SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002 COMMISSION FILE NO. 2-91651-D Broadleaf Capital Partners,Inc. NEVADA 87-0490034 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 2531 SAN JACINTO AVENUE SAN JACINTO, CA 92583 (ADDRESS AND ZIP CODE OF PRINCIPAL EXECUTIVE OFFICES) (909) 652-3885 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) 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 [X] NO[ ]. INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OR REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. THE NUMBER OF SHARES OF CLASS A COMMON STOCK OUTSTANDING AS OF DECEMBER 31, 2002 WAS 24,089,208. DOCUMENTS INCORPORATED BY REFERENCE: NONE. ITEM 1 - BUSINESS Broadleaf Capital Partners, Inc., a Nevada corporation (the Company), incorporated February 1984, has continued with its restructuring and plans expansion through the ongoing development of its available operations, and other business opportunities. The Company is a publicly traded diversified investment holding company that makes direct investments in, and/or acquisitions of, private and undervalued public companies in a variety of different industries. In addition to the providing of management services, the Company may participate in the formation of, and invest in emerging or early- stage, small to medium size companies in various fields of business by arranging for and contributing capital. Potential ventures are evaluated based on the ability of the business to be viable and reach a significant milestone with the Company's initial investment, as well as possessing a potential to generate reasonable revenues through strong intellectual property rights and experienced management. The Company continually seeks and evaluates investment opportunities that have the potential of earning reasonable returns. The Company has in the past, and may again in the future, raise capital specifically for the purpose of permitting it to make an investment that the company believes is attractive. The Company's current investment focus is centered around six (6) core content areas; real estate, transportation, branded sports and health, media and communications, finance and energy fuels. The Company plans to invest in ventures with a operating history, is performing with the potential of a profit to the bottom line and, in some cases, has the need for identification and implementation of experienced management. Identifying and developing each new business opportunity may require the Company to dedicate certain amounts of financial resources, management attention, and personnel, with no assurance that these expenditures will be recouped. Similarly, the selection of companies and the determination of whether a company offers a viable business plan, an acceptable likelihood of success, and future profitability involves inherent risk and uncertainty. ITEM 2 - INVESTMENT HISTORY RIVERSIDE PARK APARTMENTS The Company formed a limited partnership in June 1992 and acquired two apartment buildings for $3,350,000 to be repaired, developed and managed. During the year ending 1992, the Company reduced its interest to 1% and has remained a general partner with a 1% interest. CANYON SHADOWS APARTMENTS The Company acquired a 120-unit apartment complex in April 1995 for $875,000. The Company received a $975,000 loan that converts to a grant from the City of Riverside for the purpose of acquisition and rehabilitation and, in 1996, the Company was awarded $2,200,000 in Federal Tax Credits for the project. In December 1996, the project was sold to a tax credit partnership in which the Company retained a $905,000 capital account, as well as a 1% interest as a general partner for which it is entitled to receive a management fee and 75.9% of the project cash flow. VIR-TEK Vir-Tek is a minority disabled veteran engineering and contracting firm, formed to take advantage of recently passed federal legislation (H.R. 1568) requiring 3% participation on all programs and projects funded by federal dollars. Vir- Tek provides environmental management, facility and operations management, mapping and information management, engineering services, project management, and waste management. The company emphasizes teamwork in combination with innovation to design balanced solutions to complex environmental, industrial, and engineering problems. Vir-Tek has served commercial, industrial, and residential construction developers as well as concerns of city, county, and federal agencies. The Company has maintained a 49% equity interest in Vir-Tek under the terms of the contract. INETPARTNERS, INC. Peacock Financial holds a 51 percent interest in iNetPartners, Inc. The Company has recently signed a Letter of Intent with Daniels Advisory Group, which is expected to acquire the majority interest and will bring a new operating entity into iNetPartners. SAN DIEGO SOCCER DEVELOPMENT CORPORATION The Company currently owns approximately 350,000 shares of San Diego Soccer Development Corporation (SDSDC). SDSDC has begun a restructuring and had recently changed its name to Soccer Development of America. BIO-FRIENDLY CORPORATION The Company invested $180,000 for 437,500 shares of common stock at 40 cents a share of Bio-Friendly Corporation, a fuel technology company. ITEM 3 - LEGAL PROCEEDINGS Unresolved legal issues are: City of San Jacinto - Involves the delinquency of payments of the property and Mello Roos taxes on 105 parcels of real property owned by PR Equities, where Peacock Financial Corporation is the General Partner. The properties were encumbered with taxes and the Company determined the properties were not a viable investment and the properties were foreclosed on for the tax liability. Bank of Hemet - This case involved a loan to PR Equities, with Peacock Financial Corporation as the General Partner. The loan went into default and an abstract of judgment had been filed for nearly $1,000,000. This case was settled for $100,000 to be paid over a period of eighteen months. In December 2001, the bank's position was purchased by the firm, Jaeger & Kodner, LLC, which settled in November 2002 for $280,000. First Miracle Group - The Company received a legal judgment in the amount of $100,000 in relation to Dotcom Ventures, LLC. Negotiations are ongoing to settle for a lesser amount. Steven Slagter - The case involved an action brought against PR Equities, with Peacock Financial Corporation as the General Partner. It involved the collection of approximately $900,000 on a promissory note. There was a summary judgment for nearly $1.35 million. The Company is currently in settlement negotiations. Helen Apostle - This case involved an action for approximately $90,000 involving a defaulted loan. The Company has been in preliminary settlement negotiations and the case is currently unresolved. Garrett Martin - Involves an unpaid Consulting agreement wherein a judgment was entered against the Company for $21,800. The Company is currently in preliminary settlement negotiations for a lesser amount. In June 2001, the Company instituted legal proceedings against former members of the management of Peacock Financial Corporation and the former management of Dotcom Ventures, LLC. The case is currently pending and a trial date has not been set. One of these former members has received a legal judgment against the Company totaling $20,110. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS Common Stock of the Company is traded in the over-the-counter market, and quoted on the Electronic Bulletin Board. During the fiscal year ending December 31, 2002, the Company's common stock traded between $.007 and $.55 per share. The Company has not yet adopted any policy regarding payment of dividends.
