Item 1. Business
Patriot Berry Farms, Inc. (“Patriot Berry” or the “Company”) was incorporated in the State of Nevada on December 15, 2010 under the name of Gaia Remedies, Inc. The Company is in the business of acquiring and establishing profitable berry farms throughout the United States. The main focus of the Company is on blueberry production with a secondary focus on strawberry and raspberry production. Patriot Berry is a development stage company and has not yet realized any revenues from its planned principal activities.
On December 27, 2012, a change in control occurred as an officer and director of the Company purchased 54,400,000 shares of common stock of the Company’s common stock, par value $0.001 per share (the “Common Stock”), of which 19,200,000 shares were subsequently voluntarily cancelled for no consideration. On January 28, 2013, the Company changed its name to Patriot Berry Farms, Inc.
Further, an additional change in control occurred pursuant to a stock purchase agreement (the “Stock Purchase Agreement”), dated March 21, 2014, whereby the Company’s President and sole director sold 35,200,000 shares of Common Stock to Daniel Cattlin for an aggregate price of $20,000, which sale of common stock constituted a controlling interest in Company, or 50.5% of the Company’s then issued and outstanding common stock. In connection with the Stock Purchase Agreement, the Company’s former President, Alexander Houstoun-Boswall resigned from his positions of President, Chief Executive Officer, Treasurer, and member of the board of the directors, while remaining with the Company in the capacity of a business development consultant. The Company’s board of directors accepted the resignation of Mr. Houstoun-Boswall and appointed Mr. Cattlin to serve as the Company’s President, Chief Executive Officer, Secretary, Treasurer, and sole director of the Company.
Description of Business
On May 15, 2013, the Company began implementation of its new business plan: the acquisition and operation of established and profitable berry farms throughout the United States. The Company's main focus is on blueberry production with a secondary focus on strawberry and raspberry production.
Blueberry Farm Acquisition
On November 15, 2013, the Company closed on a contract for sale and purchase, dated August 20, 2013, with Douglas and Gail Harmon, for the purchase of an operational blueberry farm in Levy County, Florida (the “Morningstar Farm”). In accordance with the terms of the contract the Company paid $400,000, plus $2,765 in closing costs, for a total purchase price of $402,765. In conjunction with the acquisition of the Morningstar Farm, the Company originated a $280,000, non-interest bearing note payable with the seller. The terms of the promissory note require the Company to remit payments of principal in the amount of $20,000 in fourteen (14) equal monthly installments until paid in full. If payment has not been remitted on the first of each respective month, a late fee of $1,000 will be assessed. Accordingly, during the year ended March 31, 2014, the Company had repaid $80,000, resulting in note payable balance of $200,000 as of March 31, 2014.
The Morningstar Farm is the Company’s first blueberry farm, and represents a major step in the implementation of the Company’s business plan. In 2007 Florida’s commercial blueberry crops yielded gross receipts of almost $33 million, ranking Florida seventh nationally in blueberry revenues, and accounting for 8.6 percent of the total value of the U.S. blueberry crop.1 And in 2012, there were more acres of blueberries harvested in Florida than in any of the previous 10 years.2 The Company, through its management and advisors, has identified other blueberry farms as acquisition candidates, and expects to acquire several additional blueberry farms during the 2015 fiscal year.
Exclusive Blueberry Sales Agreement
On April 4, 2014, the Company, through Douglas Harmon, who is the Company’s Farm Manager of the Morningstar Farm entered into an exclusive sales agreement (the “Sale Agreement”) with Dole Berry Company (“Dole”). Pursuant to the Agreement, Dole will be acting as the exclusive sales agent of the Company to market and sell all of the blueberries produced by the Grower from the Farm for a period of five (5) harvest years beginning January 1, 2014 until December 31, 2018 unless terminated earlier. The Company shall receive advances equal to $1.00 per pound of finished product weight each week minus receiving and handling charges, as well as 10% commission to be paid to Dole. The Company will pay to the Mr. Harmon a commission equal to 2% of the revenues from the sales of finished products.
Market Overview
Blueberries have been transformed from a niche market to a global commodity marked by increasing, year-round demand.
In the US - the world's largest producer - blueberries are the second most important berry crop, representing over 24% of the nation's $3.5 billion strawberry-blueberry-raspberry market.
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1see Berry Production for Your Small Farm, University of Florida, IFAS Extension http://smallfarms.ifas.ufl.edu/alternative_enterprises/Articles/Article14-England.pdf
2see Cultivated blueberries: Commercial acreage, yield per acre, production, and season-average grower price in Florida, 1992-2012, U.S. Department of Agriculture, Economic Research Service
Driving the market is increased consumption by existing blueberry eaters, the introduction of new consumers, and market expansion into new domestic regions and growing export regions.
In turn, the strength of the blueberry market represents many new opportunities, particularly in terms of improved grower economics and new end market users.
Not surprisingly, US blueberry growers are highly optimistic about the long-term the future of what they consider an increasingly dynamic industry.
History & Uses
The blueberry is one of the few native North American fruits, and was used for centuries for food and medicine by Native Americans.
New World settlers quickly learned the value of blueberries. They ate them fresh, preserved and canned them, and relied on them for an important beverage that sustained Civil War Soldiers.
Today, their use has exploded into hundreds of market applications: fresh consumption; canned for pie fillings and sauces; frozen for food industry uses such as baking confectionery or ice creams; dried for retail snack and food processing industries; powdered; liquefied for use in beverages, purees, concentrates and dairy products; entrees; and more.
Market Growth
As the world’s largest producer of blueberries, the total US crop value in 2011 reached a record $863.9 million, an increase of over 1,980% compared to 1980's crop value of only $41.4 million.
Such continued production growth is made possible by continued investment in acres planted. In 1980, the total number of US blueberry acres harvested was 21,850. By 2011, that total had grown an estimated 229.5% to 72,000 acres, or over 112 square miles.
By continuing to increase its total acreage, the US has been able to increase its total blueberry production to 516.7 million pounds in 2011, a 75.8% increase over its total in 2000. Increased acreage also means more opportunities for the acquisition of existing blueberry operations.
When blueberry demand is broken down across the fresh and frozen markets, both represent increasing per capita consumption over the past 3 decades.
In 2002, fresh blueberry consumption exceeded demand for frozen blueberries in the US for the first time, and the trend has continued to grow ever since.
By 2010, frozen blueberry consumption had reach an estimated record of 0.60 pounds per person while fresh blueberry consumption had reached an all-time high of 1.11 pounds per person.
In turn, the growing, lucrative fresh blueberry market represents just one of the opportunities available to US growers for improving overall profitability.
Marketing & Distribution
Also driving the growth of the US blueberry market are various industry associations that help growers increase their knowledge and profitability while fostering consumer consumption.
In particular, the North American Blueberry Council (NABC) voted in 2000 to establish a federally mandated marketing and promotion order.
The order established a grower assessment program, invested in medical research to document the health benefits of blueberry consumption, and developed consumer marketing initiatives.
