONS


As a result of the reverse acquisition on October 4, 2017, we acquired approximately $0.5 million of liabilities, net of assets, of the former operations of West Coast Ventures Group Corp. (which have been discontinued). During 2017 we issued 3,000,000 shares of our common stock to extinguish $30,000 of indebtedness. We are evaluating the means to relieve the Company of these liabilities.


(7) SHORT-TERM BANK REVOLVING LINES OF CREDIT


In 2016 the Company, through three wholly-owned subsidiaries of a wholly owned subsidiary, opened three short term revolving lines of credit with its bank to be utilized as overdraft protection and to cover short-term cash shortfalls. These lines were entered into by J&F Restaurants, LLC, with the two separate lines being tied to the bank accounts of El Senor Sol - Evergreen and Illegal Burger - Evergreen, and Illegal Burger, LLC - Arvada.  In February 2017 the principal stockholder converted these lines to a personal line of credit collateralized as an equity line on his personal residence. The lines carried a variable interest rate of Wall Street Prime Index Rate plus 2.00%, and matured in March 2021. In February 2017, the principal stockholder these lines to a personal line of credit collateralized as an equity line on his personal residence. At September 30, 2018 and December 31, 2017 the balances of each of these lines were $0.


(8) STOCKHOLDER LOAN


The principal stockholder of the Company has loaned the Company funds at various times on an undocumented loan basis with no stated interest rate. These loans were made principally to complete the conversion of the Illegal Burger - Arvada (2014) and Illegal Burger - Writer Square (2015 and 2016), Illegal Burger Capitol Hill (2016) and Illegal Burger CitiSet (2018) locations. This stockholder loan balance was $118,386 and $90,675 at September 30, 2018 and December 31, 2017, respectively. In February 2017 the principal stockholder converted the three short-term bank revolving line of credits to a personal line of credit collateralized as an equity line on his personal residence.


(9) NOTES PAYABLE TO THIRD PARTIES


a) Future Receivables Sale Agreements

The Company, through Nixon Restaurant Group, Inc., J&F Restaurants, LLC, Illegal Burger, LLC, Illegal Burger Writer Square, LLC and Illegal Burger Capitol Hill, LLC, entered into several agreements to obtain advances against future restaurant credit/debit card sales. The agreements provide for funding of various percentages of future qualified credit/debit merchant card receivables. At September 30, 2018 and December 31, 2017, the total payable balances inclusive of interest under these factoring agreements were $205,472 and $230,791, respectively.




F-11



WEST COAST VENTURES GROUP CORP.

Notes to Unaudited Condensed Consolidated Financial Statements


(9) NOTES PAYABLE TO THIRD PARTIES, continued


a) Future Receivables Sale Agreements, continued

During the first quarter 2018, we negotiated settlement agreements with two of these lenders to pay off the balances owed at the rate of $8,000 per month over two years and $4,000 per month over one year. The balance of these settlement agreements is $38,370 at September 30, 2018.


b) One Year Note

The Company, through J&F Restaurants, LLC, entered into a one year note with a third party for a loan of $88,000. This note was payable daily in the amount of $376.64 paid via ACH draft from the J&F Restaurants, LLC - El Senor Sol Evergreen bank account. This note carries interest at a 7% rate. This note was renewed on December 30, 2016, and the Company received $74,548 in cash, which is net of the $10,452 remaining balance. The new note is payable as a percentage of future qualified credit/debit merchant card receivables. The loan balance was $31,984 and $51,608 at September 30, 2018 and December 31, 2017, respectively.


c) Convertible Notes - Variable Conversion

In the third quarter 2018, the Company entered into a convertible note in exchange for $68,000 in cash. This note matures in nine months and carries a 12% interest rate. The note converts into shares of the Company’s common stock at a price of 61% of the average of the two lowest trade prices and the lowest trade price for the Common Stock during the 15 Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. The Company entered into a settlement agreement with the holder of one of the variable conversion notes which requires the Company to pay installments of $15,000 on August 31, $35,000 on October 31, $50,000 on November 30 and $100,000 on December 31, 2018. This agreement does not allow for the lender to convert any of the then remaining debt. The lenders’ only recourse is to file suit should the Company not make timely payments. This agreement included a penalty of $40,528 as a portion of the $200,000 total settlement of which $185,000 is outstanding at September 30, 2018.


