UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2015
or
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number: 333-174557
Blue Water Global Group, Inc.
(Exact name of registrant as specified in its charter)
| |
Nevada (State or other jurisdiction of incorporation or organization) | 45-0611648 (I.R.S. Employer Identification Number) |
Wellsburg Street #7, Cole Bay, St. Maarten, Dutch West Indies
(Address of principal executive offices)
Tel: (949) 264-1475, Fax: (949) 607-4052
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer ¨ Accelerated Filer ¨
Non-Accelerated Filer ¨ (Do not check if a smaller reporting company) Smaller Reporting Company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ¨ No x
The number of shares outstanding of the Registrant's common stock, $0.001 par value, as of August 11, 2015, was 131,322,679.
1
TABLE OF CONTENTS
| | | | |
Item | | Page |
| | |
PART I FINANCIAL INFORMATION | | 4 |
| Item 1 | Financial Statements | | 4 |
| Item 2 | Managements Discussion and Analysis of Financial Condition and Results of Operations | | 28 |
| Item 3 | Quantitative and Qualitative Disclosures About Market Risk | | 45 |
| Item 4 | Controls and Procedures | | 45 |
| | |
PART II OTHER INFORMATION | | 46 |
| Item 1 | Legal Proceedings | | 46 |
| Item 1A | Risk Factors | | 47 |
| Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | | 47 |
| Item 3 | Defaults Upon Senior Securities | | 47 |
| Item 4 | Mine Safety Disclosures | | 47 |
| Item 5 | Other Information | | 47 |
| Item 6 | Exhibits | | 47 |
Signatures | | 47 |
2
Forward-Looking Statements
Certain statements made in this Quarterly Report on Form 10-Q are forward-looking statements regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements of the Registrant to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Registrants plans and objectives are based, in part, on assumptions involving it continuing as a going concern and executing on its stated business plan and objectives. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Registrant. Although the Registrant believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Quarterly Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Registrant or any other person that the objectives and plans of the Registrant will be achieved.
As used in this Quarterly Report, the terms "we", "us", "our", "Blue Water", Registrant, and Issuer mean Blue Water Global Group, Inc. unless the context clearly requires otherwise.
3
PART I FINANICAL INFORMATION
Item 1. Financial Statements
BLUE WATER GLOBAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
| | | | | |
| | June 30, 2015 | | December 31, 2014 |
Current assets: | | | | |
| Cash and equivalents | $ | 130,373 | $ | 192,556 |
| Accounts receivable, net | | 3,606 | | - |
| Vendor deposits | | - | | 28,422 |
| Inventory | | 102,531 | | 42,484 |
| | | 236,510 | | 263,462 |
| | | | |
Property and equipment, net | | 286,915 | | - |
| | | | |
Other assets: | | | | |
| Available for sale securities | $ | 200,000 | $ | 200,000 |
| Deposits, long-term | | 2,400 | | 2,400 |
| | | 202,400 | | 202,400 |
| | | | |
Total assets: | $ | 725,825 | $ | 465,862 |
The accompanying notes to the consolidated financial statements are an integral part of these statements.
4
BLUE WATER GLOBAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(continued)
LIABILITIES AND STOCKHOLDERS (DEFICIT)
| | | | | | |
Current liabilities: | | | | |
| Accounts payable | $ | 67,908 | $ | 8,211 |
| Accounts payable, related party | | 527,607 | | 494,718 |
| Convertible notes payable, net of unamortized debt discounts of $823,607 and $527,389, respectively | |
445,644 | |
106,361 |
| Accrued interest | | 33,089 | | 6,986 |
| Derivative liability | | 2,345,240 | | 1,424,011 |
| Total current liabilities | | 3,419,488 | | 2,040,287 |
| | | | | |
Long-term debt: | | | | |
| Convertible notes payable, net of unamortized debt discounts of $121,427 | | 17,406 | | - |
| | | | | |
| Total liabilities | $ | 3,436,894 | $ | 2,040,287 |
| | | | |
Commitments and contingencies | | - | | - |
| | | | | |
Stockholders (deficit): | | | | |
| Preferred stock, $0.001 par value, 5,000,000 shares authorized; | | | | |
| | Series A Preferred Stock, $0.001 par value, 1,000,000 shares designated, 150,000 and 150,000 shares issued and outstanding as of June 30, 2015 and December 31, 2014 | |
150 | |
150 |
| | Series B Preferred Stock, $0.001 par value, 1,300,000 shares designated, 1,209,548 and -0- shares issued and outstanding as of June 30, 2015 and December 31, 2014 | |
1,210 | |
- |
| Common stock, $0.001 par value, 700,000,000 shares authorized; 121,645,987 and 126,206,213 shares issued and outstanding as of June 30, 2015 and December 31, 2014 | |
121,646 | |
126,206 |
| Additional paid-in capital | | 4,841,406 | | 2,844,076 |
| Accumulated deficit | | (7,675,481) | | (4,544,857) |
| | | | | |
| Total stockholders (deficit) | $ | (2,711,069) | $ | (1,574,425) |
| | | | |
Total liabilities and stockholders (deficit) | $ | 725,825 | $ | 465,862 |
The accompanying notes to the consolidated financial statements are an integral part of these statements.
5
BLUE WATER GLOBAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| | | | | | | | | |
| | For the three months ended June 30, | | For the six months ended June 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
| | | | | | | | | |
Sales | $ | 2,157 | $ | - | $ | 6,621 | $ | - |
Cost of sales | | 902 | | - | | 2,631 | | - |
Gross profit | | 1,255 | | - | | 3,990 | | - |
| | | | | | | | | |
Expenses: | | | | | | | | |
| General and administrative | | 21,106 | | 7,009 | | 496,463 | | 12,604 |
| Accounting fees | | 18,500 | | 4,000 | | 28,000 | | 7,000 |
| Advertising and marketing | | 12,888 | | 8,196 | | 37,339 | | 15,414 |
| Consulting fees | | 51,900 | | 37,250 | | 352,082 | | 215,500 |
| Legal fees | | 13,165 | | 24,388 | | 46,335 | | 47,288 |
| Investor relations | | - | | 10,000 | | 15,000 | | 10,000 |
| Transfer agent | | 2,640 | | 1,047 | | 4,860 | | 2,129 |
| Total expenses | | 120,199 | | 91,890 | | 980,079 | | 309,935 |
| | | | | | | | | |
(Loss) from operations | | (118,944) | | (91,890) | | (976,089) | | (309,935) |
| | | | | | | | | |
Other income (expense) | | | | | | | | |
| Interest expense | | (687,520) | | (125,524) | | (1,108,295) | | (160,776) |
| Loss on extinguishment of debt | | - | | (22,624) | | - | | (22,624) |
| Gain (loss) on change in fair value of derivative liability | |
218,006 | |
- | |
(1,046,240) | |
- |
| Total other income (expense) | | (469,514) | | (148,148) | | (2,154,535) | | (183,400) |
| | | | | | | | | |
Provision for income taxes | | - | | - | | - | | - |
| | | | | | | | | |
Net (loss) | $ | (588,458) | $ | (240,038) | $ | (3,130,624) | $ | (493,335) |
| | | | | | | | | |
(Loss) per common share, basic and diluted |
$ |
(0.00) |
$ |
(0.00) |
$ |
(0.03) |
$ |
(0.00) |
| | | | | | | | | |
Weighted average number of common shares outstanding, basic and diluted | |
120,983,922 | |
195,776,062 | |
121,632,584 | |
189,993,154 |
The accompanying notes to the consolidated financial statements are an integral part of these statements.
6
BLUE WATER GLOBAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS (DEFICIT)
Six Months Ended June 30, 2015
(unaudited)
| | | | | | | | | |
| | | | | | | Additional | | |
| Series A Preferred Stock | Series B Preferred Stock | Common Stock | Paid in | Accumulated | |
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total |
Balance, December 31, 2014 | 150,000 | $ 150 | - | $ - | 126,206,213 | $ 126,206 | $ 2,844,076 | $ (4,544,857) | $ (1,574,425) |
Return and cancellation of previously issued shares of common stock | - | - | - | - | (12,500,000) | (12,500) | 12,500 | - | - |
Issuance of common shares for compensation | - | - | - | - | 3,900,000 | 3,900 | 424,710 | - | 428,610 |
Issuance of common shares for conversion of debt | | | | | 706,422 | 706 | 37,491 | - | 38,197 |
Issuance of common shares for services | - | - | - | - | 3,333,334 | 3,334 | 270,000 | - | 273,334 |
Issuance of Series B preferred stock as dividend to common stockholders | - | - | 1,209,548 | 1,210 | - | - | (1,210) | - | - |
Reclassify fair value of derivative to equity upon payoff of convertible notes | - | - | - | - | - | - | 1,286,363 | - | 1,286,363 |
Associated costs of equity investments | - | - | - | - | - | - | (32,524) | - | (32,524) |
Net loss | - | - | - | - | - | - | - | (3,130,624) | (3,130,624) |
Balance, June 30, 2015 | 150,000 | $ 150 | 1,209,548 | $ 1,210 | 121,645,969 | $ 121,646 | $ 4,841,406 | $ (7,675,481) | $ (2,711,069) |
The accompanying notes to the consolidated financial statements are an integral part of these statements.
BLUE WATER GLOBAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| | | | | | |
| | | Six months ended June 30, |
| |
2015 | |
2014 |
Cash flows from operating activities: | | | | |
| Net (loss) | $ | (3,130,624) | $ | (493,335) |
| Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities | | | | |
| | Depreciation | | 244 | | - |
| | Amortization of discount on convertible debt | | 850,487 | | 154,041 |
| | Change in fair market value of derivative liability | | 1,046,240 | | - |
| | Common stock issued in connection with services provided by consultants | | 701,944 | | - |
| Changes in operating assets and liabilities: | | | | |
| | Increase in accounts receivable | | (3,606) | | - |
| | Increase in inventory | | (31,625) | | - |
| | Increase (decrease) in accounts payable | | 59,698 | | 195,297 |
| | Increase in accounts payable, related party | | 32,889 | | (15,001) |
| | Increase in accrued interest | | 26,103 | | 4,514 |
| | | | | | |
| Net cash used in by operating activities | | (448,250) | | (154,484) |
| | | | | | |
Cash flows from investing activities: | | | | |
| Purchase of property and equipment | $ | (287,159) | | - |
| Payments related to available for sale securities | | (32,524) | $ | - |
| | | | | |
| Net cash used in by investing activities | | (319,683) | | - |
| | | | |
Cash flows from financing activities: | | | | |
| Net proceeds from convertible promissory notes | $ | 1,189,500 | $ | 175,000 |
| Net proceeds from sale of common stock | | - | | 40,803 |
| Repayments of convertible promissory notes | | (483,750) | | - |
| | | | | |
| Net cash provided by financing activities | | 705,750 | | 215,803 |
| | | | |
Net increase (decrease) in cash | | (62,183) | | 61,319 |
| | | | | | |
Cash beginning of period | | 192,556 | | 7,357 |
| | | | | | |
Cash end of period | $ | 130,373 | $ | 68,676 |
The accompanying notes to the consolidated financial statements are an integral part of these statements.
8
BLUE WATER GLOBAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| | | | | | |
| | | Six months ended June 30, |
| |
2015 | |
2014 |
Non-cash investing and financing operating activities: | | | | |
| Common stock issued in settlement of convertible notes | $ | 17,000 | $ | 5,000 |
| Beneficial Conversion Feature (BCF) of convertible notes | | - | | 312,500 |
| Preferred shares issued as a dividend | | 1,210 | | - |
| Settlement of derivative | | 1,286,362 | | - |
| Derivative liabilities | | 1,182,548 | | - |
| Cancellation of shares | | 12,500 | | - |
| | | | | | |
Supplemental disclosure of cash flow information: | | | | |
| Interest | $ | - | $ | - |
| Income taxes | | - | | - |
| | $ | - | $ | - |
The accompanying notes to the consolidated financial statements are an integral part of these statements.
9
BLUE WATER GLOBAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(unaudited)
NOTE 1 Summary of Significant Accounting Policies
A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows.
Business and organization
Blue Water Global Group, Inc. (Company or Blue Water) is an emerging growth company that was incorporated under the laws of the State of Nevada on March 3, 2011 under the name Blue Water Restaurant Group, Inc. Blue Water amended its Articles of Incorporation on June 13, 2013 to change its name to Blue Water Global Group, Inc. The Company is currently developing a chain of casual dining restaurants in popular tourist destinations throughout the Caribbean region under the Blue Water Bar & Grill brand and is preparing to launch a line of premium rums which include its Blue Water Ultra-Premium Rum and aged spiced Blue Water Caribbean Gold Premium Rum. Additionally, the Company is engaged in making strategic equity investments in promising businesses that are in the early stages of obtaining their own listing on the OTC Bulletin Board (OTCBB).
Interim Financial Statements
The unaudited condensed interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.
The condensed balance sheet as of December 31, 2014 has been derived from audited financial statements.
Operating results for the three and six months ended June 30, 2015 are not necessarily indicative of results that may be expected for the year ending December 31, 2015. These condensed financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2014 filed with the Companys Form 10-K with the Securities and Exchange Commission on April 13, 2015.
Basis of presentation
The Company is currently developing a chain of casual dining restaurants in popular tourist destinations throughout the Caribbean region under the Blue Water Bar & Grill brand and is preparing to launch a line of premium rums which include its flagship rum Blue Water Ultra-Premium Rum and aged spiced Blue Water Caribbean Gold Premium Rum. Additionally, the Company is engaged in making strategic equity investments in promising businesses that are in the early stages of obtaining their own listing on the OTC Bulletin Board (OTCBB). The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. In addition, the Company has stockholders' deficiencies at June 30, 2015 and requires additional financing to fund future operations. Further, there is no assurance that approval of the Companys products will be received and that the Company will be able to generate cash flow to fund operations from its commercial products.
