ENERGYTEK CORP.
(FORMERLY BROADLEAF CAPITAL PARTNERS, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2016
NOTE 1 - RECENT COMPANY BACKGROUND
EnergyTek Corp. formerly Broadleaf Capital Partners, Inc. (the Company), is a Nevada company. In November of 2013 the Company formed a wholly owned subsidiary Sustained Release, Inc. Although a private placement memorandum was done in December 2013, no funds were raised. On February 13, 2014, the Company sold its wholly- owned subsidiary Pipeline Nutrition to a related party. For accounting purposes, the effective date of the transaction was retroactively made to be December 31, 2013. Our financial statements presented here reflect this event for both periods presented. During March 2014 we formed a new subsidiary Texas Gulf Exploration & Production, Inc. which, on March 28, 2014, acquired the majority of assets of Texas Gulf Oil & Gas Inc. Also in March 2014 we formed another new subsidiary Legal Capital Corp., which on March 28, 2014 acquired the majority of assets of Litigation Capital, Inc. On March 31, 2014 we entered into an agreement whereby the acquisition of our subsidiary, Sustained Release, Inc., was rescinded. No sales of Preferred Stock were ever sold in this proposed private placement and the Company has withdrawn this private offering. In January 2015 we entered into a Joint Venture with Wagley Offshore-Onshore, Inc. to acquire distressed energy assets.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
This summary of significant account policies of the Company is presented to assist in understanding the Company's financial statements. The financial statements and the notes are the representation of the Company's management, who are responsible for their integrity and objectivity. These accounting policies conform to U.S. generally accepted accounting principles ("US GAAP") and have been consistently applied in the preparation of the financial statements.
Basis of Presentation
The Consolidated Financial Statements include the accounts of the Company and its majority-owned and wholly-owned subsidiaries. All significant intercompany account balances, transactions, profits and losses have been eliminated.
Principles of Consolidation
The financial statements include the accounts of the Company and its subsidiaries. Intercompany transactions and balances have been eliminated. Equity investments through which we exercise significant influence over but do not control the investee and are not the primary beneficiary of the investee's activities are accounted for using the equity method where applicable. Investments through which we are not able to exercise significant influence over the investee and which do not have readily determinable fair values are accounted for under the cost method where applicable.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, 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.
Fair Value of Financial Instruments
For certain of the Company's financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable, the carrying amounts approximate fair value due to their short maturities.
Revenue Recognition
The Company ASC No. 605 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the sales price is fixed or determinable, and (iii) collectability is reasonably assured.
ENERGYTEK CORP.
(FORMERLY BROADLEAF CAPITAL PARTNERS, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2016
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
Cash comprises cash in hand and cash held on demand with banks. The Company considers all highly liquid investments with original maturities of 90 days or less to be cash equivalents. Cash equivalents are carried at cost, which approximates market value. Cash and cash equivalents comprise of the non-interest bearing checking accounts in US Dollars.
Accounts Receivable, Net
Accounts receivable represent amounts due from customers on product and other sales. These accounts receivable, which are reduced by an allowance for doubtful accounts, are recorded at the invoiced amount and do not bear interest. The Company evaluates the collectability of its accounts receivable based on a combination of factors, including whether sales were made pursuant to letters of credit. In cases where management is aware of circumstances that may impair a specific customer's ability to meet its financial obligations, management records a specific allowance against amounts due, and reduces the net recognized receivable to the amount the Company believes will be collected. For all other customers, the Company maintains an allowance that considers the total receivables outstanding, historical collection rates and economic trends. Accounts are written off when all efforts to collect have been exhausted.
Stock Based Compensation
When applicable, the Company will account for stock-based payments to employees in accordance with ASC 718, "Stock Compensation" ("ASC 718"). Stock-based payments to employees include grants of stock, grants of stock options and issuance of warrants that are recognized in the consolidated statement of operations based on their fair values at the date of grant.
