10-Q 1 tcki_10q.htm QUARTERLY REPORT Quarterly Report


 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


(Mark One)


þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarter period ended March 31, 2018


or


¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from _______________________to__________________________


Commission File Number: 333-186282


TurnKey Capital, Inc.

(Exact name of registrant as specified in its charter)


Nevada

33-1225521

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)


2929 East Commercial Blvd., PH-D,

Ft. Lauderdale, Florida 33308

 (Address of principal executive offices)(Zip Code)


954-440-4678

(Registrant’s telephone number, including area code)


Not applicable

 (Former name, former address and former fiscal year, if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 þ  No ¨


Indicate by check mark whether the registrant has submitted electronically and posted 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 þ  No ¨


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer   ¨

Accelerated filer   ¨

Non-accelerated filer     ¨

Smaller reporting company  þ

(Do not check if a smaller reporting company)

Emerging growth company  ¨


If an emerging growth company, indicate by checkmark if the registrant has not elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ¨


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes þ  No ¨


As of June 25, 2018 the issuer had 39,216,665 shares of its common stock issued and outstanding.

 

 

 




 


TurnKey Capital, Inc. and Subsidiaries

Form 10-Q

For the Quarterly Period Ended March 31, 2018



 

 

Page No.

PART I

FINANCIAL INFORMATION

 

                        

 

                        

ITEM 1.

FINANCIAL STATEMENTS:

 

 

Condensed Consolidated Balance Sheets March 31, 2018 (unaudited) and December 31, 2017

1

 

Condensed Consolidated Statements of Operations Three Months Ended March 31, 2018 and 2017 (unaudited)

2

 

Condensed Consolidated Statements of Cash Flows Three Months Ended March 31, 2018 and 2017(unaudited)

3

 

Notes to Condensed Consolidated Financial Statements (unaudited)

4

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

8

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

11

ITEM 4.

CONTROLS AND PROCEDURES

11

 

 

 

PART II

OTHER INFORMATION

 

 

 

 

ITEM 1.

LEGAL PROCEEDINGS

13

ITEM 1A.

RISK FACTORS

13

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

13

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

13

ITEM 4.

MINE SAFETY DISCLOSURES

13

ITEM 5.

OTHER INFORMATION

13

ITEM 6.

EXHIBITS

13





 




 


PART 1.  FINANCIAL INFORMATION


ITEM 1.

FINANCIAL STATEMENTS


TurnKey Capital, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets


 

 

March 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash

 

$

14,132

 

 

$

2,025

 

Total current assets

 

 

14,132

 

 

 

2,025

 

 

 

 

 

 

 

 

 

 

Furniture and equipment

 

 

1,226

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

15,358

 

 

$

2,025

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Deficit

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

116,586

 

 

$

19,728

 

Accounts payable - related party

 

 

56,542

 

 

 

56,542

 

Advances - related parties

 

 

423,217

 

 

 

344,525

 

Total current liabilities

 

 

596,345

 

 

 

420,795

 

 

 

 

 

 

 

 

 

 

Long Term Liabilities

 

 

 

 

 

 

 

 

Advances payable

 

 

200,000

 

 

 

200,000

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

796,345

 

 

 

620,795

 

 

 

 

 

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 5,000,000 shares authorized; 600,000 shares issued and outstanding

 

 

600

 

 

 

600

 

Common stock, $0.001 par value, 750,000,000 shares authorized; 39,216,665 shares issued and outstanding

 

 

39,217

 

 

 

39,217

 

Additional paid-in capital

 

 

1,034,283

 

 

 

1,034,283

 

Accumulated deficit

 

 

(1,855,087

)

 

 

(1,692,870

)

Total stockholders' deficit

 

 

(780,987

)

 

 

(618,770

)

Total liabilities and stockholders' deficit

 

$

15,358

 

 

$

2,025

 



The accompanying notes are an integral part of these condensed consolidated financial statements







1



 


TurnKey Capital, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)


 

 

Three Months Ended

March 31,

 

