Notes to Unaudited Consolidated Financial
Statements
For the three months ended June 30, 2014
NOTE 1: HISTORY OF OPERATIONS
Gepco,
Ltd. (“Gepco, Ltd.” or the “Company”) was incorporated on June 27, 2008 in the State of Nevada as Kensington
Leasing, Ltd. The Company’s initial business plan was to specialize in leasing equipment to a select clientele. Because
it took longer than anticipated to launch the Company’s leasing business, the Company elected to investigate additional
lines of business. The leasing business generated minimal revenues since inception and was discontinued.
On
June 4, 2010, the Company, through its newly formed wholly-owned subsidiary Allianex Corp., purchased substantially all of the
assets of Allianex, LLC (the “Allianex acquisition”). The Company’s primary business after the Allianex acquisition
until the acquisition of Wikifamilies SA, as discussed below, was the production, marketing and distribution of a retail line
of prepaid stored value cards for the purchase of technology support and security services for electronic devices. Allianex Corp.
generated nominal revenues since the acquisition and the assets were disposed of on December 22, 2011.
On
May 20, 2011, the Company acquired all of the outstanding equity securities of Wikifamilies SA (the “Wikifamilies acquisition”),
making Wikifamilies SA a wholly owned subsidiary of Kensington Leasing, Ltd. For accounting purposes, the Wikifamilies acquisition
was treated as a reverse acquisition with Wikifamilies SA treated as the acquirer and Kensington Leasing, Ltd. as the acquired
party. As a result, the business and financial information included in previous reports was the business and financial information
of Wikifamilies SA prior to May 20, 2011 and the combined entity after May 20, 2011.
On
October 27, 2011, the Company changed its name to Wikifamilies, Inc. through a short-form merger with its newly formed wholly
owned subsidiary of the same name.
As
of May 20, 2011, the Company’s business plan as Wikifamilies was to design, develop and operate an Internet-based social
media website, Wikifamilies.com, with a unique emphasis on families and new technologies which web-based platform was intended
to enhance the ability of families to communicate and share family history and events while providing a secure location to transact
family-related business matters. Then, on September 7, 2012, our business plan changed to the development and marketing of an
Internet search engine through the licensing from ClairNET, Ltd. of their process enabling online and mobile viewers to
search, index, watch and personalize web-based videos while facilitating the monetizing of investments by video content providers,
advertisers and marketers.
On
September 7, 2012, Wikifamilies, Inc. entered into a Share Exchange Agreement with ClairNET Ltd., a Hong Kong entity and their
shareholders by which all of the issued and outstanding shares of ClairNET were to be exchanged for 36,504,056 shares in Wikifamilies
Inc, representing 75% of the company’s common stock. Additionally, ClairNET Ltd was to receive 2,500,000 shares of Voting
Only Preferred Stock in Wikifamilies, with 100:1 voting rights. On the same date, the parties also signed a License Agreement
by which Wikifamilies was to acquire exclusive global licensing rights to ClairNET’s products, with an end goal of ClairNET
becoming a subsidiary of Wikifamilies, Inc.
On
September 8, 2012, the Company and the founders of Wikifamilies SA entered into a Rescission Agreement, whereby the share consideration
originally tendered by the corporation for the acquisition of the Wikifamilies SA assets, was rescinded by mutual agreement. This
Rescission unwound the March 23, 2011, Exchange Agreement between Wikifamilies Inc. and Wikifamilies SA, and Wikifamilies SA agreed
to return the remaining 26,925,000 shares to Wikifamilies treasury, being the full balance of the original 31,500,000 shares tendered
as part of the original Exchange Agreement and the Company returned its interest in Wikifamilies SA to the Wikifamilies SA founders.
The Wikifamilies SA founders retained all assets and liabilities of Wikifamilies SA. Additionally, Wikifamilies, Inc. forgave
the intercompany loans from Wikifamilies Inc. to Wikifamilies SA in full compensation for non-payment of salaries, fees and expenses
to the founders.
On
September 10, 2012, the full Board of Directors of the Company elected John Karlsson, Dan Clayton and Vincent Qi as Members of
the Board of Directors.
On
September 10, 2012, following the appointment of the new Board Members, Robert Coleridge, Chris Dengler, Steve Brown, William
Hogan and Thomas Hudson resigned from their positions on the Board. Trisha Malone resigned her position as Board Member and Chief
Financial Officer effective September 13, 2012, and Malcolm Hutchinson resigned his position as Board Member and Chief Executive
Officer effective September 13, 2012.
