(The accompanying notes are an integral part of these consolidated financial statements)
(The accompanying notes are an integral part of these consolidated financial statements)
(The accompanying notes are an integral part of these consolidated financial statements)
NOTES TO THE CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
NOTE 1- ORGANIZATION AND GOING CONCERN
Organization and Description of Business
TurnKey Capital, Inc. (formerly Train Travel Holdings, Inc.) (the Company, we, or us) was incorporated under the laws of the State of Nevada under the name of Vanell, Corp. on September 7, 2012 (Inception). The Company changed its name to Train Travel Holdings, Inc. on March 20, 2014 and to TurnKey Capital, Inc. on January 15, 2016
From Inception in 2012 through December 2013, our business operations were limited primarily to the development of a business plan to provide consulting services to commercial growers of coffee in El Salvador, the completion of private placements for the offer and sale of our common stock, discussing the offers of consulting services with potential customers, and the signing of the service agreement with Finca La Esmeralda, a private El-Salvadorian company. We discontinued our coffee business on January 23, 2014.
Commencing January 23, 2014, our business plan changed to the acquisition and operation of entertainment train companies, as well as managing and providing consulting services to entertainment train companies. Since January 2014 our management has spent all of its time and effort on developing our business plan, including identifying specific entertainment railroad acquisition targets, engaging in discussions with these potential targets to ascertain the potential level of interest, negotiating general terms with targets, and undertaking early stage due diligence of potential targets. As a result, we entered into non-binding letters of intent with two acquisition candidates and subsequently performed initial stage due diligence. In one case, the railroad was in such disrepair we determined the acquisition to not be feasible at the price being sought by the target. In another case, we determined the price was too high based on our due diligence and could not reach an agreement with the potential seller. We also entered into a series of agreements to operate a dinner train in Missouri which were subsequently unwound. In light of the forgoing, our management has looked to potential new lines of business in addition to pursuing our current line of business.
On July 6, 2015, the Company completed a share exchange agreement (the Share Exchange Agreement) with Turnkey Home Buyers USA, Inc., a Florida corporation (Turnkey), TBG Holdings Corporation (TBG), each of the Turnkey shareholders and Train Travel Holdings, Inc., a Florida corporation. The Company, Turnkey, TBG and Train Travel Holdings, Inc., a Florida corporation, are all under the common control of Neil Swartz and Tim Hart.
Pursuant to the terms of the Share Exchange Agreement, Turnkey shareholders transferred to the Company all of the issued and outstanding shares of capital stock of Turnkeys shareholders. In exchange for the acquisition of all of the issued and outstanding shares of Turnkey, the Company issued 15,337,500 shares of its common stock to Turnkey shareholders. Prior to closing, TBG, a principal shareholder of the Company and Turnkey, tendered to Turnkey for cancellation 15,000,000 shares of Turnkey common stock.
The Company shares issued to the Turnkey shareholders were not registered and were issued in a transaction which was exempt from the registration requirements pursuant to Section 4(a)(2) of the Securities Act of 1933. Each of the Turnkey shareholders were accredited investors and no underwriters or placement agents were involved.
As a result of the Share Exchange Agreement, the Turnkey shareholders owned 38.9% of the Companys common stock and 58.5% of the fully diluted common stock as a result of their ownership of the outstanding preferred stock.
4
TURNKEY CAPITAL, INC. AND SUBSIDIARIES
(FORMERLY TRAIN TRAVEL HOLDINGS, INC.)
NOTES TO THE CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
Due to the common control of Turnkey and the Company, pursuant to ASC 805-50-25, Transactions Between Entities Under Common Control and other SEC guidance including for lack of economic substance, the Share Exchange Agreement was accounted for as a transfer of the carrying amounts of assets and liabilities under the predecessor value method of accounting. Financial statement presentation under the predecessor values method of accounting as a result of a business combination between entities under common control requires the receiving entity (i.e., the Company) to report the results of operations as if both entities had always been combined. The consolidated financial statements include both entities full results since the inception of Turnkey on September 12, 2014.
Founded in September 2014, Turnkey offers clients a full suite of services for residential and commercial real estate transactions. As part of the acquisition, the Company acquired Turnkeys subsidiary, a real estate brokerage firm, to handle the sales transactions. Turnkey seeks to generate revenue in three primary ways: coaching and mentoring real estate investors to improve their returns, leasing and sales of quality turnkey rental properties, and brokerage of residential and commercial transactions.
