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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.
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 nine months ended September 30, 2014 are not necessarily indicative of the results that can be expected for the year ending December 31, 2014.
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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.
Accounts Receivable
Accounts receivable are recorded when invoices are issued and the amount management expects to collect is reported on the balance sheet. Accounts receivable are written off when they are determined to be uncollectible. The allowance for doubtful accounts is estimated based on the Companys historical losses, the existing economic condition in the industry, and the financial stability of its customers.
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 September 30, 2014, the Company has $807,603 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.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined on a first-in, first-out (FIFO) basis and market is determined on the basis of replacement cost or net realizable value.
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.
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 |
Land Improvements | 20 years |
Building | 40 years |
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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.
Revenue Recognition
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.
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 September 30, 2014 and 2013, there were 87,179 and 0 common stock equivalents outstanding, respectively.
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 December 26, 2013, the Company acquired two adjacent parcels of land located in Wildwood, Florida totaling approximately 0.90 acres. The property includes a 1,400 square foot corporate office building and an additional parcel of land that includes a mobile home. The real estate and improvements located on it were acquired from TD Bank, N.A., an unrelated party, for a purchase price of $47,500 plus customary closing costs. The Company paid the purchase price in cash at closing.
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 paid in cash at closing. See Note 6 - Significant Transactions with Related Parties. Since the acquisition of this property 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 purchase price and the historical cost was recorded as a reduction to paid-in capital of $4,440.
Property and equipment are stated at cost and consist of the following categories as of September 30, 2014 and December 31, 2013:
| Sept. 30, 2014 | Dec. 31,2013 |
Land | 22,380 | 5,651 |
Machinery & Equipment | 14,380 | 14,380 |
Buildings & Improvements | 240,602 | 43,677 |
Total Property & Equipment | 277,362 | 63,708 |
Less: Accumulated Depreciation & Amortization | (10,054) | (3,645) |
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Net Property and Equipment | 267,308 | 60,063 |
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Note 4 Long Term Investments
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. Accordingly, the investment is stated at acquisition cost and distributions are recorded as income when received. It is not practical to estimate the fair value of this investment; however, management believes that the carrying value at September 30, 2014 was not impaired.
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Note 5 Convertible Debt
Convertible Note to KBM Worldwide, Inc.
On August 22, 2014 (the Issuance Date), the Company entered into a securities purchase agreement (the Purchase Agreement) with KBM Worldwide, Inc. (KBM), whereby KBM agreed to invest $68,000 (Note Purchase Price) into the Company in exchange for the Companys issuance of a convertible promissory note, in the original principal amount of $68,000.00, which bears interest at 8% per annum (the Note). All outstanding principal and accrued interest on the Note is due and payable on the maturity date, which is May 18, 2015 (the Maturity Date). The Note Purchase Price was paid in cash to the Company by KBM on August 22, 2014. Any amount of principal or interest that is due under the Note, which is not paid by the Maturity Date, will bear interest at the rate of 22% per annum until it is paid (Default Interest). The Note is convertible by KBM into common stock of the Company (Common Stock) at any time during the conversion period, which begins 180 days after the Issuance Date and ends on the later of (i) the Maturity Date and the (ii) date of payment of the default amount (Conversion Period). 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.
The Note can be prepaid by the Company at a premium as follows: (a) between 0 and 30 days after issuance 110% of the total outstanding amount; (b) between 31 and 60 days after issuance 115% of the total outstanding amount; (c) between 61 and 90 days after issuance 120% of the total outstanding amount; (d) between 91 and 120 days after issuance 125% of the total outstanding amount; and (e) between 121 and 150 days after issuance 130% of the total outstanding amount; and (f) between 151 and 180 days after issuance 135% of the total outstanding amount. After the initial 180 period from the Issuance Date, the Company does not have a right of prepayment.
All amounts due under the Note become immediately due and payable by the Company upon the occurrence of an event of default, including but not limited to (i) the Companys failure to pay the amounts due at maturity, (ii) the Companys failure to issue shares of Common Stock upon any conversion of the Note, (iii) a breach of the covenants, representations or warranties under the Note, (iv) the appointment of a trustee, a judgment against the Company in excess of $50,000 (subject to a cure period), a liquidation of the Company or the filing of a bankruptcy petition, (v) failure to remain current in our reporting obligations under the Securities Exchange Act of 1934 or the removal of the Common Stock from quotation on an over the counter quotation service or equivalent exchange, (vi) any restatement of our financial statements, or (vii) a reverse stock split without prior notice to KBM.