The above factors raise substantial doubt as to the Company's ability to continue as a going concern. The accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that may result from the outcome of this uncertainty.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the
10
financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the recoverability and useful lives of long-lived assets, the fair value of the Companys stock, stock-based compensation, fair values relating to derivative liabilities and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents. As of June 30, 2015 and December 31, 2014, the Company had no cash equivalents.
Revenue Recognition
The Company recognizes revenue on four basic criteria that must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on managements judgments regarding the fixed nature of the fee charged for services rendered and products delivered and the collectability of those fees. Revenue is generally recognized upon shipment.
Revenue recognized during the three and six months ended June 30, 2015 related to sales of its of distilled spirits, which include its Blue Water Ultra Premium Rum and aged spiced Blue Water Caribbean Gold Premium Rum product.
Inventory/cost of sales
The Company maintains an inventory, which consists primarily of distilled spirits, manufactured and packaged by outside vendors, including component parts such as packaging and delivery to the Companys warehouse. The average cost method is utilized in valuing the inventory, and is stated at the lower of cost or market.
As of June 30, 2015, the Companys inventory, comprised of distilled spirits, available for sale was $102,531. During the three and six months ended June 30, 2015, the cost of delivered products sold in the current period was $902 and $2,631, respectively.
Long-Term Investments
The Company accounts for its long-term investments, which are designated as available-for-sale securities, in accordance with US GAAP for certain investments in debt and equity securities, which requires that available-for-sale securities be carried at fair value with unrealized gains and losses, net of tax, included in stockholders' equity under accumulated other comprehensive income (loss). Fair value of the securities is based upon quoted market prices in active markets or estimated fair value when quoted market prices are not available. As of June 30, 2015 and December 31, 2014, the Company had long-term investments consisting of (i) 20,000,000 shares of Stream Flow Media, Inc. and (ii) a net 15% interest in Next Level Hockey, LLC. During the three months ended June 30, 2015, the Company recorded associated costs of the investment of $32,524 as a charge to additional paid in capital.
Fair Value of Financial Instruments
ASC 820, Fair Value Measurements and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:
11
| | |
Level | | Description |
| | |
Level 1 | | Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. |
Level 2 | | Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. |
Level 3 | | Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. |
The estimated fair values of the Companys financial instruments are as follows:
| | | | | | | | | |
| Fair Value Measurement at June 30, 2015 Using: |
| | | | | | | | |
Description | |
6/30/15 | | Quoted Prices In Active Markets For Identical Assets (Level 1) | |
Significant Other Observable Inputs (Level 2) | |
Significant Unobservable Inputs (Level 3) |
Assets | | | | | | | | |
| Cash and equivalents | $ | 130,373 | $ | 130,373 | $ | - | $ | - |
| Accounts receivable | | 3,606 | | 3,606 | | - | | - |
| Inventory | | 102,531 | | 102,531 | | - | | - |
| Available for sale securities | | 200,000 | | 200,000 | | - | | - |
| Deposits, long-term | | 2,400 | | 2,400 | | - | | - |
Total assets measured at fair value | $ | 438,910 | $ | 438,910 | $ | - | $ | - |
| | | | | | | | |
Liabilities | | | | | | | | |
| Accounts payable | $ | 67,908 | $ | 67,908 | $ | - | $ | - |
| Accounts payable, related party | | 527,607 | | - | | 527,607 | | - |
| Convertible notes payable, net of unamortized debt discount of $945,034 | |
463,050 | |
- | |
- | |
463,050 |
| Accrued interest | | 33,089 | | 33,089 | | - | | - |
| Derivative liability | | 2,345,240 | | - | | - | | 2,345,240 |
Total liabilities measured at fair value | $ | 3,436,894 | $ | 100,997 | $ | 527,607 | $ | 2,808,290 |
| | | | | | | | | |
| Fair Value Measurement at December 31, 2014 Using: |
| | | | | | | | |
Description | |
12/31/14 | | Quoted Prices In Active Markets For Identical Assets (Level 1) | |
Significant Other Observable Inputs (Level 2) | |
Significant Unobservable Inputs (Level 3) |
Assets | | | | | | | | |
| Cash and equivalents | $ | 192,556 | $ | 192,556 | $ | - | $ | - |
| Vendor deposits | | 28,422 | | 28,422 | | - | | - |
| Materials inventory | | 42,484 | | 42,484 | | - | | - |
| Available for sale securities | | 200,000 | | 200,000 | | - | | - |
| Deposits, long-term | | 2,400 | | 2,400 | | - | | - |
Total assets measured at fair value | $ | 465,862 | $ | 465,862 | $ | - | $ | - |
| | | | | | | | |
Liabilities | | | | | | | | |
| Accounts payable | $ | 8,211 | $ | 8,211 | $ | - | $ | - |
| Accounts payable, related party | | 494,718 | | - | | 494,718 | | - |
| Convertible notes payable, net of unamortized debt discount of $527,277 | |
106,361 | |
- | |
- | |
106,361 |
| Accrued interest | | 6,986 | | 6,986 | | - | | - |
| Derivative liability | | 1,424,011 | | - | | - | | 1,424,011 |
Total liabilities measured at fair value | $ | 2,040,287 | $ | 15,197 | $ | 494,718 | $ | 1,530,372 |
Net Loss per Share Calculation
Basic net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per shares is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company excludes all potentially dilutive securities from its diluted net loss per share computation since their effect would be anti-dilutive because the Company recorded a loss for the three and six months ended June 30, 2015 and 2014.
Beneficial Conversion Feature
From time to time, the Company may issue convertible notes that may have conversion prices that create an embedded beneficial conversion feature pursuant to the Emerging Issues Task Force guidance on beneficial conversion features. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of any attached equity instruments, if any related equity instruments were granted with the debt. In accordance with this guidance, the intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using either the straight line method or the effective interest method.
Income Taxes
The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (ASC 740-10) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount
13
that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial.
Accounting for Derivative Instruments
All derivatives have been recorded on the balance sheet at fair value based on the Black-Scholes calculation. These derivatives, including embedded derivatives in the Company's convertible notes which have floating conversion prices based on changes to the quoted price of the Company's common stock and common stock equivalents tainted as a result of the derivative, are separately valued and accounted for on the Company's balance sheet. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data and requiring judgment and estimates.
Recent Accounting Pronouncements
There are various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's financial position, results of operations or cash flows.
NOTE 2 Going Concern
The Companys independent registered public accounting firm has issued a going concern opinion in their audit report dated April 13, 2015, which can be found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on April 13, 2015. This means that the Companys auditors believe there is substantial doubt that we can continue as an on-going business for the next 12 months. The Company does not anticipate generating significant revenues until it is able to open its first restaurant presently under development in St. Maarten, Dutch West Indies and have its line of premium rums widely accepted by consumers.
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United State of America, which contemplate continuation of the Company as a going concern. The Company has not established a source of revenues sufficient to cover its operating costs, and as such, has incurred an operating loss since its inception. Further, as of June 30, 2015, the Company had an accumulated net loss of ($7,675,481). These and other factors raise substantial doubt about the Companys ability to continue as a going concern. The accompanying financial statements do not include any adjustments or classifications that may result from the possible inability of the Company to continue as a going concern.
NOTE 3 Convertible Promissory Notes
Convertible notes payable are comprised of the following:
| | | | | | | |
| | | | | | | |
| | June 30, 2015 | | | December 31, 2014 |
Convertible promissory notes, due May 28, 2015, net of unamortized debt discount of $28,524 | | $ | - | | | $ | 24,476 |
Convertible promissory note, due July 3, 2015, net of unamortized debt discount of $25,440 | | | - | | | | 17,560 |
Convertible promissory note, due August 17, 2015, net of unamortized debt discount of $51,768 | | | - | | | | 13,232 |
Convertible promissory note, due August 19, 2015, net of unamortized debt discount of $47,596 | | | - | | | | 8,654 |
Convertible promissory note, due May 19, 2015, net of unamortized debt discount of $76,796 | | | - | | | | 23,204 |
| | June 30, 2015 | | | December 31, 2014 |
| | | | | | | |
Convertible promissory note, due December 22, 2015, net of unamortized debt discount of $21,575 and $48,767, respectively | | | 23,425 | | | | 1,233 |
Convertible promissory note, due December 22, 2015, net of unamortized debt discount of $42,192 and $97,534, respectively | | | 45,808 | | | | 2,466 |
Convertible promissory note, due November 14, 2015, net of unamortized debt discount of $31,457 | | | - | | | | 2,043 |
Convertible promissory note, due December 1, 2015, net of unamortized debt discount of $44,430 | | | - | | | | 5,570 |
Convertible promissory note, due November 13, 2015, net of unamortized debt discount of $47,767 | | | - | | | | 7,233 |
Convertible promissory note, due December 22, 2015, net of unamortized debt discount of $27,310 | | | - | | | | 690 |
Convertible promissory note, due July 27, 2015, net of unamortized debt discount of $14,917 | | | 85,083 | | | | - |
Convertible promissory note, due January 26, 2016, net of unamortized debt discount of $28,767 | | | 21,233 | | | | - |
Convertible promissory note, due November 17, 2015, net of unamortized debt discount of $40,513 | | | 38,487 | | | | - |
Convertible promissory note, due February 20, 2016, net of unamortized debt discount of $74,685 | | | 41,315 | | | | - |
Convertible promissory note, due February 9, 2016, net of unamortized debt discount of $66,279 | | | 14,721 | | | | - |
Convertible promissory note, due April 17, 2016, net of unamortized debt discount of $39,891 | | | 10,109 | | | | - |
Convertible promissory note, due April 16, 2016, net of unamortized debt discount of $41,742 | | | 10,758 | | | | - |
Convertible promissory note, due April 27, 2016, net of unamortized debt discount of $46,208 | | $ | 9,792 | | | $ | - |
Convertible promissory note, due November 1, 2015, net of unamortized debt discount of $67,391 | | | 32,609 | | | | - |
Convertible promissory note, due April 29, 2017, net of unamortized debt discount of $50,793 | | | 4,707 | | | | - |
Convertible promissory note, due November 5, 2015, net of unamortized debt discount of $54,180 | | | 25,820 | | | | - |
Convertible promissory note, due February 8, 2016, net of unamortized debt discount of $45,448 | | | 10,802 | | | | - |
Convertible promissory note, due February 6, 2016, net of unamortized debt discount of $63,029 | | | 15,971 | | | | - |
Convertible promissory note, due May 6, 2017, net of unamortized debt discount of $70,634 | | | 12,699 | | | | - |
Convertible promissory note, due November 12, 2015, net of unamortized debt discount of $73,369 | | | 26,631 | | | | - |
Convertible promissory note, due June 8, 2016, net of unamortized debt discount of $52,634 | | | 3,366 | | | | - |
Convertible promissory note, due March 18, 2016, net of unamortized debt discount of $50,786 | | | 2,714 | | | | - |
Total | | | 463,050 | | | | 106,361 |
Less current portion | | | (445,644 | ) | | | (106,361) |
Long term portion | | $ | 17,406 | | | $ | - |
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2015 Notes:
JSJ Investments, Inc. Notes
In 2015, the Company entered into agreements for the sale of a Convertible Promissory Notes (JSJ Notes) in the principal amount $300,000, net proceeds of $286,000 after taking into consideration an Original Issue Discount (OID) of $14,000. The JSJ Note matures six months from the date of issuance with the last due on November 12, 2015. The JSJ Notes is convertible at 50% of the lowest trading stock price of Blue Waters common stock during the thirty trading day period prior to the conversion date after 180 days. In addition, the Promissory Note provides for changes in conversion price should certain events occur (as defined).
At the inception of the JSJ Note, the Company determined the aggregate fair value of $1,637,066 of embedded derivatives. The fair value of the embedded derivatives was determined using the Lattice Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 223% , (3) weighted average risk-free interest rate of 0.15%, (4) expected life of 0.50 years, and (5) estimated fair value of the Companys common stock from $0.073 to $0.107 per share.
The determined fair value of the embedded derivative of $1,637,066 was charged as a debt discount up to the net proceeds of the note with the remainder, $1,344,066, charged to current period operations as non-cash loss on change in derivative liability.
At June 30, 2015, the Company marked to market the fair value of the derivatives of the JSJ Notes discussed above and determined a fair value of $966,821. The fair value of the embedded derivatives was determined using Lattice Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 223% , (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 0.32 years, and (5) estimated fair value of the Companys common stock of $0.0445 per share.
The Company recorded a gain on change in derivative liability of $842,643 for the six months ended June 30, 2015.
As of June 30, 2015, the outstanding balance due on the JSJ Notes was $300,000. During the three and six months ended June 30, 2015, this note incurred $109,515 and $144,322 in amortization expenses that was recorded in the financial statements as interest expense. Further, as of June 30, 2015, the remaining unamortized debt discount was $155,678.
Union Capital, LLC note
On January 26, 2015, the Company entered into an agreement for the sale of a Convertible Promissory Note (Union) in the principal amount $50,000 with an interest rate of 8% per annum pursuant to the terms of a Securities Purchase Agreement between Union Capital LLC. (Union) and Blue Water. The Union note closed on January 26, 2015 and matures on January 26, 2015 and is convertible at 55% of the average of the lowest closing bid price of Blue Waters common stock during the twenty trading day period prior to the conversion date after 180 days.
At the inception of the Union note, the Company determined the aggregate fair value of $389,282 of embedded derivatives. The fair value of the embedded derivatives was determined using the Black Scholes Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 277% , (3) weighted average risk-free interest rate of 0.18%, (4) expected life of 1.00 years, and (5) estimated fair value of the Companys common stock of $0.09 per share.
