Notes to Condensed Financial Statements
Note 1 Nature of Operations
Nature of Operations
EF Hutton America, Inc. (the Company) was incorporated in the State of Colorado on March 8, 2007 under the name of Twentyfour/seven Ventures, Inc. The name of the Company was changed to EFH Group, Inc. on October 28, 2014. Effective April 24, 2015, the name of the Company was changed to EF Hutton America, Inc.
EF Hutton Financial Corp., a wholly owned subsidiary of the registrant, operates an internet marketplace that connects consumers with a network of financial providers across a range of financial products and services, including, but not
limited to insurance, tax, real estate and financial planning. The marketplace, Gateway, connects consumers with a wide range of financial providers and solutions. Gateway provides a viable choice for consumers by eliminating barriers that impede consumers from using independent providers, primarily through marketing to raise awareness of the independent sector and by standardizing and streamlining the process of selecting and engaging independent financial professionals. Financial providers who register with Gateway benefit by generating new client relationships. In addition to operating Gateway, our subsidiary intends to offer specialty financial services through its institution division.
On November 25, 2014, the Company purchased certain assets of EFH Group, Inc., a Wyoming corporation (EFH Wyoming). The assets consist of various trademarks and license rights, rights to computer programming code and other intellectual property. The purchase of the assets was deemed under Generally Accepted Accounting Principles (GAAP) to be an affiliate transaction and, as such, the assets are carried at the sellers carrying value of $10,025,000 . The Company issued a total of 52,173,000 restricted common shares and 5,797,000 restricted Class B common shares as consideration for the EFH Wyoming asset purchase.
On November 23, 2014, the assets and liabilities of the Company were contributed at book value to Liberty Ventures, Inc., a wholly owned subsidiary of the Company. The common shares of EF Hutton Financial Corp., a wholly owned subsidiary of the Company were not included in the spin-off. Effective on November 25, 2014, the Company spun off Liberty Ventures, Inc. to its shareholders as of November 24, 2014.
Note 2 Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Company to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of expenses during the periods presented.
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The Company makes the estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available. The Company believes that significant estimates, assumptions and judgments are reasonable, based upon information available at the time they are made. Actual results could differ from these estimates, making it possible that a change in these estimates could occur in the near term.
Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents.
Property and equipment
Property and equipment are recorded at cost and depreciated under straight line methods over each item's estimated useful life, generally seven years for furniture and fixtures and five years for office equipment.
Revenue recognition
The Company recognizes revenue when upon receipt of the fees received for services rendered through its Gateway system.
Income tax
The Company accounts for income taxes pursuant to ASC 740. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Net income (loss) per share
The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding.
Long-Lived Assets
In accordance with ASC 350, the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value.
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New Accounting Standards
From time to time, the Financial Accounting Standards Board ("FASB") or other standards setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification ("ASC") are communicated through issuance of an Accounting Standards Update ("ASU"). Unless otherwise discussed, the Company believes that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on the condensed financial statements upon adoption.
Note 3 Going Concern
The Companys financial statements have been prepared on a going concern basis that assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Companys ability to continue as a going concern depends on its ability to generate profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities when they come due. There is no assurance that these events will be satisfactorily completed.
Note 4 - Income Taxes
Deferred income taxes arise from the temporary differences between financial statement and income tax recognition of net operating losses and other items. Loss carryovers are limited under the Internal Revenue Code should a significant change in ownership occur. The Company accounts for income taxes pursuant to ASC 740.
Income taxes at federal and state statutory rates are reconciled to the Companys actual income taxes as follows:
| |
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September 30, 2015
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Net operating loss carryforward
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0
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Total Deferred Tax Asset
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$ 78,436
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Reserve for Deferred Tax Asset
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(78,436)
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Deferred tax asset, net
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0
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Note 5 Fair Value of Financial Instruments
The Company has adopted the guidance of ASC 820, Fair Value Measurement which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
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Level 3-Inputs are unobservable inputs which reflect the reporting entitys own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
ASC 825, Financial Instruments, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company has not elected to apply the fair value option to any outstanding instruments.
