UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
For the transition period from ___________ to _____________
Commission
File Number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction | (I.R.S. Employer | |
| of incorporation or organization) | Identification No.) |
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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
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Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.
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| Smaller
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| Emerging
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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. ☐
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As of November 15, 2021, there were shares of the registrant’s common stock, $0.001 par value per share, issued and outstanding.
PACIFIC VENTURES GROUP, INC.
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
| 1 |
PACIFIC VENTURES GROUP, INC.
Consolidated Balance Sheets
| For the nine months ended Sept 30, 2021 | December 31, 2020 | |||||||
| (unaudited) | (audited) | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory Asset | ||||||||
| Other Current Asset | ||||||||
| Right to Use Asset | ||||||||
| Deposits | ||||||||
| Total Current Assets | ||||||||
| Fixed Assets | ||||||||
| Fixed assets, net | $ | $ | ||||||
| Total Fixed Assets | ||||||||
| Other Assets | ||||||||
| Intangible Assets | $ | $ | ||||||
| Right to Use Asset | ||||||||
| Rent & Utilities Deposit | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Lease Liability | ||||||||
| Current portion, notes payable | ||||||||
| Current portion, notes payable - related party | ||||||||
| Current portion, leases payable | ||||||||
| Total Current Liabilities | $ | $ | ||||||
| Long-Term Liabilities: | ||||||||
| Notes payable | $ | $ | ||||||
| Notes payable - related party | ||||||||
| Lease Liability | ||||||||
| Total Long-Term Liabilities | ||||||||
| Total Liabilities | $ | $ | ||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Preferred stock, $ par value, shares authorized, Series E, issued and outstanding | $ | $ | ||||||
| Series F, issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized, and issued and outstanding at Sept 30, 2021, which reflects the 1-for-500 reverse stock split that occurred on Apr 13, 2020 | ||||||||
| Additional paid in capital | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficit) | $ | ( | ) | $ | ( | ) | ||
| Total Liabilities and Stockholders’ Equity (Deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 2 |
PACIFIC VENTURES GROUP, INC.
Consolidated Statements of Operations
| For the three months | For the nine months | |||||||||||||||
| ended September 30, | ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Sales, net of discounts | $ | $ | $ | $ | ||||||||||||
| Cost of Goods Sold | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Marketing and Advertising | ||||||||||||||||
| Amortization and Depreciation expense | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Officer Compensation | ||||||||||||||||
| Operating Expenses/(Loss) | ||||||||||||||||
| Income/ (Loss) from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Non-Operating Income and Expenses | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Income/(Loss) before Income Taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net Ordinary Income/(Loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income / Expense | ||||||||||||||||
| Other Income - Other | ||||||||||||||||
| Net Income/(Loss) | $ | ( | ) | ( | ) | $ | ( | ) | ( | ) | ||||||
| Basic and Diluted Loss per Share - Common Stock | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted Average Number of Shares Outstanding: | ||||||||||||||||
| Basic and Diluted Class A Common Stock | ||||||||||||||||
Common stock outstanding shares reflect the 1-for-500 reverse stock split that occurred on Apr 13, 2020.
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 3 |
PACIFIC VENTURES GROUP, INC.
Consolidated Statements of Cash Flows
| For the nine months | ||||||||
| ended September 30 | ||||||||
| 2021 | 2020 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Shares issued for services | - | ( | ) | |||||
| Depreciation & Amortization Expense | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ( | ) | ||||
| Other Current Assets | ( | ) | ||||||
| Other Assets | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Other Current liabilities | ||||||||
| Capitalized interest or penalty fees | ||||||||
| Other Changes in Assets | ||||||||
| Net Cash Provided by / (Used in) Operating Activities | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES | ||||||||
| Receivable - Related | ||||||||
| Purchase of equipment, building & improvements & fixed assets | ( | ) | ( | ) | ||||
| Goodwill and Intangible Assets | ||||||||
| Net Cash Provided by / (Used In) Investing Activities | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from notes payable | ||||||||
| Proceeds from notes payable - Related | - | |||||||
| Repayment of notes payable | ( | ) | ( | ) | ||||
| Repayment of notes payable - Related | ( | ) | ( | ) | ||||
| Proceeds from long-term loans | ||||||||
| Repayment of long-term loans | ( | ) | ( | ) | ||||
| Repayment of debt by Shares | ( | ) | ||||||
| Shares Issued for Debt | ||||||||
| Shares Issued for Services | ||||||||
| Shares Issued For Cash | ||||||||
| Preferred Stocks Issued | ( | ) | ||||||
| Common Stock Issued In Exchange of Prefered shares | ||||||||
| Prior period adjustment to retained earnings | ||||||||
| Net Cash Provided by / (Used in) Financing Activities | ||||||||
| NET INCREASE (DECREASE) IN CASH | ( | ) | ||||||
| CASH AT BEGINNING OF PERIOD | ||||||||
| CASH AT END OF PERIOD | $ | $ | ( | ) | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| CASH PAID FOR: | ||||||||
| Interest fees | $ | $ | ||||||
| NON CASH FINANCING ACTIVITIES: | ||||||||
| Issuance of shares for debt conversion | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 4 |
Pacific Ventures Group, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(Unaudited)
1. NATURE OF OPERATIONS
Pacific Ventures Group, Inc. (the “Company,” “we,” “us” or “our”) was incorporated under the laws of the state of Delaware on October 3, 1986, under the name AOA Corporation. On November 12, 1991, the Company changed its name to American Eagle Group, Inc. On October 22, 2012, the Company changed its name to “Pacific Ventures Group, Inc.”.
The current structure of the Company
resulted from a share exchange with Snöbar Holdings, Inc. (“Snöbar Holdings”), which was treated as a reverse merger
for accounting purposes. On August 14, 2015, the Company entered into a share exchange agreement (the “Share Exchange Agreement”)
with Snöbar Holdings, pursuant to which the Company acquired
As the result of the Share Exchange, Snöbar Holdings became the Company’s wholly owned operating subsidiary and the business of Snöbar Holdings became the Company’s sole business operations and MAS Global Distributors, Inc., a California corporation (“MGD”), became an indirect subsidiary of the Company.
Prior to the Share Exchange, the Company operated as an insurance holding company and through its subsidiaries, which marketed and underwrote specialized property and casualty coverage in the general aviation insurance marketplace. However, in 1997, after selling several of its divisions, the Company’s remaining insurance operations were placed into receivership and the Company ceased operating its insurance business.
Since the Share Exchange represented a change in control of the Company and a change in business operations, the Company’s business operations changed to that of Snöbar Holdings and the discussions of business operations accompanying this filing are solely that of Snöbar Holdings and its affiliates and subsidiaries comprising of Snöbar Trust, International Production Impex Corporation, a California corporation (“IPIC”) , and MGD.
Snöbar Holdings was formed
under the laws of the State of Delaware on January 7, 2013. Snöbar Holdings is the trustor and sole beneficiary of Snöbar Trust,
a California trust (“Trust”), which was formed in June 1, 2013. The Trust owns
The Trust and IPIC are considered variable interest entities (“VIEs”) and Snöbar Holdings is identified as the primary beneficiary of the Trust and IPIC. Under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Snöbar Holdings performs ongoing reassessments of whether it is the primary beneficiary of a VIE. As the assessment of Snöbar Holdings’ management is that Snöbar Holdings has the power to direct the activities of a VIE that most significantly impact the VIE’s activities (it is responsible for establishing and operating IPIC), and the obligation to absorb losses of the VIE that could potentially be significant to the VIE and the right to receive benefits from the VIE that could potentially be significant to the VIE’s economic performance, it was therefore concluded by management that Snöbar Holdings is the primary beneficiary of the Trust and IPIC. As such, the Trust and IPIC were consolidated in the financial statements of Snöbar Holdings since the inception of the Trust, in the case of the Trust, and since the inception of Snöbar Holdings, in the case of IPIC.
| 5 |
On May 1, 2018, Royalty Foods Partners, LLC – a Florida Limited Liability Corporation and a subsidiary of Pacific Ventures Group, Inc. – completed an asset acquisition of San Diego Farmers Outlet, Inc. (SDFO), a California Corporation. San Diego Farmers Outlet was started over thirty-five years ago to provide primarily restaurant customers in southern California’s three largest counties with quality food and produce and does business under the name of Farmers Outlet and San Diego Farmers Outlet.
On December 17, 2019, Seaport Group Enterprises, LLC—a California Limited Liability Corporation and a subsidiary of Pacific Ventures Group, Inc.— completed an asset acquisition of Seaport Meat Company, (Seaport Meat), a California Corporation with over thirty (30) years in business servicing restaurant and retail, and institutional customers in Southern California and Arizona. Seaport Meat is a USDA meat processing plant that supplies quality meats, seafood, dry goods, dairy and produce. Seaport Meat Company built a state-of-the-art food distribution and manufacturing facility in Spring Valley, California their 12,000 square foot facility is HACCP-compliant and is a USDA Licensed processing facility with on-site daily inspections. HACCP is a management system in which food safety is addressed through the analysis and control of biological, chemical, and physical hazards from raw material production, procurement and handling, to manufacturing, distribution and consumption of the finished product. Having a USDA certified facility allows consumers to be confident that the Food Safety and Inspection Service (FSIS), the public health agency in the USDA, ensured that meat and poultry products are safe, wholesome, and correctly labeled and packaged
The Company’s customers range from a wide variety of restaurants, including many well known in Southern CA, to institutions, schools (UCSD, SDSU, etc.) and re-distributors such as US Foods and Sysco as well as to local distributors. They supply wholesale food and restaurant supplies to San Diego, Los Angeles, Orange and Riverside and offer same day service. In addition, they have clients in Arizona and Colorado that come to their facility to pick up their orders.
Because Seaport Meat Company of America can efficiently add new product lines, they can easily expand the distribution of Pacific Ventures’ San Diego Farmers Outlet and SnoBar product line, thereby accelerating Pacific Ventures’ revenue growth. The combination of a distribution and product company is unique in the San Diego area and will position the company for rapid growth.
They manufacture and wholesale custom processed beef, pork, chicken, lamb, veal and seafood. In addition, they are redistributors of a wide variety of dry goods, frozen foods, disposables and janitorial products. Their sales, distribution and finance processes are very efficient and can be expanded to add new product lines, including fresh produce and dairy
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, Snöbar Holdings and its subsidiaries, in which Snöbar Holdings has a controlling voting interest and entities consolidated under the variable interest entities (“VIE”) provisions of ASC 810, “Consolidation” (“ASC 810”). Inter-company balances and transactions have been eliminated upon consolidation.
The Company applies the provisions of ASC 810 which provides a framework for identifying VIEs and determining when a company should include the assets, liabilities, non-controlling interests, and results of activities of a VIE in its consolidated financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the Company, Snöbar Holdings, San Diego Farmers Outlet, MGD, IPIC and the Trust, which was established to hold IPIC, which in turn holds liquor licenses. All inter-company accounts have been eliminated during consolidation. See the discussion in Note 1 above for variable interest entity treatment of the Trust and IPIC.
| 6 |
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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 amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, which requires that five basic steps be followed to recognize revenue: (1) a legally enforceable contract that meets criteria standards as to composition and substance is identified; (2) performance obligations relating to provision of goods or services to the customer are identified; (3) the transaction price, with consideration given to any variable, noncash, or other relevant consideration, is determined; (4) the transaction price is allocated to the performance obligations; and (5) revenue is recognized when control of goods or services is transferred to the customer with consideration given, whether that control happens over time or not. Determination of criteria (3) and (4) are based on our management’s judgments regarding the fixed nature of the selling prices of the products and services delivered and the collectability of those amounts. The adoption of ASC 606 did not result in a change to the accounting for any of the in-scope revenue streams; as such, no cumulative effect adjustment was recorded.
Unearned Revenue
Certain amounts are
received pursuant to agreements or contracts and may only be used in the conduct of specified transactions, or the related services are
yet to be performed. These amounts are recorded as unearned or deferred revenue and are recognized as revenue in the year/period the related
expenses are incurred, or services are performed. As of September 30, 2021, the Company has $
Leases
ASC 842, Leases, was required to be adopted for all financial years beginning after December 15, 2018 and requires long term leases (longer than 12 month) to be capitalized with a corresponding liability for the term of the lease and expensed over that term. Currently the Company has 2 long-term leases SDFO & Seaport Meat Company.
Shipping and Handling Costs
The Company’s shipping costs are all recorded as operating expenses for all periods presented.