The program's efforts appear successful, with total national per capita consumption of blueberries increasing significantly from 0.26 pounds in 2000 to 1.3 pounds per person in 2011.
A key component in such marketing efforts continues to be the nation's established, massive chains of distribution from farms to grocery retailers.
US grocery retailers represent 20 of the world's largest retail chains, including SuperValue (#31 of the world's largest retailers), Safeway (#24), Kroger (#5), and 17 others.
Of particular relevance, Whole Foods, with its specific targeting of healthy eating, moved up 9 positions on the list of the world's largest retailers in 2012, overtaking The Great Atlantic & Pacific Tea Company and the Giant Eagle chains.
While blueberries are a perfect fit for the likes of Whole Foods customers, the other grocery retailers' websites also include some form of 'Healthy Eating' in their main navigation options.
In turn, the blueberry market is ideally positioned to benefit from the market's demand for healthy foods as well as from the strength of the nation's grocery retailers to meet that demand.
Imports & Exports
Since demand for blueberries is year-round and the domestic season is only from April through November, the US is a net importer of fresh blueberries, mostly from Chile. The US also imports frozen blueberries, mostly from Canada.
At the same time, the US exported a record 78.5 million pounds of fresh blueberries (valued at $124.5 million) and 36.2 million pounds of frozen blueberries in 2011, with Canada importing the majority in both cases.
As new products and new markets continue to emerge around the world, the blueberry industry continues to experience explosive exports growth.
Among the countries the US is specifically targeting for blueberry exports is China, having officially requested access to that nation's fresh blueberry market (the US is already the third leading fruit exporter to China).
The importance of China as an export market is based on the nation representing over 200 cities of 1+ million inhabitants; a growing middle class; a focus on health, safety and product traceability; and a preference for imported fruit due to scandals connected with local growers.
Market Outlook
Throughout the global economic downturn, the blueberry market continued to grow its acreage, foster increased consumer consumption, develop new markets and products, and move record amounts of production to market.
Looking forward, the US Highbush Blueberry Council (USHBC) expects continued major movement into the fresh market as overall consumption increases, and that the growing number of products using blueberries will continue to stimulate the introduction of further new products.
The USHBC also forecasts increased size of operations, economies of scale and professionalism among growers to more effectively and profitably meet the growing market demand.
Production & Returns
While North America represents nearly 90% of the global production of blueberries, the US is the world's largest single producer, with 516.7 million pounds harvested in 2011 alone.
Both industry experience and academic studies confirm the potential of blueberries to be a very profitable crop, which may explain the ongoing increase in US blueberry acreage over the past several decades.
Not even the global economic downturn could stop the ongoing expansion of US blueberry growers driven by growing domestic and global demand.
Between growing overall yields, increasing national production, and a perennial crop that can produce for up to 25 years in some locations, blueberries continue to represent an in-demand commodity marked by attractive rates of return.
Acreage Expansion
For the US blueberry market to continue growing, the proactive expansion of the nation's total blueberry acreage needs to continue since new plantings require a 24-month establishment period and full production is only realized in 4 to 6 years after planting.
Fortunately, the total number of blueberry acres harvested in the US has grown from 21,850 in 1980 to an estimated 72,000 acres (>112 sq mi) in 2011, for an increase of 229.5%.
In particular, by 2011, the western states of Oregon, Washington and California had increased their combined blueberry acreage by an estimated 134.8% over their 2004 levels.
These increases in total acreage continue to support the nation's dominance of the blueberry market while creating more opportunities for the acquisition of already-producing blueberry farms.
Growing Overall Yields
Different blueberry plantings represent varying yields depending on plant variety and maturity, soil quality, irrigation, climate, grower knowledge, and other factors.
Nevertheless, according to data from the US Department of Agriculture (USDA), when plantings of all types and at all stages are taken together, overall blueberry yield per acre in the US is on the rise.
In 1992, overall blueberry yield in the US was 3,310 pounds per acre. By 2011, estimated yield had increased by 79.5% to 5,940 pounds per acre.
In the case of an academic study from 2009 on blueberry production in California's southern San Joaquin Valley, the region's yields per acre in 2006 and 2007 averaged 8,408 and 10,970 pounds respectively (the study assumed an average marketable yield of 10,000 pounds per acre).
Meanwhile, according to the US Highbush Blueberry Council (USHBC), typical yields for mature highbush blueberry plantings in particular are 14,000 to 16,000 pounds per acre.
Production Growth
Blueberries are harvested in the US from April through November, with peak harvest in July, also known as National Blueberry Month.
As with overall yield, so too overall blueberry production in the US is on the rise. In 2000, total production was 293.3 million pounds. By 2011, production had increased 76%, reaching a record 516.7 million pounds.
During that same time period, production for the fresh blueberry market grew disproportionately by 250.3%, from 79.6 million pounds to an estimated 278.8 million pounds.
By targeting the lucrative fresh market windows of November through March via early and late varietal plantings and supporting production technologies, US growers are able to take advantage of just one of the opportunities available to them for improving overall profitability.
Also contributing to profitability is knowledge gained through industry associations and experience, and increased size of operations, economies of scale and professionalism in farming practices.
Returns & Rate of Return
The main factors to consider when assessing the profitability of a blueberry operation are annual returns, timing of those returns, and the attractiveness of the rate of return.
Based on the previously mentioned study on blueberry production in California's southern San Joaquin Valley, annual revenues of $30,000 per acre are projected (i.e., average marketable yield of 10,000 pounds per acre at $3.00 per pound).
Applying the study's projections to a blueberry operation with 1,000 mature acres would result in expected annual revenues of approximately $30 million.
Regarding timing of returns, newly planted blueberry operations typically realize full production after 4 to 6 years.
In contrast, Patriot Berry Farms targets the acquisition and operation of farms with mature plantings, which already represent full production and established returns.
In terms of rate of return, the North Carolina State University study "Evaluating the Profitability of Blueberry Production" concludes the blueberry business yields an attractive 16.6% rate of return.
Health Drivers
For centuries, Native Americans were aware of the medicinal properties of the blueberry plant.
Today, ongoing research around the world continues to discover and amass evidence of the connection between eating blueberries and overall health.
The US blueberry industry has capitalized on that evidence and the population's heightened interest in healthy eating by marketing the health benefits associated with blueberry consumption.
Meanwhile, popular publications from Time magazine to Healthy Cooking have labeled blueberries the "Super Food”; media celebrities from Oprah to Dr. Oz have promoted the fruit's health benefits; and the American Cancer Society placed blueberries at the top of its list of foods beneficial in preventing the risk of certain types of cancer.
As a result, market awareness of why blueberries are so effective at promoting health continues to grow.
In turn, the strong health-related message continues to act as a driver for increasing market consumption, both in the US and abroad.
Health Benefits
The US Department of Agriculture's (USDA) Phytochemical and Ethnobotanical databases contain documentation on 161 different chemicals and activities associated with blueberries, from acetic acid down to zinc.
Among the commonly known health benefits associated with blueberries is the fruit's high Vitamin C content, providing nearly 25% of the recommended daily requirement in one serving.