In the first quarter 2018, the Company entered into three convertible notes in exchange for $280,000 in cash. These notes mature two in nine months and one in six months and carry 12% and 8% interest rates. The notes convert into shares of the Company’s common stock at a price of 61% and 60% of the average of the two lowest trade prices and the lowest trade price for the Common Stock during the 15 and 20 Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.


In 2017, the Company entered into two convertible notes in exchange for $130,000 in cash. These notes mature in nine months and one year and carry 12% and 8% interest rates. The notes convert into shares of the Company’s common stock at a price of 61% and 55% of the average of the two lowest trade prices and the lowest trade price for the Common Stock during the 15 and 20 Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.


In 2017, the Company, through a wholly-owned subsidiary, issued a Convertible Promissory Note in exchange for $30,000 in cash. This note matures in one year from issuance and carried a 10% interest rate. The note converts into shares of the Company’s common stock at a price of 65% of the average closing price for the Common Stock during the three (3) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.


In 2016, the Company issued a convertible note in the amount of $51,221. At issuance of the note, the Company recorded a beneficial conversion feature discount of $51,221. This note was due in January 2018 and carries a 4% interest rate. In July 2017, $30,000 of this note was converted into 3,000,000 shares of the Company’s common stock. The balance of this liability has been incorporated into liabilities from discontinued operations.



F-12



WEST COAST VENTURES GROUP CORP.

Notes to Unaudited Condensed Consolidated Financial Statements


(9) NOTES PAYABLE TO THIRD PARTIES, continued


d) Convertible Notes - Fixed Conversion

During the third quarter of 2018, two parties purchased through assignment three of the variable conversion price convertible notes then outstanding. These parties immediately amended the notes to replace the variable conversion rate with a fixed conversion rate of $0.0035 per share of the Company’s common stock. The maturity dates of the three notes was extended to 2020 and 2021.


e) Third Party Notes Payable

In March 2015, the Company, through Illegal Burger, LLC, entered into an agreement with a third-party lender, who extended a $3,000,000 Senior Secured Note. Under the terms of this agreement a first draw was entered into in the amount of $375,000 as a Revolving Note. The lender retained $59,713 of this draw as fees. Under the terms of this Note, the Company was required to replace their credit card/debit card merchant processing to the lender. The lender retained 100% of the credit card/debit card transactions, and forwarded four wire transfers to the Company over a six week period. The credit card/debit card transactions for this six-week period amounted to $84,534. The lender remitted $42,379 of this amount to the Company. Of the $42,155 retained by the lender, $14,861 was applied as principal reduction, $7,088 was applied to interest expense and the remaining $20,206 was charged as fees. The Senior Secured Note also called for the payment of a $75,000 investment banking fee.


In May 2015, when it was determined that this repayment structure was not practical for a restaurant operation, the lender agreed to restructure the Revolving Note into a Replacement Promissory Note. This Replacement Promissory Note carries interest at a stated rate of 18% with a maturity of June 1, 2016. The lender charged the Company a $25,000 penalty to convert the Revolving Note into a Replacement Promissory Note. The Replacement Promissory Note called for interest only payments in June, July and August 2015. Starting in September the terms called for the payment of interest, principal starting at $33,649 increasing monthly to $38,474 in June 2016, as the interest on the then outstanding balance fell. In addition, the Replacement Promissory Note called for the payment of a $106,000 Redemption Premium as part of the total monthly payment of $49,651.


As a direct result of delays in opening the new Writer Square location, the lender agreed to interest only payments via ACH draft every Monday.  In June 2015, the Company paid $1,080 per week, which was increased to $1,200 per week for July 1 through October 15, 2015. It was then increased to $1,500 per week from October 16, 2015 through the third week of March 2016, when it was increased to $2,000 per week.