The determined fair value of the embedded derivative of $389,282 was charged as a debt discount up to the net proceeds of the note with the remainder, $339,282, charged to current period operations as non-cash loss on change in derivative liability.
At June 30, 2015, the Company marked to market the fair value of the derivatives of the Union note discussed above and determined a fair value of $76,322. The fair value of the embedded derivatives was determined using Black Scholes model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 223%, (3) weighted average risk-free interest rate of 0.26%, (4) expected life of 0.57 years, and (5) estimated fair value of the Companys common stock of $0.0445 per share.
The Company recorded a gain on change in derivative liability of $312,960 for the six months ended June 30, 2015.
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As of June 30, 2015, the outstanding balance due on the Union note was $50,000. During the three and six months ended June 30, 2015, this note incurred $12,466 and $21,233 in amortization expenses that was recorded in the financial statements as interest expense. Further, as of June 30, 2015, the remaining unamortized debt discount was $28,767.
KBM Worldwide Note
On February 17, 2015, the Company entered into an agreement for the sale of a Convertible Promissory Note (KBM) in the principal amount $79,000 with an interest rate of 8% per annum pursuant to the terms of a Securities Purchase Agreement between KBM Worldwide, Inc. (KBM), a New York corporation, and Blue Water. The KBM Note matures on November 17, 2015. The KBM Note is convertible at 58% of the average of the lowest three trading prices of Blue Waters common stock during the ten trading day period prior to the conversion date after 180 days. In addition, the Promissory Note provides for changes in conversion price should certain events occur (as defined).
At the inception of the KBM Note, the Company determined the aggregate fair value of $110,668 of embedded derivatives. The fair value of the embedded derivatives was determined using the Bionomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 223%, (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 0.75 years, and (5) estimated fair value of the Companys common stock of $0.129 per share.
The determined fair value of the embedded derivative of $110,668 was charged as a debt discount up to the net proceeds of the note with the remainder, $31,668, charged to current period operations as non-cash loss on change in derivative liability.
At June 30, 2015, the Company marked to market the fair value of the derivatives of the KBM Note discussed above and determined a fair value of $92,237. The fair value of the embedded derivatives was determined using Binomial Option Pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 223%, (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 0.38 years, and (5) estimated fair value of the Companys common stock of $0.0445 per share.
The Company recorded a gain on change in derivative liability of $18,431 for the six months ended June 30, 2015.
As of June 30, 2015, the outstanding balance due on the KBM note was $79,000. During the three and six months ended June 30, 2015, this note incurred $26,333 and $38,487 in amortization expenses that was recorded in the financial statements as interest expense. Further, as of June 30, 2015, the remaining unamortized debt discount was $40,513.
JDF Capital, Inc. Note
On February 20, 2015, the Company entered into an agreement for the sale of a Convertible Promissory Note (JDF Note) in the principal amount $116,000, net proceeds of $106,000 after taking into consideration an Original Issue Discount (OID) of $10,000. The JDF Note matures on February 20, 2016. The JDF Note is convertible at 40% of the lowest trading stock price of Blue Waters common stock during the twenty five trading day period prior to the conversion date 180 days. In addition, the Promissory Note provides for changes in conversion price should certain events occur (as defined).
At the inception of the JDF Note, the Company determined the aggregate fair value of $353,080 of embedded derivatives. The fair value of the embedded derivatives was determined using the Lattice Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 223% , (3) weighted average risk-free interest rate of 0.15%, (4) expected life of 1.00 years, and (5) estimated fair value of the Companys common stock of $0.11 per share.
The determined fair value of the embedded derivative of $353,080 was charged as a debt discount up to the net proceeds of the note with the remainder, $30,412, charged to current period operations as non-cash loss on change in derivative liability.
At June 30, 2015, the Company marked to market the fair value of the derivatives of the JDF Note discussed above and determined a fair value of $140,238. The fair value of the embedded derivatives was determined using Lattice Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 223% , (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 0.64 years, and (5) estimated fair value of the Companys common stock of $0.0445 per share.
The Company recorded a gain on change in derivative liability of $102,174 for the six months ended June 30, 2015.
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As of June 30, 2015, the outstanding balance due on the JDF Note was $116,000. During the three and six months ended June 30, 2015, this note incurred $28,921 and $41,315 in amortization expenses that was recorded in the financial statements as interest expense. Further, as of June 30, 2015, the remaining unamortized debt discount was $74,685.
Blue Citi, LLC. Note
On February 9, 2015, the Company entered into an agreement for the sale of a Convertible Promissory Note (Blue Note) in the principal amount $108,000, net proceeds of $106,000 after taking into consideration an Original Issue Discount (OID) of $6,000. The JDF Note matures on February 9, 2016. The Blue Note is convertible at 60% of the lowest daily closing bid price of Blue Waters common stock during the twenty trading day period prior to the conversion date 180 days. In addition, the Promissory Note provides for changes in conversion price should certain events occur (as defined).
At the inception of the Blue Note, the Company determined the aggregate fair value of 289,664 of embedded derivatives. The fair value of the embedded derivatives was determined using the Lattice Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 223% , (3) weighted average risk-free interest rate of 0.15%, (4) expected life of 1.00 years, and (5) estimated fair value of the Companys common stock of $0.096 per share.
The determined fair value of the embedded derivative of $289,664 was charged as a debt discount up to the net proceeds of the note with the remainder, $189,664, charged to current period operations as non-cash loss on change in derivative liability.
At June 30, 2015, the Company marked to market the fair value of the derivatives of the Blue note discussed above and determined a fair value of $268,870. The fair value of the embedded derivatives was determined using Lattice Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 223% , (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 0.61 years, and (5) estimated fair value of the Companys common stock of $0.0445 per share.
The Company recorded a gain on change in derivative liability of $135,107 for the six months ended June 30, 2015.
As of June 30, 2015, the outstanding balance due on the JDF Note was $106,000. During the three and six months ended June 30, 2015, this note incurred $26,926 and $41,721 in amortization expenses that was recorded in the financial statements as interest expense. Further, as of June 30, 2015, the remaining unamortized debt discount was $66,279.
Adar Bays, LLC
On April 17, 2015, the Company entered into a Securities Purchase Agreement with Adar Bays, LLC, an accredited investor (Adar Bays), pursuant to which we issued Adar Bays two convertible notes. The first note, due May 19, 2015 in the principal amount of $50,000 (AB Note 1), was issued in exchange for $50,000 in cash. The second note was issued May 17, 2015 in the principal amount of $50,000 (AB Note 2 and, together with AB Note 1, the AB Notes), was issued in exchange for a full-recourse, collateralized promissory note from Adar Bays in the amount of $50,000 (AB Payment Note). The AB Payment Second Note is due on April 17, 2016, unless the Company does not meet the current public information requirement pursuant to Rule 144, in which case both AB
Interest on the AB Notes accrues at the rate of 8% per annum. The Company is not required to make any payments on the AB Notes until maturity. The Company has the right to repay the AB Notes at any time during the first six months of the notes at a rate of 125% of the unpaid principal amount during the first 90 days, 135% of the unpaid principal amount between days 91 and 150, and 145% of the unpaid principal amount between days 151 and 180.
At the inception of the second Note, the Company determined the aggregate fair value of 78,755 of embedded derivatives. The fair value of the embedded derivatives was determined using the Lattice Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 223% , (3) weighted average risk-free interest rate of 0.15%, (4) expected life of 1.00 years, and (5) estimated fair value of the Companys common stock of $0.08 per share.
The determined fair value of the embedded derivative of $78,755 was charged as a debt discount up to the net proceeds of the note with the remainder, $28,755, charged to current period operations as non-cash loss on change in derivative liability.
At June 30, 2015, the Company marked to market the fair value of the derivatives of the Blue note discussed above and determined a fair value of $58,026. The fair value of the embedded derivatives was determined using Lattice Model based on
18
the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 223% , (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 0.80 years, and (5) estimated fair value of the Companys common stock of $0.0445 per share.
The Company recorded a gain on change in derivative liability of $20,729 for the six months ended June 30, 2015.
As of June 30, 2015, the outstanding balance due on the second Note was $50,000. During the three and six months ended June 30, 2015, this note incurred $10,109 in amortization expenses that was recorded in the financial statements as interest expense. Further, as of June 30, 2015, the remaining unamortized debt discount was $39,891.
LG Capital Funding, LLC
On April 16, 2015, the Company entered into a Securities Purchase Agreement with LG Capital Funding, LLC, an accredited investor (LG Capital), pursuant to which we issued LG Capital a convertible note for $52,500 in exchange for $50,000 in cash. The LG Payment Note is due on April 16, 2016, unless we do not meet the current public information requirement pursuant to Rule 144.
Interest on the LG Note accrues at the rate of 8% per annum. The Company is not required to make any payments on the LG Notes until maturity. The Company has the right to repay the LG Notes at any time during the first six months of the notes at a rate of 125% of the unpaid principal amount during the first 90 days, 135% of the unpaid principal amount between days 91 and 150, and 145% of the unpaid principal amount between days 151 and 180.
At the inception of the Note, the Company determined the aggregate fair value of $83,902 of embedded derivatives. The fair value of the embedded derivatives was determined using the Lattice Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 223% , (3) weighted average risk-free interest rate of 0.15%, (4) expected life of 1.00 years, and (5) estimated fair value of the Companys common stock of $0.058 per share.
The determined fair value of the embedded derivative of $83,902 was charged as a debt discount up to the net proceeds of the note with the remainder, $31,402, charged to current period operations as non-cash loss on change in derivative liability.
At June 30, 2015, the Company marked to market the fair value of the derivatives of the Blue note discussed above and determined a fair value of $60,951. The fair value of the embedded derivatives was determined using Lattice Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 223% , (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 0.80 years, and (5) estimated fair value of the Companys common stock of $0.0445 per share.
The Company recorded a gain on change in derivative liability of $22,951 for the six months ended June 30, 2015.
As of June 30, 2015, the outstanding balance due on the second Note was $52,500. During the three and six months ended June 30, 2015, this note incurred $10,758 in amortization expenses that was recorded in the financial statements as interest expense. Further, as of June 30, 2015, the remaining unamortized debt discount was $41,741.
Black Mountain Equities, Inc. Note )
On December 22, 2014, the Company entered into an agreement for the sale of a Convertible Promissory Note (Black Note) in the principal amount $250,000 (funded $112,000), net proceeds of $100,000 after taking into consideration an Original Issue Discount (OID) of $6,000 in 2015. The Black Notes matures on year from the date of funding, the last due June 8, 2016. The Black Notes is convertible at 60% of the lowest trading price of Blue Waters common stock during the twenty five trading days period prior to the conversion date after 180 days. In addition, the Promissory Note provides for changes in conversion price should certain events occur (as defined).
At the inception of the 2015 Black Notes, the Company determined the aggregate fair value of $184,338 of embedded derivatives. The fair value of the embedded derivatives was determined using the Lattice Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 223%, (3) weighted average risk-free interest rate of 0.15%, (4) expected life of 1.00 years, and (5) estimated fair value of the Companys common stock of $0.05 to $0.0732 per share.
19
The determined fair value of the embedded derivative of $184,338 was charged as a debt discount up to the net proceeds of the note with the remainder, $84,338, charged to current period operations as non-cash loss on change in derivative liability.
At June 30, 2015, the Company marked to market the fair value of the derivatives of the Black Notes discussed above and determined a fair value of $141,860. The fair value of the embedded derivatives was determined using Lattice Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 223% (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 0.98 years, and (5) estimated fair value of the Companys common stock of $0.0445 per share.
The Company recorded a gain on change in derivative liability of $42,478 for the six months ended June 30, 2015.
As of June 30, 2015, the outstanding balance due on the 2015 Notes was $118,000. During the three and six months ended June 30, 2015, this note incurred $13,158 in amortization expenses that was recorded in the financial statements as interest expense. Further, as of June 30, 2015, the remaining unamortized debt discount was $98,842.
Cardinal Capital Group, Inc. Note
On April 29, 2015, the Company entered into an agreement for the sale of a Convertible Promissory Note (Cardinal Note) in the principal amount $55,500 and net proceeds of $50,000 after taking into consideration an Original Issue Discount (OID) of $5,500. The Cardinal Note matures on April 29, 2017. The Cardinal Note is convertible at 55% of the lowest daily closing bid of Blue Waters common stock during the twenty trading day period prior to the conversion date.
At the inception of the Cardinal Note, the Company determined the aggregate fair value of $82,865 of embedded derivatives. The fair value of the embedded derivatives was determined using the Lattice Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 223%, (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 2.0 year, and (5) estimated fair value of the Companys common stock of $0.078 per share.
The determined fair value of the embedded derivative of $82,865 was charged as a debt discount up to the net proceeds of the note with the remainder, $27,365, charged to current period operations as non-cash loss on change in derivative liability.
At June 30, 2014, the Company marked to market the fair value of the derivatives of the Cardinal Note discussed above and determined a fair value of $121,604. The fair value of the embedded derivatives was determined using Lattice Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 223%, (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 1.87 years, and (5) estimated fair value of the Companys common stock of $0.0445 per share.
The Company recorded a gain on change in derivative liability of $14,987 for the six months ended June 30, 2015.
As of June 30, 2015, the outstanding balance due on the Cardinal Note was $55,500. During the three and six months ended June 30, 2015, this note incurred $4,707 in amortization expenses that was recorded in the financial statements as interest expense. Further, as of June 30, 2015, the remaining unamortized debt discount was $50,793.