The Company accounts for stock-based payments to non-employees in accordance with ASC 505-50, "Equity-Based Payments to Non-Employees." Stock-based payments to non-employees include grants of stock, grants of stock options and issuances of warrants that are recognized in the consolidated statement of operations based on the value of the vested portion of the award over the requisite service period as measured at its then-current fair value as of each financial reporting date.
The Company calculates the fair value of option grants and warrant issuances utilizing the Binomial pricing model. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. ASC 718 requires forfeitures to be estimated at the time stock options are granted and warrants are issued to employees and non-employees, and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term "forfeitures" is distinct from "cancellations" or "expirations" and represents only the unvested portion of the surrendered stock option or warrant. The Company estimates forfeiture rates for all unvested awards when calculating the expense for the period. In estimating the forfeiture rate, the Company monitors both stock option and warrant exercises as well as employee termination patterns. The resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on a straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and improvements are capitalized. As property and equipment are sold or retired, the applicable cost and accumulated depreciation are removed from the accounts and any resulting gain or loss thereon is recognized as operating expenses.
Depreciation is calculated using the straight-line method over the estimated useful lives or, in the case of leasehold improvements, the term of the related lease, including renewal periods, if shorter. Estimated useful lives are as follows:
ENERGYTEK CORP.
(FORMERLY BROADLEAF CAPITAL PARTNERS, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2016
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Buildings
|
40 years
|
Equipment
|
5-15 years
|
The Company reviews property, plant and equipment and all amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Recoverability is based on estimated undiscounted cash flows. Measurement of the impairment loss, if any, is based on the difference between the carrying value and fair value.
Impairment of Long-Lived Assets and Amortizable Intangible Assets
The Company follows ASC 360-10, "Property, Plant, and Equipment," which established a "primary asset" approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
Intangible Assets - Goodwill
The excess of the purchase price over net tangible and identifiable intangible assets of business acquired is carried as Goodwill on the balance sheet. Goodwill is not amortized, but instead is assessed for impairment at least annually and upon the occurrence of certain triggering events or substantive changes in circumstances that indicate that the fair value of goodwill may be impaired. Measurement of the impairment loss, if any, is based on the difference between the carrying value and fair value of reporting unit. The goodwill impairment test follows a two-step process. In the first step, the fair value of a reporting unit is compared to its carrying value. If the carrying value of a reporting unit exceeds its fair value, the second step of the impairment test is performed for purposes of measuring the impairment. In the second step, the fair value of the reporting unit is allocated to all of the assets and liabilities of the reporting unit to determine an implied goodwill value. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of goodwill, an impairment loss will be recognized in an amount equal to that excess. During the quarter ended the company did not recognized any impairment charges.
Business segments
ASC 280, "Segment Reporting" requires use of the "management approach" model for segment reporting. The management approach model is based on the way a company's management organizes segments within the Company for making operating decisions and assessing performance. The Company determined it has two operating segments as of March 31, 2016 and 2015.
Acquisitions
The Company recognizes the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date. Contingent purchase consideration is recorded at fair value at the date of acquisition. Any excess purchase price over the fair value of the net assets acquired is recorded as goodwill. Within one year from the date of acquisition, the Company may update the value allocated to the assets acquired and liabilities assumed and the resulting goodwill balances as a result of information received regarding the valuation of such assets and liabilities that was not available at the time of purchase. Measuring assets and liabilities at fair value requires the Company to determine the price that would be paid by a third party market participant based on the highest and best use of the assets or interests acquired. Acquisition costs are expensed as incurred.
ENERGYTEK CORP.
(FORMERLY BROADLEAF CAPITAL PARTNERS, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2016
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value Measurements
For certain financial instruments, including accounts receivable, accounts payable, interest payable, advances payable and notes payable, the carrying amounts approximate fair value due to their relatively short maturities.