We determined the conversion feature associated with this convertible note 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. Amortization of the beneficial conversion feature triggered by this convertible note is reported as interest expense on the income statement. A total of $7,977 was recorded as interest expense for the nine month period ended September 30, 2014 ($0 for 2013), of which $7,396 related to debt discount amortization and $581 related to stated interest.
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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 8,040,625 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 at September 30, 2014.
The Series A Preferred Stock have 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.
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).
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Note 7 - Significant Transactions with Related Parties
On September 26, 2013, the Company sold 5,000,000 of its unregistered common stock to Kent Campbell, its Chief Executive Officer and a Director for a purchase price of $0.32 per share for a total of $1,600,000.
On October 15, 2013, the Company sold to: (i) Sarah Campbell, its Chief Accounting Officer at the time, 100,000 shares of its unregistered common stock for a purchase price of $0.32 per share for a total of $32,000, and (ii) Thomas G. Campbell (Kent Campbells father), 150,000 shares of its restricted common stock for a purchase price of $0.32 per share for a total purchase price of $48,000.
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, through its wholly owned subsidiary Ashland Holdings, LLC (Ashland), completed the purchase of the property located at 5913 Tampa Street, Hanahan, South Carolina 29410 for $82,500.00 from DayBreak Capital, LLC, a related party (DayBreak). The purchase price was paid in cash at closing. Kent Campbell, our Chief Executive Officer and a Director, and Denis Espinoza, our President, Chief Operating Officer, and a Director each own 50% of DayBreak. See Note - Property and Equipment.
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Note 8 Subsequent Events
Orangeburg Property
On October 11, 2014 the Company entered into a purchase and sale agreement with unrelated parties to purchase the residential mobile home park located at 1197 Cannon Bridge Rd., Orangeburg, South Carolina 29115 (the Property) for $115,000.00 payable in cash at closing. The material terms of the agreement to acquire this property include: (i) an initial deposit from the Company in the amount of $2,500 which amount has been paid and shall be credited to the purchase price of the property at closing; (ii) a property inspection period that expires 60 days after the Sellers deliver documents requested by the Company during which time Company can terminate the agreement at any time within the period by delivering written notice to the Sellers; and (iii) a closing date for the sale of the Property that shall occur on or before 30 days after the inspection period. The agreement also contains additional covenants, representations and warranties that are customary of real estate purchase and sale agreements.
Lady Lake Property
On October 31, 2014, the Company completed the purchase of a 960 square foot residential located at 13537 County Road 109E-1, Lady Lake, Florida 32159 for $53,000 which amount was paid in cash at closing. The amount of the purchase price was reduced by $1,500 from the previously reported price of $54,500 to cover plumbing repairs to the property.
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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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Accounts Receivable
Accounts receivable are recorded when invoices are issued and the amount management expects to collect is reported on the balance sheet. Accounts receivable are written off when they are determined to be uncollectible. The allowance for doubtful accounts is estimated based on the Companys historical losses, the existing economic condition in the industry, and the financial stability of its customers.
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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 September 30, 2014, the Company has $807,603 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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Inventories
Inventories are stated at the lower of cost or market. Cost is determined on a first-in, first-out (FIFO) basis and market is determined on the basis of replacement cost or net realizable value.
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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.
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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 |
Land Improvements | 20 years |
Building | 40 years |
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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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Revenue Recognition
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.
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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 |
Land Improvements | 20 years |
Building | 40 years |
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| Sept. 30, 2014 | Dec. 31,2013 |
Land | 22,380 | 5,651 |
Machinery & Equipment | 14,380 | 14,380 |
Buildings & Improvements | 240,602 | 43,677 |
Total Property & Equipment | 277,362 | 63,708 |
Less: Accumulated Depreciation & Amortization | (10,054) | (3,645) |
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Net Property and Equipment | 267,308 | 60,063 |
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