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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.
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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 Measurements
The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:
Level 1 – Quoted prices in active markets for identical assets or liabilities;
Level 2 – Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and
Level 3 – Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.
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 December 31, 2015, the Company has $319,478 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 $30,000 has been recorded on long term investments for the years ended December 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.
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.
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 December 31, 2015 and 2014, the Company had 0 and 2,021,858 common stock equivalents outstanding related to the convertible notes payable.
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 Company’s 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 Company’s 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 December 31, 2015 and December 31, 2014:
Dec. 31, 2015 | Dec. 31, 2014 | |||||||
Land | 72,105 | 58,201 | ||||||
Furniture & Fixtures | 21,885 | 19,832 | ||||||
Buildings | 119,637 | 119,637 | ||||||
Improvements | 37,308 | 15,861 | ||||||
Income Producing Properties | 233,435 | 168,512 | ||||||
Total Property & Equipment | 484,370 | 382,043 | ||||||
Less: Accumulated Depreciation & Amortization | (20,553 | ) | (6,814 | ) | ||||
Net Property and Equipment | 463,817 | 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 Company’s 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 Company’s 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 51,096 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
As of December 31, 2015, the Company has authorized 320,000,000 shares, of which 300,000,000 are Common Stock, par value $0.001 per share with 1,514,172 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, $.001 par with 10,000 shares of Series B Preferred issued and outstanding, and 3,500,000 shares designated as Series C Convertible Preferred Stock, $.001 with 0 shares issued and outstanding.
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 Company’s 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 Company’s stockholders or any issue put to the stockholders for voting; |
● | Except as otherwise provided in the Certificate of Designation, the Company’s 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. |
The Series C Convertible Preferred Stock has the following designations, rights and preferences:
● | the shares have no voting rights. | |
● | each share is convertible at the option of the holder into eight shares of the Company’s common stock at any time after the Company merges or consolidates with or into another person. The rate of conversion is subject to adjustment as discussed below. | |
● | each 500 shares are automatically convertible into one share of the Company’s common stock if the Company does not complete a merger within 50 days of the date the shares are issued. | |
● | the conversion price of the Series C Preferred is subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events. | |
● | the Series C Preferred shares are not convertible to the extent that (a) the number of shares of the Company’s common stock beneficially owned by the holder and (b) the number of shares of the Company’s common stock issuable upon the conversion of the Series C Preferred or otherwise would result in the beneficial ownership by holder of more than 4.99% of the Company’s then outstanding common stock. This ownership limitation can be increased or decreased to any percentage not exceeding 9.99% by the holder upon 61 days notice to us. |
During the year ended December 31, 2014, the Company issued 6,818 common shares for cash of $12,000; 10,000 series A preferred shares for cash of $1,000; 1,818 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 51,096 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 July 29, 2015, the Company entered into a Securities Purchase Agreement with an accredited investor pursuant to which the Company sold to that investor 3,000,000 shares of series C convertible preferred stock for cash of $99,990.00. The merger identified in the designations, rights and preferences of the series C convertible preferred did not occur within the allotted time and triggered the automatic conversion of the series C preferred shares into common shares at a rate of 2,750 to 1. The conversion of the series C preferred stock resulted in the issuance of 1,091shares of common stock on September 17, 2015.
On October 26, 2015, the Company took action by written consent of the Company’s board of directors to approve a 1-for-5.5 reverse stock split of issued and outstanding common stock. The reverse stock split was completed and effective on November 25, 2015. All share references in these financial statements have been retroactively adjusted for this reverse stock split, unless otherwise noted.