The
three members of the Board of Directors elected on September 10, 2012 changed the Company’s name in the State of Nevada
to ClairNET, Ltd. but failed to complete the ClairNET, Ltd. merger, which left the Company with no operating entity, and failed
to file any and all required filings with the Securities and Exchange Commission (the “SEC”), in effect abandoning
the Company. After repeated attempts at contact with the Board of Directors with no response, certain creditors of the Company
petitioned the Eighth Judicial District Court in Clark County Nevada to receive custodianship of the Company.
On
April 8, 2013, the Eighth District Court of the State of Nevada appointed Trisha Malone as Custodian of Wikifamilies, Inc. pursuant
to section 78.347 of the Nevada Revised Statutes, and authorized her to appoint a new Board of Directors, to continue the business
of the Company, and to bring current the Company’s filings with the SEC. The appointment was made pursuant to a petition
filed by Trisha Malone with the Court on February 27, 2013, to become Custodian of the Company due to former management’s
malfeasance and nonfeasance in allowing the filings with the SEC to become delinquent, exposing the Company to potential revocation
of registration proceedings under Section 12j of the Securities Exchange Act of 1934 and a potential trading suspension under
Section 12k of the Securities Exchange Act, and in failing to maintain the business of the Company.
The
Court also nullified the issuance of shares of Company Common Stock issued as a result of the Exchange Agreement entered into
between the Company and ClairNET, Ltd., a Hong Kong corporation, dated September 7, 2012 and the Technology License Agreement
between the Company and ClairNET, Ltd., a Hong Kong corporation. Among the nonfeasance of the prior management was the failure
to effect the change of the Company's name from Wikifamilies, Inc. to ClairNET, Ltd. in the marketplace, by notification to FINRA.
Prior to being known as ClairNET, Ltd., the Company was known as Wikifamilies, Inc., to reflect the business plan of operations
of its foreign subsidiary, Wikifamilies, S.A. However, Wikifamilies, S.A. was returned to its founders by reason of a Rescission
Agreement executed between the founders and the Company on September 8, 2012.
The
Court further ordered that all stock issued as a result of the September 7, 2012 Share Exchange Agreement between the Company
and ClairNET Ltd., a Hong Kong entity and their shareholders, are declared null and void and ordered to be returned to the Company
or its transfer agent for cancellation. The Court further ordered that the License Agreement between the Company and ClairNET,
Ltd. a Hong Kong entity, is declared null and void.
Finally,
the Court ordered the cancellation of an aggregate of 26,925,000 shares of Common Stock to effectuate the Company's September
8, 2012 Rescission agreement with the founders of Wikifamilies SA.
On
April 9, 2013, the duly appointed Custodian of the Company appointed Trisha Malone and Larry A. Zielke as Members of the Board
of Directors. Ms. Malone was also appointed as Chief Executive Officer, Chief Financial Officer and Secretary of the Company and
Mr. Zielke was appointed as Vice President and Corporate Counsel.
On
August 27, 2013, the Company held a Special Meeting of Shareholders. At the Special Meeting, the shareholders of the
Company approved the change in the Corporation’s name from Wikifamilies, Inc. to Gepco, Ltd. On September 11, 2013, the
Company filed an amendment to its Articles of Incorporation to, inter alia, change its name to Gepco, Ltd. from ClairNET, Ltd.
(Wikifamilies, Inc.) In conjunction with the amendment, the Company filed with FINRA to change its name and ticker symbol. Effective
October 8, 2013, the Company’s common stock, which was previously traded under the ticker symbol “WFAM” on the
OTCQB market, began trading under the new ticker symbol “GEPC”.
On October 15, 2013, the “Company entered into
a Stock Purchase Agreement (the “Stock Purchase Agreement”) with GemVest, Ltd. pursuant to which the Company agreed
to purchase (the “Acquisition”) 100% of the issued and outstanding capital stock (“GemVest Shares”) of
GemVest, Ltd., a Nevada corporation (“GemVest”) in exchange for 150,000,000 shares of the Company’s restricted
Common Stock. The Acquisition was consummated (the “Closing”) on December 6, 2013, in a transaction exempt from registration
under Section 4(2) of the Securities Act of 1933, as amended and resulted in a change in control of the Company. Pursuant to the
Agreement, GemVest and the Company agreed to the following covenants regarding management of the Company for a period of five
years from the date of Closing:
|
·
|
Angelique de Maison shall serve as Executive Chairman of the Company and
of GemVest, Peter Voutsas shall serve as Chief Executive Officer and Chief Investment Officer of the Company and of GemVest, Trisha
Malone shall serve as President, Chief Financial Officer and Secretary of the Company and Chief Financial Officer, Chief Operating
Officer and Secretary of GemVest, Nicholas Marlin shall serve as Chief Marketing Officer of the Company and President and Chief
Marketing Officer of GemVest and Ronald Loshin shall serve as Chief Creative Officer of the Company and of GemVest.
