NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 1 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
HISTORY
ROKWADER, INC. (the Company), was organized
under the laws of the State of Delaware on March 18, 2005 as a vehicle to seek, investigate and, if such investigation warrants,
acquire a target company or business that primarily desires to seek the perceived advantages of a publicly-held corporation. On
April 23, 2007, Rokwader completed an acquisition of all of the issued and outstanding capital stock of Latigo Shore Music, Inc.
(“Latigo”). Substantially all of the business conducted by Rokwader is through Latigo, its wholly-owned subsidiary.
In May and June 2015, the Company underwent a change of control when it sold an aggregate of 15,250,000 shares of its common stock,
together with a warrant to purchase an additional 5,900,000 shares of its common stock to Coco Partners, LLC. As a result of this
transaction and the change of control of the Company, our business strategies and plan of operations have evolved into two segments:
(i) the continuation of the Latigo music publishing business; and (ii) the investment and acquisition vehicle through its subsidiaries
and through its principal shareholder Coco Partners.
BASIS OF CONSOLIDATION
The consolidated financial statements
include the accounts of Rokwader, Inc. and Subsidiaries. Inter-Company accounts and transactions have been eliminated.
INCOME TAXES
The Company follows the guidance of
the Financial Accounting Standards Board’s Accounting Standards Codification Topic 740 related to Income Taxes. According
to Topic 740, deferred income taxes are recorded to reflect the tax consequences in future years of temporary differences between
the tax basis of the assets and liabilities and their financial amounts at year-end.
For federal income tax purposes, substantially
all expenses incurred prior to the commencement of operations must be deferred and then they may be written off over a 180-month
period. Tax deductible losses can be carried forward for 20 years until utilized for federal tax purposes. The Company will provide
a valuation allowance in the full amount of the deferred tax assets since there is no assurance of future taxable income. Additionally,
the Company may reserve a portion of the deferred tax assets due to restrictions of tax benefits related to changes in ownership.
The Company utilizes the Financial Accounting
Standards Board’s Accounting Standards Codification Topic 740 related to Income Taxes to account for the uncertainty in income
taxes. Topic 740 for Income Taxes clarifies the accounting for uncertainty in income taxes by prescribing rules for recognition,
measurement and classification in financial statements of tax positions taken or expected to be in a tax return. Further, it prescribes
a two-step process for the financial statement measurement and recognition of a tax position. The first step involves the determination
of whether it is more likely than not (greater than 50 percent likelihood) that a tax position will be sustained upon examination,
based on the technical merits of the position. The second step requires that any tax position that meets the more likely than not
recognition threshold be measured and recognized in the financial statements at the largest amount of benefit that is a greater
than 50 percent likelihood of being realized upon ultimate settlement. This topic also provides guidance on the accounting for
related interest and penalties, financial statement classification and disclosure. The Company’s policy is that any interest
or penalties related to uncertain tax positions are recognized in income tax expense when incurred. The Company has no uncertain
tax positions or related interest or penalties requiring accrual at March 31, 2016 and December 31, 2015.
7
CASH
Cash and cash equivalents consist primarily
of cash in banks and highly liquid investments with original maturities of 90 days or less.
CONCENTRATIONS OF CREDIT RISK
The Company maintains all cash in deposit
accounts, which at times may exceed federally insured limits. The Company has not experienced a loss in such accounts.
As of March 31, 2016, the Company had
bank balances of $5,028,846 in two banks. The Company holds more than $250,000 in interest bearing accounts at one bank, thus there
is a credit risk related to these cash deposits as of March 31, 2016 of $4,778,846 since these amounts exceed the current federally
insured amount of $250,000 per depositor, per insured bank, for each account ownership category.
EARNINGS PER COMMON SHARE
Basic earnings per common share are
computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share consists
of the weighted average number of common shares outstanding plus the dilutive effects of options and warrants calculated using
the treasury stock method. In loss periods, dilutive common equivalent shares are excluded as the effect would be anti-dilutive.
USE OF ESTIMATES IN THE PREPARATION
OF FINANCIAL STATEMENTS
The preparation 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, the disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates
and assumptions.