 

 

2018

 

 

2017

 

Income

 

 

 

 

 

 

Revenue - related party

 

$

30,000

 

 

$

37,500

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

General and administrative

 

 

12,444

 

 

 

11,947

 

Other operations expense

 

 

21,598

 

 

 

 

Professional fees - related party

 

 

52,500

 

 

 

53,600

 

Legal and professional

 

 

105,675

 

 

 

2,362

 

Total operating expenses

 

 

192,217

 

 

 

67,909

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(162,217

)

 

 

(30,409

)

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(162,217

)

 

 

(30,409

)

Provision for income taxes

 

 

 

 

 

 

Net loss

 

$

(162,217

)

 

$

(30,409

)

 

 

 

 

 

 

 

 

 

Net loss per common share basic and diluted

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding basic

 

 

39,216,665

 

 

 

39,216,665

 



The accompanying notes are an integral part of these condensed consolidated financial statements





2



 


TurnKey Capital, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)


 

 

Three Months Ended

March 31,

 

 

 

2018

 

 

2017

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(162,217

)

 

$

(30,409

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Increase in accounts payable and accrued expenses

 

 

96,858

 

 

 

 

Decrease in accounts payable - related party

 

 

 

 

 

(33,751

)

Net cash used in operating activities

 

 

(65,359

)

 

 

(64,160

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities -

 

 

 

 

 

 

 

 

Purchase of furniture and equipment

 

 

(1,226

)

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities -

 

 

 

 

 

 

 

 

Increase in advances - related parties

 

 

78,692

 

 

 

78,925

 

 

 

 

 

 

 

 

 

 

Net increase in cash

 

 

12,107

 

 

 

14,765

 

Cash at beginning of period

 

 

2,025

 

 

 

1,244

 

Cash at end of period

 

$

14,132

 

 

$

16,009

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

Taxes paid

 

$

 

 

$

 

Interest paid

 

$

 

 

$

 



The accompanying notes are an integral part of these condensed consolidated financial statements






3



 


TURNKEY CAPITAL, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017


NOTE 1- GENERAL


Organization


TurnKey Capital, Inc. (formerly Train Travel Holdings, Inc.) (“TKCI”, “the Company,” “we,” or “us”) was incorporated under the laws of the State of Nevada under the name of Vanell, Corp. on September 7, 2012 (“Inception”). The Company changed its name to Train Travel Holdings, Inc. on March 20, 2014 and to TurnKey Capital, Inc. on January 15, 2016.


On July 6, 2015, the Company completed a share exchange agreement (the “Share Exchange Agreement”) with Turnkey Home Buyers USA, Inc., a Florida corporation (“Turnkey”), TBG Holdings Corporation (“TBG”), each of the Turnkey shareholders and Train Travel Holdings, Inc., a Florida corporation. The Company, Turnkey, TBG and Train Travel Holdings, Inc., a Florida corporation, are all under the common control of Neil Swartz and Timothy Hart.


Pursuant to the terms of the Share Exchange Agreement, Turnkey stockholders transferred to the Company all of the issued and outstanding shares of capital stock of Turnkey’s stockholders. In exchange for the acquisition of all of the issued and outstanding shares of Turnkey, the Company issued 15,337,500 shares of its common stock to Turnkey stockholders. Prior to closing, TBG, a principal stockholder of the Company and Turnkey, tendered to Turnkey for cancellation 15,000,000 shares of Turnkey common stock.

 

The Company shares issued to the Turnkey stockholders were not registered and were issued in a transaction which was exempt from the registration requirements pursuant to Section 4(a)(2) of the Securities Act of 1933. Each of the Turnkey shareholders were accredited investors and no underwriters or placement agents were involved.


As a result of the Share Exchange Agreement, the Turnkey stockholders owned 38.9% of the Company’s common stock and 58.5% of the fully diluted common stock as a result of their ownership of the outstanding preferred stock.


