Attached files
file | filename |
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8-K/A - PERIOD ENDED 10-18-10 - GATEWAY ENERGY CORP/NE | gateway8ka101810.htm |
EX-99.2 - UNAUDITED PRO FORMA CONSOLIDATED FINANCIALS - GATEWAY ENERGY CORP/NE | exhibit992.htm |
EX-23.1 - CONSENT OF INDEPENDENT PUBLIC ACCOUNTING FIRM - GATEWAY ENERGY CORP/NE | exhibit231.htm |
Laser Pipeline Company, LP
September 30, 2010
Table of Contents
Pages (s) | |
Independent Auditors' Report | 1 |
Balance Sheets | 2 |
Statements of Income | 3 |
Statements of Changes in Partners' Capital | 4 |
Statements of Cash Flows | 5 |
Notes to Financial Statements | 6-8 |
INDEPENDENT AUDITORS REPORT
To the Partners of Laser Pipeline Company, LP
We have audited the accompanying balance sheets of Laser Pipeline Company, LP (the Partnership) as of September 30, 2010 and December 31, 2009 and the related statements of income, changes in partners capital and cash flows for the period ended September 30, 2010 and the year ended December 31, 2009. These financial statements are the responsibility of the Partnerships management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with U.S. generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Laser Pipeline Company, LP as of September 30, 2010 and December 31, 2009 and the results of its operations and its cash flows for the period ended September 30, 2010 and the year then ended December 31, 2009 in conformity with U.S. generally accepted accounting principles.
November 18, 2010
2
Laser Pipeline Company, LP
Balance Sheets
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|
September 30, |
December 31, |
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|
|
2010 |
2009 |
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Assets |
|
|
|
|||||
|
|
|
|
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Current assets |
|
|
|
|||||
Cash and cash equivalents |
|
$ |
153,311 |
$ |
94,330 |
|||
Accounts receivable - trade |
|
45,977 |
35,403 |
|||||
Accounts receivable - due from parent |
|
- |
653,021 |
|||||
|
|
|
|
|||||
Total current assets |
|
199,288 |
782,754 |
|||||
|
|
|
|
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Pipeline and other transportation equipment, net of accumulated depreciation and amortization of $308,252 and $243,314 for 2010 and 2009, respectively |
|
996,765 |
1,054,256 |
|||||
|
|
|
|
|||||
Total assets |
|
$ |
1,196,053 |
$ |
1,837,010 |
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|
|
|
|
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Liabilities and Partners Capital | ||||||||
|
|
|
|
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Current liabilities |
|
|
|
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Accounts payable and accrued liabilities - trade |
|
$ |
52,855 |
$ |
10,067 |
|||
Accounts payable and accrued liabilities - due to parent |
|
572,068 |
1,390,254 |
|||||
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|
|
|
|||||
Total current liabilities |
|
624,923 |
1,400,321 |
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|
|
|
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Commitments and contingencies |
|
- |
- |
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|
|
|
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Partners capital |
|
571,130 |
436,689 |
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|
|
|
|
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Total liabilities and partners capital |
|
$ |
1,196,053 |
$ |
1,837,010 |
See notes to financial statements.
3
Laser Pipeline Company, LP
Statements of Income
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|
Period from January 1 to September 30, 2010 |
|
Year Ended December 31, 2009 |
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Transportation revenues |
$ |
217,702 |
$ |
285,054 |
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|
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Operating expenses |
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|
|
|
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Transportation expenses |
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16,669 |
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29,669 |
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Depreciation |
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64,938 |
|
86,742 |
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General and administrative |
|
1,654 |
|
5,254 |
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|
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Total operating expenses |
|
83,261 |
|
121,665 |
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Net income |
$ |
134,441 |
$ |
163,389 |
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|
|
|
|
|
See notes to financial statements.
4
Laser Pipeline Company, LP
Statements of Changes in Partners Capital
For the Period Ended September 30, 2010 and the Year Ended December 31, 2009
|
General Partner |
|
Limited Partner |
|
Total |
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|
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|
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Partners capital - January 1, 2009 |
$ |
27 |
$ |
273,273 |
$ |
273,300 |
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|
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Net income |
16 |
|
163,373 |
|
163,389 |
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|
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Partners capital - December 31, 2009 |
43 |
|
436,646 |
|
436,689 |
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|
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Net income |
13 |
|
134,428 |
|
134,441 |
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|
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Partners capital - September 30, 2010 |
$ |
56 |
$ |
571,074 |
$ |
571,130 |
See notes to financial statements.
5
Laser Pipeline Company, LP
Statements of Cash Flows
|
|
Period from January 1 to September 30, 2010 |
|
Year Ended December 31, 2009 |
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Cash flows from operating activities |
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Net income |
$ |
134,441 |
$ |
163,389 |
|||
Adjustments to reconcile net income to net cash provided by (used in) operating activities |
|
|
|
|
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Depreciation |
|
64,938 |
|
86,742 |
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Changes in operating assets and liabilities |
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|
|
|
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Accounts receivable - trade |
|
(10,574 |
) |
|
7,266 |
||
Accounts receivable - due from parent |
|
653,021 |
|
(350,000 |
) | ||
Accounts payable and accrued liabilities - trade |
|
42,788 |
|
(3,800 |
) | ||
Accounts payable and accrued liabilities - due to parent |
|
(818,186 |
) |
|
- |
||
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|
|
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|
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Net cash provided by (used in) operating activities |
|
66,428 |
|
(96,403 |
) | ||
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Cash flows from investing activities |
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|
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|
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Purchase of property and equipment |
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(7,447 |
) |
|
- |
||
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Net cash used in investing activities |
|
(7,447 |
) |
|
- |
||
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Net increase (decrease) in cash and cash equivalents |
|
58,981 |
|
(96,403 |
) | ||
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|
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Cash and cash equivalents - beginning of year |
|
94,330 |
|
190,733 |
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Cash and cash equivalents - end of year |
$ |
153,311 |
$ |
94,330 |
|||
|
|
|
|
|
See notes to financial statements.