LONG-LIVED ASSETS
The realizability of long-lived assets
is evaluated periodically as events or circumstances indicate a possible inability to recover the carrying amount. Long-lived assets
that will no longer be used in our business are written-off in the period identified since they are no longer expected to generate
any positive cash flows for us. Long-lived assets that continue to be used by us are periodically evaluated for recoverability.
Such evaluation is based on various analyses, including cash flow and profitability projections. The analyses necessarily involve
significant management judgment. In the event the projected undiscounted cash flows are less than net book value of the assets,
the carrying value of the assets is written down to its estimated fair value.
No impairment loss on intangible assets
was recognized for the three months ended March 31, 2016 and 2015, respectively.
8
REVENUE RECOGNITION
As required by FASB ASC Topic 605, Revenue
Recognition (“ASC 605”), the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery
has occurred, the sales price is fixed or determinable and collection is probable.
Revenues are earned from the receipt of royalties relating to the licensing of rights in musical compositions. The receipt of royalties
principally relates to amounts earned from the public performance of copyrighted material, the mechanical reproduction of copyrighted
material on recorded media including digital formats, and the use of copyrighted material in synchronization with visual images.
Consistent with industry practice, music publishing royalties generally are recognized as revenue when cash is received. Revenue
generally is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities.
PROPERTY AND EQUIPMENT
Property and equipment are stated at
cost and are depreciated using the straight-line method over the estimated useful lives of the respective assets, which are as
follows:
Equipment 2-10 years
Furniture 2-10 years
Expenditures for repairs and maintenance
are charged to expense as incurred. The costs of major renewals and betterments are capitalized. The cost and related accumulated
depreciation of property and equipment are removed from the accounts upon retirement or other disposition and any resulting gain
or loss is reflected in operations of the period.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2016, the FASB issued ASU 2016-09,
Compensation – Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 was issued
as part of the Board’s Simplification Initiative. The areas for simplification in this Update involve several aspects of
the accounting for share-based payment transactions, Accounting for Income Taxes, Classification of Excess Tax Benefits on the
Statement of Cash Flows, Forfeitures, Minimum Statutory Tax Withholding Requirements, Classification of Employee Taxes Paid on
the Statement of Cash Flows When an Employer Withholds Shares for Tax-Withholding Purposes, Practical Expedient- Expected Term,
and Intrinsic Value. In addition to those simplifications, the amendments eliminate the guidance in Topic 718 that was indefinitely
deferred shortly after the issuance of FASB Statement No. 123 (revised 2004), Share-Based Payment. For public business entities,
the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those
annual periods. For all other entities, the amendments are effective for annual periods beginning after December 15, 2017, and
interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for any entity in any interim
or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the
beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments
in the same period. The Company is currently assessing this guidance for future implementation.
9
In February 2016, the FASB issued ASU
2016-02, Leases (Topic 842). ASU 2016-02 requires entities to recognize lease assets and lease liabilities on the balance sheet
and disclosing key information about leasing arrangements. Topic 842 requires the recognition of lease assets and lease liabilities
by lessees for those leases classified as operating leases under previous GAAP. When measuring assets and liabilities arising from
a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain
to exercise an option to extend the lease or not to exercise an option to terminate the lease. Similarly, optional payments to
purchase the underlying asset should be included in the measurement of lease assets and lease liabilities only if the lessee is
reasonably certain to exercise that purchase option. In addition, also consistent with the previous leases guidance, a lessee (and
a lessor) should exclude most variable lease payments in measuring lease assets and lease liabilities, other than those that depend
on an index or a rate or are in substance fixed payments.
For leases with a term of 12 months
or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets
and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line
basis over the lease term.
The accounting applied by a lessor is
largely unchanged from that applied under previous GAAP. In addition to the changes outlined above, the previous accounting model
for leveraged leases continues to apply only to those leveraged leases that commenced before the effective date of the guidance
in this Update.
The amendments in this Update are effective
for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, for any of the following:
-
A public business entity
-
A not-for-profit entity that has issued,
or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market.
-
An employee benefit plan that files
financial statements with the U.S. Securities and Exchange Commission (SEC).