Disputed Liabilities
The Company is involved in a variety
of disputes, claims, and proceedings concerning its business operations and certain liabilities. We determine whether an estimated loss
from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. We assess our potential
liability by analyzing our litigation and regulatory matters using available information. We develop our views on estimated losses in
consultation with outside counsel handling our defense in these matters, which involves an analysis of potential results, assuming a combination
of litigation and settlement strategies. Should developments in any of these matters cause a change in our determination as to an unfavorable
outcome and result in the need to recognize a material accrual or should any of these matters result in a final adverse judgment or be
settled for significant amounts, they could have a material adverse effect on our results of operations, cash flows and financial position
in the period or periods in which such change in determination, judgment or settlement occurs. As of September 30, 2021, the Company has
$
| 7 |
Cash Equivalents
The Company
considers highly liquid instruments with original maturity of three months or less to be cash equivalents. As of September 30, 2021, the
Company has a cash balance of $
Accounts Receivable
As of September 30, 2021, Accounts
Receivable are stated at net realizable value of $
Inventories
Inventories are stated at the
lower of cost or market value. Cost has been determined using the first-in, first-out method. Inventory quantities on-hand are regularly
reviewed, and where necessary, reserves for excess and unusable inventories are recorded. Inventory consists of finished goods beef, pork,
chicken, seafood, all other restaurant related goods, and also includes ice cream, popsicles and the related packaging materials. As of
December 30, 2020, the Company had total inventory assets of $
Income Taxes
Deferred taxes are provided on an asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the difference between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Income/(loss) per share of common stock is calculated by dividing the net income/(loss) by the weighted average number of shares of common stock outstanding during the period. The Company has no potentially dilutive securities. Accordingly, basic and dilutive income/(loss) per common share are the same.
Property and Equipment
Property and equipment are carried
at cost less accumulated depreciation and includes expenditures that substantially increase the useful lives of existing property and
equipment. Maintenance, repairs, and minor renovations are expensed as incurred. Upon sale or retirement of property and equipment, the
cost and related accumulated depreciation are eliminated from the respective accounts and the resulting gain or loss is included in the
results of operations. The Company provides for depreciation of property and equipment using the straight-line method over the estimated
useful lives or the term of the lease, as appropriate. The estimated useful lives are as follows: vehicles,
| 8 |
Identifiable Intangible Assets
As of September 30, 2021, the Company’s Identifiable Intangible Assets are as follows:
Intangible Assets
Identifiable Intangible Assets
Trade Name (San Diego
Farmers Outlet) $
Trade Name (Seaport
Meat) $
Wholesale Customer Relationships
(San Diego Farmers Outlet) $
Wholesale Customer Relationships
(Seaport Meat) $
Total Identifiable Intangible
Assets $
Goodwill
Assembled Workforce
$
Unidentified Intangible
Value $
Total Goodwill $
Total Intangible Assets $
Total Accumulated Amortization
$
Management does not believe that there is an impairment as of December 20, 2021.
Fair Value of Financial Instruments
The carrying amounts of the Company’s financial instruments, which include cash, accounts receivable, accounts payable, and accrued expenses are representative of their fair values due to the short-term maturity of these instruments.
Concentration of Credit Risk
Financial instruments that potentially
subject the Company to concentration of credit risk consist primarily of cash and accounts receivable. The Company maintains cash balances
at financial institutions within the United States which are insured by the Federal Deposit Insurance Corporation (“FDIC”)
up to limits of approximately $
Critical Accounting Policies
The Company considers revenue recognition and the valuation of accounts receivable, allowance for doubtful accounts, and inventory and reserves as its significant accounting policies. Some of these policies require management to make estimates and assumptions that may affect the reported amounts in the Company’s financial statements.
Recent Accounting Pronouncements
In June 2009, the FASB established the Accounting Standards Codification (“Codification” or “ASC”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). Rules and interpretive releases of the Securities and Exchange Commission (the “SEC”) issued under authority of federal securities laws are also sources of GAAP for SEC registrants. Existing GAAP was not intended to be changed as a result of the Codification, and accordingly the change did not impact our financial statements. The ASC does change the way the guidance is organized and presented.
In April 2015, FASB issued Accounting Standards Update (“ASU”) No. 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”, to simplify presentation of debt issuance costs by requiring 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. The ASU does not affect the recognition and measurement guidance for debt issuance costs. For public companies, the ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted.
| 9 |
In April 2015, FASB issued ASU No. 2015-04, “Compensation – Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets”, which permits the entity to measure defined benefit plan assets and obligations using the month-end that is closest to the entity’s fiscal year-end and apply that practical expedient consistently from year to year. The ASU is effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted.
In April 2015, FASB issued ASU No. 2015-05, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement”, which provides guidance to customers about whether a cloud computing arrangement includes a software license. If such includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If the arrangement does not include a software license, the customer should account for it as a service contract. For public business entities, the ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early application is permitted. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
In April 2015, FASB issued ASU No. 2015-06, “Earnings Per Share (Topic 260): Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions”, which specifies that, for purposes of calculating historical earnings per unit under the two-class method, the earnings (losses) of a transferred business before the date of a drop down transaction should be allocated entirely to the general partner. In that circumstance, the previously reported earnings per unit of the limited partners (which is typically the earnings per unit measure presented in the financial statements) would not change as a result of the dropdown transaction. Qualitative disclosures about how the rights to the earnings (losses) differ before and after the dropdown transaction occurs for purposes of computing earnings per unit under the two-class method also are required. The ASU is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Earlier application is permitted.
In June 2014, FASB issued ASU No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation”. The update removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. In addition, the update adds an example disclosure in Risks and Uncertainties (Topic 275) to illustrate one way that an entity that has not begun planned principal operations could provide information about the risks and uncertainties related to the company’s current activities. Furthermore, the update removes an exception provided to development stage entities in Consolidations (Topic 810) for determining whether an entity is a variable interest entity-which may change the consolidation analysis, consolidation decision, and disclosure requirements for a company that has an interest in a company in the development stage. The update is effective for the annual reporting periods beginning after December 15, 2014, including interim periods therein. Early application is permitted with the first annual reporting period or interim period for which the entity’s financial statements have not yet been issued (Public business entities) or made available for issuance (other entities). Our company adopted this pronouncement.
In June 2014, FASB issued ASU No. 2014-12, “Compensation – Stock Compensation (Topic 718); Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The amendments in this ASU apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. For all entities, the amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. Entities may apply the amendments in this ASU either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this Update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition.
| 10 |
In August 2014, the FASB issued ASU 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued).
All other newly issued accounting pronouncements which are not yet effective have been deemed either immaterial or not applicable.
We reviewed all other recently issued accounting pronouncements and determined these have no current applicability to the Company or their effect on the financial statements would not have been significant.
3. GOING CONCERN
The accompanying
consolidated financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying
consolidated financial statements, the Company has incurred a net loss of $
In order to continue as a going concern, the Company will need, among other things, additional capital resources. The Company is significantly dependent upon its ability, and will continue to attempt, to secure equity and/or additional debt financing. There are no assurances that the Company will be successful and without sufficient financing it would be unlikely for the Company to continue as a going concern.
The unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These unaudited consolidated financial statements do not include any adjustments that might arise from this uncertainty.
4. INVENTORIES
As of September 30, 2021, the
Company had inventory assets for a total of $
| 11 |
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment on September 30, 2021, and December 31, 2020, consisted of:
| Sept 30, 2021 | December 31, 2020 | |||||||
| Computers | $ | |||||||
| Office Furniture | ||||||||
| Building & Improvement | ||||||||
| Forklift 1 | ||||||||
| Forklift 2 | ||||||||
| Truck 2019 Hino 155 3710 | ||||||||
| Truck 2019 Hino 155 7445 | ||||||||
| Truck 2018 Hino 155 5347 | ||||||||
| Truck 2018 Hino 155 5647 | ||||||||
| Truck 2019 Hino 155 5680 | ||||||||
| Machinery & Equipment | ||||||||
| Leasehold Improvements | ||||||||
| Office Equipment | ||||||||
| Vehicles | ||||||||
| Accumulated Depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation
and Amortization expenses for the nine (9) months ended September 30, 2021, was $
6. ACCRUED EXPENSE
As of
September 30, 2021, the Company had accrued expenses of $
7. INCOME TAX
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
8. RELATED PARTY TRANSACTIONS
The following table presents a summary of the Company’s promissory notes issued to related parties as of September 30, 2021:
| Noteholder | Note Amount | Issuance Date | Unpaid Amount | |||||||
| S. Masjedi | $ | $ | ||||||||
| A. Masjedi | ||||||||||
| M. Shenkman | ||||||||||
| M. Shenkman | ||||||||||
| M. Shenkman | ||||||||||
| M. Shenkman (Entrust) | ||||||||||
| $ | $ | |||||||||
| 12 |
The following description represent note payable-related party transaction pre-Share Exchange that were assumed by the Company as a condition to the Share Exchange:
In January 2011, MGD, which is
now a majority owned subsidiary of Snöbar Holdings, entered into an unsecured promissory note with Mrs. Masjedi, who is now the Company’s
President, Chief Executive Officer, Interim Chief Financial Officer, director and majority stockholder. The note had a principal balance
of $
On February 21, 2012, Snöbar
Holdings entered into an unsecured promissory note with Mr. Shenkman, who is Chairman of the Board of Directors and a shareholder of the
Company. The note had a principal balance of $
On February 23, 2012, Snöbar
Holdings entered into a promissory note with Mr. Shenkman for $
On March 14, 2013, Snöbar
Holdings entered into an unsecured promissory note with a Mr. Shenkman, the Company’s Chairman of the Board of Directors. The note
had a principal balance of $
On June 1, 2013, Snöbar Holdings
entered into a promissory note with Azizollah Masjedi, father-in-law to Shannon Masjedi who’s the Company’s President, Chief
Executive Officer, Interim Chief Financial Officer, director and majority stockholder, in an amount of $
On September 9, 2014, Snobar
Holdings entered into a second unsecured promissory note with Mr. Shenkman, through his affiliate company Entrust Group for a total amount
of $
| 13 |
9. NOTES PAYABLE
| Note Amount | Issuance Date | Balance | ||||||||
| A. Rodriguez | $ | $ | ||||||||
| A. Rodriguez | ||||||||||
| A. Rodriguez | ||||||||||
| Henry Mahgerefteh | ||||||||||
| TRA Capital | ||||||||||
| BNA Inv | ||||||||||
| Brian Berg | ||||||||||
| Classic Bev | ||||||||||
| PowerUp | ||||||||||
| TysAdco Partners | ||||||||||
| LGH Investments | ||||||||||
| PNC, Inc. | ||||||||||
| PPP | ||||||||||
| SBA Loan | ||||||||||
| Dicer | ||||||||||
| TCA Global fund | ||||||||||
| TCA Global fund 2 | ||||||||||
| $ | $ | |||||||||
| Purchase Receivables | ||||||||||
| Amount | Issuance Date | Balance | ||||||||
| Cap Call | ||||||||||
| Fox Capital | ||||||||||
| $ | $ | |||||||||
The following description represent unrelated notes payable transactions pre-reverse merger between Snöbar and the Company that were assumed by the Company as a condition to the Share Exchange Agreement:
In February 2012, MGD entered
into an unsecured promissory note with a certain unrelated party, now a shareholder of the Company for a principal balance of $
On March 14, 2013, Snöbar Holdings entered into an unsecured promissory note with a certain unrelated third party, now a shareholder of the Company. The note had a principal balance of $ with an interest rate of % and had a maturity date of . The note’s maturity date has subsequently been extended to . The entire balance is owed and outstanding as of September 30, 2021.
On July 22, 2013, Snöbar Holdings entered into an unsecured promissory note with a certain unrelated third party. The note had a principal balance of $ with an original interest rate of %. Maturity date has been extended to , and interest rate has been reduced to %, and lender agreed to make all interest retroactive and deferred. The balance of the note was $ as of September 30, 2021.
The following description represents unrelated note payable transactions post-merger between Snöbar and the Company:
Effective September 25, 2020,
the Company entered into a settlement agreement with BNA/TRA in the amount of $
| 14 |
In March 2021, the Company entered
into a financing arrangement with Power Up Lending pursuant to which the Company borrowed a total principal of $
Over the past year Classic Beverage
has periodically issued loans to the Company. The Company has agreed to pay interest
On May 1, 2018, Pacific Ventures
Group entered into a secured promissory note with TCA Global Master Fund. The note was secured by interests in tangible and intangible
property of Pacific Ventures Group. The effective interest rate on the note is
On December 17, 2019, Pacific
Ventures Group entered into a secured promissory note with TCA Special Situations Credit Strategies ICAV. The note was secured by interests
in tangible and intangible property of Pacific Ventures Group. The effective interest rate is
On May 20, 2020, The Company
entered into a SBA loan and SBA PPP note in the amounts of $
On July 20, 2020, Seaport
Group Enterprises LLC entered a note in the amount of $
On December 8, 2019, The
Company entered into a settlement agreement on the Seller Carryback note with PNC Inc in the amount of $
In
September 2020, Seaport Group Enterprises LLC entered into a revenue based factoring agreement with Cap Call and received an aggregate
of $
In
September 2020, Seaport Group Enterprises LLC entered into a revenue based factoring agreement with Cap Call and received an aggregate
of $
In
the second quarter 2021, The Company entered into a note with Tysadco Partners in the amount of $
In
May of 2021, The Company entered into a note with LGH Financial in the amount of $
As of September 30, 2021, the Company had short-term
notes payable of $
| 15 |
10. STOCKHOLDERS’ EQUITY
Common Stock and Preferred Stock
The Company is authorized to issue
up to shares of its preferred stock, $ par value per share. The Company designated shares of preferred stock
as Series E Preferred Stock (the “Series E Preferred Stock”). Under the rights, preferences and privileges of the Series E
Preferred Stock, for every share of Series E Preferred Stock held, the holder thereof has
From January 1, 2021, through September 30, 2021, the Company issued shares of its common stock.