Due to the common control of Turnkey and the Company, pursuant to ASC 805-50-25, “Transactions Between Entities Under Common Control” and other SEC guidance including for lack of economic substance, the Share Exchange Agreement was accounted for as a transfer of the carrying amounts of assets and liabilities under the predecessor value method of accounting. Financial statement presentation under the predecessor values method of accounting as a result of a business combination between entities under common control requires the receiving entity (i.e., the Company) to report the results of operations as if both entities had always been combined. The consolidated financial statements include both entities’ full results since the inception of Turnkey on September 12, 2014.


ROM Business


On September 1, 2016, the Company formed a new subsidiary, Remote Office Management, Inc. (“ROM”) to market bundled accounting and computer/IT services. Simultaneously, ROM entered into a professional services agreement with R3 Accounting, (an accounting firm owned by Timothy Hart, a director, secretary and CFO of the Company) and PC Lauderdale (an unrelated computer/IT company). The purpose of the agreement was to form a joint venture where by these entities would cross market professional services under ROM for one stop computer/IT and accounting services. Through ROM, we generated revenues of $30,000 and $37,500 during the three months ended March 31, 2018 and 2017, respectively, from accounting and computer/IT services. These services were provided to affiliates.





4



TURNKEY CAPITAL, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017



On June 30, 2017, the Company, entered into a Strategic Alliance Agreement (the “Agreement”) with Seminole Indian Company (“SIC”), a company controlled by Chief James E. Billie and Craig Talesman. The purpose and intent of this Agreement is to combine the resources and talents of, TKCI and SIC, in order to take advantage of every opportunity permitted by tribal sovereignty to create revenue streams in multiple areas in conjunction with operating partners that have existing marketing and customers in place, thereby limiting the capital requirements and risk. The Company does not have any paid employees, however the officers and directors continue to work to further the Company’s business objectives. To date there have been no revenues pursuant to this alliance and there are no pending contracts or agreements.


Basis of Presentation


The unaudited condensed consolidated financial statements of TurnKey Capital, Inc. as of March 31, 2018, and for the three months ended March 31, 2018 and 2017, have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States for interim financial reporting and include the Company’s wholly-owned subsidiaries, Turnkey Home Buyers USA, Inc. and Remote Office Management, Inc. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2017, as filed with the Securities and Exchange Commission (the “SEC”) as part of the Company’s Form 10-K on March 1, 2018 and amended March 9, 2018. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.


Going Concern


The condensed consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As of March 31, 2018, the Company had $14,132 of cash, a working capital deficit of $582,213 and an accumulated deficit of $1,855,087 and further losses are anticipated in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. There is no assurance that these events will be satisfactorily completed. We expect TBG, a related party as discussed in Note 2, to continue to provide support services until sufficient capital is raised.


Income Taxes


The Company accounts for income taxes using the liability method prescribed by ASC 740 “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset the deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.


Pursuant to accounting standards related to the accounting for uncertainty in income taxes, the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50% likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. The accounting standard also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transition.




5



TURNKEY CAPITAL, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017



The Company assessed its earning history, trends and estimates of future earnings and determined that the deferred tax asset could not be realized as of March 31, 2018. Accordingly, a valuation allowance was recorded against the net deferred tax asset.


Revenue Recognition


The Company records revenue when all of the following have occurred; (1) persuasive evidence of an arrangement exists, (2) service delivery has occurred, (3) the sales price to the customer is fixed and determinable, and (4) collectability is reasonably assured.


Revenue is recognized at point of sale, with no further obligations.


Loss Per Share


The computation of basic loss per share (“LPS”) is based on the weighted average number of shares that were outstanding during the period, including shares of common stock that are issuable at the end of the reporting period. The computation of diluted LPS is based on the number of basic weighted-average shares outstanding plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common shares outstanding using the treasury stock method. The computation of diluted net income per share does not assume conversion, exercise or contingent issuance of securities that would have an antidilutive effect on loss per share. Therefore, when calculating LPS if the Company experienced a loss, there is no inclusion of dilutive securities as their inclusion in the LPS calculation is antidilutive. Furthermore, options and warrants will have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options or warrants (they are in the money).