For all other entities, the amendments
in this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning
after December 15, 2020. Early application of the amendments in this Update is permitted for all entities. The Company is currently
assessing this guidance for future implementation.
10
In November 2015, the FASB issued ASU
2015-17, Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes. ASU 2015-17 requires that deferred tax liabilities
and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to
all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and
assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this
Update. The amendments in this Update will align the presentation of deferred income tax assets and liabilities with International
Financial Reporting Standards (IFRS). IAS 1, Presentation of Financial Statements, requires deferred tax assets and liabilities
to be classified as noncurrent in a classified statement of financial position. For public entities, the amendments in ASU 2015-17
will be effective for financial statements issued for annual periods beginning after December 15, 2016 and interim periods within
those annual periods. For all other entities, thee amendments in this Update are effective for financial statements issued for
annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.
Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The amendments
in this Update may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods
presented. If an entity applies the guidance prospectively, the entity should disclose in the first interim and first annual period
of change, the nature of and reason for the change in accounting principle and a statement that prior periods were not retrospectively
adjusted. If an entity applies the guidance retrospectively, the entity should disclose in the first interim and first annual period
of change the nature of and reason for the change in accounting principle and quantitative information about the effects of the
accounting change on prior periods. The Company is currently assessing this guidance for future implementation.
In February 2015, the FASB issued ASU
2015-02, Consolidation (Topic 810) Amendments to the Consolidation Analysis. ASU 2015-02 change the analysis that a reporting entity
must perform to determine whether it should consolidate certain types of legal entities. The amendments in this Update affect the
following areas: (1) Limited partnerships and similar legal entities, (2) Evaluating fees paid to a decision maker or a service
provider as a variable interest, (3) The effect of fee arrangements on the primary beneficiary determination, (4) The effect of
related parties on the primary beneficiary determination, and (5) Certain investment funds. The amendments in this Update are effective
for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15,
2015. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, and
for interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an
interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning
of the fiscal year that includes that interim period. A reporting entity may apply the amendments in this Update using a modified
retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption.
A reporting entity also may apply the amendments retrospectively. The Company is currently assessing this guidance for future implementation.
EQUITY BASED PAYMENTS TO NON-EMPLOYEES
The Company applied the Financial Accounting
Standards Board’s Accounting Standards Codification Topic 505 related to Equity Based Payments to Non-Employees to account
for these options and warrants issued. According to Topic 505, all transactions in which goods or services are the consideration
received for the issuance of equity instruments shall be accounted for based on the fair value of the consideration received or
the fair value of the equity instruments issued, whichever is more reliably measurable. The Company believes that fair value of
these options and warrants is a more reliable measure of the consideration received for services performed for the Company. We
determined the fair value of these equity instruments using the Black-Scholes option-pricing model. Factors used in the determination
of the fair value of these equity instruments include, the stock price at the grant date, the exercise price, the expected life
of the equity instrument, the volatility of the underlying stock, the expected dividends on it, and the risk-free interest rate
over the expected life of the equity instrument.
11
NOTE 2 – STOCKHOLDERS’ EQUITY
DEFICIT
The dividend yield reflects that the
Company has not paid any cash dividends since inception and does not intend to pay any cash dividends in the foreseeable future.
A summary of option activity as is presented
below:
|
|
|
|
Weighted
|
|
Average
|
|
|
|
|
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
|
|
Exercise
|
|
Contractual
|
|
Intrinsic
|
|
|
Shares
|
|
Price
|
|
Life (Years)
|
|
Value
|
Outstanding at December 31, 2015
|
|
|
6,158,333
|
|
|
$
|
0.68
|
|
|
|
4.10
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Exercised
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Exprired/Cancelled
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Outstanding at March 31, 2016
|
|
|
6,158,333
|
|
|
$
|
0.68
|
|
|
|
4.10
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2016
|
|
|
6,158,333
|
|
|
$
|
0.68
|
|
|
|
4.10
|
|
|
$
|
—
|
|
As of March 31, 2016, all options are
vested.
On December 21, 2015, Brooktide, LLC
exercised 66,667 of its vested stock options. The Company issued 66,667 shares of its common stock at an exercise price of $0.75
per share for a total of $50,000.
