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Note 1 - Organization
Great Plains Holdings, Inc. (the Company) was incorporated under the laws of the state of Nevada on December 30, 1999 under the name LILM, Inc. The Company changed its name on December 3, 2013 as part of its plans to diversify its business through the acquisition and operation of commercial real estate, including but not limited to self-storage facilities, apartment buildings, 55+ senior manufactured homes communities, and other income producing properties. Historically, the Company has principally engaged in manufacture and marketing of the LiL Marc urinal used in the training of young boys, but is changing its focus to residential and commercial rental real estate as well as exploring other business opportunities.
The accompanying unaudited consolidated financial statements have been prepared by the Companys management in conformity with accounting principles generally accepted in the United States of America. The consolidated financial statements are prepared in accordance with the requirements for unaudited interim periods, and consequently, do not include all disclosures required to be made in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.
Operating results for the three months ended March 31, 2015 are not necessarily indicative of the results that can be expected for the year ending December 31, 2015.
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Note 2 - Summary of Significant Accounting Policies
Use of Estimates
We use estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than a forced sale or liquidation. Significant differences can arise between the fair value and carrying amount of financial instruments that are recognized at historical cost amounts. The carrying value of the companys financial assets and liabilities approximate the fair value of the short maturity of those instruments.
Accounting Method
The Company recognizes income and expenses based on the accrual method of accounting.
Advertising
The Company expenses all advertising costs as they are incurred.
Cash and Cash Equivalents
Cash and cash equivalents are defined as demand deposits, money market accounts and overnight investments at banks. Cash is maintained in banks insured by the FDIC for an aggregate of up to $250,000. The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Concentrations of Risk
Financial Instruments which potentially subject the Company to concentrations of risk consist primarily of cash and cash equivalents. The Company places its cash and cash equivalents with major financial institutions. At March 31, 2015, the Company has $376,606 in excess of federally insured limits.
Dividend Policy
The Company has not yet adopted a policy regarding dividends.
Income Taxes
The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to reverse. An allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized.
Impairment of Long-lived Assets
The Company reviews long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable based on the undiscounted future cash flows of the asset. If the carrying amount of the asset is determined not to be recoverable, a write-down to fair value is recorded. Fair values are determined based on quoted market values, discounted cash flows, or external appraisals, as applicable. The Company reviews long-lived assets for impairment at the individual asset or the asset group level for which the lowest level of independent cash flows can be identified.
Long Term Investments
Non-marketable equity investments are carried at cost. Investments held by the Company are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the investment may not be recoverable. In the event that facts and circumstances indicate that the cost may be impaired, an evaluation of recoverability would be performed. Impairment expense of $17,788 and $0 has been recorded on long-lived assets for the periods ended March 31, 2015 and 2014, respectively.
Principles of Consolidation
The accompanying consolidated financials include the accounts of the Company and its subsidiaries from its inception. All significant intercompany accounts and balances have been eliminated in consolidation.
Property & Equipment
Property and equipment are stated at cost. The Company provides for depreciation and amortization using the straight-line method over the estimated useful lives of the various classes of property, as follows:
Machinery & Equipment | 5 to 7 years |
Furniture & Fixtures | 5 to 7 years |
Improvements | 10 to 20 years |
Building | 40 years |
Income Producing Properties | 40 years |
Expenditures for additions, improvements and betterments that extend the useful lives of existing assets, if material, are generally capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.
Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability would be performed.
Recognition of Sales Revenue
Revenue is recognized upon the completion of the sales and shipment of the product. The product is sold via the internet and is delivered to customers or to wholesale resellers using a ground courier service.
Recognition of Rental Income
Revenue from lease of residential and commercial properties is recognized when earned with the passage of time per the terms of the leases in effect.
Sales Taxes
The State of Florida imposes a sales tax ranging from 6.0% to 7.5% on all of the Companys sales delivered within the State. The Company collects that sales tax from customers and remits the entire amount to the State. The Companys accounting policy is to exclude the tax collected and remitted to the State from revenue and cost of sales.
Shipping and Handling Costs
The Company classifies freight billed to customers as sales revenue and related freight costs as cost of sales.
Basic and Diluted Net Income (Loss) Per Share
Basic net income (loss) per share amounts are computed based on the weighted average number of shares actually outstanding. Diluted net income (loss) per share amounts are computed using the weighted average number of common shares and common equivalent shares outstanding as if shares had been issued on the exercise of any common share rights unless the exercise becomes antidilutive and then the basic and diluted per share amounts are the same. As of March 31, 2015 and 2014, there were 0 common stock equivalents outstanding.