|
|
·
|
The Board of the Company shall consist of six directors: Angelique de Maison,
Peter Voutsas, Trisha Malone, Larry Zielke, Ronald Loshin and Nicholas Marlin. The Board of GemVest shall consist of five directors:
Angelique de Maison, Peter Voutsas, Trisha Malone, Ronald Loshin and Nicholas Marlin.
|
|
·
|
If the Company’s EBITDA (as defined in GAAP) is not at least $750,000
for the fiscal year ended December 31, 2014, then on a pro rata basis, based on percentage of ownership of Gepco immediately prior
to Closing, the shareholders of Gepco shall return to the Company one million shares of the Company’s Common Stock for each
$10,000 increment by which EBITDA is less than $750,000.
|
Subsequent to the Closing of
the Acquisition, GemVest became a wholly owned subsidiary of Gepco. For accounting purposes, GemVest is deemed the accounting acquirer.
For accounting purposes, the
acquisition of GemVest by Gepco has been recorded as a reverse merger of a public company, with the exception that no goodwill
is generated. Consequently, the historical financial information in the accompanying consolidated financial statements is that
of Gemvest from its date of inception, October 2, 2013 and that of the combined entity from December 6, 2013 through December 31,
2013. GemVest is a start-up development stage company that has had no revenue or expenses from its inception through December
31, 2013. As the Company was a shell company prior to the acquisition of GemVest, GemVest is the acquirer for accounting purposes,
and future financial reporting shall be set forth as if GemVest acquired the Company. As a result of the Merger, Gepco now owns
all of the assets, liabilities and operations of GemVest and ownership to all intellectual property rights for GemVest in the future.
On April 29, 2014, the Company
signed a letter of intent with Peter Marco, LLC to acquire 100% of its outstanding equity interests, which are owned by Peter Voutsas,
Gepco’s CEO. The purchase price shall be payable in cash, Company common stock, and a purchase money note in amounts based
upon good faith negotiation after receipt of a third party appraisal. The closing of this transaction is subject to definitive
documentation and the satisfaction of all conditions set forth therein, and was expected to occur in late July 2014; however, definitive
documentation have not been completed, needed funds have not been secured and closing has not occurred as of the date of this filing.
Unless the context otherwise
requires, references to the “Company” mean the Company and its wholly-owned subsidiary GemVest, Ltd. In the context
of Common Stock, notes and other securities, references to the “Company” mean Gepco, Ltd. unless otherwise stated.
NOTE 2: GOING CONCERN
The Company commenced generating revenues
in March 2014 and has funded its operations primarily through the issuance of equity. As shown in the accompanying consolidated
financial statements, the Company has a limited operating history and limited cash flow and has an accumulated deficit during development
stage of $545,263 at June 30, 2014. Accordingly, the Company’s ability to identify and accomplish a business strategy and
to ultimately achieve profitable operations is solely dependent upon its ability to obtain additional debt or equity financing.
These conditions raise substantial
doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments
to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements
have been prepared in conformity with accounting principles generally accepted in the United States of America. The accompanying
consolidated financial statements include the accounts of Gepco, Ltd. and its 100% wholly-owned subsidiary, GemVest, Ltd. All intercompany
balances and transactions have been eliminated in consolidation. As the Company was a shell company prior to the acquisition of
GemVest, GemVest is the acquirer for accounting purposes, and future financial reporting shall be set forth as if GemVest acquired
the Company. GemVest, Ltd. was incorporated on October 2, 2013 in the State of Nevada. GemVest is a start-up development
stage company that began selling and brokering high end rare investment grade diamonds in the first quarter of 2014, but had no
revenue or significant expenses from its inception through December 31, 2013.
Estimates
The presentation of financial
statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures 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 these
estimates.
Cash and cash equivalents
The Company considers all cash
on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly- liquid investments
with maturities of three months or less, when purchased, to be cash and cash equivalents.
Revenue Recognition
Revenue is recognized net of
indirect taxes, rebates and trade discounts and consists primarily of the sale of products, and services rendered.
Revenue is recognized in accordance
with Accounting Standards Codification Topic No. 605-10-S99 “Revenue Recognition” (ASC 605-10-S99) when the following
criteria are met:
|
·
|
evidence of an arrangement exists;
|
|
·
|
delivery has occurred or services have been rendered and the significant risks and rewards of
ownership have been transferred to the purchaser;
|
|
·
|
transaction costs can be reliably measured;
|
|
·
|
the selling price is fixed or determinable; and
|
|
·
|
collectability is reasonably assured.
|
The Company may, at its option, allow customers to return merchandise
for a cash refund or credit, less a restocking fee. During the three months ended June 30, 2014 the Company allowed a customer
to return an item sold for $100,000 less a 25% restocking fee. The net return of $75,000 was booked as a credit to revenue for
the quarter.