Macallan Partners, LLC Note
On April 30, 2015, the Company entered into an agreement for the sale of a Convertible Promissory Note (Macallan Note) in the principal amount $80,000 with an interest rate of 8% per annum pursuant to the terms of a Securities Purchase Agreement between Macallan Partners, LLC. (Macallan) and Blue Water. The Macallan Note matures on November 5, 2015. The Macallan Note is convertible at 50% of the lowest closing bid price of Blue Waters common stock during the twenty trading day period prior to the conversion date. In addition, the Promissory Note provides for changes in conversion price should certain events occur (as defined).
At the inception of the Macallan Note, the Company determined the aggregate fair value of $110,532 of embedded derivatives. The fair value of the embedded derivatives was determined using the Lattice Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 223%, (3) weighted average risk-free interest rate of 0.15%, (4) expected life of 0.51 years, and (5) estimated fair value of the Companys common stock of $0.0795 per share.
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The determined fair value of the embedded derivative of $110,532 was charged as a debt discount up to the net proceeds of the note with the remainder, $30,532, charged to current period operations as non-cash loss on change in derivative liability.
At June 30, 2015, the Company marked to market the fair value of the derivatives of the Macallan Note discussed above and determined a fair value of $99,318. The fair value of the embedded derivatives was determined using Lattice Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 223% to 235%, (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 0.35 years, and (5) estimated fair value of the Companys common stock of $0.0445 per share.
The Company recorded a gain on change in derivative liability of $11,214 for the six months ended June 30, 2015.
As of June 30, 2015, the outstanding balance due on the Macallan Note was $80,000. During the three and six months ended June 30, 2015, this note incurred $25,820 in amortization expenses that was recorded in the financial statements as interest expense. Further, as of June 30, 2014, the remaining unamortized debt discount was $54,180.
Auctus Private Equity Fund LLC Note
On May 8, 2015, the Company entered into an agreement for the sale of a Convertible Promissory Note (Auctus Note) in the principal amount $56,250 with an interest rate of 8% per annum pursuant to the terms of a Securities Purchase Agreement between Auctus Private Equity Fund LLC. (Auctus), a Nevada corporation, and Blue Water. The Auctus Note matures on February 8, 2016. The Auctus Note is convertible at 55% of the average of the lowest two trading prices of Blue Waters common stock during the twenty five trading day period prior to the conversion date after 180 days. In addition, the Promissory Note provides for changes in conversion price should certain events occur (as defined).
At the inception of the Auctus Note, the Company determined the aggregate fair value of $103,539 of embedded derivatives. The fair value of the embedded derivatives was determined using the Lattice Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 223% , (3) weighted average risk-free interest rate of 0.15%, (4) expected life of 0.75 years, and (5) estimated fair value of the Companys common stock of $0.0786 per share.
The determined fair value of the embedded derivative of $103,539 was charged as a debt discount up to the net proceeds of the note with the remainder, $47,289, charged to current period operations as non-cash loss on change in derivative liability.
At June 30, 2015, the Company marked to market the fair value of the derivatives of the Auctus Note discussed above and determined a fair value of $78,732. The fair value of the embedded derivatives was determined using Lattice Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 223%, (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 0.61 years, and (5) estimated fair value of the Companys common stock of $0.0445 per share.
The Company recorded a gain on change in derivative liability of $24,807 for the six months ended June 30, 2015.
As of June 30, 2015, the outstanding balance due on the Auctus Note was $56,250. During the three and six months ended June 30, 2015, this note incurred $10,802 in amortization expenses that was recorded in the financial statements as interest expense. Further, as of June 30, 2015, the remaining unamortized debt discount was $45,448.
Vis Vires Group, Inc.
In 2015, the Company entered into an agreements for the sale of a Convertible Promissory Notes (Vis Vires Notes) in the aggregate principal amount $132,500 with an interest rate of 8% per annum pursuant to the terms of a Securities Purchase Agreement between Vis Vires Group, Inc. (Vis Virs), a New York corporation, and Blue Water. The Vis Vires Notes matures approximately nine months from issuance with the last due on March 18, 2016. The Notes are convertible at 58% of the average of the lowest three trading prices of Blue Waters common stock during the ten trading day period prior to the conversion date after 180 days.
At the inception of the Notes, the Company determined the aggregate fair value of $148,517 of embedded derivatives. The fair value of the embedded derivatives was determined using the Lattice Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 223% , (3) weighted average risk-free interest rate of 0.15%, (4) expected life of 0.75 years, and (5) estimated fair value of the Companys common stock of $0.055 to 0.079 per share.
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The determined fair value of the embedded derivative of $148,517 was charged as a debt discount up to the net proceeds of the note with the remainder, $16,017, charged to current period operations as non-cash loss on change in derivative liability.
At June 30, 2015, the Company marked to market the fair value of the derivatives of the Vis Vires Notes discussed above and determined a fair value of $142,814. The fair value of the embedded derivatives was determined using Lattice Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 223%, (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 0.61 years, and (5) estimated fair value of the Companys common stock of $0.0445 per share.
The Company recorded a net gain on change in derivative liability of $5,703 for the six months ended June 30, 2015.
As of June 30, 2015, the outstanding balance due on the Vis Vires Notes was $132,500. During the three and six months ended June 30, 2015, this note incurred $18,685 in amortization expenses that was recorded in the financial statements as interest expense. Further, as of June 30, 2015, the remaining unamortized debt discount was $113,815.
JMJ Financial Note
On May 6, 2015, (Effective Date), the Company sold to JMJ Financial (JMJ Financial) a $150,000 Convertible Promissory Note (JMJ Note). The JMJ Note provides up to an aggregate of $135,000 in gross proceeds after taking into consideration an Original Issue Discount (OID) of $15,000. The Notes mature two years from the date of issuance. As of June 30, 2015, the Company has received net proceeds under this note of $75,000.
At any time after 180 days of the Effective Date, the Investor may convert all or part of the JMJ Note into shares of Blue Waters common stock at the lesser of $0.09 a share or 60% of the lowest trade price in the 25 trading days prior to the conversion.
At the inception of the JMJ Note, the Company determined the aggregate fair value of $76,381 of embedded derivatives. The fair value of the embedded derivatives was determined using the Lattice Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 223% , (3) weighted average risk-free interest rate of 0.15%, (4) expected life of 2.0 years, and (5) estimated fair value of the Companys common stock of $0.078 per share.
The determined fair value of the embedded derivative of $76,381 was charged as a debt discount up to the net proceeds of the note.
At June 30, 2015, the Company marked to market the fair value of the derivatives of the JMJ Note discussed above and determined a fair value of $70,145. The fair value of the embedded derivatives was determined using Lattice Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 223%, (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 1.85 years, and (5) estimated fair value of the Companys common stock of $0.0445 per share.
The Company recorded a gain on change in derivative liability of $6,236 for the six months ended June 30, 2015.
As of June 30, 2015, the outstanding balance due on the JMJ Note was $83,333 (including OID). During the three and six months ended June 30, 2015, this note incurred $5,747 in amortization expenses that was recorded in the financial statements as interest expense. Further, as of June 30, 2015, the remaining unamortized debt discount was $70,634.
During the six months ended June 30, 2015, the Company issued an aggregate of 706,422 shares of its common stock in settlement of $17,000 of convertible notes.
NOTE 4 STOCKHOLDERS EQUITY
Preferred stock
The Company has authorized 5,000,000 shares of preferred stock, $0.001 par value. The Companys Board of Directors is authorized, without further action by the shareholders, to issue shares of preferred stock and to fix the designations, number,
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rights, preferences, privileges and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and sinking fund terms.
As of June 30, 2015, the Company had designated up to 1,000,000 shares of the authorized preferred stock as the Series A preferred stock, $0.001 per share. As of June 30, 2015 and December 31, 2014, the Company has 150,000 shares of Series A preferred stock issued and outstanding.
On April 13, 2015, the Companys board of directors designated 1,300,000 shares of preferred stock as Series B Preferred Stock at $0.001 par value. Series B Preferred Stock shall rank superior to all other classes of stock including common and other future classes of preferred in regard to liquidation, dissolution or winding up of the Company. The Series B Preferred Stock shall participate in all legal dividends declared by the board of directors, have no voting rights and is not convertible into any other class or classes of the Companys stock.
In April 2015, the Companys Board of Directors has approved a special one-time stock dividend of one (1) share of Series B Preferred Stock for every one-hundred (100) shares of common stock held. Fractional amounts will be rounded to the nearest whole number. 1,209,548 shares of Series B Preferred Stock was distributed in April 2015.
Common stock
The Company has authorized 700,000,000 shares of common stock, with a par value of $0.001 per share. As of June 30, 2015 and December 31, 2014, the Company has 121,645,969 and 126,206,213, respectively, shares of common stock issued and outstanding.
During the six months ended June 30, 2015, 12,500,000 previously issued shares of the Companys common stock were returned and canceled. The returned shares were recorded at $-0- value.
During the six months ended June 30, 2015, the Company issued an aggregate of 3,900,000 shares of its common stock for board compensation at a fair value of $428,610 based on the closing stock price at date of grant.
During the six months ended June 30, 2015, the Company issued 3,333,334 shares of its common stock for services rendered at a fair value of $273,334 based on the closing stock price at date of grant.
During the six months ended June 30, 2015, the Company issued an aggregate of 706,422 shares of its common stock in settlement of $17,000 of convertible notes. As the shares were issued in accordance with the terms of the convertible notes, no gain or loss was recognized upon the conversions.
NOTE 5 INVESTMENTS
Long-Term Investments; Available-For-Sale Securities
The following table summarizes the Companys long-term Available-For-Sale (AFS) Securities as of June 30, 2015 and December 31, 2014:
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| As of June 30, 2015 and December 31, 2014 |
| |
Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | |
Estimated Fair Value |
| | | | | | | | |
Equity securities (1) | $ | - | $ | 200,000 | $ | - | $ | 200,000 |
| | | | | | | | |
Total | $ | - | $ | 200,000 | $ | - | $ | 200,000 |
(1)
The Companys long-term AFS securities consisted of 20,000,000 shares of Stream Flow Media, Inc. which were valued at $200,000 and a net 15% interest in Next Level Hockey, LLC which was valued at $-0-.
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All of our investments, excluding trading securities, are subject to periodic impairment review. The impairment analysis requires significant judgment to identify events or circumstances that would likely have significant adverse effect on the future value of the investment. We consider various factors in determining whether an impairment is other-than-temporary, including the severity and duration of the impairment, forecasted recovery, the financial condition and near-term prospects of the investee, and our ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.
NOTE 6 STRATEGIC ALLIANCE AGREEMENT WITH TAURUS FINANCIAL PARTNERS, LLC
On June 21, 2013 the Company entered into a Strategic Alliance Agreement with Taurus Financial Partners, LLC (Taurus). Under this Strategic Alliance Agreement the Company was granted the exclusive right to participate in Tauruss future Registered Spin-Off transactions.
In a typical Registered Spin-Off transaction, the Company will acquire between 10 15% of an operating business that is in the process of going public on the OTC Bulletin Board. Taurus will then register these shares with the Securities and Exchange Commission (SEC). Once Taurus has registered these shares with the SEC, the Company will spin-off approximately one-third of them to its then stockholders in the form of a special stock dividend.
Stream Flow Media, Inc.
On December 2, 2013 the Company entered into its first Registered Spin-Off transaction pursuant to the Strategic Alliance Agreement with Stream Flow Media, Inc., a Colorado corporation (Stream Flow). As per the terms of this transaction, Stream Flow issued 20,000,000 shares of its common stock, $0.001 par value, to Blue Water, which represents approximately 20% of Stream Flows issued and outstanding shares of common stock as of April 6, 2015 in return for the Company agreeing to pay all of Stream Flows expenses related to obtaining a listing on the OTCBB.
Stream Flow is presently in the process of preparing and filing its Form 15c2-11 with FINRA to obtain its listing on the OTCBB. Once Stream Flow obtains its listing on the OTCBB, and upon approval by both the SEC and FINRA, the Company will issue a special one-time stock dividend of approximately 25%, or 5,000,000, of its Stream Flow shares to its shareholders. The remaining Stream Flow shares will be sold by the Company over an 18-24 month period with the net proceeds going towards financing new units of its Blue Water Bar & Grill restaurant concept and expanding the distribution and marking of its premium distilled spirits.
The Company accounts for its Stream Flow asset as Available-For-Sale (AFS) securities that are carried in the financial statements at fair value. Changes in fair value are recorded in the financial statements as an unrealized gain (loss) in Other Comprehensive Income (OCI).
During the six months ended June 30, 2015, the Company had accumulated $32,524 in costs related to the Stream Flow shares, recorded to additional paid in capital. At June 30, 2015 and December 31, 2014, the Company recorded the investment at fair value relating to its stock holdings based on expected market listing. Accordingly, the Company carried the Stream Flow shares at $200,000 valuation on the balance sheet as of June 30, 2015 and December 31, 2014.
Next Level Hockey, LLC
On September 5, 2014 the Company entered into a definitive agreement with Next Level Hockey, LLC (Next Level), a New Jersey limited liability company. As per the terms of this transaction, the Company will receive a net 15% equity interest in Next Level when it goes public on the OTCBB in return for the Company agreeing to pay all of Next Levels expenses related to obtaining a listing on the OTCBB.
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NOTE 7 SUBSIDIARIES
As of June 30, 2015, the Company had the following wholly-owned subsidiaries:
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| | |
Name of Subsidiary | | Place of Incorporation |
| | |
Blue Water Bar & Grill, N.V. (1) | | St. Maarten, Dutch West Indies |
Blue Water Beverage Brands, Ltd. (2) | | British Virgin Islands |
BWG Investments & Development, Ltd. (3) | | British Virgin Islands |
(1)
As of June 30, 2015, Blue Water Bar & Grill, N.V. (i) was in good standing with the government of St. Maarten, (ii) had no assets or liabilities, (iii) maintained an operating Business License, and (iv) maintained two Managing Directors Licenses.