Recent Accounting Pronouncements
The Company does not expect that the adoption of recent accounting pronouncements will have a material impact on its financial statements.
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Note 3 - Property and Equipment
On September 17, 2014, the Company acquired a residential duplex located in Hanahan, South Carolina from DayBreak Capital, LLC, a related party. The real estate was purchased for a price of $83,402. Kent Campbell, the Companys Chief Executive Officer is the majority shareholder of DayBreak Capital, LLC. Therefore, as this was a transaction between entities under common control, the Company recorded the cost of the land and buildings at historical cost. These amounts were $16,729 for the land, and $62,233 for the buildings (total cost of $78,962). The difference between the agreed upon cost and the historical cost was recorded to additional paid-in capital ($4,440).
On October 31, 2014, the Company acquired a mobile home located in Lady Lake, Florida. The real estate and improvements located on it were acquired from an unrelated party for a purchase price of $53,000 plus customary closing costs. The Company paid the purchase price in cash at closing.
On December 12, 2014, the Company acquired a mobile home located in Wildwood, Florida. The real estate and improvements located on it were acquired from an unrelated party for a purchase price of $29,000 plus customary closing costs. The Company paid the purchase price in cash at closing.
On December 22, 2014, the Company acquired a mobile home located in Wildwood, Florida. The real estate and improvements located on it were acquired from an unrelated party for a purchase price of $27,000 plus customary closing costs. The Company paid the purchase price in cash at closing.
On March 9, 2015, the Company acquired a residential duplex located in Hanahan, South Carolina from DayBreak Capital, LLC, a related party. The real estate was purchased for a price of $66,815. Kent Campbell, the Companys Chief Executive Officer is the majority shareholder of DayBreak Capital, LLC. Therefore, as this was a transaction between entities under common control, the Company recorded the cost of the land and buildings at historical cost. These amounts were $13,904 for the land, and $51,721 for the buildings (total cost of $65,625). The difference between the agreed upon cost and the historical cost was recorded to additional paid-in capital ($1,190).
Property and equipment are stated at cost and consist of the following categories as of March 31, 2015 and December 31, 2014:
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| March 31, 2015 | December 31, 2014 |
Land | 72,105 | 58,201 |
Furniture & Fixtures | 19,832 | 19,832 |
Buildings | 119,637 | 119,637 |
Improvements | 21,461 | 15,861 |
Income Producing Properties | 220,233 | 168,512 |
Total Property & Equipment | 453,268
| 382,043 |
Less: Accumulated Depreciation & Amortization | (10,000) | (6,814) |
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Net Property and Equipment | 443,268 | 375,229 |
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Note 4 - Long Term Investments and Deposits
On April 10, 2014, the Company purchased for a price of $30,000 a 1.67% interest in Texstar Preferred Partner Joint Venture III, LP (Texstar). Texstar owns a 60% net revenue interest in the Engleke Lease, an oil and gas lease covering the Austin Chalk, Eagle Ford and Buda reservoirs located in the Luling-Banyon field area in Guadalupe County, Texas. This lease contains 14 oil and gas wells that are employing re-stimulation and secondary recovery efforts with targeted remaining recoverable reserves of 2,990,000 barrels of oil. This investment is accounted for using the cost method of accounting. At December 31, 2014, the Company noted indicators of impairment due to the return on the investment not being what was anticipated. Accordingly, the Company performed an impairment analysis and based on that analysis determined the investment was fully impaired. Therefore, the Company recorded an impairment loss on this investment of $30,000 for the year ended December 31, 2014.
On December 10, 2014, the Company entered into a securities purchase (with subsequent amendment dated January 30, 2015) and royalty agreement with Bonjoe Gourmet Chips, LLC, (Bonjoe) a Florida limited liability company, and its members Joseph Trudel and Gilbert Hess. The Company delivered $11,500 under the original agreement, which was being held as a deposit until the exchange was complete. Additionally, the Company provided Bonjoe with a $6,200 working capital loan that accrued interest of $88 through March 31, 2015. As of March 31, 2015, the Company determined it would no longer pursue this opportunity and therefore determined an impairment loss was necessary. The Company recorded a related impairment loss of $17,788, as of March 31, 2015.
