Galenfeha, Inc.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2016 and 2015
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
ASSETS
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
Cash
|
$
|
129,973
|
|
$
|
47,333
|
|
Accounts receivable
|
|
-
|
|
|
107,424
|
|
Accounts receivable from
related parties
|
|
14,189
|
|
|
336
|
|
Inventory
|
|
-
|
|
|
950,617
|
|
Assets held for sale
|
|
381,041
|
|
|
-
|
|
Prepaid expenses
|
|
-
|
|
|
10,083
|
|
Total current assets
|
|
525,203
|
|
|
1,115,793
|
|
FIXED ASSETS, net of accumulated depreciation of $0 and
$21,419,
|
|
|
|
|
|
|
respectively
|
|
-
|
|
|
187,386
|
|
OTHER ASSETS
|
|
|
|
|
|
|
Goodwill
|
|
-
|
|
|
389,839
|
|
Customer list, net of accumulated
amortization of $0 and $5,928,
|
|
|
|
|
|
|
respectively
|
|
-
|
|
|
16,870
|
|
Deposits
|
|
1,000
|
|
|
1,000
|
|
Total other assets
|
|
1,000
|
|
|
407,709
|
|
TOTAL ASSETS
|
$
|
526,203
|
|
$
|
1,710,888
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS (DEFICIT)
EQUITY
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities
|
$
|
32,892
|
|
$
|
228,014
|
|
Accounts payable to
related parties
|
|
-
|
|
|
123,282
|
|
Deferred revenue
|
|
43,602
|
|
|
-
|
|
Liabilities held for
sale
|
|
350,000
|
|
|
-
|
|
Current maturities of long term debt
|
|
-
|
|
|
195,771
|
|
Related party
convertible promissory note
|
|
-
|
|
|
125,000
|
|
Due to officer
|
|
110,000
|
|
|
-
|
|
Total current
liabilities
|
|
536,494
|
|
|
672,067
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
536,494
|
|
|
672,067
|
|
|
|
|
|
|
|
|
STOCKHOLDERS (DEFICIT) EQUITY
|
|
|
|
|
|
|
Preferred stock
|
|
|
|
|
|
|
Authorized: 50,000,000
common shares, $0.001 par value, 27,347,563
issued
and outstanding at December 31, 2016 and 0
issued
and outstanding at December 31, 2015
|
|
27,348
|
|
|
-
|
|
Common stock
|
|
|
|
|
|
|
Authorized: 150,000,000
common shares, $0.001 par value, 69,318,537
issued
and outstanding at December 31, 2016 and 86,126,100
issued and outstanding at December 31, 2015
|
|
69,318
|
|
|
86,126
|
|
Additional paid-in capital
|
|
3,384,950
|
|
|
3,162,529
|
|
Accumulated deficit
|
|
(3,491,907
|
)
|
|
(2,209,834
|
)
|
Total stockholders (deficit) equity
|
|
(10,291
|
)
|
|
1,038,821
|
|
TOTAL LIABILITIES AND STOCKHOLDERS
(DEFICIT) EQUITY
|
$
|
526,203
|
|
$
|
1,710,888
|
|
The Accompanying Notes are an Integral Part of These
Consolidated Financial Statements
F-2
Galenfeha, Inc.
CONSOLIDATED STATEMENTS OF
OPERATIONS
For the Years Ended December 31, 2016 and 2015
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Operating Expenses:
|
|
|
|
|
|
|
General and administrative
|
|
54,707
|
|
|
127,284
|
|
Payroll expenses
|
|
35,028
|
|
|
114,127
|
|
Professional fees
|
|
63,985
|
|
|
194,002
|
|
Loss on sale of fixed assets
|
|
-
|
|
|
5,317
|
|
Impairment loss on pump assets
|
|
443,935
|
|
|
-
|
|
Total operating expenses
|
|
597,655
|
|
|
440,730
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
(597,655
|
)
|
|
(440,730
|
)
|
|
|
|
|
|
|
|
Other (expense) income
|
|
|
|
|
|
|
Interest income
|
|
6
|
|
|
44
|
|
Cancellation of debt income
|
|
13,545
|
|
|
-
|
|
Interest expense
|
|
(473,045
|
)
|
|
(118,018
|
)
|
Gain (loss) on derivative instruments
|
|
129,054
|
|
|
-
|
|
Total other income (expense)
|
|
(330,440
|
)
|
|
(117,974
|
)
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
(928,095
|
)
|
|
(558,704
|
)
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
(353,978
|
)
|
|
(1,040,612
|
)
|
|
|
|
|
|
|
|
Net loss
|
$
|
(1,282,073
|
)
|
$
|
(1,599,316
|
)
|
|
|
|
|
|
|
|
Loss per share, basic and diluted:
|
|
|
|
|
|
|
Continuing operations
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
Discontinued operations
|
|
(0.00
|
)
|
|
(0.01
|
)
|
Net loss
|
$
|
(0.01
|
)
|
$
|
(0.02
|
)
|
Weighted average number of common shares
|
|
|
|
|
|
|
outstanding, basic and diluted
|
|
88,586,086
|
|
|
85,415,212
|
|
The Accompanying Notes are an Integral Part of These
Consolidated Financial Statements
F-3
Galenfeha, Inc.
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS EQUITY
For the Years Ended December 31, 2016 and
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
Balance December 31, 2014
|
|
-
|
|
|
-
|
|
|
77,812,000
|
|
|
77,812
|
|
|
909,988
|
|
|
(610,518
|
)
|
|
377,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for cash
|
|
-
|
|
|
-
|
|
|
16,122,000
|
|
|
16,122
|
|
|
1,496,078
|
|
|
-
|
|
|
1,512,200
|
|
Common shares issued for acquisition of subsidiary
|
|
-
|
|
|
-
|
|
|
767,000
|
|
|
767
|
|
|
190,983
|
|
|
-
|
|
|
191,750
|
|
Options expense
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
295,553
|
|
|
-
|
|
|
295,553
|
|
Common shares returned and cancelled
|
|
-
|
|
|
-
|
|
|
(9,224,900
|
)
|
|
(9,225
|
)
|
|
9,225
|
|
|
-
|
|
|
-
|
|
Common shares issued for services
|
|
-
|
|
|
-
|
|
|
650,000
|
|
|
650
|
|
|
260,702
|
|
|
-
|
|
|
261,352
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,599,316
|
)
|
|
(1,599,316
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2015
|
|
-
|
|
|
-
|
|
|
86,126,100
|
|
$
|
86,126
|
|
$
|
3,162,529
|
|
$
|
(2,209,834
|
)
|
$
|
1,038,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclass of conversion option to derivative liability
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(6,175
|
)
|
|
-
|
|
|
(6,175
|
)
|
Options expense
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
65,360
|
|
|
-
|
|
|
65,360
|
|
Stock issued for conversion of debt
|
|
-
|
|
|
-
|
|
|
10,040,000
|
|
|
10,040
|
|
|
62,230
|
|
|
-
|
|
|
72,270
|
|
Derivative liability extinguished on
conversion
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
163,487
|
|
|
-
|
|
|
163,487
|
|
Common shares issued for services
|
|
-
|
|
|
-
|
|
|
500,000
|
|
|
500
|
|
|
12,250
|
|
|
-
|
|
|
12,750
|
|
Revaluation of common shares issued for
services
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,780
|
|
|
-
|
|
|
4,780
|
|
Non-vested options forfeited
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(94,519
|
)
|
|
-
|
|
|
(94,519
|
)
|
Related party gain on sale of battery
assets
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
15,008
|
|
|
-
|
|
|
15,008
|
|
Common stock converted to preferred stock
|
|
27,347,563
|
|
$
|
27,348
|
|
|
(27,347,563
|
)
|
|
(27,348
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,282,073
|
)
|
|
(1,282,073
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2016
|
|
27,347,563
|
|
$
|
27,348
|
|
|
69,318,537
|
|
$
|
69,318
|
|
$
|
3,384,950
|
|
$
|
(3,491,907
|
)
|
$
|
(10,291
|
)
|
The Accompanying Notes are an Integral Part of These
Consolidated Financial Statements
F-4
Galenfeha, Inc.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
For the Years Ended December 31, 2016 and 2015
|
|
Year Ended
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net loss
|
$
|
(1,282,073
|
)
|
$
|
(1,599,316
|
)
|
Adjustments to reconcile net loss to net cash
used in operating activities:
|
|
|
|
|
|
|
Impairment loss on pump assets
|
|
443,935
|
|
|
-
|
|
Depreciation and
amortization from discontinued operations
|
|
25,711
|
|
|
24,390
|
|
Non-vested options forfeited
|
|
(94,519
|
)
|
|
-
|
|
Common shares issued for
services
|
|
17,530
|
|
|
261,352
|
|
Options
expense
|
|
65,360
|
|
|
295,553
|
|
Loss on disposal of fixed
assets
|
|
-
|
|
|
5,317
|
|
Gain on
derivative instruments
|
|
(129,054
|
)
|
|
|
|
Amortization of debt
discounts
|
|
372,016
|
|
|
106,507
|
|
Changes
in Operating Assets and Liabilities:
|
|
|
|
|
|
|
Decrease (increase) in accounts receivable
|
|
107,424
|
|
|
(107,424
|
)
|
Decrease (increase) in accounts receivable from related party
|
|
(13,853
|
)
|
|
113,170
|
|
Decrease (increase) in inventory
|
|
344,070
|
|
|
(753,824
|
)
|
Decrease (increase) in prepaid expenses and other assets
|
|
(3,747
|
)
|
|
(10,083
|
)
|
Increase (decrease) in accounts payable and accrued liabilities
|
|
(166,328
|
)
|
|
193,705
|
|
Increase (decrease) in accounts payable to related parties
|
|
(123,282
|
)
|
|
123,282
|
|
Increase (decrease) in deferred revenue
|
|
43,602
|
|
|
-
|
|
Net cash used in operating activities
|
|
(393,208
|
)
|
|
(1,347,371
|
)
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
Purchase of fixed assets from discontinued
operations
|
|
-
|
|
|
(73,076
|
)
|
Proceeds from sale of fixed
assets
|
|
-
|
|
|
5,000
|
|
Cash paid for acquisition of subsidiary
|
|
-
|
|
|
(160,300
|
)
|
Cash received for sale of
battery assets
|
|
350,000
|
|
|
-
|
|
Net cash provided by (used in) investing activities
|
|
350,000
|
|
|
(228,376
|
)
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
Proceeds from notes payable
|
|
421,000
|
|
|
267,573
|
|
Payments on notes payable
|
|
(617,853
|
)
|
|
(133,152
|
)
|
Proceeds from convertible
debentures, net of original issue discounts
|
|
344,493
|
|
|
-
|
|
Proceeds from related party promissory note
|
|
100,000
|
|
|
-
|
|
Payments on related party
convertible promissory note