The Company is authorized to issue
up to shares of its common stock, $ par value per share.
On April 13, 2020, the Company effected a 500 for 1 reverse split of its common stock. The number of authorized common shares remained .
The following table represents S1 investments and issuances:
| S1 Issuances | Investment | Shares issued | Cost Basis | Date | ||||||||||
| Tysadro Partners | ||||||||||||||
| Tysadro Partners |
| |||||||||||||
| Trillium | ||||||||||||||
| Vision | ||||||||||||||
11. COMMITMENTS, CONTINGENCIES AND UNCERTAINTIES
Operating Lease
The Company is currently obligated
under
SDFO operations are located at
10407 Friars Rd, San Diego, CA 92110, where they occupy an aggregate of approximately
Seaport Group Enterprise LLC is
located at 2533 Folex Way, Spring Valley CA 91978, where they occupy an aggregate of approximately
San Diego Farmers Outlet and Seaport Meat Company Operating Leases
The Company on May 1, 2018, assumed a lease agreement
for a facility site and entered into a lease agreement for office space for San Diego Farmers Outlet. The lease has a term of five years
expiring on
| 16 |
Future minimum lease payments, as set forth in the lease, are below:
| YEAR | AMOUNT | |||
| 2020 | $ | |||
| 2021 | $ | |||
| 2022 | $ | |||
| 2023 | $ | |||
The Company on December 1, 2019, entered into a lease
agreement for a facility site for office space for Seaport Meat Company. The lease has a term of five years expiring on
Future minimum lease payments, as set forth in the lease, are below:
| YEAR | AMOUNT | |||
| 2020 | $ | |||
| 2021 | $ | |||
| 2022 | $ | |||
| 2023 | $ | |||
| 2024 | $ | |||
Concentration Risk
The Company is potentially subject to concentration risk in its sales revenue and from a major supplier of g
ods for sale.
Major Customer
The Company has one major customer that accounted
for approximately
Major Vendor
The Company has one major vendor that accounted
for approximately
12. SUBSEQUENT EVENTS
ASC 855-16-50-4 establishes accounting and disclosure requirements for subsequent events. ASC 855 details the period after the balance sheet date during which we should evaluate events or transactions that occur for potential recognition or disclosure in the financial statements, the circumstances under which we should recognize events or transactions occurring after the balance sheet date in its financial statements and the required disclosures for such events.
On November 9, 2021, the Small
Business Administration forgave Seaport Group Enterprises PPP loan in the amount of $
| 17 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
Statements in this Quarterly Report on Form 10-Q (this “Quarterly Report”) which are not historical in nature are “forward-looking statements” within the meaning of the federal securities laws. These statements often include words such as “believe,” “expect,” “project,” “anticipate,” “intend,” “plan,” “outlook,” “estimate,” “target,” “seek,” “will,” “may,” “would,” “should,” “could,” “forecast,” “mission,” “strive,” “more,” “goal,” or similar expressions and are based upon various assumptions and our experience in the industry, as well as historical trends, current conditions, and expected future developments. However, you should understand that these statements are not guarantees of performance or results, and there are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those expressed in the forward-looking statements, including, among others:
| ● | any declines in the consumption of food prepared away from home; | |
| ● | the extent and duration of the negative impact of the COVID-19 pandemic on us; | |
| ● | cost inflation/deflation and commodity volatility; | |
| ● | competition; | |
| ● | reliance on third-party suppliers and interruption of product supply or increases in product costs; | |
| ● | changes in our relationships with customers and group purchasing organizations; | |
| ● | our ability to increase or maintain the highest margin portions of our business; | |
| ● | effective integration of acquired businesses; | |
| ● | achievement of expected benefits from cost savings initiatives; | |
| ● | increases in fuel costs; | |
| ● | economic factors affecting consumer confidence and discretionary spending; | |
| ● | changes in consumer eating habits; | |
| ● | reputation in the industry; | |
| ● | labor relations and costs and continued access to qualified and diverse labor; | |
| ● | cost and pricing structures; | |
| ● | changes in tax laws and regulations and resolution of tax disputes; | |
| ● | environmental, health and safety and other government regulation, including actions taken by national, state and local governments to contain the COVID-19 pandemic, such as travel restrictions or bans, social distancing requirements, and required closures of non-essential businesses; | |
| ● | product recalls and product liability claims; | |
| ● | adverse judgments or settlements resulting from litigation; | |
| ● | disruption of existing technologies and implementation of new technologies; | |
| ● | cybersecurity incidents and other technology disruptions; | |
| ● | management of retirement benefits and pension obligations; | |
| ● | extreme weather conditions, natural disasters and other catastrophic events, including pandemics and the rapid spread of contagious illnesses; | |
| ● | risks associated with intellectual property, including potential infringement; | |
| indebtedness and restrictions under agreements governing indebtedness; and | ||
| ● | interest rate increases. |
We caution that the factors described herein, and other factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
| 18 |
General
The Company was incorporated under the laws of the State of Delaware on October 3, 1986, under the name “AOA Corporation”. On October 22, 2012, the Company changed its name to “Pacific Ventures Group, Inc.”. Prior to the Share Exchange described below, the Company operated as an insurance holding company and through its subsidiaries, marketed and underwrote specialized property and casualty coverage in the general aviation insurance marketplace.
The current structure of the Company resulted from a share exchange with Snöbar Holdings, Inc. (“Snöbar”), which was treated as a reverse merger for accounting purposes. On August 14, 2015, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with Snöbar Holdings, Inc. (“Snöbar Holdings”), pursuant to which the Company acquired 100% of the issued and outstanding shares of Snöbar Holdings’ Class A and Class B common stock in exchange for 22,500,000 restricted shares of the Company’s common stock, as well as issuing 2,500,000 restricted shares of the Company’s common stock to certain other persons (the “Share Exchange”). As the result of the Share Exchange, Snöbar Holdings. became the Company’s wholly owned operating subsidiary and the business of Snöbar Holdings became the Company’s sole business operations. In addition, Snöbar Holdings’ majority owned subsidiary, MAS Global Distributors, Inc., a California corporation (“MGD”), became an indirect subsidiary of the Company.
International Production Impex Corporation, a California corporation (“IPIC”), which was formed on August 2, 2001. IPIC is in the business of selling alcohol-infused ice cream and ice-pops and holds all of the rights to the liquor licenses to sell such products and trade names “SnöBar”. Accordingly, the Trust holds all ownership interest of IPIC and its liquor licenses, permitting IPIC to sell its product to distributors, with all income, expense, gains and losses rolling up to the Trust, of which Snöbar Holdings is the sole beneficiary. Snöbar Holdings also owns 99.9% of the shares of MAS Global Distributors, Inc., a California corporation (“MGD”). As a result of the foregoing structure, Snöbar Holdings is the primary beneficiary of all assets, liabilities and any income received from the business of the Trust and IPIC through the Trust and is the parent company of MGD.
Description of the Business Operations of Snöbar Holdings
Snöbar Holdings is the trustor and sole beneficiary of the Trust. The Trust owns 100% of the shares of IPIC. IPIC is the owner of liquor licenses and the trade name “SnöBar” .
IPIC is a food, beverage and alcohol distribution company who has sold alcohol-infused ice cream and ice-pops and holds all of the rights to the liquor licenses to sell such products and trade names “SnöBar”. IPIC is initially marketing two products: SnöBar alcohol infused ice pops, and SnöBar alcohol infused ice cream and sorbet. SnöBar ice pops are original frozen alcohol beverage bars, similar to popsicles on a stick, but made with premium liquor such as premium tequila and vodka and are currently manufactured in three flavors, Margarita, Cosmopolitan and Mojito. The alcohol freezing technology used to produce these beverage bars can be applied to almost any alcohol type and mixture, presenting significant market potential and an almost unlimited variety of flavors and employment of premium brands. Each ice pop is the equivalent of a full cocktail.
SnöBar ice cream is an additional innovative product that the Company is marketing using proprietary formulas and technology. These products are premium ice cream and sorbets that are distilled spirit cocktails containing up to 15% quality liqueurs and liquors. Currently, there are four flavors available: Brandy Alexander; Brandy Alexander with chocolate chips; Grasshopper; and Pink Squirrel. There are also numerous different liquor ice cream flavors in development in classic ice cream drink styles such as Coffee Liqueur Ice Cream, Piña Colada Sorbet, Sherry Ice Cream, and Strawberry Margarita Sorbet. The product contains ultra-premium dairy and the highest quality of ingredients.
The SnöBar brand is fully trademarked within the USA and is currently seeking worldwide trademark rights.
As of March 31, 2020, Snöbar products are currently being sold in the east coast by our distributor. The Company’s management has been actively constructing an online platform that will allow Snöbar distribution on a national level. Please see “Plan of Operations” below for further detail.
| 19 |
On May 1, 2018, Royalty Foods Partners, LLC – a Florida Limited Liability Corporation and a subsidiary of Pacific Ventures Group, Inc. – completed an asset acquisition of San Diego Farmers Outlet, Inc. (SDFO), a California Corporation. San Diego Farmers Outlet was started over thirty-five years ago to provide primarily restaurant customers in southern California’s three largest counties with quality food and produce and does business under the name of Farmers Outlet and San Diego Farmers Outlet.
On December 17, 2019, the Company completed an asset acquisition of Seaport Meat Company, (Seaport Meat), a California Corporation with over thirty (30) years in business servicing restaurant and retail, and institutional customers in Southern California and Arizona. Seaport Meat is a USDA meat processing plant that supplies quality meats, seafood, dry goods, dairy and produce. Seaport Meat Company built a state-of-the-art food distribution and manufacturing facility in Spring Valley, California their 12,000 square foot facility is HACCP-compliant and is a USDA Licensed processing facility with on-site daily inspections. HACCP is a management system in which food safety is addressed through the analysis and control of biological, chemical, and physical hazards from raw material production, procurement and handling, to manufacturing, distribution and consumption of the finished product. Having a USDA certified facility allows consumers to be confident that the Food Safety and Inspection Service (FSIS), the public health agency in the USDA, ensured that meat and poultry products are safe, wholesome, and correctly labeled and packaged
Plan of Operations
Snobar
As of the date of this Quarterly Report, Snöbar products are currently being sold in the east coast of United States by the Company’s distributor. The Company’s management has been actively constructing an online platform that will allow Snöbar distribution on a national level. The Company’s platform is complete and ready to “go live” and, with the aim of purchasing inventory as well as increasing sales and marketing efforts.
The Company has recently signed an agreement with a new co-packer to produce and manufacture the Snobar Product Line. The new factory will produce the Snobar Product Line for a reduced price which will allow for greater profitability for the company. The new factory has all of the necessary licensing in place required to manufacture the Snobar Product Line. The company expects to place its first order with the new copacker in 2021. The company will launch the state of California and be looking to expand sales across the nation.
In addition, the Company is planning to offer distribution rights throughout the country which will allow the Snöbar Product Line to expand its footprint very rapidly. The distribution rights will also bring in additional revenue to the Company.
The Company will need to access the capital markets or in order to sustain its operations for the next 12 months. The Company’s plan of action in the next 12 months is to continue development of the Snöbar Product Line and fulfill the current orders that the brand has in hand from the Company’s distributor in South Carolina as well as from other accounts. The Snöbar Product Line will have two fulfillment centers to ship the online orders, one in California to service west of the Mississippi and another fulfillment center in South Carolina to service east of the Mississippi. These fulfillment centers are established and ready to proceed as soon as inventory is purchased.