In September 2014, Turnkey acquired the intellectual properties of Robert Blair Real Estate, which included videos, instructional books, and an established real estate investor education program. Prior to September 2014, Turnkeys current management team has been mentoring real estate investors for over 20 years.
Turnkeys Single-Family Rental home division has developed an acquisition platform that is capable of acquiring large numbers of properties across many acquisition channels in multiple markets. When identifying desirable markets, the company focuses on steady population growth, strong rental demand and a desirable level of distressed sales of homes that can be acquired below replacement cost, providing for attractive potential rental yields and capital appreciation. More specifically, the company looks to acquire single-family homes in select submarkets that are appealing to middle income families, based on its disciplined market selection criteria, such as above-average median household incomes, well-regarded school districts, proximity to employment centers and lifestyle amenities, access to transportation routes and public transit and low crime levels. Turnkey believes that homes in these areas will attract tenants with strong credit profiles, produce high occupancy/rental rates, providing for long-term property appreciation potential.
In pursuit of our existing real estate business, on September 15, 2016 Turnkey entered an asset purchase agreement with ECP Capital Partners, Inc. Pending due diligence and a final closing, in exchange for 5,000,000 shares of Turnkey (convertible into 28,800,083 shares of the Company) the agreement would provide two vacant lots in a Port Charlotte real estate development, and option to purchase another 20 additional lots in the same development, and the rights and title to certain assets associated with Castle Capital Development Group. Due diligence for this transaction is currently underway.
On September 1, 2016, the Company formed a new subsidiary, Remote Office Management, Inc. (ROM) to market bundled accounting and computer/IT services. Simultaneously, ROM entered into an professional services agreement with R3 Accounting, (an accounting firm owned by Timothy Hart, a director, secretary and CFO of the Company) and PC Lauderdale (an unrelated computer/IT company). The purpose of the agreement was to form a joint venture where by these entities would cross market professional services under ROM for one stop computer/IT and accounting services.
Change of Control
On January 23, 2014, Mr. Francisco Douglas Magana (Magana), our then president and controlling shareholder, entered into a Common Stock Purchase Agreement (the Agreement) with the Company and Train Travel Holdings Inc. (Travel Train Holdings Florida) wherein Magana sold 15,000,000 shares of the Companys common stock constituting 77.32% of the Companys issued and outstanding shares of common stock to Travel Train Holdings Florida for an aggregate purchase price of $150,000. The principals of Travel Train Holdings Florida are Neil Swartz and Timothy Hart.
As part of the Agreement, Magana tendered his letter of resignation as the President, Secretary, Treasurer, Director and member of the Company Board effective as of the date of the Agreement.
5
TURNKEY CAPITAL, INC. AND SUBSIDIARIES
(FORMERLY TRAIN TRAVEL HOLDINGS, INC.)
NOTES TO THE CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
On January 23, 2014, in Lieu of a Special Meeting the Board of Directors of the Company, we accepted the resignation of Magana and elected Neil Swartz to the positions of Director, President and CEO of the Company and Timothy Hart to the positions of Director, Secretary and CFO.
Going Concern
The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As of September 30, 2016, the Company had $0 of cash, has incurred losses since Inception of $1,482,074 and further losses are anticipated in the development of its business raising substantial doubt about the Companys ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. There is no assurance that these events will be satisfactorily completed.
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of the management, all adjustments considered necessary for a fair representation of the financial position and the results of operations and cash flows for the interim periods have been included.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany transactions and balances have been eliminated in consolidation. The results of our subsidiary are consolidated with the Companys based on guidance from the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) No. 810, Consolidation (ASC 810).
Accounting estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes.
6
TURNKEY CAPITAL, INC. AND SUBSIDIARIES
(FORMERLY TRAIN TRAVEL HOLDINGS, INC.)
NOTES TO THE CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
Fair Value Measurement
The Company measures fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The Company utilizes a three-tier hierarchy which prioritizes the inputs used in the valuation methodologies in measuring fair value:
Level 1. Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access. The Company has no assets or liabilities valued with Level 1 inputs.
Level 2. Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. The Company has no assets or liabilities valued with Level 2 inputs.
