Securities and Exchange Commission
Washington, DC 20549
-------------------------------------------------
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2003
Commission File No. 2-91651-D
Broadleaf Capital Partners, Inc.
-------------------------------------
Nevada 87-0410039
---------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
7341 W. Charleston Blvd, Suite 140
Las Vegas, NV 89117
-----------------------------------
(Address and zip code of principal executive offices)
(702) 736-1560
--------------------------
(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.
[X] YES [ ] NO
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
Common Stock 16,513,263 Shares Outstanding
$0.001 par value as of March 31, 2003
Traditional Small Business Disclosure Format (check one) Yes [ ] No [X]
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements................................. 4
Balance Sheet (unaudited)............................ 5-6
Statements of Operations (unaudited)................. 7
Statements of Cash Flows (unaudited)................. 8
Notes to Financial Statements........................ 9-15
Item 2. Management's Discussion and Analysis of Plan of Operation..16
Item 3. Controls and Procedures............................... 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................... 17
Item 2. Changes in Securities and Use of Proceeds............. 17
Item 3. Defaults upon Senior Securities....................... 17
Item 4. Submission of Matters to a Vote of Security Holders... 17
Item 5. Other Information..................................... 17
Item 6. Exhibits and Reports on Form 8-K...................... 17
Signatures...................................................... 24
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND EXHIBITS
The unaudited financial statements of registrant for the three months ended
March 31, 2003, follow. As prescribed by item 310 of Regulation S-B, the
independent auditor has reviewed these unaudited interim financial statements
of the registrant for the three months ended March 31, 2003. The financial
statements reflect all adjustments, which are, in the opinion of management,
necessary to a fair statement of the results for the interim period presented.
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)
==========
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of certain factors affecting Registrant's results
of operations, liquidity and capital resources. You should read the following
discussion and analysis in conjunction with the Registrant's consolidated
financial statements and related notes that are included herein under Item 1
above.
CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.
This Form 10-QSB contains forward-looking statements within the meaning of
section 27A of the Securities Act of 1933 and section 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially from
those set forth in the forward-looking statements. These forward-looking
statements represent the Registrant's present expectations or beliefs
concerning future events. The Registrant cautions that such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the
Registrant to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, the uncertainty as to the Registrant's
future profitability; the uncertainty as to the demand for Registrant's
services; increasing competition in the markets that Registrant conducts
business; the Registrant's ability to hire, train and retain sufficient
qualified personnel; the Registrant's ability to obtain financing on acceptable
terms to finance its growth strategy; and the Registrant's ability to develop
and implement operational and financial systems to manage its growth.
MANAGEMENT DISCUSSION
Broadleaf Capital Partners, Inc. (Company) is a venture capital fund and plans
to continue as a Business Development Corporation (BDC) under the 1940 Act.
The Company makes direct investments in and provides management services to
businesses that have at least a one-year operating history, the original
founding management, with minimum annual revenues of $1.5 million, and
operating in niche or under-served markets. The Company intends to expand on
its investment strategy and portfolio through the internal development of its
present operations and other business opportunities, as well as the acquisition
of additional business ventures. The Company has in the past, and may again
in the future, raise capital specifically for the purpose of maintaining
operations and making an investment that the Company believes is attractive.
The Company's websites can be found at: www.broadleafcapital.com
ANALYSIS OF FINANCIAL CONDITION
The first quarter of 2003 marked the continuance of assessing and consolidating
the Company's previous investments and operations.
Results of Operations - Three months ended March 31, 2003, compared to the
three months ended March 31, 2002.
Revenues. Revenues for the three months ended March 31, 2003 decreased by
$30,902 or 94% to $1,900 from $32,802 for the three months ended March 31,
2002. This decrease was primarily due to the absence of development income.
Expenses. Expenses for the three months ended March 31, 2003 decreased by
$188,724 or 46% to $226,110 from $415,134 for the three months ended March
31, 2002. General and administrative expenses for the three months ended March
31, 2003 decreased by $64,699 or 24% to $211,470 from $276,169. This decrease
was primarily due to a reduction in operations.
Changes in Financial Condition, Liquidity and Capital Resource.