The Company’s anticipated general and administrative costs can be expected to increase due to additional marketing costs associated with online sales. Specifically, the Company expects to utilize marketing and promotions through social media, radio and other avenues to create more brand awareness. The Company expects to continue to utilize independent contractors and not increase the number of employees.
| 20 |
Seaport Meat Company
Seaport Meat Company, (Seaport Meat), a California Corporation with over thirty (30) years in business servicing restaurant and retail, and institutional customers in Southern California and Arizona. Seaport Meat is a USDA meat processing plant that supplies quality meats, seafood, dry goods, dairy and produce. Seaport Meat Company built a state-of-the-art food distribution and manufacturing facility in Spring Valley, California their 12,000 square foot facility is HACCP-compliant and is a USDA Licensed processing facility with on-site daily inspections. HACCP is a management system in which food safety is addressed through the analysis and control of biological, chemical, and physical hazards from raw material production, procurement and handling, to manufacturing, distribution and consumption of the finished product. Having a USDA certified facility allows consumers to be confident that the Food Safety and Inspection Service (FSIS), the public health agency in the USDA, ensured that meat and poultry products are safe, wholesome, and correctly labeled and packaged
The Company’s customers range from a wide variety of restaurants, including many well known in Southern CA, to institutions, schools (UCSD, SDSU, etc.) and re-distributors such as US Foods and Sysco as well as to local distributors. They supply wholesale food and restaurant supplies to San Diego, Los Angeles, Orange and Riverside and offer same day service. In addition, they have clients in Arizona and Colorado that come to their facility to pick up their orders.
Because Seaport Meat Company of America can efficiently add new product lines, it is expected that this will expand the distribution of Pacific Ventures’ San Diego Farmers Outlet and SnoBar product line, thereby accelerating Pacific Ventures’ revenue growth. We believe the combination of a distribution and product company is unique in the San Diego area and will position the company for rapid growth.
Seaport Meat Company manufactures and wholesales custom processed beef, pork, chicken, lamb, veal, and seafood. In addition, they are redistributors of a wide variety of dry goods, frozen foods, disposables, and janitorial products. Their sales, distribution and finance processes are very efficient and can be expanded to add new product lines, including fresh produce and dairy
In 2021, the California COVID-19 restrictions have eased up on the restaurants and dining facilities. The Company has seen an increase in sales and our third quarter revenue has already exceeded our 2020 year-end revenue. The Company has managed to retain all new customers and seen the return of large customers such as PetCo Park (San Diego Padres Stadium) and the LA and San Diego County Fairs.
During 2020, the U.S. foodservice industry faced unprecedented challenges as the COVID-19 pandemic caused substantial disruption across many of our customers’ operations and, in some cases, resulted in permanent closures of restaurants. As a company, we took several actions to increase liquidity, conserve cash, manage working capital, and reduce expenses to align with the decrease in demand.
We also acted quickly to protect the health and safety of our communities by implementing new protocols and enhanced safety measures to protect our frontline associates and customers, many of whom are “essential workers” and unable to work remotely. As we adapted to rapidly changing conditions, we also increased our efforts to stay connected to our current customers and attract new customer.
As the U.S. meat industry experienced meat shortages due to massive outbreaks of COVID-19 and in some cases large facilities were forced to close, meat prices reached an all-time high due to the lack of product and increase in demand. While our competitors choose to pass these increases in price to the customers, Seaport management made a conscious decision to stand by our customers and Seaport lowered our margins to support our customers during the pandemic. By lowering our margins during the second and third quarters Seaport attracted many new customers and won the loyalty of its current customer base.
Seaport was able to maintain the historical average of the prior year’s revenues but did share the burden of the pandemic and incurred a net loss because of this decrease in demand.
During the onset of the pandemic Seaport’s sales staff and management acted quickly to recover any lost revenue due to the massive government mandated shutdown. Some of Seaports largest customers were forced to stay closed for almost a year which include Petco Park the San Diego Padres Stadium, and the SoCal County Fairs. Seaport attracted more business from Hospitals, Nursing Homes, and Naval Bases just to name a few.
Both Seaport Meat Company and Farmers Outlet would like our customers know that we appreciate their loyalty and continued support we were all in this together.
| 21 |
Although the Company has been able to extend the maturity dates as well as repayment terms of a substantial amount of its existing debt, there is no assurance that the Company will be able to further extend such repayments or maturity dates to avoid a default, as such further extension depends on the consent of the holders of such debt. If the Company is unable to make such payments and repayments and unable to extend and delay required payments or maturities of such debt, the holders of such debt will have the right to take legal action seeking enforcement of the debt. If any legal action is taken against it, the Company would face the risk of having to deplete our limited cash resources to defend against such suit or face the entry of a default judgment. In either event, such action would have grave impact on the Company’s operations. The Company’s ability to continue operations will be dependent upon the successful completion of additional long-term or permanent equity financing, the support of creditors and shareholders, and, ultimately, the achievement of profitable operations. There can be no assurances that the Company will be successful, which would in turn significantly affect our ability to be successful in its new business plan. If not, the Company will likely be required to reduce operations or liquidate assets. The Company will continue to evaluate its projected expenditures relative to its available cash and to seek additional means of financing in order to satisfy the Company’s working capital and other cash requirements.
San Diego Farmers Outlet
SDFO covers a large market area servicing Los Angeles, Orange County and San Diego, which we have estimated to be a $2.5 billion addressable market.
Unlike some larger distributors who make their customers receive products on a day and time convenient to the distributor, SDFO delivers daily and pays attention to what the customer wants. Farmers Outlet added products to meet the needs of restaurants, Hotels, Clubs and bars, Resorts, food trucks and caterers. Free delivery was added to demonstrate that Farmers Outlet had customers interest first in mind.
Farmers Outlet provides a wide array of products to serve customers of all types. However, they do have a niche in providing fresh produce and food products. Farmers Outlet provides specialty produce that the larger distributors do not carry on a daily basis.
Farmers Outlet covers a large market area servicing Los Angeles, Orange County and San Diego, which we have estimated to be a $2.5 billion addressable market. Farmers Outlet currently services the San Diego territory and has over 125 active customers, and no customer represents more than five percent of Farmers Outlet gross revenues.
The company services customers in high, middle and low-income communities with a specialty in providing food and fresh produce to customers serving small to medium size restaurants of all nationalities, including Chinese, Korean, Mexican, American, Japanese and Thai.
Pacific Ventures intends to expand its business through the acquisition of other food manufacturing and distribution companies that serve the Los Angeles, Orange County and San Diego area, thereby combining and expanding upon a combined customer base with an expanding range of products and services.
Results of Operations
Nine Months ended September 30, 2021, as Compared to Nine Months Ended September 30, 2020
Revenues — The Company recorded $30,507,410 sales revenue for the nine months ended September 30, 2021, as compared to $22,929,026 for the same period of September 30, 2020. The Company had $1,566,973 inventory of saleable merchandise as of September 30, 2021, as compared to $1,216,562 for the period ending December 31, 2020.
Operating Expenses — Total cash used in operating expenses for the nine months ended September 30, 2021, was $2,803,128 as compared to $2,651,613 in the same period in, 2020, due to increased operating activities during the period ended September 30, 2021, and an increase in salaries and wages.
| 22 |
Selling, General and Administrative Expenses — Selling, general and administrative expenses for the nine months ended September 30, 2021, increased to $4,172,571 from $3,636,326 in the same period in 2020, which was due to an increase in various expenses and business expansion.
Marketing and Advertising Expenses – Marketing and advertising expenses for the nine months ended September 30, 2021, was $241,110 compared to $27,698 on September 30, 2020.
Professional fees – Professional fees expense for the nine months ended September 30, 2021, was $919,510, which includes accounting, legal fees and consulting services compared to $752,723 during the same period in 2020.
Depreciation and Amortization Expenses — Depreciation and Amortization expenses for the nine months ended September 30, 2021, and 2020 was $585,931 and $505,969, respectively.
Salaries and Wages — Salaries and wages expense, in the form of payroll expenses, which is included under selling & general expenses for the nine months ended September 30, 2021, was $1,437,656, as compared to $1,197,218 for the prior same period.
Other Non-Operating Income and Expenses — For the nine months period ended September 30, 2021, the Company recorded interest and penalty expenses in the amount of $2,476,692 for a non-operating loss in the same amount. In the nine months ended September 30, 2020, the Company recorded other non-operating expenses of $1,261,273 in interest expense for a non-operating loss in the same amount.
Net Loss — Net loss for nine months ended September 30, 2021, was $4,551,641, as compared to net loss of $3,896,531 for the nine months ended September 30, 2020.
Financial Condition, Liquidity and Capital Resources
As of September 30, 2021, the Company had a working capital deficit of $4,287,357, consisting of $496,959 in cash, $1,504,545 in accounts receivable, $1,556,973 in inventory, $483,688 in other assets and $16,845 in deposits, offset by accounts payable $3,211,128, accrued expenses of $1,180,717, equipment of $67,147, $3,702,376 in the current portion of notes payable and $195,000 in other current liabilities.
For the nine months period ended September 30, 2021, the Company used $2,803,128 of cash in operating activities, used $101,982 for investing activities and obtained $3,343,835 cash from financing activities, resulting in an increase in total cash of $438,725 and a cash balance of $496,959 for the period. For the nine months period ended September 30, 2020, the Company used cash of $2,651,613 in operating activities, used cash of $177,590 for investing activities and obtained cash of $2,478,385 from financing activities, resulting an decrease in cash of $350,819 and a cash deficit balance of $34,861 at the end of such period.
Total current assets as of September 30, 2021, was $4,069,011, while current liabilities were $8,356,369. The Company has incurred an operating loss of $4,551,641 for the nine months period ended September 30, 2021, largely due the increase in operating expenses, business expansion and increase in interest and penalty fees. During the nine months period ended September 30, 2021, the Company had an accumulated deficit of $19,984,766. These factors raise substantial doubt about our ability to continue as a going concern.
Changes in the composition of our Notes Payable and Notes Payable-Related Parties are presented in the table below:
| As of September 30, 2021 | As of Dec 31, 2020 | |||||||||||||||
| $ Current | $Long-Term | $ Current | $ Long Term | |||||||||||||
| Notes Payable | 1,219,705 | 13,306,315 | 1,531,858 | 10,541,853 | ||||||||||||
| Notes Payable - Related | 439,875 | 42,000 | 437,995 | 42,000 | ||||||||||||
| $ | 1,659,580 | $ | 13,348,315 | $ | 1,969,853 | $ | 10,583,853 | |||||||||
| 23 |
Total Notes Payable for related and unrelated parties increased by $2,454,190 from the fiscal year ended December 31, 2020, from $12,553,706 to $15,007,896 in the nine months period ended September 30, 2021.
As of September 30, 2021, total stockholders’ equity deficit increased to $13,463,853 from $10,512,919 as of December 31, 2020. Accumulated deficit increased from $16,063,780 in the fiscal year ended December 31, 2020 to $19,984,766 for the nine months period ended September 30, 2021.
As of September 30, 2021, the Company had a cash balance of $496,959 (i.e. cash is used to fund operations). The Company does not believe our current cash balances will be sufficient to allow us to fund our operating plan for the next twelve months. Our ability to continue as a going concern is dependent on us obtaining adequate capital to fund operating losses until we become profitable. If we are unable to obtain adequate capital, we could be forced to cease operations or substantially curtail its drug development activities. These conditions raise substantial doubt as to our ability to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities should we be unable to continue as a going concern.
Our principal sources of liquidity in the past have been cash generated by issuing new shares of the Company’s common stock and cash generated from loans to us. In order to be able to achieve our strategic goals, we need to further expand our business and financing activities. To continue to develop our product offerings and generate sales, significant capital has been and will continue to be required. Management intends to fund future operations through additional private or public equity and/or debt offerings. We continue to engage in preliminary discussions with potential investors and broker-dealers, but no terms have been agreed upon. There can be no assurances, however, that additional funding will be available on terms acceptable to us, or at all. Any equity financing may be dilutive to existing shareholders. We do not currently have any contractual restrictions on our ability to incur debt and, accordingly we could incur significant amounts of indebtedness to finance operations. Any such indebtedness could contain covenants which would restrict our operations.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.
Based on this definition, we have identified the critical accounting policies and judgments addressed which are described in Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report. Although we believe that our estimates, assumptions and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required for smaller reporting companies.
Item 4. Controls and Procedures.
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Evaluation of Disclosure Controls and Procedures
As required by Securities Exchange Act of 1934, as amended (the “Exchange Act”), Rule 13a-15(b), we have carried out an evaluation (the “Evaluation”), under the supervision and with the participation of our management, including our Chief Executive Officer and Interim Chief Financial Officer, of the effectiveness of the design and operation of our management, and the design and operation of our disclosure controls and procedures as of March 31, 2020. Based upon an evaluation of the effectiveness of disclosure controls and procedures, our Chief Executive Officer and Interim Chief Financial Officer has concluded that as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) were not effective because of the material weaknesses described below, in order to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the SEC and is accumulated and communicated to management, including the Chief Executive Officer and Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure (see below for further discussion).We had neither the resources, nor the personnel, to provide an adequate control environment.