|
|
(225,000
|
)
|
|
(125,000
|
)
|
Borrowings on finance contracts
|
|
18,168
|
|
|
20,596
|
|
Payments on finance contracts
|
|
(24,960
|
)
|
|
(13,805
|
)
|
Net advance from officer
|
|
110,000
|
|
|
-
|
|
Proceeds from sale of common
stock
|
|
-
|
|
|
1,512,200
|
|
Net cash provided by financing activities
|
|
125,848
|
|
|
1,528,412
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH
|
|
82,640
|
|
|
(47,335
|
)
|
CASH AT BEGINNING OF PERIOD
|
|
47,333
|
|
|
94,668
|
|
CASH AT END OF PERIOD
|
$
|
129,973
|
|
$
|
47,333
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
Interest expense
|
$
|
115,364
|
|
$
|
2,402
|
|
Income
taxes
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
NONCASH INVESTING AND FINANCING ACTIVITIES
|
|
|
|
|
|
|
Return and cancellation of common stock
|
$
|
-
|
|
$
|
9,225
|
|
Common stock issued for
acquisition of subsidiary
|
|
-
|
|
|
191,750
|
|
Note payable issued for acquisition of
subsidiary
|
|
-
|
|
|
53,000
|
|
Deposit used for acquisition
of subsidiary
|
|
-
|
|
|
66,000
|
|
Assumption of liabilities by an officer for disposal of fixed assets
|
|
-
|
|
|
42,016
|
|
Debt discount due to derivative liabilities
|
|
286,366
|
|
|
-
|
|
Common stock issued for debt
conversion
|
|
72,270
|
|
|
-
|
|
Reclass of conversion option from equity to
derivative liabilities
|
|
6,175
|
|
|
-
|
|
Derivative liability
extinguished on conversion
|
|
163,487
|
|
|
-
|
|
Common stock converted to preferred stock
|
|
27,348
|
|
|
-
|
|
Assets reclassed to held for
sale
|
|
381,041
|
|
|
-
|
|
Liabilities reclassed to held for sale
|
|
350,000
|
|
|
-
|
|
Related party gain on sale of
battery assets
|
|
15,008
|
|
|
-
|
|
The Accompanying Notes are an Integral Part of These
Consolidated Financial Statements
F-5
Galenfeha, Inc.
Notes to Consolidated Financial
Statements
December 31, 2016 and 2015
NOTE 1 - NATURE OF BUSINESS
Galenfeha was incorporated on March 14, 2013 in the state of
Nevada. Our corporate office is located at 420 Throckmorton Street, Suite 200,
Ft. Worth Texas 76102, and our telephone number is 1-817-945-6448. Our website
is www.galenfeha.com.
We are engineering, product development, and manufacturing
company that generates revenue by receiving royalties from products we
developed, providing engineering, regulatory, and business consulting services
across numerous disciplines, such as aerospace, automotive, and medical, and by
making investments in companies that our management team feels to be
undervalued. Our objective is to be a vehicle that assembles a team and finances
the development of groundbreaking new technology that is resistant to adverse
economic and market fluctuations.
With the recent sale of our stored energy division, and our oil
and gas equipment division, we have moved the Company in the direction our
founder originally envisioned.
A condensed version of our 2017 Statement of Work is as
follows:
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1.
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Finalize purchase of Additive Manufacturing,
LLC
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2.
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Explore investments both private and public
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3.
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Develop new technologies for product development,
engineering, and manufacturers
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4.
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Formulate applications for new products recently
developed
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5.
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Commercialize new technology and
products
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NOTE 2 - GOING CONCERN
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. The Company
has a working capital deficit and has incurred net losses and net cash used in
operations since inception. These conditions raise substantial doubt about the
Companys ability to continue as a going concern. The Companys ability to
continue as a going concern is dependent upon the Companys ability to achieve a
level of profitability. The Company intends on financing its future development
activities and its working capital needs largely from the sale of public equity
securities with some additional funding from other traditional financing
sources, including term notes until such time that funds provided by operations
are sufficient to fund working capital requirements. The financial statements of
the Company do not include any adjustments relating to the recoverability and
classification of recorded assets, or the amounts and classifications of
liabilities that might be necessary should the Company be unable to continue as
a going concern.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Financial Statements and related disclosures have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). The Financial Statements have been prepared using the
accrual basis of accounting in accordance with Generally Accepted Accounting
Principles (GAAP) of the United States (See Note 2 regarding the assumption
that the Company is a going concern). Certain prior period amounts have been
reclassified to conform to current period presentation.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, Daylight Pumps, Inc. All
significant inter-company accounts and transactions have been eliminated.
USE OF 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. These estimates and
assumptions also affect the reported amounts of revenues, costs, and expenses
during the reporting period. Management evaluates these estimates and
assumptions on a regular basis. Actual results could differ from those
estimates.
F-6
REVENUE RECOGNITION
The Company recognizes revenue for sales and billing for
freight charges upon delivery of the product to the customer at a fixed and
determinable price with a reasonable assurance of collection, passage of title
to the customer as indicated by shipping terms and fulfillment of all
significant obligations, pursuant to the guidance provided by Accounting
Standards Codification (ASC) Topic 605. For sales to all customers, including
manufacturer representatives, distributors or their third-party customers, these
criteria are met at the time product is delivered. When other significant
obligations remain after products are delivered, revenue is recognized only
after such obligations are fulfilled. In addition, judgments are required in
evaluating the credit worthiness of our customers. Credit is not extended to
customers and revenue is not recognized until we have determined that
collectability is reasonably assured. The Company estimates customer product
returns based on historical return patterns and reduces sales and cost of sales
accordingly.
During the year ended December 31, 2016, 10% of sales were to a
single related party customer. In addition, four other third party customers
contributed to 84% of total revenue in 2016. During the year ended December 31,
2015, 52% of sales were to a single related party customer. These revenue
generating activities have been discontinued (see Note 16).
CASH AND CASH EQUIVALENTS
All cash, other than held in escrow, is maintained with a major
financial institution in the United States. Deposits with this bank may exceed
the amount of insurance provided on such deposits. Temporary cash investments
with an original maturity of three months or less are considered to be cash
equivalents. Cash at December 31, 2016 and December 31, 2015 was $129,973 and
$47,333, respectively.
ACCOUNTS RECEIVABLE
Accounts receivable represents the uncollected portion of
amounts recorded as revenues. Management performs periodic analyses to evaluate
all outstanding accounts receivable to estimate an allowance for doubtful
accounts that may not be collectible, based on the best facts available to
management. Management considers historical collection patterns, accounts
receivable aging trends and specific identification of disputed invoices in its
analyses. After all reasonable attempts to collect a receivable have failed, the
receivable is directly written off. As of December 31, 2016 and December 31,
2015, the balance of the allowance for doubtful accounts was $0 and $0,
respectively.
As of December 31, 2016, accounts receivable from a single
related party customer comprised 100% of accounts receivable. As of December 31,
2015, accounts receivable from one third party customer comprised 81% of
accounts receivable, while another third-party customer comprised 12% of
accounts receivable.
INVENTORIES
Inventories are stated at the lower of cost, determined on a
first-in, first-out basis (FIFO), or market, including direct material costs
and direct and indirect manufacturing costs. Inventory consists of the following
amounts as of December 31, 2016 and 2015.