2002 2001 2000 ------------ ------------ ------------- Quarter Ended Low High Low High Low High ---- ---- ---- ---- ---- ---- March 31 $.06 $.55 $.015 $.06 $.57 $1.96 June 30 .04 .25 .01 .035 .31 .95 September 30 .01 .055 .005 .02 .17 .34 December 31 .007 .019 .001 .006 .02 .19
At December 31, 2002, there were over 6,000 holders of record of the Company's stock. ITEM 6 - SELECTED FINANCIAL DATA
Statement of Operations Data 2002 2001 2000 1999 1998 Total Revenues $10,226 $15,125 $764,814 $704,556 $609,811 Operating Expenses 962,030 3,060,384 4,403,483 1,149,144 1,717,939 ------------- ------------ ------------ ----------- ------------ Income/(Loss) from Operations (951,804) (3,045,259) (3,638,669) (444,588) (1,108,128) ------------- ------------ ------------ ----------- ------------ Other Income and Expenses 314,735 (579,485) (2,824,945) (248,149) (425,308) ------------- ------------ ------------ ----------- ------------ Net Income (Loss) $(652,990) $(3,655,086) $(8,616,328) $(692,737) $(1,533,436) ------------- ------------ ------------ ----------- ------------ Weighted Average Shares 17,657,498 1,313,955 506,551 305,038 199,502 ------------- ------------ ------------ ----------- ------------ Earnings (Loss) Per Share ($0.04) ($2.78) ($17.01) ($2.27) ($7.69) ------------- ------------ ------------ ----------- ------------ Balance Sheet Data Cash $749 $764 $2,513 $190,581 $(4,509) Total Other Net Assets 958,703 1,163,154 1,945,693 3,388,761 3,360,591 ------------- ------------ ------------ ----------- ------------ Total Assets $959,452 $1,163,918 $1,948,206 $3,579,342 $3,356,082 ------------- ------------ ------------ ----------- ------------ Current Liabilities $3,600,891 $4,028,848 $1,910,015 $982,542 $1,329,717 Long Term Debt 500,000 500,000 523,175 500,000 864,501 Total Other Net Liabilities 311,813 295,892 305,055 0 0 Total Stockholders Equity (Deficit) $(3,453,252) $(3,660,822) $(790,039) $2,096,799 $1,161,864 ------------- ------------ ------------ ----------- ------------ Total Liabilities & Equity (Deficit) $959,452 $1,163,918 $1,948,206 $3,579,342 $3,356,082 ------------- ------------ ------------ ----------- ------------
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Fiscal year 2002 was the Company's fourth year in operation as a Business Development Corporation under the Investment Act of 1940. Management believes that the key to a successful Business Development Corporation is the ability to produce ongoing revenues and profits from its investments and services, through the employment of a strong well-seasoned management team, clearly focused on select niche markets; and by developing an extensive referral network; while maintaining a conservative underwriting and due diligence structure. RESULTS OF OPERATIONS Revenues totaled $10,226 for the fiscal year ending December 31, 2002. For the year ending December 31, 2001, revenues were $15,125. The decrease resulted from a drop in distributions from the Canyon Shadows partnership. General and administrative expenses for the year ended December 31, 2002 were $927,470, as compared to $2,519,661 for the year ended December 31, 2001. The decrease was due to reduced administrative and operating costs. Depreciation and amortization expenses was $34,560 for the year ended December 31, 2002 as compared to $40,182 for the year ended December 31, 2001. Interest expense was $353,069 for the year ended December 31, 2002 as compared to $167,934 for the year ended December 31, 2001. The difference was primarily due to the accrued interest associated with outstanding convertible debentures and imputed interest on judgment payables. Loss on disposition of assets was $43,803 for year ended December 31, 2002 as compared to $43,324 for year ended December 31, 2001. Total operating loss was $652,990 for the year ending December 31, 2002 as compared to $3,655,086 for the year ended December 31, 2001. This difference reflects the write-off of certain of the Company's investments in 2001. Comparison to years 2001 and 2000: Total operating loss was $8,616,328 for the year ending December 31, 2000 as compared to $3,655,086 for the year ended December 31, 2001. This decrease reflects the write off of certain of the Company's investments, particularly the soccer franchises in 2000, and lower level of operations in 2001. We believe that inflation will not have any adversarial affect on the operations of the Company. We believe that inflation will not have any adversarial affect on the operations of the Company. Changes in Financial Condition, Liquidity and Capital Resource: For the twelve months ended December 31, 2002, the Company funded its operations and capital requirements partially with its own working capital and partially with proceeds from stock offerings. The Company currently has no lines of credit available and is operating in a negative cash flow. Future operations will depend on attracting additional investments into the Company, which are essential to the Company's future. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See index to financial statements included herein. ITEM 9 - CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTION AND CONTROL PERSONS, COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Name Age Position Period of Service Robert A. Braner 63 Interim President and Since 2000 Chairman of the Board Donald Johnson 66 Interim CFO and Director Since 2001 Lisa Martinez 43 Accounting Administrator Since 1997 and Corporate Secretary
All directors hold office until the next annual shareholders meeting or until their death, resignation, and retirement or until their successors have been elected and qualified. Mr. Robert A. Braner, 63, is serving as Interim President. He brings with him more than thirty years experience in providing leadership to progressively minded growth companies and internationally known organizations. Mr. Braner combines diverse financial, management and creative leadership with solid and diversified, extensive international experience in the cross-cultural business process. He was the former President and Chief Operating Officer of Automobili Lamborghini USA, Inc. Mr. Donald Johnson, 66 is serving as Interim CFO. Mr. Johnson brings years experience as CFO for both public and private Companies'. Mr Johnson brings vast management experience, education, and financial expertise to the Company. Mr Johnson's prior experience in managing turn around and tight cash flow Companies' make him uniquely qualified to assist the Company with its turnaround strategy. Ms. Lisa Martinez, 43, is Corporate Secretary and the Accounting Administrator of Broadleaf Capital Partners. She has over 20 years of accounting experience and has the managerial duties to handle the multitude of public and privates business entities for Broadleaf through effective and organizational administrative skills. The Securities Exchange Act of 1934 requires all executive officers and directors to report any changes in ownership of common stock of the Company to the Securities and Exchange Commission and the Company. ITEM 11 - EXECUTIVE COMPENSATION The following table shows the amount of compensation earned for services in all capacities to the Company for the last fiscal year for the executive officers at December 31, 2002.
Names and Position Year Salary Paid Robert Braner, President and Chief Executive Officer and Director 2002 $250,000 $129,892 Donald Johnson, CFO & Director 2002 $ -0- $ -0- Lisa L. Martinez, Corporate Secretary 2000 $ 60,000 $ 57,500
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT At the close of business on December 31, 2002, the Company had 24,089,208 shares outstanding. The shares held by each of the members of management is as follows: Robert Braner 800,000 shares Donald Johnson 160,664 shares Lisa Martinez 185,124 shares ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None ITEM 14 - CONTROLS AND PROCEDURES Within 90 days prior to the date of filing of this report, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer (who also effectively serves as the Chief Financial Officer), of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer concluded that our disclosure controls and procedures are effective for gathering, analyzing and disclosing the information we are required to disclose in the reports we file under the Securities Exchange Act of 1934, within the time periods specified in the SEC's rules and forms. There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to the date of this evaluation. ITEM 15 - EXHIBITS AND REPORTS ON FORM 8-K Audited Financial Statements and Notes thereto are filed as part of this report. On February 8, 1996, the Company filed Form 8-K containing its merger. BROADLEAF CAPITAL PARTNERS, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2002 AND 2001 CONTENTS Independent Auditors' Report.............................................3 Consolidated Balance Sheets.............................................4 Consolidated Schedules of Investments........................................6 Consolidated Statements of Operations.........................................8 Consolidated Statements of Stockholders' Equity (Deficit).........................................10 Consolidated Statements of Cash Flows.............................................14 Notes to the Consolidated Financial Statements........................................16 INDEPENDENT AUDITORS' REPORT Broadleaf Capital Partners, Inc. and Subsidiaries Board of Directors San Jacinto, California We have audited the accompanying consolidated balance sheets of Broadleaf Capital Partners, Inc. and Subsidiaries as of December 31, 2002 and 2001, including the consolidated schedules of investments as of December 31, 2002 and 2001, and the related consolidated statements of operations, changes in shareholders' equity, and cash flows for the years ended December 31, 2002, 2001, and 2000. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As explained in Notes 4 and 6, "investments" and "other investments" consist of loans to and investments in small businesses and limited partnerships totaling $937,424 (97% of total assets) and $1,038,856 (89% of total assets) as of December 31, 2002 and 2001, respectively. The values of these investments have been estimated by the Board of Directors in the absence of readily ascertainable market values. However, because of the inherent uncertainty of valuation, the Board of Directors' estimate of values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Broadleaf Capital Partners, Inc. and Subsidiaries as of December 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for the years ended December 31, 2002, 2001, and 2000 in conformity with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has a significant deficit in working capital, has a deficit in stockholders' equity and has suffered recurring losses to date, which raises substantial doubt about its ability to continue as a going concern. Management's plans with regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. HJ & Associates, LLC Salt Lake City, Utah April 14, 2002 BROADLEAF CAPITAL PARTNERS, INC. AND SUBSIDIARIES Consolidated Balance Sheets
December 31, 2002 2001 ------- ------- CURRENT ASSETS Cash $749 $764 Accounts receivable, net (Note 3) - 24,855 Prepaid expenses 367 - ------- ------- Total Current Assets 1,116 25,619 ------- ------- FIXED ASSETS, NET (Notes 3 and 5) 20,022 98,384 ------- ------- OTHER ASSETS Investments in limited partnerships (Note 4) 937,424 1,038,856 Other investments (cost - $1,031,867) (Note 6) - - Other assets 890 1,059 ------- ------- Total Other Assets 938,314 1,039,915 ------- ------- $959,452 $1,163,918 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) December 31, 2002 2001 CURRENT LIABILITIES Accounts payable $505,425 $499,195 Accrued expenses - officers and directors 120,893 225760 Accrued expenses 272,828 181,789 Accrued interest 275,999 176638 Judgments payable (Note 10) 1,574,802 2083300 Notes payable - current portion (Note 7) 850,944 862166 ------- ------- Total Current Liabilities 3,600,891 4,028,848 ------- ------- LONG-TERM DEBT Notes payable - long term (Note 7) 500,000 500,000 ------- ------- NET LIABILITIES IN EXCESS OF THE ASSETS OF 311,813 295,892 ------- ------- Total Liabilities 4,412,704 4,824,740 ------- ------- COMMITMENTS AND CONTINGENCIES (Note 10) STOCKHOLDERS' EQUITY (DEFICIT) Preferred stock: 10,000,000 shares authorized at $0.01 par value; 515,300 shares issued and outstanding 5,153 5,153 Common stock: 250,000,000 shares authorized at $0.001 par value; 24,089,208 and 2,303,508 shares issued and outstanding, respectively 24,090 2,304 Additional paid-in capital 12,794,424 12,302,987 Subscriptions receivable - (347,337) Accumulated deficit (16,276,919) (15,623,929) ------- ------- Total Stockholders' Equity (Deficit) (3,453,252) (3,660,822) ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $959,452 $1,163,918 ======= =======
The accompanying notes are an integral part of these consolidated financial statements. 5 BROADLEAF CAPITAL PARTNERS, INC. AND SUBSIDIARIES Schedule of Investments
December 31, 2002 Number of Description of Shares Owned Fair Company Business (or %) Cost Value Canyon Shadows Real estate 10% $1,131,961 $937,424 (e) IPO/Emerging Growth Company, LLC Start-up 33% 100,000 - (e) San Diego Soccer Development Dormant company 350,000 164,658 - (e) Solutions Media Other 800,000 15,962 - Bio-Friendly Start-up 437,500 180,000 - (e) Las Vegas Soccer Development Start-up 1,020,000 20,000 - (e) ------- ------- $1,612,581 $937,424 ------- ------- December 31, 2001 Canyon Shadows Real estate 10% $1,131,961 $1,038,856 (d) IPO/Emerging Growth Company, LLC Start-up 33% 100,000 - (a) San Diego Soccer Soccer Development Franchise 1,551,001 715,905 - (c) Solutions Media Other 800,000 15,962 - (b) Bio-Friendly Corporation Start-up 437,500 180,000 - (d) Las Vegas Soccer Development Start-up 1,020,000 20,000 - (d) ------- ------- $2,163,828 $1,038,856 ------- -------
BROADLEAF CAPITAL PARTNERS, INC. AND SUBSIDIARIES Schedule of Investments (Continued) All of the above investments are considered non-income producing securities. The aggregate gross unrealized depreciation for 2002 and 2001 are $675,157 and $1,124,972, respectively. (a) Non-public company, represents ownership in an LLC, fair value is determined in good faith by the Company's Board of Directors based on a variety of factors. (b) Public market method of valuation based on trading price of stock at year- end. (c) The fair value of restricted shares is determined in good faith by the Company's Board of Directors based on a variety of factors, including recent and historical prices and other recent transactions. (d) The Company's Board of Directors has valued this investment at cost, less cash distributions to the Company from Canyon Shadows. (e) At December 31, 2002, the Company's Board of Directors determined that the Company is unlikely to recover its investments in these companies, and elected to value the investments at zero. 7 BROADLEAF CAPITAL PARTNERS, INC. AND SUBSIDIARIES Consolidated Statements of Operations
For the Year Ended December 31, 2002 2001 2000 INVESTMENT REVENUE Management consulting fees $- $- $525,000 Property management and administrative income - - 12,525 Website development - - 104,900 Other income 10,226 15,125 122,389 ------- ------- ------- Total Revenues 10,226 15,125 764,814 ------- ------- ------- EXPENSES General and administrative 927,470 2,519,661 2,827,709 Bad debt expense - 500,541 1,536,998 Depreciation and amortization 34,560 40,182 38,776 ------- ------- ------- Total Expenses 962,030 3,060,384 4,403,483 ------- ------- ------- NET INVESTMENT LOSS (951,804) (3,045,259) (3,638,669) ------- ------- ------- OTHER INCOME (EXPENSE) Gain on forgiveness of debt 659,166 - - Interest income - 26,062 11,969 Interest expense (353,069) (167,934) (918,756) Realized gain on investments 52,441 - 512,150 Unrealized loss on investments - (394,289) (621,108) Loss on disposition of assets (43,803) (43,324) (1,809,200) ------- ------- ------- Total Other Income (Expense) 314,735 (579,485) (2,824,945) ------- ------- ------- LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND (637,069) (3,624,744) (6,463,614) Income taxes (Note 2) - - - ------- ------- ------- LOSS FROM CONTINUING OPERATIONS (637,069) (3,624,744) (6,463,614) ------- ------- ------- LOSS FROM DISCONTINUED OPERATIONS NET OF ZERO TAX EFFECT (Note 15) (15,921) (30,342) (2,152,714) ------- ------- ------- NET LOSS (652,990) (3,655,086) (8,616,328) ------- ------- ------- OTHER COMPREHENSIVE LOSS Loss on treasury stock - - (274,287) Dividends (71,982) (22,479) (22,812) ------- ------- ------- NET COMPREHENSIVE LOSS $(724,972) $(3,677,565) $(8,913,427) ======= ======= =======
8 BROADLEAF CAPITAL PARTNERS, INC. AND SUBSIDIARIES Consolidated Statements of Operations (Continued)
For the Year Ended December 31, 2002 2001 2000 BASIC LOSS PER SHARE Continuing operations $(0.04) $(2.76) $(12.76) Discontinued operations (0.00) (0.02) (4.25) Basic Loss Per Share $(0.04) $(2.78) $(17.01) ======= ======= ======== WEIGHTED AVERAGE NUMBER OF 17,657,498 1,313,955 505,551 ========== ========= ========
BROADLEAF CAPITAL PARTNERS, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity (Deficit) December 31, 2002 and 2001