Blueberries are also high in fiber, with just a handful meeting the recommended daily requirement. Fiber, in turn, promotes regularity, heart health and optimal cholesterol levels.
Also of importance is that blueberries represent an excellent source of manganese, which is essential for bone development. Manganese is also needed for the conversion of proteins, carbohydrates and fats into energy.
Antioxidant Properties
A further health benefit documented by various medical research trials is the blueberry's antioxidant properties.
Antioxidants help neutralize free radicals, which are unstable molecules linked to the development of cancer, cardiovascular disease and other age-related conditions such as Alzheimer’s.
Among the antioxidants in blueberries are Vitamins C and E, anthocyanins and phenolics.
The USDA Human Nutrition Research Center on Aging places blueberries among the fruits with the highest antioxidant activity.
Anti-Aging Properties
Blueberries have also been linked with anti-aging processes, which could be of growing significance as the US population continues to age and suffer from age-related decreases in cognitive and motor functioning.
The work of Jim Joseph, director of the neuroscience laboratory in the USDA Human Nutrition Research Center, has discovered that feeding blueberries to laboratory rats slows mental capacity loss related to aging.
When testing the same effects on humans, preliminary results show that eating a cup of blueberries a day results in a 5-6% improvement in motor skills when compared to a control group.
Further Research
Additional research findings into the health-related benefits of blueberries can be found throughout the popular media.
The Dr. Oz Show reported on recently published studies that indicate blueberries contain the active antioxidant compound pterostilbene, which can lower blood pressure and help the heart.
Dr. Oz also highlighted a study that reviewed the diets of over 93,000 women and found that those with the highest blueberry consumption were 32% less likely to suffer an early heart attack.
Oprah Winfrey's website, meanwhile, recently reported on how the anthocyanins in blueberries not only give the fruit its deep color, but may also have anti-diabetic effects.
The website also reported on new research that suggests blueberries might protect heart muscle from damage.
Projects
May saw a successful end to Patriot Berry’s 2014 harvest, with its last batch of early-ripened Florida Blueberry’s being delivered to Dole Berry Company, LLC, on May 11th, 2014. The harvest, which commenced on April 16, 2014, amassed 32,196 lb.’s of Florida Blueberry’s, more than double when compared to 2012’s crop.
Due to Morningstar’s geographical position, (being placed in North-Central Florida), Patriot Berry Farm has been able to benefit financially from the ‘Early Crop’ Florida Blueberry Market, which for a six week period supplies the United States with blueberries exclusively.
Patriot Berry Farms is currently in a stage of aggressive initial asset growth through acquisition, to gain more farms to reach the goal of being a major operator within the US berry market, the Company plans to gather 1,000 to 2,000 acres of mature blueberry plantings under a single operational team.
Throughout the growth phase, the Company will also consider all opportunities for entry into farming operations with established strawberry and raspberry production.
By remaining focused on those farms and industry traditions that have already proven successful, Patriot Berry Farms will gain the solid - and profitable - foundation on which it needs to build.
Patent, Trademark, License and Franchise Restrictions and Contractual Obligations and Concessions
We do not own, either legally or beneficially, any patents or trademarks.
Research and Development Activities
On June 11, 2013, the Company engaged Strikly Berry Consulting, LLC to advise the Company on its berry farm development program, including: assessment of land or existing farms the Company is considering acquiring, assistance with evaluation of historical farm performance and production system advice including, but not limited to, pre-plant decision making, fertility, and pruning/training recommendations of berry crops.
On August 1, 2013, the Company entered into an Executive Agreement (the “Dimeo”) with Mr. Anthony Dimeo III. Pursuant to the Dimeo Agreement, the Mr. Dimeo shall act as the Company’s Director of Farming by providing consulting services to the Company including: identifying new farms; advising the Company regarding new farm purchases; participating in negotiations; developing berry distribution; and helping improve the Company’s operations. The Agreement is effective for a term of 24 months.
Compliance with Environmental Laws
There are many statutes affecting the agricultural community. Below is a list of some major federal statutes containing important environmental requirements that affect the agricultural community:
·
Clean Air Act
The objective of the Clean Air Act is to protect human health, welfare, and the environment by maintaining and improving the quality of the air through the development of standards.
The Clean Air Act includes agriculture specific requirements including air emissions from farming practices. An overview of the Clean Air Act can be found at: http://www.epa.gov/agriculture/lcaa.html
·
Clean Water Act
The objective of the Federal Water Pollution Control Act, commonly referred to as the Clean Water Act (CWA), is to restore and maintain the chemical, physical, and biological integrity of the nation's waters by preventing point and nonpoint pollution sources, providing assistance to publicly owned treatment works for the improvement of wastewater treatment, and maintaining the integrity of wetlands.
An overview of the CWA can be found at: http://www.epa.gov/agriculture/lcaa.html
·
Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)
The objective of CERCLA is to clean up uncontrolled releases of specified hazardous substances. CERCLA includes agriculture specific requirements including Planning and Agriculture, Release Reporting and Agriculture, and Release Response and Agriculture. An overview of CERCLA can be found at: http://www.epa.gov/agriculture/lcla.html
·
Coastal Zone Act Reauthorization Amendments of 1990
The objective of the Coastal Zone Management Act is to control nonpoint pollution sources that affect coastal water quality. An overview of the Coastal Zone Management Act can be found at:
http://www.epa.gov/agriculture/lzma.html
·
Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA)
The objective of FIFRA is to provide federal control of pesticide distribution, sale, and use. All pesticides used in the United States must be registered (licensed) by EPA. Registration assures that pesticides will be properly labeled and that, if used in accordance with specifications, they will not cause unreasonable harm to the environment. Use of each registered pesticide must be consistent with use directions contained on the label or labeling.
FIFRA includes agriculture specific requirements including Tolerances and Agriculture, Certification and Agriculture, and Worker Protection Standard for Agricultural Pesticides. An overview of FIFRA can be found at: http://www.epa.gov/agriculture/lfra.html
·
Food Quality Protection Act
This law amends the two major pesticide laws: the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) and the Federal Food, Drug, and Cosmetic Act (FFDCA). An overview of the Food Quality Protection Act can be found at: http://www.epa.gov/agriculture/lqpa.html
·
Resource Conservation and Recovery Act
The objectives of the Resource Conservation and Recovery Act (RCRA) are to protect human health and the environment from the potential hazards of waste disposal, to conserve energy and natural resources, to reduce the amount of waste generated, and to ensure that wastes are managed in an environmentally sound manner. RCRA regulates the management of solid waste (e.g., garbage), hazardous waste, and underground storage tanks holding petroleum products or certain chemicals.
The RCRA includes agriculture specific requirements including Hazardous Waste and Agriculture, Universal Waste and Agriculture, Used Oil and Agriculture, and Underground Storage Tanks and Agriculture. An overview of the RCRA can be found at: http://www.epa.gov/agriculture/lrca.html
·
Safe Drinking Water Act
The objective of the Safe Drinking Water Act is to protect public health by establishing safe limits (based on the quality of water at the tap) for contaminants that may have an adverse effect on human health, and to prevent contamination of surface and ground sources of drinking water.