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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 Company’s 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 Company’s 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 Company’s 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 December 31, 2015 and December 31, 2014 consisted of the following:
Dec. 31, | Dec. 31 | |||||||
2015 | 2014 | |||||||
Assets: | ||||||||
Cash and Cash Equivalents | 214 | 1,200 | ||||||
Accounts Receivable | 0 | 537 | ||||||
Total Current Assets | 214 | 1,737 | ||||||
Current Liabilities: | ||||||||
Accounts Payable | 2 | 9 | ||||||
Total Current Liabilities | 2 | 9 |
The income (loss) from discontinued operations presented in the income statement for the year ended December 31, 2015 and 2014, consisted of the following:
Dec. 31, | Dec. 31, | |||||||
2015 | 2014 | |||||||
Revenue | 33,572 | 16,074 | ||||||
Cost of Goods Sold | (15,852 | ) | (12,972 | ) | ||||
Gross Profit | 17,720 | 3,102 | ||||||
Operating Expenses: | ||||||||
Depreciation and Amortization | - | (2,457 | ) | |||||
General and Administrative | (4,100 | ) | (23,863 | ) | ||||
Total Operating Expenses | (4,100 | ) | (26,320 | ) | ||||
Net Loss on Asset Disposal | - | (20,106 | ) | |||||
Net Income (Loss) before Income Taxes | 13,620 | (43,325 | ) | |||||
Income Tax Benefit | - | - | ||||||
Net Income (Loss) from Discontinued Operations | 13,620 | (43,325 | ) |
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Note 9 – Income Taxes
On December 31, 2015, the Company had a net operating loss available for carryforward of $982,901. The income tax benefit of approximately $334,189 from the carryforward has been fully offset by a valuation allowance as we have determined the ability to use the future tax benefit is doubtful. The net operating loss will expire starting in 2020.
Year Ended | Estimated NOL Carryforward | NOL Expires | Estimated Tax Benefit from NOL | Valuation Allowance | Net Tax Benefit | |||||||||
2000 | 8,867 | 2020 | 3,015 | (3,015 | ) | - | ||||||||
2001 | 13,537 | 2021 | 4,603 | (4,603 | ) | - | ||||||||
2002 | 13,858 | 2022 | 4,712 | (4,712 | ) | - | ||||||||
2003 | 18,081 | 2023 | 6,148 | (6,148 | ) | - | ||||||||
2004 | 1,731 | 2024 | 589 | (589 | ) | - | ||||||||
2005 | 12,692 | 2025 | 4,315 | (4,315 | ) | - | ||||||||
2006 | 15,821 | 2026 | 5,379 | (5,379 | ) | - | ||||||||
2007 | 19,881 | 2027 | 6,760 | (6,760 | ) | - | ||||||||
2008 | 14,674 | 2028 | 4,989 | (4,989 | ) | - | ||||||||
2009 | 16,971 | 2029 | 5,770 | (5,770 | ) | - | ||||||||
2010 | 13,493 | 2030 | 4,558 | (4,558 | ) | - | ||||||||
2011 | 11,825 | 2031 | 4,021 | (4,021 | ) | - | ||||||||
2012 | 20,263 | 2032 | 6,889 | (6,889 | ) | - | ||||||||
2013 | 80,228 | 2033 | 27,278 | (27,278 | ) | - | ||||||||
2014 | 378,040 | 2034 | 128,534 | (128,534 | ) | - | ||||||||
2015 | 342,939 | 2035 | 116,599 | (116,599 | ) | - | ||||||||
$ | 982,901 | $ | 334,189 | $ | (334,189 | ) | $ | - |
The total valuation allowance as of December 31, 2015 was $334,189, which increased by $116,599 for the year ended December 31, 2015.
As of December 31, 2015 and 2014, the Company has no unrecognized income tax benefits. The Company’s policy for classifying interest and penalties associated with unrecognized income tax benefits is to include such items as tax expense. No interest or penalties have been recorded during the years ended December 31, 2015, and 2014 and no interest or penalties have been accrued as of December 31, 2015 and 2014. As of December 31, 2015 and 2014, the Company did not have any amounts recorded pertaining to uncertain tax positions.
Federal and state laws impose substantial restrictions on the utilization of tax attributes in the event of an “ownership change,” as defined in Section 382 of the Internal Revenue Code. Currently, the Company is analyzing the change of control as a result of the February 5, 2016 subsequent event transaction (See Note 10). As a result of the ownership change, potential near term utilization of these assets will be reduced.
