Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - Titanium Healthcare, Inc. | Financial_Report.xls |
| EX-31.1 - CERTIFICATION - Titanium Healthcare, Inc. | sacq_ex311.htm |
| EX-32.1 - CERTIFICATION - Titanium Healthcare, Inc. | sacq_ex321.htm |
| EX-31.2 - CERTIFICATION - Titanium Healthcare, Inc. | sacq_ex312.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
(Amendment No. 1)
(Mark one)
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x
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Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
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| For the fiscal year ended December 31, 2013 | ||
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o
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Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
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| For the transition period from _________ to __________ | ||
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Commission file number 0-53803
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SMSA Gainesville Acquisition Corp.
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(Exact name of registrant as specified in its charter)
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Nevada
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27-0984261
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(State of incorporation)
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(I.R.S. Employer Identification No.)
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610 Coit Road, Suite 200, Dallas Texas 75075
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(Address of principal executive offices)
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(469) 606-4520
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(Issuer’s telephone number)
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Securities registered under Section 12(b) of the Exchange Act – None
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Securities registered pursuant to Section 12(g) of the Act – Common Stock – $0.001 par value
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes o No x
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Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the 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 o
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Indicate by check mark whether the registrant has submitted electronically on its corporate Website, 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 o No x
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Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
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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.
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| Large accelerated filer | o | Accelerated filer | o | Non-accelerated filer | o | 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 x No o
The aggregate market value of voting and non-voting common equity held by non-affiliates as of June 30, 2013 was approximately $-0- based upon 500,008 shares held by non-affiliates and a closing market price of $0.00 per share on April 2, 2014.
As of April 2, 2014, there were 10,000,008 shares of Common Stock issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
EXPLANATORY NOTE
In this Annual Report on Form 10-K/A (Amendment No. 1) for the fiscal year ended December 31, 2013 (“Annual Report”), SMSA Gainesville Acquisition Corp. (“the Company”) is restating its previously issued and audited financial statements and the related disclosures for the year ended December 31, 2013 (the “Restated Period”). As discussed in further detail below and in Note K to the accompanying financial statements, the restatement is the result of a misapplication in the guidance on accounting for Push-Down Accounting (as defined below). We assessed the impact of this misapplication on our prior interim and annual financial statements and concluded that the combined impact was material to the annual financial statements for the year ended December 31, 2013. Consequently, we have restated the financial statements identified above. All amounts in this Annual Report reflect the impact of the restatement adjustments.
For a more detailed explanation of these matters and resulting restatements, please see Part II, Item 8: Financial Statements – Note K to the Financial Statements.
2
BACKGROUND ON RESTATEMENT
On August 22, 2014, the Chief Financial Officer (“CFO”) of the Company concluded, in preparation and review of the quarterly reports of the Company, that audited financial statements of the Company for the year ended December 31, 2013 included an accounting error as a result of a misapplication of accounting principles as discussed further herein. Based on the recommendation of the CFO, the Company’s Board of Directors determined that the financial statements included in its Form 10-K for the year ended December 31, 2013 as filed on April 24, 2014, should no longer be relied upon. That determination was reflected in a current report on Form 8-K filed by the Company with the SEC on August 29, 2014.
The Company determined there was an error in the accounting for the purchase of the Company by Titan Partners, LLC (“Titan”), which purchase is more fully described in the Company’s Current Report on Form 8-K filed with the SEC on December 26, 2013 and that description is hereby incorporated by reference. Because the purchase resulted in a change in ownership of the Company greater than 95%, causing the Company to become substantially wholly owned by Titan, Staff Accounting Bulletin (“SAB”) Topic 5J requires that a new basis of accounting be established for the purchased assets and liabilities (referred to as “Push-Down Accounting”). The accounting treatment given to the purchase in the Company’s year-end 2013 financial statements did not take into effect that the purchase resulted in a change in ownership exceeding 95% as is required by SAB Topic 5J.
The date of acquisition was determined to be December 20, 2013, the date of execution of the stock purchase agreement between Titan and the Company. Upon consummation of the transaction, Titan received approximately 96% of the issued and outstanding shares of common stock of the Company in exchange for $200,000. On January 29, 2014, following the resolution of administrative matters between the selling shareholders and their respective brokers, Titan received an additional 2% of the Company’s issued and outstanding shares of common stock in exchange for $50,000, resulting in Titan owning a combined total of 98.92% of the Company’s issued and outstanding shares of common stock. As the Company is considered a shell company that does not constitute a business for the purposes of business combinations (as defined under the Accounting Standards Codification 805-10-55-4, the transaction between Titan and the Company has been treated as an asset purchase. Under an asset purchase, assets are recognized based on their cost to the acquiring entity, which generally includes the transaction costs of the asset acquired and is allocated to the individual assets acquired or liabilities assumed based on their relative fair values and does not give rise to goodwill.
The restatement reflects the application of Push-Down Accounting to the Company. The Company is considered a shell company with no operations and which does not constitute or meet the definition of a business. Pushing down the transaction cost of investors in Titan to acquire control of the Company through a stock purchase agreement resulted in recognition of a charge in the amount of $253,945 and a reclassification of $55,603 of professional fees. All previously reported assets of the Company remain the same and no new basis, as required by Push-Down Accounting, is needed to be recorded. There is no change in the previously reported cash and cash equivalents or cash flows from operating and financing activities.
Items Amended in this Annual Report on Form 10-K/A
This Amended Form 10-K amends and restates Items 7, 8 and 9A of Part II and Item 15 of Part IV of the Original Form 10-K, and no other items in the Original Form 10-K are amended hereby. Except to account for the amended and restated information described above, the foregoing items have not been updated to reflect events occurring after the filing date of the Original Form 10-K. Accordingly, this Amended Form 10-K should be read in conjunction with our filings made and to be made with the SEC on and after the filing of the Original Form 10-K. Pursuant to the rules of the SEC, Item 15 of Part IV of the Original Form 10-K has been amended to contain currently-dated certifications from our Chief Executive Officer and Chief Financial Officer, as required by Rule 12b-15.
Unless otherwise specifically identified as the “Original Form 10-K”, “Amended Form 10-K” or the “Form 10-K/A”, any references to the Form 10-K made throughout this document shall refer to the Form 10-K filed with the SEC on April 24, 2014, as amended.
3
PART II
Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
(1) Caution Regarding Forward - Looking Information
Certain statements contained in this annual filing, including, without limitation, statements containing the words “believes”, “anticipates”, “expects” and words of similar import, constitute forward - looking statements. Such forward - looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward - looking statements.
Such factors include, among others, the following: international, national and local general economic and market conditions: demographic changes; the ability of the Company to sustain, manage or forecast its growth; the ability of the Company to successfully make and integrate acquisitions; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; changes in healthcare plan reimbursement policies; changes in rules governing the relationship between doctors and pharmacies; the ability to attract and retain qualified personnel; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-K/A and investors are cautioned not to place undue reliance on such forward - looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward - looking statements contained herein to reflect future events or developments.
