UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended June 30, 2014 | ||
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from _____ to ______
Commission File Number: 000-51872
GREAT PLAINS HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 87-0645394 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 4060 NE 95th Road, Wildwood, Florida 34785 |
| (Address of principal executive offices) |
| (352) 561-8182 |
| (Registrant’s telephone number, including area code) |
| Not applicable. |
| (Former name, former address and former fiscal year, if changed since last report) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | [ ] | Accelerated filer | [ ] |
| Non-accelerated filer (Do not check if a smaller reporting company) | [ ] | Smaller reporting company | [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X ]
Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.
| Class | Outstanding as of August 8, 2014 |
| Common Stock, $0.001 par value | 8,040,625 |
TABLE OF CONTENTS
| Heading | Page | |
| PART I — FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 2 |
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 9 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 12 |
| Item 4. | Controls and Procedures | 12 |
| PART II — OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 13 |
| Item 1A. | Risk Factors | 13 |
| Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 13 |
| Item 3. | Defaults Upon Senior Securities | 13 |
| Item 4. | Mine Safety Disclosures | 13 |
| Item 5. | Other Information | 13 |
| Item 6. | Exhibits | 14 |
| Signatures | 15 | |
1
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
| Condensed Consolidated Balance Sheets | ||||||||
| June 30, | December 31, | |||||||
| 2014 | 2013 | |||||||
| (UNAUDITED) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and Cash Equivalents | $ | 1,209,631 | $ | 1,479,152 | ||||
| Accounts Receivable | 205 | 285 | ||||||
| Inventory | 13,702 | 15,712 | ||||||
| Prepaid Expenses | - | 2,875 | ||||||
| Total Current Assets | 1,223,538 | 1,498,024 | ||||||
| Property and Equipment | ||||||||
| Property and Equipment | 192,749 | 58,057 | ||||||
| Less: Accumulated Depreciation | (7,635 | ) | (3,645 | ) | ||||
| Land | 5,651 | 5,651 | ||||||
| Net Property and Equipment | 190,765 | 60,063 | ||||||
| Other Assets | ||||||||
| Cost Method Investments | 30,000 | - | ||||||
| Total Other Assets | 30,000 | - | ||||||
| Total Assets | $ | 1,444,303 | $ | 1,558,087 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable | $ | 89 | $ | 7,504 | ||||
| Total Current Liabilities | 89 | 7,504 | ||||||
| Long-Term Liabilities | ||||||||
| Refundable Deposits | 500 | - | ||||||
| Total Long-Term Liabilities | 500 | - | ||||||
| Total Liabilities | 589 | 7,504 | ||||||
| Stockholders' Equity | ||||||||
Preferred stock, 20,000,000 shares authorized, $.001 par value, 10,000 and 0 shares issued and outstanding, respectively | 10 | - | ||||||
Common stock, 300,000,000 shares authorized, $.001 par value, 8,040,625 and 7,993,125 shares issued and outstanding, respectively | 8,041 | 7,993 | ||||||
| Additional Paid in Capital | 1,879,431 | 1,856,489 | ||||||
| Accumulated Deficit | (443,768 | ) | (313,899 | ) | ||||
| Total Stockholders' Equity | 1,443,714 | 1,550,583 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 1,444,303 | $ | 1,558,087 | ||||
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2
| GREAT PLAINS HOLDINGS INC | ||||||||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Sales | ||||||||||||||||
| Sales Revenue | $ | 4,496 | $ | 5,321 | $ | 10,881 | $ | 12,711 | ||||||||
| Total Sales | 4,496 | 5,321 | 10,881 | 12,711 | ||||||||||||
| Cost of Goods Sold | ||||||||||||||||
| Cost of Sales | 1,122 | 410 | 3,302 | 1,014 | ||||||||||||
| Total Cost of Goods Sold | 1,122 | 410 | 3,302 | 1,014 | ||||||||||||
| Gross Profit | 3,374 | 4,911 | 7,579 | 11,697 | ||||||||||||
| Operating Expenses | ||||||||||||||||
| Royalties | 26 | 44 | 73 | 109 | ||||||||||||
| Depreciation and Amortization | 2,273 | 85 | 3,989 | 170 | ||||||||||||
| General and Administrative | 54,688 | 9,597 | 133,386 | 25,920 | ||||||||||||
| Total Operating Expenses | 56,987 | 9,726 | 137,448 | 26,199 | ||||||||||||
| Operating Loss | (53,613 | ) | (4,815 | ) | (129,869 | ) | (14,502 | ) | ||||||||
| Other Income (Expenses) | ||||||||||||||||
| Interest Expense | - | (620 | ) | - | (1,143 | ) | ||||||||||
| Total Other Income (Expenses) | - | (620 | ) | - | (1,143 | ) | ||||||||||
| Net Loss Before Taxes | (53,613 | ) | (5,435 | ) | (129,869 | ) | (15,645 | ) | ||||||||
