NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
1.
THE COMPANY
The Company was incorporated in the State of New Jersey on October 1, 2003 under the name of Creative Beauty Supply of New Jersey Corporation and subsequently changed its name to Gotham Capital Holdings, Inc. on May 18, 2015. The Company commenced operations in the beauty supply industry as of January 1, 2004. On November 30, 2007, the Companys Board of Directors approved a plan to dispose of its wholesale and retail beauty supply business. As of January 1, 2009, the Company has had no operations and is a shell company.
The Companys current business plan is to attempt to identify and negotiate with a business target for the merger of that entity with and into the Company. In certain instances, a target company may wish to become a subsidiary of the Company or wish to contribute assets to the Company rather than merge.
No assurance can be given that the Company will be successful in identifying or negotiating with any target company. The Company provides a means for a foreign or domestic private company to become a reporting (public) company whose securities would be qualified for trading in the United States secondary market.
The Board of Directors of the Company adopted resolutions to amend their Articles of Incorporation to increase the authorized shares to 200,000,000 (See note 6), to amend Articles of Incorporation to change the Companys name to Gotham Capital Holdings, Inc. and authorize a 1-for-2 reverse split of all outstanding common shares. The corporation actions became effective as of May 18, 2015.
On April 1, 2015, the Company entered into a Securities Purchase Agreement (SPA) with Gotham Capital, Inc. and certain Gotham Capital, Inc. shareholders which would have resulted in a change of control of the Company upon execution of the agreement. On July 22, 2016, both parties signed a mutual release which agrees to settle disputes and differences that have arisen between the two parties and cancelled the SPA. The Company has received a reimbursement of $20,000 for professional fees related to the agreement which has been recorded as miscellaneous income in the statement of operations (See note 4).
See Note 7 for further updates regarding potential business targets and corporate actions taken subsequent to December 31, 2016.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial Statement Presentation
The Companys financial statements are prepared in conformity with accounting principles generally accepted in the United States of America.
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Use of Estimates
The preparation of these financial statements require management to make estimates, judgments and assumptions that affect the reporting amounts of assets, liabilities, revenue and expenses. The Company continually evaluates the accounting policies and estimates used to prepare the financial statements. The Company bases its estimates on historical experiences and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management.
Cash Equivalents
Short-term investments with an original maturity of ninety days or less and highly liquid investments are considered cash and cash equivalents. Cash and cash equivalents consist of a money market account.
Income Taxes
The Company utilizes Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC 740), Income Tax (ASC 740). ASC 740 requires the recognition of deferred tax assets and liabilities for the expected future tax consequence of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities using enacting tax rates in effect in the years in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company has adopted the provisions of FASB ASC 740-10-05, Accounting for Uncertainties in Income Taxes. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
Loss Per Share
The Company computes loss per share in accordance with ASC 260, Earnings Per Share. Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share reflects the potential dilution that could occur if securities or other agreements to issue common stock were exercised or converted into common stock. Diluted earnings per share is computed based upon the weighted average number of common shares and dilutive common equivalent shares outstanding, which includes convertible debentures, stock options and warrants. There were no dilutive common stock equivalents for all periods presented.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.
The Companys recurring losses from operations, lack of revenue generating operations and accumulated deficit raise substantial doubt about the ability of the Company to continue as a going concern.
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Management believes the Company will continue to incur losses and negative cash flows from operating activities for the foreseeable future and will need additional equity or debt financing to sustain its operations until it can achieve profitability and positive cash flows, if ever. Management plans to seek additional debt and/or equity financing for the Company, but cannot assure that such financing will be available on acceptable terms. The Companys continuation as a going concern is dependent upon its ability to ultimately attain profitable operations, generate sufficient cash flows to meet its obligations, and obtain additional financing as may be required. The outcome of this uncertainty cannot be assured.
The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. There can be be no assurance that management will be successful in implementing its business plan or that the successful implementation of such business plan will actually improve the Companys operating results.
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheet for cash and cash equivalents, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments.
Recently Issued Accounting Standards
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted would have a material effect on the accompanying financial statements.
3.
CONCENTRATION OF CREDIT RISK
The Company maintains its cash balance with a major bank. The balances are insured by the Federal Deposit Insurance Corporation up to $250,000 per depositor. At December 31, 2016 and 2015 all cash balances were fully insured.
4.
MISCELLANEOUS INCOME
On August 22, 2016 the Company received $20,000 as a reimbursement for professional fees paid in 2015. The reimbursement has been classified as miscellaneous income in the Statement of Operations. (See note 1).
5.
INCOME TAXES
The deferred income tax assets and liabilities at December 31, 2016 and 2015 are as follows:
|
| |
|
2016
|
2015
|
Net operating loss carry forwards
|
$218,600
|
$213,900
|
Less: Valuation allowance
|
(218,600)
|
(213,900)
|
Total
|
$ -
|
$ -
|
A 100% valuation allowance was provided at December 31, 2016 and 2015 as it is uncertain if the deferred tax assets would be utilized and the net operating loss carryforwards may be limited due to potential changes of control. The increase in the valuation allowance was a result from the current year net operating loss.
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At December 31, 2016, the Company has unused federal net operating loss carry forwards of approximately $614,000 expiring between 2024 and 2036 and unused New Jersey net operating loss carry forwards of approximately $199,000 expiring between 2029 and 2036.