(2) General
The Company was organized on September 9, 2009 , as a Nevada corporation . On August 4, 2010, the Company entered into a stock purchase agreement with Paul Interrante pursuant to which Mr. Interrante acquired 9,500,000 shares of our common stock for approximately $9,500 cash or $0.001 per share.
On December 19, 2013, Mr. Interrante and Halter Financial Investments, LP ("HFI") entered into a stock purchase agreement with Titan Partners, LLC for the sale and purchase of 9,892,956 shares of common stock of the Company. Mr. Interrante agreed to transfer all of the 9,500,000 shares of common stock then owned by him and HFI agreed to transfer all of the 392,956 shares of common stock then owned by it. Mr. Interrante and HFI collectively transferred 9,892,956 shares of common stock in exchange for $250,000. The total shares of common stock transferred to the Purchaser represented 98.92% of the Company’s then issued and outstanding common stock.
Our current business plan is to acquire, develop, and operate pharmacies in various states across the United States, including, but not limited to Arizona, Maryland, New York, New Jersey, Connecticut, Massachusetts, District of Columbia, Virginia, Ohio, Illinois and Georgia. A pharmacy acquired by the Company would most likely not continue to operate as it did prior to the acquisition by the Company; it is the Company’s intention that such pharmacies would fill prescriptions primarily for non-sterile compounding medications. Compounding medications are “made from scratch” – individual ingredients are mixed together to create individual formulations that target specific conditions. For example, we expect to compound transdermal pain creams, wound creams, burn creams, and migraine masks, using FDA-approved ingredients. It is expected that pharmacies owned and operated by the Company will only fill individual patient prescriptions.
Based on the experience of other businesses operated by the principals of Titan Partners, LLC, it is anticipated that once the Company has acquired a pharmacy and is operational, the Company will generate revenue by filling prescriptions. The Company intends to retain earnings until the Company has at least $100 million in undepreciated net tangible assets. Retention of earnings is necessary to satisfy certain state-specific valuation thresholds that enable physicians to invest in public companies to which they refer patients.
Notwithstanding the foregoing, the pharmacies owned and operated by the Company will not fill prescriptions referred by physician-stockholders unless such physician referral is permitted under applicable state and federal law. The Company does not currently plan to fill prescriptions for any federally-funded beneficiaries until it has (i) at least $50 million in undepreciated net tangible assets and (ii) stockholder equity exceeding $75 million. The Company’s business plan also includes building a network of physicians, other providers, and distributors that can collaborate in the delivery of quality healthcare.
4
(3) Results of Operations (Based on Restated Results)
The Company had no revenue for either of the years ended December 31, 2013 or 2012 or for the period from August 1, 2007 (date of the Company’s inception) through December 31, 2013.
Operating expenses for the respective years ended December 31, 2013 and 2012 were approximately $380,273 and $14,428, respectively. These expenses were also directly related to $250,000 incurred by Titan Partners, LLC to purchase the Company, the maintenance of the corporate entity and the preparation and filing of periodic reports pursuant to the Exchange Act.
It is anticipated that future expenditure levels will fluctuate, but will generally increase as the Company complies with its periodic reporting requirements and implements its business plan.
Loss per share for the years ended December 31, 2013 and 2012 and for the period from August 1, 2007 (date of the Company’s inception) through December 31, 2013 were approximately $(0.04), $(0.00) and $(0.05) based on the weighted-average shares issued and outstanding.
The Company does not expect to generate any meaningful revenue or incur operating expenses for purposes other than fulfilling the obligations of a reporting company under the Exchange Act unless and until such time that the Company begins to execute upon its current business plan.
The Company incurred approximately $ 59,120 in legal fees in 2013 to further develop its current business plan. The Company expects to incur additional legal fees in the future as it continues to develop and implement its business plan.
(4) Liquidity and Capital Resources
For years ended December 31, 2013 and 2012, the Company received capital contributions of approximately $12,300 and $2,059, respectively. The majority stockholder funded the $250,000 used by Titan to purchase 98.92% of the Company's then issued and outstanding shares of common stock and funded a $50,000 retainer for legal services in December 2013.
The Company currently has limited cash on hand, no operating assets, and a business plan with inherent risk. Because of these factors, the Company’s auditors have issued an audit opinion on the Company’s financial statements which includes a statement describing our going concern status. This means, in the auditor’s opinion, substantial doubt about our ability to continue as a going concern exists at the date of their opinion.
We have historically met our capital requirements through short-term and long-term borrowings and capital contributions from our majority stockholders. We intend to engage in a series of private placements of equity securities through which we will raise sufficient capital to implement our business plan. Once our business plan is fully implemented, we anticipate we will be able to provide the necessary liquidity from our cash on hand, and cash flow from operations; however, if we do not generate sufficient cash flow from operations, we may attempt to continue to finance our operations through equity and/or debt financings.
It is the belief of management and significant stockholder that this plan will provide sufficient working capital necessary to support and preserve the integrity of the corporate entity. However, there is no legal obligation for either management or a significant stockholder to provide funding in the future. Further, the Company is at the mercy of future economic trends and business operations of the Company’s majority stockholder to have the resources available to support the Company. The Company may also experience difficulty in implementing its business plan, which will have a significant adverse impact on the Company’s liquidity and capital resources.
Regardless of whether the Company’s cash assets prove to be inadequate to meet the Company’s operational needs, the Company might seek to compensate providers of services by issuances of stock in lieu of cash.
5
(5) Critical Accounting Policies
Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
Our significant accounting policies are summarized in Note E of our financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would effect our consolidated results of operations, financial position or liquidity for the periods presented in this report.
(6) Effect of Climate Change Legislation
The Company currently has no known or identified exposure to any current or proposed climate change legislation which could negatively impact the Company’s operations or require capital expenditures to become compliant. Additionally, any currently proposed or to-be-proposed-in-the future legislation concerning climate change activities, business operations related thereto or a publicly perceived risk associated with climate change could, potentially, negatively impact the Company’s ability to implement its business plan.
(7) Off-Balance Sheet Arrangements
We currently do not have any off-balance sheet arrangements.
Item 8 – Financial Statements and Supplementary Data
The required financial statements begin on page F - 1 of this document.
Item 9A – Controls and Procedures
Disclosure Controls and Procedures. Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer (“Certifying Officer”), has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a - 15 and 15d-15(e) promulgated under the Exchange Act as of the end of the period covered by this Annual Report. Disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and include controls and procedures designed to ensure that information we are required to disclose in such reports is accumulated and communicated to management, including our Certifying Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, our Certifying Officer concluded that as of such date, our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by us in our reports is recorded, processed, summarized and reported within the time periods specified by the SEC due to a weakness in our controls described below. However, our Certifying Officer believes that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the respective periods presented.