An overview of the Safe Drinking Water Act can be found at: http://www.epa.gov/agriculture/ldwa.html
Employees
The Company’s sole employee is Daniel Cattlin, its sole officer and director. Our officer and director is responsible for planning, developing and operational duties, and will continue to do so throughout the early stages of our growth.
Reports to Securities Holders
We provide an annual report that includes audited financial information to our shareholders. We will make our financial information equally available to any interested parties or investors through compliance with the disclosure rules for a small business issuer under the Securities Exchange Act of 1934. We are subject to disclosure filing requirements including filing Form 10K annually and Form 10Q quarterly. In addition, we will file Form 8K and other proxy and information statements from time to time as required. We do not intend to voluntarily file the above reports in the event that our obligation to file such reports is suspended under the Exchange Act. The public may read and copy any materials that we file with the Securities and Exchange Commission, ("SEC"), at the SEC's Public Reference Room at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
Item 1A.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 1B.
Item 1B. Unresolved Staff Comments
None.
Item 2.
Item 2. Properties
The Company is based in Orlando, Florida, with principal executive offices located at 7380 Sand Lake Road, Suite 500, Orlando, Florida 32819 and our telephone number is (503) 505-6946.
On November 15, 2013, the Company closed on a contract for sale and purchase, dated August 20, 2013, with Douglas and Gail Harmon, for the purchase of the Morningstar Farm, an operational blueberry farm in Levy County, Florida. The Morningstar Farm consists of ten acres, of which six and a half acres are dedicated to the growth of blueberries.
Item 3.
Item 3. Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
Item 4.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issure Purchases of Equity Securities
Market Information
Shares of our common stock have been quoted on the OTCQB since July, 2013, under the symbol “PBFI”. The market for our common stock is limited, and can be volatile. The following table sets forth the high and low bid prices relating to our common stock on a quarterly basis for the periods indicated as quoted by the OTCQB. These quotations reflect inter-dealer prices without retail mark-up, mark-down, or commissions, and may not reflect actual transactions.
Holders
As of June 30, 2014, there were 11 total record holders of 73,349,871 shares of the Company's common stock.
Dividends
The Company has not paid any cash dividends to date and does not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of the Company's business.
Securities Authorized for Issuance Under Equity Compensation Plans
None
Recent Sales of Unregistered Securities
Except for provided below, all unregistered sales of our securities were previously disclosed in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
In February 2014, the Company issued 320,000 shares of its common stock, par value $0.001 per share, in exchange for $160,000 in cash.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 6.
Item 6. Selected Financial Data
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our financial statements and related notes appearing elsewhere in this prospectus. This discussion and analysis contains forward looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forwarding looking statements as a result of certain factors, including but not limited to, those which are not within our control.
Although we qualify as an “emerging growth company” as defined in the JOBS Act, and have elected not to take advantage of certain exemptions from various reporting requirements that are available to “emerging growth companies.”
Overview
Patriot Berry Farms, Inc. was incorporated in the State of Nevada on December 15, 2010 under the name of Gaia Remedies, Inc. On December 27, 2012, a change in control occurred as a director of the Company purchased 54,400,000 shares of common stock of the Company. On January 28, 2013, the Company changed its name to Patriot Berry Farms, Inc.
On May 15, 2013, the Company began implementation of its new business plan: the acquisition and operation of established and profitable berry farms throughout the United States. The Company’s main focus is on blueberry production with a secondary focus on strawberry and raspberry production. Patriot is a development stage company and has not yet realized any revenues from its planned principal activities.
In August 2013, the Company hired a Director of Farming and entered into an agreement, wherein the Company will pay a fee of $5,000 per month to the director for a period of 24 months in exchange for assistance in identifying, underwriting, and negotiating the terms of potential farm acquisitions on the Company’s behalf. Further, the director will assist the Company in the development of its operations and distribution, amongst other responsibilities. Upon the expiration of the initial 24 months of the director’s agreement’s term, the Company will ascertain if an increase in the monthly fee is warranted.
In November 2013, the Company acquired the Morningstar Farm, an operational blueberry farm in Levy County, Florida.
On April 4, 2014, the Company, through Douglas Harmon, who is the Company’s Farm Manager of the Morningstar Farm entered into the Sale Agreement with Dole Berry Company. Pursuant to the Sale Agreement, Dole will be acting as the exclusive sales agent of the Company to market and sell all of the blueberries produced by the Grower from the Farm for a period of five (5) harvest years beginning January 1, 2014 until December 31, 2018 unless terminated earlier. The Company shall receive advances equal to $1.00 per pound of finished product weight each week minus receiving and handling charges, as well as 10% commission to be paid to Dole. The Company will pay to the Mr. Harmon a commission equal to 2% of the revenues from the sales of finished products.
Results of Operations
We have had no operating revenues since our inception on December 15, 2010 through March 31, 2014, but have incurred operating expenses in the amount of $995,373 for the same period. Our activities have been financed from the proceeds of share subscriptions. During the years ended March 31, 2014 and 2013, our operating expenses were $904,255 and $57,254, respectively. As a result, our net loss for the year ended March 31, 2014 was $904,255 compared to $57,254 for the year ended March 31, 2013. The increase in operating expenses is attributed primarily to an increase in stock compensation expense from $0 in 2013 compared to $550,000 in 2014, resulting from the acquisition of the Morningstar Farm, as well as the additional consulting service agreements entered into by the Company.
During our fiscal year ended March 31, 2014, we incurred a net loss of $904,255, which resulted in an accumulated deficit of $995,373 since inception. Further losses are anticipated in the development of its business, raising substantial doubt about the Company’s ability to continue as a going concern.
Our financial statements are prepared in accordance with U.S. generally accepted accounting the principles. We have expensed all development costs related to our establishment.
Liquidity and Capital Resources
Since its inception, the Company has financed its cash requirements from the sale of common stock and advances by a related party. Uses of funds have included activities to establish our business, professional fees and other general and administrative expenses.
In May 2013, the Company entered into an investment agreement with a third-party (the “Investor”) whereby the Investor agreed to invest up to $8,500,000 in exchange for the Company’s common stock. The Investor’s investment in common stock of the Company is to be made in multiple closings between May 2013 and May 2015 pursuant to the agreement. On July 24, 2013, the Investor cancelled its investment agreement.
We believe the Company will not have adequate resources to implement its strategic objectives in upcoming quarters. Due to our lack of operating history and present inability to generate revenues, our auditors have stated their opinion that there currently exists substantial doubt about our ability to continue as a going concern.