| Net Loss | $ | (53,613 | ) | $ | (5,435 | ) | $ | (129,869 | ) | $ | (15,645 | ) | ||||
| Loss per share of common stock | ||||||||||||||||
| (basic and diluted) | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.02 | ) | $ | (0.00 | ) | ||||
| Weighted average shares outstanding | ||||||||||||||||
| (basic and diluted) | 8,030,625 | 2,633,750 | 8,030,625 | 2,633,750 | ||||||||||||
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
| GREAT PLAINS HOLDINGS INC | ||||||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||||||
| (UNAUDITED) |
| Six Months Ended | ||||||||
| June 30, | June 30, | |||||||
| 2014 | 2013 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net Income (Loss) | $ | (129,869 | ) | $ | (15,645 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and Amortization | 3,989 | 170 | ||||||
| Contributions to capital - expenses paid by shareholders | - | 7,867 | ||||||
| Issuance of common stock for expenses | - | - | ||||||
| Change in Operating Assets and Liabilities: | ||||||||
| Accounts Receivable | 80 | - | ||||||
| Inventory | 2,010 | 1,013 | ||||||
| Prepaid Assets | 2,875 | - | ||||||
| Accounts Payable | (7,415 | ) | 1,429 | |||||
| Refundable Deposits | 500 | |||||||
| Net Cash Used In Operating Activities: | (127,830 | ) | (5,166 | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchases of Property and Equipment | (124,691 | ) | - | |||||
| Patent | - | - | ||||||
| Investments | (30,000 | ) | ||||||
| Net Cash Used In Investing Activities: | (154,691 | ) | - | |||||
| Cash Flows from Financing Activities | ||||||||
| Notes Payable - Related Party | - | 7,225 | ||||||
| Payment to Related Party | - | (2,506 | ) | |||||
| Proceeds from the Issuance of Preferred Stock | 1,000 | - | ||||||
| Proceeds from the Issuance of Common Stock | 12,000 | - | ||||||
| Net Cash Provided By Financing Activities: | 13,000 | 4,719 | ||||||
| Net Change in Cash & Cash Equivalents | (269,521 | ) | (447 | ) | ||||
| Beginning Cash & Cash Equivalents | 1,479,152 | 447 | ||||||
| Ending Cash & Cash Equivalents | $ | 1,209,631 | $ | - | ||||
| Noncash Investing and Financing Activities | ||||||||
| Issuance of 922,900 common shares for a patent | $ | - | $ | - | ||||
| Issuance of 10,000 common shares for property and equipment | $ | 10,000 | $ | - | ||||
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
GREAT PLAINS HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
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.
Included in the following unaudited consolidated financial statements are the combined statements of operations of the Company and its subsidiaries for the period April 22, 1997 to June 30, 2014.
The accompanying unaudited consolidated financial statements have been prepared by the Company’s management 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 six months ended June 30, 2014 are not necessarily indicative of the results that can be expected for the year ending December 31, 2014.
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 company’s 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 Company’s 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.
5
GREAT PLAINS HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
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 June 30, 2014, the Company has $835,102 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 upon 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 |
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 sale 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.
6
GREAT PLAINS HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
Sales Taxes
The State of Florida imposes a sales tax ranging from 6.0% to 7.5% on all of the Company’s sales delivered within the State. The Company collects that sales tax from customers and remits the entire amount to the State. The Company’s 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 June 30, 2014 and 2013, there were no common stock equivalents outstanding.
Recent Accounting Pronouncements
In June 2014, the FASB issued ASU 2014-10, “Development Stage Entities (Topic 915)”. The guidance eliminates the definition of a development stage entity thereby removing the incremental financial reporting requirements from U.S. GAAP for development stage entities, primarily presentation of inception to date financial statements. The provisions of the amendments are effective for the Company's calendar year 2015, however, early adoption is permitted and, accordingly, we have implemented this guidance effective June 30, 2014.
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.