At both September 30, 2018 and December 31, 2017, the principal balance of the loan was $322,220. The Company also accrued the $25,000 conversion penalty, the $75,000 investment banking fee and the $106,000 redemption premiums as accrued interest because the Replacement Promissory Note allows for prepayment but all these “fees” are due upon prepayment.


On October 8, 2018, the lender filed suit in Broward County, Florida. The Company has received an extension of time to answer this lawsuit. The Company expects to either negotiate a settlement agreement or to vigorously defend this action.


Certain other third parties have advanced funds to WCVC to fund its ongoing operations prior to the reverse acquisition. These advances have been formalized into demand notes payable, which, at September 30, 2017, amount to $54,039 and carried a 5% interest rate. WCVC has a $250,000 note payable which matured in April 2018 and carried a 5% interest rate. These liabilities have been incorporated into liabilities from discontinued operations.




F-13



WEST COAST VENTURES GROUP CORP.

Notes to Unaudited Condensed Consolidated Financial Statements


(10) STOCKHOLDERS’ DEFICIT


At September 30, 2018 and December 31, 2017, the Company has 250,000,000 shares of par value $0.001 common stock authorized and 19,281,532 and 30,556,544 issued and outstanding, respectively. At September 30, 2018 and December 31, 2017, the Company has 10,000,000 shares of par value $0.001 preferred stock authorized and 500,000 issued and outstanding at both dates.


During 2017 the Company, through a subsidiary, issued 112,000 shares in exchange for $50,000 in cash. During 2017 the Company issued 500,000 shares of Series A preferred stock and 5,418,000 shares of common stock in connection with the reverse acquisition of Nixon Restaurant Group, Inc.


In the first quarter 2018 the Company issued 100,000 shares of common stock in exchange for services valued at $22,600. The Company issued 340,000 shares of common stock valued at $85,000 as a debt inducement. The Company issued 1,155,829 shares of common stock valued at $216,140 to settle $16,528 of convertible debt and 50,898 shares of common stock valued at $9,518 upon the cash-less exercise of a warrant.


In the second quarter 2018 the Company issued 650,000 shares of common stock in exchange for services valued at $59,000. The Company issued 3,349,783 shares of common stock valued at $266,729 to settle $94,226 of convertible debt. The CEO of the Company contributed back to the Company and cancelled 22,000,000 shares of common stock valued at $3,140,000 pursuant to a request from OTC Markets as part of the approval to list the common stock on the OTCQB.


In the third quarter 2018 the Company issued 750,000 shares of common stock in exchange for services valued at $18,750. The Company issued 764,205 shares of common stock valued at $19,769 to settle $7,102 of convertible debt. The Company issued 5,111,000 shares of common stock in exchange for $27,220 in cash. The Company repurchased and retired 1,546,727 shares of common stock for $34,000 in cash under a settlement agreement with the holder of a variable convertible note holder.


The rights and privileges of the Series A preferred stock are solely as a “super voting” stock, whereby each one share of Series A holds votes amounting to the equivalent of 100,000 shares of common stock. Therefore, the 500,000 shares of Series A issued and outstanding hold aggregate votes equal to 500,000,000 common shares. The Series A shares have no dividend rights, no liquidation preferences, are not transferable and can be redeemed by the holder for $5,000 in cash from the Company for the entire 500,000 share block at the holder’s option.


(11) COMMITMENTS AND CONTINGENCIES


a) Real Property Leases

The Company leases six restaurant spaces from unrelated parties. Rent expense paid was $329,865 and $321,923 for the nine months ended September 30, 2018 and 2017.





F-14



WEST COAST VENTURES GROUP CORP.