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2016
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2015
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Raw Materials
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$
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196,760
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$
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311,673
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Work In Process
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-
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-
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Finished Goods
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184,281
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638,944
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Total Inventory (held for sale as of
December 31, 2016)
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$
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381,041
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$
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950,617
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An impairment loss of $44,825 was recognized against
inventory assets held for sale during the year ended December 31, 2016.
PROPERTY AND INTANGIBLE ASSETS
Property, plant and equipment is recorded at cost. Depreciation
is computed using the straight-line method over estimated useful lives of three
to ten years for furniture, fixtures, and equipment and forty years for
improvements. Total depreciation and amortization expense related to property
and equipment was $25,711 and $24,390 for the years ended December 31, 2016 and
2015. Expenditures for repairs and maintenance are charged to expense as
incurred. Intangible asset consisted of a customer list acquired in the Daylight
Pumps acquisition. Amortization is computed using the straight-line method over
the estimated useful life of three years. Total amortization expense related to
intangible asset was $7,599 and total depreciation expense related to property
and equipment was $18,112 for the year ended December 31, 2016. Total
amortization expense related to intangible asset was $5,928 and total
depreciation expense related to property and equipment was $18,462 for the year
ended December 31, 2015.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews and evaluates long-lived assets for
impairment when events or changes in circumstances indicate the related carrying
amounts may not be recoverable. An impairment loss is recognized when estimated
future cash flows expected to result from the use of the asset and its eventual
disposition is less than its carrying amount. When impairment is identified, the
carrying amount of the asset is reduced to its estimated fair value. Assets to
be disposed of are recorded at the lower of net book value or fair market value
less cost to sell at the date management commits to a plan of disposal. There
were impairments of $9,271 and $0 to long-lived assets for the Companys years
ended December 31, 2016 or 2015.
F-7
GOODWILL
Goodwill is carried at cost and is not amortized. The Company
tests goodwill for impairment on an annual basis at the end of each fiscal year,
relying on a number of factors including operating results, business plans,
economic projections, anticipated future cash flows, and marketplace date.
Company management uses its judgment in assessing whether goodwill has become
impaired between annual impairment tests according to specifications set forth
in ASC 350. The Company completed an evaluation of goodwill at December 31, 2016
and 2015 and recognized an impairment loss of $389,839 and $0, respectively.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs, predominately internal labor
costs and costs of materials, are charged to expense when incurred.
ADVERITISING EXPENSES
Advertising expenses are expensed as incurred. The Company
expensed advertising costs of $9,478 and $93,112 for the years ended December
31, 2016 and 2015, respectively.
SHIPPING AND HANDLING CHARGES
The Company incurs costs related to shipping and handling of
its manufactured products. These costs are expensed as incurred as a component
of cost of sales. Shipping and handling charges related to the receipt of raw
materials are also incurred, which are recorded as a cost of the related
inventory.
DEFERRED INCOME TAXES AND VALUATION ALLOWANCE
The Company accounts for income taxes under FASB ASC 740 Topic
Income Taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statements carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period the enactment occurs.
A valuation allowance is provided for certain deferred tax assets if it is more
likely than not that the Company will not realize tax assets through future
operations. No deferred tax assets were recognized at December 31, 2016 and
2015.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per share is calculated in accordance with
FASB ASC 260 topic, Earnings Per Share. The weighted-average number of common
shares outstanding during each period is used to compute basic earning or loss
per share. Diluted earnings or loss per share is computed using the weighted
average number of shares and diluted potential common shares outstanding.
Dilutive potential common shares are additional common shares assumed to be
exercised.
Basic net income (loss) per common share is based on the weighted average number of shares of common stock outstanding at December 31, 2016 and 2015. During the years ended December 31, 2016 and 2015, the Company excluded 300,000 and 2,050,000 options, respectively, from the calculation of diluted loss per share as their inclusion would have been anti-dilutive.
FAIR VALUE ACCOUNTING
As required by the Fair Value Measurements and Disclosures
Topic of the FASB ASC 820, fair value is measured based on a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value as
follows: (Level 1) observable inputs such as quoted prices in active markets;
(Level 2) inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly; and (Level 3) unobservable inputs in
which there is little or no market data, which require the reporting entity to
develop its own assumptions.
The three levels of the fair value hierarchy are described
below:
Level 1
Unadjusted quoted prices in active markets that
are accessible at the measurement date for identical, unrestricted assets or
liabilities;
Level 2
Quoted prices in markets that are not active, or
inputs that are observable, either directly or indirectly, for substantially the
full term of the asset or liability;
Level 3
Prices or valuation techniques that require
inputs that are both significant to the fair value measurement and unobservable
(supported by little or no market activity).
The Company utilized level 3 inputs to estimate the fair value
of its derivative instruments using the Black-Scholes Option Pricing Model.
There were no outstanding assets or liabilities measured on a recurring basis at
December 31, 2016 or 2015.
F-8
SHARE-BASED EXPENSES
FASB ASC 718 Compensation Stock Compensation prescribes
accounting and reporting standards for all share-based payment transactions in
which employee services are acquired. Transactions include incurring
liabilities, or issuing or offering to issue shares, options, and other equity
instruments such as employee stock ownership plans and stock appreciation
rights.
Share-based payments to employees, including grants of employee
stock options, are recognized as compensation expense in the financial
statements based on their fair values. That expense is recognized over the
period during which an employee is required to provide services in exchange for
the award, known as the requisite service period (usually the vesting period).
The Company accounts for stock-based compensation issued to
non-employees and consultants in accordance with the provisions of FASB ASC
505-50, Equity Based Payments to Non-Employees. Measurement of share-based
payment transactions with non-employees is based on the fair value of whichever
is more reliably measurable: (a) the goods or services received; or (b) the
equity instruments issued. The fair value of the share-based payment transaction
is determined at the earlier of performance commitment date or performance
completion date.
Aggregate share-based expenses (including options and common
stock) for the years ending December 31, 2016 and 2015 were $(11,629) and
$556,905 respectively.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Management does not expect the adoption of any recently issued
accounting pronouncements to have a material impact on the Companys present or
future financial statements.
NOTE 4 PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated
depreciation. Depreciation is recorded using the straight-line method over the
estimated useful lives of the related assets, ranging from three to forty years.
A summary is as follows:
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December 31, 2016
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December 31, 2015
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Manufacturing assets
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$
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-
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$
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168,015
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Vehicles
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-
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-
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Furniture and equipment
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-
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19,318
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Improvements
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-
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21,472
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-
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208,805
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Less accumulated depreciation
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-
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(21,419
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)
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Property and equipment, net
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$
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-
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$
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187,386
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Depreciation expense related to property and equipment was
$18,112 and $18,462 for the years ended December 31, 2016 and 2015,
respectively.
During the year ended December 31, 2016, the Company disposed
all of its manufacturing assets, furniture and equipment, and leasehold
improvements when the Company sold its stored energy division to Fleaux Services
of Louisiana, LLC, a related party. All of the manufacturing assets, furniture
and equipment, and leasehold improvements were on hand and used at the
manufacturing facility in Shreveport, Louisiana. As of December 31, 2016 the
Company had closed this office and terminated any leases relating these
facilities.
During the year ended December 31, 2015, James Ketner, Chairman
of the Board, purchased a GMC Truck and a Chrysler automobile from the company
in exchange for the settlement of an officer loan in the amount of $24,316, a
cash payment of $5,000 and the assumption of the note payable to Chrysler
Capital in the amount of $17,700. These transactions resulted in a loss on the
disposal of fixed assets of $5,317. Cash paid for purchase of fixed assets was $73,076 during the year ended December 31, 2015.
NOTE 5 NOTES PAYABLE
On May 12, 2016, the Company incurred a loan of $5,625 relating
to the renewal of their commercial general liability insurance. The note has an
interest rate of 8.00%, payable in payments of $583 for 10 months. Additionally
in May of 2016, the Company incurred a loan of $5,746 relating to the renewal of
their workers compensation, commercial property, and commercial automobile
insurance. The loan balance increased by $6,798 on September 27, 2016 due to an
additional workers compensation assessment after auditing the prior payroll
period. The note has an interest rate of 0.00%, payable in payments of $936,
$1,223, $599, and $7.669 in months one, two, three and four, respectively, and
$509 per month for the remaining four months. The Company has cancelled all
insurance policies financed under these agreements and the outstanding balance
on these finance agreements was $0 and $6,791 as of December 31, 2016 and
December 31, 2015, respectively.
F-9
In August 2015, the Company incurred a loan of $78,593 that is
secured by a customer purchase order. The loan has an interest rate of 4.75%
payable in four payment of $19,843 with the first payment due on December 28,
2015. Since the prior customer purchase orders had been fulfilled and paid, the
loan of $78,593 was repaid by a second loan of $88,980 on December 28, 2015
which was secured by current customer purchase orders. The second loan of
$88,980 has an interest rate of 4.75% and is payable in one principal payment of
$88,980 plus accrued interest on April 28, 2016. The outstanding balance on this
loan was $0 and $88,980 as of December 31, 2016 and December 31, 2015,
respectively.