On January 1, 2008, the Company adopted ASC 820-10, "Fair Value Measurements and Disclosures." ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The Company did not identify any non-recurring assets and liabilities that are required to be presented in the balance sheets at fair value in accordance with ASC 815.
In February 2007, the FASB issued ASC 825-10 "Financial Instruments." ASC 825-10 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. ASC 825-10 is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. The Company adopted ASC 825-10 on January 1, 2008. The Company chose not to elect the option to measure the fair value of eligible financial assets and liabilities.
Income Taxes
Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards, 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 the changes in tax laws and rates of the date of enactment.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
ENERGYTEK CORP.
(FORMERLY BROADLEAF CAPITAL PARTNERS, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2016
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Applicable interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statements of operations.
Borrowings
Borrowings are recognized initially at cost which is the fair value of the proceeds received, net of transaction costs incurred. In subsequent periods, borrowings are stated at amortized cost using the effective yield method; any difference between fair value of the proceeds (net of transaction costs) and the redemption amount is recognized as interest expense over the period of the borrowings.
Provisions
Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Company expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain.
The Company recognizes the estimated liability to repair or replace products sold still under warranty at the balance sheet date. This provision is calculated based on past history of the level of repairs and replacements.
Legal Matters
The Company is not currently involved in any litigation and no reserves for litigation costs have been made at this time.
Special Purpose Entities
The Company does not have any off-balance sheet financing activities.
Net Income per Share
The Company computes net income (loss) per share in accordance with ASC 260-10, "Earnings Per Share." The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per share gives effect to all dilutive potential common shares outstanding during the period using the "as if converted" basis. The Company has currently authorized a Series C Preferred stock which is convertible at a rate of one share of preferred stock into one percent of the fully diluted common stock outstanding at the close of business on the last day prior to the date of notice of conversion.
Common Stock
There is currently only one class of common stock. Each share common stock is entitled to one vote. The authorized number of common stock of the Company at December 31, 2015 was 500,000,000 shares with a par value per share of $0.001. Authorized shares that have been issued and fully paid amounted to 22,787,964 as of December 31, 2015 and 1,508,367 as of December 31, 2014. Our common authorized shares were increased on July 23, 2014 from 250,000,000 to 500,000,000. We also effectuated a 1 for 150 reverse stock split of our common stock on July 23, 2014. All our financial information in these statements have been adjusted to reflect that split.
ENERGYTEK CORP.
(FORMERLY BROADLEAF CAPITAL PARTNERS, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2016
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Preferred Stock
On November 16, 2013, the Company's Board of Directors authorized the issuance of Preferred stock of 10,000,000 with a par value of $0.01 per share. The terms of these shares will be determined upon issuance; however, no shares were ever sold or issued.
In March of 2014 the Company issued 900 shares of Series A Preferred Stock. Series A Preferred Stock shall have the right to convert any or all of the series of Series A Preferred Stock into Common Stock. Each share of Series A Preferred Stock shall be convertible at the option of the holder at any time, after the date of issuance of such shares. Each Series A Preferred Share converts into one hundred thousand (100,000) shares of Common Stock.
On May 21, 2014, the 900 shares of Series A Preferred Stock were exchanged for 900 Shares of Series C Preferred Stock. Series C Stock shall have the right to convert any or all of the series of Series A Preferred Stock into Common Stock. Each share of Series C Preferred Stock shall be convertible at the option of the holder at any time, after the date of issuance of such shares. Each Series C Preferred Share converts into one hundred thousand (100,000) shares of Common Stock. Prior to January 1, 2016, in no event shall the number of Series C Preferred Stock or the number of shares of Common Stock into which the Series C Preferred Stock is convertible be subject to any adjustment resulting from a reverse split of the Common Stock. On all matters the holders of Series C Preferred Stock and the holders of Common Stock shall vote together and not as separate classes. Each holder of Series C Preferred Stock shall be entitled to one (1) vote for each share of series C Preferred Stock held. On January 9, 2015 10 Series C shares were exchanged for 1,000,000 shares of our Common Stock.