The tax years from 2013 and forward remain open to examination by federal and state authorities due to net operating loss and credit carryforwards. The Company is currently not under examination by the Internal Revenue Service or any other taxing authorities .
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Note 10- Subsequent Events
On February 1, 2016, the Company issued 268,333 shares of its restricted common stock to its Placement Agent. Such shares were issued pursuant to a Placement Agent Agreement with the Company and services rendered in connection with a private placement of the Company’s securities.
On February 5, 2016, The Company, GPH Merger Sub, Inc., a Nevada corporation and wholly-owned subsidiary of GTPH (“Merger Sub”), and Jerrick Ventures, Inc., a privately-held Nevada corporation headquartered in New Jersey (“Jerrick”), entered into an Agreement and Plan of Merger (the “Agreement”) pursuant to which the Merger Sub was merged with and into Jerrick, with Jerrick surviving as a wholly-owned subsidiary of the Company (the “Merger”). The transaction (the “Closing”) took place on February 5, 2016 (the “Closing Date”). The Company acquired, through a reverse triangular merger, all of the outstanding capital stock of Jerrick in exchange for issuing Jerrick’s shareholders (the “Jerrick Shareholders”), pro-rata, a total of 28,500,000 shares of the Company’s common stock. GTPH shall assume 33,414 shares of Jerrick’s Series A Convertible Preferred Stock (the “Series A Preferred”) and 8,064 shares of Series B Convertible Preferred Stock (the “Series B Preferred”) and file the appropriate certificates of designation to reflect the rights, preferences and privileges of the Jerrick’s Series A Preferred and Series B Preferred. Jerrick shareholders that hold either Series A Preferred or Series B Preferred will be able to exchange such shares for the equivalent in GTPH on a one for one basis. Additionally, GTPH shall assume 12,391,667 outstanding common stock purchase warrants of Jerrick such that each Jerrick shareholder that holds a warrant to purchase shares of Jerrick common stock will by virtue of the Merger, be able to purchase the equivalent number of shares of GTPH Common Stock under the same terms and conditions.
In connection with the Merger, on February 5, 2016, the Company and Kent Campbell entered into a Spin-Off Agreement (the “Spin-Off Agreement”), pursuant to which Mr. Campbell purchased from the Company (i) all of the Company’s interest in Ashland Holdings, LLC, a Florida limited liability company, and (ii) all of the Company’s interest in Lil Marc, Inc., a Utah corporation, in exchange for the cancellation of 781,818 shares of the Parent Company’s Common Stock held by Mr. Campbell. In addition, Mr. Campbell assumed all debts, obligations and liabilities of the Company existing prior to the Merger, pursuant to the terms and conditions of the Spin-Off Agreement.
On February 5, 2016 and in conjunction with the Merger, the Company entered into a Share Exchange Agreement with Kent Campbell, Denis Espinoza and Sarah Campbell (the “Exchange Agreement”). Pursuant to the Exchange Agreement, (i) Kent Campbell cancelled 363,636 shares of the Company’s common stock, 6,000 shares of the Company’s Series A Preferred Stock and 10,000 shares of the Company’s Series B Preferred Stock in exchange for 1,648,881 shares of the Company’s Series D Preferred Stock, (ii) Denis Espinoza cancelled 58,951 shares of the Company’s common stock and 4,000 shares of the Company’s Series A Preferred Stock in exchange for 265,676 shares of the Company’s Series D Preferred Stock, and (iii) Sarah Campbell cancelled 21,818 shares of the Company’s common stock in exchange for 98,933 shares of the Company’s Series D Preferred Stock.
In addition, on February 6, 2016, the Company entered into Stock Purchase Agreements (the “Purchase Agreements”) with three investors providing for the issuance and sale of an aggregate of 2,626,308 shares of the Company’s common stock, par value $0.001 per share, for an aggregate purchase price of $2,626.
The directors of GTPH have approved the Agreement and the transactions contemplated under the Agreement. The directors of Jerrick have approved the Agreement and the transactions contemplated thereunder and as of the Closing Date the shareholders of Jerrick will own approximately 92% of the Company’s common stock.
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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.