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Note 5 - Convertible Debt
On August 22, 2014, the Company entered into a securities purchase agreement with KBM Worldwide, Inc. (KBM), whereby KBM agreed to invest $68,000 into the Company in exchange for the Companys issuance of a convertible promissory note, which bears interest at 8% per annum. All outstanding principal and accrued interest on the Note is due and payable on the maturity date, which is May 18, 2015. The Note is convertible by KBM into common stock of the Company at any time during the conversion period, which begins February 18, 2015 (180 days after the issuance) and ends May 18, 2015 (at maturity). The conversion price for each share is 61% multiplied by the lowest average three day market price of the Common Stock during the ten trading days prior to the relevant notice of conversion.
On November 17, 2014, the Company entered into a securities purchase agreement with KBM Worldwide, Inc., whereby KBM agreed to invest $43,000 into the Company in exchange for the Companys issuance of a convertible promissory note, which bears interest at 8% per annum. All outstanding principal and accrued interest on the Note is due and payable on the maturity date, which is August 19, 2015. The Note is convertible by KBM into common stock of the Company at any time during the conversion period, which begins May 16, 2015 (180 days after the issuance) and ends August 19, 2015 (at maturity). The conversion price for each share is 61% multiplied by the lowest average three day market price of the Common Stock during the ten trading days prior to the relevant notice of conversion.
We determined the conversion feature associated with these convertible notes should be accounted for under ASC 470, whereby a debt discount is recorded based on the intrinsic value. As such, we recorded a debt discount of $43,590 on August 22, 2014 and $27,492 for the notes described above. Amortization of the beneficial conversion feature triggered by this convertible note is reported as interest expense on the income statement. A total of $28,658 was recorded as interest expense for the year ended December 31, 2014, of which $26,272 related to debt discount amortization and $2,386 related to stated interest. A total of $50,621 was recorded as interest expense through March 19, 2015 (date notes were paid off see below), of which $18,518 related to debt discount amortization, $1,314 related to stated interest, and $30,789 related to a prepayment premium.
On February 23, 2015, the Company issued 281,080 shares of common stock upon receipt of a conversion request from KBM, for $12,000 in convertible debt, associated with the August 22, 2014 promissory note.
On March 19, 2015, the Company paid both notes in full (including accrued interest) with available cash in the operating account. The remaining debt discount was amortized to interest expense ($26,291).
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Note 6 - Stockholders Equity
The company has authorized 320,000,000 shares, of which 300,000,000 are Common Stock, par value $0.001 per share with 8,321,655 shares of Common Stock issued and outstanding and 20,000,000 shares of Preferred Stock, par value $0.001 per share, with 1,000,000 shares designated as Series A Preferred Stock, $0.001 par with 10,000 shares of Series A Preferred Stock issued and outstanding, and 10,000 shares designated as Series B Preferred Stock, $0.001 par with 10,000 shares of Series B Preferred issued and outstanding as of December 31, 2014.
The Series A Preferred Stock has the following designations, rights, and preferences:
· The stated value of each shares is $0.001;
· Each share shall entitle the holder thereof to 300 votes on all matters submitted to a vote of the stockholders of the Company;
· Except as otherwise provided in the Certificate of Designation, the Companys Articles, or by law, the holders of Series A Preferred Stock shall have general voting rights and shall vote together as one class, with all holders of shares of any other capital stock of the Company, on all matters submitted to a vote of stockholders of the Company; and,
· The holders of the Series A Preferred Stock shall not have any conversion rights.
The Series B Preferred Stock has the following designations, rights, and preferences:
· The stated value of each shares is $0.001;
· Each share shall entitle the holder thereof to 10,000 votes on all matters submitted to a vote of the stockholders of the Company. In the event that such votes do not total at least 51% of all votes, then the votes cast by the holders of the Series B preferred stock shall equal to 51% of all votes cast at any meeting of the Companys stockholders or any issue put to the stockholders for voting;
· Except as otherwise provided in the Certificate of Designation, the Companys Articles, or by law, the holders of Series B Preferred Stock shall have general voting rights and shall vote together as one class, with all holders of shares of any other capital stock of the Company, on all matters submitted to a vote of stockholders of the Company; and,
· The holders of the Series B Preferred Stock are not entitled to dividends or distributions.
On May 3, 2014, the Company issued 10,000 shares of its common stock for the acquisition of assets classified as Buildings & Improvements. These shares were valued based on the fair value of service provided ($10,000).
During the year ended December 31, 2014, the Company issued 37,500 common shares for cash of $12,000; 10,000 series A preferred shares for cash of $1,000; 10,000 common shares for services, valued at $10,000; and 10,000 series B preferred shares for cash of $5,000.