6
Management’s Annual Report on Internal Control over Financial Reporting. Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a - 15(f) of the Exchange Act.
Internal control over financial reporting is defined under the Exchange Act as a process designed by, or under the supervision of, our CEO and CFO and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
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·
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Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
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·
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Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
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·
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Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
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Because of its inherent limitation, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. Accordingly, even an effective system of internal control over financial reporting will provide only reasonable assurance with respect to financial statement preparation.
Management’s assessment of the effectiveness of the Company’s internal control over financial reporting is as of the year ended December 31, 2013. As we are classified as a shell company and, during the period of this report, had only a sole officer and director, the Company’s internal controls were deficient for the following reasons: (1) there were no entity level controls because there was only one person serving in the dual capacity of sole officer and sole director, (2) there were no segregation of duties as that same person approved and directed the payment of the Company’s bills, and (3) there was no separate audit committee. As a result, the Company’s internal controls had an inherent weakness which may increase the risks of errors in financial reporting under current operations and accordingly are deficient as evaluated against the criteria set forth in the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on their evaluation, our management concluded that our internal controls over financial reporting were not effective as of December 31, 2013.
To respond to this material weakness, we have devoted, and plan to continue to devote, significant effort and resources to the remediation and improvement of our internal control over financial reporting. While we have processes to identify and intelligently apply developments in accounting, we plan to hire employees skilled in technical accounting, to enhance these processes to better evaluate our research and understanding of the nuances of increasingly complex accounting standards. Our plan at this time includes providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time and we can offer no assurance that these initiatives will ultimately have the intended effects.
Notwithstanding the material weaknesses described above, management has concluded that our audited financial statements for the periods included in this Annual Report on Amended Form 10-K/A are fairly stated in all material respects in accordance with generally accepted accounting principles for each of the periods presented herein.
This Annual Report does not include an attestation report of our registered public accounting firm regarding our internal control over financial reporting, pursuant to the current appropriate laws and regulations.
Changes in Internal Control over Financial Reporting.
Other than the internal control improvement discussed above, there have been no changes in our internal control over financial reporting during the fourth quarter ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
7
PART IV
Item 15 - Exhibits and Financial Statement Schedules.
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Exhibit Number
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Descriptions | |
| 31.1 | Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002. | |
| 31.2 | Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002. | |
| 32.1 | Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002. | |
| 101 | Interactive data files pursuant to Rule 405 of Regulation S-T. |
(Financial statements follow on next page)
8
SMSA Gainesville Acquisition Corp.
(a development stage company)
Contents
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Page
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Report of Registered Independent Certified Public Accounting Firm
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F-2 | |||
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Financial Statements
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Balance Sheets as of December 31, 2013 (as Restated) and 2012
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F-3 | |||
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Statement of Operations and Comprehensive Loss for each of the years ended December 31, 2013 (as Restated) and 2012 and for the period from August 1, 2007 (date of bankruptcy settlement) through December 31, 2013 (as Restated)
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F-4 | |||
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Statement of Changes in Stockholders’ Equity for the period from August 1, 2007 (date of bankruptcy settlement) through December 31, 2013 (as Restated)
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F-5 | |||
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Statement of Cash Flows for each of the years ended December 31, 2013 (as restated) and 2012 and for the period from August 1, 2007 (date of bankruptcy settlement) through December 31, 2013 (as Restated)
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F-6 | |||
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Notes to Financial Statements (as Restated)
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F-7 | |||
F-1
REPORT OF REGISTERED INDEPENDENT CERTIFIED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of:
SMSA Gainesville Acquisition Corp.
(A Development Stage Company)
We have audited the accompanying balance sheets of SMSA Gainesville Acquisition Corp (a Development Stage Company), as of December 31, 2013 and 2012, and the related statements of operations, shareholders' equity (deficit), and cash flows for each of the two years in the period ended December 31, 2013 and for the period from August 1, 2007 (date of bankruptcy settlement) to December 31, 2013. These financial statements are the responsibility of SMSA Gainesville Acquisition Corp’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SMSA Gainesville Acquisition Corp., as of December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2013, and for the period from August 1, 2007 (date of bankruptcy settlement) to December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note D to the financial statements the Company has suffered recurring losses. The Company has no operations or significant assets and is dependent upon its majority shareholder to provide the sufficient working capital to pay for its current operating expenses, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note D. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
As discussed in Note K to the financial statements, the 2013 financial statements have been restated to correct a misstatement.
/s/ Goldman Accounting Services CPA, PLLC
GOLDMAN ACCOUNTING SERVICES CPA, PLLC
Suffern, New York
April 24, 2014 , except as to Note K which is as of September 10, 2014
F-2
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SMSA Gainesville Acquisition Corp.
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(a development stage company)
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Balance Sheets
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December 31, 2013 and 2012
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December 31,
2013
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December 31,
2012
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(as Restated)
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ASSETS
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Current Assets
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Cash
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$
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38
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$
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353
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Total Assets
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38
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353
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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Current Liabilities
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Due to shareholder
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41,057
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-
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Accrued shell acquisition costs
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109,548
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-
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Accrued expenses
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17,053
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-
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Total Liabilities
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167,658
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-
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Stockholders' Equity (Deficit)
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Preferred stock - $0.001 par value 10,000,000 shares authorized; None issued and outstanding
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-
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-
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Common Stock - $0.001 par value 100,000,000 shares authorized; 10,000,008 shares issued and outstanding
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10,000
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10,000
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Additional paid-in capital
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305,029
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92,729
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Deficit accumulated during the development stage
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(482,649
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)
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(102,376
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)
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Total Stockholders' Equity (Deficit)
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(167,620
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)
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353
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Total Liabilities and Stockholders' Equity
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$
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38
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$
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353
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The accompanying notes are an integral part of the financial statements.
F-3
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SMSA Gainesville Acquisition Corp.
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(a development stage company)
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Statements of Operations
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Years ended December 31, 2013 and 2012 and
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Period from August 1, 2007 (date of bankruptcy settlement) through December 31, 2013
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Year Ended
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Year Ended
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Period from
August 1, 2007
(date of bankruptcy settlement) through
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December 31,
2013
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December 31,
2012
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December 31,
2013
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(as Restated)
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Revenues
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$
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-
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$
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-
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$
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-
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Operating Expenses
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Professional fees
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68,720
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7,360
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101,012
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Reorganization costs
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-
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-
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52,500
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Shell acquisition costs
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309,548
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-
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309,548
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Other general and administrative costs
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2,005
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7,068
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19,590
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Total operating expenses
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380,273
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14,428
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482,650
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Loss from operations
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(380,273
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)
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(14,428
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)
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(482,650
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)
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Other Income (Expense)
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Interest income
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-
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1
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1
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Total other income (expense)
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-
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1
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1
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Loss before provision for income taxes
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(380,273
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)
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(14,427
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)
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(482,649
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)
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Provision for income taxes
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-
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-
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-
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Net Loss
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$
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(380,273
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)
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$
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(14,427
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)
|
$
|
(482,649
|
)
|
|||
|
Loss per weighted-average share of common stock outstanding, computed on net loss - basic and fully diluted
|
$
|
(0.04
|
) |
$
|
(0.00
|
) | $ |
(0.05
|
) | |||
|
Weighted-average number of shares of common stock outstanding - basic and fully diluted
|
10,000,008
|
10,000,008
|
10,000,008
|
|||||||||
The accompanying notes are an integral part of the financial statements.