Inventory
Inventory, which consists primarily
of diamonds, gemstones and diamond and gemstone jewelry, is stated at the lower of cost or market. Cost is determined by the specific
identification method. The specific identification method requires a business to identify each unit of merchandise with the unit's
cost and retain that identification until the inventory is sold. Once a specific inventory item is sold, the cost of the unit is
assigned to cost of goods sold.
The Company evaluates the need
to record adjustments for impairment of inventory. As of June 30, 2014, the Company has not needed to adjust for impairment.
Fair Value of Financial Instruments
The carrying amounts for the
Company’s cash, investments, accounts payable, accrued liabilities and current portion of long term debt approximate fair
value due to the short-term maturity of these instruments.
Beneficial Conversion Feature of Convertible Notes Payable
The convertible feature of certain
of our convertible notes payable provides for a rate of conversion that was at market value at the time of issuance but below market
value at market close on the same day. Such feature is normally characterized as a “Beneficial Conversion Feature”
(“BCF”). Pursuant to Accounting Standards Codification Topic 470-20-25 “Debt” (ASC 470-20-25), the estimated
fair value of the BCF is recorded in the consolidated financial statements as a discount from the face amount of the notes. Such
discounts are amortized to accretion of convertible debt discount over the term of the notes (or conversion of the notes, if sooner).
At the issuance of a series
of convertible notes in 2013 and 2014 the Company recorded a total debt discount of $280,185. As of June 30, 2014, the Company
has recorded amortization of the BCF in connection with these convertible notes with a principal value of $325,638 in the amount
of $280,185. This amortization has been reported after the Acquisition as a component of interest expense in the amount of $130,883
in the consolidated statement of operations and prior to the Acquisition as a component of retained earnings in the amount of $149,302
on the consolidated balance sheet. The debt discount balance at June 30, 2014 was $0 net of amortization.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded
at the invoiced amount. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit
losses in existing accounts receivable. The Company determines the allowance based on historical write-off experience and customer
specific data. If an amount has not been settled within its contractual payment term then it is considered past due. The Company
reviews the allowance for doubtful accounts regularly and past due balances are reviewed for collectability. Account balances are
charged off against the allowance when the Company believes that the amount will not be recovered.
The Company analyzes accounts receivable and historical bad
debts, customer credit-worthiness, current economic trends, and changes in its customer payment terms and collection trends when
evaluating the adequacy of its allowance for doubtful accounts. Any change in the assumptions used in analyzing a specific account
receivable may result in an additional allowance for doubtful accounts being recognized in the period in which the change occurs.
Earnings (Loss) Per Share
Per Accounting Standards Codification
Topic 260 “Earnings Per Share” (ASC 260), basic EPS is determined using net income divided by the weighted average
shares outstanding during the period. Diluted EPS is computed by dividing net income by the weighted average shares outstanding,
assuming all dilutive potential shares of Common Stock were issued.
NOTE 4: GEMVEST, LTD. ACQUISITION
On October 15, 2013, the Company
entered into a Stock Purchase Agreement with GemVest pursuant to which the Company purchased 100% of the issued and outstanding
capital stock of GemVest, a Nevada corporation in exchange for 150,000,000 shares of the Company’s restricted Common
Stock which at closing represented approximately 77.49% of the Company’s outstanding Common Stock.
Subsequent to closing of the
Acquisition, GemVest became a wholly owned subsidiary of the Company. For accounting purposes, GemVest is deemed the accounting
acquirer. As a result, the business and financial information included in the report is the business and financial information
of GemVest prior to December 6, 2013 and the combined entity after December 6, 2013. The assets and liabilities of both companies
were retained as of December 6, 2013 while the stockholder’s equity of the Company prior to the acquisition was eliminated
with the exception of accumulated deficit that exceeded the additional paid in capital balance. Such retained losses in the amount
of $368,775 are included as a deficit assumed at merger.
NOTE 5: CONVERTIBLE NOTES
The
following table sets forth the outstanding Convertible Note indebtedness of the Company at the date indicated:
|
|
|
Principal at December 31, 2013
|
|
|
|
Accrued Interest
|
|
|
|
Balance at December 31, 2013
|
|
|
|
Unamortized Debt Discount
|
|
|
|
Convertible Note Balance at December 31, 2013
|
|
Suprafin, Ltd.
|
|
|
131,461
|
|
|
|
10,317
|
|
|
|
141,778
|
|
|
|
(67,942
|
)
|
|
|
73,836
|
|
Sunatco, Ltd.
|
|
|
85,150
|
|
|
|
2,520
|
|
|
|
87,670
|
|
|
|
(41,556
|
)
|
|
|
46,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total convertible notes
|
|
|
216,611
|
|
|
|
12,837
|
|
|
|
229,448
|
|
|
|
(109,498
|
)
|
|
|
119,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal at June 30, 2014
|
|
|
|
Accrued Interest
|
|
|
|
Balance at June 30, 2014
|
|
|
|
Unamortized Debt Discount
|
|
|
|
Convertible Note Balance at June 30, 2014
|
|
Suprafin, Ltd.