Following is the computation of basic and diluted net loss per share for the three months ended March 31, 2018 and 2017:


 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

Basic and Diluted LPS Computation

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

Loss available to common stockholders'

 

$

(162,217

)

 

$

(30,409

)

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

39,216,665

 

 

 

39,216,665

 

 

 

 

 

 

 

 

 

 

Basic and diluted LPS

 

$

 

 

$

 


Potentially dilutive securities not included in the calculation of diluted net loss per share attributable to common stockholders because to do so would be anti-dilutive are as follows (in common stock equivalent shares):


Preferred stock (convertible)

 

 

29,100,000

 

 

 

29,100,000

 


Recent Accounting Pronouncements


The Company reviews new accounting standards as issued. Although some of these accounting standards issued or effective after the end of the Company’s previous fiscal year may be applicable, the Company has not identified any standards that the Company believes merit discussion. The Company believes that none of the new standards will have a significant impact on the condensed consolidated financial statements.




6



TURNKEY CAPITAL, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017



NOTE 2 – RELATED PARTY TRANSACTIONS


Amounts due from and to related parties as of March 31, 2018 and December 31, 2017 are detailed below:


 

 

March 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Accounts payable - related party

 

$

56,542

(1)

 

$

56,542

(1)

Advances - related parties

 

$

423,217

(2)

 

$

344,525

(2)

———————

(1)

Represents amounts owed to R3 Accounting for accounting related services and are payable on demand.


(2)

As of March 31, 2018, due to related party represents advances paid by TBG owned, in part by Timothy Hart, CFO and Neil Swartz, CEO, for services that are being expensed at a rate of $10,000 per month and are payable on demand.


All of the Company’s revenue for the three months ended March 31, 2018 and 2017 were earned by a subsidiary controlled by Timothy Hart, a director, secretary and CFO of the Company.


During the three months ended March 31, 2018, the company incurred $30,000 of expense related to management fees owed to TBG Holdings and $22,500 of accounting fees owed to R3 accounting. During the three months ended March 31, 2017, the company incurred $30,000 of expense related to management fees owed to TBG Holdings and $23,600 of accounting fees owed to R3 Accounting.


ROM entered into a professional services agreement with R3 Accounting and PC Lauderdale (an unrelated computer/IT company). The purpose of the agreement was to form a joint venture where by these entities would cross market professional services under ROM for one stop computer/IT and accounting services. Through ROM, we generated revenues of $30,000 and $37,500 during the three months ended March 31, 2018 and 2017, respectively, from accounting and computer/IT services. These services were provided to affiliates. All of the revenues for the three months ended March 31, 2018 and 2017 were from a related party.


NOTE 3 – ADVANCES PAYABLE


During 2015, the Company received proceeds of $200,000 for an anticipated business transaction. During 2016, it became clear that the transaction would not be consummated. The Board of Directors is considering various alternatives to satisfy this liability and has proposed to issue 2,000,000 shares of common stock at $.10 per share. As of March 31, 2018, the liability is still unpaid. The advances payable have no stated maturity and bear no interest.


NOTE 4– PREFERRED STOCK


The 600,000 outstanding preferred shares are convertible into 29,100,000 common shares. The preferred shares do not pay dividends. The number of votes for the preferred shares shall be the same as the amount of shares of common shares that would be issued upon conversion.


NOTE 5– PENDING LEGAL MATTERS


In December 2017 the Company was named in a civil arbitration proceeding in San Diego, CA. The complaint alleges a contract dispute between the Company's that are related to alleged services that were performed for the Company. The arbitration alleged the Company engaged in a breach of contract. The management plans a vigorous defense and it believes there are meritorious defenses in their favor. The Company's legal counsel has opined that an unfavorable outcome of this case is deemed possible and any possible loss cannot be determined at this time. The Company expects to issue 3,000,000 shares to settle this case, accordingly an accrual of $96,100 has been recorded on the condensed consolidated financial statements regarding this matter and has been included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheet.