In March of 2014 the Company issued 300,000 shares of Series B Preferred stock. The holders of Series B Preferred Stock shall be entitled to when and if declared by the Board of Directors out of the funds of the Company, non-cumulative cash dividends accruing on a daily basis from the date of issuance of the Series B Preferred Stock through and including the date on which dividends are paid at an annual rate of six percent (6%) per share of Series B Preferred Stock. Series B Preferred Stock shall rank senior to the Common Stock and the Series C Preferred Stock. On all matters the holders of Series B Preferred Stock and the holders of Common Stock shall vote together and not as separate classes and the Series B Preferred Stock shall be counted as one vote per each share.
Reclassifications
Certain reclassifications have been made to prior year balances to conform to the current year presentation.
Comprehensive Income
Comprehensive income represents net income plus the change in equity of a business enterprise resulting from transactions and circumstances from non-owner sources. The Company's comprehensive income equal net income for the three months ended March 31, 2016, and 2015.
NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS
The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
ENERGYTEK CORP.
(FORMERLY BROADLEAF CAPITAL PARTNERS, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2016
NOTE 4 - GOING CONCERN
As reported in the consolidated financial statements, the Company has an accumulated deficit and has had cash flow constraints with its current revenue stream. These trends have been consistent for the past few periods, 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 raising additional capital through sales of common stock and 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 5 - EARNINGS PER SHARE
The following table sets forth the information used to compute basic and diluted net income per share attributable to the Company for the three months ended March 31, 2016:
|
|
3/31/2016
|
|
|
3/31/2015
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(44,725
|
)
|
|
$
|
(58,080
|
)
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common stock - Basic
|
|
|
22,787,964
|
|
|
|
19,241,365
|
|
Equivalents
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
-
|
|
|
|
-
|
|
Warrants
|
|
|
-
|
|
|
|
-
|
|
Convertible notes, Preferred stock
|
|
|
2,400,000
|
|
|
|
7,400,000
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common stock - Basic and Diluted
|
|
|
22,787,964
|
|
|
|
19,241,365
|
|
|
|
|
|
|
|
|
|
|
ENERGYTEK CORP.
(FORMERLY BROADLEAF CAPITAL PARTNERS, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2016
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
For the Periods Ended:
|
|
3/31/2016
|
|
|
12/31/2015
|
|
|
|
|
|
|
|
|
Property, plant and equipment consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
$
|
21,074
|
|
|
$
|
247,750
|
|
Computers and software
|
|
|
7,400
|
|
|
|
7,400
|
|
Other equipment
|
|
|
400
|
|
|
|
400
|
|
Less: disposal
|
|
|
0
|
|
|
|
(226,676
|
)
|
Total property, plant and equipment
|
|
|
28,874
|
|
|
|
28,874
|
|
Less:
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
7,105
|
|
|
|
36,800
|
|
Current depreciation expense
|
|
|
5,150
|
|
|
|
5,105
|
|
Less: disposal
|
|
|
0
|
|
|
|
(34,800
|
)
|
Total accumulated depreciation
|
|
|
12,255
|
|
|
|
7,105
|
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment
|
|
$
|
16,619
|
|
|
$
|
21,769
|
|
|
|
|
|
|
|
|
|
|
Intangible assets consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
256,000
|
|
|
$
|
256,000
|
|
Intangible assets
|
|
|
7,751,031
|
|
|
|
7,751,031
|
|
Less:
|
|
|
|
|
|
|
|
|
Impairment
|
|
|
7,907,031
|
|
|
|
7,907,031
|
|
|
|
|
|
|
|
|
|
|
Net intangible assets
|
|
$
|
100,000
|
|
|
$
|
100,000
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense was $5,105 at December 31, 2015 and $20,600 at December 31, 2014.
|
|
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company pays $2,500 per month to a related party for office space and administrative services on a month-to-month basis. There are no long-term commitments pertaining to this arrangement.