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Sunatco, Ltd.
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total convertible notes
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
On April 16, 2013 the Board
of Directors elected to issue Convertible Notes to Trisha Malone in the amount of $40,000 for past services rendered which had
been previously been recorded as accrued salaries, see NOTE 8: RELATED PARTY TRANSACTIONS, to Walker River Investments Corp. for
costs paid for the custodianship proceeding in the amount of $44,177, and to Suprafin, Ltd. in the amount of $141,461 for past
expenses paid on behalf of the Company which had previously been recorded as note payable, see NOTE 6: NOTES PAYABLE. These Convertible
Notes were convertible into shares of the Company’s Common Stock at $.005 per share.
On April 16, 2013 Trisha Malone
requested that her $40,000 Convertible Note be converted to 8,000,000 shares of restricted Common Stock, and Walker River Investments
Corp. requested that their $44,177 Convertible Note be converted to 8,835,480 shares of Common Stock. As these Convertible Notes
were converted within the conversion term, there was no gain or loss on the conversion.
The Company accrued interest
at 10% per annum on the Convertible Note for Suprafin, Ltd. On October 15, 2013 Suprafin, Ltd. elected to convert $10,000 of their
Note with the Company into 2,000,000 shares of the Company’s Common Stock. On January 13, 2014 Suprafin, Ltd. elected to
convert $15,000 of their Convertible Note with the Company into 3,000,000 shares of the Company’s Common Stock. On February
5, 2014 Suprafin, Ltd. elected to convert $113,350 of their Convertible Note with the Company into 22,670,000 shares of the Company’s
Common Stock. On April 23, 2014, Suprafin and the Company agreed to allow for repayment of the remaining unconverted principal
balance of $3,111 and accrued interest of $11,820 to be repaid in cash and that the convertible feature of the Convertible Note
was extinguished. The Convertible Note was then reclassified to a note payable. $12,500 of the note was repaid in cash on April
24, 2014 leaving a balance due of $2,431 which was no longer convertible.
On August 21, 2013 the Board
of Directors elected to issue a Convertible Note to Sunatco, Ltd. up to $100,000 for loans for expenses paid on behalf of the Company.
Through June 30, 2014, Sunatco, Ltd. loaned the Company a total of $100,000 for working capital needs including $37,601 in past
expenses paid on behalf of the Company which had previously been recorded as note payable, see NOTE 7: NOTES PAYABLE. These Convertible
Notes are convertible into shares of the Company’s Common Stock at $.01 per share. The Company accrued interest at 10% per
annum on the Convertible Note for Sunatco, Ltd. On February 5, 2014 Sunatco, Ltd. elected to convert $10,000 of its Convertible
Note with the Company into 1,000,000 shares of the Company’s Common Stock. On March 18, 2014 Sunatco, Ltd. elected to convert
$10,000 of its Convertible Note with the Company into 1,000,000 shares of the Company’s Common Stock. On April 9, 2014, Sunatco,
Ltd. elected to convert the entire $80,000 principal balance of their debt and $5,072 in accrued interest into 8,507,235 shares
of Common Stock. The balance of the Convertible Note was $0 as of June 30, 2014.
The Company evaluated beneficial
conversion features as of issuance date of these four Convertible Notes and recorded total debt discount in the amount of $280,185.
Debt discount is amortized over term of the Convertible Notes or at conversion of the note if earlier. As of June 30, 2014 $130,883
of the debt discount had been fully amortized leaving a balance of $0 unamortized.
NOTE 6: NOTES PAYABLE
The
following table sets forth the outstanding advances and notes payable indebtedness of the Company at the date indicated:
|
|
December 31, 2013
|
|
|
|
|
Principal
|
|
|
|
Accrued Interest
|
|
|
|
Note Balance
|
|
Advances payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
Suprafin, Ltd.
|
|
|
1,261
|
|
|
|
–
|
|
|
|
1,261
|
|
Notes payable related parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas Hudson
|
|
|
50,000
|
|
|
|
–
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total notes payable
|
|
|
51,261
|
|
|
|
–
|
|
|
|
51,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
|
|
Principal
|
|
|
|
Accrued Interest
|
|
|
|
Note Balance
|
|
Advances payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sunatco, Ltd.