Notes to Unaudited Condensed Consolidated Financial Statements


(11) COMMITMENTS AND CONTINGENCIES


a) Real Property Leases

Future minimum lease payments under these real property lease agreements are as follows:


For the Year Ending December 31,

ESSE

 

IBE

 

IBA

 

IBWS

 

IBCH

 

IBCS

 

Total

2018 (3 months)

$

12,000

 

$

8,400

 

$

18,154

 

$

24,527

 

$

16,378

 

$

24,300

 

$

91,759

2019

$

36,000

 

$

25,200

 

$

74,795

 

$

102,643

 

$

67,477

 

$

98,400

 

$

368,515

2020

$

-

 

$

-

 

$

77,038

 

$

102,643

 

$

69,501

 

$

100,200

 

$

349,382

2021

$

-

 

$

-

 

$

25,931

 

$

102,643

 

$

23,394

 

$

102,000

 

$

253,968

2022

$

-

 

$

-

 

$

-

 

$

102,643

 

$

-

 

$

103,800

 

$

206,443

Thereafter

$

-

 

$

-

 

$

-

 

$

321,616

 

$

-

 

$

621,600

 

$

943,216

Total minimum lease payments

$ 48,000

 

$ 33,600

 

$ 195,918

 

$ 756,715

 

$ 176,750

 

$ 1,050,300

 

$ 2,213,283



ESSE: El Senor Sol - Evergreen; IBE: Illegal Burger Evergreen; IBA: Illegal Burger- Arvada; IBWS - Illegal Burger Writer Square; IBCH - Illegal Burger Capitol Hill; IBCS - Illegal Burger CitiSet


The Company’s leases for El Senor Sol - Evergreen and Illegal Burger - Evergreen locations expired on August 31, 2017. The Company is currently leasing on a month to month basis and in August 2018 signed new one-year leases for these locations.


b) Other

The Company is subject to asserted claims and liabilities that arise in the ordinary course of business. The Company maintains insurance policies to mitigate potential losses from these actions. In the opinion of management, the amount of the ultimate liability with respect to those actions will not materially affect the Company’s financial position or results of operations.


c) Litigation

On October 8, 2018, the creditor holding the First Amended Senior Secured Note from Illegal Burger, LLC filed suit in Broward County, Florida. The Company has received an extension of time to answer this lawsuit. The Company expects to either negotiate a settlement agreement or to vigorously defend this action.


(12) CONCENTRATIONS OF CREDIT RISK


a) Cash

The Company maintains its cash in bank deposit accounts, which may, at times, may exceed federally insured limits. The Company had no cash balance in excess of FDIC insured limits at September 30, 2018 and December 31, 2017.


(13) SUBSEQUENT EVENTS


a) Operations

Illegal Burger CitiSet, the Company’s fifth Illegal Burger location, opened in October 2018.



F-15



Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations


Management’s Discussion and Analysis and Results of Operations


The following management’s discussion and analysis (“MD&A”) should be read in conjunction with West Coast Ventures Group Corp. (“WCVC”) financial statements for the years ended December 31, 2017 and December 31, 2016, and the notes thereto included in the Company’s Form 10-K filed with the U.S. Securities and Exchange Commission on April 17, 2018. Additional information relating to WCVC is available through its brand website: www.illegalburger.com and www.westcoastventuresgroupcorp.com


Safe Harbor for Forward-Looking Statements  


Certain statements included in this MD&A may constitute forward-looking statements, including those identified by the expressions anticipate, believe, plan, estimate, expect, intend, and similar expressions to the extent they relate to NRG or its management. These forward-looking statements are not facts, promises or guarantees; rather, they reflect current expectations regarding future results or events. These forward-looking statements are subject to risks and uncertainties that could cause actual results, activities, performance or events to differ materially from current expectations. These include risks related to revenue growth, operating results, industry, products and litigation, as well as the matters discussed in WCVC  MD&A under Risk Factors. Readers should not place undue reliance on any such forward-looking statements. WCVC disclaims any obligation to publicly update or to revise any such statements to reflect any change in the Company’s expectations or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.


Overview


West Coast Ventures Group Corp. (“our”, “us”, “we” ,“WCVC”or the “Company”) was originally incorporated as Energizer Tennis, Corp. on September 16, 2011 in the State of Nevada. On October 4, 2017, effective for accounting purposes on September 30, 2017, WCVC entered into an agreement to acquire Nixon Restaurant Group, Inc. in a transaction accounted for as a reverse acquisition.