Additional Preferred Stock Common Stock Paid-in Subscriptions Accumulated Shares Amount Shares Amount Capital Receivable Deficit ------- ------- ------- ------- ------- ------- ------- Balance, December 31, 1999 670,300 6,703 378,106 $378 $5,495,001 $(327,055) (3,078,228) Common stock issued for cash and subscription receivable - - 223,308 223 4,617,973 (158,001) - Common stock issued for services - - 12,820 13 248,387 - - Common stock issued on conversion of debentures - - 145,772 146 619,145 - - Common stock issued for investments - - 8,000 8 169,992 - - Common stock issued in lieu of interest - - 62 - 6,208 - - Common stock issued in conversion of preferred stock (125,000) (1,250) 1,250 1 1,249 - - Accrued dividends - - - - (22,812) - - Stock offering costs - - - - (202,325) - - Cash received on subscriptions receivable - - - - - 199,000 - Additional interest recorded on convertible debentures - - - - 534,000 - - ------- ------- ------- ------- ------- ------- ------- Balance Forward 545,300 $5,453 769,318 $769 $11,466,818 $(286,056) $(3,078,228) ------- ------- ------- ------- ------- ------- ------- Additional Preferred Stock Common Stock Paid-in Subscriptions Accumulated Shares Amount Shares Amount Capital Receivable Deficit ------- ------- ------- ------- ------- ------- ------- Balance Forward 545,300 $5,453 769,318 $769 $11,466,818 $(286,056) $(3,078,228) Unrealized loss on treasury stock - - - - - - (69,222) Realized loss on treasury stock - - - - - - (205,065) Net loss for the year ended December 31, 2000 - - - - - - (8,616,328) ------- ------- ------- ------- ------- ------- ------- Balance, December 31, 2000 545,300 $5,453 769,318 $769 $11,466,818 $(286,056) $(3,078,228) Debentures converted to common stock - - 1,005,298 1,005 512,907 (4,000) - Common shares issued for cash - - 321,767 322 260,912 - - Common shares issued for subscriptions receivable - - 210,750 211 84,526 (84,737) - Cash received on subscriptions receivable - - - - - 27,455 - Preferred shares cancelled (20,000) (200) - - 200 - - Preferred shares converted to common shares on 1-for-1 basis (10,000) (100) 100 1 99 - - Common shares cancelled - - (3,725) (4) 4 - - ------- ------- ------- ------- ------- ------- ------- Balance Forward 515,300 $5,153 2,303,508 $2,304 $12,325,466 $(347,338) $(11,968,843) ------- ------- ------- ------- ------- ------- ------- Additional Preferred Stock Common Stock Paid-in Subscriptions Accumulated Shares Amount Shares Amount Capital Receivable Deficit ------- ------- ------- ------- ------- ------- ------- Balance Forward 515,300 $5,153 2,303,508 $2,304 $12,325,466 $(347,338) $(11,968,843) Dividends accrued on preferred shares - - - - (22,479) - - Net loss for the year ended December 31, 2001 - - - - - - (3,655,086) ------- ------- ------- ------- ------- ------- ------- Balance December 31, 2001 515,300 $5,153 2,303,508 $2,304 $12,302,987 $(347,338) $(15,623,929) Cash received on subscription receivable - - - - - 10,068 - Common stock issued for cash and subscription receivable - - 11,169,091 11,169 134,989 (21,000) - Reduction of debt for stock subscription - - - - - 200,500 - Common stock issued for services - - 1,979,669 1,980 19,756 - - Common stock issued on conversion of debt - - 8,636,945 8,637 224,746 - - Accrued dividends - - - - (76,197) - - Beneficial conversion accrual on debentures - - - - 175,000 - - ------- ------- ------- ------- ------- ------- ------- Balance Forward 515,300 $5,153 24,089,213 $24,090 $12,781,281 $(157,770) $(15,623,929) ------- ------- ------- ------- ------- ------- ------- Additional Preferred Stock Common Stock Paid-in Subscriptions Accumulated Shares Amount Shares Amount Capital Receivable Deficit ------- ------- ------- ------- ------- ------- ------- Balance Forward 515,300 $5,153 24,089,213 $24,090 $12,781,281 $(157,770) $(15,623,929) Fair market value of warrants - - - - 13,143 - - Allowance for uncollectible subscriptions - - - - - 157,770 - Net loss for the year ended December 31, 2002 - - - - - - (652,990) ------- ------- ------- ------- ------- ------- ------- Balance, December 31, 2002 515,300 $5,153 24,089,208 $24,090 $12,794,424 - $(16,276,919) ------- ------- ------- ------- ------- ------- -------
13 BROADLEAF CAPITAL PARTNERS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows December 31, 2002 and 2001
For the Year Ended December 31, 2002 2001 2000 ------- ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss from continuing operations $(637,069) $(3,624,744) $(6,463,614) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 34,560 40,182 38,776 Allowance for uncollectible subscription receivable 157,769 - - Beneficial conversion costs 175,000 - - Warrants issued below market 13,143 - - Bad debt expense - 500,541 1,536,998 Loss on disposal of assets 43,802 43,324 1,809,200 Loss on investments, net - 394,289 108,958 Judgment-related expenses (gains) (508,498) 2,083,300 - Additional interest on convertible debentures - - 534,000 Common stock issued for services 21,736 - 248,400 Discontinued operations: Net loss (15,921) (30,342) (2,152,714) Depreciation and amortization - 9,640 6,683 Bad debts - - 9,987 Changes in operating assets and liabilities: (Increase) decrease in accounts and notes receivable 24,855 2,145 19,828 (Increase) decrease in notes receivable - related party - - (185,476) (Increase) decrease in other assets (198) 5,146 (62) Increase (decrease) in accounts payable 6,230 25,698 314,224 Increase (decrease) in other liabilities 214,414 256,976 671,006 Increase (decrease) in discontinued operation reserve 15,921 (9,163) 288,385 ------- ------- ------- Net Cash Used in Operating Activities (454,256) (303,008) (3,215,421) ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Funds received from investments 101,432 - - Purchase of licensing rights - - (150,000) Purchase of investments - - (181,543) Notes receivable - advances - (399,930) (1,189,611) Notes receivable - received - - 30,343 Purchase of property and equipment - - (193,149) ------- ------- ------- Net Cash Used in Investing Activities 101,432 (399,930) (1,683,960) ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Repayment of notes payable (10,417) - (306,590) Proceeds from long-term borrowings 228,000 412,500 843,500 Repurchase of stock - - (282,467) Stock offering costs - - (202,325) Receipt of subscription receivable 10,068 27,455 199,000 Stock issued for cash 125,158 261,234 4,460,195 ------- ------- ------- Net Cash Provided by Financing Activities $352,809 $701,189 $4,711,313 ------- ------- ------- NET DECREASE IN CASH $(15) $(1,749) $(188,068) CASH, BEGINNING OF YEAR 764 2,513 190,581 ------- ------- ------- CASH, END OF YEAR $749 $764 $2,513 ------- ------- ------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid $ - $ 472 $357,123 Income taxes paid $ - $ - $ - SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES Common stock issued in conversion of debentures and interest $233,383 $509,912 $625,499 Common stock issued for services $ 21,736 $ - $248,400 Common stock issued for investments $ - $ - $170,000 Purchase of fixed assets through issuance of notes payable $ - $ - $ 31,195
BROADLEAF CAPITAL PARTNERS, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2002 and 2001 NOTE 1 -COMPANY BACKGROUND The consolidated financial statements include those of Broadleaf Capital Partners, Inc., a Nevada company, (Broadleaf), and its wholly- owned subsidiaries, Peacock Real Estate Development Corporation (PREDC), Peacock International Corporation (PIC), DotCom Ventures, LLC (DotCom), Peacock Sports, Inc. (PSI), Broadleaf Asset Management (BAM), Broadleaf Financial Services (BFS), and Brand Asset Management (Brand). The consolidated financial statements also include its majority-owned subsidiaries, Bay Area Soccer Development Corporation (Bay Area) (70%), Orange County Soccer Development Corporation (Orange) (70%), Riverside County Soccer Development Corporation (Riverside) (53%), and iNetPartners, Inc. (iNet) (51%). Collectively, they are referred to herein as "the Company". PREDC, a wholly-owned subsidiary, was originally formed on July 29, 1993. On October 22, 1999, the name was changed from Peacock Financial Corporation (California) to Peacock Real Estate Development Corporation. PREDC has had no significant operations since inception. PIC, a wholly-owned subsidiary, was formed on December 8, 1997. It has had no operations to date, but was formed to invest and trade in securities on an international basis. DotCom was organized on July 23, 1999. Peacock acquired its initial 50% ownership with an initial investment of $112,203. On January 5, 2000, the Company acquired the remaining 50% ownership by granting options to acquire a total of 500,000 restricted common shares of the Company at $0.10 per share. DotCom was organized for the purposes of conducting an internet production company and to consult start-up and emerging growth companies with their internet strategies. During the year ended December 31, 2001, DotCom had no significant operations. PSI was incorporated in January 2000 to hold and manage investments in professional sports. As of December 31, 2001, PSI had no significant operations. In January 2000, the Company acquired an 85% ownership interest for $50,000 cash in Orange County Soccer Development Corporation (Orange). The investment was recorded as a purchase. At December 31, 2001, Orange discontinued operations (Note 15). In February 2000, the Company acquired an 85% ownership interest for $100,000 cash in Bay Area Soccer Development Corporation (Bay Area). The investment was recorded as a purchase. At December 31, 2001, Bay Area discontinued its operations (Note 15). In February 2000, the Company acquired a 53% ownership interest in Riverside County Soccer Development Corporation (Riverside) for $6,000. The investment was recorded as a purchase. At December 31, 2001, Riverside discontinued its operations (Note 15). Broadleaf holds a 51% interest in iNet as of December 31, 2001. iNet was organized under the laws of the State of California on December 15, 1999 with the intent to develop Internet e-commerce applications for both the new and used automotive markets. As of December 31, 2001, iNet had no significant operations. Broadleaf's