Fair Value Measurements
The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:
Level 1 – Quoted prices in active markets for identical assets or liabilities;
Level 2 – Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and
Level 3 – Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.
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 December 31, 2015, the Company has $319,478 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 $30,000 has been recorded on long term investments for the years ended December 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.
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.
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 December 31, 2015 and 2014, the Company had 0 and 2,021,858 common stock equivalents outstanding related to the convertible notes payable.
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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Dec. 31, 2015 | Dec. 31, 2014 | |||||||
Land | 72,105 | 58,201 | ||||||
Furniture & Fixtures | 21,885 | 19,832 | ||||||
Buildings | 119,637 | 119,637 | ||||||
Improvements | 37,308 | 15,861 | ||||||
Income Producing Properties | 233,435 | 168,512 | ||||||
Total Property & Equipment | 484,370 | 382,043 | ||||||
Less: Accumulated Depreciation & Amortization | (20,553 | ) | (6,814 | ) | ||||
Net Property and Equipment | 463,817 | 375,229 |
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Dec. 31, | Dec. 31 | |||||||
2015 | 2014 | |||||||
Assets: | ||||||||
Cash and Cash Equivalents | 214 | 1,200 | ||||||
Accounts Receivable | 0 | 537 | ||||||
Total Current Assets | 214 | 1,737 | ||||||
Current Liabilities: | ||||||||
Accounts Payable | 2 | 9 | ||||||
Total Current Liabilities | 2 | 9 |
Dec. 31, | Dec. 31, | |||||||
2015 | 2014 | |||||||
Revenue | 33,572 | 16,074 | ||||||
Cost of Goods Sold | (15,852 | ) | (12,972 | ) | ||||
Gross Profit | 17,720 | 3,102 | ||||||
Operating Expenses: | ||||||||
Depreciation and Amortization | - | (2,457 | ) | |||||
General and Administrative | (4,100 | ) | (23,863 | ) | ||||
Total Operating Expenses | (4,100 | ) | (26,320 | ) | ||||
Net Loss on Asset Disposal | - | (20,106 | ) | |||||
Net Income (Loss) before Income Taxes | 13,620 | (43,325 | ) | |||||
Income Tax Benefit | - | - | ||||||
Net Income (Loss) from Discontinued Operations | 13,620 | (43,325 | ) |
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Year Ended | Estimated NOL Carryforward | NOL Expires | Estimated Tax Benefit from NOL | Valuation Allowance | Net Tax Benefit | |||||||||
2000 | 8,867 | 2020 | 3,015 | (3,015 | ) | - | ||||||||
2001 | 13,537 | 2021 | 4,603 | (4,603 | ) | - | ||||||||
2002 | 13,858 | 2022 | 4,712 | (4,712 | ) | - | ||||||||
2003 | 18,081 | 2023 | 6,148 | (6,148 | ) | - | ||||||||
2004 | 1,731 | 2024 | 589 | (589 | ) | - | ||||||||
2005 | 12,692 | 2025 | 4,315 | (4,315 | ) | - | ||||||||
2006 | 15,821 | 2026 | 5,379 | (5,379 | ) | - | ||||||||
2007 | 19,881 | 2027 | 6,760 | (6,760 | ) | - | ||||||||
2008 | 14,674 | 2028 | 4,989 | (4,989 | ) | - | ||||||||
2009 | 16,971 | 2029 | 5,770 | (5,770 | ) | - | ||||||||
2010 | 13,493 | 2030 | 4,558 | (4,558 | ) | - | ||||||||
2011 | 11,825 | 2031 | 4,021 | (4,021 | ) | - | ||||||||
2012 | 20,263 | 2032 | 6,889 | (6,889 | ) | - | ||||||||
2013 | 80,228 | 2033 | 27,278 | (27,278 | ) | - | ||||||||
2014 | 378,040 | 2034 | 128,534 | (128,534 | ) | - | ||||||||
2015 | 342,939 | 2035 | 116,599 | (116,599 | ) | - | ||||||||
$ | 982,901 | $ | 334,189 | $ | (334,189 | ) | $ | - |
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