7



 


ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


This report on Form 10-Q and other reports filed by Turnkey Capital, Inc. from time to time with the U.S. Securities and Exchange Commission (collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward- looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks contained in elsewhere in this report, relating to the Company’s industry, the Company’s operations and results of operations, and any businesses that the Company may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.


Turnkey Operations


At March 31, 2018 Turnkey’s real estate subsidiary was inactive.


ROM Operations


On September 1, 2016, the Company formed a new subsidiary, Remote Office Management, Inc. (“ROM”) to market bundled accounting and computer/IT services. Simultaneously, ROM entered into a professional services agreement with R3 Accounting, (an accounting firm owned by Timothy Hart, a director, secretary and CFO of the Company) and an unrelated computer/IT company. The purpose of the agreement was to form a joint venture where by these entities would cross market professional services under ROM for one stop computer/IT and accounting services.


We cannot accurately predict the amount of funding or the time required to successfully implement our business plan. The actual cost and time required to achieve profitability may vary significantly depending on, among other things, the ability to acquire entertainment train operations on favorable terms, the health of our targeted real estate markets, the cost of developing, acquiring, and operating rental properties, the availability of qualified personnel and marketing and other costs associated with the planned operations. Because of this uncertainty, even if financing is available to us, we may secure insufficient funding to effectuate our business plan.


As of March 31, 2018, we had negative working capital of $582,213 and cash of $14,132. Based upon current and near term anticipated level of operations and expenditures, we believe that cash on hand is not sufficient to enable us to continue operations for the next twelve months. Management recognizes that in order for us to meet our capital requirements, and continue to operate, additional financing will be necessary. We expect to raise additional funds through private or public equity investment in order to expand the range and scope of our business operations. We will seek access to private or public equity but there is no assurance that such additional funds will be available for us to finance our operations on acceptable terms, if at all. If we are unable to raise additional capital or generate positive cash flow, it is unlikely that we will be able to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.


Results of Operations


Three Months Ended March 31, 2018 Compared to the Three Month Period Ended March 31, 2017


Revenue


During the three month period ended March 31, 2018 and 2017, we generated revenues of $30,000 and $37,500, respectively. The decrease in revenue is attributed to activity generated in the Company’s consulting practice through ROM. These revenues were generated from affiliated companies.

 




8



 


Operating Expenses


A summary of our operating expense for the three months ended March 31, 2018 and 2017 follows:


 

 

Three Months Ended

 

 

 

 

 

 

March 31,

 

 

Increase /

 

 

 

2018

 

 

2017

 

 

(Decrease)

 

Operating expense

 

 

 

 

 

 

 

 

 

General and administrative

 

$

12,444

 

 

$

11,947

 

 

$

497

 

Other operations expense

 

 

21,598

 

 

 

 

 

 

21,598

 

Professional fees - related party

 

 

52,500

 

 

 

53,600

 

 

 

(1,100

)

Legal and professional

 

 

105,675

 

 

 

2,362

 

 

 

103,313

 

Total operating expense

 

$

192,217

 

 

$

67,909

 

 

$

124,308

 


General and administrative ("G&A") costs include costs related to public company costs and other office related costs. G&A costs increased during the three months ended March 31, 2018 compared to the three months ended March 31, 2017 due to increases in public company costs.


During the three months ended March 31, 2018 the Company incurred a loss on its planned acquisition of Palm Beach Integrative Medicine LLC. The Company was unable to come to favorable terms and the deal was unwound. As a result all of the acquisition costs used were expensed and recorded in other operations expense.


Professional fees – related party costs primarily include costs for management services provided by TBG related to the development of our planned operations and costs related to R3 Accounting. The decrease in costs related to less work required in maintaining the public company.