The Company also took out a line of credit of $100,000 on
August 5, 2015 which is payable on demand. The line of credit is secured by all
present and future inventory, all present and future accounts receivable, other
receivables, contract rights, instruments, documents, notes, and all other
similar obligation and indebtedness that may now and in the future be owed to
the Company, and all general intangibles. On January 15, 2016 the Companys line
of credit was increased from $100,000 to $200,000. The Company withdrew an
additional $70,000 in funds from the line of credit and paid loan origination
and documentation fees of $1,000 at closing to bring the total outstanding line
of credit balance to $171,000 as of January 15, 2016. Under the terms of the new
agreement the loan is a fixed rate (4.75%) revolving line of credit loan to the
Company for $200,000 due on January 15, 2017. The outstanding balance on this
loan was $0 and $100,000 as of December 31, 2016 and December 31, 2015,
respectively. Additionally, the line of credit is secured by a deposit account
held at the Grantors institution which had a cash balance of $0 and $11,499 as
of December 31, 2016 and December 31, 2015, respectively.
On August 23, 2016, the Company entered into a Promissory Note
Agreement with Kevin L. Wilson, in the amount of $350,000. The note bears an
interest rate of 11 ½ % per annum from the date until the principal is paid in
full. This note may be prepaid in whole or in part, without penalty. All
outstanding principal, interest and fees shall be due and payable on or before
August 23, 2017. As of December 31, 2016, the principal and interest due on the
note is $364,336 (the accrued interest of $14,336 is presented as accounts
payable in the consolidated balance sheet). This note was assumed by the
purchaser in the sale of the Companys Daylight Pumps division. It is classified
as liabilities held for sale as of December 31, 2016.
On May 12, 2016, the Company entered into a Promissory Note
Agreement with Diane Moore, a related party, in the amount of $100,000. The note
bears an interest rate of 5% per annum until the balance is paid in full.
Repayment of the loan is due on or before December 31, 2016. The note was paid
in full on November 16, 2016 leaving a balance due of $0 as of December 31,
2016, and the holder agreed to forego any accrued interest due under the terms
of the note.
In 2015, the Company financed inventory purchased from Daylight
Pumps in the related business combination in the amount of $53,000 which is
payable to Warren T. Robertson. The note has an interest rate of 0.00%, payable
in four payments of $13,250, by the end of each quarter, beginning April 1,
2105. The Company repaid $53,000 under this note during the year ended December
31, 2015 and the outstanding balance was $0 as of December 31, 2015.
During 2015, the Company made payments of $1,559 towards an
outstanding note payable to Chrysler Capital in the amount of $19,259 as of
December 31, 2014. The remaining balance of $17,700 was assumed by James Ketner,
former Chairman of the Board (see Note 4).
The current maturities and five year debt schedule for the
notes is as follows:
2016
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$
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-
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2017
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350,000
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2018
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-
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2019
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-
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2020
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-
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Total current notes payable
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$
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350,000
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NOTE 6 CONVERTIBLE LOANS
As of November 4, 2016, the Company had terminated and
extinguished all of the convertible notes the Company entered into during the
first and second quarters of 2016.
February 2016 Note
Effective February 29, 2016 the Company entered into a
Convertible Promissory Note (Vista Note) with Vista Capital Investments, LLC
pursuant to which the Company issued Vista Capital Investments, LLC a
convertible note in the amount of $275,000 with an original issue discount in
the amount of $25,000. The principal amount due Vista Capital Investments, LLC
is based on the consideration paid. The maturity date is two years from the
effective date of each payment. On February 29, 2016 the Company received
consideration of $75,000 for which an original issue discount of $7,500 was
recorded. In addition, the Company recognized a discount of $5,625 on fees paid
upon entering into this agreement and recognized accrued interest under the
Vista Note totaling $16,500. There were no additional borrowings under the Vista
Note during the twelve months ended December 31, 2016. The Vista Note carries an
interest rate of 6% which shall be applied on the issuance date to the original
principal amount.
The Vista Note provides Vista Capital Investments, LLC the
right at any time, to convert the outstanding balance (including accrued and
unpaid interest) into shares of the Companys common stock at 70% of the lowest
trade price in the 25 trading days previous to the conversion, additional
discounts may apply in the case that conversion shares are not deliverable or if
the shares are ineligible. As a result of the derivatives calculation (see Note 8) an additional discount of $72,775 was recorded. On September 1, 2016 Vista converted $9,951 of the Vista Convertible Note into a total of 790,000 shares of Common Stock at a fair value of
$0.01260 per share. On September 28, 2016 Vista converted $10,200 of the Vista Convertible Note into a total of 2,000,000 shares of Common Stock at a fair value of $0.0051 per share. See Note 9.
F-10
Amortization of the debt discount totaled $102,400 for the twelve months ended December 31, 2016. The principal balance due, net of the amortized discount under the Vista Note was $0 at December 31, 2016.
March 2016 Note
Effective March 2, 2016 the Company entered into a Convertible Promissory Note (“JMJ Note”) with JMJ Financial pursuant to which the Company issued JMJ Financial a convertible note in the amount of $500,000 with an original issue
discount in the amount of $50,000. The principal amount due JMJ is based on the consideration paid. The maturity date is two years from the effective date of each payment. On March 2, 2016 the Company received consideration of $100,000 for
which an original issue discount of $10,000 was recorded. In addition, the Company recognized a discount of $7,500 on fees paid upon entering into this agreement. There were no additional borrowings under the JMJ Note during the twelve
months ended December 31, 2016. If the Company doesn’t repay the JMJ Note on or before 90 days from the effective date the Company may not make further payments on this JMJ Note prior to the maturity date and a one-time interest charge of 12%
will be applied to the principal amount. Since no payments were made on the note on or before 90 days from the effective date of the note, accrued interest due was recorded in the amount of $13,200 on June 1, 2016 which shall be applied to the
original principal balance. Interest paid under the JMJ Note totaled $17,672 at December 31, 2016.
The JMJ Note provides JMJ Financial the right at any time, to convert the outstanding balance (including accrued and unpaid interest) into shares of the Company’s common stock at 60% of the lowest trade price in the 25 trading days previous to
the conversion, additional discounts may apply in the case that conversion shares are not deliverable or if the shares are ineligible. As a result of the derivatives calculation (see Note 8) an additional discount of $96,374 was recorded. On
September 12, 2016 JMJ converted $8,820 of the JMJ Convertible Note into a total of 700,000 shares of Common Stock at a fair value of $0.01260 per share. On September 21, 2016 JMJ converted $9,000 of the JMJ Convertible Note into a total
of 750,000 shares of Common Stock at a fair value of $0.01200 per share. On September 28, 2016 JMJ converted $7,344 of the JMJ Convertible Note into a total of 1,200,000 shares of Common Stock at a fair value of $0.006120 per share. On
October 5, 2016 JMJ converted $7,800 of the March 2016 JMJ Convertible Note into a total of 1,300,000 shares of Common Stock at a fair value of $0.006000 per share. On October 18, 2016 JMJ converted $9,000 of the March 2016 JMJ
Convertible Note into a total of 1,500,000 shares of Common Stock at a fair value of $0.006000 per share. On October 25, 2016 JMJ converted $10,152 of the March 2016 JMJ Convertible Note into a total of 1,800,000 shares of Common Stock at a
fair value of $0.005640 per share. See Note 9.
Amortization of the debt discount totaled $142,116 for the twelve months ended December 31, 2016. The principal balance due, net of the amortized discount under the JMJ Note was $0 at December 31, 2016.
April 2016 Note
Effective April 22, 2016 the Company entered into a Convertible Promissory Note (“Auctus Note”) with Auctus Fund, LLC pursuant to which the Company issued Auctus Fund, LLC a convertible note in the amount of $75,000. The maturity
date is January 22, 2017. On April 22, 2016 the Company received consideration of $75,000. In addition, the Company recognized a discount of $6,750 on fees paid upon entering into this agreement. The Auctus Note carries an interest rate of
10% which shall be applied on the issuance date to the original principal amount. Interest paid under the Auctus Note totaled $17,672 for the twelve months ended December 31, 2016.
The Auctus Note provides Auctus Fund, LLC the right at any time, to convert the outstanding balance (including accrued and unpaid interest) into shares of the Company’s common stock at 60% of the lowest trade price in the 25 trading days
previous to the conversion, additional discounts may apply in the case that conversion shares are not deliverable or if the shares are ineligible. As a result of the derivatives calculation (see Note 8) an additional discount of $62,625 was
recorded. Amortization of the debt discount totaled $75,000 for the twelve months ended December 31, 2016. The principal balance due, net of the amortized discount under the Auctus Note was $0 at December 31, 2016.
May 2016 Note
Effective April 18, 2016 the Company entered into a Convertible Promissory Note (“Adar Note”) with Adar Bays, LLC pursuant to which the Company issued Adar Bays, LLC a convertible note in the amount of $52,500 with an original issue
discount in the amount of $2,500. The maturity date is April 18, 2017. On May 12, 2016 the Company received consideration of $50,000 for which an original issue discount of $2,500 was recorded. In addition, the Company recognized a
discount of $6,250 on fees paid upon entering into this agreement. The Adar Note carries an interest rate of 8% which shall be applied on the issuance date to the original principal amount. Interest paid under the Adar Note totaled $27,207
for the twelve months ended December 31, 2016.