The Companys financial instruments primarily consist of cash, due from shareholder, receivables, accounts payable, accrued expenses and advances and amounts due to related parties. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying amount of cash, accounts receivable, prepaid rent, customer deposits held, accounts and income taxes payable, accrued liabilities, customer deposits owed and deferred purchase agreement approximate fair value because of the short-term nature of these financial instruments. The carrying amounts of its advances and amounts due to related parties approximates fair value as of the condensed balance sheets dates presented, because interest rates on these instruments approximate market interest rates after consideration of stated interest rates.
Note 6 Intangible Assets
On November 25, 2014, the Company purchased certain assets from EFH Group, Inc., a Wyoming corporation. The license to use the EF Hutton name was the only material asset purchased. This license has an indefinite useful life.
The purchase of the assets was deemed under GAAP to be an affiliate transaction and, as such, the assets are carried at the sellers carrying value of $10,025,000. The Company issued a total of 52,173,000 restricted common shares and 5,797,000 restricted Class B common shares as consideration for the EFH Wyoming asset purchase.
On May 6, 2015, the Company acquired a registered investment advisor with no material assets or liabilities. Pursuant to the acquisition, the Company issued 37,500 common shares valued at $30,000.
Note 7 Stockholders Equity
Common stock
Pursuant to the asset purchase agreement, the Company issued
the 52,173,000 common shares and 5,797,000 Class B common shares to EFH Wyoming, a company controlled by an officer and director of the registrant.
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The Class B common shares have the following rights and privileges:
Dividend rights - Fifty percent (50%) of the standard common share dividend
Liquidation rights - Fifty percent (50%) of standard common share liquidation rights
Exchange privileges - Exchangeable for standard common shares on a one for one basis
with thirty (30) days prior notice to the Company.
On Feb 2, 2015, the Company issued 11,034 common shares as stock based compensation for services valued at $8,055.
On March 17, 2015, the Company issued 26,940 common shares as stock based compensation for services valued at $9,968.
On March 24, 2015, the Company issued 100,000 common shares each to Messrs. Christopher Daniels and Stanley Hutton, officers and directors of the Company, with an aggregate value of $160,000.
On May 6, 2015, the Company issued 37,500 common shares valued at $30,000 for the acquisition of a registered investment advisor with no material assets or liabilities.
On June 12, 2015, the Company issued 20,000 common shares for cash at $16,000.
On June 18, 2015, the Company issued 200,000 common shares to Craig Marchek for services valued at $80,000.
On July 31, 2015, the Company issued 200,000 common shares to Dennis White for services valued at $160,000.
On August 5, 2015, the Company issued 12,000 common shares to Frederick P. Ziwot for cash of $9,600.
On August 28, 2015, the Company issued 20,000 common shares to Barbara Portman for cash of $15,000.
Note 8 Related Party Transactions
Stanley Hutton Rumbough, a director of the registrant, advanced the registrant $18,367 during the six months ended September 30, 2015. The advance is repayable upon demand and is without interest.
Additionally, during the six months ended September 30, 2015, Mr. Rumbough purchased 120,000 common shares for $50,000. The common shares have not yet been issued.
Christopher Daniels, an officer and director of the registrant, advanced the registrant $7,960 during the six months ended September 30, 2015. The advance is repayable upon demand and is without interest.
John Daniels, a director of the registrant, advanced the registrant $100 during the six months ended September 30, 2015. The advance is repayable upon demand and is without interest.
On April 28, 2015, the Company authorized the issuance of 200,000 common shares to John Daniels, a director of the Company, with an aggregate value of $124,000. The common shares have not yet been issued.
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EFH Group Inc., a Wyoming corporation, the majority shareholder of the registrant, advanced the registrant $13,991 during the year ended December 31, 2014. The advance is repayable upon demand and is without interest.
For the six months ended March 31, 2015, the Company incurred expenses of $42,000 due to Impacct, LLC, an entity controlled by Lance Diamond, an officer of the Company.
On March 24, 2015, the Company issued 100,000 common shares each to Messrs. Christopher Daniels and Stanley Hutton, officers and directors of the Company, with an aggregate value of $160,000.
On June 18, 2015, the Company issued 200,000 common shares to Craig Marchek, a director of the Company for services valued at $80,000.
On July 31, 2015, the Company issued 200,000 common shares to Dennis White, a director of the Company for services valued at $160,000.
Note 9 Subsequent Events
The Company has evaluated subsequent events through the date these condensed financial statements were available to be issued of November 20, 2015, and determined that there are no other reportable subsequent events.
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