In order to meet our budgeted cash requirements over the next 12 months, we anticipate raising money from equity financing from the sale of our common stock and additional shareholder loan commitments. If we are not successful in raising additional financing, we anticipate that we will not be able to proceed with our business plan. In such a case, we may decide to discontinue our current business plan and seek other business opportunities. Any business opportunity would require our management to perform diligence on possible acquisition of additional assets. Such due diligence would likely include purchase investigation costs such as professional fees by consultants, conducting due diligence searches and travel costs. It is anticipated that additional funds will be required to close any possible acquisition. During this period, we will need to maintain our periodic filings with the appropriate regulatory authorities and will incur legal and accounting costs. If no other such opportunities are available and we cannot raise additional capital to sustain minimum operations, we may be forced to discontinue business. We do not have any specific alternative business opportunities in mind and have not planned for any such contingency.
Off-balance sheet arrangements
We have no off-balance sheet arrangements including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 8.
Item 8. Financial Statements and Supplementary Data
Patriot Berry Farms, Inc.
(A Development Stage Company)
Index to the Financial Statements
March 31, 2014 and 2013
LBB & ASSOCIATES LTD., LLP
10260 Westheimer Road, Suite 310
Houston, TX 77042
Phone: (713) 800-4343 Fax: (713) 456-2408
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
Patriot Berry Farms, Inc.
(A Developmental Stage Company)
Orlando, Florida
We have audited the accompanying balance sheets of Patriot Berry Farms, Inc. (the “Company”) as of March 31, 2014 and 2013, and the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended and for the period from December 15, 2010 (inception) to March 31, 2014. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Patriot Berry Farms, Inc. as of March 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended and the period from December 15, 2010 (inception) to March 31, 2014 in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 9 to the financial statements, the Company's absence of revenues, recurring losses from operations, and its need for additional financing in order to fund its projected loss in 2015 raise substantial doubt about its ability to continue as a going concern. The 2014 financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ LBB & Associates Ltd., LLP
LBB & Associates Ltd., LLP
Houston, Texas
June 26, 2014
Patriot Berry Farms, Inc.
(A Development Stage Company)
Balance Sheets
See accompanying notes to the financial statements.
Patriot Berry Farms, Inc.
(A Development Stage Company)
Statements of Operations
See accompanying notes to the financial statements.
Patriot Berry Farms, Inc.
(A Development Stage Company)
Statement of Stockholders’ Equity (Deficit)
See accompanying notes to the financial statements.
Patriot Berry Farms, Inc.
(A Development Stage Company)
Statements of Cash Flows
See accompanying notes to the financial statements.
Patriot Berry Farms, Inc.
(A Development Stage Company)
Notes to the Financial Statements
1) ORGANIZATION
Patriot Berry Farms, Inc. (formerly Gaia Remedies) (“Patriot” or the “Company”) was incorporated in the State of Nevada on December 15, 2010 under the name of Gaia Remedies, Inc.
DEVELOPMENT STAGE COMPANY
The Company is considered to be in the development stage as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915 “Development Stage Entities.” The Company’s efforts have been devoted primarily to raising capital, borrowing funds and attempting to implement its planned, principal activities.
RECLASSIFICATIONS
For comparability, certain prior period amounts have been reclassified, where appropriate, to conform to the financial statement presentation used in 2014.
2) SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s periodic filings with the Securities and Exchange Commission include, where applicable, disclosures of estimates, assumptions, uncertainties and markets that could affect the financial statements and future operations of the Company.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with original maturities of less than three months, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had $451 and $2,575 in cash as of March 31, 2014 and 2013, respectively.
2) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company accounts for income taxes under FASB ASC 740 "Income Taxes." Under the asset and liability method of FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments as defined by FASB ASC 825 include cash, trade accounts receivable, and accounts payable and accrued expenses. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at March 31, 2014 and 2013.
FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. FASB ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
Level 1. Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.
The Company does not have any assets or liabilities measured at fair value on a recurring basis at March 31, 2014 and 2013. The Company did not have any fair value adjustments for assets and liabilities measured at fair value on a nonrecurring basis at March 31, 2014 and 2013.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50 "Equity - Based Payments to Non-Employees." Measurement of share-based payment transactions with non-employees shall be based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction should be determined at the earlier of performance commitment date or performance completion date.
NET INCOME OR (LOSS) PER SHARE OF COMMON STOCK
The Company has adopted ASC 260 “Earnings per Share,” (“EPS”) which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.
The Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.
2) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATIONS OF CREDIT RISK
The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables it will likely incur in the near future. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Management believes recently issued accounting pronouncements will have no impact on the financial statements of the Company.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation. Major renewals and improvements are capitalized; minor replacements, maintenance and repairs are charged to current operations. Depreciation is computed by applying the straight-line method over the estimated useful lives which are generally three to seven years.
LONG-LIVED ASSETS
We review our long-lived assets for recoverability whenever events or changes in circumstances indicate that the carrying amount of such long-lived asset or group of long-lived assets (collectively referred to as "the asset") may not be recoverable. Such circumstances include, but are not limited to:
·
a significant decrease in the market price of the asset;
·
a significant change in the extent or manner in which the asset is being used;
·
a significant change in the business climate that could affect the value of the asset;
·
a current period loss combined with projection of continuing loss associated with use of the asset;
·
a current expectation that, more likely than not, the asset will be sold or otherwise disposed of before the end of its previously estimated useful life.
We continually evaluate whether such events and circumstances have occurred. When such events or circumstances exist, the recoverability of the asset's carrying value shall be determined by estimating the undiscounted future cash flows (cash inflows less associated cash outflows) that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the asset. To date, no such impairment has occurred. To the extent such events or circumstances occur that could affect the recoverability of our long-lived assets, we may incur charges for impairment in the future.
3) STOCKHOLDERS’ EQUITY
In August 2013, the Company issued 200,000 shares of common stock, par value $0.001 for $100,000 cash.
In September 2013, the Company’s board of directors voted to convert $95,949 of related party advances by its President into shares of common stock, par value $0.001 at $0.40 per share, resulting in a total issuance of 239,871 shares of common stock (see Note 5).
In September 2013, the Company’s board of directors voted to issue its former President 250,000 shares of fully vested, issuable common stock as compensation, in addition to any existing compensation agreed to. Further, upon each quarter end beginning September 30, 2013, and continuing for the term of the former President’s employment with the Company, an additional 250,000 shares of the Company’s common stock shall become vested and issuable. Accordingly, the Company has issued 750,000 shares of common stock, par value $0.001 to its former President for compensation of services rendered. These shares have been valued at $0.50 per share and $375,000 has been expensed as stock compensation expense for the year ended March 31, 2014. In addition, the Company incurred $125,000 in stock compensation expense, which represents 250,000 shares of common stock, par value $0.001, earned by the Company’s former President for services rendered during the three month period ended March 31, 2014. These shares have not been issued and, accordingly, the $125,000 has been accrued for as of March 31, 2014 and is recorded in accounts payable - related party (see Note 6).
In September 2013, the Company issued 100,000 shares of its common stock, par value $0.001, to two parties for services rendered. These shares have been valued at $0.50 per share and $50,000 has been expensed as stock compensation expense for the year ended March 31, 2014.
In October 2013, the Company issued 100,000 shares of its common stock, par value $0.001 per share, for $50,000 in cash.