|
|
|
10,000
|
|
|
|
–
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable
|
|
|
10,000
|
|
|
|
77
|
|
|
|
10,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable related parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas Hudson
|
|
|
50,000
|
|
|
|
–
|
|
|
|
50,000
|
|
Ronald Loshin
|
|
|
250,000
|
|
|
|
5,445
|
|
|
|
255,445
|
|
Suprafin, Ltd.
|
|
|
2,431
|
|
|
|
–
|
|
|
|
2,431
|
|
|
|
|
302,431
|
|
|
|
5,445
|
|
|
|
307,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total notes payable
|
|
|
322,431
|
|
|
|
5,522
|
|
|
|
327,953
|
|
Through December 31, 2012 Suprafin,
Ltd. had loaned the Company a total of $103,944 for working capital needs and assumed $38,565 in loans due for a total loan balance
of $142,509 as of December 31, 2012. These loans were provided at no interest, payable on demand. On April 16, 2013 the Board of
Directors elected to issue a Convertible Note to Suprafin, Ltd. for past expenses paid totaling $141,461, the total amount due
to Suprafin, Ltd. as of April 16, 2013. This note is convertible into shares of the Company’s Common Stock at $.005 per share.
The balance due to Suprafin, Ltd. under the original loan not replaced by the Convertible Note is $1,261. See NOTE 5: CONVERTIBLE
NOTES. This balance was repaid to Suprafin, Ltd. during the three months ended June 30, 2014.
Through August 21, 2013 Sunatco,
Ltd. had loaned the Company a total of $37,601 for working capital needs. These loans were provided at no interest, payable on
demand. On August 21, 2013 the Board of Directors elected to issue a Convertible Note to Sunatco, Ltd. up to $100,000 for expenses
paid on behalf of the Company. This note is convertible into shares of the Company’s Common Stock at $.01 per share. See
NOTE 5: CONVERTIBLE NOTES. Sunatco, Ltd. has loaned the Company a total of $110,000 to date, $100,000 in Convertible Notes and
$10,000 as an additional loan at no interest and no set repayment terms.
On February 14, 2012, former
Director Thomas Hudson loaned the Company a total of $50,000 for working capital needs. The loan was originally due on September
30, 2012. On August 17, 2012 Mr. Hudson agreed to extend the due date to September 30, 2012. The loan is currently in default.
Should the Company, at its sole discretion, decide that it is not in a financial position to repay said funds in currency, both
parties mutually agree that said amount repayable may be converted into common shares of the Company calculated at a rate per share
of twenty five cents per share or at eighty percent (80%) of the previous week’s averaged closing price, whichever is the
lesser. If the Company does not repay the loan in cash, as a penalty it shall provide Lender with one hundred thousand (100,000)
warrants enabling him to purchase one hundred thousand (100,000) shares of Common Stock at a redemption price of twenty five cents
($.25) per share. Redemption of such warrants in entirety or in part is at the sole discretion of Lender. By way of interest on
such loan, Lender shall be provided with two hundred thousand (200,000) warrants enabling him to purchase two hundred thousand
(200,000) shares of Common Stock at a redemption price of twenty cents ($.20) per share being a total of forty thousand dollars
($40,000). Redemption of such warrants in entirety or in part is at the sole discretion of Lender. The options shall remain valid
for a period of three years from the date of this Agreement, after which they shall become null and void. As the warrants were
in lieu of interest, we recorded an interest expense as of December 31, 2012 of $37,487. The fair value of the warrants in lieu
of interest expenses is valued using Black-Sholes option-pricing model. The loan was not repaid as of June 30, 2014.
On January 22, 2014, director
Ronald Loshin loaned the Company a total of $250,000 for the purchase of inventory under a Promissory Note. The Promissory Note
accrues interest at 5% per annum and the principal and accrued interest is due and payable immediately upon the sale of the investment
grade diamond purchased with the funds received. Accrued interest in the amount of $5,445 is included in Mr. Loshin’s note
balance of $255,445 as of June 30, 2014.
On April 23, 2014, Suprafin
and the Company agreed to allow for repayment of the remaining unconverted principal balance of a convertible note, see Note 5:
CONVERTIBLE NOTES, in the amount of $3,111 and accrued interest of $11,820 to be repaid in cash and that the convertible feature
of the Convertible Note was extinguished. The Convertible Note was then reclassified to a note payable. $12,500 of the note was
repaid in cash on April 24, 2014 leaving a balance due of $2,431 which was no longer convertible.