Legal and professional expenses related to amounts incurred by the outside accounting firm and lawyers. The increase of $37,213 is primarily a result of a $96,100 charge. In December 2017 the Company was named in a civil arbitration proceeding in San Diego, CA. The complaint alleges a contract dispute between the Company's that are related to alleged services that were performed for the Company. The arbitration alleged the Company engaged in a breach of contract. The management plans a vigorous defense and it believes there are meritorious defenses in their favor. The Company's legal counsel has opined that an unfavorable outcome of this case is deemed possible and any possible loss can not be determined at this time. An accrual of $96,100 has been reflected on the financial statements regarding this matter. The additional increase is related to expenses with the Company’s SEC counsel.


Liquidity and Capital Resources


Our available working capital and capital requirements will depend upon numerous factors, including our ability to make accretive acquisitions, increase demand for real estate services, find, secure and monetize real estate investments and our ability to attract and retain key employees.   

 

During the three months ended March 31, 2018, because of our operating losses, we did not generate positive operating cash flows. As of March 31, 2018, we had an accumulated deficit of $1,855,087, cash on hand of $14,132 and negative working capital of $582,213. As a result, we have significant short-term cash needs. These needs historically have been satisfied through proceeds from the sales of our securities and related party advances. We are expecting to reduce the need for such short term financing as we build our revenues by growing our business. (See "Plan of Operating and Funding" below). In order to repay our obligations in full or in part when due, we will be required to raise capital from other sources. There is no assurance, however, that we will be successful in these efforts.


Cash used in operating activities was $65,359 for the three months ended March 31, 2018, as compared to cash used of $64,160 during the three months ended March 31, 2017.


Cash used in investing activities was $1,226 for the three months ended March 31, 2018. There were no such expenditures for investing activities during the three months ended March 31, 2017.


Cash provided by financing activities was $78,692 for the three months ended March 31, 2018 compared to $78,925 during the three months ended March 31, 2017.



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We expect TBG will continue to provide support services until sufficient capital is raised.


Plan of Operation and Funding


We expect that working capital requirements will continue to be funded through further related party advances and further issuances of securities until our business activities can generate positive cash flow. Our working capital requirements are expected to increase in line with the growth of our business.


We have minimal working capital, nor do we have lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments and related party advances. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet short-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.


Critical Accounting Policies and Estimates


The preparation of condensed consolidated financial statements and related disclosures in conformity with GAAP requires us to make judgments, assumptions and estimates that have a significant impact on the results that we report in our condensed consolidated financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. Note 1 of the Notes to Condensed Consolidated Financial Statements describes the significant accounting policies used in the preparation of the condensed consolidated financial statements. Certain of these significant accounting policies require us to make critical accounting estimates, as defined below.


A critical accounting estimate is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes:


·

we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and

·

different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.


Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statements are fairly stated in accordance with GAAP, and present a meaningful presentation of our financial condition and results of operations.


Our most critical accounting estimates include:


·

the recognition and measurement of current and deferred income taxes, which impact our provision for taxes


Below, we discuss these policies further, as well as the estimates and judgments involved.

  



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Income Taxes


The Company accounts for income taxes using the liability method prescribed by ASC 740 “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset the deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.


Pursuant to accounting standards related to the accounting for uncertainty in income taxes, the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50% likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. The accounting standard also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transition.


The Company assessed its earning history, trends and estimates of future earnings and determined that the deferred tax asset could not be realized as of March 31, 2018. Accordingly, a valuation allowance was recorded against the net deferred tax asset.


Off-Balance Sheet Arrangements


As of the date of this report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.


ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.


As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.


ITEM 4.

CONTROLS AND PROCEDURES.


Evaluation of Disclosure Controls and Procedures


We carried out an evaluation as required by paragraph (b) of Rule 13a-15 and 15d-15 of the Exchange Act, under the supervision and with the participation of our management, including our President (Chief Executive Officer) and Chief Financial Officer, of the effectiveness of our financial disclosures, controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of March 31, 2018.

 

A material weakness can be defined as an insufficiency of internal controls that may result in a more than remote likelihood that a material misstatement will not be prevented, detected or corrected in a Company’s financial statements.