In November, 2013, the Company issued 300,000 shares of its common stock, par value $0.001 per share, for $150,000 in cash.
In January, 2014, the Company issued 120,000 shares of its common stock, par value $0.001 per share, for $60,000 in cash.
In February, 2014, the Company issued 160,000 shares of its common stock, par value $0.001 per share, for $80,000 in cash.
In March, 2014, the Company issued 40,000 shares of its common stock, par value $0.001 per share, for $20,000 in cash.
4) CHANGE IN CONTROL
On March 21, 2014, the Company’s former President entered into and closed a stock purchase agreement (“Agreement”), whereby the President sold his controlling interest in the Company to a third party, or 35,200,000 shares of common stock, par value $0.001, representing 50.5% of the then issued and outstanding shares of the Company, for an aggregate price of $20,000. In connection with the Agreement, the Company’s former President resigned from his positions of President, Chief Executive Officer, Treasurer, and member of the board of the directors, while remaining with the Company in the capacity of a business development consultant. Pursuant to the terms of the consulting arrangement with the Company, the former President will receive $3,000 per month for services rendered. The Company’s board of directors accepted the resignation of its former President and appointed the buyer of the 35,200,000 shares of common stock as its President, Chief Executive Officer, Secretary, Treasurer, and director of the Company.
5) RELATED PARTY ADVANCES
During the year ended March 31, 2014 the Company’s former President advanced $90,916 to fund certain operating expenses. In September 2013, the Company’s board of directors voted to convert $95,949 of the then-existing related party advances balance into shares of its common stock at $0.40 per share, for a total of 239,871 shares of common stock.
During the year ended March 31, 2014, the remaining balance of $15,697 owed to the former President was forgiven and recorded in additional paid-in capital as contributed capital. The related party advances balance as of March 31, 2014 is $0. These advances were non-interest bearing, due upon demand and unsecured.
6) RELATED PARTY TRANSACTIONS
In May 2013, the Company entered into a formal employment agreement with its former President. Pursuant to the terms of the agreement, the Company’s former President was appointed to act in its capacity for an initial period of three years, and at an annual salary of $120,000. Accordingly, during the year ended March 31, 2014, the Company paid $120,000 to the President and this amount has been recorded in selling, general and administrative operating expenses.
In connection with the Agreement and change in control (See Note 4), the Company entered into a formal employment agreement with its newly appointed President, whereby the Company agreed to remit an annual salary of $120,000, payable monthly, for services rendered. Furthermore, the Company entered into a consulting agreement with its former President, whereby the Company agreed to remit $3,000 per month for services rendered on its behalf. As of March 31, 2014, the Company has incurred and accrued $4,613, representing the pro-rata amount of salaries due to its current and former Presidents pursuant to the terms of the above referenced agreements. This amount has been recorded in accounts payable - related party.
During the three month period ended March 31, 2014, the Company incurred and accrued $125,000 in stock-based compensation, representing the fair value of 250,000 shares of common stock, par value $0.001 per share, payable to its former President.
7) COMMITMENTS
In May 2013, the Company entered into an investment agreement with a third-party (the “Investor”) whereby the Investor agreed to invest up to $8,500,000 in exchange for the Company’s common stock. The Investor’s investment in common stock of the Company is to be made in multiple closings between May 2013 and May 2015 pursuant to the agreement. On July 24, 2013, the Investor cancelled its investment agreement.
In August 2013, the Company hired a Director of Farming and entered into an agreement, wherein the Company will pay a fee of $5,000 per month to the director for a period of 24 months in exchange for assistance in identifying, underwriting, and negotiating the terms of potential farm acquisitions on the Company’s behalf. Further, the director will assist the Company in the development of its operations and distribution, amongst other responsibilities. Upon the expiration of the initial 24 months of the agreement, the Company will ascertain if an increase in the monthly fee is warranted.
In December 2013, the Company entered into an agreement with a third-party for a period of six (6) months, wherein the Company will pay a fee of $2,000 per month in exchange for advisory services, including providing information and suggestions for improvement of production systems of berry crops, particularly blueberry, and on farms or properties being considered for purchase by the Company. Accordingly, during the year ended March 31, 2014, the Company had incurred $8,000 pursuant to the terms of the agreement, which amount is included in selling, general and administrative expense.
8) BLUEBERRY FARM ACQUISITION
In November 2013, the Company acquired an operational blueberry farm in Levy County, Florida, including equipment (“Harmon Blueberry Farm”). In accordance with the terms of the contract the total purchase price was $402,765. The Company paid $122,765 in cash and issued a note for $280,000 (the “Note”).
The Note is non-interest bearing and is secured by a mortgage on the Harmon Blueberry Farm. The terms of the promissory note require the Company to remit payments of principal in the amount of $20,000 in fourteen (14) equal monthly installments until paid in full. Accordingly, during the year ended March 31, 2014, the Company had repaid $80,000, resulting in note payable balance of $200,000 as of March 31, 2014. As of the date of this report, the company had not paid the $20,000 monthly installments for the months of April, May and June 2014. Accordingly, a $1,000 late fee for each payment will be accrued.
The acquisition was accounted for under the acquisition method of accounting and the related assets acquired assets and liabilities assumed were recorded at fair value. The operating results of the farm totaling approximately $16,800 in selling, general and administrative expense has been included in the consolidated results of operations of the Company for the year ended March 31, 2014.
The preliminary allocation of the purchase price through March 31, 2014 was:
The allocation of the purchase price above is considered preliminary and was based on valuation information, estimates and assumptions available at March 31, 2014. Management is still in the process of verifying data and finalizing information related to the valuation and recording of identifiable intangible assets, deferred income taxes and the resulting effects on the value of goodwill (if any). As the values of certain assets are preliminary in nature, they are subject to adjustment as additional information is obtained. Any changes to the preliminary valuation of assets acquired or liabilities assumed may result in material adjustments. Any measurement period adjustments will be applied retrospectively to the acquisition date. The Company expects to finalize these matters within the measurement period.
9) GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As of March 31, 2014, the Company has an accumulated deficit of $995,373. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the next twelve months.
The ability of the Company to emerge from the development stage is dependent upon, among other things, obtaining additional financing to continue operations. In response to this and other potential problems, management intends to raise additional funds through public or private placement offerings. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
10) PROVISION FOR INCOME TAXES
We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. When it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit. We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carryforwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carryforward period.
The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the years ended March 31, 2014 and 2013, respectively, under ASC 740. We did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of accumulated deficit on the consolidated balance sheet.
The Company is subject to United States income taxes at a rate of 34%. Operating loss carry forwards totaled $995,373 and $91,118 as of March 31, 2014 and 2013, respectively, and will begin to expire in 2031. Accordingly deferred Federal and State tax assets of approximately $120,500 and $19,000, respectively, were offset by a valuation allowance.