On June 6, 2014, GemVest entered
into a note payable for the purchase of inventory for a total of $10,000. The Note principal is secured by cash in GemVest’s
bank account and by investment grade diamonds and other gems in inventory. The Note has a five year term and bears interest at
the rate of 11.75% per annum payable quarterly in arrears. During the first five business days of any calendar quarter, the Note
holder may notify the Company in writing (“Prepayment Notice”) of its demand for prepayment of any part or whole of
the then existing principal amount of the Note (“Principal Prepayment”). The Company must make such Principal Prepayment
in cash no later than the 15th calendar day of the calendar quarter following the quarter in which the Prepayment Notice was given.
NOTE 7: RELATED PARTY TRANSACTIONS
Common Stock Issuances
On April 16, 2013 the Board of
Directors elected to issue Convertible Notes to Trisha Malone in the amount of $40,000 for past services rendered, Suprafin, Ltd.
for past expenses paid totaling $141,461, and to Walker River Investments Corp. for costs paid for the custodianship proceeding
in the amount of $44,177. These notes are convertible into shares of the Company’s Common Stock at $.005 per share. Trisha
Malone requested that her $40,000 note be converted to 8,000,000 shares of Common Stock, and Walker River Investments Corp. requested
that their $44,177 note be converted to 8,835,480 shares of Common Stock. Ms. Malone is an officer and director of the Company
and is therefore a related party. Walker River Investments Corp. owned more than 10% of the Company following the conversion of
their note into common stock and may therefore be considered a related party. Zirk de Maison is the husband of Angelique de Maison,
our former Executive Chairman and therefore may be considered a related party to the Company although Mr. and Mrs. de Maison individually
disclaim beneficial ownership of the other’s property and investments. Mr. de Maison is the sole officer and shareholder
of Suprafin, Ltd.
Also on April 16, 2013 the Board
of Directors granted Trisha Malone 2,000,000 shares of Common Stock valued at $19,800 as advance payment for services to be performed
as Chief Executive Officer, Chief Financial Officer and Secretary of the corporation and granted Larry A. Zielke 1,000,000 shares
of Common Stock valued at $9,900 as advance payment for services to be performed as Vice President of the Company.
Notes and Loans
On February 14, 2012, former
Director Thomas Hudson loaned the Company a total of $50,000 for working capital needs. The loan was due on September 30, 2012
and is currently in default. See NOTE 6: NOTES PAYABLE. Mr. Hudson is no longer a director of the Company.
On April 16, 2013, the Board
of Directors elected to issue a Convertible Note to Suprafin, Ltd. for loans for past expenses paid totaling $141,461, the total
amount due to Suprafin, Ltd. as of April 16, 2013. This note was convertible into shares of the Company’s Common Stock at
$.005 per share. Suprafin, Ltd. elected to convert a total of $138,350 of their Note with the Company into 27,670,000 shares of
the Company’s Common Stock leaving a principal balance due of $3,111. On April 23, 2014, Suprafin and the Company agreed
to allow for repayment of the remaining unconverted principal balance of the Convertible Note, see Note 5: CONVERTIBLE NOTES, in
the amount of $3,111 and accrued interest of $11,820 to be repaid in cash and that the convertible feature of the Convertible Note
was extinguished. The Convertible Note was then reclassified to a note payable. $12,500 of the note was repaid in cash on April
24, 2014 leaving a balance due of $2,431 which was no longer convertible. See NOTE 6: NOTES PAYABLE.
On August 21, 2013, the Board
of Directors elected to issue a Convertible Note to Sunatco, Ltd. for up to $100,000 for loans for expenses paid on behalf of the
Company. This note was convertible into shares of the Company’s Common Stock at the rate of $0.01 per share. $100,000 had
been borrowed under this note as of June 30, 2014. Sunatco, Ltd. elected to convert of the entire $100,000 of their Note with the
Company plus $5,072 in accrued interest into 10,507,235 shares of the Company’s Common Stock. See NOTE 5: CONVERTIBLE NOTES
and NOTE 6: NOTES PAYABLE. Mr. de Maison is the sole officer and shareholder of Sunatco, Ltd.
Accrued Salaries
On April 16, 2013, the Board
of Directors elected to issue a Convertible Note to Trisha Malone in the amount of $40,000 for accrued salaries for past services
rendered and on the same day Trisha Malone requested that her Convertible Note be converted to shares of Common Stock. As of June
30, 2014 there was $3,316 in accrued salaries due included as a component of Accounts Payable.
NOTE 8: COMMON STOCK
The authorized capital stock
of Gepco, Ltd. consists of 250,000,000 shares of Common Stock, $0.001 par value per share, and 15,000,000 shares of Preferred Stock,
par value of $0.001 per share. At June 30, 2014, there were outstanding 156,109,790 shares of Common Stock and no shares of Preferred
Stock.
On February 14, 2012, the Company
issued 200,000 warrants for the purchase of 200,000 shares of Common Stock at a redemption price of twenty cents ($.20) per share
in connection with a loan agreement. Redemption of such warrants in entirety or in part is at the sole discretion of warrant holder.