Level 3. Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company has no assets or liabilities valued with Level 3 inputs.
Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, accounts payable, accrued liabilities and related party advances approximate their fair value because of the short- term nature of these instruments and their liquidity. Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.
Income Taxes
The Company follows the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Revenue Recognition
We anticipate earning income from the operations of residential real estate properties classified as real estate owned. Revenue is recognized when all of the following criteria were met: persuasive evidence of an arrangement existed, services had been provided, all significant contractual obligations had been satisfied, and collection was reasonably assured.
Real Estate Owned and Held-For-Sale
Real estate owned, shown net of accumulated depreciation and impairment charges, is comprised of real property acquired for cash or through partial or full settlement of mortgage debt. Real estate acquired is recorded at its estimated fair value at the time of acquisition.
We allocate the purchase price of our operating properties to land and building and to any other identified intangible assets or liabilities. We finalize our purchase price allocation on these assets within one year of the acquisition date.
Real estate assets are depreciated using the straight-line method over their estimated useful lives. Ordinary repairs and maintenance which are not reimbursed by the tenants are expensed as incurred. Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their estimated useful life.
7
TURNKEY CAPITAL, INC. AND SUBSIDIARIES
(FORMERLY TRAIN TRAVEL HOLDINGS, INC.)
NOTES TO THE CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
Our properties are individually reviewed for impairment each quarter, if events or circumstances change indicating that the carrying amount of the assets may not be recoverable. We recognize impairment if the undiscounted estimated cash flows to be generated by the assets are less than the carrying amount of those assets. Measurement of impairment is based upon the estimated fair value of the asset. In the evaluation of a property for impairment, many factors are considered, including estimated current and expected operating cash flows from the property during the projected holding period, costs necessary to extend the life or improve the asset, expected capitalization rates, projected stabilized net operating income, selling costs, and the ability to hold and dispose of such real estate owned in the ordinary course of business. Impairment charges may be necessary in the event discount rates, capitalization rates, lease-up periods, future economic conditions, and other relevant factors vary significantly from those assumed in valuing the property.
Real estate is classified as held-for-sale when management commits to a plan of sale, the asset is available for immediate sale, there is an active program to locate a buyer, and it is probable the sale will be completed within one year. Real estate assets that are expected to be disposed of are valued, on an individual asset basis, at the lower of their carrying amount or their fair value less costs to sell.
We recognize sales of real estate properties upon closing. Payments received from purchasers prior to closing are recorded as deposits. Gain on real estate sold is recognized using the full accrual method when the collectability of the sale price is reasonably assured and we are not obligated to perform significant activities after the sale. Gain may be deferred in whole or in part until collectability of the sales price is reasonably assured and the earnings process is complete.
Advertising Costs
The Companys policy regarding advertising is to expense advertising when incurred. The Company incurred advertising expense of $0 during the nine-month period ended September 30, 2016.
Stock-Based Compensation
As of September 30, 2016 the Company has not issued any stock-based payments. Stock-based compensation is accounted for at fair value in accordance with SFAS ASC 718, when applicable. To date, the Company has not adopted a stock option plan and has not granted any stock options.
Net Income (Loss) Per Share
The computation of basic earnings per share (EPS) is based on the weighted average number of shares that were outstanding during the period, including shares of common stock that are issuable at the end of the reporting period. The computation of diluted EPS is based on the number of basic weighted-average shares outstanding plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common shares outstanding using the treasury stock method. The computation of diluted net income per share does not assume conversion, exercise or contingent issuance of securities that would have an antidilutive effect on earnings per share. Therefore, when calculating EPS if the Company experienced a loss, there is no inclusion of dilutive securities as their inclusion in the EPS calculation is antidilutive. Furthermore, options and warrants will have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options or warrants (they are in the money).
8
TURNKEY CAPITAL, INC. AND SUBSIDIARIES
(FORMERLY TRAIN TRAVEL HOLDINGS, INC.)