For the three months ended March 31, 2003, the Company funded its operations
and capital requirements partially with its own working capital and partially
with proceeds from stock offerings. As of March 31, 2003, the Company had cash
of $877.
Forward-Looking Statements
This Form 10-QSB includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-QSB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things
as future capital expenditures (including the amount and nature thereof),
finding suitable merger or acquisition candidates, expansion and growth of the
Company's business and operations, and other such matters are forward-looking
statements.
These statements are based on certain assumptions and analyses made by the
Company in light of its experience and its perception of historical trends,
current conditions and expected future developments as well as other factors it
believes are appropriate in the circumstances. However, whether actual results
or developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, general economic market and
business conditions; the business opportunities (or lack thereof) that may be
presented to and pursued by the Company; changes in laws or regulation; and
other factors, most of which are beyond the control of the Company.
This Form10-QSB contains statements that constitute "forward-looking
statements." These forward-looking statements can be identified by the use of
predictive, future-tense or forward-looking terminology, such as "believes,"
"anticipates," "expects," "estimates," "plans," "may," "will," or similar
terms. These statements appear in a number of places in this Registration and
include statements regarding the intent, belief or current expectations of the
Company, its directors or its officers with respect to, among other things: (i)
trends affecting the Company's financial condition or results of operations for
its limited history; (ii) the Company's business and growth strategies; (iii)
the Internet and Internet commerce; and, (iv) the Company's financing plans.
Investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve significant risks and
uncertainties, and that actual results may differ materially from those
projected in the forward-looking statements as a result of various factors.
Factors that could adversely affect actual results and performance include,
among others, the Company's limited operating history, dependence on continued
growth in the use of the Internet, the Company's inexperience with the
Internet, potential fluctuations in quarterly operating results and expenses,
security risks of transmitting information over the Internet, government
regulation, technological change and competition.
Consequently, all of the forward-looking statements made in this Form 10-QSB
are qualified by these cautionary statements and there can be no assurance that
the actual results or developments anticipated by the Company will be realized
or, even if substantially realized, that they will have the expected
consequence to or effects on the Company or its business or operations. The
Company assumes no obligations to update any such forward-looking statements.
Item 3. 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.
PART II - OTHER INFORMATION
Item 1. 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 firm, Jaeger & Kodner, LLC, which settled in November 2002 for
$280,000, purchased the bank's position.
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 2. Changes in Securities and Use of Proceeds: NONE
Item 3. Defaults Upon Senior Securities: NONE
Item 4. Submission of Matters to a Vote of Security Holders: NONE
Item 5. Other Information: NONE
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
- Exhibit 99.1 Certification Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
- Exhibit 99.2 Certification Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
(a) Reports on Form 8-K: NONE
Exh. 99-1
Form 8-K
CURRENT REPORT
ITEM 5. OTHER ITEMS
a.) CHANGE OF ADDRESS
The new address for the Company is 7341 W. Charleston Blvd., Suite 140, Las
Vegas, Nevada, 89117. The new telephone number for the business is 702-736-
1560. The new fax number for the business is 702-736-1608.
b.) CHANGE OF CORPORATE COUNSEL
On April 7, 2003 the Board of Directors accepted the resignation of Sarkis
Kaloustian as the Corporate Counsel for the Company. The Board of Directors
accepted Mr. Michael Gardiner of Rathbone, Rudderman and Gardiner as the new
Corporate Counsel for the Company.
ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS
On April 7, 2003, the Board of Directors accepted the resignation of Lisa
Martinez as the Accounting Administrator and Corporate Secretary. The Board of
Directors accepted the resignation of Mr. Donald E. Johnson as the Chief
Financial Officer of the Company.
On April 7, 2003, the Board of Directors selected Melissa R. Blue as the
Corporate Secretary and Interim Chief Financial Officer of the Company. Melissa
is originally from New Jersey and moved to South Carolina to receive her
Bachelors of Science in Business Administration with the concentration in
Accounting from Winthrop University in Rock Hill. Melissa has previously worked
for small and medium sized accounting firms in both Las Vegas and in Columbia,
South Carolina. Melissa was one of the founders of a Las Vegas CPA firm in 2002
and was the lead auditor for the firm's public company clients. Melissa is a
member of the Nevada Society of CPA's, the American Institute of CPA, and the
local chapter of the Latin Chamber of Commerce.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: May 20, 2003
SIGNATURES
Pursuant to the requirements 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.
