The following management's discussion and analysis ("MD&A") should be read in
conjunction with West Coast Ventures Group Corp. ("WCVC") financial statements
for the years ended December 31, 2019 and December 31, 2018, and the notes
thereto. Additional information relating to WCVC is available through its brand
websites: www.westcoastventuresgroupcorp.com; www.illegalbrands.com;
www.illegalburger.com; www.illegalpizza.restaurant and
www.franchise.illegalburger.com
Safe Harbor for Forward-Looking Statements
Certain statements included in this MD&A constitute forward-looking statements,
including those identified by the expressions anticipate, believe, plan,
estimate, expect, intend, and similar expressions to the extent they relate to
WCVC or its management. These forward-looking statements are not facts, promises
or guarantees; rather, they reflect current expectations regarding future
results or events. These forward-looking statements are subject to risks and
uncertainties that could cause actual results, activities, performance or events
to differ materially from current expectations. These include risks related to
revenue growth, operating results, industry, products and litigation, as well as
the matters discussed in WCVC MD&A under Risk Factors. Readers should not place
undue reliance on any such forward-looking statements. WCVC disclaims any
obligation to publicly update or to revise any such statements to reflect any
change in the Company's expectations or in events, conditions, or circumstances
on which any such statements may be based, or that may affect the likelihood
that actual results will differ from those set forth in the forward-looking
statements.
Overview
West Coast Ventures Group Corp. ("our", "us", "we", "WCVC", or the "Company")
was originally incorporated as Energizer Tennis, Corp. on June 16, 2011 in the
State of Nevada. On October 4, 2017, effective for accounting purposes on June
30, 2017, WCVC entered into an agreement to acquire Nixon Restaurant Group, Inc.
in a transaction accounted for as a reverse acquisition.
Nixon Restaurant Group, Inc. ("us", "we" NRG or "our") was formed on October 12,
2015, under the laws of the State of Florida. On October 19, 2015, we issued 20
million shares of common stock to acquire 100% of the ownership interests in J&F
Restaurants, LLC, Illegal Burger, LLC and Illegal Burger Writer Square LLC,
Colorado Limited Liability Companies controlled by our founder, James Nixon. As
a result of the transaction, J&F Restaurants, LLC, Illegal Burger, LLC and
Illegal Burger Writer Square LLC became our wholly-owned subsidiaries.
We own and operate the following seven (7) restaurant locations, and own the
following entities:
·
J&F Restaurants, LLC was formed in Colorado on March 12, 2011, and owns and
operates Kalaka Mexican Kitchen (f/k/a El Senor Sol), a casual Mexican
restaurant located at 29017 Hotel Way, Unit 103B Evergreen, Colorado 80439 which
opened in June 2011.
·
J&F Restaurants, LLC also owns and operates Illegal Burger, an upscale fast
casual restaurant located at 29017 Hotel Way, Unit 102B, Evergreen, Colorado
80439 which opened in August 2013.
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·
Illegal Burger, LLC was formed in Colorado on May 31, 2013, and owns and
operates Illegal Burger, an upscale fast food restaurant located at 15400 W 64th
Avenue, Unit E1A, Arvada, Colorado 80007 which opened in January 2013,
·
Illegal Burger Writer Square LLC was formed in Colorado on April 19, 2015, and
owns and operates an Illegal Burger location in downtown Denver at 1512 Larimer
Street, Suite R, Denver, Colorado 80202 which opened in January 2016.
·
Illegal Burger Capital Hill, LLC was formed in Colorado on March 4, 2016, and
owns and operates an Illegal Burger location at 609 North Grant Street, Denver,
Colorado 80202 which opened in June 2016.
·
Illegal Burger CitiSet, LLC was formed in Colorado on June 21, 2018, and owns
and operates an Illegal Burger location at 652 South Colorado Boulevard, Unit A,
Denver, Colorado 80246 which opened in October 2018.
·
Illegal Burger Franchising, LLC was formed in Colorado on January 17, 2019,
located at 6610 Holman St, Unit 301, Arvada, Colorado 80004 which is the entity
offering for sale Illegal Burger franchises.
·
Illegal Pizza Lauderhill, LLC was formed in Florida on February 5, 2019, and
owns and operates an Illegal Pizza location at 5401 N. University Dr,
Lauderhill, Florida 33351 which opened in July 2019.
·
Illegal Brands, LLC was formed in Colorado on April 1, 2019, located at 6610
Holman St, Unit 301, Arvada, Colorado 80004 which is the entity to sell CBD
products which are currently composed of CBD infused water and packets of
soluble CBDs.
·
Illegal Brands IP LLC was formed in Colorado on April 9, 2019, located at 6610
Holman St., Unit 301, Arvada, Colorado, 80004, which owns all the intellectual
property (i.e. trademarks, word marks, etc) for all of the operating entities.