Due to our limited resources, the following material weaknesses in our internal control over financial reporting continued to exist on September 30, 2021:
| ● | we do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); | |
| ● | we do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our limited size and early-stage nature of operations, segregation of all conflicting duties may not always be possible and may not be economically feasible; however, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals; | |
| ● | we do not have an independent audit committee of our Board of Directors; | |
| ● | insufficient monitoring and review controls over the financial reporting closing process, including the lack of individuals with current knowledge of GAAP that led to the restatement of our previously issued financial statements; and |
We believe that these material weaknesses primarily related, in part, to our lack of sufficient staff with appropriate training in GAAP and SEC rules and regulations with respect to financial reporting functions, and the lack of robust accounting systems, as well as the lack of sufficient resources to hire such staff and implement these accounting systems.
If and when our financial resources allow, we plan to take a number of actions to correct these material weaknesses including, but not limited to, establishing an audit committee of our Board of Directors comprised of three independent directors, hiring a full-time Chief Financial Officer, adding experienced accounting and financial personnel and retaining third-party consultants to review our internal controls and recommend improvements.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Changes in Internal Control Over Financial Reporting
There were no material changes in our internal control over financial reporting (as defined in Rule 13a- 15(f) under the Exchange Act) that occurred as of September 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
CEO and CFO Certifications
Exhibits 31.1 and 31.2 to this Quarterly Report are the Certifications of the Chief Executive Officer and the Interim Chief Financial Officer, respectively. These Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act (the “Section 302 Certifications”). This Item 4 of this Quarterly Report, which you are currently reading, is the information concerning the Evaluation referred to above and in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
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PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
There are no legal proceedings that have occurred within the past ten years concerning our directors or officers which involved a criminal conviction, a criminal proceeding, an administrative or civil proceeding limiting one’s participation in the securities or banking industries, or a finding of securities or commodities law violations. Expect for Mr. Shenkman, who filed for Chapter 11 business bankruptcy in 2010, which was dismissed in May 2012, none of our directors or officers have filed for or have been affiliated with any company that has filed for bankruptcy within the last ten years.
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results. The company is not aware of any other legal proceedings except what is listed below.
On or about November 23, 2020, in action in San Diego Supreme Court was filed against San Diego Farmers Outlet and Pacific Ventures Group. In the case, plaintiff seeks an award of damages in the sum of $41,168.00. The parties are engaged in ongoing settlement discussions. In the meantime, the company intends to contest the allegations against it vigorously. Except as set forth above, we are unable to estimate the likelihood of an unfavorable outcome in the case or estimate the amount owed range of potential loss at this time.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
During the nine months ended September 30, 2021, the Company issued 13,569,115 shares of its common stock.
ITEM 3. Defaults Upon Senior Securities
The Company is not aware of any defaults upon its senior securities.
ITEM 4. Mine Safety Disclosures
Not applicable.
ITEM 5. Other Information.
None.
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ITEM 6. Exhibits
| 27 |
| 28 |
| 31.1* | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act. | |
| 31.2* | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act. | |
| 32.1** | Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS* | Inline XBRL Instance Document | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104* | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| * | Filed herewith. |
| ** | Furnished herewith. |
| 29 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| PACIFIC VENTURES GROUP, INC. | ||
| Date: November 15, 2021 | By: | /s/ Shannon Masjedi |
| Shannon Masjedi | ||
| President, Chief Executive Officer and Interim Chief Financial Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) | ||
| 30 |
Exhibit 31.1
CERTIFICATION OF CEO PURSUANT TO RULE 13a-14(a) OR 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Shannon Masjedi, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Pacific Ventures Group, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared.
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| /s/ Shannon Masjedi | |
| Shannon Masjedi | |
| President and Chief Executive Officer |
Date: November 15, 2021
Exhibit 31.2
CERTIFICATION OF CFO PURSUANT TO RULE 13a-14(a) OR 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Shannon Masjedi, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Pacific Ventures Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared.
(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| /s/ Shannon Masjedi | |
| Shannon Masjedi | |
| Interim Chief Financial Officer |
Date: November 15, 2021
Exhibit 32.1
CERTIFICATION OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Pacific Ventures Group, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Shannon Masjedi, the Chief Executive Officer and Interim Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Shannon Masjedi | |
| Shannon Masjedi | |
President, Chief Executive Officer and Interim Chief Financial Officer |
Date: November 15, 2021
This Certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Sep. 30, 2021 |
Dec. 31, 2020 |
Sep. 30, 2020 |
Apr. 13, 2020 |
Dec. 31, 2019 |
|---|---|---|---|---|---|
| Preferred stock, par value | $ 0.001 | $ 0.001 | |||
| Preferred stock, shares authorized | 10,000,000 | 10,000,000 | |||
| Preferred stock, shares issued | 10,000,000 | ||||
| Common stock, par value | $ 0.498 | $ 0.498 | |||
| Common stock, shares authorized | 900,000,000 | 900,000,000 | 900,000,000 | ||
| Common stock, share outstanding | 30,440,466 | 30,440,466 | 6,871,351 | ||
| Common stock, shares issued | 30,440,466 | 30,440,466 | 6,871,351 | ||
| Series E Preferred Stock [Member] | |||||
| Preferred stock, shares issued | 4,000,000 | 4,000,000 | 5,000,000 | ||
| Preferred stock, shares outstanding | 4,000,000 | 4,000,000 | 5,000,000 | ||
| Series F Preferred Stock [Member] | |||||
| Preferred stock, shares authorized | 10,000 | ||||
| Preferred stock, shares issued | 10,000 | 10,000 | 10,000 | ||
| Preferred stock, shares outstanding | 10,000 | 10,000 | 10,000 |
Consolidated Statements of Operations - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Income Statement [Abstract] | ||||
| Sales, net of discounts | $ 11,665,852 | $ 7,540,361 | $ 30,507,410 | $ 22,929,026 |
| Cost of Goods Sold | 10,382,872 | 7,060,129 | 26,978,646 | 20,429,567 |
| Gross Profit | 1,282,980 | 480,232 | 3,528,764 | 2,499,459 |
| Operating Expenses | ||||
| Selling, general and administrative | 1,554,041 | 1,503,850 | 4,172,571 | 3,636,326 |
| Marketing and Advertising | 41,963 | 8,555 | 241,110 | 27,698 |
| Amortization and Depreciation expense | 199,744 | 178,947 | 585,931 | 505,969 |
| Professional fees | 572,617 | 299,100 | 919,510 | 752,723 |
| Officer Compensation | 75,000 | 75,000 | 225,000 | 225,000 |
| Operating Expenses/(Loss) | 2,443,363 | 2,065,453 | 6,144,123 | 5,147,716 |
| Income/ (Loss) from Operations | (1,160,384) | (1,585,221) | (2,615,359) | (2,648,257) |
| Other Non-Operating Income and Expenses | ||||
| Interest expense | (1,080,512) | (453,139) | (2,476,692) | (1,261,273) |
| Net Income/(Loss) before Income Taxes | (2,240,896) | (2,038,360) | (5,092,051) | (3,909,530) |
| Provision for income taxes | ||||
| Net Ordinary Income/(Loss) | (2,240,896) | (2,038,360) | (5,092,051) | (3,909,530) |
| Other Income / Expense | ||||
| Other Income - Other | 10,063 | 3,476 | 540,410 | 13,000 |
| Net Income/(Loss) | $ (2,230,833) | $ (2,034,885) | $ (4,551,641) | $ (3,896,531) |
| Basic and Diluted Loss per Share - Common Stock | $ (0.07329) | $ (0.29614) | $ (0.14953) | $ (0.56707) |
| Weighted Average Number of Shares Outstanding: | ||||
| Basic and Diluted Class A Common Stock | 30,440,466 | 6,871,351 | 30,440,466 | 6,871,351 |
NATURE OF OPERATIONS |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| NATURE OF OPERATIONS | 1. NATURE OF OPERATIONS
Pacific Ventures Group, Inc. (the “Company,” “we,” “us” or “our”) was incorporated under the laws of the state of Delaware on October 3, 1986, under the name AOA Corporation. On November 12, 1991, the Company changed its name to American Eagle Group, Inc. On October 22, 2012, the Company changed its name to “Pacific Ventures Group, Inc.”.
The current structure of the Company resulted from a share exchange with Snöbar Holdings, Inc. (“Snöbar Holdings”), which was treated as a reverse merger for accounting purposes. On August 14, 2015, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with Snöbar Holdings, pursuant to which the Company acquired 100% of the issued and outstanding shares of Snöbar Holdings’ Class A and Class B common stock in exchange for restricted shares of the Company’s common stock, while simultaneously issuing restricted shares of the Company’s common stock to certain other persons, including for services provided and to a former officer of the Company (the “Share Exchange”).
As the result of the Share Exchange, Snöbar Holdings became the Company’s wholly owned operating subsidiary and the business of Snöbar Holdings became the Company’s sole business operations and MAS Global Distributors, Inc., a California corporation (“MGD”), became an indirect subsidiary of the Company.
Prior to the Share Exchange, the Company operated as an insurance holding company and through its subsidiaries, which marketed and underwrote specialized property and casualty coverage in the general aviation insurance marketplace. However, in 1997, after selling several of its divisions, the Company’s remaining insurance operations were placed into receivership and the Company ceased operating its insurance business.
Since the Share Exchange represented a change in control of the Company and a change in business operations, the Company’s business operations changed to that of Snöbar Holdings and the discussions of business operations accompanying this filing are solely that of Snöbar Holdings and its affiliates and subsidiaries comprising of Snöbar Trust, International Production Impex Corporation, a California corporation (“IPIC”) , and MGD.
Snöbar Holdings was formed under the laws of the State of Delaware on January 7, 2013. Snöbar Holdings is the trustor and sole beneficiary of Snöbar Trust, a California trust (“Trust”), which was formed in June 1, 2013. The Trust owns 100% of the shares of IPIC, which was formed on August 2, 2001. IPIC is in the business of selling alcohol-infused ice cream and ice-pops and holds all the rights to the liquor licenses to sell such products and trade names “Snöbar”. As such, the Trust holds all ownership interest of IPIC and its liquor licenses, permitting IPIC to sell its product to distributors, with all income, expense, gains and losses rolling up to the Trust, of which Snöbar Holdings is the sole beneficiary. Snöbar Holdings also owns 99.9% of the shares of MGD. MGD is in the business of selling and leasing freezers and providing marketing services. As a result of the foregoing, Snöbar Holdings is the primary beneficiary of all assets, liabilities and any income received from the business of the Trust and IPIC through the Trust and is the parent company of MGD.
The Trust and IPIC are considered variable interest entities (“VIEs”) and Snöbar Holdings is identified as the primary beneficiary of the Trust and IPIC. Under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Snöbar Holdings performs ongoing reassessments of whether it is the primary beneficiary of a VIE. As the assessment of Snöbar Holdings’ management is that Snöbar Holdings has the power to direct the activities of a VIE that most significantly impact the VIE’s activities (it is responsible for establishing and operating IPIC), and the obligation to absorb losses of the VIE that could potentially be significant to the VIE and the right to receive benefits from the VIE that could potentially be significant to the VIE’s economic performance, it was therefore concluded by management that Snöbar Holdings is the primary beneficiary of the Trust and IPIC. As such, the Trust and IPIC were consolidated in the financial statements of Snöbar Holdings since the inception of the Trust, in the case of the Trust, and since the inception of Snöbar Holdings, in the case of IPIC.
On May 1, 2018, Royalty Foods Partners, LLC – a Florida Limited Liability Corporation and a subsidiary of Pacific Ventures Group, Inc. – completed an asset acquisition of San Diego Farmers Outlet, Inc. (SDFO), a California Corporation. San Diego Farmers Outlet was started over thirty-five years ago to provide primarily restaurant customers in southern California’s three largest counties with quality food and produce and does business under the name of Farmers Outlet and San Diego Farmers Outlet.
On December 17, 2019, Seaport Group Enterprises, LLC—a California Limited Liability Corporation and a subsidiary of Pacific Ventures Group, Inc.— completed an asset acquisition of Seaport Meat Company, (Seaport Meat), a California Corporation with over thirty (30) years in business servicing restaurant and retail, and institutional customers in Southern California and Arizona. Seaport Meat is a USDA meat processing plant that supplies quality meats, seafood, dry goods, dairy and produce. Seaport Meat Company built a state-of-the-art food distribution and manufacturing facility in Spring Valley, California their 12,000 square foot facility is HACCP-compliant and is a USDA Licensed processing facility with on-site daily inspections. HACCP is a management system in which food safety is addressed through the analysis and control of biological, chemical, and physical hazards from raw material production, procurement and handling, to manufacturing, distribution and consumption of the finished product. Having a USDA certified facility allows consumers to be confident that the Food Safety and Inspection Service (FSIS), the public health agency in the USDA, ensured that meat and poultry products are safe, wholesome, and correctly labeled and packaged
The Company’s customers range from a wide variety of restaurants, including many well known in Southern CA, to institutions, schools (UCSD, SDSU, etc.) and re-distributors such as US Foods and Sysco as well as to local distributors. They supply wholesale food and restaurant supplies to San Diego, Los Angeles, Orange and Riverside and offer same day service. In addition, they have clients in Arizona and Colorado that come to their facility to pick up their orders.