Nixon Restaurant Group, Inc. (“us”, “we” NRG or “our”) was formed on October 12, 2015, under the laws of the State of Florida. On October 19, 2015, we issued 20 million shares of common stock to acquire 100% of the ownership interests in J&F Restaurants, LLC, Illegal Burger, LLC and Illegal Burger Writer Square LLC, Colorado Limited Liability Companies controlled by our founder, James Nixon.  As a result of the transaction, J&F Restaurants, LLC, Illegal Burger, LLC and Illegal Burger Writer Square LLC became our wholly-owned subsidiaries.


We own and operate the following six (6) restaurant locations:


·

J&F Restaurants, LLC was formed in Colorado on March 12, 2011 and owns and operates El Senor Sol, a casual Mexican restaurant located at 29017 Hotel Way, Unit 103B, Evergreen, Colorado 80439-8235, which opened in September 2011.

·

J&F Restaurants, LLC also owns and operates Illegal Burger, an upscale fast casual restaurant located at 29017 Hotel Way, Unit 102B, Evergreen, Colorado 80439-8235, which opened in August 2013.

·

Illegal Burger, LLC was formed in Colorado on May 31, 2013 and owns and operates Illegal Burger, an upscale fast food restaurant located at 15400 W 64th Avenue, Unit E1A, Arvada Colorado 80007-6876, which opened in January 2013,

·

Illegal Burger Writer Square LLC was formed in Colorado on April 19, 2015, and owns and operates an Illegal Burger location at 1512 Larimer Street, Suite R, Denver Colorado 80202-1690, which opened in January 2016, and

·

Illegal Burger Capital Hill, LLC was formed in Colorado on March 4, 2016 and owns and operates an Illegal Burger location at 609 North Grant Street, Denver Colorado 80202-3506, which opened in September 2016.



F-4



·

Illegal Burger CitiSet, LLC was formed in Colorado on September 21, 2018 and owns and operates an Illegal Burger location at 652 South Colorado Boulevard, Unit A, Glendale Colorado 80246, which opened in October 2018.


Each of our Illegal Burger restaurants offers a full bar. Each of our restaurants offers a full menu and alcoholic beverages including liquor. Our Illegal Burger restaurants offer consumers a practical alternative to the over- commercialized healthy dining craze by offering a variety of burgers made with all never frozen, hormone-free beef, french fries, cheesy taters and adult and virgin milk shares including Nutella, peanut butter, caramel, Oreo, vanilla, chocolate and strawberry as well as a full bar.  Our El Senor Sol restaurant offers Mexican food and a full bar including tequila menu.


Our principal executive office is located at 15400 W. 64th Avenue, Unit E1A, Arvada, Colorado 80007.  Our telephone number is (303) 423 1300. Our websites are: www.illegalburger.com and www.westcoastventuresgroupcorp.com .


Three Months Ended September 30, 2018 Compared to the Three Months Ended September 30, 2017


Revenue


For the three months ended September 30, 2018, revenue generated was $806,989, as compared to $712,470 for the three months ended September 30, 2017. The year over year same store increase of approximately 13.3% was mainly attributable to expansion of our marketing, especially in the downtown location and an increased emphasis and rapid growth on the various on-line ordering and delivery platforms we employ.


Cost of Sales


Ongoing restaurant cost of sales decreased to $648,620 from $650,837, or 0.3%. This decrease was primarily due to an active cost control program instituted during 2018. Our ongoing restaurant cost of sales, as a percentage of sales, was approximately 79.3% and 91.4% for the three months ended September 30, 2018 and 2017, respectively.


Gross Profit


Our ongoing restaurant operations gross profit was $158,369 and $61,633 for the three months ended September 30, 2018 and 2017, respectively. Our ongoing restaurant gross profit, as a percentage of sales, was approximately 19.6% and 8.7% for the three months September 30, 2018 and 2017, respectively.


Our ongoing restaurant gross profit, as a percentage of gross sales was higher in 2018 in spite of the current trend of high personnel cost in the industry because of heavy competition for personnel from the construction and marijuana industries in Denver; across the board increased prices in our foodstuffs and our increased marketing costs. At the end of the first quarter 2018 we raised our prices chain-wide to counteract the decrease in gross profit seen in the first quarter.