Property and equipment are stated at cost and consist of the following categories as of June 30, 2014 and December 31, 2013:
June 30, 2014 | December 31, 2013 | |||||||
| Land | 5,651 | 5,651 | ||||||
| Machinery & Equipment | 14,380 | 14,380 | ||||||
| Buildings & Improvements | 178,369 | 43,677 | ||||||
| Total Property & Equipment | 198,400 | 63,708 | ||||||
| Less: Accumulated Depreciation & Amortization | (7,635 | ) | (3,645 | ) | ||||
| Net Property and Equipment | 190,765 | 60,063 | ||||||
During the three months ended June 30, 2014, the Company transferred $41,033 from construction in progress to Buildings & Improvements, as the related asset was completed and ready for its intended use on April 8, 2014.
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 an 80% working interest and 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, 12 producing wells and2 injection wells that are employing re-stimulation and secondary recovery efforts. 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 June 30, 2014 was not impaired.
7
GREAT PLAINS HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
Note 5 - 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 June 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 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. |
On May 3, 2014, the Company issued 10,000 shares of its common stock for the acquisition of assets classified as Buildings & Improvements at June 30, 2014. These shares were valued based on the fair value of service provided ($10,000).
Note 6 - 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 Campbell’s 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.
Note 7 - Commitments and Contingencies
On October 16, 2013 the Company entered into a lease with an unaffiliated third party for a warehouse for a term of one year. The lease may be terminated by the Company with 30 days notice within the first 6 months of the lease term. The warehouse occupies approximately 1,250 square feet of space with a monthly rent of $960 for the first six months and $1,065 per month thereafter. The Company has terminated this lease effective April 15, 2014 and will move its product assembly, shipping operations and executive offices to its recently acquired Wildwood, Florida property.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Form 10-Q.
Overview
Great Plains Holdings, Inc. (“we”, “us”, the “Company”, “Great Plains”) was incorporated in Nevada on December 30, 1999 under the name LILM, Inc. We changed our name effective December 3, 2013 in connection with our plans to diversify our 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, we have been engaged in the manufacture, marketing and sales of the LiL Marc, a plastic boys’ toilet-training device constructed of white polyethylene plastic having the appearance of white porcelain.
Outlook
Lil Marc. Sales of Lil Marc toilet training devices have been declining. During the three months ended June 30, 2014 revenues related to sales of this product have declined by $825 compared to the same period in 2013 and in the six months ended June 30, 2014 revenues declined $1,830 compared to the same period in 2013. We believe the reduction is due in large part by the entrance into the market by a Chinese company that is offering virtually the same product as ours for a price that is substantially below our selling price and our cost. While we will be exhibiting this product at the ABC KIDS Expo juvenile products industry trade show in Las Vegas in September 2014, it is uncertain how this competition will affect us on a long term basis and our ability to compete. We plan to monitor our sales performance following this trade show and depending on the outcome of our sales efforts, we intend to explore strategic alternatives including, but not limited to, the outright sale of this business and its assets.
Real Estate. While we have been evaluating several real estate development projects, we have determined that we will require substantial additional funds to complete one or more of these projects. While we have been seeking additional financing, we have not been able to attract a sufficient amount of capital beyond the investments made by our majority shareholder to complete the size of transaction we believe is necessary to generate sufficient income to support the increased overhead associated with our SEC reporting responsibilities. Consequently, we are evaluating the feasibility of continuing to look for real estate development projects.
Other Investments. On April 10, 2014, we purchased a 1.67 % interest in a limited partnership that owns an 80% working interest and 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 (12 producing wells and 2 injection wells) that are employing re-stimulation and secondary recovery efforts with targeted remaining recoverable reserves of 2,990,000 barrels of oil. We are unable to determine at this time the amount of revenue, if any, to be generated from this investment.
Results of Operations
The following comparative analysis on results of operations was based primarily on the comparative financial statements, footnotes and related information for the periods identified below and should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this report.
Comparison of the Three Months Ended June 30, 2014 and June 30, 2013
Revenue
During the three months ended June 30, 2014, total sales were $4,496 compared with $5,321 for the three months ended June 30, 2013, a decrease of $825. This decrease is primarily a result of lower sales volume of our LiL Marc as we sought to implement new marketing strategies in light of increased competition discussed above partially offset by an increase in rent revenues of $684 from our recently acquired real estate.