The warrants shall remain valid for a period of three years from the date of the loan or February 14, 2015, after which they shall
become null and void. See NOTE 6: NOTES PAYABLE.
The
following is a summary of warrant activity for the six months ended June 30, 2014:
|
|
|
Number of Shares
|
|
|
|
Weighted Average Exercise Price
|
|
|
|
Weighted Average Remaining Life
|
|
Outstanding - December 6, 2013:
|
|
|
200,000
|
|
|
$
|
0.20
|
|
|
|
14.5 months
|
|
Warrants Issued
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
Warrants Exercised
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
Outstanding - December 31, 2013:
|
|
|
200,000
|
|
|
$
|
0.20
|
|
|
|
13.7 months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants Issued
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
Warrants Exercised
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
Outstanding - June 30, 2014
|
|
|
200,000
|
|
|
$
|
0.20
|
|
|
|
7.6 months
|
|
On December 6, 2013, the Company issued 150,000,000
(75,000,000 post retroactive effect of the July 8, 2014 cancelled shares). shares of Common Stock to the shareholders of GemVest,
Ltd. upon closing of the Stock Purchase Agreement with GemVest, Ltd. as described in NOTE 4: GEMVEST ACQUISITION.
From
October 15, 2013 through June 30, 2014, Suprafin, Ltd. elected to convert a total of $138,350 of their Note with the Company
into 27,670,000 shares of the Company’s Common Stock ($10,000 of this Note was converted and 2,000,000 shares were
issued prior to the reverse merger and are included as a component of the effect of the reverse merger). See NOTE 5:
CONVERTIBLE NOTES and NOTE 6: NOTES PAYABLE.
From February 5, 2013 through
June 30, 2014, Sunatco, Ltd. elected to convert a total of $105,072 of their Note with the Company into 10,507,235 shares of the
Company’s Common Stock. A $14,850
beneficial conversion feature on this Note was recorded as additional paid in capital during the six months ended June 30,
2014. See NOTE 5: CONVERTIBLE NOTES and NOTE 6: NOTES PAYABLE.
On October 15, 2013, the Board
of Directors approved the sale of up to 15,000,000 shares of Common Stock at a price of $0.10 per share. The sale of such shares
began in March of 2014 with 1,350,000 shares sold as of June 30, 2014.
Subsequent to the quarter ended
June, 30, 2014, on July 8, 2014, Angelique de Maison resigned as the Executive Chairman of the Company and its wholly owned subsidiary,
Gemvest, Ltd. In conjunction with such resignations, Ms. de Maison is returning to the Company the 75 million shares of Company
common stock issued to her as part of the December 6, 2013 reverse merger transaction. Said return of shares will cover any shares
due back to the Company under the “claw back” provision should GemVest not reach its stated net income goals. Due to
the fact that these shares will be cancelled without the exchange of consideration, the Company considered this a change in capital
structure. In accordance with SAB Topic 4-C, the Company recorded the cancellation retroactively as of June 30, 2014
as a reduction to common stock at par value with a corresponding increase to additional paid-in capital.
NOTE 9: NEW ACCOUNTING
PRONOUNCEMENTS
In January 2014, the Financial
Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-05,
Service Concession
Arrangements (Topic 853), a consensus of the FASB Emerging Issues Task Force
. The objective of the update is to specify that
an operating entity should not account for a service concession arrangement within the scope of this update as a lease in accordance
with Topic 840, Leases. It is effective for fiscal years beginning after December 15, 2014. The Company does not expect ASU 2014-05
to have a material effect on its financial condition, results of operation, or cash flows.
In June 2014, the Financial
Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-10,
Development Stage
Entities (Topic 915), Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities
Guidance in Topic 810, Consolidation,
amending the FASB Accounting Standards Codification. The amendments in this Update remove
the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing
the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition,
the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the
statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage
entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose
in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development
stage. The amendments also clarify that the guidance in Topic 275, Risks and Uncertainties, is applicable to entities that have
not commenced planned principal operations. It is effective for fiscal years beginning after December 15, 2014. The Company does
not expect ASU 2014-10 to have a material effect on its financial condition, results of operation, or cash flows.
NOTE 10: SUBSEQUENT EVENTS
Other Events
Effective July 8, 2014, Angelique
de Maison has resigned as the Executive Chairman of the Company and its wholly owned subsidiary, Gemvest, Ltd. In conjunction with
such resignations, Ms. de Maison is returning to the Company the 75 million shares of Company common stock issued to her as part
of the December 6, 2013 reverse merger transaction. Said return of shares will cover any shares due back to the Company under the
“claw back” provision should GemVest not reach its stated net income goals.