(2)
As of June 30, 2015, Blue Water Beverage Brands, Ltd. (i) was in good standing with the government of the British Virgin Islands, (ii) had no assets or liabilities, and (iii) maintained an operating Business License enabling it to conduct operations both inside and outside of the BVI.
As of June 30, 2015, Blue Water Beverage Brands, Ltd. (i) was in good standing with the government of the British Virgin Islands, (ii) had no assets or liabilities, and (iii) maintained an operating Business License enabling it to conduct operations both inside and outside of the BVI.
NOTE 8 RELATED PARTY TRANSACTIONS
As of June 30, 2015, the Company operated out of office space that is being provided to us by our Vice President, Michael Hume, free of charge. There is no written agreement or other material terms relating to this arrangement.
Additionally, a significant portion of the Companys expenses have been paid by Taurus Financial Partners, LLC (Taurus), an independent service provider that currently provides SEC EDGAR compliance and filing services to the Company, and have been accounted for under the accounts payable to a related party line item. As of June 30, 2015 and December 31, 2014, the Companys accounts payable to Taurus aggregated $527,607 and $494,718, respectively.
As of June 30, 2015 and December 31, 2014, Taurus owned 16,000,000 shares of the Companys issued and outstanding common stock and 150,000 shares of the Companys issued and outstanding preferred stock, which represented 12.7% and 100% of each class of securities, respectively. It is important to note that our President and Chief Executive Officer, J. Scott Sitra, is concurrently the President and Chief Executive Officer at Taurus and has voting disposition over the controlling block of Taurus shares.
NOTE 9 PROPERTY AND EQUIPMENT
Property and equipment as of June 30, 2015 and December 31, 2014 is summarized as follows:
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| | June 30, 2015 | | | December 31, 2014 | |
Warehouse equipment | | $ | 2,922 | | | $ | - | |
Construction in process | | | 284,237 | | | | - | |
Subtotal | | | 287,159 | | | | - | |
Less accumulated depreciation | | | (244 | ) | | | - | |
Property and equipment, net | | $ | 286,915 | | | $ | - | |
Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives. Warehouse equipment is depreciated over an estimated useful life of 5 years. Construction in process is comprised of the accumulated costs of construction of a restaurant bar and grill by the Companys wholly owned subsidiary, Blue Water Bar &
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Grill. N.V., with completion expected in the fall of 2015. Once in service, an estimated life will be established and depreciation with begin.
When property and equipment is retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.
Depreciation expense was $146 and $244 for the three and six months ended June 30, 2015, respectively; and $-0- and $-0- for the three and six months ended June 30, 2014, respectively
NOTE 10 SUBSEQUENT EVENTS
Issuance of Convertible Notes
On July 22, 2015, the Company concluded a coordinated round of bridge financing involving three investors that netted Blue Water $142,500 in bridge financing. The table below summarizes each investor and the amount of financing received in this round of bridge financing. A more comprehensive disclosure relating to this round of financing is hereby incorporated by reference to the Form 8-K filed with the SEC on July 30, 2015.
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Name of Investor | | Face Amount of Note |
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Spero Holdings, LLC | $ | 50,000 |
GDW Holdings Group, LLC | | 55,000 |
Vis Virus, Inc. | | 53,500 |
Redemption of Outstanding Convertible Note
On July 27, 2015, Blue Water repaid an outstanding convertible note to JSJ Investments, Inc. in full, including the principal balance, OID and accrued interest. In accordance with this payment, this note was cancelled and returned to Blue Water. A more comprehensive disclosure relating to this note redemption is hereby incorporated by reference to the Form 8-K filed with the SEC on July 28, 2015.
Increase in Authorized Capital
On August 6, 2015, Blue Water increased its authorized capital to 2,500,000,000 shares comprised of 2,495,000,000 shares of common stock, $0.001 par value, and 5,000,000 shares of preferred stock, $0.001 par value. This increase was performed to prevent Blue Water from potentially going into a technical default situation on certain debt covenants associated with some its outstanding convertible debt. A more comprehensive disclosure relating to this corporate action is hereby incorporated by reference to the Form 8-K filed with the SEC on August 7, 2015.
Amendment to Certificate of Designation for Series A Preferred Stock
On August 6, 2015, Blue Water amended the Certificate of Designation of its Series A Preferred Stock to modify the voting rights associated with this class of preferred stock. Each share of Series A Preferred Stock now carries three-thousand (3,000) votes in all Company voting matters, including the election of officers and directors; votes may not be cumulated. A more comprehensive disclosure relating to this corporate action is hereby incorporated by reference to the Form 8-K filed with the SEC on August 7, 2015.
Conversions of Outstanding Convertible Note
Adar Bays, LLC Convertible Promissory Note 2
Between July 8, 2015 and July 28, 2015 Blue Water received four Notice of Conversions from Adar Bays, LLC converting an aggregate of $45,000 into 3,553,892 shares of Blue Waters common stock.
The remaining principal balance on this note is now $-0-.
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This convertible note with Adar Bays is described in detail the Form 8-K filed with the SEC on December 23, 2014.
LG Capital Funding, LLC Convertible Promissory Note 2
Between July 13, 2015 and August 3, 2015 Blue Water received four Notice of Conversions from LG Capital Funding, LLC converting an aggregate of $50,000 into 4,363,034 shares of Blue Waters common stock.
The remaining principal balance on this note is now $50,000.
This convertible note with LG Capital Funding is described in detail the Form 8-K filed with the SEC on December 23, 2014.
Union Capital, LLC Convertible Promissory Note
Between July 27, 2015 and August 4, 2015 Blue Water received two Notice of Conversions from Union Capital, LLC converting an aggregate of $15,000 into 1,759,784 shares of Blue Waters common stock.
The remaining principal balance on this note is now $35,000.
This convertible note with Union Capital is described in detail the Form 8-K filed with the SEC on January 29, 2015.
No other material events or transactions have occurred during this subsequent event reporting period which required recognition or disclosure in the financial statements.
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Our independent registered public accounting firm has issued a going concern opinion in their audit report dated April 13, 2015, which can be found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on April 13, 2015. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next 12 months. We do not anticipate generating significant revenues until we are able to open our first restaurant and have our distilled spirits widely accepted by consumers. Accordingly, we must raise additional cash from sources other than operations.
To meet our need for cash we are continually exploring new sources of financing, including raising funds through a secondary public offering, a private placement of securities and/or loans. If we are unable to secure additional financing, we will either have to suspend operations until we do raise the cash or cease operations entirely.
The following discussion should be read in conjunction with our financial statements and the notes thereto and the other information included in this Quarterly Report as filed with the SEC on Form 10-Q.
Limited Operating History; Need for Additional Capital
There is limited historical financial information about us upon which to base an evaluation of our performance. We are an emerging growth business with limited operating history. We cannot guarantee that we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns, such as increases in marketing costs, increases in administration expenditures associated with daily operations, increases in accounting and audit fees, and increases in legal fees related to filings and regulatory compliance.
To become profitable and competitive, we have to successfully open operating restaurant properties and have our distilled spirits accepted by consumers. We anticipate relying on equity sales of our common stock in order to continue to fund our business operations until we are able to generate sufficient revenues to cover our operating expenses, which may never happen. Issuances of additional shares will result in dilution to our then existing stockholders. There is no assurance that we will be able to make any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.
We are continually exploring new sources of financing to meet our need for additional cash, including raising funds through sales of our equity securities and loans. We cannot provide any assurances that our efforts to secure additional financing will be successful. We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations. Further, future equity financing could result in additional and substantial dilution to existing shareholders.
Plan of Operations
Blue Water was incorporated on March 3, 2011 in the State of Nevada. We are developer of casual dining restaurant properties and premium distilled spirits. Blue Water is currently developing a chain of casual dining restaurants in popular tourist destinations throughout the Caribbean region under the Blue Water Bar & Grill brand and selling a line of premium rums, which includes our Blue Water Ultra Premium Rum and aged spiced Blue Water Caribbean Gold Premium Rum, in St. Maarten, Dutch West Indies and Anguilla, British West Indies. Additionally, Blue Water is engaged in making strategic equity investments in promising businesses that are in the early stages of obtaining their own listing on the OTC Bulletin Board.
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The projected costs and other related expenses are estimates made by our management and our actual costs related to opening our proposed restaurant may differ significantly.
In addition to the foregoing, and unless otherwise noted, all of the cost estimates and forecasts throughout our business plan are mere estimates made by our management. Our actual costs related to opening and operating the proposed restaurants may differ significantly from our estimates, which could have a negative impact on our overall business, cause our business to fail, and result in you losing all of your investment.
Blue Water Structure and Areas of Operation
Blue Water Bar & Grill
The Blue Water Bar & Grill restaurant concept is the Perfectly CaribbeanSM experience featuring a casual, open air Caribbean themed restaurant designed to offer customers a distinctive and relaxing island dining experience. Central to each restaurant will be a large covered outside patio area where customers can enjoy their drinks and food while overlooking a beautiful water view. The patio area will feature an inviting island styled walk up (and in some cases, swim up) bar and a small stage area for live musical performances by local musicians and dancing. Each restaurant will have an open aired kitchen so customers can see their food being prepared.
Each restaurant will begin serving breakfast at 7am. On weekends the restaurant will promote an American styled breakfast buffet and feature a do-it-yourself Bloody Mary station. Lunch service will commence at 11am and will feature handmade burgers, gourmet sandwiches and salads, and Caribbean jerk styled dishes. Dinner service will start at 5pm and will feature hand-cut aged Certified Angus steaks and prime rib, fresh seafood caught by local fishermen, hand tossed pizzas, and specialty homemade desserts. The restaurant will close at 11pm nightly and the bar will close later at the managers discretion.
During weekdays the bar will host a daily happy hour (4pm 6pm) that will offer reduced priced drinks and appetizer specials. When the sun sets the patio will be outlined by tiki torches, which will promote a fun nighttime island atmosphere while helping ward off unwanted insects such as mosquitoes.
In addition, each restaurant will offer its customers specialty drinks in souvenir glasses, mugs, and shot glasses that come with the drink. These items, along with fun and unique t-shirts and other souvenirs, will be available for retail purchase in a separate souvenir hut that will be approximately 130 square feet in size. These souvenir items will be primarily marketed to the tourist customers. Based on our preliminary discussions with an importer of these types of souvenir items, we estimate selling this merchandise at a 300% - 600% retail markup, depending on the particular item.
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St. Maarten Blue Water Bar & Grill
In February 2015 Blue Water broke ground on its first Blue Water Bar & Grill in St. Maarten, Dutch West Indies. The beachfront building site is located in the pristine eco-friendly Indigo Bay development and is the second restaurant approved for beachfront construction. The first Indigo Bay restaurant, Kokomo, opened in December 2013 and has been a tremendous success to date. For more information visit their respective websites at www.indigo-bay.com and www.kokomo-sxm.com.
Key elements to the design and site location include:
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Blue Water's building site (Lot #L04) measures approximately 1,552 square meters (16,706 square feet) and is located on a picturesque white sand beach.
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This Blue Water Bar & Grill location will feature a large, open-aired tiki roof, swimming pool with swim up bar stools, two fire pits, and beach and pool lounge chairs with full drink and food service.
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The restaurant's foot print measures approximately 415 square meters (4,467 square feet) and seats up to 203 people:
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98 under the main tiki roof, 64 under tropical cover, 26 at the bar, and 15 at the swim up bar.
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Indigo Bay is an eco-friendly commercial and residential development encompassing approximately 150 acres of lush tropical and beachfront land.
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Indigo Bay is St. Maarten's newest and closest attraction to the Port of St. Maarten and is just a quick ride by water taxi for cruise ship passengers.
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Approximate GPS coordinates: 18⁰01'17.5 North and 63⁰04'33 West.
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Keys for Success
To better achieve our business objectives and successfully compete with other restaurants, we have developed the following focal points and strategies we anticipate implementing in all of our future restaurants:
Create a Fun, Energetic, Destination Drinking and Dining Experience. We wish to create and promote a fun and socially open atmosphere whereby our customers can, if they choose to do so, openly interact with one another. Topics of discussion and frequent interest will often center around where each other is from, what activities have they done while on the island, and giving and receiving recommendations for future activities while on the island; sometimes the floor and bar staff will participate in these discussions and offer their own words of advice. We intend to accomplish this by utilizing sectional floor and foot traffic planning, whereby the bar area will promote social interaction among customers, a stage area will feature local live entertainment performers to create a lively and festive atmosphere, and more intimate dining tables will be located further in the back to provide separation for those who just wish to dine alone and enjoy the island atmosphere. We believe that if we are successful at achieving this goal, new customers tourists, local ex-patriots and native locals alike will become repeat, or regular, customers and subsequently promote the restaurant by word-of-mouth to their friends and family.
Distinctive Concept. In each restaurant we wish to create a fun and consistent experience for our customers centered around our full bar service, dining offerings, and daily entertainment. The restaurants concept will be carried throughout our customers entire visit and will involve all aspects of the experience, including the exterior design of the building, interior layout and decorum, employee greetings and uniforms, specialty drinks and menu items, and fun and creative souvenirs such as interestingly shaped drink glasses and bright and flamboyant t-shirts that can remind the customer of their vacation or make an excellent gift for someone back home.
Comfortable Adult Atmosphere. Our restaurants will be primarily adult orientated. While children will be welcomed during daytime hours as long as they are accompanied by a responsible adult at all times during their visit, no one under 21 years of age (or the minimum legal drinking age as established by statute) will be allowed into our restaurants after 10pm. We believe
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that this policy will help maintain a fun and relaxed atmosphere that appeals to adult customers, and will help attract groups such as private parties and business organizations.