F-4
|
SMSA Gainesville Acquisition Corp.
|
|
(a development stage company)
|
|
Statement of Changes in Stockholders’ Equity (Deficit)
|
|
Period from August 1, 2007 (date of bankruptcy settlement) through December 31, 2013
|
|
Common Stock
|
Additional
paid–in
|
Deficit
accumulated
during the development
|
||||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Stage
|
Total
|
||||||||||||||||
|
Stock issued pursuant to plan of reorganization at bankruptcy settlement date on August 1,2007
|
500,008
|
$
|
500
|
$
|
500
|
$
|
-
|
$
|
1,000
|
|||||||||||
|
Net loss for the period
|
-
|
-
|
-
|
(5,000
|
)
|
(5,000
|
)
|
|||||||||||||
|
Balances at December 31, 2007
|
500,008
|
500
|
500
|
(5,000
|
)
|
(4,000
|
)
|
|||||||||||||
|
Net loss for the year
|
-
|
-
|
-
|
(841
|
)
|
(841
|
)
|
|||||||||||||
|
Balances at December 31, 2008
|
500,008
|
500
|
500
|
(5,841
|
)
|
(4,841
|
)
|
|||||||||||||
|
Net loss for the year
|
-
|
-
|
-
|
(9,530
|
)
|
(9,530
|
)
|
|||||||||||||
|
Balances at December 31, 2009
|
500,008
|
500
|
500
|
(15,371
|
)
|
(14,371
|
)
|
|||||||||||||
|
Sale of common stock
|
9,500,000
|
9,500
|
-
|
-
|
9,500
|
|||||||||||||||
|
Capital contributed to support operations
|
-
|
-
|
74,640
|
-
|
74,640
|
|||||||||||||||
|
Net loss for the year
|
-
|
-
|
-
|
(60,269
|
)
|
(60,269
|
)
|
|||||||||||||
|
Balances at December 31, 2010
|
10,000,008
|
10,000
|
75,140
|
(75,640
|
)
|
9,500
|
||||||||||||||
|
Capital contributed to support operations
|
-
|
-
|
15,530
|
-
|
15,530
|
|||||||||||||||
|
Net loss for the year
|
-
|
-
|
-
|
(12,309
|
)
|
(12,309
|
)
|
|||||||||||||
|
Balances at December 31, 2011
|
10,000,008
|
10,000
|
90,670
|
(87,949
|
)
|
12,721
|
||||||||||||||
|
Capital contributed to support operations
|
-
|
-
|
2,059
|
-
|
2,059
|
|||||||||||||||
|
Net loss for the year
|
-
|
-
|
-
|
(14,427
|
)
|
(14,427
|
)
|
|||||||||||||
|
Balances at December 31, 2012
|
10,000,008
|
10,000
|
92,729
|
(102,376
|
)
|
353
|
||||||||||||||
|
Capital contributed to support operations
|
-
|
-
|
12,300
|
-
|
12,300
|
|||||||||||||||
|
Shell acquisition costs (as Restated)
|
-
|
-
|
200,000
|
-
|
200,000
|
|||||||||||||||
|
Net loss for the year (as Restated)
|
-
|
-
|
-
|
(380,273
|
)
|
(380,273
|
)
|
|||||||||||||
|
Balances at December 31, 2013 (as Restated)
|
10,000,008
|
$
|
10,000
|
$
|
305,029
|
$
|
(482,649
|
)
|
$
|
(167,620
|
)
|
|||||||||
The accompanying notes are an integral part of the financial statements.
F-5
|
SMSA Gainesville Acquisition Corp.
|
|
(a development stage company)
|
|
Statements of Cash Flows
|
|
Years ended December 31, 2013 and 2012 and
|
|
Period from August 1, 2007 (date of bankruptcy settlement) through December 31, 2013
|
|
Year Ended
|
Year Ended
|
Period from August 1, 2007 (date of bankruptcy settlement)
through
|
||||||||||
|
December 31,
2013
|
December 31,
2012
|
December 31,
2013
|
||||||||||
|
(as Restated)
|
(as Restated)
|
|||||||||||
|
Cash Flows from Operating Activities
|
||||||||||||
|
Net loss for the period
|
$
|
(380,273
|
)
|
$
|
(14,427
|
)
|
$
|
(482,649
|
)
|
|||
|
Adjustments to reconcile net loss to net cash used in operating activities
|
||||||||||||
|
Shell acquisition costs
|
309,548
|
-
|
309,548
|
|||||||||
|
Increase in accrued expenses
|
17,053
|
-
|
17,053
|
|||||||||
|
Net cash used in operating activities
|
(53,672
|
)
|
(14,427
|
)
|
(156,048
|
)
|
||||||
|
Cash Flows from Investing Activities
|
-
|
-
|
-
|
|||||||||
|
Cash Flows from Financing Activities
|
||||||||||||
|
Sale of common stock
|
-
|
-
|
9,500
|
|||||||||
|
Due to shareholder
|
41,057
|
-
|
41,057
|
|||||||||
|
Capital contributed to support operations
|
12,300
|
2,059
|
104,529
|
|||||||||
|
Capital funded from bankruptcy trust
|
-
|
-
|
1,000
|
|||||||||
|
Net cash provided by financing activities
|
53,357
|
2,059
|
156,086
|
|||||||||
|
Increase (Decrease) in Cash
|
(315
|
)
|
(12,368
|
)
|
38
|
|||||||
|
Cash at beginning of period
|
353
|
12,721
|
-
|
|||||||||
|
Cash at end of period
|
$
|
38
|
$
|
353
|
$
|
38
|
||||||
| Supplemental Disclosure | ||||||||||||
|
Interest paid during the period
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
|
Income taxes paid during the period
|
-
|
-
|
- |
|
||||||||
|
Push-down of capital to acquire shell to paid-in-capital and shell acquisition costs
|
$
|
309,548
|
$
|
-
|
$
|
309,548
|
||||||
The accompanying notes are an integral part of the financial statements.
F-6
SMSA Gainesville Acquisition Corp.
(a development stage company)
Notes to Financial Statements
December 31, 2013
Note A - Background and Description of Business
SMSA Gainesville Acquisition Corp. (Company) was organized on September 9, 2009 as a Nevada corporation to effect the reincorporation of Senior Management Services of Gainesville, Inc., a Texas corporation, mandated by the plan of reorganization discussed below.