The Adar Note provides Adar Bays, LLC the right at any time, to convert the outstanding balance (including accrued and unpaid interest) into shares of the Company’s common stock at 60% of the lowest trade price in the 20 trading days previous
to the conversion, additional discounts may apply in the case that conversion shares are not deliverable or if the shares are ineligible. As a result of the derivatives calculation (see Note 8) an additional discount of $39,550 was recorded.
Amortization of the debt discount totaled $52,500 for the twelve months ended December 31, 2016. The principal balance due, net of the amortized discount under the Adar Note was $0 at December 31, 2016.
F-11
NOTE 7 CONVERTIBLE LOANS RELATED PARTY
The Company issued a convertible promissory note to a related
party in 2014 for $250,000 (see Note 13). The Company accounts for convertible
notes payable in accordance with the guidelines established by the Financial
Accounting Standards Boards (FASB) Accounting Standards Codification (ASC)
Topic 470-20, Debt with Conversion and Other Options. The Beneficial Conversion
Feature ("BCF") of a convertible note is normally characterized as the
convertible portion or feature of certain notes payable that provide a rate of
conversion that is below market value or in-the-money when issued. The Company
records a BCF related to the issuance of a convertible note when issued and also
records the estimated fair value of any warrants issued with those convertible
notes. Beneficial conversion features that are contingent upon the occurrence of
a future event are recorded when the contingency is resolved.
The BCF of a convertible note is measured by allocating a
portion of the note's proceeds to the warrants, if applicable, and as a discount
on the carrying amount of the convertible note equal to the intrinsic value of
the conversion feature, both of which are credited to additional
paid-in-capital. The value of the proceeds received from a convertible note is
then allocated between the conversion features and warrants and the debt on an
allocated fair value basis. The allocated fair value is recorded in the
financial statements as a debt discount (premium) from the face amount of the
note and such discount is amortized over the expected term of the convertible
note (or to the conversion date of the note, if sooner) and is charged to
interest expense.
The note is convertible into common stock of the Company at
$0.50 per share. The intrinsic value of the beneficial conversion feature was
determined to be $125,000 at the commitment date and the discount is being
amortized over the one year life of the promissory note. As of December 31,
2016, $125,000 of the discount has been amortized as interest expense. Interest
amortized for the years ended December 31, 2016 and 2015 was $0 and $106,507,
respectively. The Company repaid $125,000 under this note during the year ended
December 31, 2015, and $125,000 during the year ended December 31, 2016. The
outstanding balance was $0 as of December 31, 2016.
This conversion option was accounted for as a derivative
liability during the year ended December 31, 2016 resulting in a
reclassification of the fair value of the derivative liability of $6,175 from
equity (see Note 8).
Interest expense accrued on the convertible promissory note was
$0 and $11,699 for the years ended December 31, 2016 and 2015, respectively. The
note matured on November 7, 2015 and is currently paid in full. The note was
unsecured, bared interest at 7% per annum and was convertible into common stock
at $0.50 per share. The note was paid in full on November 16, 2016 and the
holder agreed to forego any accrued interest due under the terms of the note.
NOTE 8 DERIVATIVE LIABILITY
During the year ended December 31, 2016, the Company identified
conversion features embedded within its convertible debt. The Company has
determined that the conversion feature of the Notes represents an embedded
derivative since the Notes are convertible into a variable number of shares upon
conversion. Accordingly, the embedded conversion feature must be bifurcated from
the debt host and accounted for as a derivative liability. Therefore, the fair
value of the derivative instruments have been recorded as liabilities on the
balance sheet with the corresponding amount recorded as discounts to the Notes.
Such discounts will be accreted from the issuance date to the maturity date of
the Notes. The change in the fair value of the derivative liabilities will be
recorded in other income or expenses in the statement of operations at the end
of each period, with the offset to the derivative liabilities on the balance
sheet. The fair values of the embedded derivative liabilities were determined
using the Black-Scholes valuation model on the issuance dates with the
assumptions in the table below.
The change in fair value of the Companys derivative
liabilities for the year ended December 31, 2016 is as follows:
December 31, 2015 fair value
|
$
|
-
|
|
Additions recognized as derivative loss at
inception
|
|
437,086
|
|
Additions recognized as note
discount at inception
|
|
286,366
|
|
Derivative liability extinguished on
conversion
|
|
(163,487
|
)
|
Reclass from equity to
derivative liability
|
|
6,175
|
|
Fair value mark to market adjustment
|
|
(566,140
|
)
|
December 31, 2016 fair value
|
$
|
-
|
|
The gain on the change in fair value of derivative liabilities
for the year ended December 31, 2016 totaled $129,054.
The fair value at the issuance and re-measurement dates for the
convertible debt treated as derivative liabilities are based upon the following
estimates and assumptions made by management for the year ended December 31,
2016:
Exercise prices
|
See Notes 6 and
7
|
Expected dividends
|
0%
|
Expected volatility
|
188%-400%
|
Expected term
|
See Notes 6 and 7
|
Discount rate
|
.29%-.85%
|
F-12
NOTE 9 - SHAREHOLDERS EQUITY
PREFERRED STOCK
The authorized stock of the Company consists of 50,000,000
preferred shares with a par value of $0.001.
During 2016, four officers and directors of the Company
exchanged 27,347,563 common shares for 27,347,563 preferred shares. As of
December 31, 2016, 27,347,563 shares of the Companys preferred stock Series B
were issued and outstanding.
On December 20, 2016, shareholders of the company approved an
amendment to the Bylaws for the creation of preferred stock. The preferred class
of stock will consist of two (2) series, Series A, and Series B. All affiliates
of the company who purchased stock during the formation of the company and who
purchased stock for financing activities at prices below market will move their
common shares into the Series B preferred stock, effective immediately. The
Series B votes 1:1; is subject to all splits the same as common; converts back
to common 1:1; and cannot be converted back to common for resale in the open
market until a 30 day VWAP (volume weighted average price) of $.45 cents has
been met in the Companys public trading market. All future sales of company
securities by affiliates will adhere to rules and regulations of the Commission.
Affiliates who purchased stock at offering prices that were
current at the time of purchase, and affiliates who make open market purchases
and are directly responsible for a merger/acquisition that brings retained
earnings to the company, can convert these common shares 1:1 into Series A
preferred stock. Series A votes 1:1; converts back to common 1:1; is not subject
to splits in order to facilitate mergers, acquisitions, or meeting the
requirements of a listed exchange; and cannot be converted back to common for
resale in the open market until a 30 day VWAP of $3.50 per share has been met in
the Companys public trading market. All future sales of company securities by
affiliates will adhere to rules and regulations of the Commission.
COMMON STOCK
The authorized stock of the Company consists of 150,000,000
common shares with a par value of $0.001.
As of December 31, 2016 and December 31, 2015, 69,318,537 and
86,126,100 shares of the Companys common stock were issued and outstanding.
On February 17, 2015, the Company sold 1,350,000 shares of its
common stock to one private investor at a price of $0.10 per share, for a total
of $135,000. Between February 2 and April 27, 2015, the Company sold 10,272,000
shares of common stock to 117 private investors at a fixed price of $0.10 per
share, or an aggregate sale price of $1,027,200. On September 18, 2015, the
Company sold 2,000,000 shares of its common stock to an entity controlled by
former Board Chairman James Ketner at a price of $0.05 per share, for a total of
$100,000. On September 24, 2015, the Company sold 2,500,000 shares of common
stock to Galenfeha President/CEO Lucien Marioneaux, Jr. at a fixed price of
$0.10 per share, for a total of $250,000. These purchases were made pursuant to
the board resolution ratified on August 28, 2015 for affiliate stock purchase.
In October 2014, the Company entered into an agreement for the issuance of 1,000,000 common shares for CAD/CAM Engineering Design Services for GLFH1200 series battery development. The shares vest in equal installments of 250,000 each year following the date of the agreement. On May 1, 2015, the Company issued 250,000 shares under this award. Since inception through December 31, 2015, $141,352 was expensed under this award. This nonemployee award is valued upon completion of services. This nonemployee signed an agreement effective July 22, 2016 between them and the Company acknowledging that the Company does not anticipate the need for any additional engineering contract services resulting in the return of non-vested options back to the Company. This resulted in a reduction to engineering research and development expense of $23,311 for the year ended December 31, 2016.
On July 1, 2015, the Company issued 400,000 shares of common
stock for legal services rendered valued at $120,000. The $120,000 was expensed
during the year ended December 31, 2015.
Following the passing of Director Richard G. Owston on June 20,
2015, 5,124,900 shares of common stock were returned to the Companys treasurer
and cancelled, pursuant to the lockup agreement signed by all Directors and
filed with the SEC on October 25, 2013.
Following the tendered resignation of James Ketner, Chairman of the Board on December 31, 2015, 4,100,000 shares of common stock were returned to the Company’s treasurer and cancelled, pursuant to the lockup agreement signed by all Directors and filed with the SEC on October 25, 2014.