High Standard of Customer Service. Because service is one the key areas restaurants differentiate themselves from one another and a constant source of either compliments or complaints from customers we intend to foster a high level of customer service among our employees, ranging from the general manager to the greeters, through intense training (cross training for all manager level employees and a one-week training course, complete with required testing on all food and drink offerings, operational procedures, and computer checkout for all other employees), constant monitoring (from the on-duty manager and surprise visits from secret shoppers), and emphasizing consideration of our customers first and foremost in all decisions. From the moment a customer walks into the front door, we want them to experience a high level of guest service provided by a knowledgeable, energetic staff. Bar tenders will be required to be able to free pour simultaneously from multiple liquor bottles and perform flare techniques (flipping, tossing, and twirling of liquor bottles) for our customers entertainment; greeters and servers will be required to introduce customers to the concept, explain the drink and entree menus and daily specials, and generally set the stage for a fun and memorable experience for them.
Provide Dining Value. We believe that our restaurants should provide our customers with interesting, high quality, and generously portioned (covering the entire plate) menu items that are aesthetically appealing and result in the customer leaving fully satisfied. Complementing the dining aspect, we intend to offer the customer a unique variety of original drinks, each designed to perpetuate and immerse the customer in the restaurants overall concept. It is our goal to generate at least a US$28 average check per guest, inclusive of food and drinks. We estimate that our overall gross sales will be comprised of 65% food and 35% drinks. We anticipate achieving and maintaining a 30% food cost and 18% liquor cost, which relates to our actual cost of the product compared to the gross revenue the product generates. For example, if we sold a fish entree for $20 our actual cost would be $6 and our gross profit would be $14. Prices for entrees will start at around $12 for a hamburger and rise to $42 for a prime rib steak dinner; prices for drinks will start at $3 for beer, $6 for basic well mixed drinks, and $8 for specialty drinks. These price points are competitive with the existing restaurants our management team has scouted in the Simpson Bay area of St. Maarten, Dutch West Indies, where we intend to open our first Blue Water Bar & Grill that will cater to the tourist and local ex-patriot alike.
It is important to note that although we aspire to operate at or below the above food and liquor costs, we cannot guarantee that we will ever achieve such food or liquor costs or, if achieved, will be able to maintain them.
Operations and Management
Our ability to effectively manage an operation including high volume restaurants (annual gross sales of US$1,000,000 or more) with live entertainment offerings is critical to our overall success. In order to maintain quality and consistency at each of our future restaurants we must carefully train and properly supervise our personnel and the establishment of, and adherence to, high standards relating to personnel performance, food and beverage preparation, entertainment productions and equipment, and maintenance of the restaurant facilities. We believe our current management is capable of overseeing our planned growth over the next two years. While staffing levels will vary from restaurant to restaurant depending on actual sales volumes, we anticipate our typical restaurant management staff to be comprised of a general manager, a kitchen manager (who also serves as the head chef) and a bar manager (who also serves as the head bartender); the kitchen manager and bar manager will also act as assistant general managers when the general manager is off-duty and will receive a slightly higher base salary compared to our other chefs and bartenders to compensate for their added responsibilities.
Recruiting. We will actively recruit and select individuals who share our passion for customer service. Our selection process includes testing and multiple interviews to aid in the selection of new employees, regardless of their prospective position. We will offer a competitive compensation plan to our managers that includes a base salary, bonuses for achieving performance objectives, and possibly incentive stock options once they have worked for us for at least one full year. For example, the general manager in our initial Blue Water Bar & Grill restaurant will most likely be offered a base salary of $1,500 a month, plus up to $1,000 a month in additional performance incentives for achieving minimum gross sales and exceeding the minimum targeted food, liquor, and labor costs, as determined by our executive management team. In addition, all employees are entitled to discount meals at any of our future restaurants.
Training. We believe that proper training is the key to exceptional customer service. Each new management hire will go through an extensive training program, which will include cross-training in all management duties. All non-management new hires will go through a standard training program where they will learn and be tested on all of our food and drink offerings, operational procedures, and our point-of-sale (POS) computer system.
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Management Information Systems (MIS). All of our future restaurants will be equipped with a variety of integrated management information systems. These systems will include an easy-to-use point-of-sale (POS) computer system which facilitates the movement of customer food and drink orders between the customer areas and kitchen and bar operations, controls cash, handles credit card authorizations, keeps track of sales on a per employee basis for incentive awards purposes, and provides on-site and executive level management with real-time sales and inventory data. Additionally, we intend to implement a centralized accounting system that will include a food cost program and a labor scheduling and tracking program. Physical inventories of food and drink items will be performed on a weekly basis. Further, daily, weekly, and monthly financial information will be provided to executive level management for analysis and comparison to our budget and to comparable restaurants. By closely monitoring each restaurants gross sales, cost of sales, labor, and other cost trends we will be better able to control our costs, inventory levels, and identify problems with individual operations, if any, early on.
Secret Shopper. Because we believe exceptional customer service is paramount to our success, we intend to implement a secret shopper program to monitor the quality control at all of our future restaurants. Secret shoppers are independent persons who test the quality of our food, drink, and service as paying customers without the knowledge of the restaurants management or employees. Secret shoppers then report their unbiased experiences to our executive level management.
Blue Water Premium Rums
Through its wholly-owned subsidiary, Blue Water Beverage Brands, Ltd., Blue Water has developed a line of award winning premium rums that are produced and bottled in the Dominican Republic. These rums are currently sold in St. Maarten, Dutch West Indies and Anguilla, British West Indies. Blue Water is currently working on expanding its distribution channels in this Caribbean region, including the exclusive and influential St. Barths, French West Indies and St. Kitts and Nevis.
Blue Water intends to introduce a third rum expression (an exclusive and limited edition sipping quality Añejo rum) in late 2015 and will continue expanding distribution of its premium rums throughout the Caribbean and, ultimately, export them into the United States in early 2016.
| |
| Blue Water Ultra Premium Rum
Made in the Dominican Republic and steeped in time honored elite Caribbean rum making tradition dating back to the eighteenth century, Blue Water Ultra Premium Rum is distilled from pure sugarcane harvested at the pinnacle of freshness and carefully crafted by a maestro ronero (master rum-maker). Through our dedication to tradition and our commitment to exceptional quality comes an ultra premium rum of unparalleled smoothness and distinctive taste that can be experienced neat, on the rocks, or in your favorite cocktail.
Blue Water Ultra Premium Rum is 40% alcohol/volume (80 proof). |
| |
| Blue Water Caribbean Gold Premium Rum
Crafted in the Dominican Republic claimed by Christopher Columbus in 1492 and the birthplace of Europes quest for Caribbean treasure and riches comes a gold spiced rum able to satisfy even the most ruthless pirate and noble conquistador. Carefully blended using centuries old rum making techniques, Blue Water Caribbean Gold Rum obtains its pure color and sweet undertones from aging three years in oak barrels before being delicately infused with natural spices making it a true Caribbean spiced rum of unforgettable taste that can be enjoyed neat, on the rocks, or in your favorite cocktail.
Blue Water Caribbean Gold Premium Rum is 35% alcohol/volume (70 proof). |
Award Winning Rums
Since the official launch in late February 2015, Blue Waters line of premium rums have received multiple awards in professionally judged international blind tasting competitions as well as favorable reviews from a variety of industry experts and rum and distilled spirits publications. Some of these awards include:
Blue Water Ultra Premium Rum
·
Los Angeles International Spirits Competition 2015 (Silver medal)
Blue Water Caribbean Gold Premium Rum
·
Los Angeles International Spirits Competition 2015 (Best in Category)
·
Miami Rum Renaissance Festival 2015 (Gold medal)
·
LA International Spirits Competition 2015 (Gold medal)
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Strategic Alliances and Investment Holdings
On June 21, 2013 Blue Water entered into a Strategic Alliance Agreement with Taurus Financial Partners, LLC (Taurus). Under this Strategic Alliance Agreement Blue Water was granted the exclusive right to participate in Tauruss future Registered Spin-Off transactions.
In a typical Registered Spin-Off transaction, Blue Water will acquire between 15 20% of an operating business that is in the process of going public on the OTC Bulletin Board (OTCBB). Taurus will then register these shares with the Securities and Exchange Commission (SEC). Once Taurus has registered these shares with the SEC, Blue Water will spin-off a portion of them to its then stockholders in the form of a special stock dividend.
Blue Water anticipates participating in three or four of these transactions each fiscal year. It is important to note that Blue Waters President and Chief Executive Officer, J. Scott Sitra, is concurrently the President and Chief Executive Officer of Taurus.
Stream Flow Media, Inc.
On December 2, 2013 Blue Water entered into the first of these types of transactions under this Strategic Alliance Agreement with Stream Flow Media, Inc., a Colorado corporation (Stream Flow). As per the terms of this transaction, Stream Flow issued 20,000,000 shares of its common stock, $0.001 par value, to Blue Water, which represents approximately 20% of Stream Flows issued and outstanding shares of common stock as of April 6, 2014 in return for Blue Water agreeing to pay all of Stream Flows expenses related to obtaining a listing on the OTCBB.
Stream Flow is presently in the process of preparing and filing its Form 15c2-11 with FINRA, the second step in obtaining a listing on the OTCBB. Once Stream Flow obtains its listing on the OTCBB, and upon approval by both the SEC and FINRA, Blue Water will issue a special one-time stock dividend of approximately 25%, or 5,000,000, of its Stream Flow shares to its then shareholders. The remaining Stream Flow shares will be sold by Blue Water over an 18-24 month period with the net proceeds going towards financing new units of its Blue Water Bar & Grill restaurant concept.
Blue Water accounts for its Stream Flow shares as Available-For-Sale (AFS) securities that are valued at fair value. Changes in fair value are recorded in the financial statements as additions (subtractions) to equity.
During the six months ended June 30, 2015, Blue Water had accumulated $32,524 in costs related to the Stream Flow shares, recorded to additional paid in capital. At June 30, 2015 and December 31, 2014, Blue Water recorded the investment at fair
35
value relating to its stock holdings based on expected market listing. Accordingly, Blue Water carried the Stream Flow shares at $200,000 valuation on the balance sheet as of June 30, 2015 and December 31, 2014.
Next Level Hockey, LLC
On September 5, 2014, and under this Strategic Alliance Agreement, Blue Water entered into a definitive agreement with Next Level Hockey, LLC (Next Level), a New Jersey limited liability company. The following is a summary of the terms of this transaction:
·
The Next Level transaction will essentially mirror Blue Waters December 2013 investment in Stream Flow Media, Inc.
·
Blue Water will own a net 15% equity interest in Next Level when it goes public on the OTCBB
As of June 30, 2015 Next Levels management was still in the process of compiling the documentation necessary for preparing their initial SEC Registration Statement on Form S-1.
Long-Term Plan (5 Years)
Blue Water Bar & Grill
Over the next five years we plan to focus on a disciplined growth strategy of opening one new Blue Water Bar & Grill restaurant each year. Aside from the Blue Water Bar & Grill currently under development in St. Maarten, Dutch West Indies, we have also identified the following Caribbean islands we intend to eventually open a Blue Water Bar & Grill restaurant:
·
Aruba, Dutch West Indies;
·
Nassau, Bahamas;
·
Cozumel, Mexico;
·
Grand Cayman; and
·
Barbados.
We estimate that we will need to raise an aggregate of between $4 - $5 million to open the proposed restaurants on each of the listed Caribbean islands. This capital will most likely be raised through the sales of additional equity securities, which will have a dilutive effect on existing shareholders.
Distilled Spirits
The Blue Water Ultra Premium Rum and Blue Water Caribbean Gold Premium Rum brands are currently available in St. Maarten, Dutch West Indies and Anguilla, British West Indies. Blue Water is presently working to expand availability through distribution agreements into the neighboring islands, including the exclusive and influential St. Barths, French West Indies and St. Kitts and Nevis. Blue Water will continue expanding these brands throughout the Caribbean Region and, ultimately, export them into the United States in early 2016.
In addition to the Blue Water Ultra Premium Rum and Blue Water Caribbean Gold Premium Rum brands, Blue Water is presently working with its Dominican Republic based producer and bottler to expand its product line premium rums. In particular, Blue Water is developing an exclusive and limited edition sipping quality Añejo rum for introduction in late 2015.
Sales and Marketing
Our marketing strategy is aimed at attracting new customers through both traditional and creative avenues. We intend to focus on building a reputation among local customers (those living on the island) while directing our marketing efforts toward tourists staying on the island or visiting for the day on a cruise ship. We intend to accomplish this through:
·
Grand opening promotions;
·
Traditional paid advertising (e.g. radio, television, newspaper, etc.);
·
Free media exposure (e.g. hosting charity events, food reviews, etc.); and
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·
Working directly with tourism bureau representatives and transportation representatives (taxi association, bus association, day sail and charter businesses, etc.).
When opening a new Blue Water Bar & Grill restaurant we intend to host grand opening parties for local leaders, media personalities, hospitality employees such as resort and hotel staff, and tourism bureau representatives (inclusive of cruise ship industry representatives and hotel/resort industry representatives). Our goal with courting these groups is to introduce them to our concept and court them to refer new customers to our restaurants and provide us with free future media exposure.
Afterwards we will sustain awareness through more traditional marketing methods, including radio and television spots, newspaper ads, billboards and road signs, and resort and hotel concierge promotional cards and discount coupons.
If our strategy is successful it will lead to word of mouth referrals, which is our ultimate goal. This is accomplished by providing our customers with consistently excellent service and quality food and drinks.
While we do not have a fixed marketing budget, we do anticipate launching each new restaurant with a marketing blitz campaign and tapering it down to less than 5% of the restaurants annual gross sales once it is sufficiently established with regular and recurring revenue.