The Company’s emergence from Chapter 11 of Title 11 of the United States Code on August 1, 2007 created the combination of a change in majority ownership and voting control - that is, loss of control by the then-existing stockholders, a court-approved reorganization, and a reliable measure of the entity’s fair value - resulting in a fresh start, creating, in substance, a new reporting entity. Accordingly, the Company, post bankruptcy, has no significant assets, liabilities or operating activities. Therefore, the Company, as a new reporting entity, qualifies as a “development stage enterprise” as defined in Development Stage Entities topic of the FASB Accounting Standards Codification and as a shell company as defined in Rule 405 under the Securities Act of 1933, (Securities Act), and Rule 12b-2 under the Securities Exchange Act of 1934, (Exchange Act).
On August 4, 2010, the Company entered into a Share Purchase Agreement, (Share Purchase Agreement), with Paul Interrante (Interrante), a resident of Dallas, Texas, pursuant to which he acquired 9,500,000 shares of our common stock for approximately $9,500 cash or $0.001 per share. As a result of this transaction, 10,000,008 shares of our common stock are currently issued and outstanding.
On December 19, 2013, Mr. Interrante, and Halter Financial Investments, L.P., (“HFI”) the majority shareholders (“Sellers”) entered into a stock purchase agreement (the “Purchase Agreement”) with Titan Partners, LLC (the “Purchaser”) for the sale and purchase of 9,892,956 shares of Common Stock of the Company. Individually, Mr. Interrante agreed to transfer 9,500,000 shares of Common Stock and HFI agreed to transfer 392,956 shares of Common Stock. On December 20, 2013, the sellers transferred 9,692,956 shares to Titan Partners in exchange for $200,000. On January 29, 2014, the sellers transferred the remaining 200,000 shares to Titan Partners in exchange for $50,000. The total shares of Common Stock transferred to the Purchaser represented 98.92% of the Company’s issued and outstanding Common Stock .
Our current business plan is to acquire, develop, and operate pharmacies in various states across the United States, including, but not limited to Arizona, Maryland, New York, New Jersey, Connecticut, Massachusetts, District of Columbia, Virginia, Ohio, Illinois and Georgia. There are no pending mergers as of the date of the financial statements. The Company plans to change its name to be in line with its new business model. The Company incurred approximately $59,120 in legal fees through December 31, 2013 to further develop its current business plan. These costs are reflected as a component of professional fees in the accompanying statement of operations for the year ended December 31, 2013.
F-7
SMSA Gainesville Acquisition Corp.
(a development stage company)
Notes to Financial Statements
December 31, 2013
Note B - Reorganization Under Chapter 11 of the U. S. Bankruptcy Code
The Company’s plan of reorganization (the “Plan”) was confirmed by the Bankruptcy court on August 1, 2007 and became effective on that date. On August 4, 2010 the Company entered into a stock purchase transaction with Paul Interrante as discussed in Note A and in certification of compliance, with certain compliance provisions that was issued by the Bankruptcy Court on August 1, 2007.
The Company paid approximately $52,500 of legal fees to take the Company out of bankruptcy and prepare a plan of compliance and certificate of compliance to effect the discharge out of bankruptcy. These costs are reflected as a component of reorganization costs in the accompanying statement of operations for the period from August 1, 2007 (date of bankruptcy settlement) through December 31, 2013.
Note C - Preparation of Financial Statements
The Company follows the accrual basis of accounting in accordance with generally accepted accounting principles and has established a year-end for accounting purposes of December 31.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 from those estimates.
Note D - Going Concern Uncertainty
The Company has no post-bankruptcy operating history, limited cash on hand, no assets and has a business plan with inherent risk. Because of these factors, the Company’s auditors have issued an audit opinion on the Company’s annual financial statements which includes a statement describing our going concern status. This means, in the auditor’s opinion, substantial doubt about our ability to continue as a going concern exists at the date of their opinion.
Our current business plan is to acquire, develop, and operate pharmacies in various states across the United States, including, but not limited to Arizona, Maryland, New York, New Jersey, Connecticut, Massachusetts, District of Columbia, Virginia, Ohio, Illinois and Georgia. The Company’s pharmacy operations will require licensing, permits, and accreditation from various federal and state agencies as a condition to beginning its operations including, but not limited to, licensure by state pharmacy boards. The process will include certain license applications or the acquisition of pharmacy operations with the appropriate licenses, permits or accreditations. The development and operations of the Company could be adversely affected by the failure or inability to obtain the necessary approvals, changes in standards applicable to such approvals, and possible delays and expenses associated with obtaining such approvals. There is no assurance that the Company will be successful in obtaining such licenses and permits.
The Company's ultimate continued existence is dependent upon its ability to generate sufficient cash flows from operations to support its daily operations as well as provide sufficient resources to retire existing liabilities and obligations on a timely basis. The Company faces considerable risk in its business plan and a potential shortfall of funding due the potential inability to raise capital in the equity securities market. If adequate operating capital and/or cash flows are not received during the next twelve months, the Company could become dormant until such time as necessary funds could be raised.
F-8
SMSA Gainesville Acquisition Corp.
(a development stage company)
Notes to Financial Statements
December 31, 2013
Note D - Going Concern Uncertainty - Continued
There can be no assurance that such financing will be available, or, if available, the financing will be on terms satisfactory to the Company. If financing is needed, but is not available, the Company may not be able to operate successfully and any investment made in it may be lost.
Note E - Summary of Significant Accounting Policies
|
1.
|
Cash and cash equivalents
The Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.
|
| 2. | Push-Down Accounting
The Company has adopted the provisions required by Staff Accounting Bulletin (“SAB”) Topic 5J which requires that a new basis of accounting be established for the purchased assets and liabilities (referred to as “push-down accounting”). As the Company is considered a shell company that does not constitute a business for the purposes of business combinations (as defined under the Accounting Standards Codification (“ASC”) 805-10-55-4), the purchase has been treated as an asset purchase. Under an asset purchase, assets are recognized based on their cost to the acquiring entity, which generally includes the transaction costs of the asset acquired and is allocated to the individual assets acquired or liabilities assumed based on their relative fair values and does not give rise to goodwill. The application of this guidance resulted in the restatement of the Company’s 2013 financial statements described in Note K.
|
|
3.
|
Reorganizational costs
The Company has adopted the provisions required by the start-up activities topic of the FASB Accounting Standards Codification whereby all costs incurred with the incorporation and reorganization of the Company were charged to expense as incurred.
|
|
4.
|
Income Taxes
The Company files income tax returns in the United States of America and various states, as appropriate and applicable. The Company is not subject to U.S. federal, state and local income tax examinations for any period prior to January 1, 2010.
The Company uses the asset and liability method of accounting for income taxes. At December 31, 2013 and 2012, respectively, the deferred tax asset and deferred tax liability accounts, as recorded when material to the financial statements, are entirely the result of temporary differences. Temporary differences generally represent differences in the recognition of assets and liabilities for tax and financial reporting purposes, primarily accumulated depreciation and amortization.