11) SUBSEQUENT EVENTS
On April 4, 2014, the Company, through Douglas Harmon, who is the Company’s Farm Manager of the Morningstar Farm entered into an exclusive sales agreement (the “Sale Agreement”) with Dole Berry Company (“Dole”). Pursuant to the Agreement, Dole will be acting as the exclusive sales agent of the Company to market and sell all of the blueberries produced by the Grower from the Farm for a period of five (5) harvest years beginning January 1, 2014 until December 31, 2018 unless terminated earlier. The Company shall receive advances equal to $1.00 per pound of finished product weight each week minus receiving and handling charges, as well as 10% commission to be paid to Dole. The Company will pay to the Mr. Harmon a commission equal to 2% of the revenues from the sales of finished products.
In May 2014, the Company issued 120,000 shares of its common stock, par value $0.001 per share, for $60,000 in cash.
In June 2014, the Company entered into an addendum to amend its President's employment agreement entered into on March 21, 2014. Pursuant to the amendment, the Company agreed to issue to its President 1,500,000 shares of common stock, par value $0.001 per share, upon execution of the addendum, and 500,000 shares of common stock, par value $0.001 per share, upon each one year anniversary of the addendum's effective date.
Item 9.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A.
Item 9A. Controls and Procedures.
Disclosure controls and procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures were designed to provide reasonable assurance that the controls and procedures would meet their objectives.
As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2014, our disclosure controls and procedures were effective at the reasonable assurance level.
Management’s Annual Report on Internal Control over Financial Reporting
Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, 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, and includes those policies and procedures that:
(1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and
(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of our assets that could have a material effect on the financial statements.
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.
Management has used the framework set forth in the report entitled Internal Control-Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission, known as COSO, to evaluate the effectiveness of our internal control over financial reporting. Based on this assessment, management has concluded that our internal control over financial reporting was effective as of March 31, 2014.
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which permanently exempts non-accelerated filers (generally issuers with a public float under $75 million) from complying with Section 404(b) of the Sarbanes-Oxley Act of 2002.
There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
As of the end of the period covered by this report (the “Evaluation Date”), the Company carried out an evaluation, under the supervision and with the participation of the Company's Principal Executive Officer and Principal Financial Officer (the “Certifying Officers”) of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in rules 13a-15(e) and 15d-15(e)) under the Exchange Act. Based on that evaluation, the Certifying Officers have concluded that, as of the Evaluation Date, the disclosure controls and procedures in place were adequate to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported on a timely basis in accordance with applicable rules and regulations.
Internal control over financial reporting
The Certifying Officers reviewed our internal control over financial reporting (as defined in rules 13a-15(f) and 15d-15(f)) under the Exchange Act as of the Evaluation Date and concluded that no changes occurred in such control or in other factors during the year ended March 31, 2014 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
Item 9B.
Item 9B. Other Information.
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
The following table presents information with respect to our officers, directors and significant employees as of the date of this Report:
Each director serves until our next annual meeting of the stockholders or unless they resign earlier. The Board of Directors elects officers and their terms of office are at the discretion of the Board of Directors.
Each of our directors serves until his or her successor is elected and qualified. Each of our officers is elected by the board of directors to a term of one (1) year and serves until his or her successor is duly elected and qualified, or until he or she is removed from office. At the present time, members of the board of directors are not compensated for their services to the board.
Daniel Cattlin, 26, President, Chief Executive Officer, Secretary, Treasurer, and Director.
Daniel Cattlin brings a new age perspective to the business, with expertise in project and asset management, and a background in corporate finance - this, giving him both the operational and financial understanding to take companies from start up and early development, through to expansion and capital growth within a public environment.
His success in creating business growth and developed began when he started in asset management. Mr. Cattlin worked for a specialist property management firm where he learnt the key factors associated to creating growth within this sector; understanding the financial, legal, and compliance procedures involved, and a master of negotiation, Mr. Cattlin achieved high returns for both his company and his clients, which lead to him successfully managing several multi million dollar portfolios for investment clients.
Mr. Cattlin then went on to work at a Financial Advisory where he specializing in Corporate Finance, Mr. Cattlin helped his clients deal with the source of funding and the capital structure of their corporation, as well as the actions that their managers should take to increase the value of the firm to the shareholders.
As of the date of this Report, there has not been any material plan, contract or arrangement (whether or not written) to which any of our officers or directors are a party in connection with their appointments as officers or directors of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act, requires that our directors and executive officers and persons who beneficially own more than 10% of our Common Stock (referred to herein as the “Reporting Persons”) file with the SEC various reports as to their ownership of and activities relating to our Common Stock. Such Reporting Persons are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based solely upon our review of reports filed with the SEC, none of the Company’s Reporting Persons have filed the Section 16(a) reports.
Code of Conduct and Ethics
We have not adopted a corporate Code of Conduct and Ethics that applies to our officers, employees and directors.
Director Independence
Our Board of Directors has reviewed the materiality of any relationship that each of our directors has with us, either directly or indirectly. Based on this review, the board has determined that none of the directors are “independent directors” as defined by in the rules of The NASDAQ OMX Group, Inc. listing standards and Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended.
Committees
We have not formed an Audit Committee, Compensation Committee or Nominating and Corporate Governance Committee as of the filing of this prospectus. Our Board of Directors performs the principal functions of an Audit Committee. We currently do not have an audit committee financial expert on our Board of Directors. We believe that an audit committee financial expert is not required because the cost of hiring an audit committee financial expert to act as one of our directors and to be a member of an Audit Committee outweighs the benefits of having an audit committee financial expert at this time
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers, during the past ten years, has been involved in any legal proceeding of the type required to be disclosed under applicable SEC rules, including:
1.
Any petition under the Federal bankruptcy laws or any state insolvency law being filed by or against, or a receiver, fiscal agent or similar officer being appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
2.
Conviction in a criminal proceeding, or being a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
3.
Being the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
i.
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
ii.
Engaging in any type of business practice; or
iii.
Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
4.
Being the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (3)(i) of this section, or to be associated with persons engaged in any such activity;
5.
Being found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
6.
Being found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
7.
Being the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
i.
Any Federal or State securities or commodities law or regulation; or
ii.
Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
iii.
Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
8.
Being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Item 11.
Item 11. Executive Compensation
Compensation of Officers
The following summary compensation table sets forth information concerning compensation for services rendered in all capacities during 2014 and 2013 awarded to, earned by or paid to our executive officers.
Summary Compensation Table
_________________
(1)
Daniel Cattlin was appointed as the Company’s President, Chief Executive Officer, Secretary and Treasurer on March 21, 2014.
(2)
Mr. Houstoun-Boswall resigned from his positions as officer and director of the Company on March 21, 2014. Mr. Houstoun-Boswall’s resignation was not a result of any disagreements relating to the Company’s operations, policies or practices. Following his resignation, Mr. Houstoun-Boswall shall remain as the Company’s Business Development Consultant for a monthly compensation of $3,000 per month.