On February 23, 2015, the Company issued 281,080 shares of common stock upon receipt of a conversion request from KBM, for $12,000 in convertible debt, associated with the August 22, 2014 promissory note.
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Note 7 - Significant Transactions with Related Parties
On March 17, 2014, the Company sold to: (i) Kent Campbell, its Chief Executive Officer, 6,000 shares of its unregistered preferred stock for a purchase price of $0.10 per share for a total of $600; and, (ii) Denis Espinoza, its Chief Operations Officer, 4,000 shares of its unregistered preferred stock for a purchase price of $0.10 per share for a total of $400.
On September 17, 2014, the Company acquired a residential duplex located in Hanahan, South Carolina from DayBreak Capital, LLC, a related party. The real estate was purchased for a price of $83,402. Kent Campbell, the Companys Chief Executive Officer is the majority shareholder of DayBreak Capital, LLC. Therefore, as this was a transaction between entities under common control, the Company recorded the cost of the land and buildings at historical cost. These amounts were $16,729 for the land, and $62,233 for the buildings (total cost of $78,962). The difference between the agreed upon cost and the historical cost was recorded to additional paid-in capital ($4,440).
On November 30, 2014, the Company sold to: (i) Kent Campbell, its Chief Executive Officer, 10,000 shares of its unregistered series B preferred stock for a purchase price of $0.50 per share for a total of $5,000.
On March 9, 2015, the Company acquired a residential duplex located in Hanahan, South Carolina from DayBreak Capital, LLC, a related party. The real estate was purchased for a price of $66,815. Kent Campbell, the Companys Chief Executive Officer is the majority shareholder of DayBreak Capital, LLC. Therefore, as this was a transaction between entities under common control, the Company recorded the cost of the land and buildings at historical cost. These amounts were $13,904 for the land, and $51,721 for the buildings (total cost of $65,625). The difference between the agreed upon cost and the historical cost was recorded to additional paid-in capital ($1,190).
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Note 8 - Discontinued Operations
On December 31, 2014, the Board of Directors committed to a plan to discontinue operations of its subsidiary Lil Marc, Inc. (Lil Marc). Lil Marc manufactures, markets and sells the LiL Marc, a plastic boys toilet-training device. Due to declining sales and a competitor selling the same product for a price below the Companys cost, the Company intends to discontinue this business. This decision represents a strategic shift in operations to focus efforts and resources on its real estate operations, oil and gas leasing property, and other business opportunities.
The assets and liabilities held for discontinued operations presented on the balance sheet as of March 31, 2015 and December 31, 2014 consisted of the following:
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| March 31, | Dec. 31 |
Assets: |
| 2015 | 2014 |
Cash and Cash Equivalents |
| 4,677 | 1,200 |
Accounts Receivable |
| 0 | 537 |
Total Current Assets |
| 4,677 | 1,737 |
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Current Liabilities: |
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Accounts Payable |
| 0 | 9 |
Total Current Liabilities |
| 0 | 9 |
The losses from discontinued operations presented in the income statement for the three months ended March 31, 2015 and the three months ended March 31, 2014 consisted of the following:
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| March 31, | March 31, |
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| 2015 | 2014 |
Revenue |
| 8,312 | 5,035 |
Cost of Goods Sold |
| (3,712) | (1,418) |
Gross Profit |
| 4,600 | 3,617 |
Operating Expenses: |
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Depreciation and Amortization |
| - | (614) |
General and Administrative
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| (1,652) | (9,170) |
Total Operating Expenses |
| (1,652) | (9,784) |
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Net Income (Loss) before Income Taxes |
| 2,948 | (6,167) |
Income Tax Benefit |
| - | - |
Net Income (Loss) from Discontinued Operations |
| 2,948 | (6,167) |
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Use of Estimates
We use estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates.
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Fair Value of Financial Instruments
The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than a forced sale or liquidation. Significant differences can arise between the fair value and carrying amount of financial instruments that are recognized at historical cost amounts. The carrying value of the companys financial assets and liabilities approximate the fair value of the short maturity of those instruments.
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Accounting Method
The Company recognizes income and expenses based on the accrual method of accounting.
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Advertising
The Company expenses all advertising costs as they are incurred.