The Company agreed to set up short term notes payable to the board for unpaid fees during 2013 and the first quarter of 2014. A short term note was issued to Donna Steward for $3,750 and Charles Snipes for $1,500, Robert Anderson for $750, with a stated 8% interest rate. In addition the Company agreed to set a short term note payable to President Mike King for his 2013 and first quarter 2014 salary of $11,250 under the same terms. These liabilities were exchanged for stock during the third quarter of 2014.
Our subsidiary, Texas Gulf Exploration & Production, Inc., has entered into a five year agreement whereby we have the right of first refusal to provide all wellhead services for all of Texas Gulf Oil & Gas, Inc. oil and or gas wells at cost plus 10% for such services. However, the value for such contract, as reported herein is only a potential future value and differ significantly as it is dependent on upon the future price of oil and the Company's ability to raise capital for the cost of providing services under the contract. Texas Gulf Oil & Gas, Inc. has a 60-day right of first refusal to invest funds in any new oil or gas leases that Texas Gulf Exploration & Production, Inc. locates and signs leases for.
ENERGYTEK CORP.
(FORMERLY BROADLEAF CAPITAL PARTNERS, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2016
NOTE 7 - RELATED PARTY TRANSACTIONS (CONTINUED)
During the course of 2014 a related party has advanced $80,894 to Texas Gulf Exploration & Production, Inc. in the form of working capital advances. These loans are due on demand and carry no interest rate. This was increased to $128,116 during the first quarter of 2015.
The Company paid off additional related party accrued liabilities through the issuance of 120,000 shares of our common stock valued at $33,400.
NOTE 8 – NOTES PAYABLE
Notes payable consist of the following for the periods ended;
|
|
3/31/2016
|
|
|
12/31/2015
|
|
|
|
|
|
|
|
|
Conventional convertible note issued as working capital advances during 2014 with an interest rate stated at 5%. This note is due September 30, 2015 and can be converted at $0.30 per share.
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
|
|
|
|
|
|
|
Conventional convertible note issued as working capital advances during 2014 with an interest rate stated at 5%. This note is due September 30, 2015 and can be converted at $0.30 per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
|
|
|
|
|
|
|
Promissory note from a related party issued as working capital advances during 2014 with an interest rate stated at 0%. This note is due on demand.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,942
|
|
|
|
95,942
|
|
|
|
|
|
|
|
|
|
|
Conventional convertible note issued as working capital advances during 2014 with an interest rate stated at 5%. This note is due May 10, 2016 and can be converted at $0.30 per share. |
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
Conventional convertible note issued as working capital advances during 2014 with an interest rate stated at 5%. This note is due May 10, 2016 and can be converted at $0.30 per share. |
|
|
|
|
|
|
|
|
|
|
|
|
16000 |
|
|
|
0 |
|
|
|
Funds advanced from a related party issued for working capital during 2015 with an interest rate stated at 0%. This note is due on demand.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,493
|
|
|
|
52,493
|
|
|
|
|
|
|
|
|
|
|
Promissory note from a related party issued as working capital advances during 2014 with an interest rate stated at 0%. This note is due on demand.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,069
|
|
|
|
90,069
|
|
|
|
|
|
|
|
|
|
|
Total Notes Payable
|
|
|
285,884
|
|
|
|
253,504
|
|
|
|
|
|
|
|
|
|
|
Less Current Portion
|
|
|
285,884
|
|
|
|
253,504
|
|
|
|
|
|
|
|
|
|
|
Long Term Notes Payable
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
All are classified as short term by the Company. Accrued interest on these notes totaled.
|
|
$
|
0
|
|
|
$
|
0
|
|
ENERGYTEK CORP.
(FORMERLY BROADLEAF CAPITAL PARTNERS, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2016
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The company current has no commitments or contingencies that require reporting.
NOTE 10 – SUBSEQUENT EVENTS
There were no reportable subsequent events.