During the year ended December 31, 2015, the Company issued
767,000 common shares for the acquisition of its subsidiary, valued at $191,750
(see Note 12).
In July 2016, the Company entered into an agreement for the
issuance of 1,000,000 common shares for consulting services. The shares are to
be transferred in four quarterly installments of two hundred fifty thousand
shares on or before the fifth day of the following months: August 2016, October
2016, January 2017, and April 2017. On August 5, 2016, the Company issued
250,000 shares under this award. On October 5, 2016, the Company issued another
250,000 shares under this award. Since inception through December 31, 2016,
$17,530 was expensed under this award and $7,529 remains to be expensed over the
remaining service period.
On September 1, 2016 Vista converted $9,954 of the February
2016 Vista Convertible Note into a total of 790,000 shares of Common Stock at a
fair value of $0.01260 per share. See Note 6.
F-13
On September 12, 2016 JMJ converted $8,820 of the March 2016
JMJ Convertible Note into a total of 700,000 shares of Common Stock at a fair
value of $0.01260 per share. See Note 6.
On September 21, 2016 JMJ converted $9,000 of the March 2016
JMJ Convertible Note into a total of 750,000 shares of Common Stock at a fair
value of $0.01200 per share. See Note 6.
On September 28, 2016 JMJ converted $7,344 of the March 2016JMJ
Convertible Note into a total of 1,200,000 shares of Common Stock at a fair
value of $0.006120 per share. See Note 6.
On September 28, 2016 Vista converted $10,200 of the February
2016 Vista Convertible Note into a total of 2,000,000 shares of Common Stock at
a fair value of $0.0051 per share. See Note 6.
On October 5, 2016 JMJ converted $7,800 of the March 2016 JMJ
Convertible Note into a total of 1,300,000 shares of Common Stock at a fair
value of $0.006000 per share. See Note 6.
On October 18, 2016 JMJ converted $9,000 of the March 2016 JMJ
Convertible Note into a total of 1,500,000 shares of Common Stock at a fair
value of $0.006000 per share. See Note 6.
On October 25, 2016 JMJ converted $10,152 of the March 2016 JMJ
Convertible Note into a total of 1,800,000 shares of Common Stock at a fair
value of $0.005640 per share. See Note 6.
NOTE 10 - OPTIONS
During the year ended December 31, 2015, the Company granted an aggregate of 2,050,000 options to a military sales representative and three employees. Col. Ashton Naylor (Ret) received 100,000 options exercisable at $0.25 per share, Chris Watkins received 750,000 options exercisable at $0.25 per share, Jeff Roach received 1,000,000 options exercisable at $0.20 per share, and Brian Nallin received 200,000 options exercisable at $0.20 per share. These options expire on April 1, 2016; June 11, 2020, February 1, 2017, and December 31, 2017 respectively. The options granted to Brian Nallin vest immediately and the other options vest in equal tranches over periods ranging from 2 to 5 years. The aggregate fair value of the option grants was determined to be $430,839 using the Black-Scholes Option Pricing Model and the following assumptions: volatilities between 218% and 396%, risk free rates between .27% and 1.74%, expected terms between 1 and 5 years and zero expected dividends. The fair value of the award is being expensed over the vesting periods. $65,360 and $295,553 was expensed during the year ended December 31, 2016 and December 31, 2015, respectively, $91,519 was reversed from option expense due to non-vested options forfeited for the year ended December 31, 2016, and $0 remains to be expensed over the remaining vesting period.
As of December 31, 2015, there were 2,050,000 options
outstanding of which 925,000 were exercisable. During 2016, 1,750,000 of these
options were forfeited. As of December 31, 2016, there were 300,000 options
outstanding which were exercisable.
The range of exercise prices and remaining weighted average
life of the options outstanding at December 31, 2015 were $0.20 to $0.25 and
2.37 years, respectively. The aggregate intrinsic value of the outstanding
options at December 31, 2015 was $0. The exercise price and remaining weighted
average life of the options outstanding at December 31, 2016 were $0.25 and 0.08
years, respectively. The aggregate intrinsic value of the outstanding options at
December 31, 2016 was $0. All options mentioned above are for employees that are
no longer with the company, by either termination because of discontinued
operations, or leaving the company of their own accord. At the time of this
filing, there were no options outstanding which are exercisable.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
The Company entered into two lease agreements for office and
research/warehouse facilities in Louisiana. The office lease is $10,200 per year
for 24 months beginning May 1, 2014. Beginning in May of 2016 this lease became
month to month and is $850 per month. The research/warehouse facility lease is
$2,600 per month for 24 months beginning on November 1, 2014. Both leases in
Louisiana were terminated in November of 2016.
Additionally, the Company leases space in Fort Worth, Texas for
corporate facilities for $99 monthly or $1,188 per year. The terms of this lease
are also month to month.
Year Ended
|
|
Amount
|
|
2016
|
|
29,400
|
|
2017
|
|
-
|
|
2018
|
|
-
|
|
2019
|
|
-
|
|
2020
|
|
-
|
|
|
$
|
29,400
|
|
From time to time the Company may be a party to litigation
matters involving claims against the Company. Management believes that there are
no current matters that would have a material effect on the Companys financial
position or results of operations.
F-14
On September 15, 2016, the Company entered into a Cooperative
Endeavor and Joint Marketing Agreement with T&L Consolidated, LLC whereby
T&L Consolidated, LLC was engaged to locate and identify interested parties
to the Company and assist with brokering the sale of the timer and Daylight Pump
division to such third parties. Upon a sale of Daylight Pumps to a customer
identified by T&L, the parties agree to the following distribution of the
sales proceeds. The first $650,000 shall be paid to the Galenfeha, thereafter
the next $650,000 shall be paid to T&L, and anything in excess of $1,300,000
shall be split equally between the Company and T&L. As of December 31, 2016,
we do not anticipate using the services of T&L Consolidated, and nothing has
been paid to this third party in the twelve months ending December 31, 2016 and
2015.
Galenfeha entered into an Independent Sales Contract with
Electromax Power Solutions, LLC (EPS) with an initial two year term beginning
October 2016 and ending October 2018. This contract shall automatically renew on
the two year anniversary for an additional one year term. EPS shall facilitate
sales of Galenfeha products, affiliated products, and equipment to customers.
Galenfeha shall pay EPS 20% of all new initial and sustained revenue derived by
EPSs efforts, involvement, sales, and any other activities brought forth by EPS
to Galenfeha. Net sales revenue shall be measured as the product sales price
less cost of goods sold according to generally accepted accounting principles.
As of December 31, 2016, we do not anticipate using the services of Electromax
Power Solutions, LLC, and nothing has been paid to this third party in the
twelve months ending December 31, 2016 and 2015.
NOTE 12 BUSINESS COMBINATION
On March 21, 2015, the Company completed its acquisition of
Daylight Pumps, LLC, a corporation organized under the laws of Arkansas. The
acquisition was for the business process and inventory assets. Consideration was
$226,300 in cash (of which $66,000 was paid as a deposit in 2014), a note
payable of $53,000 and 767,700 common shares of stock. Upon evaluation of the
inventory and customer list, it was determined fair market values were $58,413
and $22,798, respectively, with the balance considered additional goodwill in
the transaction. The stock consideration was determined at the price of $0.25 as
traded on March 21, 2015. The acquisition was reported as follows:
|
|
March 21, 2015
|
|
Inventory assets
|
$
|
58,413
|
|
Customer list
|
|
22,798
|
|
|
|
81,211
|
|
|
|
|
|
Cash for consideration
|
|
226,300
|
|
Note payable
|
|
53,000
|
|
Fair value of stock for consideration
|
|
191,750
|
|
Total Consideration
|
|
471,050
|
|
|
|
|
|
Goodwill
|
$
|
389,839
|
|
We have not included unaudited pro forma results of operations
data for the year ended December 31, 2015 and 2014 as if the Company and the
entity described above had been combined on January 1, 2014, because historical
financial information of Daylight Pumps, LLC prior to the date of acquisition
was not available.
NOTE 13 RELATED PARTY TRANSACTIONS
On October 31, 2014, the Company entered into a Convertible
Promissory Note Agreement with Ray Moore Sr., a related party, in the amount of
$250,000. The note bears an interest rate of 7% per annum until paid in full.
Repayment of the loan is due on or before November 7, 2015. The lender shall
have the right to convert this indebtedness to equity shares of Galenfeha at the
rate of one share per $.50 of indebtedness for a total of 500,000 shares upon
the expiration date, or at any time the Lender desired for the relieve of
indebtedness of Maker. The Company received $250,000 cash consideration on
November 6, 2014, per the agreement. On March 10, 2015, Galenfeha made a cash
payment of $125,000 on the note, leaving a balance of $125,000 plus accrued
interest. The note was paid in full on November 16, 2016 with a final cash
payment of $125,000, leaving a principal and interest balance due of $0 as of
December 31, 2016, and the holder agreed to forego any accrued interest due
under the terms of the note.