Our cost of goods sold for the three months ended June 30, 2014 increased by $712 compared to the same period in 2013 primarily as a result of sales of inventory with a higher cost associated with our new warehouse facility. We are unable to predict our gross profit in 2014 as we develop sales forecasts and assess the results of planned marketing initiatives, including our attendance at the ABC KIDS Expo juvenile products industry trade show discussed above. Costs of goods are also subject to change based on U.S. based shipping costs from California to our warehouse in Florida.
9
Operating Expenses
Total operating expenses for the three months ended June 30, 2014 were $56,987, an increase of $47,261 compared to the same period in 2013. This increase was primarily a result of an increase in professional and consulting fees related to our SEC compliance and fees incurred to conduct due diligence on investment opportunities and other general operating expenses. We expect further increases in our operating expenses if we ramp up our sales efforts for the LiL Marc urinal and begin our commercial real estate diversification strategy discussed above.
Net Loss
The net loss for the three months ended June 30, 2014 was $53,613, an increase of $48,178 compared to the same period in 2013. This increase was primarily a result of an increase in operating expenses and a reduction in revenue as discussed above.
Comparison of the Six Months Ended June 30, 2014 and June 30, 2013
Revenue
During the six months ended June 30, 2014, total sales were $10,881 compared with $12,711 for the six months ended June 30, 2013, a decrease of $1,830. This decrease is primarily a result of lower sales volume of our LiL Marc as we sought to implement new marketing strategies in light of increased competition discussed above partially offset by an increase in rent revenues of $684 from our recently acquired real estate.
Our cost of goods sold for the six months ended June 30, 2014 increased by $2,288 compared to the same period in 2013 primarily as a result of sales of inventory with a higher cost associated with our new warehouse facility. We are unable to predict our gross profit in 2014 as we develop sales forecasts and assess the results of planned marketing initiatives, including our attendance at the ABC KIDS Expo juvenile products industry trade show discussed above. Costs of goods are also subject to change based on U.S. based shipping costs from California to our warehouse in Florida.
Operating Expenses
Total operating expenses for the six months ended June 30, 2014 were $137,448, an increase of $111,249 compared to the same period in 2013. This increase was primarily a result of an increase in professional and consulting fees related to our SEC compliance and fees incurred to conduct due diligence on investment opportunities and other general operating expenses. We expect further increases in our operating expenses if we ramp up our sales efforts for the LiL Marc urinal and begin our commercial real estate diversification strategy discussed above.
Net Loss
The net loss for the six months ended June 30, 2014 was $129,869, an increase of $114,224 compared to the same period in 2013. This increase was primarily a result of an increase in operating expenses and a reduction in revenue as discussed above.
Liquidity and Capital Resources
Liquidity is a measure of a company’s ability to meet potential cash requirements. At June 30, 2014, we had $1,223,538 in current assets consisting of $1,209,631 in cash, $205 in accounts receivable and $13,702 in inventory. At December 31, 2013, we had $1,498,024 of current assets consisting of $1,479,152 in cash, $15,712 in inventory and $2,875 in prepaid expenses and $285 in accounts receivables. Total liabilities at June 30, 2014 and December 31, 2013 were $589 and $7,504, respectively.
Net cash used in operating activities was $127,830 during the six months ended June 30, 2014 compared to $5,166 in the same period in 2013, an increase of $122,664. The increase in cash used in operating activities is primarily attributable to an increase in net loss and a decrease in accounts payable, partially offset by an increase in depreciation, prepaid assets, inventory and refundable deposits.
10
Net cash used in investing activities was $154,691 during the six months ended June 30, 2014 compared to $0 in the same period in 2013, an increase of $154,691 as a result of investments in property plant and equipment and an investment in oil and gas leases.
Net cash provided by financing activities was $13,000 during the six months ended June 30, 2014 compared to $4,719 in the same period in 2013, an increase of $8,281. The increase was primarily a result of $13,000 in proceeds from the issuance of our common and preferred stock.
As discussed above, our sales volume of our LiL Marc products have declined due to increased competition discussed above. With regard to our real estate development plans, we evaluating the feasibility of continuing to look for real estate development projects and we recently made an investment in an entity that owns an interest in oil and gas wells. As a result of these factors, we are unable to determine at this time if and when we may achieve a profitable level of operations. We believe, however, that our cash is adequate for at least the next 12 months.
Inflation
In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.
Related Party Transactions
We have specified the following person and entity as related parties with ending balances as of June 30, 2014:
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 and now our Chief Financial Officer, 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 Campbell’s 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.