The Company has adopted the provisions required by the Income Taxes topic of the FASB Accounting Standards Codification. The Codification Topic requires the recognition of potential liabilities as a result of management’s acceptance of potentially uncertain positions for income tax treatment on a “more-likely-than-not” probability of an assessment upon examination by a respective taxing authority. As a result of the implementation of Codification’s Income Tax Topic, the Company did not incur any liability for unrecognized tax benefits.
|
F-9
SMSA Gainesville Acquisition Corp.
(a development stage company)
Notes to Financial Statements
December 31, 2013
Note E - Summary of Significant Accounting Policies - Continued
|
5.
|
Loss Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.
|
|
6.
|
Income (Loss) per share
Basic earnings (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the respective period presented in our accompanying financial statements.
Fully diluted earnings (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of common stock equivalents (primarily outstanding options and warrants).
Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net income (loss) position at the calculation date.
As of December 31, 2013 and 2012, respectively, the Company had no outstanding stock warrants, options or convertible securities which could be considered as dilutive for purposes of the loss per share calculation.
|
Note F - Fair Value of Financial Instruments
The carrying amount of cash, accrued expenses, accrued shell acquisition costs and due to shareholder, approximates fair value due to the short term nature of these items and/or the current interest rates payable in relation to current market conditions.
F-10
SMSA Gainesville Acquisition Corp.
(a development stage company)
Notes to Financial Statements
December 31, 2013
Note G - Related Party Transactions
The Plan provides that all costs and expenses associated with or related to our reincorporation in the State of Nevada, any subsequent mergers or business combination transactions, issuance of the Plan Shares, any filings with the U. S. Securities and Exchange Commission or other regulatory bodies, our operating expenses (including circumstantial use of office equipment and administrative services), in addition to providing assistance with formulating the structure of any proposed business combination transaction is the responsibility of Halter Financial Group, Inc. (HFG), an entity controlled by the Company’s former sole officer and director and the Company’s former controlling stockholder. The Plan also states that HFG is not entitled to receive any repayment of such expenses prior to, or as a condition of, a merger or acquisition. The contributed capital totaled $12,300, $2,059 and $104,529 for the years ended December 31, 2013 and 2012 and for the period from August 1, 2007 (date of bankruptcy settlement) through December 31, 2013, respectively, have been reflected as a component of additional paid-in capital in the accompanying balance sheets.
During the year ended December 31, 2013, Titan Partners, LLC, a majority shareholder of the Company, paid $41,057 of legal fees to further develop its current business plan on behalf of the Company. This amount has been reflected as due to shareholder in the accompanying balance sheet as of December 31, 2013. The amount due to shareholder is unsecured, non-interest bearing, and due on demand.
Note H - Income Taxes
The components of income tax (benefit) expense for each of the years ended December 31, 2013 and 2012 and for the period from August 1, 2007 (date of bankruptcy settlement) through December 31, 2013 are as follows:
|
|
Year Ended
|
Year Ended
|
Period from August 1, 2007 (date of bankruptcy settlement) through
|
|||||||||
|
December 31,
2013
|
December 31,
2012
|
December 31,
2013
|
||||||||||
| (as Restated) | (as Restated) | |||||||||||
|
Federal:
|
||||||||||||
|
Current
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
|
Deferred
|
-
|
-
|
-
|
|||||||||
|
-
|
-
|
-
|
||||||||||
|
State:
|
||||||||||||
|
Current
|
-
|
-
|
-
|
|||||||||
|
Deferred
|
-
|
-
|
-
|
|||||||||
|
-
|
-
|
-
|
||||||||||
|
|
||||||||||||
|
Total
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
F-11
SMSA Gainesville Acquisition Corp.
(a development stage company)
Notes to Financial Statements
December 31, 2013
Note H - Income Taxes - Continued
As of December 31, 2013, the Company has a net operating loss carryforward of approximately $482,649 to offset future taxable income. The amount and availability of any net operating loss carryforwards will be subject to the limitations set forth in the Internal Revenue Code. Such factors as the number of shares ultimately issued within a three year look-back period; whether there is a deemed more than 50 percent change in control; the applicable long-term tax exempt bond rate; continuity of historical business; and subsequent income of the Company all enter into the annual computation of allowable annual utilization of any net operating loss carryforward(s).
The Company's income tax expense (benefit) for each of the years ended December 31, 2013 and 2012 and for the period from August 1, 2007 (date of bankruptcy settlement) through December 31, 2013 varied from the statutory rate of 34% as follows:
|
Year Ended
|
Year Ended
|
Period from
August 1, 2007
(date of bankruptcy settlement) through
|
||||||||||
|
December 31,
2013
|
December 31,
2012
|
December 31,
2013
|
||||||||||
| (as Restated) | (as Restated) | |||||||||||
|
Statutory rate applied to income before income taxes
|
$
|
(129,293
|
)
|
$
|
(4,905
|
)
|
$
|
(164,101
|
)
|
|||
|
Increase (decrease) in income taxes resulting from:
|
||||||||||||
|
State income taxes
|
-
|
-
|
-
|
|||||||||
|
Other, including reserve for deferred tax asset and
|
||||||||||||
|
application of net operating loss carryforward
|
129,293
|
4,905
|
164,101
|
|||||||||
|
Income tax expense
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
The Company’s only temporary difference as of December 31, 2013 and 2012, respectively, relates to the Company’s net operating loss pursuant to the applicable Federal Tax Law. As of December 31, 2013 and 2012, respectively, the deferred tax asset is as follows:
|
Year Ended
|
Year Ended
|
|||||||
|
December 31,
2013
|
December 31,
2012
|
|||||||
| (as Restated) | ||||||||
|
Deferred tax assets
|
||||||||
|
Net operating loss carryforwards
|
$
|
164,101
|
34,807
|
|||||
|
Less valuation allowance
|
(164,101
|
)
|
(34,807
|
)
|
||||
|
Net Deferred Tax Asset
|
$
|
-
|
$
|
-
|
||||
During the years ended December 31, 2013 and 2012, respectively, the valuation allowance against the deferred tax asset increased by approximately $129,293 and $4,905.
F-12
SMSA Gainesville Acquisition Corp.
(a development stage company)
Notes to Financial Statements
December 31, 2013
Note I - Capital Stock Transactions
Pursuant to the Plan affirmed by the U. S. Bankruptcy Court - Northern District of Texas - Dallas Division, the Company issued 500,008 plan shares to meet the requirements of the Plan. The 500,008 shares of the Company’s “new” common stock were issued to holders of various claims, as defined in the Plan, in settlement of all unpaid pre-confirmation obligations of the Company and/or the bankruptcy trust.