Because Seaport Meat Company of America can efficiently add new product lines, they can easily expand the distribution of Pacific Ventures’ San Diego Farmers Outlet and SnoBar product line, thereby accelerating Pacific Ventures’ revenue growth. The combination of a distribution and product company is unique in the San Diego area and will position the company for rapid growth.
They manufacture and wholesale custom processed beef, pork, chicken, lamb, veal and seafood. In addition, they are redistributors of a wide variety of dry goods, frozen foods, disposables and janitorial products. Their sales, distribution and finance processes are very efficient and can be expanded to add new product lines, including fresh produce and dairy
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, Snöbar Holdings and its subsidiaries, in which Snöbar Holdings has a controlling voting interest and entities consolidated under the variable interest entities (“VIE”) provisions of ASC 810, “Consolidation” (“ASC 810”). Inter-company balances and transactions have been eliminated upon consolidation.
The Company applies the provisions of ASC 810 which provides a framework for identifying VIEs and determining when a company should include the assets, liabilities, non-controlling interests, and results of activities of a VIE in its consolidated financial statements.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Accounting Policies [Abstract] | |
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the Company, Snöbar Holdings, San Diego Farmers Outlet, MGD, IPIC and the Trust, which was established to hold IPIC, which in turn holds liquor licenses. All inter-company accounts have been eliminated during consolidation. See the discussion in Note 1 above for variable interest entity treatment of the Trust and IPIC.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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 amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, which requires that five basic steps be followed to recognize revenue: (1) a legally enforceable contract that meets criteria standards as to composition and substance is identified; (2) performance obligations relating to provision of goods or services to the customer are identified; (3) the transaction price, with consideration given to any variable, noncash, or other relevant consideration, is determined; (4) the transaction price is allocated to the performance obligations; and (5) revenue is recognized when control of goods or services is transferred to the customer with consideration given, whether that control happens over time or not. Determination of criteria (3) and (4) are based on our management’s judgments regarding the fixed nature of the selling prices of the products and services delivered and the collectability of those amounts. The adoption of ASC 606 did not result in a change to the accounting for any of the in-scope revenue streams; as such, no cumulative effect adjustment was recorded.
Unearned Revenue
Certain amounts are received pursuant to agreements or contracts and may only be used in the conduct of specified transactions, or the related services are yet to be performed. These amounts are recorded as unearned or deferred revenue and are recognized as revenue in the year/period the related expenses are incurred, or services are performed. As of September 30, 2021, the Company has $ 0.0 in deferred revenue. As of December 31, 2021, the Company also had $ 0.0 deferred revenue.
Leases
ASC 842, Leases, was required to be adopted for all financial years beginning after December 15, 2018 and requires long term leases (longer than 12 month) to be capitalized with a corresponding liability for the term of the lease and expensed over that term. Currently the Company has 2 long-term leases SDFO & Seaport Meat Company.
Shipping and Handling Costs
The Company’s shipping costs are all recorded as operating expenses for all periods presented.
Disputed Liabilities
The Company is involved in a variety of disputes, claims, and proceedings concerning its business operations and certain liabilities. We determine whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. We assess our potential liability by analyzing our litigation and regulatory matters using available information. We develop our views on estimated losses in consultation with outside counsel handling our defense in these matters, which involves an analysis of potential results, assuming a combination of litigation and settlement strategies. Should developments in any of these matters cause a change in our determination as to an unfavorable outcome and result in the need to recognize a material accrual or should any of these matters result in a final adverse judgment or be settled for significant amounts, they could have a material adverse effect on our results of operations, cash flows and financial position in the period or periods in which such change in determination, judgment or settlement occurs. As of September 30, 2021, the Company has $0 in disputed liabilities on its balance sheet.
Cash Equivalents
The Company considers highly liquid instruments with original maturity of three months or less to be cash equivalents. As of September 30, 2021, the Company has a cash balance of $496,960 in cash and cash equivalents, compared to $58,234 on December 31, 2020.
Accounts Receivable
As of September 30, 2021, Accounts Receivable are stated at net realizable value of $1,732,180. This value includes an appropriate allowance for estimated uncollectible accounts. The allowance is calculated based upon the level of past due accounts and the relationship with and financial status of our customers. As of December 31, 2020, the Company wrote off $14,588 of bad debt expense. The Company wrote off $588 of bad debts during the nine (9) months ended September 30, 2021, and thus has not set an allowance for doubtful accounts.
Inventories
Inventories are stated at the lower of cost or market value. Cost has been determined using the first-in, first-out method. Inventory quantities on-hand are regularly reviewed, and where necessary, reserves for excess and unusable inventories are recorded. Inventory consists of finished goods beef, pork, chicken, seafood, all other restaurant related goods, and also includes ice cream, popsicles and the related packaging materials. As of December 30, 2020, the Company had total inventory assets of $1,216,562 consisting of all of Seaport Meat Company’s inventory assets of fresh and frozen proteins and seafood and all other restaurants supply items. As of September 30, 2021, the Company has $1,566,973 in inventories.
Income Taxes
Deferred taxes are provided on an asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the difference between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Income/(loss) per share of common stock is calculated by dividing the net income/(loss) by the weighted average number of shares of common stock outstanding during the period. The Company has no potentially dilutive securities. Accordingly, basic and dilutive income/(loss) per common share are the same.
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation and includes expenditures that substantially increase the useful lives of existing property and equipment. Maintenance, repairs, and minor renovations are expensed as incurred. Upon sale or retirement of property and equipment, the cost and related accumulated depreciation are eliminated from the respective accounts and the resulting gain or loss is included in the results of operations. The Company provides for depreciation of property and equipment using the straight-line method over the estimated useful lives or the term of the lease, as appropriate. The estimated useful lives are as follows: vehicles, five years; office furniture and equipment, to fifteen years; equipment, three years.
Identifiable Intangible Assets
As of September 30, 2021, the Company’s Identifiable Intangible Assets are as follows:
Intangible Assets
Identifiable Intangible Assets
Trade Name (San Diego Farmers Outlet) $193,000 Trade Name (Seaport Meat) $449,000 Wholesale Customer Relationships (San Diego Farmers Outlet) $266,000 Wholesale Customer Relationships (Seaport Meat) $2,334,239
Total Identifiable Intangible Assets $3,349,670
Goodwill
Assembled Workforce $21,000 Unidentified Intangible Value $470,000 Total Goodwill $491,000
Total Intangible Assets $3,283,744 Total Accumulated Amortization $449,495
Management does not believe that there is an impairment as of December 20, 2021.
Fair Value of Financial Instruments
The carrying amounts of the Company’s financial instruments, which include cash, accounts receivable, accounts payable, and accrued expenses are representative of their fair values due to the short-term maturity of these instruments.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and accounts receivable. The Company maintains cash balances at financial institutions within the United States which are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to limits of approximately $250,000. The Company has not experienced any losses regarding its bank accounts and believes it is not exposed to any risk of loss on its cash bank accounts.
Critical Accounting Policies
The Company considers revenue recognition and the valuation of accounts receivable, allowance for doubtful accounts, and inventory and reserves as its significant accounting policies. Some of these policies require management to make estimates and assumptions that may affect the reported amounts in the Company’s financial statements.
Recent Accounting Pronouncements
In June 2009, the FASB established the Accounting Standards Codification (“Codification” or “ASC”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). Rules and interpretive releases of the Securities and Exchange Commission (the “SEC”) issued under authority of federal securities laws are also sources of GAAP for SEC registrants. Existing GAAP was not intended to be changed as a result of the Codification, and accordingly the change did not impact our financial statements. The ASC does change the way the guidance is organized and presented.
In April 2015, FASB issued Accounting Standards Update (“ASU”) No. 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”, to simplify presentation of debt issuance costs by requiring 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. The ASU does not affect the recognition and measurement guidance for debt issuance costs. For public companies, the ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted.
In April 2015, FASB issued ASU No. 2015-04, “Compensation – Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets”, which permits the entity to measure defined benefit plan assets and obligations using the month-end that is closest to the entity’s fiscal year-end and apply that practical expedient consistently from year to year. The ASU is effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted.
In April 2015, FASB issued ASU No. 2015-05, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement”, which provides guidance to customers about whether a cloud computing arrangement includes a software license. If such includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If the arrangement does not include a software license, the customer should account for it as a service contract. For public business entities, the ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early application is permitted. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
In April 2015, FASB issued ASU No. 2015-06, “Earnings Per Share (Topic 260): Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions”, which specifies that, for purposes of calculating historical earnings per unit under the two-class method, the earnings (losses) of a transferred business before the date of a drop down transaction should be allocated entirely to the general partner. In that circumstance, the previously reported earnings per unit of the limited partners (which is typically the earnings per unit measure presented in the financial statements) would not change as a result of the dropdown transaction. Qualitative disclosures about how the rights to the earnings (losses) differ before and after the dropdown transaction occurs for purposes of computing earnings per unit under the two-class method also are required. The ASU is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Earlier application is permitted.
In June 2014, FASB issued ASU No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation”. The update removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. In addition, the update adds an example disclosure in Risks and Uncertainties (Topic 275) to illustrate one way that an entity that has not begun planned principal operations could provide information about the risks and uncertainties related to the company’s current activities. Furthermore, the update removes an exception provided to development stage entities in Consolidations (Topic 810) for determining whether an entity is a variable interest entity-which may change the consolidation analysis, consolidation decision, and disclosure requirements for a company that has an interest in a company in the development stage. The update is effective for the annual reporting periods beginning after December 15, 2014, including interim periods therein. Early application is permitted with the first annual reporting period or interim period for which the entity’s financial statements have not yet been issued (Public business entities) or made available for issuance (other entities). Our company adopted this pronouncement.
In June 2014, FASB issued ASU No. 2014-12, “Compensation – Stock Compensation (Topic 718); Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The amendments in this ASU apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. For all entities, the amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. Entities may apply the amendments in this ASU either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this Update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition.
In August 2014, the FASB issued ASU 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued).
All other newly issued accounting pronouncements which are not yet effective have been deemed either immaterial or not applicable.
We reviewed all other recently issued accounting pronouncements and determined these have no current applicability to the Company or their effect on the financial statements would not have been significant.
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GOING CONCERN |
9 Months Ended |
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Sep. 30, 2021 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| GOING CONCERN | 3. GOING CONCERN
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying consolidated financial statements, the Company has incurred a net loss of $4,551,641 for the nine (9) months ended September 30, 2021 and has an accumulated deficit of $19,984,766 as of September 30, 2021.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. The Company is significantly dependent upon its ability, and will continue to attempt, to secure equity and/or additional debt financing. There are no assurances that the Company will be successful and without sufficient financing it would be unlikely for the Company to continue as a going concern.
The unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These unaudited consolidated financial statements do not include any adjustments that might arise from this uncertainty.
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INVENTORIES |
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| Inventory Disclosure [Abstract] | |
| INVENTORIES | 4. INVENTORIES
As of September 30, 2021, the Company had inventory assets for a total of $1,566,973. The Company had inventory assets of $1,216,562 as of December 31, 2020.
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PROPERTY, PLANT AND EQUIPMENT |
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| PROPERTY, PLANT AND EQUIPMENT | 5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment on September 30, 2021, and December 31, 2020, consisted of:
Depreciation and Amortization expenses for the nine (9) months ended September 30, 2021, was $585,931 compared to $505,969 for the same period of September 30, 2020.
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ACCRUED EXPENSE |
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| Payables and Accruals [Abstract] | |
| ACCRUED EXPENSE | 6. ACCRUED EXPENSE
As of September 30, 2021, the Company had accrued expenses of $1,180,717 compared to $902,442, for the year-end December 31, 2020.
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INCOME TAX |
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Sep. 30, 2021 | |
| Income Tax Disclosure [Abstract] | |
| INCOME TAX | 7. INCOME TAX
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
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RELATED PARTY TRANSACTIONS |
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| RELATED PARTY TRANSACTIONS | 8. RELATED PARTY TRANSACTIONS
The following table presents a summary of the Company’s promissory notes issued to related parties as of September 30, 2021:
The following description represent note payable-related party transaction pre-Share Exchange that were assumed by the Company as a condition to the Share Exchange:
In January 2011, MGD, which is now a majority owned subsidiary of Snöbar Holdings, entered into an unsecured promissory note with Mrs. Masjedi, who is now the Company’s President, Chief Executive Officer, Interim Chief Financial Officer, director and majority stockholder. The note had a principal balance of $150,000 with an interest rate of 3% and has a maturity date of December 31, 2022. The balance of the note on September 30, 2021, was $0.
On February 21, 2012, Snöbar Holdings entered into an unsecured promissory note with Mr. Shenkman, who is Chairman of the Board of Directors and a shareholder of the Company. The note had a principal balance of $10,000 with an interest rate of 5% and is due on demand. The note’s maturity date has subsequently been extended to December 31, 2022. Interest against the note was extinguished in a subsequent extension of the term. The note had a principal balance of $10,000 as of September 30, 2021.