June 23, 2003 /s/ Robert A. Braner
- ------------------- -------------------------
Date Robert A. Braner
Interim President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person(s) on behalf of the
registrant and in the capacities and on the dates indicated.
June 23, 2003 /s/ Melissa R. Blue
- ------------------- -----------------------
Date Melissa R. Blue
Corporate Secretary
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 quarterly report on Form 10-QSB of
BROADLEAF CAPITAL PARTNERS, INC.;
2.Based on my knowledge, this quarterly 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
quarterly report; and
3.Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
position, results of operations, and cash flows of the issuer
as of, and for, the periods presented in this quarterly
report.
4.I am responsible for establishing and maintaining disclosure
controls and procedures for the issuer and have:
(i) Designed such disclosure controls and procedures to
ensure that material information relating to the issuer is
made known to me, particularly during the period in which
the periodic reports are being prepared;
(ii) Evaluated the effectiveness of the issuer's disclosure
controls and procedures as of March 31, 2003; and
(iii) Presented in the report our conclusions about the
effectiveness of the disclosure controls and procedures
based on my evaluation as of the Evaluation Date;
5.I have disclosed, based on my most recent evaluation, to the
issuer's auditors and the audit committee of the board of
directors (or persons fulfilling the equivalent function):
(i) All significant deficiencies in the design or
operation of internal controls which could adversely affect
the issuer's ability to record, process, summarize and
report financial data and have identified for the issuer's
auditors any material weaknesses in internal controls (none
were so noted); and
(ii) Any fraud, whether or not material, that involves
management or other employees who have a significant role
in the issuer's internal controls (none were so noted); and
6.I have indicated in the 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.
Date: June 23, 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, Melissa R. Blue, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
BROADLEAF CAPITAL PARTNERS, INC.;
2. Based on my knowledge, this quarterly 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
quarterly report; and
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
position, results of operations, and cash flows of the issuer
as of, and for, the periods presented in this quarterly
report.
4. I am responsible for establishing and maintaining disclosure
controls and procedures for the issuer and have:
(i) Designed such disclosure controls and procedures to
ensure that material information relating to the issuer is
made known to me, particularly during the period in which
the periodic reports are being prepared;
(ii) Evaluated the effectiveness of the issuer's disclosure
controls and procedures as of March 31, 2003; and
(iii) Presented in the report our conclusions about the
effectiveness of the disclosure controls and procedures
based on my evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the
issuer's auditors and the audit committee of the board of
directors (or persons fulfilling the equivalent function):
(i) All significant deficiencies in the design or
operation of internal controls which could adversely affect
the issuer's ability to record, process, summarize and
report financial data and have identified for the issuer's
auditors any material weaknesses in internal controls (none
were so noted); and
(ii) Any fraud, whether or not material, that involves
management or other employees who have a significant role
in the issuer's internal controls (none were so noted); and
6.I have indicated in the 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.
Date: June 23, 2003
/s/ Melissa R. Blue
---------------------
CFO and Corporate Secretary
PAGE-14-
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 Quarterly report of Broadleaf Capital
Partners, Inc. (the "Company") on Form 10-QSB for the period ending
March 31, 2003, as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Robert A. Braner, acting in the capacity as the
Chief Executive Officer of the Company, certify to the best of my knowledge,
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) or 15(d) 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 result of
operations of the Company.
/s/ Robert A. Braner
- - ---------------------------
Robert A. Braner
Chief Executive Officer
June 23, 2003
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 Quarterly report of Broadleaf Capital
Partners, Inc. (the "Company") on Form 10-QSB for the period ending
March 31, 2003, as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Melissa R. Blue, acting in the capacity as the
Interim Chief Financial Officer of the Company, certify to the best of my
knowledge, 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) or 15(d) 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 result of
operations of the Company.
/s/ Melissa R. Blue
- - ---------------------------
Melissa R. Blue
Chief Financial Officer
June 23, 2003