On August 4, 2010, the Company entered into a share exchange agreement with Interrante pursuant to which he acquired 9,500,000 shares of our common stock for approximately $9,500 cash or $0.001 per share. As a result of this transaction, 10,000,008 shares of our common stock are currently issued and outstanding.
On December 19, 2013, the Sellers entered into a purchase agreement with the Purchaser for the sale and purchase of 9,892,956 shares of Common Stock of the Company. Individually, Mr. Interrante agreed to transfer 9,500,000 shares of Common Stock and HFI agreed to transfer 392,956 shares of Common Stock. On December 20, 2013, the Sellers transferred 9,692,956 shares to the Purchaser in exchange for $200,000. On January 29, 2014, the Sellers transferred the remaining 200,000 shares to the Purchaser in exchange for $50,000. The total shares of Common Stock transferred to the Purchaser represented 98.92% of the Company’s issued and outstanding Common Stock.
On December 20, 2013, in connection with the purchase agreement , Mr. Interrante resigned as a Director of the Company and as our President, Chief Financial Officer, Treasurer and Secretary of the Company. Simultaneously with the effective date of Mr. Interrante’s resignation as a Director of the Company, Kamran Nezami was appointed as a Director of the Company and now serves as our Sole Director and Chairman of the Board of Directors. Prior to resigning as a Director, Mr. Interrante appointed Robert E. Ham as the Company’s Chief Financial Officer, a position Mr. Ham currently holds.
Note J - Subsequent Events
On February 18, 2014, our Board adopted resolutions and filed a preliminary information statement with the Securities and Exchange Commission approving a Certificate of Amendment in the State of Nevada. As of the date of these financials, this certificate of amendment has not yet been filed with the State of Nevada. The Company’s Articles of Incorporation currently provide for authorized capital stock consisting of 100,000,000 Shares of Common Stock. Following the amendment, the authorized capital stock of the Company will be increased to 250,000,000 shares of common stock. On April 18, 2014 the Company amended this information statement filing to disclose shares sold in the Private Placement.
The board of directors of SMSA Gainesville Acquisition Corp. appointed Maulik Parikh, M.D., as President and Chief Executive Officer effective February 27, 2014.
On February 21, 2014, GML Holdings, LP, a Texas limited partnership, as Landlord, and SMSA Gainesville Acquisition Corp., a Nevada corporation, as Tenant, executed a commercial lease (“Lease Agreement”) for the premises known as Suite 170 of Unit 2 of 610 Coit, A Condominium, which is located at 610 Coit Road, Plano, Texas 75075. The term of the lease is for a period of five years, commencing on February 21, 2014, and expiring March 31, 2019. The basic rent for the initial term of the lease is equal to $10,000 per month plus additional rent, which includes all other charges and expenses related to the premises (e.g., taxes, charges for utilities and services used or consumed in the premises, and Landlord’s share of condominium assessments, dues, fees and charges as they relate to the premises). Tenant paid a security deposit of $10,000, and this amount w ill be refunded to Tenant at the end of the initial five-year term, if no event of default by Tenant has occurred. The General Partner of GML Holdings, LP is GML Holdings Management, LLC. Kamran Nezami, our sole Director, participates in the management of GML Holdings Management, LLC.
F-13
SMSA Gainesville Acquisition Corp.
(a development stage company)
Notes to Financial Statements
December 31, 2013
Note J - Subsequent Events - Continued
As part of the ongoing Private Placement, which began on March 1, 2014, the Company has received signed subscription agreements and checks from 16 investors. Each one of those investors was told, prior to submitting his subscription agreement, that a $5,000 investment would entitle him to receive 100,000 shares of Company common stock. The Company communicated to the investors in the Private Placement that the 100,000 shares would be held by each investor once the Company increased its number of authorized shares and completed a 13.3935 to 1 forward stock split. Prior to completion of the increase in the authorized number of shares and the planned 13.3935 to 1 forward stock split, the investment checks of six of those 6 investors were deposited by the Company totaling $30,000. The Company, based on the opinion of Company counsel, has taken the position, as to those six investors, that their investment has been accepted and each is entitled now to receive 7,466.333 (pre-split) shares for their $5,000 investment. The Company asked each such investor to confirm in writing their agreement with that position. As to the other ten investors, the Company has asked each of them to similarly confirm in writing that if their $5,000 check is deposited prior to the anticipated stock split, they would expect to receive 7,466.333 shares of our common stock. The Company’s position, based on the opinion of Company counsel, is that any investor who does not provide this confirmation will promptly have returned to him the full amount of his investment. As a result, and assuming all such confirmations sent to investors confirming the number of shares to be issued to each investor are received as expected, the Company has to date sold 44,798 shares of its common stock in the Private Placement. Once our number of authorized shares has been increased from 100,000,000 shares of common stock to 250,000,000 shares of common stock, and upon completion of the forward stock split of 13.3935 to 1, the 44,798 shares will become 600,002 shares of our common stock. The Company received $30,000 in exchange for such shares. The Company will separately report any sale to any of the other ten investors once it has received back from an investor the expected confirmation letter confirming the number of shares they purchased and deposited that investor’s check. If the Company receives the expected confirmation letter from all ten such investors, after completion of the anticipated stock split the Company will issue 1 million shares in aggregate to such investors and the Company will deposit the $50,000 of checks received from such investors.
Note K - Restatement
On August 22, 2014, upon recommendation of the Company’s management, the Board of Directors of the Company concluded that its audited financial statements included in the Company’s Original Form 10-K cannot be relied upon due to an error relating to the push-down accounting impact of the purchase of 98.92% of the Company’s equity by Titan Partners, LLC (“Titan”) in December 2013. Because the purchase resulted in a change in ownership of the Company greater than 95%, causing the Company to become substantially wholly owned by Titan, Staff Accounting Bulletin (“SAB”) Topic 5J requires that a new basis of accounting be established for the purchased assets and liabilities (referred to as “push-down accounting”). The accounting treatment given to the purchase in the Company’s year-end 2013 financial statements did not take into effect that the purchase resulted in a change in ownership exceeding 95% as is required by SAB Topic 5J. The restatement related to the improper exclusion of the $250,000 purchase price, $3,945 of shell acquisition costs, and reclassification of $55,603 of shell acquisition costs from professional fees. Under purchase accounting guidance, these costs should have been pushed-down from the books of Titan Partners, LLC to the Company’s books. The result of including the impact of these amounts resulted in the Company recognizing a charge for shell acquisition costs in the amount of $309,548 of which $55,603 of this total was recorded in the Company's prior 2013 financial statements as professional fees in the statement of operations. The Company reclassified these professional fees to shell acquisition costs in the accompanying restated financial statements. The net restatement amount in the accompanying restated financial statements is $253,945 which consists of the total shell acquisition costs of $309,548 less the previously recorded shell acquisition costs classified from professional fees to shell acquisition costs of $55,603.
There is no change in the previously reported cash and cash equivalents or cash flows from operating and financing activities. The error had no impact on any period before or after December 31, 2013.