On February 23, 2012, Snöbar Holdings entered into a promissory note with Mr. Shenkman for $10,000, maturing in one year at an interest of 8%. The note has subsequently been extended to December 31, 2022. Interest under the note was extinguished in a subsequent extension of the term. The note had an outstanding balance of $10,000 as of September 30, 2021.
On March 14, 2013, Snöbar Holdings entered into an unsecured promissory note with a Mr. Shenkman, the Company’s Chairman of the Board of Directors. The note had a principal balance of $10,000 with an interest rate of 5% and an original maturity date of March 14, 2014, subsequently extended to December 31, 2022, with a lower interest rate of 2%/year. Mr. Shenkman also agreed to make all interest retroactive and deferred. The note had an outstanding balance of $6,000 as of September 30, 2021.
On June 1, 2013, Snöbar Holdings entered into a promissory note with Azizollah Masjedi, father-in-law to Shannon Masjedi who’s the Company’s President, Chief Executive Officer, Interim Chief Financial Officer, director and majority stockholder, in an amount of $500,000 to purchase all the shares and interests of IPIC. The note matured on June 31, 2017. As of September 30, 2021, the outstanding balance under this note was $439,875, which includes interest and penalty charges.
On September 9, 2014, Snobar Holdings entered into a second unsecured promissory note with Mr. Shenkman, through his affiliate company Entrust Group for a total amount of $6,000 and a third unsecured promissory note for a total amount of $10,000, both at an annual interest rate of 2%. No term was provided for in each note, but Mr. Shenkman has agreed to a maturity date of December 31, 2022, and the accrual of interest rates and deferral to maturity. The notes had an aggregate outstanding balance of $16,000 as of September 30, 2021.
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NOTES PAYABLE |
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| NOTES PAYABLE | 9. NOTES PAYABLE
The following description represent unrelated notes payable transactions pre-reverse merger between Snöbar and the Company that were assumed by the Company as a condition to the Share Exchange Agreement:
In February 2012, MGD entered into an unsecured promissory note with a certain unrelated party, now a shareholder of the Company for a principal balance of $30,000 at in interest rate of 8% per year and maturity date of August 1, 2014. The note’s maturity date has been extended to December 31, 2025, and the interest rate under the extinguished as part of the extension. The note had an outstanding balance of $25,000 as of September 30, 2021.
On March 14, 2013, Snöbar Holdings entered into an unsecured promissory note with a certain unrelated third party, now a shareholder of the Company. The note had a principal balance of $ with an interest rate of % and had a maturity date of . The note’s maturity date has subsequently been extended to . The entire balance is owed and outstanding as of September 30, 2021.
On July 22, 2013, Snöbar Holdings entered into an unsecured promissory note with a certain unrelated third party. The note had a principal balance of $ with an original interest rate of %. Maturity date has been extended to , and interest rate has been reduced to %, and lender agreed to make all interest retroactive and deferred. The balance of the note was $ as of September 30, 2021.
The following description represents unrelated note payable transactions post-merger between Snöbar and the Company:
Effective September 25, 2020, the Company entered into a settlement agreement with BNA/TRA in the amount of $400,000. The settlement pays as follows October 1, 2020, PACV pays $30,000, November 1, 2020, PACV pays $30,000. On the 1st of every month following $11,500 payment to be made until balance is paid in full. As of September 30, 2021 the note is current.
In March 2021, the Company entered into a financing arrangement with Power Up Lending pursuant to which the Company borrowed a total principal of $257,000 secured by shares of the Company’s common stock. The notes were subject to a 6 month hold before any stock was issued. The current balance as of September 30, 2021, is $128,500.
Over the past year Classic Beverage has periodically issued loans to the Company. The Company has agreed to pay interest 10% per year and has agreed on penalty fees if late on payments. The note is due on demand. The current balance is $302,527, including capitalized interests and penalty fees.
On May 1, 2018, Pacific Ventures Group entered into a secured promissory note with TCA Global Master Fund. The note was secured by interests in tangible and intangible property of Pacific Ventures Group. The effective interest rate on the note is 16%. The outstanding balance of the notes with TCA Global Fund for San Diego Farmers Outlet is $3,304,745 as of September 30, 2021, which includes capitalized interests.
On December 17, 2019, Pacific Ventures Group entered into a secured promissory note with TCA Special Situations Credit Strategies ICAV. The note was secured by interests in tangible and intangible property of Pacific Ventures Group. The effective interest rate is 16%. The outstanding balance of the notes for Seaport Meat is $7,000,791 as of September 30, 2021, which includes capitalized interests.
On May 20, 2020, The Company entered into a SBA loan and SBA PPP note in the amounts of $417,600 and $431,000, respectively as a result of the COVID-19 pandemic. The note is current, and the Company believes that this will be forgiven by the SBA. The standards set forth for forgiveness have been met and exceeded to order to obtain forgiveness by the SBA. The Company’s forgiveness application is pending.
On July 20, 2020, Seaport Group Enterprises LLC entered a note in the amount of $64,678.00 for a new piece of machinery in order to upgrade the processing line. The note is payable monthly in installment payments of $1,500.00. As of September 30, 2021, the note is current.
On December 8, 2019, The Company entered into a settlement agreement on the Seller Carryback note with PNC Inc in the amount of $700,000. The payment schedule calls for $200,000 payment that was made in July and $61,500 every quarter for a period of two years. As of September 30, 2021, the note is current.
In September 2020, Seaport Group Enterprises LLC entered into a revenue based factoring agreement with Cap Call and received an aggregate of $500,000 CAP Call (less origination fees of $15,000) in exchange for $650,000 of future receipts relating to monies collected from customers or other third-party payors. Under the terms of the agreement, the Company is required to make weekly payments equal to $21,500 for 30 weeks. The Company received net proceeds of $485,000. Payments are current.
In September 2020, Seaport Group Enterprises LLC entered into a revenue based factoring agreement with Cap Call and received an aggregate of $500,000 Fox Business(less origination fees of $15,000) in exchange for $650,000 of future receipts relating to monies collected from customers or other third-party payors. Under the terms of the agreement, the Company is required to make weekly payments equal to $21,500 for 30 weeks. The Company received net proceeds of $485,000. Payments are current.
In the second quarter 2021, The Company entered into a note with Tysadco Partners in the amount of $1,300,000. The note can be repaid in cash or converted common stock or a combination of both. Balance of the note is $1,201,000. As of September 30, 2021, the note is current.
In May of 2021, The Company entered into a note with LGH Financial in the amount of $500,000. The note can be repaid in cash or converted common stock or a combination of both. As of September 30, 2021, the note is current.
As of September 30, 2021, the Company had short-term notes payable of $1,659,580 and long-term notes payable of $13,348,315. The Company had purchase receivables of $2,042,796.
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STOCKHOLDERS’ EQUITY |
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| STOCKHOLDERS’ EQUITY | 10. STOCKHOLDERS’ EQUITY
Common Stock and Preferred Stock
The Company is authorized to issue up to shares of its preferred stock, $ par value per share. The Company designated shares of preferred stock as Series E Preferred Stock (the “Series E Preferred Stock”). Under the rights, preferences and privileges of the Series E Preferred Stock, for every share of Series E Preferred Stock held, the holder thereof has the voting rights equal to 10 shares of common stock. As of December 31, 2019, there were shares of Series E Preferred Stock issued and outstanding. Additionally, Company has designated shares of Series F Preferred Stock and shares of the Series F Preferred Stock are issued and outstanding. Each share of Series F Preferred Stock is convertible into 0.1% of the issued and outstanding stock at the time of conversion.
From January 1, 2021, through September 30, 2021, the Company issued shares of its common stock.
The Company is authorized to issue up to shares of its common stock, $ par value per share. Holders of common stock have one vote per share. As of September 30, 2021, and the same period in 2020, there were and shares of the Company’s common stock issued and outstanding, respectively.
On April 13, 2020, the Company effected a 500 for 1 reverse split of its common stock. The number of authorized common shares remained .
The following table represents S1 investments and issuances:
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COMMITMENTS, CONTINGENCIES AND UNCERTAINTIES |
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| Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| COMMITMENTS, CONTINGENCIES AND UNCERTAINTIES | 11. COMMITMENTS, CONTINGENCIES AND UNCERTAINTIES
Operating Lease
The Company is currently obligated under two operating leases for office spaces and associated building expenses. Both leases are on a month-to-month basis at a monthly rate of $450 and $330, respectively.
SDFO operations are located at 10407 Friars Rd, San Diego, CA 92110, where they occupy an aggregate of approximately 10,000 square feet pursuant to leases. The 5-year leases are on an annual basis at a monthly rate of $6,000 per month.
Seaport Group Enterprise LLC is located at 2533 Folex Way, Spring Valley CA 91978, where they occupy an aggregate of approximately 12,000 square feet pursuant to the lease. The 5-year leases are on an annual basis starting at a monthly rate of $15,145.00 per month.
San Diego Farmers Outlet and Seaport Meat Company Operating Leases
The Company on May 1, 2018, assumed a lease agreement for a facility site and entered into a lease agreement for office space for San Diego Farmers Outlet. The lease has a term of five years expiring on April 30, 2023.
Future minimum lease payments, as set forth in the lease, are below:
The Company on December 1, 2019, entered into a lease agreement for a facility site for office space for Seaport Meat Company. The lease has a term of five years expiring on November 30, 2024.
Future minimum lease payments, as set forth in the lease, are below:
Concentration Risk
The Company is potentially subject to concentration risk in its sales revenue and from a major supplier of g ods for sale.
Major Customer
The Company has one major customer that accounted for approximately 41% and $11,849,787of sales for the nine months ended September 30, 2021. The Company expects to maintain this relationship with the customer.
Major Vendor
The Company has one major vendor that accounted for approximately 31% and $8,501,868 of cost of sales for the nine months ended September 30, 2021. The Company expects to maintain this relationship with the vendor.
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SUBSEQUENT EVENTS |
9 Months Ended |
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Sep. 30, 2021 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | 12. SUBSEQUENT EVENTS
ASC 855-16-50-4 establishes accounting and disclosure requirements for subsequent events. ASC 855 details the period after the balance sheet date during which we should evaluate events or transactions that occur for potential recognition or disclosure in the financial statements, the circumstances under which we should recognize events or transactions occurring after the balance sheet date in its financial statements and the required disclosures for such events.
On November 9, 2021, the Small Business Administration forgave Seaport Group Enterprises PPP loan in the amount of $431,000.00. So the Company’s long term debt has been reduced by this amount. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
9 Months Ended |
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Sep. 30, 2021 | |
| Accounting Policies [Abstract] | |
| Principles of Consolidation | Principles of Consolidation
The consolidated financial statements include the Company, Snöbar Holdings, San Diego Farmers Outlet, MGD, IPIC and the Trust, which was established to hold IPIC, which in turn holds liquor licenses. All inter-company accounts have been eliminated during consolidation. See the discussion in Note 1 above for variable interest entity treatment of the Trust and IPIC.
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| Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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 amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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| Revenue Recognition | Revenue Recognition
The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, which requires that five basic steps be followed to recognize revenue: (1) a legally enforceable contract that meets criteria standards as to composition and substance is identified; (2) performance obligations relating to provision of goods or services to the customer are identified; (3) the transaction price, with consideration given to any variable, noncash, or other relevant consideration, is determined; (4) the transaction price is allocated to the performance obligations; and (5) revenue is recognized when control of goods or services is transferred to the customer with consideration given, whether that control happens over time or not. Determination of criteria (3) and (4) are based on our management’s judgments regarding the fixed nature of the selling prices of the products and services delivered and the collectability of those amounts. The adoption of ASC 606 did not result in a change to the accounting for any of the in-scope revenue streams; as such, no cumulative effect adjustment was recorded.
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| Unearned Revenue | Unearned Revenue
Certain amounts are received pursuant to agreements or contracts and may only be used in the conduct of specified transactions, or the related services are yet to be performed. These amounts are recorded as unearned or deferred revenue and are recognized as revenue in the year/period the related expenses are incurred, or services are performed. As of September 30, 2021, the Company has $ 0.0 in deferred revenue. As of December 31, 2021, the Company also had $ 0.0 deferred revenue.
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| Leases | Leases
ASC 842, Leases, was required to be adopted for all financial years beginning after December 15, 2018 and requires long term leases (longer than 12 month) to be capitalized with a corresponding liability for the term of the lease and expensed over that term. Currently the Company has 2 long-term leases SDFO & Seaport Meat Company.
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| Shipping and Handling Costs | Shipping and Handling Costs
The Company’s shipping costs are all recorded as operating expenses for all periods presented.