On May 12, 2016, the Company entered into a Promissory Note
Agreement with Diane Moore, a related party, in the amount of $100,000. The note
bears an interest rate of 5% per annum until the balance is paid in full.
Repayment of the loan is due on or before December 31, 2016. The note was paid
in full on November 16, 2016 leaving a principal and interest balance due of $0
as of December 31, 2016, and the holder agreed to forego any accrued interest
due under the terms of the note.
On November 16, 2016, the Company entered into an agreement
with Fleaux Services, LLC for the sale of the companys battery and stored
energy division, which includes, but is not limited to, all inventory, support
equipment, and office operations located at 9204 Linwood Avenue, Suite 104 and
105, Shreveport, LA 71106. Mr. Trey Moore is the President/CEO of Fleaux
Services, and also is a Director of Galenfeha, Inc. The sale is for a cash
consideration of $350,000 USD; plus a 3% royalty on all Galenfeha-style
batteries sold over the course of the next two years from the date this purchase
agreement was executed. The cash consideration was for $175,000 in inventory and
$175,000 for business good-will and was provided directly by Fleaux Services in
cash. The sale includes all future sales, future purchase orders resulting from
previous negotiations, and all intellectual property related to Galenfeha, Inc.
battery manufacturing and distribution. Fleaux Services, LLC will assume
responsibility for expenses related to the Galenfeha, Inc. battery division that
includes previous expenses incurred for sales meetings that secured future
purchase orders. All contractual agreements between the Galenfeha Inc. battery division and outside parties, including, but not limited to, consultants, suppliers, distributors, and sales representatives, become the responsibility of Fleaux Services, LLC. This includes all suppliers’
outstanding invoices for materials not yet delivered and support equipment that will be relinquished to Fleaux Services, LLC upon the execution of this agreement. Galenfeha, Inc. will retain payments on all current outstanding purchase orders
invoiced before the date of this purchase agreement. A gain on the sale of the battery and stored energy division of $15,008 was recognized as a capital transaction.
F-15
On November 4, 2016, Mr. James Ketner, Galenfeha’s Chairman and CEO made a cash contribution to the Company in the amount of $100,000 in exchange for a note that has a fixed repayment of $110,000. The note bears no interest, and can be
repaid by the Company when the funds become available. The note can be renegotiated between Galenfeha and Mr. Ketner if both parties agree to the terms. There were no principal repayments on the note for the twelve months ending December 31, 2016,
and the principal balance due under the note as of December 31, 2016 was $110,000.
Falcon Resources, LLC & MarionAv, LLC are two companies owned by Board Member, Trey Moore, and CEO/President, Lucien Marioneaux, Jr., respectively. These related party entities provide flight services to employees and directors of the Company.
The total amount paid for flight services to Falcon Resources, LLC was $6,600 and $18,838 for the years ended December 31, 2016 and 2015, respectively. The outstanding payable balance to Falcon Resources, LLC was $0 and $3,511 for
the years ended December 31, 2016 and 2015, respectively. The total amount paid for flight services to MarionAv, LLC was $5,050 and $2,343 for the years ended December 31, 2016 and 2015, respectively. The outstanding payable balance to
MarionAv, LLC was $0 and $1,388 for the years ended December 31, 2016 and 2015, respectively.
Galenfeha sells a portion of its finished goods to Fleaux Services, LLC, a company owned by Board Member, Trey Moore. During the year ended December 31, 2016 and December 31, 2015, sales to the related company totaled $94,005 and $670,838,
respectively. As of December 31, 2016 and 2015, the Company had outstanding receivables from the related party company of $14,189 and $336, respectively. During the year ended December 31, 2015, the Company purchased $25,500 of
engineering research & development services rendered and $9,359 of shop supplies form Fleaux Services, LLC. During the year ended December 31, 2016, the Company paid Fleaux Services, LLC $17,032 for inventory and shop supply purchases.
As of December 31, 2016 and 2015, the Company had an outstanding accounts payable balance to Fleaux Services, LLC totaling $0 and $28,744, respectively.
Galenfeha purchases component parts used in the assembly of inventory items from River Cities Machine, LLC, a company owned by Board Member and former President and CEO, Lucien Marioneaux, Jr. During the year ended December 31, 2016 and 2015,
purchases from the related company totaled $960 and $202,258, respectively. As of December 31, 2016 and 2015, the Company had an outstanding accounts payable balance to River Cities Machine, LLC totaling $0 and $76,441, respectively.
In addition, during the twelve months ended December 31, 2016 and 2015, the Company generated revenue of $720 and $6,000, respectively, from Board Member and former President and CEO, Lucien Marioneaux, Jr.
Galenfeha agreed to pay Lucien Marioneaux, Jr., Board Member and former President & CEO, an auto allowance of $1,500 per month beginning May 2015, and the Company terminated this agreement effective October 1, 2016. For the twelve months
ending December 31, 2016 and 2015, the Company paid a total of $13,500 and $10,500, respectively, to Mr. Marioneaux. As of December 31, 2016 and 2015, the Company had outstanding payable balances to Lucien Marioneaux of $0 and
$1,500, respectively.
Beginning in May of 2015, the Company agreed to pay a consulting fee of $8,000 per month to KTNR, Inc., a related party entity owed by the former Chairman of the Board, James Ketner. Total consulting fees paid during the years ended December 31,
2015 totaled $56,000, and the December 2015 consulting fee due to KTNR, Inc. was paid during the twelve months ending December 31, 2016. The consulting agreement with KTNR, Inc. terminated on December 31, 2015. As of December 31, 2015, the
Company had an outstanding payable balance to KTNR, Inc. of $8,000.
On September 18, 2015, the Company sold 2,000,000 shares of its common stock to an entity President & CEO, James Ketner, controls at a price of $0.05 per share, for a total of $100,000. On September 24, 2015, the Company sold 2,500,000
shares of common stock to Board Member and former President/CEO Lucien Marioneaux, Jr. at a fixed price of $0.10 per share, for a total of $250,000. These purchases were made pursuant to the board resolution ratified on August 28, 2015 for
affiliate stock purchase. As of December 31, 2015, the Company had an outstanding payable to Lucien Marioneaux of $1,500. As of December 31, 2016, the Company had outstanding payable balances to Lucien Marioneaux of $0.
Other outstanding accounts payable balances to related parties totaled $0 and $3,698 as of December 31, 2016 and 2015. The amounts are unsecured, due on demand and bear no interest.
NOTE 14 – UNCERTAIN TAX POSITIONS
The Company received a letter on May 17, 2016 from the Caddo-Shreveport Sales and Use Tax Commission informing them of a parish sales and use tax audit scheduled to begin on June 28, 2016. The audit period covered is January 1, 2013 through May 31,
2016. The audit is currently under way and no judgments or assessments have been issued. Management is of the opinion that this audit will not result in any material change in the Company’s financial results.
NOTE 15 – INCOME TAX
We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. When it is
more likely than not that a tax asset cannot be realized through future income
the Company must allow for this future tax benefit. We provided a full valuation
allowance on the net deferred tax asset, consisting of net operating loss carry
forward, because management has determined that it is more likely than not that
we will not earn income sufficient to realize the deferred tax assets during the
carry forward period.
F-16
The Company has not taken a tax position that, if challenged,
would have a material effect on the financial statements for the period March
14, 2013 (date of inception) through December 31, 2016 applicable under FASB ASC
740. We did not recognize any adjustment to the liability for uncertain tax
position and therefore did not record any adjustment to the beginning balance of
accumulated deficit on the consolidated balance sheet. The Company is in the
process of filing appropriate returns for the Company. The component of the
Companys deferred tax assets as of December 31, 2016 and 2015 are as follows:
|
|
2016
|
|
|
2015
|
|
Deferred tax asset
|
$
|
666,315
|
|
$
|
541,247
|
|
Valuation allowance
|
$
|
(666,315
|
)
|
|
(541,247
|
)
|
Net deferred tax asset
|
$
|
-
|
|
$
|
-
|
|
The approximate net operating loss carry forward was approximately $1,900,000 as of December 31, 2016 and will start to expire in 2033. The Company did not pay any income taxes during 2016 or 2015.
NOTE 16 DISCONTINUED OPERATIONS STORED ENERGY AND
DAYLIGHT PUMP DIVISIONS
On November 16, 2016, the Company entered into an agreement
with Fleaux Services, LLC for the sale of the Companys battery and stored
energy division, which includes, but is not limited to, all inventory, support
equipment, and office operations located at 9204 Linwood Avenue, Suite 104 and
105, Shreveport, LA 71106. The sale is for a cash consideration of $350,000 USD;
plus a 3% royalty on all Galenfeha-style batteries sold over the course of the
next two years from the date this purchase agreement was executed. The cash
consideration was for $175,000 in inventory and $175,000 for business good-will
and was provided directly by Fleaux Services in cash. The sale includes all
future sales, future purchase orders resulting from previous negotiations, and
all intellectual property related to Galenfeha, Inc. battery manufacturing and
distribution. Fleaux Services, LLC will assume responsibility for expenses
related to the Galenfeha, Inc. battery division that includes previous expenses
incurred for sales meetings that secured future purchase orders. All contractual
agreements between the Galenfeha Inc. battery division and outside parties,
including, but not limited to, consultants, suppliers, distributors, and sales
representatives, become the responsibility of Fleaux Services, LLC. This
includes all suppliers outstanding invoices for materials not yet delivered and
support equipment that will be relinquished to Fleaux Services, LLC upon the
execution of this agreement. Galenfeha, Inc. will retain payments on all current
outstanding purchase orders invoiced before the date of this purchase agreement.