NOTE 11 - ACQUISITIONS
On March 31, 2014, The Company's subsidiary Legal Capital Corp, acquired certain assets of Litigation Capital Corp. Also on March 31, 2014, the Company's subsidiary Texas Gulf Exploration & Production, Inc. acquired certain assets of Texas Gulf Oil and Gas Inc., The acquisitions were accounted for as business purchases and recorded at the estimated fair values of the net tangible and identifiable intangible assets acquired. The excess of the purchase price over the assets acquired was recorded as goodwill. Valuations generally were determined by an independent valuation expert and the acquisition of the key operating assets were audited as significant subsidiaries. The valuation of the assets acquired from Texas Gulf Oil & Gas, Inc. is based upon potential future earnings from the 5 year oil well servicing contract by and between our subsidiary, Texas Gulf Exploration & Production, Inc., and Texas Gulf Oil & Gas, Inc. The potential earnings are not guaranteed and could differ significantly due to the market price of crude oil and the inability of the Company to raise the capital necessary to sustain the operations of our subsidiary. Our Texas Gulf Oil & Gas, Inc. asset has recorded an impairment as more fully described in our fixed asset footnote. A summary of the purchase price, assets acquired and other information for each of these business purchases is as follows:
|
|
Litigation
|
|
|
Texas
|
|
|
|
Capital
|
|
|
Gulf Oil
|
|
|
|
Corp.
|
|
|
& Gas
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
45,727
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
256,000
|
|
|
|
7,751,031
|
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
|
0
|
|
|
|
45,650
|
|
|
|
|
|
|
|
|
|
|
Total Assets Purchased
|
|
$
|
301,727
|
|
|
|
7,796,681
|
|
|
|
|
|
|
|
|
|
|
Components of purchase price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series C Preferred
|
|
$
|
0
|
|
|
$
|
7,722,650
|
|
|
|
|
|
|
|
|
|
|
Series B Preferred
|
|
|
300,727
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Assumption of liabilities
|
|
|
1,000
|
|
|
|
74,031
|
|
|
|
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
301,727
|
|
|
$
|
7,796,681
|
|
These investments were reduced for an impairment charge of $6,665,887 in December of 2014 and an additional impairment charge of $1,241,144 in 2015 due to industry economic conditions reducing our carrying value to $100,000.
ENERGYTEK CORP.
(FORMERLY BROADLEAF CAPITAL PARTNERS, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2016
NOTE 12 - NOTES RECEIVABLE
During December 2013 the company sold its working subsidiary Pipeline Nutrition, U.S.A. Inc. to a related party and extended the collection of a note receivable from December 31, 2013 until December 31, 2014 in exchange for increasing its current note to $135,000. In addition to extending the due date of the note the Company will receive an additional $165,000 in a long term note equaling $300,000 in total. $5,000 was received in February 2014, $130,000 is due in December 2014 and the balance of $160,000 is due at March 1, 2015. This note has an 8% stated interest rate payable upon maturity of the note. After notification from Pipeline Nutrition, U.S.A. that they were ceasing operations we have impaired this note for the full receivable of $295,000 for the three months ended March 31, 2016.
NOTE 13 – INCOME TAXES
The Company, a C-corporation, accounts for income taxes under ASC Topic 740 (SFAS No. 109) Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company adopted the provisions of FASB ASC 740-10 " Uncertainty in Income Taxes " (ASC 740-10), on January 1, 2007. The Company has not recognized a liability as a result of the implementation of ASC 740-10. A reconciliation of the beginning and ending amount of unrecognized tax benefits has not been provided since there is no unrecognized benefit since the date of adoption. The Company has not recognized interest expense or penalties as a result of the implementation of ASC 740-10. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
Currently the Company has projected $24,981,815 as of March 31, 2016 in Net Loss Operating Loss carry-forwards available. The benefits of the potential tax savings will be recognized in the financial statements upon the acquisition or development of revenue source to apply against these losses. The company recognizes that the Internal Revenue Service has the final determination of the NOL available going forward and that amount may be significantly different from that recorded to date.