NOTES TO THE CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
Following is the computation of basic and diluted net loss per share for the nine months ended September 30, 2016 and 2015:
Basic and Diluted EPS Computation
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Numerator:
|
|
|
|
|
|
|
|
Loss available to common stockholders'
|
|
$
|
(211,556
|
)
|
|
$
|
(533,421
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
39,100,041
|
|
|
|
38,729,165
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted EPS
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
Potentially dilutive securities not included in the calculation of diluted net loss per share attributable to common stockholders because to do so would be anti- dilutive are as follows (in common stock equivalent shares):
|
|
|
|
|
|
|
|
|
Preferred stock convertible into common stock
|
|
|
29,100,000
|
|
|
|
29,100,000
|
|
Recent accounting pronouncements
We review new accounting standards as issued. Although some of these accounting standards issued or effective after the end of our previous fiscal year may be applicable to us, we have not identified any standards that we believe merit further discussion. We believe that none of the new standards will have a significant impact on our financial statements.
NOTE 3 REAL ESTATE OWNED
During the nine months ended September 30, 2016, the Company did not purchase any properties.
NOTE 4 DUE FROM / TO RELATED PARTIES & RELATED PARTY TRANSACTIONS
Amounts due from and to related parties as of September 30, 2016 and December 31, 2015 are detailed below:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Due from related parties
|
|
$
|
121,051
|
(1)
|
|
$
|
182,437
|
(1)
|
Accounts payable - related party
|
|
|
(51,524)
|
(2)
|
|
|
(45,249)
|
(2)
|
Advances - related party
|
|
|
(225,417)
|
(3)
|
|
|
(225,854)
|
(3)
|
(1)
Due from related parties represents Turnkey Home Buyers USA, Inc. advances paid to TBG for services that are being expensed at a rate of $10,000 per month.
(2)
Related to accounting services provided by the Company to Travel Train Holdings Florida.
(3)
Non-interest bearing balances are due to Travel Train Holdings Florida, and are repayable on demand.
All of the Companys revenue were earned by a subsidiary controlled by Timothy Hart, a director, secretary and CFO of the Company.
9
TURNKEY CAPITAL, INC. AND SUBSIDIARIES
(FORMERLY TRAIN TRAVEL HOLDINGS, INC.)
NOTES TO THE CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
NOTE 5 ADVANCES PAYABLE
During the three months ended December 31, 2015, the Company received proceeds of $200,000 for an anticipated business transaction. The details of the transaction were to be negotiated in the first quarter of 2016. Subsequent to December 31, 2015, the terms of the transaction had not been agreed to, thus the Board of Directors has considered various alternatives to satisfy this liability and has proposed to issue 2,000,000 shares of common stock at $.10 per share to consummate the transaction.
NOTE 6 PREFERRED STOCK
On January 13, 2016, The Company filed a Certificate of Amendment with the State of Nevada to amend its Articles of Incorporation to increase its authorized shares of preferred stock from 1,000,000 to 5,000,000 shares with a par value of $ 0.001 per share.
NOTE 7 COMMON STOCK
As of September 30, 2016 and December 31, 2015, 39,216,665 and 38,831,665 shares of our common stock were issued and outstanding, respectively.
On January 13, 2016, The Company filed a Certificate of Amendment with the State of Nevada to amend its Articles of Incorporation to increase its authorized shares of common stock from 75,000,000 to 750,000,000 shares with a par value of $ 0.001 per share.
During November and December 2015, the Company issued 102,500 restricted shares of common stock related to a prior years PPM adjustment.
On July 6, 2015, the Company completed a Share Exchange Agreement for 100% of the issued and outstanding shares of Turnkey Home Buyers USA, Inc. by issuing 15,337,500 shares of common stock. Due to the common control of Turnkey and the Company, pursuant to ASC 805-50-25, Transactions Between Entities Under Common Control and other SEC guidance including for lack of economic substance, the Agreement was accounted for as a transfer of the carrying amounts of assets and liabilities under the predecessor value method of accounting. Financial statement presentation under the predecessor values method of accounting requires the receiving entity to report the results of operations as if both entities had always been combined. As a result, the Company has reflected the shares issued pursuant to the Agreement retrospectively.
During the three months ended March 31, 2016 the Company issued 385,000 restricted shares of common stock related to a prior years PMM adjustment.
NOTE 8 SUBSEQUENT EVENTS
Management has reviewed material events subsequent to the quarterly period ended September 30, 2016 and prior to the filing of financial statements in accordance with FASB ASC 855 Subsequent Events. There were no additional disclosures deemed necessary.
10
ITEM 2.