A gain on the sale of the battery and stored energy division of $15,008 was
recognized as a capital transaction.
On March 9, 2017, the Company entered into an agreement with
Fleaux Services, LLC for the sale of the Companys Daylight Pumps division,
which includes, but in not limited to, all inventory located at 9204 Linwood
Avenue, Suite 104 and 105, Shreveport, LA 7116, as well as all usage rights for
the name Daylight Pump. The sale is for cash consideration of $25,000, and
Fleaux Services, LLC will assume the responsibility of a promissory note held by
Kevin L. Wilson in the amount of $350,000 and all accrued interest due since the
date of issuance on August 23, 2016. The sale will include all future pump
sales, future purchase orders resulting from previous negotiations, and all
intellectual property related to Daylight Pumps. During 2016, the Company
recognized an aggregate impairment loss on this asset group of $443,935 to
recognize the asset group at the lower of fair value or carrying value.
The Company recognized the sale of its stored energy division
and Daylight Pumps division as a discontinued operation, in accordance with ASU
2014-08,
Reporting Discontinued Operations and Disclosures of Disposals of
Components of an Entity.
Assets and Liabilities of Discontinued Operations
The following table provides the details of the assets and
liabilities of our discontinued stored energy division:
Assets sold:
|
|
November 16, 2016
|
|
Inventory assets
|
$
|
180,681
|
|
Prepaid expenses
|
|
13,830
|
|
Property and equipment, net of
accumulated depreciation
|
|
169,275
|
|
Total assets of discontinued operations
|
|
363,786
|
|
|
|
|
|
Consideration received:
|
|
|
|
Cash proceeds
|
|
350,000
|
|
Liabilities assumed
|
|
28,794
|
|
Total liabilities of discontinued operations
|
|
378,794
|
|
|
|
|
|
Net assets sold
|
|
363,786
|
|
Consideration received
|
|
378,794
|
|
Related party gain recognized as a capital transaction
|
|
15,008
|
|
F-17
The following table provides the details of the assets and
liabilities held for sale of our discontinued Daylight Pump division:
Assets of discontinued operations:
|
|
December 31, 2016
|
|
Current:
|
|
|
|
Inventory
assets
|
$
|
381,041
|
|
Total
assets of discontinued operations
|
|
381,041
|
|
|
|
|
|
Liabilities of discontinued operations:
|
|
|
|
Current:
|
|
|
|
Current portion of note
payable
|
|
350,000
|
|
Total liabilities of discontinued operations
|
|
350,000
|
|
Income and Expenses of Discontinued Operations
The following table provides income and expenses of
discontinued operations for the years ended December 31, 2016 and 2015,
respectively.
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Revenue Third Parties
|
$
|
817,426
|
|
|
613,446
|
|
Revenue Related Parties
|
|
97,208
|
|
|
676,838
|
|
Less: Cost of Goods Sold
|
|
672,752
|
|
|
958,604
|
|
Gross Profit
|
|
241,882
|
|
|
331,680
|
|
|
|
|
|
|
|
|
Other expenses
|
|
|
|
|
|
|
General and administrative
|
|
312,104
|
|
|
382,629
|
|
Payroll expenses
|
|
268,280
|
|
|
790,808
|
|
Engineering research and development
|
|
(24,571
|
)
|
|
174,465
|
|
Depreciation and amortization expense
|
|
25,711
|
|
|
24,390
|
|
Interest expense
|
|
14,336
|
|
|
-
|
|
Income (loss) from discontinued operations
|
|
(353,978
|
)
|
|
(1,040,612
|
)
|
NOTE 17 SUBSEQUENT EVENTS
On January 18, 2017 the company extinguished the remainder of
the Consulting Agreement with Asher Oil & Gas Exploration in Natchez,
Mississippi; and Lane Murray, of Jackson, Mississippi. The Company issued a
one-time payment to the consultants of $40,000, which included the cancellation
of any additional stock issuance, and the return of the 500,000 shares of
Galenfeha common stock previously issued in Quarters 3 and 4 of 2016. The terms
of this agreement previously included a $50,000 non-refundable retainer, as well
as 1,000,000 shares of Galenfeha, Inc. (GLFH) common stock, to be issued in four
quarterly installments. As of December 31, 2016, the consultants had received
the retainer and a total of 500,000 shares of Galenfeha, Inc. common stock, per
the agreement. As of the date of this filing, this consulting agreement has been
extinguished; the 500,000 shares of Galenfeha, Inc. common stock have been
returned and cancelled; and no further stock will be issued pursuant to this
agreement. The consultants will keep their initial $50,000 non-refundable
retainer.
On January 20, 2017 an offer was extended to Mr. Ron Barranco
for the position of Chief Technology Officer. Mr. Barranco accepted this
position on January 20, 2017.
On January 21, 2017 Galenfeha entered into a non-binding Letter
of Intent to purchase Additive Manufacturing, LLC for a cash purchase of
$14,000,000, subject to the terms and conditions set forth below.
|
1.
|
Galenfeha, Inc. will purchase all of Additive
Manufacturing, LLCs stock, subject to approval by the Additive
Manufacturing, LLC shareholders, for a total cash consideration of
$14,000,000. An initial payment of $7,000,000 will be due upon the
execution of a definitive purchase agreement; the balance will be paid by
Galenfeha, Inc. no later than three (3) years from the executed contract
date. Both parties will strive for a closing date no later than 45 days
from the date of this executed Letter of Intent.
|
|
2.
|
The acquisition of Additive Manufacturing, LLC includes
all tangible and intangible assets, equipment, contract rights, and
intellectual property used in the business, and all future business
resulting from previous and/or ongoing negotiations by Additive
Manufacturing, LLC.
|
|
3.
|
The definitive acquisition agreement will contain
provisions, conditions, representations, and warranties ordinary and
customary to transactions of the type and nature contemplated by this
letter of intent.
|
|
4.
|
Galenfeha, Inc., through the direction and decisions of
its CTO, Mr. Ron Barranco, intends to maintain all current employees of
Additive Manufacturing LLC. In addition, Tory Sirkin will serve as Vice
President of Additive Manufacturing, LLC, for a minimum of one year.
Salary and/or commission structure will be detailed in the final
contract.
|
|
5.
|
Galenfeha and Additive Manufacturing, LLC will each bear
its own expenses associated with this letter, all due diligence, and
consummation of the proposed acquisition contemplated herein, whether or
not the proposed acquisition is actually completed.
|
|
6.
|
The parties agree to negotiate in good faith a definitive acquisition agreement, contingent upon the completion of an audit by Galenfeha’s PCAOB auditors MaloneBailey. The audit of Additive Manufacturing, LLC, covering two (2) years of financials results, shall commence immediately upon acceptance of this letter. The purchase price outlined in the letter of intent is contingent on the findings of the Audit by MaloneBailey, and that the revenues and earnings for 2016 of approximately $7,000,000 and $2,000,000 are accurate.
|
|
7.
|
Unless and until this letter of intent is terminated,
Additive Manufacturing, LLC will not seek a purchaser for itself, any
business, or current operations of Additive Manufacturing, LLC.
|
|
8.
|
Pending the closing of the proposed acquisition,
Galenfeha, Inc. and Additive Manufacturing, LLC shall each maintain its
current business practices. Neither party shall enter into any
extraordinary transaction without written approval from both
parties.
|
|
9.
|
Both parties will provide access to management,
personnel, agents, accountants, attorneys, books, records, and facilities
during normal business hours. Such access shall be limited to purposes of
conducting due diligence, and shall not unduly interfere with normal
business activities.
|
|
10.
|
All information contained herein is confidential;
separate Confidentiality and Non-Disclosure Agreements shall accompany
this letter of intent.
|
This letter and its application and interpretation shall be
subject to the laws of the states of California and Texas.
On January 27, 2017, two company officers disclosed with the
commission on Form 3, they had purchased a combined total of 7,568,537 shares of
common stock in the open market. This stock was removed from the common share
structure and converted into Series A preferred shares.
On March 9, 2017, the Company entered into an agreement with
Fleaux Services, LLC for the sale of the Companys Daylight Pumps division,
which includes, but in not limited to, all inventory located at 9204 Linwood
Avenue, Suite 104 and 105, Shreveport, LA 7116, as well as all usage rights for
the name Daylight Pump. The sale is for cash consideration of $25,000, and
Fleaux Services, LLC will assume the responsibility of a promissory note held by
Kevin L. Wilson in the amount of $350,000 and all accrued interest due since the
date of issuance on August 23, 2016. The sale will include all future pump
sales, future purchase orders resulting from previous negotiations, and all
intellectual property related to Daylight Pumps (see Note 16).
F-18