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| Disputed Liabilities | Disputed Liabilities
The Company is involved in a variety of disputes, claims, and proceedings concerning its business operations and certain liabilities. We determine whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. We assess our potential liability by analyzing our litigation and regulatory matters using available information. We develop our views on estimated losses in consultation with outside counsel handling our defense in these matters, which involves an analysis of potential results, assuming a combination of litigation and settlement strategies. Should developments in any of these matters cause a change in our determination as to an unfavorable outcome and result in the need to recognize a material accrual or should any of these matters result in a final adverse judgment or be settled for significant amounts, they could have a material adverse effect on our results of operations, cash flows and financial position in the period or periods in which such change in determination, judgment or settlement occurs. As of September 30, 2021, the Company has $0 in disputed liabilities on its balance sheet.
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| Cash Equivalents | Cash Equivalents
The Company considers highly liquid instruments with original maturity of three months or less to be cash equivalents. As of September 30, 2021, the Company has a cash balance of $496,960 in cash and cash equivalents, compared to $58,234 on December 31, 2020.
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| Accounts Receivable | Accounts Receivable
As of September 30, 2021, Accounts Receivable are stated at net realizable value of $1,732,180. This value includes an appropriate allowance for estimated uncollectible accounts. The allowance is calculated based upon the level of past due accounts and the relationship with and financial status of our customers. As of December 31, 2020, the Company wrote off $14,588 of bad debt expense. The Company wrote off $588 of bad debts during the nine (9) months ended September 30, 2021, and thus has not set an allowance for doubtful accounts.
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| Inventories | Inventories
Inventories are stated at the lower of cost or market value. Cost has been determined using the first-in, first-out method. Inventory quantities on-hand are regularly reviewed, and where necessary, reserves for excess and unusable inventories are recorded. Inventory consists of finished goods beef, pork, chicken, seafood, all other restaurant related goods, and also includes ice cream, popsicles and the related packaging materials. As of December 30, 2020, the Company had total inventory assets of $1,216,562 consisting of all of Seaport Meat Company’s inventory assets of fresh and frozen proteins and seafood and all other restaurants supply items. As of September 30, 2021, the Company has $1,566,973 in inventories.
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| Income Taxes | Income Taxes
Deferred taxes are provided on an asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the difference between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
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| Net Income/(Loss) Per Common Share |
Income/(loss) per share of common stock is calculated by dividing the net income/(loss) by the weighted average number of shares of common stock outstanding during the period. The Company has no potentially dilutive securities. Accordingly, basic and dilutive income/(loss) per common share are the same.
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| Property and Equipment | Property and Equipment
Property and equipment are carried at cost less accumulated depreciation and includes expenditures that substantially increase the useful lives of existing property and equipment. Maintenance, repairs, and minor renovations are expensed as incurred. Upon sale or retirement of property and equipment, the cost and related accumulated depreciation are eliminated from the respective accounts and the resulting gain or loss is included in the results of operations. The Company provides for depreciation of property and equipment using the straight-line method over the estimated useful lives or the term of the lease, as appropriate. The estimated useful lives are as follows: vehicles, five years; office furniture and equipment, to fifteen years; equipment, three years.
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| Identifiable Intangible Assets | Identifiable Intangible Assets
As of September 30, 2021, the Company’s Identifiable Intangible Assets are as follows:
Intangible Assets
Identifiable Intangible Assets
Trade Name (San Diego Farmers Outlet) $193,000 Trade Name (Seaport Meat) $449,000 Wholesale Customer Relationships (San Diego Farmers Outlet) $266,000 Wholesale Customer Relationships (Seaport Meat) $2,334,239
Total Identifiable Intangible Assets $3,349,670
Goodwill
Assembled Workforce $21,000 Unidentified Intangible Value $470,000 Total Goodwill $491,000
Total Intangible Assets $3,283,744 Total Accumulated Amortization $449,495
Management does not believe that there is an impairment as of December 20, 2021.
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| Fair Value of Financial Instruments | Fair Value of Financial Instruments
The carrying amounts of the Company’s financial instruments, which include cash, accounts receivable, accounts payable, and accrued expenses are representative of their fair values due to the short-term maturity of these instruments.
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| Concentration of Credit Risk | Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and accounts receivable. The Company maintains cash balances at financial institutions within the United States which are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to limits of approximately $250,000. The Company has not experienced any losses regarding its bank accounts and believes it is not exposed to any risk of loss on its cash bank accounts.
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| Critical Accounting Policies | Critical Accounting Policies
The Company considers revenue recognition and the valuation of accounts receivable, allowance for doubtful accounts, and inventory and reserves as its significant accounting policies. Some of these policies require management to make estimates and assumptions that may affect the reported amounts in the Company’s financial statements.
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In June 2009, the FASB established the Accounting Standards Codification (“Codification” or “ASC”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). Rules and interpretive releases of the Securities and Exchange Commission (the “SEC”) issued under authority of federal securities laws are also sources of GAAP for SEC registrants. Existing GAAP was not intended to be changed as a result of the Codification, and accordingly the change did not impact our financial statements. The ASC does change the way the guidance is organized and presented.
In April 2015, FASB issued Accounting Standards Update (“ASU”) No. 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”, to simplify presentation of debt issuance costs by requiring 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. The ASU does not affect the recognition and measurement guidance for debt issuance costs. For public companies, the ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted.
In April 2015, FASB issued ASU No. 2015-04, “Compensation – Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets”, which permits the entity to measure defined benefit plan assets and obligations using the month-end that is closest to the entity’s fiscal year-end and apply that practical expedient consistently from year to year. The ASU is effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted.
In April 2015, FASB issued ASU No. 2015-05, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement”, which provides guidance to customers about whether a cloud computing arrangement includes a software license. If such includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If the arrangement does not include a software license, the customer should account for it as a service contract. For public business entities, the ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early application is permitted. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
In April 2015, FASB issued ASU No. 2015-06, “Earnings Per Share (Topic 260): Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions”, which specifies that, for purposes of calculating historical earnings per unit under the two-class method, the earnings (losses) of a transferred business before the date of a drop down transaction should be allocated entirely to the general partner. In that circumstance, the previously reported earnings per unit of the limited partners (which is typically the earnings per unit measure presented in the financial statements) would not change as a result of the dropdown transaction. Qualitative disclosures about how the rights to the earnings (losses) differ before and after the dropdown transaction occurs for purposes of computing earnings per unit under the two-class method also are required. The ASU is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Earlier application is permitted.
In June 2014, FASB issued ASU No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation”. The update removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. In addition, the update adds an example disclosure in Risks and Uncertainties (Topic 275) to illustrate one way that an entity that has not begun planned principal operations could provide information about the risks and uncertainties related to the company’s current activities. Furthermore, the update removes an exception provided to development stage entities in Consolidations (Topic 810) for determining whether an entity is a variable interest entity-which may change the consolidation analysis, consolidation decision, and disclosure requirements for a company that has an interest in a company in the development stage. The update is effective for the annual reporting periods beginning after December 15, 2014, including interim periods therein. Early application is permitted with the first annual reporting period or interim period for which the entity’s financial statements have not yet been issued (Public business entities) or made available for issuance (other entities). Our company adopted this pronouncement.
In June 2014, FASB issued ASU No. 2014-12, “Compensation – Stock Compensation (Topic 718); Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The amendments in this ASU apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. For all entities, the amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. Entities may apply the amendments in this ASU either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this Update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition.
In August 2014, the FASB issued ASU 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued).
All other newly issued accounting pronouncements which are not yet effective have been deemed either immaterial or not applicable.
We reviewed all other recently issued accounting pronouncements and determined these have no current applicability to the Company or their effect on the financial statements would not have been significant.
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PROPERTY, PLANT AND EQUIPMENT (Tables) |
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| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT | Property, plant and equipment on September 30, 2021, and December 31, 2020, consisted of:
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RELATED PARTY TRANSACTIONS (Tables) |
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| SCHEDULE OF PROMISSORY NOTES ISSUED TO RELATED PARTIES | The following table presents a summary of the Company’s promissory notes issued to related parties as of September 30, 2021:
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NOTES PAYABLE (Tables) |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF PROMISSORY NOTES ISSUED TO UNRELATED THIRD PARTIES |
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| SCHEDULE OF PURCHASE RECEIVABLES |
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STOCKHOLDERS’ EQUITY (Tables) |
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| SCHEDULE OF INVESTMENT AND ISSUANCES TEXT BLOCK | The following table represents S1 investments and issuances:
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COMMITMENTS, CONTINGENCIES AND UNCERTAINTIES (Tables) |
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||
| San Diego Farmers Outlet, Inc. [Member] | |||||||||||||||||||||||||||||||
| SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES | Future minimum lease payments, as set forth in the lease, are below:
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| Seaport Meat Company's [Member] | |||||||||||||||||||||||||||||||
| SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES | Future minimum lease payments, as set forth in the lease, are below:
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NATURE OF OPERATIONS (Details Narrative) - shares |
Aug. 14, 2015 |
Sep. 30, 2021 |
|---|---|---|
| International Production Impex Corporation [Member] | ||
| Restructuring Cost and Reserve [Line Items] | ||
| Ownership percentage | 100.00% | |
| MGD [Member] | ||
| Restructuring Cost and Reserve [Line Items] | ||
| Ownership percentage | 99.90% | |
| Snobar Holding, Inc. [Member] | ||
| Restructuring Cost and Reserve [Line Items] | ||
| Acquisition percentage | 100.00% | |
| Exchange for restricted shares to common stock, number of shares | 22,500,000 | |
| Issuing shares of restricted common stock to certain other persons | 2,500,000 |
GOING CONCERN (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||
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Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
| Net loss | $ 2,230,833 | $ 2,034,885 | $ 4,551,641 | $ 3,896,531 | |
| Accumulated deficit | $ 19,984,766 | $ 19,984,766 | $ 16,063,780 | ||
INVENTORIES (Details Narrative) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Inventory assets | $ 1,566,973 | $ 1,216,562 |
SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Property, Plant and Equipment [Abstract] | ||
| Computers | $ 11,788 | $ 11,788 |
| Office Furniture | 23,908 | 23,908 |
| Building & Improvement | 29,673 | 29,673 |
| Forklift 1 | 4,533 | 3,000 |
| Forklift 2 | 2,871 | 2,871 |
| Truck 2019 Hino 155 3710 | 24,865 | 24,865 |
| Truck 2019 Hino 155 7445 | 34,213 | 34,213 |
| Truck 2018 Hino 155 5347 | 30,181 | 30,181 |
| Truck 2018 Hino 155 5647 | 30,181 | 30,181 |
| Truck 2019 Hino 155 5680 | 29,592 | 29,592 |
| Machinery & Equipment | 1,096,522 | 994,540 |
| Leasehold Improvements | 66,932 | 66,932 |
| Office Equipment | 62,400 | 62,400 |
| Vehicles | 409,108 | 409,108 |
| Accumulated Depreciation | (985,263) | (583,810) |
| Property, plant and equipment, net | $ 871,503 | $ 1,169,441 |
PROPERTY, PLANT AND EQUIPMENT (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Property, Plant and Equipment [Abstract] | ||||
| Depreciation and amortization expense | $ 199,744 | $ 178,947 | $ 585,931 | $ 505,969 |
ACCRUED EXPENSE (Details Narrative) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Payables and Accruals [Abstract] | ||
| Accrued expenses | $ 1,180,717 | $ 902,442 |
SCHEDULE OF PURCHASE RECEIVABLES (Details) |
9 Months Ended |
|---|---|
|
Sep. 30, 2021
USD ($)
| |
| Factoring amount | $ 1,607,500 |
| Outstanding balance | 2,042,796 |
| CapCall [Member] | |
| Factoring amount | $ 1,000,000 |
| Number of loans and issuance date, description | 3 loans - 2020 |
| Outstanding balance | $ 1,392,796 |
| Fox Capital [Member] | |
| Factoring amount | 607,500 |
| Outstanding balance | $ 650,000 |
| Issuance Date | Dec. 01, 2020 |
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES (Details) |
Sep. 30, 2021
USD ($)
|
|---|---|
| San Diego Farmers Outlet, Inc. [Member] | |
| 2020 | $ 72,000 |
| 2021 | 72,000 |
| 2022 | 72,000 |
| 2023 | 24,000 |
| Seaport Meat Company's [Member] | |
| 2020 | 177,000 |
| 2021 | 177,000 |
| 2022 | 177,000 |
| 2023 | 177,000 |
| 2024 | $ 162,250 |
SUBSEQUENT EVENTS (Details Narrative) - USD ($) |
Nov. 09, 2021 |
Sep. 30, 2021 |
|---|---|---|
| Subsequent Event [Line Items] | ||
| Long term debt | $ 13,348,315 | |
| Seaport Meat Company's [Member] | Paycheck Protection Program [Member] | Subsequent Event [Member] | ||
| Subsequent Event [Line Items] | ||
| Long term debt | $ 431,000.00 |