F-14
SMSA Gainesville Acquisition Corp.
(a development stage company)
Notes to Financial Statements
December 31, 2013
Note K – Restatement - Continued
The impact of this error correction on the affected line items of the Company’s December 31, 2013 annual financial statement is set forth below:
Balance Sheet as of December 31, 2013
|
As Previously Reported on
Form 10-K
|
Adjustments
|
As Restated
|
||||||||||
|
Due to shareholder
|
$ | 41,057 | $ | - | $ | 41,057 | ||||||
|
Accrued shell acquisition costs
|
- | 109,548 | 109,548 | |||||||||
|
Accrued expenses
|
72,656 | (55,603) | 17,053 | |||||||||
|
Total Liabilities
|
113,713 | 53,945 | 167,658 | |||||||||
|
Stockholders' Deficit:
|
||||||||||||
|
Common Stock, $0.001 par value, 100,000,000 shares authorized, 10,000,008 shares,
100,000,000 shares and 100,000,000 shares issued and outstanding
|
10,000 | - | 10,000 | |||||||||
|
Additional paid-in capital
|
105,029 | 200,000 | 305,029 | |||||||||
|
Deficit accumulated during the development stage
|
(228,704 | ) | (253,945 | ) | (482,649 | ) | ||||||
|
Total Stockholders' Deficit
|
(113,675 | ) | (53,945 | ) | (167,620 | ) | ||||||
|
Total Liabilities and Stockholders' Deficit
|
$ | 38 | $ | - | $ | 38 | ||||||
F-15
SMSA Gainesville Acquisition Corp.
(a development stage company)
Notes to Financial Statements
December 31, 2013
Note K – Restatement - Continued
|
Statements of Operations for the Year Ended
December 31, 2013
|
Statements of Operations for the Period from August 1, 2007 (date of bankruptcy settlement) through December 31, 2013
|
|||||||||||||||||||||||
|
As Previously Reported on
Form 10-K
|
Adjustments
|
As Restated
|
As Previously Reported on
Form 10-K
|
Adjustments
|
As Restated
|
|||||||||||||||||||
|
Revenues
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
|
Operating Expenses
|
||||||||||||||||||||||||
|
Professional fees
|
124,323 | (55,603 | ) | 68,720 | 156,615 | (55,603 | ) | 101,012 | ||||||||||||||||
|
Reorganization costs
|
- | - | - | 52,500 | - | 52,500 | ||||||||||||||||||
|
Shell acquisition costs
|
- | 309,548 | 309,548 | - | 309,548 | 309,548 | ||||||||||||||||||
|
Other general and administrative costs
|
2,005 | - | 2,005 | 19,590 | - | 19,590 | ||||||||||||||||||
|
Total operating expenses
|
126,328 | 253,945 | 380,273 | 228,705 | 253,945 | 482,650 | ||||||||||||||||||
|
Loss from operations
|
(126,328 | ) | (253,945 | ) | (380,273 | ) | (228,705 | ) | (253,945 | ) | (482,650 | ) | ||||||||||||
|
Other Income (Expense)
|
||||||||||||||||||||||||
|
Reorganization costs
|
- | - | - | - | - | - | ||||||||||||||||||
|
Interest income
|
- | - | - | 1 | - | 1 | ||||||||||||||||||
|
Total other income (expense)
|
- | - | - | 1 | - | 1 | ||||||||||||||||||
|
Loss before provision for income taxes
|
(126,328 | ) | (253,945 | ) | (380,273 | ) | (228,704 | ) | (253,945 | ) | (482,649 | ) | ||||||||||||
|
Provision for income taxes
|
- | - | - | - | - | - | ||||||||||||||||||
|
Net Loss
|
$ | (126,328 | ) | $ | (253,945 | ) | $ | (380,273 | ) | $ | (228,704 | ) | $ | (253,945 | ) | $ | (482,649 | ) | ||||||
|
Loss per weighted-average share of common stock outstanding - basic and diluted
|
$ | (0.01 | ) | $ | (0.03 | ) | $ | (0.04 | ) | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.05 | ) | ||||||
|
Weighted-average number of shares of common stock outstanding - basic and diluted
|
10,000,008 | 10,000,008 | 10,000,008 | 10,000,008 | 10,000,008 | 10,000,008 | ||||||||||||||||||
F-16
SMSA Gainesville Acquisition Corp.
(a development stage company)
Notes to Financial Statements
December 31, 2013
Note K – Restatement - Continued
|
Statements of Cash Flows for the Year Ended
December 31, 2013
|
Statements of Cash Flows for the Period from August 1, 2007 (date of bankruptcy settlement) through December 31, 2013
|
|||||||||||||||||||||||
|
As Previously Reported on
Form 10-K
|
Adjustments
|
As Restated
|
As Previously Reported on
Form 10-K
|
Adjustments
|
As Restated
|
|||||||||||||||||||
|
Cash flows from operating activities:
|
||||||||||||||||||||||||
|
Net loss
|
$ | (126,328 | ) | $ | (253,945 | ) | $ | (380,273 | ) | $ | (228,704 | ) | $ | (253,945 | ) | $ | (482,649 | ) | ||||||
|
Adjustments to reconcile net loss to net cash used for operating activities
|
||||||||||||||||||||||||
|
Shell acquisition costs
|
- | 309,548 | 309,548 | - | 309,548 | 309,548 | ||||||||||||||||||
|
Increase in accrued expenses
|
72,656 | (55,603) | 17,053 | 72,656 | (55,603) | 17,053 | ||||||||||||||||||
|
Net cash used for operating activities
|
(53,672 | ) | - | (53,672 | ) | (156,048 | ) | - | (156,048 | ) | ||||||||||||||
|
Supplemental Disclosure
|
||||||||||||||||||||||||
|
Push down of capital to acquire shell to paid-in-capital and shell acquisition costs
|
- | 309,548 | 309,548 | - | 309,548 | 309,548 | ||||||||||||||||||
F-17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf of the undersigned, thereunto duly authorized.
|
SMSA Gainesville Acquisition Corp.
|
|||
| Dated: September 10, 2014 | By: | /s/ James York | |
|
James York
President and Chief Executive Officer
|
|||
| By: |
/s/ Chuck Talley
|
||
|
Chuck Talley
|
|||
|
Chief Financial Officer
|
|||
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints, James York his true and lawful attorney-in-fact and agent, acting alone, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection wherewith, with the Commission, granting unto said attorney-in-fact and agent, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all said attorney-in-fact and agent, acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated:
|
Signature
|
Title
|
Date
|
||
|
/s/ Chuck Talley
|
Chief Financial Officer
|
September 10, 2014
|
||
|
Chuck Talley
|
(principal financial officer and principal accounting officer)
|
|||
|
/s/ Kamran Nezami
|
Sole Director, Chairman
|
September 10, 2014
|
||
|
Kamran Nezami
|
9