Employment Agreements
On May 8, 2013, the Company entered into an employment agreement (the “Houstoun-Boswall Employment Agreement”) with the Company’s former President, Mr. Alexander Houstoun-Boswall. Pursuant to the Houstoun-Boswall Employment Agreement:(a) the Company appointed Mr. Houstoun-Boswall to act as the Company’s president for an initial period of three years, at an annual salary of One Hundred Twenty Thousand Dollars (US $120,000); and (b) Mr. Houstoun Boswall agreed to devote sufficient working time, efforts, attention and energies to fully perform his duties as President of the Company. The Employment Agreement terminated upon Mr. Houstoun Boswall’s resignation as an officer and director of the Company.
On March 21, 2014, the Company entered into a business development consulting agreement (the “Consulting Agreement”) with Alexander Houstoun-Boswall. Pursuant to the Consulting Agreement, Mr. Houstoun-Boswall will provide the Company primarily with consulting services in connection with the Company’s business operations and will cease responsibility for regulatory duties. The Company will pay Mr. Houstoun-Boswall $3,000 per month. The Consulting Agreement may be cancelled by either the Company or Mr. Houstoun-Boswall at any time and for any reason upon thirty (30) days written notice.
On March 21, 2014, the Company entered into a formal employment agreement (the “Cattlin Employment Agreement”) with the Company’s new President, Mr. Daniel Cattlin. Pursuant to the Cattlin Employment Agreement: (a) the Company appointed Mr. Cattlin to act as the Company’s President for an initial period of three years, at an annual salary of One Hundred Twenty Thousand Dollars (US $120,000); and (b) Mr. Cattlin agreed to devote sufficient working time, efforts, attention and energies to fully perform his duties as an officer of the Company.
On June 23, 2014, the Company amended the Cattlin Employment agreement (the “Cattlin Addendum”), pursuant to which the Company agreed to issue Daniel Cattlin, the sole officer and director of the Company, 1,500,000 shares of Common Stock upon execution of the addendum, and 500,000 shares of Common Stock upon each one year anniversary of the addendum's effective date.
Retirement, Resignation or Termination Plans
We sponsor no plan, whether written or verbal, that would provide compensation or benefits of any type to an executive upon retirement, or any plan that would provide payment for retirement, resignation, or termination as a result of a change in control of our company or as a result of a change in the responsibilities of an executive following a change in control of our company.
Directors’ Compensation
The persons who served as members of our board of directors, including executive officers did not receive any compensation for services as director for 2014 and 2013.
Option Exercises and Stock Vested
There were no options exercised or stock vested during the years ended March 31, 2014 and March 31, 2013.
Outstanding Equity Awards at 2014 Fiscal Year End
There were no outstanding equity awards for the years ended March 31, 2014 and March 31, 2013.
Pension Benefits and Nonqualified Deferred Compensation
The Company does not maintain any qualified retirement plans or non-nonqualified deferred compensation plans for its employees or directors.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management Related Stockholder Matters
The following table sets forth information regarding the beneficial ownership of shares of our common stock as of the date of this Report by :
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Each of our directors;
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Each of our named executive officers;
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All of our directors and executive officers as a group; and
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Each person known by us to beneficially own more than 5% of our outstanding common stock.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC and includes voting and investment power with respect to the securities. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days of this Report are deemed outstanding. Such shares, however, are not deemed outstanding for purposes of computing the percentage ownership of any other person. To our knowledge, except as indicated in the footnotes to this table and subject to community property laws where applicable, the persons named in the table have sole voting and investment power with respect to all shares of our common stock shown opposite such person’s name. The percentage of beneficial ownership is based on 73,349,871 shares of our common stock outstanding as of June xx, 2014.
Unless otherwise noted below, the address of the persons and entities listed in the table is c/o Patriot Berry Farms, Inc., 7380 Sand Lake Road, Suite 500, Orlando, Florida 32819.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence
During the year ended March 31, 2014 the Company’s former President advanced $90,916 to fund certain operating expenses. In September, 2013, the Company’s board of directors voted to convert $95,949 of the then-existing related party advances balance into shares of its common stock at $0.40 per share, for a total of 239,871 shares of common stock. During the year ended March 31, 2014, the remaining balance of $15,697 owed to the former President was forgiven and recorded in additional paid-in capital as contributed capital. The related party advances balance as of March 31, 2014 is $0. These advances were non-interest bearing, due upon demand and unsecured.
On June 23, 2014, pursuant to the Cattlin Addendum, the Company agreed to issue Daniel Cattlin, the sole officer and director of the Company, 1,500,000 shares of Common Stock upon execution of the addendum, and 500,000 shares of Common Stock upon each one year anniversary of the addendum's effective date.
During the three month period ended March 31, 2014, the Company incurred and accrued $125,000 in stock-based compensation, representing the fair value of 250,000 shares Common Stock, payable to Alexander Houstoun-Boswall, the former President of the Company.
Our management is involved in other business activities and may, in the future become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between our business and their other business interests. In the event that a conflict of interest arises at a meeting of our directors, a director who has such a conflict will disclose his interest in a proposed transaction and will abstain from voting for or against the approval of such transaction.
None of our directors are independent, as described in the standards for independence set forth in the Rules of the American Stock Exchange.
Director Independence
Our common stock is quoted on the OTC Markets, which does not have director independence requirements. Under NASDAQ rule 4200(a)(15), a director is not considered to be independent if he or she is also an executive officer or employee of the corporation. Our sole director is also the sole officer of the Company, and we therefore have no independent directors.
Item 14.
Item 14. Principal Accounting and Fee Services
During the years ended March 31, 2014, and 2013, we engaged LBB & Associates Ltd., LLP, as our independent auditor. For the years ended March 31, 2014, and March 31, 2013, we incurred fees as discussed below:
Audit fees consist of fees related to professional services rendered in connection with the audit of our annual financial statements and review of our quarterly financial statements.
Our policy is to pre-approve all audit and permissible non-audit services performed by the independent accountants. These services may include audit services, audit-related services, tax services and other services. Under our audit committee’s policy, pre-approval is generally provided for particular services or categories of services, including planned services, project based services and routine consultations. In addition, the audit committee may also pre-approve particular services on a case-by-case basis. Our audit committee approved all services that our independent accountants provided to us in the past two fiscal years.
PART IV
Item 15.
Item 15. Exhibits
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(1) Incorporated by reference to the Registration Statement on Form S-1 filed on June 15, 2011
(2) Incorporated by reference to the Current Report on Form 8-K filed on June 17, 2013
(3) Incorporated by reference to the Current Report on Form 8-K filed on August 26, 2013
(4) Incorporated by reference to the Current Report on Form 8-K filed on March 24, 2014
(5) Incorporated by reference to the Current Report on Form 8-K filed on May 9, 2014
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PATRIOT BERRY FARMS, INC.
Date: June 30, 2014
By:
/s/ Daniel Cattlin
Daniel Cattlin
President, Chief Executive Officer, Secretary, Treasurer and Director
(Duly Authorized, Principal Executive Officer and Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: June 30, 2014
By:
/s/ Daniel Cattlin
Daniel Cattlin
President, Chief Executive Officer, Secretary, Treasurer and Director