On December 22, 2015, the Company extended
its remaining 258,333 outstanding stock options through December 31, 2016.
On February 18, 2015, the Company issued
317,392 shares of common stock valued at the price of $0.6177 in an agreement to convert $135,000 of the oldest notes payable and
accrued interest of $61,060 which were owed to Mr. Yale Farar and Brooktide LLC. As the date herein, the average price between
the “bid and “ask” price of the Company’s stock on the OTC:QB market was $0.42 per share.
On February 24, 2015, the Company issued
10,000 shares of common stock at the price of $0.44, for services rendered by Jeston Cade. The shares of common stock are restricted
shares and were valued at the price of $0.44, the closing price on February 24, 2014 on the OTC:OB market as of the date hereof.
In May 2015, Coco Partners and the Company
entered into an agreement pursuant to which Coco Partners would purchase (i) a maximum of 15,250,000 shares of our common stock
and (ii) a warrant to purchase an aggregate of 5,900,000 shares of our common stock (the “Warrant”) for an aggregate
maximum purchase price of $6,100,000 (the “Purchase Price”). The Purchase Price is payable as follows: (a) $3,050,000
for 7,625,000 shares and the Warrant upon the closing (the “Closing”) and (b) an additional 7,625,000 shares for $3,050,000
on or before June 30, 2015. The Closing occurred on May 7, 2015 and the Company received the initial purchase price of $3,050,000
and the second $3,050,000 for an additional 7,625,000 shares was received on June 30, 2015.
The terms of the Warrant provide that
Coco Partners has the right to purchase, at any time after the Closing until April 1, 2020, up to (i) 5,000,000 shares of our common
stock at an exercise price of $0.60 per share, (ii) 500,000 shares of our common stock at an exercise price of $1.000 per share
and (iii) 400,000 shares of our common stock at an exercise price of $1.25 per share. The Warrant includes certain anti-dilution
adjustments to the exercise prices in the event of payment of dividend, subdivision and combination with respect to outstanding
shares of our common stock.
12
The Transaction resulted in a change
of control of the Company. With the purchase of the 15,250,000 shares, Coco Partners acquired approximately 83.8% of the outstanding
shares of our common stock (this does not include any potential exercise of the Warrant). Upon the Closing, Mr. Robert Wallace,
who has a controlling interest in Coco Partners, was appointed Chief Executive Officer, Chief Financial Officer, and Corporate
Secretary and as a member of our Board of Directors (the “Board”). Mr. Yale Farar resigned his position as President
of the Company but remains as a director and Mr. Gary Saderup resigned his positions as the Secretary of the Company and a director
of the Board.
NOTE 3 – INTANGIBLES
On December 17, 2010, Latigo, a wholly
owned subsidiary of the Company, acquired all right, title and interest in 50 musical compositions from the Gary Harju music catalog
to the extent of his writer’s and publisher’s share for a cost of $15,000 paid in cash on the closing date of December
17, 2010. The Harju Catalog (including copyrights and publishing rights) consists of 50 original songs written in whole or in part
by Mr. Gary Harju. Some of the songs are owned outright by Latigo as a result of the acquisition, and others are and will continue
to be subject to publishing agreements with various music publishers, who will continue to collect the publisher’s share
of royalties. The other parties who have partial interests in the catalog will continue to receive their share of royalties and
other income. The Company will amortize the costs of the Harju Catalog over its estimated useful life based on projected net revenues.
The Company projects to generate revenues from the Harju Catalog for an estimate of 20 years based on Mr. Harju’s past accomplishments
and the ability of the recorded music to generate revenues for long periods of time. Therefore, the Company estimated the useful
life of the Harju Catalog to be 20 years.