Each of our Illegal Burger, Illegal Pizza and Kalaka Mexican Kitchen restaurants
offers a full bar. Each of our restaurants offers a full menu and alcoholic
beverages including liquor. Our Illegal Burger restaurants offer consumers a
practical alternative to the over- commercialized healthy dining craze by
offering a variety of burgers made with all never frozen, hormone-free beef,
french fries, cheesy taters and adult and virgin milk shakes including Nutella,
peanut butter, caramel, Oreo, vanilla, chocolate and strawberry as well as a
full bar. Our new Illegal Pizza concept offers consumers a practical alternative
to the over-commercialized healthy dining craze by offering a variety of pizzas
made with all never frozen, natural toppings. Our Kalaka Mexican Kitchen
restaurant offers Mexican food and a full bar including a tequila menu.
Our principal executive office is located at 6610 Holman St., Unit 301, Arvada,
Colorado, 80004. Our telephone number is 303-537-7022. Our websites are:
www.illegalburger.com; www.westcoastventuresgroupcorp.com;
www.illegalbrands.com; www.illegalpizza.restaurant and
www.franchise.illegalburger.com
Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018
Revenue
For the year ended December 31, 2019, revenue generated was $3,635,234, as
compared to $3,054,623 for the year ended December 31, 2018. The year over year
increase of approximately 19.01% was mainly attributable to the CitiSet location
being open for a full year and the opening of the Illegal Pizza location and
expansion of our marketing, especially in the downtown location. Our year over
year same store sales growth was 2.77%.
Cost of Sales
Ongoing restaurant cost of sales increased to $3,647,950 from $2,921,266, or an
increase of 24.88%. This increase was primarily due to a corresponding increase
in sales for the year and the current trend of high personnel turnover in the
industry as well as the minimum wage increase in Colorado, requiring higher cost
of training of staff and our increased marketing costs. Our ongoing restaurant
cost of sales, as a percentage of sales, was approximately 100.35% and 95.63%
for the years ended December 31, 2019 and 2018, respectively.
Gross Profit
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Our ongoing restaurant operations gross profit was $(12,716) and $171,302 for
the years ended December 31, 2019 and 2018, respectively. Our ongoing restaurant
gross profit, as a percentage of sales, was approximately (0.35)% and 5.61% for
the years ended December 31, 2019 and 2018, respectively.
Our ongoing restaurant gross profit, as a percentage of gross sales was lower in
2019 because of the current trend of high personnel turnover in the industry,
requiring higher cost of training of staff and our increased marketing costs and
Illegal Pizza only being open for 5 months with a very slow ramp up in sales.
General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2019 were
$1,613,975 compared to $919,540 for the year ended December 31, 2018. The
increase was the result of dramatically increased professional fees, stock based
compensation to third parties and public company expenses.
Net Loss
Net loss for the year ended December 31, 2019 was $5,293,313 compared to a net
loss of $1,756,548 for the year ended December 31, 2018. This increase in the
loss was the result of many factors: the current trend of high personnel
turnover in the industry, requiring higher cost of training of staff; our
increased marketing costs; continued expenditures to ensure that the restaurants
are run efficiently and effectively; implementation of several new computer
systems in this process; revised, updated and developed system and process
manuals for both operations and training; approximately $1,263,000 increase in
derivative expense and approximately $1,400,00 increase in interest expense.
Liquidity and Capital Resources
Cash Flow Activities
Cash decreased $9,635 to $0 at December 31, 2019 from $9,635 at December 31,
2018. This decrease was a result of an increase in operating activities costs,
an increase in investing costs and an increase in financing activities.
Financing Activities
During 2019, we received proceeds of third party debt of $515,000; $1,929,235
from proceeds of convertible debt and $260,881 for the sale of common stock;
repaid $206,434 of a stockholder loan and repaid $1,385,845 of third party debt.
Critical Accounting Policies and Estimates
We consider our critical accounting policies to be those that require the more
significant judgments and estimates in the preparation of financial statements,
including the following:
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash equivalents, trade
receivables, prepaid expenses, payables and accrued expenses. Fair value
estimates are made at a specific point in time, based on relevant market
information about the financial instrument. These estimates are subjective in
nature and involve uncertainties and
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matters of significant judgment and therefore cannot be determined with
precision. We consider the carrying values of our financial instruments in the
consolidated financial statements to approximate fair value, due to their
short-term nature.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation.
Depreciation is provided for using straight-line methods over the estimated
useful lives of the respective assets, usually three to seven years.
Valuation of Long-Lived Assets
We periodically evaluate long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying value of an asset may not be
recoverable. If the estimated future cash flows (undiscounted and without
interest charges) from the use of an asset were less than the carrying value, a
write-down would be recorded to reduce the related asset to its estimated fair
value. We do not believe that there has been any impairment to long-lived
assets as of December 31, 2019 and 2018.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined in Regulation S-K
Item 303(a)(4).
Recent Accounting Pronouncements
(See "Recently Issued Accounting Pronouncements" in Note 2 of Notes to the
Consolidated Financial Statements.)
Management's Plans
Our plan is to continue to grow our business through the opening of additional
strategic locations, and to actively promote the franchising side of our
business. During the next twelve months we anticipate incurring costs related to
(i) filing of Exchange Act reports; and, (ii) operating our businesses. We will
require additional operating capital to maintain and continue operations. We
will need to raise additional capital through debt or equity financing, and
there is no assurance we will be able to raise the necessary capital.
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WEST COAST VENTURES GROUP CORP. 