General and Administrative Expenses


General and administrative expenses for the three months ended September 30, 2018 were $281,893 compared to $126,722 for the three months ended September 30, 2017. 100% of the increase was the result of becoming a public company and the related ongoing expenses.


Net Loss


Net loss for the three months ended September 30, 2018 was $486,470 compared to a net loss of $111,139 for the three months ended September 30, 2017. This increase in the loss was the result of many factors: high personnel cost in the industry because of heavy competition for personnel from the construction and marijuana industries in Denver; across the board increased prices in our foodstuffs and our increased marketing costs;



5



ongoing public company expenses and principally, derivative costs.


Nine Months Ended September 30, 2018 Compared to the Nine Months Ended September 30, 2017


Revenue


For the nine months ended September 30, 2018, revenue generated was $2,244,075, as compared to $2,079,349 for the nine months ended September 30, 2017. The year over year same store increase of approximately 7.9% was mainly attributable to expansion of our marketing, especially in the downtown location and an increased emphasis on and growth of the various on-line ordering and delivery platforms we employ.


Cost of Sales


Ongoing restaurant cost of sales increased to $2,005,555 from $1,898,452, or 5.6%. This increase was primarily due to high personnel cost in the industry because of heavy competition for personnel from the construction and marijuana industries in Denver; across the board increased prices in our foodstuffs and our increased marketing costs. Our ongoing restaurant cost of sales, as a percentage of sales, was approximately 89.4% and 91.3% for the nine months ended September 30, 2018 and 2017, respectively.


Gross Profit


Our ongoing restaurant operations gross profit was $238,520 and $180,897 for the nine months ended September 30, 2018 and 2017, respectively. Our ongoing restaurant gross profit, as a percentage of sales, was approximately 10.6% and 8.7% for the nine months ended September 30, 2018 and 2017, respectively.


Our ongoing restaurant gross profit, as a percentage of gross sales was lower in 2018 because of the current trend of high personnel cost in the industry because of heavy competition for personnel from the construction and marijuana industries in Denver; across the board increased prices in our foodstuffs and our increased marketing costs. At the end of the first quarter 2018 we raised our prices chain-wide to counteract the decrease in gross profit seen in the first quarter.


General and Administrative Expenses


General and administrative expenses for the nine months ended September 30, 2018 were $834,174 compared to $355,394 for the nine months ended September 30, 2017. 100% of the increase was the result of becoming a public company and the related ongoing expenses.


Net Loss


Net loss for the nine months ended September 30, 2018 was $2,123,553 compared to a net loss of $323,521 for the nine months ended September 30, 2017. This increase in the loss was the result of many factors: high personnel cost in the industry because of heavy competition for personnel from the construction and marijuana industries in Denver; across the board increased prices in our foodstuffs and our increased marketing costs; ongoing public company expenses and principally, derivative costs.


Liquidity and Capital Resources


Cash Flow Activities


Cash was unchanged at $0 at September 30, 2018 and December 31, 2017.


Financing Activities


During the nine months ended September 30, 2018, we received proceeds of $348,000 from issuance of convertible notes, $12,296 from our officer, $181,998 from the issuance of third party debt, $49,000 from third



6



party advances and $27,220 from the sale of our common stock and repaid $109,031 of third party debt, $15,000 on a convertible debt settlement agreement, $9,980 of our officer loan and $34,000 to repurchase 1,546,727 shares of our common stock under a convertible debt settlement agreement. During the nine months ended September 30, 2017, we received proceeds of third party debt of $180,488, $69,049 from our officer, $30,000 from issuance of a convertible note and repaid $209,346 of third party debt.


Critical Accounting Policies and Estimates


We consider our critical accounting policies to be those that require the more significant judgments and estimates in the preparation of financial statements, including the following:


Use of Estimates


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


Fair Value of Financial Instruments


The Company’s financial instruments consist of cash and cash equivalents, trade receivables, prepaid expenses, payables, accrued expenses and notes payable.   Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. We consider the carrying values of our financial instruments in the condensed consolidated financial statements to approximate fair value, due to their short-term nature.


Property and Equipment


Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is provided for using straight-line methods over the estimated useful lives of the respective assets, usually three to seven years.