remaining subsidiaries, BAM, BFS, and Brand, were all incorporated in 2001. These subsidiaries have had no operations to date, but were formed with the intent to help forward the Company's business strategy in 2002. On September 15, 1998, the Company filed with the Securities and Exchange Commission to become a Business Development Corporation as defined under the Investment Act of 1940. Simultaneously, the Company registered an offering circular with the SEC for 13,000,000 shares of common stock under Regulation E of the Investment Act to raise capital and to make investments in real estate and in eligible portfolio companies. The Company participates in the formation of, and invests in, emerging or early-stage companies in various fields of business by arranging for and contributing capital and providing management assistance. NOTE 2 - GOING CONCERN As reported in the consolidated financial statements, the Company has an accumulated deficit of $16,276,919 and $15,623,929 as of December 31, 2002 and 2001, respectively. The Company incurred losses of $652,990 and $3,655,086 for the years ended December 31, 2002 and 2001, respectively. The Company also has certain debts that are in default at December 31, 2002. The Company's stockholders' deficit at December 31, 2002 and 2001 was $3,453,252 and $3,660,822, respectively, and its current liabilities exceeded its current assets by $3,599,775 and $4,003,229, respectively. These factors create uncertainty about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital it could be forced to cease operations. In order to continue as a going concern, develop and generate revenues and achieve a profitable level of operations, the Company will need, among other things, additional capital resources. Management's plans to obtain such resources for the Company include (1) raising additional capital through sales of common stock, (2) converting promissory notes into common stock and (3) entering into acquisition agreements with profitable entities with significant operations. In addition, management is continually seeking to streamline its operations and expand the business through a variety of industries, including real estate and financial management. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows: a. Accounting Method Broadleaf Capital Partners, Inc. (the Company) is a closed-end management investment company organized as a Nevada corporation. The Company has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended (the 1940 Act). Although business development companies should prepare their financial statements in conformity with accounting principles generally accepted in the United States of America, and are subject to audit as are other investment companies, the statement presentation of some companies may need to be tailored to present the information in a manner most meaningful to their particular group of investors. Since debt is a significant item, the Company concluded that a balance sheet would be more appropriate than a statement of net assets. Also, the Company believes Article 5 of Regulation S-X applies. b. Fixed Assets Fixed assets are recorded at cost. Major additions and improvement are capitalized. The cost and related accumulated depreciation of equipment retired or sold are removed from the accounts and any differences between the undepreciated amount and the proceeds from the sale are recorded as gain or loss on sale of assets. Depreciation is computed using the straight-line method over the estimated useful life of the assets as follows: Description Estimated Useful Life Furniture and fixtures 5 to 7 years Computers and software 5 years Automobiles 5 years c. Basic and Diluted Loss Per Share 2002 2001 Loss (numerator) $ (652,990) $(3,655,086) Shares (denominator) 17,657,498 1,313,955 Per share amount $ (0.04) $ (2.78) The computations of basic loss per share of common stock are based on the weighted average number of common shares outstanding during the period of the consolidated financial statements. Common stock equivalents, consisting of convertible debt and preferred shares, have not been included in the calculation as their effect is antidilutive for the periods presented. d. Change in Accounting Principles In April 2002, the FASB issued Statement No. 145 "Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical Corrections" (SFAS 145). SFAS 145 will require gains and losses on extinguishments of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under Statement of Financial Accounting Standards No. 4 (SFAS 4). Extraordinary treatment will be required for certain extinguishments as provided in APB Opinion No. 30. SFAS 145 also amends Statement of Financial Accounting Standards No. 13 to require certain modifications to capital leases be treated as a sale-leaseback and modifies the accounting for sub-leases when the original lessee remains a secondary obligor (or guarantor). SFAS 145 is effective for financial statements issued after May 15, 2002, and with respect to the impact of the reporting requirements of changes made to SFAS 4 for fiscal years beginning after May 15, 2002. The adoption of the applicable provisions of SFAS 145 did not have an effect on our consolidated financial statements. In June 2002, the FASB issued Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS 146 nullifies Emerging Issues Task Force Issue No. 94-3 "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS 146 applies to costs associated with an exit activity that does not involve an entity newly acquired in a business combination or with a disposal activity covered by SFAS 144. SFAS 146 is effective for exit or disposal activities that are initiated after December 31, 2002, with earlier application encouraged. We are currently reviewing SFAS 146 and intend to implement it no later than January 1, 2003. In October 2002, the FASB issued Statement No. 147 "Acquisitions of Certain Financial Institutions - an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9" (SFAS 147). SFAS 147 removes acquisitions of financial institutions from the scope of both Statement 72 and Interpretation 9 and requires that those transactions be accounted for in accordance with FASB Statements No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets. Thus, the requirement in paragraph 5 of Statement 72 to recognize (and subsequently amortize) any excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired as an unidentifiable intangible asset no longer applies to acquisitions within the scope of this Statement. In addition, this Statement amends FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, to include in its scope long-term customer-relationship intangible assets of financial institutions such as depositor- and borrower-relationship intangible assets and credit cardholder intangible assets. Consequently, those intangible assets are subject to the same undiscounted cash flow recoverability test and impairment loss recognition and measurement provisions that Statement 144 requires for other long-lived assets that are held and used. SFAS 147 is effective October 1, 2002. The adoption of the applicable provisions of SFAS 147 did not have an effect on our consolidated financial statements. In December 2002, the FASB issued Statement No. 148 "Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of FASB Statement No. 123" (SFAS 148). SFAS 148 provides alternate methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock- based employee compensation and the effect of the method used on reporting results. SFAS 148 is effective for fiscal years beginning after December 15, 2003. We are currently reviewing SFAS 148. e. Principles of Consolidation The consolidated financial statements include those of Broadleaf Capital Partners, Inc., a Nevada corporation, and its wholly-owned subsidiaries, Peacock Real Estate Development Corporation (California) (PREDC), Peacock International Corporation (Bahamas) (PIC), DotCom Ventures, LLC (DotCom), Peacock Sports, Inc. (PSI), Broadleaf Asset Management (BAM), Broadleaf Financial Services (BFS), and Brand Asset Management (Brand). They also include the majority owned subsidiaries, Bay Area Soccer Development Corporation (Bay Area) (80%), Orange County Soccer Development Corporation (Orange) (85%), Riverside County Soccer Development Corporation (Riverside) (53%), and iNet Partners, Inc. (iNet) (51%). All significant intercompany accounts and transactions have been eliminated. f. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. g. Provision for Taxes Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit 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 deferred tax assets consist of the following components as of December 31, 2002 and 2001: December 31 ------------- 2002 2001 ----------- ----------- Deferred tax assets: NOL Carryover $ 6,316,700 $4,610,850 Deferred tax liabilities: Related Party (331,100) - Valuation allowance (5,985,600) (4,610,850) ----------- ----------- Net deferred tax asset $ - $ - =========== =========== The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the years ended December 31, 2002 and 2001 due to the following: December 31 ------------- 2002 2001 ----------- ----------- Book loss $ 225,625 $1,334,853 Stock for services/options expense (8,480) - Other 18,295 (395,774) Judgments (18,190) (747,282) Related Parties 8,650 (129,107) Valuation allowance (225,900) (62,690) ----------- ----------- $ - $ - =========== =========== At December 31, 2002, the Company had net operating loss carryforwards of approximately $16,202,000 that may be offset against future taxable income from the year 2002 through 2022. No tax benefit has been reported in the December 31, 2002 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years. h. Advertising The Company follows the policy of charging the costs of advertising to expense as incurred. i. Revenue Recognition The Company receives shares in certain companies for providing capital and investment services. The Company records management consulting income based on the fair value of the shares received. j. Accounts and Notes Receivable Accounts and notes receivable are shown net of an allowance for doubtful accounts of $2,075,798 and $2,068,387 as of December 31, 2002 and 2001, respectively. k. Investment Valuation The Company's loans, net of participations and any unearned discount, are considered investments under the 1940 Act and are recorded at fair value. Since no ready market exists for these loans, the fair value is determined in good faith by the Board of Directors. In determining the fair value, the Company and Board of Directors consider factors such as the financial condition of the borrower, the adequacy of the collateral and individual credit risks. Investments in equity securities are recorded at fair value, represented as cost, plus or minus unrealized appreciation or depreciation, respectively. The carrying values of investments that have no readily-determinable market values are determined by the Board of Directors, based upon its analysis of the assets and revenues of the underlying investee companies. Because of the inherent uncertainty of valuations, the Board of Directors' estimates of the values of the investments may differ significantly from the values that would have been used had a ready market for the investments existed and the differences could be material. l. Reclassifications Certain reclassifications have been made to prior year balances to conform with the current year presentation. m. Restricted Securities All investments in securities are restricted shares, and have been valued by the Board of Directors. In determining investment values, the Board considers many pertinent factors, including the results of operations of each company. NOTE 4 - INVESTMENTS IN LIMITED PARTNERSHIPS During 1987, the Company formed a limited partnership agreement where the Company is the general partner, holding a 15% interest. The partnership was formed to acquire and develop approximately 500 acres of land in San Jacinto, California. The general partner was not required to make an initial capital contribution, thus the initial investment was recorded at $0. The Board of Directors has determined that this investment is unlikely to produce income in the near future, and has valued the investment at $0 as of December 31, 2002. On June 29, 1992, the Company acquired an interest in a limited partnership. The partnership intends to seek out and consummate certain real-estate investment opportunities. The Company acts as the general partner and holds a 1% interest in the partnership. As of December 31, 2001, the Company had recognized no income or losses from its investment in this partnership. The Board of Directors has determined that this investment is unlikely to produce income and has valued the investment at $0 as of December 31, 2002 and 2001. In December 1995, the Company acquired an interest in a limited liability company. The LLC's intent is to acquire and develop certain residential subdivisions. The Company retains a 50% ownership in the limited liability company. The Company's Board of Directors determined this investment was unlikely to produce income in the near future, and has valued the investment at $0 at December 31, 2002 and 2001. During 1995, the Company received a $975,000 loan that converted to a grant from the City of Riverside to acquire and rehabilitate a 120-unit apartment complex (see Note 12). During April 1996, the Company was awarded $2,400,000 in Federal tax credits relating to this project. During December 1996, the Company sold the completed project to a tax credit partnership named Canyon Shadows, L.P., retaining a 1% interest as general partner, and receiving a $905,000 capital account in the partnership. During 1999, a $70,000 note held by the Company was transferred to Canyon Shadows, L.P., which was recorded as a capital distribution to the Company (see Note 12). Additional costs were incurred by the Company on behalf of the partnership resulting in a total investment in Canyon Shadows, L.P. of $1,131,961 at December 31, 2000. The Company's Board of Directors determined that the value of this investment approximated the current interest in the partnership. The valuation was based upon projected future occupancy of the apartment unit. In 2002, Canyon Shadows distributed $101,422 to the Company, leaving a balance of $937,424 at December 31, 2002. NOTE 5 - FIXED ASSETS Fixed assets consist of the following: For the Year Ended December 31, ------------------- 2002 2001 -------- -------- Furniture and fixtures $ 3,599 $ 5,823 Computers and software 32,699 126,865 Other equipment 20,000 22,815 -------- -------- 56,298 155,503 Accumulated depreciation (36,276) (57,119) -------- -------- Net fixed assets $ 20,022 $ 98,384 ======== ======== Depreciation expense for the years ended December 31, 2002 and 2001 was $34,560, and $40,182, respectively. NOTE 6 - OTHER INVESTMENTS On October 19, 1998, the Company issued 1,000,000 shares of its outstanding common stock valued at $100,000 to acquire an approximate 33% interest in IPO/Emerging Growth Company, LLC. (IPO). The Company's Board of Directors determined the approximate value of this investment at December 31, 2000 to be $83,487. In 2001, the Company's Board of Directors determined its investment in IPO was unlikely to produce income in the near future, and elected to value the investment at $0 and $0 as of December 31, 2002 and 2001, respectively. During 2000, the Company acquired an additional 1,050,000 restricted shares of SDSDC for an additional cost of $531,519 bring the total cost to $715,905. 1,000,000 of those shares were received as an incentive for providing capital, and were recorded at $500,000 or $0.50 per share. A decline in the value of the shares was recorded at December 31, 2000 of $607,055 bringing the total value of the 1,555,001 shares at December 31, 2000 to $108,850. The Company's shares represent an approximate 15% ownership in SDSDC at December 31, 2001. Management of the Company does not exercise any influence or control over management of SDSDC. During 2001, the Company's Board of Directors determined its investment in SDSDC was unlikely to produce income in the near future, and elected to value the investment at $0 and $0 as of December 31, 2002 and 2001. On February 2, 1999, the Company issued 750,000 shares of its outstanding common stock valued at $75,000 to acquire approximately 20% (2,000,000 shares) of the outstanding shares of Solutions Media, Inc. (Solutions). On June 15, 1999, the Company entered into a separate agreement whereby the 750,000 shares of the Company were returned for cancellation in exchange for the return of the 2,000,000 shares of Solutions. As part of the agreement, the Company received 800,000 shares of Solutions as an investment fee valued at $400,000. The 800,000 shares of Solutions represented an approximate ownership of 2% at December 31, 1999. In 2000, the Company's Board of Directors determined this investment was unlikely to produce income in the near future, and elected to value the investment at $0. The Board determined there was no change in the value of this investment in 2002. During 1999, the Company purchased 1,020,000 shares of Las Vegas Soccer Development Corporation (LVSDC) for $20,000 cash, which represents an approximate ownership of 25% at December 31, 2000. The Company's Board of Directors has valued this investment at $0 as of December 31, 2001. During 2000, the Company invested a total of $180,000 in Bio-Friendly Corporation (Bio-Friendly) for 437,500 shares of Bio-Friendly common stock, which the Company's Board of Directors determined to be the approximate value of this investment at December 31, 2000. These shares were valued at $0 in 2001 by the Company's Board of Directors. NOTE 7 - NOTES PAYABLE Notes payable consist of the following at December 31, 2002 and 2001: December 31, ------------------------ 2002 2001 -------- -------- Note payable at 5%, secured by an assignment of partnership cash, interest payable quarterly, principal due January 1, 2007, convertible to common stock. $ 500,000 $500,000 Note payable at variable rate (18.0% at December 31, 2000) collateralized by deed of trust on real property. Lump sum payment was due May 21, 1999, currently in default. 