On June 1, 2013, Latigo, a wholly owned
subsidiary of the Company, acquired all right, title and interest in Andrew Dorff’s “writer’s share” of
certain musical compositions written and/or co-written by him for a cost of $40,000 paid in cash. The musical compositions include
106 songs total. The Company currently owns the publishing rights from these musical compositions. Some of the songs are owned
outright by Latigo as a result of the acquisition, and others are and will continue to be subject to publishing agreements with
various music publishers, who will continue to collect the publisher’s share of royalties and other income. The Company will
amortize the costs of Andrew Dorff’s “writer’s share” over its estimated useful life based on projected
net revenues. The Company projects to generate revenues from Andrew Dorff’s “writer’s share” for an estimate
of 20 years based on Andrew Dorff’s past accomplishments and the ability of the recorded music to generate revenues for long
periods of time.
|
|
March 31, 2016
|
|
December 31, 2015
|
|
|
Gross
|
|
Accumulated
|
|
Gross
|
|
Accumulated
|
|
|
Amount
|
|
Amortization
|
|
Amount
|
|
Amortization
|
Intangibles subject to amortization:
|
|
|
|
|
|
|
|
|
Harju Music Catalog
|
|
|
15,000
|
|
|
|
6,710
|
|
|
|
15,000
|
|
|
|
6,442
|
|
Dorff's Writer's Share
|
|
|
40,000
|
|
|
|
7,298
|
|
|
|
40,000
|
|
|
|
6,678
|
|
|
|
$
|
55,000
|
|
|
$
|
14,008
|
|
|
$
|
55,000
|
|
|
$
|
13,120
|
|
For the three months ended March 31,
2016 and 2015, respectively, amortization expense was $888 and $922, respectively.
Amortization of the remaining intangible
assets is expected to be $18,378 from 2016 through 2021, and $22,612 in aggregate for years thereafter through 2032.
13
NOTE 4 – PROPERTY AND EQUIPMENT
|
|
March 31, 2016
|
|
December 31, 2015
|
|
|
Gross
|
|
Accumulated
|
|
Gross
|
|
Accumulated
|
|
|
Amount
|
|
Depreciation
|
|
Amount
|
|
Depreciation
|
Property and Equipment
|
|
|
|
|
|
|
|
|
Musical Equipment
|
|
$
|
4,692
|
|
|
$
|
704
|
|
|
$
|
4,692
|
|
|
$
|
469
|
|
Computer Equipment
|
|
|
1,396
|
|
|
|
186
|
|
|
|
1,396
|
|
|
|
116
|
|
Office Furniture
|
|
|
3,700
|
|
|
|
493
|
|
|
|
3,700
|
|
|
|
308
|
|
|
|
$
|
9,788
|
|
|
$
|
1,383
|
|
|
$
|
9,788
|
|
|
$
|
893
|
|
Depreciation expense for the three months
ended March 31, 2016 and 2015, respectively, was $490 and zero.
NOTE 5 - LEASES
The Company leases office space under
a lease arrangement that is classified as an operating lease. The office space lease provides that the Company pay insurance, utilities
and maintenance plus minimum monthly rentals of $1,161 at March 31, 2016. As of March 31, 2016, the Company had a one year office
space lease extending through May 31, 2016. Minimum annual rental commitments under non-cancelable leases having initial or remaining
lease terms in excess of one year, including the new facilities lease, are as follows:
December 31,
|
|
Amount
|
|
2016
|
|
|
$
|
2,322
|
|
|
2017
|
|
|
|
—
|
|
|
2018
|
|
|
|
—
|
|
|
2019
|
|
|
|
—
|
|
|
2020
|
|
|
|
—
|
|
|
Thereafter
|
|
|
|
—
|
|
|
Total minimum future rental payments
|
|
|
$
|
2,322
|
|
Total rental expenses for the three
months ended March 31, 2016 and 2015, respectively, were $3,483 and zero.
14
NOTE 6 – INCOME TAXES
The current year provision for income
taxes includes income taxes currently payable and those deferred due to temporary differences between financial statement and tax
basis of assets and liabilities. The provision for income taxes consists of
The following:
|
|
2015
|
|
2014
|
Current
|
|
|
|
|
Federal
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
Federal
|
|
|
243
|
|
|
|
—
|
|
State
|
|
|
42
|
|
|
|
—
|
|
|
|
|
285
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
285
|
|
|
$
|
—
|
|
The following reconciles the federal
statutory income tax rate to the effective rate of the provision for income taxes.