Off-balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Forward-Looking and Cautionary Statements
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management’s plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results. A list of factors that could cause our actual results of operations and financial condition to differ materially is set forth below, and these factors are discussed in greater detail under the “Risk Factors” section of our Annual Report on Form 10-K as filed with the SEC on April 4, 2014:
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| ● | the ability to maintain current business and, if feasible, expand the marketing of products; |
| ● | the ability to attract and retain new individual and retail customers; |
| ● | the sufficiency of existing capital resources and the ability to raise additional capital to fund cash requirements for future operations; |
| ● | uncertainties involved in the rate of growth of business and acceptance of the Company’s product; |
| ● | anticipated size or trends of the market segments in which we compete and the anticipated competition in those markets; |
| ● | future capital requirements and our ability to satisfy our needs; and |
| ● | general economic conditions. |
We caution that the factors described herein and other factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure and control procedures are also designed to ensure that such information is accumulated and communicated to management, including the chief executive officer and chief financial officer, to allow timely decisions regarding required disclosures.
As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. Based on the evaluation described above, our management, including our principal executive officer and chief financial officer, have concluded that, as of June 30, 2014, our disclosure controls and procedures were not effective for the reasons discussed below.
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Management identified the following material weakness and significant deficiencies in its assessment of the effectiveness of internal control over financial reporting as of June 30, 2014:
| · | Material Weakness – The Company did not maintain effective controls over certain aspects of the financial reporting process because we lacked a sufficient complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate with our financial reporting requirements. |
| · | Significant Deficiencies – Inadequate segregation of duties. |
We expect to be materially dependent upon a third party to provide us with accounting consulting services for the foreseeable future. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP, there are no assurances that the material weaknesses and significant deficiencies in our disclosure controls and procedures and internal control over financial reporting will not result in errors in our financial statements which could lead to a restatement of those financial statements.
Changes in Internal Control.
There were no changes identified in connection with our internal control over financial reporting during the six months ended June 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings to which we are a party or to which any of our property is subject and, to the best of our knowledge, no such actions against us are contemplated or threatened.
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On May 3, 2014, the Company issued 10,000 shares of its common stock for the acquisition of assets classified as Buildings & Improvements at June 30, 2014. These shares were valued based on the fair value of service provided ($10,000). The shares of common stock referenced herein were issued in reliance upon the exemption from securities registration afforded by the provisions of Section 4(a)(2) of the Securities Act of 1933, as amended, ("Securities Act"), and/or Regulation D, as promulgated by the U.S. Securities and Exchange Commission under the Securities Act.
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
On August 8, 2014, the Company appointed Sarah Campbell as the Company’s Chief Financial Officer and a Director. Ms. Campbell had been the Company’s Chief Accounting Officer since October 15, 2013, Ms. Campbell is the daughter of our CEO, Kent Campbell. At this time, we do not have any written employment agreement or other formal compensation agreement with Ms. Campbell. Compensation arrangements are the subject of ongoing development and we will make appropriate additional disclosures as they are further developed and formalized. George Norman, our former Chief Financial Officer will remain as a director of the Company until his removal or resignation.
Ms. Campbell’s considerable experience in accounting and finance qualifies her to serve as a director of the Company.
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Item 6. Exhibits
| Exhibit Number | Description | |
| 3.3 | Certificate of Designation, Preferences, and Rights of Series A Preferred Stock (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed with the SEC on April 8, 2014). | |
| 10.1 | Agreement for the Purchase and Sale of Real Estate between Ashland Holdings, LLC and TD Bank dated October 29, 2013 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on November 1, 2013). | |
| 31.1 | Section 302 Certificate of Chief Executive Officer. * | |
| 31.2 | Section 302 Certificate of Principal Financial and Accounting Officer. * | |
| 32.1 | Section 906 Certificate of Chief Executive Officer and Principal Financial and Accounting Officer. * | |
| 101 INS | XBRL Instance Document** | |
| 101 SCH | XBRL Schema Document** | |
| 101 CAL | XBRL Calculation Linkbase Document** | |
| 101 DEF | XBRL Definition Linkbase Document** | |
| 101 LAB | XBRL Labels Linkbase Document** | |
| 101 PRE | XBRL Presentation Linkbase Document** | |
| * | Filed herewith. | |
| ** | The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Great Plains Holding, Inc. | |
| Date: August 11, 2014 | By: /s/ Kent Campbell |
| Kent Campbell | |
| Chief Executive Officer | |
| (Principal Executive Officer) | |
| Date: August 11, 2014 | By: /s/ Sarah Campbell |
| Sarah Campbell | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
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