 

Based upon that evaluation, our President (Chief Executive Officer) and Chief Financial Officer concluded that our disclosure controls and procedures were not effective, based on the following deficiencies:

 

 

·

Weaknesses in Accounting and Finance Personnel: We have a small accounting staff and we do not have the robust employee resources and expertise needed to meet complex and intricate GAAP and SEC reporting requirements of a U.S. public company. Additionally, numerous adjustments and proposed adjustments have been noted by our auditors. This is deemed by management to be a material weakness in preparing financial statements.

 

 

 




















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·

We have written accounting policies and control procedures, but we do not have sufficient staff to implement the related controls. Management had determined that this lack of the implantation of segregation of duties, as required by our written procedures, represents a material weakness in our internal controls.

 

 

 

 

·

Internal control has as its core a basic tenant of segregation of duties. Due to our limited size and economic constraints, the Company is not able to segregate for control purposes various asset control and recording duties and functions to different employees. This lack of segregation of duties had been evaluated by management, and has been deemed to be a material control deficiency.

 

The Company has determined that the above internal control weaknesses and deficiencies could result in a reasonable possibility for interim financial statements that a material misstatements will not be prevented or detected on a timely basis by the Company’s internal controls.

 

Management is currently evaluating what steps can be taken in order to address these material weaknesses. As a growing small business, the Company continuously devotes resources to the improvement of our internal control over financial reporting. Due to budget constraints, the staffing size, proficiency and specific expertise in the accounting department is below requirements for the operation. The Company is anticipating correcting deficiencies as funds become available.


Changes in Internal Control over Financial Reporting


There have been no changes in our internal control over financial reporting during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.





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PART II - OTHER INFORMATION


ITEM 1.

LEGAL PROCEEDINGS.


In December 2017 the Company was named in a civil arbitration proceeding in San Diego, CA. The complaint alleges a contract dispute between the Company's that are related to alleged services that were performed for the Company. The arbitration alleged the Company engaged in a breach of contract. The management plans a vigorous defense and it believes there are meritorious defenses in their favor. The Company's legal counsel has opined that an unfavorable outcome of this case is deemed possible and any possible loss cannot be determined at this time. The Company expects to issue 3,000,000 shares to settle this case, accordingly an accrual of $96,100 has been recorded on the condensed consolidated financial statements regarding this matter.


Management is not aware of any other legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party averse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.


ITEM 1A.

RISK FACTORS.


As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.


ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.


None.


ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.


None.


ITEM 4.

MINES SAFETY DISCLOSURES.


Not applicable to our Company.


ITEM 5.

OTHER INFORMATION.


None.


ITEM 6.

EXHIBITS.


Exhibits:


No.

     

Description

31.1*

  

Certification of Neil Swartz, Chief Executive Officer of TurnKey Capital, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.

31.2*

  

Certification of Timothy Hart, Chief Financial Officer of TurnKey Capital, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.

32.1*

  

Certification of Neil Swartz, Chairman and Chief Executive Officer of TurnKey Capital, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.

32.2*

 

Certification of Timothy Hart, Chief Financial Officer of TurnKey Capital, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.

101.INS*

  

XBRL Instance Document

101.SCH*

  

XBRL Taxonomy Extension Schema

101.CAL*

  

XBRL Taxonomy Extension Calculation Linkbase

101.DEF*

  

XBRL Taxonomy Extension Definition Linkbase

101.LAB*

  

XBRL Taxonomy Extension Label Linkbase

101.PRE*

  

XBRL Taxonomy Extension Presentation Linkbase

———————

* 

filed herewith



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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 its behalf by the undersigned, thereunto duly authorized.


 

TurnKey Capital, Inc.

 

 

 

Dated: June 28, 2018

By:

/s/ Neil Swartz

 

 

Neil Swartz

 

 

Chief Executive Officer, Director

Principal Executive Officer

 

 

 

 

 

 

Dated: June 28, 2018

By:

/s/ Timothy S. Hart

 

 

Timothy S. Hart

 

 

Chief Financial Officer, Director

Principal Financial Officer






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