At December 31, 2016 and 2015, the Company had no material unrecognized tax benefits, and no adjustments to liabilities or operations were required. The Company does not expect that its unrecognized tax benefits will materially increase within the next twelve months. The Company did not recognize any interest or penalties related to uncertain tax positions at December 31, 2016 and 2015.
The Company files its federal and New Jersey income tax returns under varying statutes of limitations. The 2013 through 2016 tax years generally remain subject to examination by federal and New Jersey tax authorities.
6. STOCKHOLDERS EQUITY (DEFICIENCY)
Effective May 18, 2015, the Company increased the authorized shares to 200,000,000. 190,000,000 shares shall be designated common stock and have a par value of $0.001 per share and 10,000,000 shares shall be designated preferred stock and have a par value of $0.001 per share. The Company also recorded a 1-for-2 reverse split of all outstanding common shares which occurred on May 18, 2015 and is reflected in all per share amounts in the financial statements.
Holders of shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock do not have cumulative voting rights. Holders of common stock are entitled to share ratable in dividends, if any, as may be declared from time to time by the Board of Directors in its discretion from funds legally available therefore. In the event of liquidation, dissolution, or winding up of the Company, the holders of common stock are entitled to share pro rata in all assets remaining after payment in full of all liabilities. All of the outstanding shares of common stock are fully paid and non-assessable. Holders of common stock have no preemptive rights to purchase the Companys common stock. There are no conversion or redemption rights or sinking fund provisions with respect to the common stock.
7. SUBSEQUENT EVENTS
On March 16, 2017, the Board of Directors of the Company adopted resolutions to change the Companys name to IIOT-OXYS, Inc., to authorize a change of domicile from New Jersey to Nevada, to authorize a 2017 Stock Awards Plan, and to approve the Securities Exchange Agreement between the Company and OXYS Corporation (OXYS), a Nevada Corporation. The actions have been approved by stockholders representing 84.2% of the Company.
Our Board of Directors and Majority Shareholders has approved a securities exchange agreement with the shareholders of OXYS to acquire 100% of the issued voting shares of OXYS in exchange for 34,687,244 of the Companys common shares. The securities and exchange agreement has not been executed as of the date of this filing. Upon execution of the securities and exchange agreement, the acquisition will result in a change of control of the Company. The
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34,687,244 common shares to be issued consist wholly of securities exempt from registration under the Securities Act of 1933. The share consideration to be paid by the Company to the OXYS shareholders will represent approximately 90% of our issued voting equity on a fully diluted basis following closing. The corporate actions will not be effective until twenty days after the Definitive Information Statement filing date with the Securities and Exchange Commission.
Also at closing of the Securities Exchange Agreement, Carmine Catizone, a current officer and director, and Pasquale Catizone, a majority shareholder, will return an aggregate of 1,500,000 common shares to the Company for cancellation such that neither Carmine nor Pasquale Catizone shall retain 5% or more of our voting securities. Pasquale Catizone has entered into a consulting agreement with OXYS to provide consulting services during the transition. At closing of the Securities and Exchange Agreement, Carmine Catizone and Daniel Generelli will resign as officers and directors.
The Board of Directors and Majority Shareholders have determined that it is in the best interests of the Company to implement the 2017 Stock Awards Plan. The 2017 Stock Awards Plan was adopted by the Board of Directors of the Company on March 16, 2017. The aggregate number of common shares that may be issued under the Plan shall be 7,000,000 common shares.
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ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of December 31, 2016. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Based on this evaluation, our chief executive officer and chief financial officer have concluded such controls and procedures to be not effective as of December 31, 2016 to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms and to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Managements Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is the process designed by and under the supervision of our chief executive officer and chief financial officer, or the persons performing similar functions, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external reporting in accordance with accounting principles generally accepted in the United States of America. These officers have evaluated the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in
Internal Control over Financial Reporting Guidance for Smaller Public Companies
.
Our chief executive officer and chief financial officer have assessed the effectiveness of our internal control over financial reporting as of December 31, 2016 and concluded that it was not effective because of the material weakness described below:
Due to resource constraints, material weaknesses continue to be evident to management regarding our inability to generate all the necessary disclosure for inclusion in our filings with the Securities and Exchange Commission due to the lack of resources and segregation of duties. A material weakness is a significant deficiency in one or more of the internal control components that alone or in the aggregate precludes our internal controls from reducing to an appropriately low level the risk that material misstatements in our consolidated financial statements will not be prevented or detected on a timely basis.
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This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the registrants registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the registrant to provide only managements report in this annual report.
Evaluation of Changes in Internal Control over Financial Reporting
Our chief executive officer and chief financial officer have evaluated changes in our internal controls over financial reporting that occurred during the year ended December 31, 2016. Based on that evaluation, our chief executive officer and chief financial officer, or those persons performing similar functions, did not identify any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Remediation Plan for Material Weaknesses
At such time that it is economically feasible, we will aggressively recruit experienced professionals to ensure that we maintain adequate segregation of duties and have controls in place to ensure proper disclosures are in our filings with the Securities and Exchange Commission. Although we believe that these corrective steps will enable management to conclude that the internal controls over our financial reporting are effective when the staff is trained, we cannot assure you these steps will be sufficient. We may be required to expend additional resources to identify, assess and correct any additional weaknesses in internal control.
Important Considerations
The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time. Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.