86,854 86,854 Note payable at 10%, secured by deed of trust, due March 31, 1996, currently in default. 65,000 65,000 Funds borrowed from a related entity 28,000 - Debentures at 10%, unsecured, convertible into common shares at the option of the holder, all debentures are currently in default. 661,090 700,312 Others 10,000 10,000 -------- -------- Total Notes Payable 1,350,944 1,362,166 Less: Current Portion (850,944) (862,166) -------- -------- Long-Term Notes Payable $ 500,000 $500,000 ======== ======== NOTE 8- RELATED PARTY TRANSACTIONS The Company is a partner in several limited partnerships (Note 4). The Company occasionally pays for operating expenses of the partnerships and is reimbursed as funds become available to the partnerships. The Company is owed certain amounts from a former officer of the Company. The amounts are non-interest bearing and due on demand. At December 31, 2000 these amounts totaled $223,172 and an allowance for bad debts of $143,407 provided for the amounts determined to be uncollectible. These amounts totaled $212,922 at December 31, 2001 and, due to the uncertainty of collection, these amounts have been allowed for in full, bringing the net amount to $0 and $0 at December 31, 2002 and 2001, respectively. NOTE 9 - PROFIT SHARING PLAN In 1989, the Company adopted a profit sharing plan covering all eligible employees. Contributions are made at the discretion of the Board of Directors. There were no contributions to the plan for the years ended December 31, 2002 and 2001. NOTE 10 -COMMITMENTS AND CONTINGENCIES a. General Partner Obligations The Company serves as general partner in several real estate development partnerships. The Company may be held liable for certain liabilities, although because the amounts are minimal and the entities are limited liability companies, management does not feel that the potential liabilities will have a material impact on the Company. b. Wrap Around Mortgage The Company has sold a property subject to a mortgage. The mortgage has not been fully assumed by the buyer. If the buyer defaults on the mortgage, the Company may be liable for the balance owing. c. Housing Grant In April 1995, the Company acquired a 120-unit apartment complex using a $975,000 loan that was converted to a grant from the City of Riverside, California. The loan is non-recourse and is secured by a second trust deed on the property. If the Company meets certain requirements pertaining to the complex, which have been stipulated by the city, the loan will be forgiven in its entirety. As of December 31, 2002, management has complied with all of the requirements and believes that the repayment of $905,000 (the grant portion) of the $975,000 is highly remote. d. Litigation At December 31, 2002, the Company was party to certain legal proceedings, resulting in judgments payable totaling $2,083,300. The following is a summary of those payables: During the year, Bank of Hemet received a legal judgment against the Company totaling $932,006. In 2000, however, the Company had negotiated a settlement in this case for $100,000, and booked this amount as a contingent liability at December 31, 2000. In 2001, the Company defaulted on this settlement. As a result, during 2001, the Company recorded the full amount of the judgment, less payments made by the Company to Bank of Hemet. On November 20, 2002, the Company negotiated another settlement on this amount totaling $280,000, payable from proceeds from the Canyon Shadows investment. During 2002, the contingency was recorded at this amount plus interest imputed at an annual rate of 8%. At December 31, 2002, this liability is recorded at $269,535. In 2000, a non-related individual filed suit against the Company. Later that year, management negotiated a settlement with this individual totaling $250,000, and the amount was recorded as a contingent liability at December 31, 2000. In 2001 the Company defaulted on the settlement agreement. As a result, during 2001, the Company recorded the full amount of the alleged damages, less payments made by the Company to the individual. On May 21, 2002, the Company negotiated another settlement with this individual totaling $125,000 payable in cash payments and a convertible debenture. Subsequent to May 2002, the Company defaulted on this settlement agreement. As a result, in the current year, the Company recorded the full amount of the alleged damages, less payments made by the Company to the individual, plus interest imputed at an annual rate of 8%. At December 31, 2002, this liability is recorded at $1,238,785. In 2001, 1st Miracle Group, Inc. received a legal judgment against the Company totaling $100,000. Management was able to negotiate a settlement on this amount, totaling $20,000. At December 31, 2002, the liability is recorded at the settled amount, plus accrued interest imputed at 8% annually totaling $21,600. In 2001, AMG Consulting brought legal action against the Company, seeking damages of $21,012. Management is currently attempting to negotiate a settlement on this amount. At December 31, 2002, this contingent liability is recorded at the full amount plus accrued interest imputed at 8% annually totaling $23,566. In 2002, a former employee received a legal judgment against the Company totaling $20,110. At December 31, 2002, this liability is recorded at the settled amount plus accrued interest imputed at 8% annually totaling $21,316. e. Employment Agreements In December 2001, the Company entered into employment agreements with its CEO and CFO. Both agreements cover a period of 24 months, and compensation totals $250,000 and $100,000 annually, respectively. In addition, the parties were each to receive 250,000 shares of the Company's common stock, and options to acquire 750 and 500 shares at a strike price equal to market price on date of issuance. As of December 31, 2002, the shares of common stock had not been issued. The stock options have been included in the disclosure in Note 19. a. Off Balance Sheet Risk The Company is a guarantor on a lease on a house for a related party. The lease began December 2002 and extends through December 2003, with monthly payments of $2,900. NOTE 11 -PREFERRED STOCK The Company's preferred stock has the right to quarterly dividends to be paid at the annual rate of 6%. The quarterly dividend is to be paid to all shareholders of record, as of the last day of each quarter until such time as the Company causes such shares to be converted to common shares and "registered" (free trading) with the S.E.C. and the appropriate State regulatory agency. Each preferred share is convertible into one share of the common stock of the Company, such conversion to occur automatically and registered concurrently with any public offering of the common shares of the Company. NOTE 12 -STOCK SUBSCRIPTIONS RECEIVABLE During 1999, the Company issued a total of 27,330 shares of its outstanding common stock for $443,500 under stock subscription notes receivable. These notes were non-interest bearing. During 1999, $116,445 of the amount was received. During 2000, the Company issued additional shares of common stock under promissory notes totaling $158,001 for 223,308 shares. These notes are also non-interest bearing. During 2000, an additional $199,000 was received by the Company pursuant to these subscription notes receivable. The total amount of stock subscriptions receivable at December 31, 2000 was $286,056. In 2001, 210,750 shares were issued for subscriptions receivable of $88,737. The Company received cash on these amounts totaling $27,455. Total stock subscriptions receivable at December 31, 2001 was $347,338. In 2002, $10,068 of this amount was received. In addition, $200,500 was exchanged for debt and additional shares were issued for $21,000. At December 31, 2002 the remaining $157,770 was determined to be uncollectible and a allowance was established. NOTE 13 -SEGMENT INFORMATION The Company's reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies. The Company had three separate reportable segments during the year ended December 31, 2000, management consulting, website development and soccer franchises. As discussed in Note 14, the soccer subsidiaries were discontinued as of December 31, 2000. The remaining two segments will be the Company's focus in the future. The accounting policies applied to determine the segment information are the same as those described in the summary of significant accounting policies. Financial information with respect to the reportable segments are as follows: 2002 ---------------------------------- Management Consulting Website Fees Development Total --------- ----------- --------- Revenues $ 10,226 $ - $ 10,226 Expenses (922,030) (40,000) (962,030) Other income (expenses) 314,735 - 314,735 --------- ----------- --------- Net loss per segment $ (597,069) $(40,000) $ (637,069) ========= =========== ========= 2001 ---------------------------------- Management Consulting Website Fees Development Total --------- ----------- --------- Revenues $ 15,125 $ - $ 15,125 Expenses (3,034,428) (99,149) (3,133,577) Other income (expenses) (492,435) (13,857) (506,292) --------- ----------- --------- Net loss per segment $(3,511,738) $(113,006) $(3,624,744) ========= =========== ========= NOTE 14 -INVESTMENTS AND INVESTMENT VALUATION On September 15, 1998, the Company filed with the Securities and Exchange Commission to become a Business Development Corporation as defined under the Investment Act of 1940 in order to invest in real estate and eligible portfolio companies. This resulted in the Company becoming a specialized type of investment company. The investment valuation method adopted in 1982 provides for the Company's Board of Directors to be responsible for the valuation of the Company's investments (and all other assets). In the development of the Company's valuation methods, factors that affect the value of investees' securities, such as significant escrow provisions, trading volume and significant business changes are taken into account. These investments are carried at fair value using the following four basic methods of evaluation: a. Cost - The cost method is based on the original cost to the Company, adjusted for amortization of original issue discounts and accrued interest for certain capitalized expenditures of the corporation. Such method is to be applied in the early stages of an investee's development until significant positive or adverse events subsequent to the date of the original investment require a change to another method. b. Private market - The private market method uses actual or proposed third party transactions in the investee's securities as a basis for valuation, utilizing actual firm offers as well as historical transactions, provided that any offer used is seriously considered and well documented by the investee. c. Public market - The public market method is the preferred method of valuation when there is an established public market for the investee's securities. In determining whether the public market method is sufficiently established for valuation purposes, the corporation is directed to examine the trading volume, the number of shareholders and the number of market makers in the investee's securities, along with the trend in trading volume as compared to the Company's proportionate share of the investee's securities. If the security is restricted, the value is discounted at an appropriate rate. d. Appraisal - The appraisal method is used to value an investment position after analysis of the best available outside information where there is no established public or private market method which have restrictions as to their resale as denoted in the schedule of investments are also considered to be restricted securities. All portfolio securities valued by the cost, private market and appraisal methods are considered to be restricted as to their disposition. In addition, certain securities valued by the public market method which have restrictions as to their resale as denoted in the schedule of investments are also considered to be restricted securities. NOTE 15 - DISCONTINUED OPERATIONS Effective December 31, 2000, the Company discontinued the operations of the Bay Area, Orange and Riverside soccer subsidiaries. The following is a summary of the loss from discontinued operations resulting from the dissolution of these subsidiaries. The Company has established a reserve for discontinued operations of $311,813 and $295,892 at December 31, 2002 and 2001, respectively, which consists of net liabilities in excess of recoverable assets. No tax benefit has been attributed to the discontinued operations. December 31, ------------------- 2002 2001 ------- ------- REVENUES $ - $ 648 ------- ------- OPERATING EXPENSES General and administrative 2,840 21,388 Depreciation and amortization 9,640 9,640 ------- ------- Total Operating Expenses 12,480 31,028 ------- ------- LOSS FROM OPERATIONS (12,480) (30,380) OTHER INCOME (EXPENSE) Loss on disposal of assets (3,441) - Interest income - 72 Interest expense - (34) ------- ------- Total Other Income (Expense) (3,441) 38 ------- ------- LOSS FROM DISCONTINUED OPERATIONS $ (15,921) $ (30,342) ======= ======= NOTE 16 - STOCK OPTIONS AND WARRANTS During the year ended December 31, 2001, the Company granted two of its officers options to acquire an aggregate of 12,500 shares of the Company's common stock at a strike price equal to the trading price on the date of issuance. A summary of the status of options and warrants at December 31, 2002, and 2001 is as follows: 2002 2001 ----------------- ----------------- Weighted Weighted Shares Shares Exercise Exercise Shares Price Shares Price Outstanding, beginning of year 12,500 $ 2.00 - $ - Granted 3,000,000 0.50 12,500 2.00 Canceled - - - - Exercised - - - - --------- ------- ------- ------- Outstanding, end of year 3,012,500 $ 0.94 12,500 $ 2.00 ========= ======= ======= ======= Exercisable, end of year 3,012,500 $ 0.94 - $ - ========= ======= ======= ======= Weighted average fair value of options and warrants granted during the year $ 0.50 $ 2.00 NOTE 17 - FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated. Common Stock Year ended December 31, ----------------------------------- 2002 2001 2000 1999 ------ ------ ------ ------ Net asset value, beginning of period $(2.78) $(2.59) $13.93 $7.67 ------ ------ ------ ------ Income from investment operations: Net Investment income (0.04) (2.48) (11.93) (2.95) Net gains (losses) on securities (both realized and unrealized) (0.00) (0.30) (2.04) (0.61) ------ ------ ------ ------ Total from investment operations (0.04) (2.78) (13.97) (3.56) ------ ------ ------ ------ Other Increase (decrease) 2.62 2.59 (2.55) 9.82 Less distributions from net investment income - - - - ------ ------ ------ ------ Net asset value, end of period $ (0.20) $(2.78) $(2.59) $13.93 ====== ====== ====== ====== Calculated using post split average shares outstanding. NOTE 18 -FOURTH QUARTER LOSS RECONCILIATION Pursuant to APB 28, "Interim Financial Reporting", the following is a reconciliation of the net loss as reported in the Company's September 30, 2002 consolidated financial statements to the net loss as recorded at December 31, 2002. Net income reported September 30, 2002 $ 601,905 4th quarter reverse of gain on forgiveness of debt due to default (1,184,752) 4th quarter gain on forgiveness of debt from settlement 659,166 Audit adjustment to accrue wages and directors fees (71,236) Audit adjustment to record beneficial conversion feature on debentures (175,000) Audit adjustment to accrue additional interest on contingencies (41,573) Other 4th quarter adjustments made by management to write off stock subscriptions receivable, record options issued at fair market value, record loss on disposal of fixed assets and record loss from operations in the 4th quarter. (441,500) ---------- Net loss reported December 31, 2002 $(652,990) ========== 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. BROADLEAF CAPITAL PARTNERS, INC. By: /s/ Robert A. Braner - ------------------------ Robert A. Braner Interim President Date: April 16, 2003 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- /s/ Robert A. Braner - ------------------------ Robert A. Braner Interim President 4/16/03 /s/ Lisa L. Martinez - ------------------------ Lisa L. Martinez Secretary 4/16/03 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Robert A. Braner, certify that: 1.I have reviewed this annual report on Form 10-KSB of BROADLEAF CAPITAL PARTNERS, INC.; 2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3.Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this annual report; 4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a)designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b)evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c)presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a)all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: April 21, 2003 /s/ Robert A. Braner President and CEO CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Donald E. Johnson, certify that: 1.I have reviewed this annual report on Form 10-KSB of BROADLEAF CAPITAL PARTNERS, INC.; 2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3.Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this annual report; 4.The registrant's other certifying officer and I are responsible for establishing and maintaing disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a)designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and c) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: April 21, 2003 /s/ Donald E. Johnson Chief Financial Officer Exhibit 99.3 CERTWICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of BROADLEAF CAPITAL PARTNERS, INC. (the "Company") on Form 10-Ksb for the period ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert A. Braner, President and CEO of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. /s/ Robert A. Braner Chief Executive Officer Date: April 21. 2003 Exhibit 99.4 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In Connection with the Annual Report of BROADLEAF CAPITAL PARTNERS, INC. (the "Company") on Form 10-Ksb for the period ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report'), I, Donald E. Johnson, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. /s/ Donald E. Johnson Chief Financial Officer Date: April 21, 2003