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Cash and Cash Equivalents
Cash and cash equivalents are defined as demand deposits, money market accounts and overnight investments at banks. Cash is maintained in banks insured by the FDIC for an aggregate of up to $250,000. The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
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Concentrations of Risk
Financial Instruments which potentially subject the Company to concentrations of risk consist primarily of cash and cash equivalents. The Company places its cash and cash equivalents with major financial institutions. At March 31, 2015, the Company has $376,606 in excess of federally insured limits.
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Dividend Policy
The Company has not yet adopted a policy regarding dividends.
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Income Taxes
The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to reverse. An allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized.
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Impairment of Long-lived Assets
The Company reviews long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable based on the undiscounted future cash flows of the asset. If the carrying amount of the asset is determined not to be recoverable, a write-down to fair value is recorded. Fair values are determined based on quoted market values, discounted cash flows, or external appraisals, as applicable. The Company reviews long-lived assets for impairment at the individual asset or the asset group level for which the lowest level of independent cash flows can be identified.
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Long Term Investments
Non-marketable equity investments are carried at cost. Investments held by the Company are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the investment may not be recoverable. In the event that facts and circumstances indicate that the cost may be impaired, an evaluation of recoverability would be performed. Impairment expense of $17,788 and $0 has been recorded on long-lived assets for the periods ended March 31, 2015 and 2014, respectively.
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Principles of Consolidation
The accompanying consolidated financials include the accounts of the Company and its subsidiaries from its inception. All significant intercompany accounts and balances have been eliminated in consolidation.
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Property & Equipment
Property and equipment are stated at cost. The Company provides for depreciation and amortization using the straight-line method over the estimated useful lives of the various classes of property, as follows:
Machinery & Equipment | 5 to 7 years |
Furniture & Fixtures | 5 to 7 years |
Improvements | 10 to 20 years |
Building | 40 years |
Income Producing Properties | 40 years |
Expenditures for additions, improvements and betterments that extend the useful lives of existing assets, if material, are generally capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.
Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability would be performed.
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Recognition of Sales Revenue
Revenue is recognized upon the completion of the sales and shipment of the product. The product is sold via the internet and is delivered to customers or to wholesale resellers using a ground courier service.
Recognition of Rental Income
Revenue from lease of residential and commercial properties is recognized when earned with the passage of time per the terms of the leases in effect.
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Shipping and Handling Costs
The Company classifies freight billed to customers as sales revenue and related freight costs as cost of sales.
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Recent Accounting Pronouncements
The Company does not expect that the adoption of recent accounting pronouncements will have a material impact on its financial statements.
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Machinery & Equipment | 5 to 7 years |
Furniture & Fixtures | 5 to 7 years |
Improvements | 10 to 20 years |
Building | 40 years |
Income Producing Properties | 40 years |
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| March 31, 2015 | December 31, 2014 |
Land | 72,105 | 58,201 |
Furniture & Fixtures | 19,832 | 19,832 |
Buildings | 119,637 | 119,637 |
Improvements | 21,461 | 15,861 |
Income Producing Properties | 220,233 | 168,512 |
Total Property & Equipment | 453,268
| 382,043 |
Less: Accumulated Depreciation & Amortization | (10,000) | (6,814) |
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Net Property and Equipment | 443,268 | 375,229 |
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The assets and liabilities held for discontinued operations presented on the balance sheet as of March 31, 2015 and December 31, 2014 consisted of the following:
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| March 31, | Dec. 31 |
Assets: |
| 2015 | 2014 |
Cash and Cash Equivalents |
| 4,677 | 1,200 |
Accounts Receivable |
| 0 | 537 |
Total Current Assets |
| 4,677 | 1,737 |
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Current Liabilities: |
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Accounts Payable |
| 0 | 9 |
Total Current Liabilities |
| 0 | 9 |
The losses from discontinued operations presented in the income statement for the three months ended March 31, 2015 and the three months ended March 31, 2014 consisted of the following:
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| March 31, | March 31, |
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| 2015 | 2014 |
Revenue |
| 8,312 | 5,035 |
Cost of Goods Sold |
| (3,712) | (1,418) |
Gross Profit |
| 4,600 | 3,617 |
Operating Expenses: |
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Depreciation and Amortization |
| - | (614) |
General and Administrative
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| (1,652) | (9,170) |
Total Operating Expenses |
| (1,652) | (9,784) |
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Net Income (Loss) before Income Taxes |
| 2,948 | (6,167) |
Income Tax Benefit |
| - | - |
Net Income (Loss) from Discontinued Operations |
| 2,948 | (6,167) |
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