Financing
We estimate that we will need to generate an aggregate of at least $1.5 million in new financing during the course of fiscal 2015 in order to meet our planned 2015 capital expenditures. Further, in order to achieve our long-term plans, we anticipate that we will need to generate at least between $4 and $5 million in additional long-term financing.
Madison Park Advisors Engagement
On July 21, 2014, Blue Water entered into an engagement with Madison Park Advisors, LLC, a New York investment advisory firm that also manages the Madison Park Investment Fund, to provide the completion capital for the St. Maarten, Dutch West Indies Blue Water Bar & Grill currently under development.
As of June 30, 2015 no funds had been raised from the engagement with Madison Park Advisors. A registered offering through an effective Registration Statement on Form S-1 had been approved by the SEC. However, due to rapidly changing market prices in relation to Blue Waters common stock as traded on the OTC Bulletin Board, Blue Water decided to cancel the registered offering that would require Blue Water to sell free-trading shares of its common stock at a substantial discount to then market prices.
Blue Water continues to work with Madison Park advisors to secure new sources of financing, both short-term and long-term.
Additional Sources of Long-Term Financing
Currently we are exploring various sources of additional financing. However, it is important to note that other than our engagement with Madison Park Advisors we presently do not have any material arrangements for this additional financing. We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations. Future equity financing, if ever available, could result in additional and potentially substantial dilution to existing shareholders.
Government Regulation
The restaurant industry is subject to many various laws which directly affect our organization and planned operations. Each restaurant we open must comply with various licensing requirements and regulations by a number of governmental authorities, which typically include health, safety and fire authorities in the municipality where our restaurant is located. The development and operation of a successful restaurant depends upon selecting and acquiring a suitable location, which is normally subject to zoning, land use, environmental, traffic, and other regulations. Further, our operations will also be subject to various laws governing such matters as wages, health insurance requirements, working conditions, citizenship and work permit requirements, and mandatory overtime pay, all of which will directly affect our labor costs.
Additionally, because we anticipate a significant portion of our revenue to be generated from the sale of alcoholic beverages, we must comply with any and all regulations governing their sale. Typically this requires the proper licensing at each
37
restaurant location (in many cases it needs to be renewed on an annual basis). Such licenses may be revoked or suspended for cause at any time. These regulations often relate to many aspects of the restaurant, including the minimum age of patrons and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling, and storage and dispensing of alcoholic beverages. The failure of any of our future restaurants to obtain and retain such a license would limit its ability to generate sufficient revenues to achieve profitability at that particular location, which could subsequently impact our businesss overall revenues and ability to achieve (and if achieved, maintain) profitability.
Compliance with Environmental Laws
We have not incurred and do not anticipate incurring any expenses associated with environmental laws.
Patents and Trademarks
We are presently using the following trademarks and service marks:
·
Blue Water Bar & Grill;
·
Blue Water Ultra Premium Rum;
·
Blue Water Caribbean Gold;
·
Perfectly Caribbean; and
·
Authentic. Pure. Caribbean.
Property and Equipment
Our principal executive office is located at Wellsburg Street #7, Cole Bay, St. Maarten, Dutch West Indies.
In addition, we lease a warehouse in St. Maarten that stores our current inventory of Blue Water premium rums and in the process of constructing a Blue Water Bar & Grill in Indigo Bay, St. Maarten.
Executive Offices and Telephone Number
Our executive office, US mailing address and main telephone number is currently:
Executive Office
US Mailing Address (Mail Forwarding Service)
Wellsburg Street #7
c/o The Mailbox #5241
Cole Bay
P. O. Box 523882
St. Maarten, Dutch West Indies
Miami, FL 33152
Telephone and Other Contact Information
Corporate Internet Websites
Tel:
(949) 264-1475
www.bluewaterglobalgroup.com
Fax:
(949) 607-4052
www.bluewaterbar.com
E-Mail:
info@bluewaterglobalgroup.com
www.bluewaterrum.com
Results of Operations
Three Months Ended June 30, 2015 and 2014
Revenues. We generated $2,157 in revenue during the three months ended June 30, 2015 compared to $-0- for the three months ended June 30, 2014. This increase in revenue was the result of commencing sales of our initial line of premium rums comprised of the Blue Water Ultra Premium Rum and Blue Water Caribbean Gold Premium Rum in St. Maarten in February 2015. We anticipate revenues to continue increasing progressively throughout the remainder of the fiscal year ending December 31, 2015 as a result of the launching of these premium rums and the anticipated opening of our first Blue Water Bar & Grill restaurant in St. Maarten, Dutch West Indies which is presently under construction.
Gross Profit. We generated a gross profit of $1,255 during the three months ended June 30, 2015 compared to a gross profit of $-0- for the same period a year ago. As a percentage of revenues, gross profit was 58.2% during the three months ended June 30, 2015.
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Operating Expenses. Our total operating expenses for the three months ended June 30, 2015 were $120,199, which is a $28,309, or 30.8%, increase compared to operating expenses of $91,890 for the same period a year ago. Our increase in operating expenses was primarily attributable to additional costs incurred in developing our product lines.
Other Income (Expenses). During the three months ended June 30, 2015 we incurred ($469,514) in other (expenses) compared to ($148,148) for the same period a year ago, which represented a $321,366, or 216.9%, increase in other (expenses). These other (expenses) were comprised of interest expenses and non-cash derivative accounting expenses relating to convertible promissory notes.
Net Income (Loss). We had a net loss of ($588,458) for the three months ended June 30, 2015 compared to a net loss of ($240,038) for the same period a year ago, which represented a $348,420, or 145.2%, increase in net loss. The increase in net loss was primarily attributable to primarily higher non-cash interest and derivative accounting expenses relating to convertible promissory notes additional service fees paid.
Six Months Ended June 30, 2015 and 2014
Revenues. We generated $6,621 in revenue during the six months ended June 30, 2015 compared to $-0- for the three months ended June 30, 2014. This increase in revenue was the result of commencing sales of our initial line of premium rums comprised of the Blue Water Ultra Premium Rum and Blue Water Caribbean Gold Premium Rum in St. Maarten in February 2015. We anticipate revenues to continue increasing progressively throughout the remainder of the fiscal year ending December 31, 2015 as a result of the launching of these premium rums and the anticipated opening of our first Blue Water Bar & Grill restaurant in St. Maarten, Dutch West Indies which is presently under construction.
Gross Profit. We generated a gross profit of $3,990 during the six months ended June 30, 2015 compared to a gross profit of $-0- for the same period a year ago. As a percentage of revenues, gross profit was 60.3% during the six months ended June 30, 2015.
Operating Expenses. Our total operating expenses for the six months ended June 30, 2015 were $980,079, which is a $670,144, or 216.2%, increase compared to operating expenses of $309,935 for the same period a year ago. Our increase in operating expenses was primarily attributable to $701,944 in one-time non-cash stock issuance expenses comprised of $428,610 for long-term management incentives and $273,334 to outside consultants.
Other Income (Expenses). During the six months ended June 30, 2015 we incurred ($2,154,535) in other (expenses) compared to ($183,400) for the same period a year ago, which represented a $1,971,135, or 1,074.8%, increase in other (expenses). These other (expenses) were comprised of interest expenses and non-cash derivative accounting expenses relating to convertible promissory notes.
Net Income (Loss). We had a net loss of ($3,130,624) for the six months ended June 30, 2015 compared to a net loss of ($493,335) for the same period a year ago, which represented a $2,637,289, or 534.6%, increase in net loss. The increase in net loss was primarily attributable to $701,944 in one-time non-cash stock issuance expenses and $2,154,535 in non-cash derivative accounting expenses relating to convertible promissory notes.
Liquidity and Capital Resources
As of June 30, 2015, we had total assets of $725,825, which consisted of $130,373 in cash, $3,606 in accounts receivable, $102,531 in inventory, property and equipment valued at $286,915, available for sale securities valued at $200,000 (comprised 20,000,000 shares of Stream Flow Media, Inc. and a net 15% interest in Next Level Hockey, LLC, valued at $200,000 and $-0-, respectively), and security deposits of $2,400.
As of June 30, 2015, our total liabilities were $3,436,894, which consisted of $67,908 in accounts payable, $527,607 in accounts payable to a related party, Taurus Financial Partners, LLC (Taurus), $463,050 in convertible promissory notes (net of unamortized debt discounts of $945,034), $33,089 in accrued interest, and $2,345,240 in derivative liabilities. (It is important to note that as of June 30, 2015, Taurus owned 16,000,000 shares of Blue Waters issued and outstanding common stock and 150,000 shares of Blue Waters issued and outstanding preferred stock, which represented 13.2% and 100% of each class of securities, respectively. It is also important to note that our President and Chief Executive Officer, J. Scott Sitra, is concurrently the President and Chief Executive Officer at Taurus and has voting disposition over the controlling block of Taurus.).
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Total Stockholders Deficit. Our stockholders deficit was ($2,711,069) as of June 30, 2015.
We expect to incur continued losses through the fiscal year ending December 31, 2015, possibly even longer. We estimate that we will need to generate at least $1.5 million in additional financing in order to meet our planned 2015 capital expenditures. Further, in order to proceed with our long-term plans, we anticipate that we will need to generate at least between $4 and $5 million in additional long-term financing. Madison Park Advisors has agreed to assist us with this financing, but until it is received we cannot guarantee or compel Madison Park Advisors to provide this financing in an expedient manner.
Convertible notes payable are comprised of the following:
| | | | | | | |
| | | | | | | |
| | June 30, 2015 | | | December 31, 2014 |
Convertible promissory notes, due May 28, 2015, net of unamortized debt discount of $28,524 | | $ | - | | | $ | 24,476 |
Convertible promissory note, due July 3, 2015, net of unamortized debt discount of $25,440 | | | - | | | | 17,560 |
Convertible promissory note, due August 17, 2015, net of unamortized debt discount of $51,768 | | | - | | | | 13,232 |
Convertible promissory note, due August 19, 2015, net of unamortized debt discount of $47,596 | | | - | | | | 8,654 |
Convertible promissory note, due May 19, 2015, net of unamortized debt discount of $76,796 | | | - | | | | 23,204 |
Convertible promissory note, due December 22, 2015, net of unamortized debt discount of $21,575 and $48,767, respectively | | | 23,425 | | | | 1,233 |
Convertible promissory note, due December 22, 2015, net of unamortized debt discount of $42,192 and $97,534, respectively | | | 45,808 | | | | 2,466 |
Convertible promissory note, due November 14, 2015, net of unamortized debt discount of $31,457 | | | - | | | | 2,043 |
Convertible promissory note, due December 1, 2015, net of unamortized debt discount of $44,430 | | | - | | | | 5,570 |
Convertible promissory note, due November 13, 2015, net of unamortized debt discount of $47,767 | | | - | | | | 7,233 |
Convertible promissory note, due December 22, 2015, net of unamortized debt discount of $27,310 | | | - | | | | 690 |
Convertible promissory note, due July 27, 2015, net of unamortized debt discount of $14,917 | | | 85,083 | | | | - |
Convertible promissory note, due January 26, 2016, net of unamortized debt discount of $28,767 | | | 21,233 | | | | - |
Convertible promissory note, due November 17, 2015, net of unamortized debt discount of $40,513 | | | 38,487 | | | | - |
Convertible promissory note, due February 20, 2016, net of unamortized debt discount of $74,685 | | | 41,315 | | | | - |
Convertible promissory note, due February 9, 2016, net of unamortized debt discount of $66,279 | | | 14,721 | | | | - |
Convertible promissory note, due April 17, 2016, net of unamortized debt discount of $39,891 | | | 10,109 | | | | - |
Convertible promissory note, due April 16, 2016, net of unamortized debt discount of $41,742 | | | 10,758 | | | | - |
Convertible promissory note, due April 27, 2016, net of unamortized debt discount of $46,208 | | $ | 9,792 | | | $ | - |
Convertible promissory note, due November 1, 2015, net of unamortized debt discount of $67,391 | | | 32,609 | | | | - |
Convertible promissory note, due April 29, 2017, net of unamortized debt discount of $50,793 | | | 4,707 | | | | - |
Convertible promissory note, due November 5, 2015, net of unamortized debt discount of $54,180 | | | 25,820 | | | | - |
Convertible promissory note, due February 8, 2016, net of unamortized debt discount of $45,448 | | | 10,802 | | | | - |
| | June 30, 2015 | | | December 31, 2014 |
| | | | | | | |
Convertible promissory note, due February 6, 2016, net of unamortized debt discount of $63,029 | | | 15,971 | | | | - |
Convertible promissory note, due May 6, 2017, net of unamortized debt discount of $70,634 | | | 12,699 | | | | - |
Convertible promissory note, due November 12, 2015, net of unamortized debt discount of $73,369 | | | 26,631 | | | | - |
Convertible promissory note, due June 8, 2016, net of unamortized debt discount of $52,634 | | | 3,366 | | | | - |
Convertible promissory note, due March 18, 2016, net of unamortized debt discount of $50,786 | | | 2,714 | | | | - |
Total | | | 463,050 | | | | 106,361 |
Less current portion | | | (445,644 | ) | | | (106,361) |
Long term portion | | $ | 17,406 | | | $ | - |
More detailed information about each of the above convertible notes can be found in the notes to the financial statements in this Quarterly Report and in the notes to the financial statements in our Annual Report filed with the SEC on April 13, 2015.
Additional Need and Sources of Financing
Currently we are exploring various sources of additional long-term financing. However, it is important to note that other than our engagement with Madison Park Advisors we presently do not have any material arrangements for this additional financing. We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations. Future equity financing, if ever available, could result in additional and potentially substantial dilution to existing shareholders.
Going Concern Consideration
Our independent registered public accounting firm has issued a going concern opinion in their audit report dated April 13, 2015, which can be found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on April 13, 2015. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next 12 months.