The net operating loss carry forwards for federal income tax purposes will expire between 2016 and 2033. Generally, these can be carried forward and applied against future taxable income at the tax rate applicable at that time. We are currently using a 35% effective tax rate for our projected available net operating loss carry-forward. However, as a result of potential stock offerings and stock issuance in connection with potential acquisitions, as well as the possibility of the Company not realizing its business plan objectives and having future taxable income to offset, the Company's use of these NOLs may be limited under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended. The Company is in the process of evaluating the implications of Section 382 on its ability to utilize some or all of its NOLs.
Components of Net Operating Loss and Valuation allowance are as follows:
ENERGYTEK CORP.
(FORMERLY BROADLEAF CAPITAL PARTNERS, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2016
NOTE 13 – INCOME TAXES (CONTINUED)
|
|
3/31/2016
|
|
|
12/31/2015
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning NOL Carryover
|
|
$
|
20,582,293
|
|
|
$
|
20,537,568
|
|
|
|
|
|
|
|
|
|
|
Adjusted Taxable Income(loss)
|
|
|
(3,547,594
|
)
|
|
|
(3,547,594
|
)
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Ending NOL Carryover
|
|
|
24,129,887
|
|
|
|
24,085,162
|
|
|
|
|
|
|
|
|
|
|
Tax Benefit Carryforward
|
|
|
8,204,162
|
|
|
|
8,188,955
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(8,204,162
|
)
|
|
|
(8,188,955
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
Net Valuation Allowance
|
|
$
|
(8,204,162
|
)
|
|
$
|
(8,188,955
|
)
|
|
|
|
|
|
|
|
|
|
In accordance with FASB ASC 740 "Income Taxes", valuation allowances are provided against deferred tax assets, if based on the weight of available evidence, some or all of the deferred tax assets may or will not be realized. The Company has evaluated its ability to realize some or all of the deferred tax assets on its balance sheet and has established a valuation allowance in the amount of $8,204,162 at March 31, 2016 and 8,188,955 at December 31, 2015.
NOTE 14 - SEGMENT INFORMATION
The accounting standards for reporting information about operating segments define operating segments as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company's chief operating decision maker is the Chief Executive Officer. The Company is organized by line of business. While the Chief Executive Officer evaluates results in a number of different ways, the line of business management structure is the primary basis for which the allocation of resources and financial results are assessed. Under the aforementioned criteria, the Company operates in two operating and reporting segments: metal purchasing, processing, recycling and selling, and used auto parts.
The information provided below is obtained from internal information that is provided to the Company's chief operating decision maker for the purpose of corporate management. The Company uses operating income (loss) to measure segment performance. The Company does not allocate corporate interest income and expense, income taxes, other income and expenses related to corporate activity or corporate expense for management and administrative services that benefit both segments. In addition, the Company does not allocate restructuring charges to the segment operating income (loss) because management does not include this information in its measurement of the performance of the operating segments. Because of this unallocated income and expense, the operating income (loss) of each reporting segment does not reflect the operating income (loss) the reporting segment would report as a stand-alone business.
The table below illustrates the Company's results by reporting segment for the three months ended March 31, 2016 and 2015:
ENERGYTEK CORP.