6
Laser Pipeline Company, LP
Notes to Financial Statements
September 30, 2010
Note 1 - Organization and Description of Business
Laser Pipeline Company, LP (the Partnership) owns and operates natural gas transportation pipelines primarily in Texas and Missouri. The Partnership was formed March 6, 2006. At September 30, 2010, the Partnership is comprised of Laser Gas Company II, LLC, as General Partner, with a .01% interest and Laser Midstream Energy II, LP as a Limited Partner with a 99.99% interest. During 2006, the Partnership acquired four pipelines through an agreement with Integrated Services, Inc. All four pipelines operate under a fee-based contract with Tyson Foods, Inc. (Tyson) which were also transferred to the Partnership at time of sale. These pipelines and transportation equipment at September 30, 2010 and December 31, 2009, represent 100% of the pipelines assets held by the Partnership.
Note 2 - Summary of Significant Accounting Policies
Basis of accounting and presentation
The Partnerships statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP).
Cash and cash equivalents
The Partnership considers all highly liquid investments with original maturities of three months or less to be cash and cash equivalents.
Revenue and accounts receivable
Transportation revenues are generated under contracts which have a stated fee per unit of throughput volume (Mcf or MMBtu) transported. Revenue from the transportation of natural gas is recognized at the delivery point. The agreements stipulate a minimum capacity to be utilized by Tyson until the contracts expire. Three of the contracts expire during 2013 and one during 2018.
Pipeline
Pipeline and transportation equipment are recorded at cost, net of accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful life of 15 years.
Expenditures for maintenance and repairs are charged to expense as incurred. When the pipeline is sold or retired, the cost and related accumulated depreciation will be removed from the accounts and any gain or loss reflected in operations.
7
Laser Pipeline Company, LP
Notes to Financial Statements
September 30, 2010
Note 2 - Summary of Significant Accounting Policies (Continued)
Impairment of long-lived assets
In accordance with the Financial Accounting Standards Board Accounting Standards Codification, long-lived assets to be held or used by the Partnership are reviewed annually to determine whether any events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
For long-lived assets to be held and used, the Partnership bases its evaluation on impairment indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present. If such impairment indicators are present or other factors exist that indicate that the carrying amount of the asset may not be recoverable, the Partnership determines whether impairment has occurred through the use of an undiscounted cash flows analysis of the asset at the lowest level for which identifiable cash flows exist. If impairment has occurred, the Partnership recognizes a loss for the difference between the carrying amount and the fair value of the asset. The fair value of the asset is measured using quoted market prices or, in the absence of quoted market prices, is based on an estimate of discounted cash flows. As of September 30, 2010, management believes all long-lived assets are fully realizable, thus no impairment has been required.
Income taxes
The Partnership does not pay Federal income tax on its taxable income. Instead, the partners are liable for Federal income tax on their respective shares of the Partnerships taxable income reported on their Federal income tax returns.
The Partnership is subject to income tax imposed by the State of Texas. The tax is a 1% tax that is levied on taxable margin. Taxable margin is defined as total revenue less deductions for cost of goods sold or compensation and benefits in which the total calculated taxable margin cannot exceed 70% of total revenue. During 2010 and 2009, the Partnership paid no state tax because it did not meet the minimum revenue thresholds.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
8
Laser Pipeline Company, LP
Notes to Financial Statements
September 30, 2010
Note 3 - Property, Plant, and Equipment
Property, plant and equipment consisted of the following at:
|
|
September 30, |
|
December 31, |
|||
|
|
2010 |
|
2009 |
|||
|
|
|
|
|
|||
Pipeline and other transportation equipment |
$ |
1,305,017 |
$ |
1,297,570 |
|||
|
|
|
|
|
|||
Less accumulated depreciation |
|
(308,252 |
) |
|
(243,314 |
) | |
|
|
|
|
|
|||
Total property and equipment, net |
$ |
996,765 |
$ |
1,054,256 |
Note 4 - Concentrations of Revenue
During the period ended September 30, 2010 and the year ended December 31, 2009, one customer accounted for 100% of the Partnerships revenues. The amounts due from this customer for these periods were $45,977 and $35,403, respectively. The Partnership has not had any significant credit losses in the past and believes its accounts are fully collectable.
Note 5 - Subsequent Events
On October 18, 2010, the Partnership completed the sale of its pipeline assets to Gateway Energy Corporation, a publicly traded company. Gateway acquired the assets for consideration consisting of $1,100,000 in cash.
Management has evaluated subsequent events as of November 18, 2010, which was the date the financial statements were available to be issued, and has determined that other than the aforementioned sale of the pipeline assets, there are no subsequent events to disclose.