Valuation of Long-Lived Assets


We periodically evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.  If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset were less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.  We do not believe that there has been any impairment to long-lived assets as of September 30, 2018 and 2017.


Off-Balance Sheet Arrangements


We do not have any off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4).


Recent Accounting Pronouncements


(See “Recently Issued Accounting Pronouncements” in Note 3 of Notes to the Financial Statements.)


Item 3.  Quantitative and Qualitative Disclosures About Market Risk


As a “smaller reporting company”, we are not required to provide the information required by this Item.




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Item 4.  Controls and Procedures


Disclosure Controls and Procedures


We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2018. This evaluation was carried out under the supervision and with the participation of our President and our Chief Financial Officer. Based upon that evaluation, our President and Chief Financial Officer concluded that, as of September 30, 2018, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.


A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of September 30, 2018, our disclosure controls and procedures were not effective for the following reasons: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.


Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting


Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending December 31, 2019: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.


Changes in Internal Control over Financial Reporting


There were no changes in our internal control over financial reporting during the quarter ended September 30, 2018, that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.



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PART II - OTHER INFORMATION


Item 1.  Legal Proceedings


On July 5, 2018, we were served with a lawsuit alleging default under a Convertible Promissory Note. We have negotiated a settlement for repayment with a series of payments over a five month period beginning August 31, 2018. This settlement also requires the lender to stay their lawsuit as long as the payments are made timely, which they have done as of the date of this filing. The settlement prohibits the lender from completing any conversions of the debt into common stock of the Company as long as the payments are made timely. This lender was also an affiliate of the Company. All of the shares beneficially held by this lender were sold back to the Company under this settlement agreement whereby they ceased being an affiliate. The Company has made the August 31, September 15 and October 31 payments under this settlement agreement.


On October 8, 2018, the creditor holding the First Amended Senior Secured Note from Illegal Burger, LLC filed suit in Broward County, Florida. The Company has received an extension of time to answer this lawsuit. The Company expects to either negotiate a settlement agreement or to vigorously defend this action.  


Item 1A.  Risk Factors


As a “smaller reporting company”, we are not required to provide the information required by this Item.


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


WCVC issued 5,111,000 shares of common stock to a two individuals in exchange for $27,220 in cash.


In the third quarter 2018 the Company issued 750,000 shares of common stock to one individual in exchange for services valued at $18,750.


The Company issued to two funds 764,205 shares of common stock valued at $19,769 to settle $7,102 of convertible debt.


The Company repurchased and retired 1,546,727 shares of common stock for $34,000 in cash under a settlement agreement with the holder of a variable convertible note holder.


Item 3.  Defaults Upon Senior Securities


None.


Item 4.  Mine Safety Disclosures


Not applicable.


Item 5.  Other Information


None.



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Item 6.  Exhibits


Exhibit Number

Description

(3)

Articles of Incorporation

3.1

Articles of Merger by and between the Company and its wholly owned subsidiary, West Coast Ventures Group Corp, filed with the Nevada Secretary of State on February 4, 2016. (filed with the SEC on May 12, 2017 as Exhibit 3.1 to the Company’s Annual Report on Form 10-K)

3.2

Certificate of Amendment of Articles of Incorporation, filed with the Nevada Secretary of State on February 4, 2016. (filed with the SEC on May 12, 2017 as Exhibit 3.2 to the Company’s Annual Report on Form 10-K)

(31)

Rule 13a-14 (d)/15d-14d) Certifications

31.1*

Section 302 Certification by the Principal Executive Officer

31.2*

Section 302 Certification by the Principal Financial Officer and Principal Accounting Officer

(32)

Section 1350 Certifications

32.1**

Section 906 Certification by the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer

101*

Interactive Data File

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

** Furnished herewith.



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

WEST COAST VENTURES GROUP CORP.

 

 

(Registrant)

 

 

 

 

 

 

Dated:  November 19, 2018

 

/s/ James M. Nixon

 

 

James M. Nixon

 

 

President, Chief Executive Officer, Chief Financial Officer, Secretary and Director

 

 

(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)




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