|
|
2015
|
|
2014
|
Federal Statutory Rate
|
|
|
34
|
%
|
|
|
34
|
%
|
Valuation Allowance Adjustment
|
|
|
-34
|
%
|
|
|
-34
|
%
|
Effective Rate
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
State Statutory Rate
|
|
|
8.84
|
%
|
|
|
8.84
|
%
|
Valuation Allowance Adjustment
|
|
|
-8.84
|
%
|
|
|
-8.84
|
%
|
Effective Rate
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities (assets)
are as follows:
|
|
2016
|
|
2015
|
|
|
|
|
|
Deferred income tax liabilities:
|
|
|
|
|
Property, Plant and Equipment
|
|
|
285
|
|
|
|
—
|
|
|
|
|
285
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax assets:
|
|
|
|
|
|
|
|
|
Start-Up Expenses
|
|
|
(50,792
|
)
|
|
|
(58,614
|
)
|
Intangible Assets
|
|
|
(10,601
|
)
|
|
|
(12,147
|
)
|
Net Operating Loss Carryforward
|
|
|
(745,490
|
)
|
|
|
(426,374
|
)
|
Charitable Contributions Carryforward
|
|
|
(199
|
)
|
|
|
—
|
|
Accrued Interest Payable
|
|
|
—
|
|
|
|
(24,323
|
)
|
Less Valuation Allowance
|
|
|
807,082
|
|
|
|
521,458
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total Deferred Taxes
|
|
$
|
285
|
|
|
$
|
—
|
|
15
As of December 31, 2015, the Company
had incurred $300,000 of start-up expenses amortizable over 15 years. Also, the Company acquired certain intangible assets in the
amount of $113,500 amortizable over 15 years.
Additionally, the Company has net operating
loss carry forwards of approximately $1,854,900 and $1,968,200 for both federal and state purpose, respectively. These federal
and state carry forwards are scheduled to expire beginning 2027. The Company is no longer subject to examination by the Internal
Revenue Service for years prior to 2011 and by the Franchise Tax Board for years prior to 2010. There could be certain limitation,
imposed by Internal Revenue Code Section 382, on the utilization of these loss carry forwards if there were more than a 50 percent
change of control. The Company has recorded a deferred tax asset of $807,100 and a deferred tax liability of $300. As of December
31, 2015, the Company established a valuation allowance of $806,800 to fully offset the deferred tax asset and deferred tax liability
based on a brief history of operations.
NOTE 7 – SUBSEQUENT EVENTS
On May 2, 2016, Rokwader Acquisition
Corporation, the Company’s wholly-owned subsidiary (“RAC”) acquired substantially all of the assets of five express
car wash businesses (collectively the “Acquired Car Wash Businesses”) located in Arizona for a total consideration
of $7,410,832, consisting of $3,968,224 in cash and 918,029 shares of RAC’s Class A Convertible Preferred Stock valued at
$3.75 per share (the “Class A Preferred”). In addition to the Acquired Wash Businesses, RAC acquired an option to purchase
the real estate associated with the Acquired Car Wash Businesses. RAC also, entered into forward purchase agreements to acquire
another six express car washes (collectively the “Retained Car Wash Businesses”) in Arizona. Each proposed purchase
by RAC is subject to the particular express car wash attaining certain financial performance metrics. There is no assurance that
the performance requirements will be met and that any of the six express car washes will be acquired.
In connection with the acquisition of
the car washes, on May 11, 2016, RAC changed its name to True Blue Car Wash Corp.
Furthermore, and in accordance with
the purchase of the Acquired Car Wash Businesses, RAC, pursuant to Stock Purchase Agreement (“SPA”), acquired a management
company that manages all eleven express car washes in exchange for up to 800,000 shares of our Class A Preferred. In connection
with this acquisition, 400,000 shares of the Class A Preferred were issued at closing and 400,000 shares of the Class A Preferred
will be issued if and when the Retained Car Wash Businesses are sold to RAC pursuant to the forward purchase agreements.
Separately, RAC also entered into a
Letter of Intent to acquire an additional eleven car washes by another leading car wash platform in Arizona. The eleven car washes
consist of nine mature operational sites and two sites currently in development. There is no assurance that RAC will be successful
in completing the purchase of any of the eleven sites.
Management has evaluated subsequent
events through the date of this report.
16