Off-Balance Sheet Transactions
We do not engage in off-balance sheet transactions.
Contractual Obligations
The following table summarizes Blue Waters contractual obligations as of June 30, 2015:
| | | | | | | | | |
| | | | Due Within |
Description | | Total | | 2015 | | 2016 | | 2017 |
| | | | | | | | |
Convertible promissory notes | $ | 1,408,083 | $ | 592,000 | $ | 677,250 | $ | 138,833 |
Warehouse, St. Maarten (1) | | 28,645 | | 7,200 | | 14,400 | | - |
Long-term marketing agreements | | 39,240 | | 5,413 | | 19,620 | | 6,207 |
| Total | $ | 1,475,968 | $ | 604,613 | $ | 711,270 | $ | 145,040 |
(1)
On January 1, 2015, Blue Water entered into a two-year lease agreement for a warehouse in St. Maarten, Dutch West Indies. Rent is fixed at $1,200 per month throughout the term of the lease. The first months rent was pro-rated at $1,045.
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CRITICAL ACCOUNTING POLICIES
The accompanying financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (US GAAP) for financial information and in accordance with the Securities and Exchange Commissions (SEC) Regulation S-X. They reflect all adjustments which are, in the opinion of Blue Waters management, necessary for a fair presentation of the financial position and operating results as of and for the three and six months ended June 30, 2015 and 2014.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Because of the use of estimates inherent in the financial reporting process, actual results may differ significantly from those estimates.
Cash and Cash Equivalents
For purposes of the statement of cash flows, Blue Water considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents. As of June 30, 2015 and December 31, 2014, Blue Water had no cash equivalents.
Revenue Recognition
Blue Water follows the guidance of FASB ASC Topic 605 for revenue recognition. In general, Blue Water recognizes revenue when (1) the price is fixed and determinable, (2) persuasive evidence of an arrangement exists, (3) the service has been provided, and (4) collectability is reasonably assured.
Blue Water anticipates generating future revenue from two sources: (i) food, beverage and souvenir sales from its Blue Water Bar & Grill restaurant concept presently under development and (ii) sales of its of distilled spirits, which includes its Blue Water Ultra Premium Rum and Blue Water Caribbean Gold Premium Rum brands. Revenue from all sources will be recognized at the time of the sale.
Inventory/cost of sales
Blue Water maintains an inventory, which consists primarily of distilled spirits, manufactured and packaged by outside vendors, including component parts such as packaging and delivery to Blue Waters warehouse. The average cost method is utilized in valuing the inventory, and is stated at the lower of cost or market.
As of June 30, 2015, Blue Waters inventory, comprised of distilled spirits, available for sale of $102,531. During the six months ended June 30, 2015, the cost of delivered products sold in the current period was $2,631.
Long-Term Investments
Blue Water accounts for its long-term investments, which are designated as available-for-sale securities, in accordance with US GAAP for certain investments in debt and equity securities, which requires that available-for-sale securities be carried at fair value with unrealized gains and losses, net of tax, included in stockholders' equity under accumulated other comprehensive income (loss). Fair value of the securities is based upon quoted market prices in active markets or estimated fair value when quoted market prices are not available. As of June 30, 2015 and December 31, 2014, Blue Water had long-term investments consisting of (i) 20,000,000 shares of Stream Flow Media, Inc. and (ii) a net 15% interest in Next Level Hockey, LLC. During the six months ended June 30, 2015, Blue Water recorded associated costs of the investment of $32,524 as a charge to additional paid in capital.
Fair Value of Financial Instruments
ASC 820, Fair Value Measurements and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A
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financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:
| | |
Level | | Description |
| | |
Level 1 | | Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. |
Level 2 | | Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. |
Level 3 | | Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. |
The estimated fair values of the Companys financial instruments are as follows:
| | | | | | | | | |
| Fair Value Measurement at June 30, 2015 Using: |
| | | | | | | | |
Description | |
6/30/15 | | Quoted Prices In Active Markets For Identical Assets (Level 1) | |
Significant Other Observable Inputs (Level 2) | |
Significant Unobservable Inputs (Level 3) |
Assets | | | | | | | | |
| Cash and equivalents | $ | 130,373 | $ | 130,373 | $ | - | $ | - |
| Accounts receivable | | 3,606 | | 3,606 | | - | | - |
| Inventory | | 102,531 | | 102,531 | | - | | - |
| Available for sale securities | | 200,000 | | 200,000 | | - | | - |
| Deposits, long-term | | 2,400 | | 2,400 | | - | | - |
Total assets measured at fair value | $ | 438,910 | $ | 438,910 | $ | - | $ | - |
| | | | | | | | |
Liabilities | | | | | | | | |
| Accounts payable | $ | 67,908 | $ | 67,908 | $ | - | $ | - |
| Accounts payable, related party | | 527,607 | | - | | 527,607 | | - |
| Convertible notes payable, net of unamortized debt discount of $945,034 | |
463,050 | |
- | |
- | |
463,050 |
| Accrued interest | | 33,089 | | 33,089 | | - | | - |
| Derivative liability | | 2,345,240 | | - | | - | | 2,345,240 |
Total liabilities measured at fair value | $ | 3,436,894 | $ | 100,997 | $ | 527,607 | $ | 2,808,290 |
| | | | | | | | | |
| Fair Value Measurement at December 31, 2014 Using: |
| | | | | | | | |
Description | |
12/31/14 | | Quoted Prices In Active Markets For Identical Assets (Level 1) | |
Significant Other Observable Inputs (Level 2) | |
Significant Unobservable Inputs (Level 3) |
Assets | | | | | | | | |
| Cash and equivalents | $ | 192,556 | $ | 192,556 | $ | - | $ | - |
| Vendor deposits | | 28,422 | | 28,422 | | - | | - |
| Materials inventory | | 42,484 | | 42,484 | | - | | - |
| Available for sale securities | | 200,000 | | 200,000 | | - | | - |
| Deposits, long-term | | 2,400 | | 2,400 | | - | | - |
Total assets measured at fair value | $ | 465,862 | $ | 465,862 | $ | - | $ | - |
| | | | | | | | |
Liabilities | | | | | | | | |
| Accounts payable | $ | 8,211 | $ | 8,211 | $ | - | $ | - |
| Accounts payable, related party | | 494,718 | | - | | 494,718 | | - |
| Convertible notes payable, net of unamortized debt discount of $527,277 | |
106,361 | |
- | |
- | |
106,361 |
| Accrued interest | | 6,986 | | 6,986 | | - | | - |
| Derivative liability | | 1,424,011 | | - | | - | | 2,058,072 |
Total liabilities measured at fair value | $ | 2,040,287 | $ | 15,197 | $ | 494,718 | $ | 1,530,372 |
Net Loss per Share Calculation
Basic net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per shares is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Blue Water excludes all potentially dilutive securities from its diluted net loss per share computation since their effect would be anti-dilutive because Blue Water recorded a loss for the three and six months ended June 30, 2015 and 2014.
Beneficial Conversion Feature
From time to time, Blue Water may issue convertible notes that may have conversion prices that create an embedded beneficial conversion feature pursuant to the Emerging Issues Task Force guidance on beneficial conversion features. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of any attached equity instruments, if any related equity instruments were granted with the debt. In accordance with this guidance, the intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using either the straight line method or the effective interest method.
Income Taxes
We account for income taxes pursuant to FASB ASC 740, Income Taxes. Under FASB ASC 740-10-25, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.
We maintain a valuation allowance with respect to deferred tax assets. Blue Water establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration Blue Waters financial position
44
and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carryforward period under the Federal tax laws.
Changes in circumstances, such as Blue Water generating taxable income, could cause a change in judgment about its ability to realize the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.
Accounting for Derivative Instruments
All derivatives have been recorded on the balance sheet at fair value based on the Black Sholes calculation. These derivatives, including embedded derivatives in Blue Water's convertible notes which have floating conversion prices based on changes to the quoted price of Blue Water's common stock and common stock equivalents tainted as a result of the derivative, are separately valued and accounted for on Blue Water's balance sheet. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data and requiring judgment and estimates.
Election to Use Extended Transitional Period Under Jumpstart Our Business Startups Act (JOBS Act)
We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.
Recent Accounting Pronouncements
There are various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on Blue Water's financial position, results of operations or cash flows.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable since we are a smaller reporting company.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this report, we conducted an evaluation under the supervision and with the participation of principal executive officer and sole director, J. Scott Sitra, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act).
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be presented or detected on a timely basis.
Based on managements assessment, we have concluded that, as of June 30, 2015, our disclosure controls and procedures were not effective in timely alerting management to the material information relating to us required to be included in our annual and interim filings with the SEC.
Management has concluded that our disclosure controls and procedures had the following material weaknesses:
·
We were unable to maintain any segregation of duties within our financial operations due to our reliance on limited personnel in the finance function. While this control deficiency has not resulted in any audit adjustments to our interim or annual financial statements, it could have resulted in a material misstatement that might have been prevented or detected by a segregation of duties;
·
Blue Water lacks sufficient resources to perform the internal audit function and does not have an Audit Committee;
45
·
We do not have an independent Board of Directors, nor do we have a board member designated as an independent financial expert to Blue Water. The Board of Directors is comprised of one (1) member who also serves as Blue Waters principal executive officer. As a result, there is a lack of independent oversight of the management team, lack of independent review of our operating and financial results, and lack of independent review of disclosures made by Blue Water; and
·
Documentation of all proper accounting procedures is not yet complete.
These weaknesses have existed since our inception on March 3, 2011 and, as of June 30, 2015, have not been remedied.
To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned material weaknesses, including, but not limited to, the following:
·
Considering the engagement of consultants to assist in ensuring that accounting policies and procedures are consistent across the organization and that we have adequate control over financial statement disclosures;
·
Hiring additional qualified financial personnel, including a Chief Financial Officer, on a full-time basis;
·
Expanding our current board of directors to include additional independent individuals willing to perform directorial functions; and
·
Increasing our workforce in preparation of opening our first Blue Water Bar & Grill in St. Maarten, Dutch West Indies and initiating wholesale and retail sales of our distilled spirits.
Since the recited remedial actions will require that we hire or engage additional personnel, these material weaknesses may not be overcome in the near-term due to our limited financial resources. Until such remedial actions can be realized, we will continue to rely on the limited advice of outside professionals and consultants.
Changes in Controls and Procedures
There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II
Item 1. Legal Proceedings
No officer, director, or persons nominated for these positions, and no promoter or significant employee of our corporation has been involved in legal proceedings that would be material to an evaluation of our management. We are not aware of any pending or threatened legal proceedings involving Blue Water Global Group, Inc.
During the past ten (10) years, J. Scott Sitra and Michael Hume have not been the subject of the following events:
1)
Any bankruptcy petition filed by or against any business of which either Mr. Sitra or Mr. Hume were a general partner or executive officer either at the time of the bankruptcy or within two (2) years prior to that time;
2)
Any conviction in a criminal proceeding or being subject to a pending criminal proceeding;
3)
An order, judgment, or decree, not subsequently reversed, suspended or vacated, or any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting Mr. Sitras or Mr. Humes involvement in any type of business, securities or banking activities; and
4)
Found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Future Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
46
Item 1A. Risk Factors
Not applicable since we are a smaller reporting company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Default Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
Item 6. Exhibits
| | |
Exhibit Number | |
Description of Exhibit |
| | |
3.1 (1) | | Articles of Incorporation |
3.2 (1) | | Bylaws |
3.3 (2) | | Amendment to Articles of Incorporation dated June 13, 2013 |
3.4 (3) | | Certificate of Change dated September 9, 2013 |
31.1 | | Section 302 Certifications under Sarbanes-Oxley Act of 2002 |
32.1 | | Section 906 Certification under Sarbanes Oxley Act of 2002 |
(1)
Incorporated by reference to our Registration Statement on Form S-1 filed May 27, 2011.
(2)
Incorporated by reference to our Current Report on Form 8-K filed July 11, 2013.
(3)
Incorporated by reference to current report on Form 8-K filed on September 23, 2013.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned, thereto duly authorized on this 14th day of August, 2014.
BLUE WATER GLOBAL GROUP, INC.
By:
/s/ J. Scott Sitra
J. Scott Sitra
President, Chief Executive Officer,
Secretary, Treasurer, Chief Financial Officer,
Principal Executive Officer,
Principal Financial Officer,
Principal Accounting Officer, and Sole Director
47
EXHIBIT 31.1
CERTIFICATION OF THE PRINICPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
and Securities and Exchange Commission Release 34-46427
I, J. Scott Sitra, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Blue Water Global Group, Inc. for the interim period ended June 30, 2015;
2.
Based on my knowledge, this report does not contain any untrue statement of 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 Registrants other certifying officer 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 Registrants 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 Registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the Registrants fourth quarter in the case of an Annual Report) that has materially effected, or is reasonably likely to materially effect, the registrants internal control over financial reporting.
5.
The Registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrants auditors and the audit committee of Registrants board of directors (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrants 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 registrants internal control over financial reporting.
Date: August 14, 2015
By:
/s/ J. Scott Sitra
J. Scott Sitra
President, Chief Executive Officer,
Principal Executive Officer, Secretary, Treasurer,
Principal Financial Officer, Principal Accounting Officer and
Sole Director
EXHIBIT 32.1
CERTIFICATION 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 Blue Water Global Group, Inc. (Company) on Form 10-Q for the interim period ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (Report), I, J. Scott Sitra, 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 and belief:
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.
Date: August 14, 2015
By:
/s/ J. Scott Sitra
J. Scott Sitra
President, Chief Executive Officer,
Principal Executive Officer, Secretary, Treasurer,
Principal Financial Officer, Principal Accounting Officer and Sole Director
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