(FORMERLY BROADLEAF CAPITAL PARTNERS, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2016
NOTE 14 - SEGMENT INFORMATION (CONTINUED)
|
3/31/2016
|
|
3/31/2015
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil service operations
|
|
$
|
0
|
|
|
$
|
0
|
|
Litigation
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
3/31/2016
|
|
3/31/2015
|
|
Cost of Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil service operations
|
|
$
|
0
|
|
|
$
|
0
|
|
Litigation
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Total Product Cost
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
3/31/2016
|
|
3/31/2015
|
|
Operating Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil service operations
|
|
$
|
44,666
|
|
|
$
|
35,718
|
|
Litigation
|
|
|
0
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
Total Operating Cost
|
|
$
|
44,666
|
|
|
$
|
35,730
|
|
|
|
|
|
|
|
|
|
|
|
3/31/2016
|
|
3/31/2015
|
|
Net Operating Income(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil service operations
|
|
$
|
(44,666
|
)
|
|
$
|
(35,718
|
)
|
Litigation
|
|
|
0
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
Total Net Operating Income(Loss)
|
|
$
|
(44,666
|
)
|
|
$
|
(35,730
|
)
|
ENERGYTEK CORP.
(FORMERLY BROADLEAF CAPITAL PARTNERS, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2016
NOTE 15 - INVESTMENTS
On January 6, 2015, the Company entered into a Joint Venture Agreement with Wagley Offshore-Onshore, Inc. (the "JV Agreement" and "Wagley", respectively). The purpose of the JV Agreement is to pursue a distressed energy asset acquisition program to take advantage of the reduction in value of these assets due to the historically low price of crude oil. The Joint Venture, to be known as Wagley-EnergyTEK J.V. LLC, a Texas limited liability company (the "LLC"), will utilize the extensive relationships of Wagley to acquire energy related assets such as equipment leases and production in exchange for a combination of cash and/or equity securities of the Company. As a term and condition of the JV Agreement, the Company issued Twenty Million (20,000,000) restricted shares of its common stock to the Joint Venture as its capital contribution to the Joint Venture. The Company is valuing this investment at the fair market value of the stock issued on the date of the transaction. This investment was fully impaired charge due to industry economic conditions.
NOTE 16 – DERIVATIVE LIABILITY
The Company accounts for derivative financial instruments in accordance with ASC 815, which requires that all derivative financial instruments be recorded in the balance sheets either as assets or liabilities at fair value.
The Company's derivative liability is an embedded derivative associated with the Company's convertible promissory note. The convertible promissory note was issued on January 14, 2015, (the "Note"), is a hybrid instruments which contain an embedded derivative feature which would individually warrant separate accounting as a derivative instrument under Paragraph 815-10-05-4. The embedded derivative feature includes the conversion feature to the Note. Pursuant to Paragraph 815-10-05-4, the value of the embedded derivative liability have been bifurcated from the debt host contract and recorded as a derivative liability resulting in a reduction of the initial carrying amount (as unamortized discount) of the notes, which are amortized as debt discount to be presented in other (income) expenses in the statements of operations using the effective interest method over the life of the notes.
The embedded derivative within the note have been valued using the Black Scholes approach, recorded at fair value at the date of issuance; and marked-to-market at each reporting period end date with changes in fair value recorded in the Company's statements of operations as "change in the fair value of derivative instrument".
As of March 31, 2016 and December 31, 2015, the estimated fair value of derivative liability was determined to be $0 and $0, respectively. On July 14, 2014, the derivative liability was recognized with a debt discount of $64,000. During the year ended December 31, 2015, amortization of $40,507 was recorded against the discount. The change in the fair value of derivative liabilities for the three months ended March 31, 2016 was $0 resulting in an aggregate gain on derivative liabilities of $0.
Summary of Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis
Financial assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed on the balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement Using
|
|
|
Carrying Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Derivative liabilities on conversion feature
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total derivative liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
ENERGYTEK CORP.
(FORMERLY BROADLEAF CAPITAL PARTNERS, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2016
Summary of the Changes in Fair Value of Level 3 Financial Liabilities
The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2016:
|
|
Derivative Liability
|
|
Fair value, January 1, 2016
|
|
$
|
-
|
|
Additions
|
|
|
-
|
|
Change in fair value
|
|
|
-
|
|
Transfers in and/or out of Level 3
|
|
|
-
|
|
Fair value, March 31, 2016
|
|
$
|
-
|
|