Attached files
Exhibit 99.3
XNERGY, INC. and Variable Interest Entity | |||||||
Consolidated Balance Sheets | |||||||
ASSETS | |||||||
| June 30, |
| December 31, | ||||
| 2011 |
| 2010 | ||||
| (unaudited) |
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CURRENT ASSETS |
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| Cash | $ | 1,267,648 |
| $ | 1,565,006 | |
| Accounts receivable, net of allowance of |
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| $140,000 and $140,000 respectively |
| 249,225 |
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| 665,845 |
| Costs in excess of billings |
| 383 |
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| 10,830 | |
| Other current assets |
| 177,352 |
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| 29,975 | |
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| Total Current Assets |
| 1,694,608 |
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| 2,271,656 |
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PROPERTY AND EQUIPMENT, net |
| 3,631,671 |
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| 3,672,902 | ||
OTHER ASSETS |
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| Related party loans |
| 2,239,910 |
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| 2,590,523 | |
| Other assets |
| 29,864 |
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| 29,864 | |
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| Total Other Assets |
| 2,269,774 |
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| 2,620,387 |
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| TOTAL ASSETS | $ | 7,596,053 |
| $ | 8,564,945 |
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |||||||
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CURRENT LIABILITIES |
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| Accounts payable and accrued expenses | $ | 2,713,700 |
| $ | 1,654,532 | |
| Billings in excess of revenues |
| 142,644 |
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| 207,350 | |
| Current portion of long-term liabilities |
| 154,034 |
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| 1,578,361 | |
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| Total Current Liabilities |
| 3,010,378 |
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| 3,440,243 |
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LONG-TERM LIABILITIES |
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| Loans and notes payable-related parties |
| 1,889,782 |
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| 1,889,782 | |
| Loans and notes payable |
| 3,147,764 |
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| 2,342,958 | |
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| Total Long-term Liabilities |
| 5,037,546 |
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| 4,232,740 |
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| Total Liabilities |
| 8,047,924 |
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| 7,672,983 |
STOCKHOLDERS' EQUITY (DEFICIT) |
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| Common stock; 100,000 shares authorized, |
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| at no par value, 100,000 and 100,000 |
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| shares issued and outstanding, respectively |
| 50,000 |
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| 50,000 | |
| Additional paid in capital |
| 424,968 |
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| 424,968 | |
| Non controlling interest |
| 286,850 |
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| 295,190 | |
| Retained earnings (accumulated deficit) |
| (1,213,689) |
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| 121,804 | |
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| Total Stockholders' Equity (Deficit) |
| (451,871) |
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| 891,962 |
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| TOTAL LIABILITIES AND |
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| STOCKHOLDERS' EQUITY (DEFICIT) | $ | 7,596,053 |
| $ | 8,564,945 |
The accompanying notes are an integral part of these consolidated financial statements
1
XNERGY, INC. and Variable Interest Entity | |||||||
Consolidated Statements of Operations | |||||||
(unaudited) | |||||||
| For the Six Months Ended | ||||||
| June 30, | ||||||
| 2011 |
| 2010 | ||||
REVENUES | $ | 1,540,098 |
| $ | 15,052,488 | ||
COST OF GOODS SOLD |
| 1,012,043 |
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| 11,813,471 | ||
GROSS PROFIT |
| 528,055 |
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| 3,239,017 | ||
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OPERATING EXPENSES |
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| Depreciation and amortization |
| 30,000 |
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| 34,027 | |
| Salary and wages |
| 1,048,775 |
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| 879,132 | |
| Professional fees |
| 109,075 |
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| 95,786 | |
| General and administrative |
| 613,795 |
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| 570,461 | |
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| Total Operating Expenses |
| 1,801,645 |
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| 1,579,406 |
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INCOME (LOSS) FROM OPERATIONS |
| (1,273,590) |
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| 1,659,611 | ||
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OTHER EXPENSE |
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| Other income |
| 505 |
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| 12,760 | |
| Interest income |
| 6,105 |
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| 9,245 | |
| Interest expense |
| (60,173) |
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| (29,090) | |
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| TOTAL OTHER EXPENSE |
| (53,563) |
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| (7,085) | |
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INCOME BEFORE INCOME TAXES |
| (1,327,153) |
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| 1,652,526 | ||
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INCOME TAX EXPENSE |
| - |
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| (11,530) | ||
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NET INCOME (LOSS) BEFORE NONCONTROLLING INTERESTS |
| (1,327,153) |
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| 1,640,996 | ||
NONCONTROLLING INTEREST IN VARIABLE INTEREST ENTITY |
| (8,340) |
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| (4,599) | ||
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NET INCOME (LOSS) | $ | (1,335,493) |
| $ | 1,636,397 |
The accompanying notes are an integral part of these consolidated financial statements
2
XNERGY, INC. and Variable Interest Entity | ||||||||
Consolidated Statements of Cash Flows | ||||||||
(unaudited) | ||||||||
| For the Six Months Ended | |||||||
| June 30, | |||||||
| 2011 |
| 2010 | |||||
OPERATING ACTIVITIES |
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| Net loss | $ | (1,335,493) |
| $ | 1,636,397 | ||
| Adjustments to reconcile net loss to net cash |
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| used in operating activities: |
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| Depreciation and amortization |
| 30,000 |
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| 34,027 | |
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| Non controlling interest |
| 8,340 |
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| 4,599 | |
| Changes in operating assets and liabilities: |
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| Accounts receivable |
| 416,620 |
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| 5,147,861 | |
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| Costs in excess of billings |
| 10,447 |
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| (49,781) | |
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| Other assets |
| (147,377) |
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| 99,849 | |
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| Billings in excess of costs |
| (64,706) |
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| (923,007) | |
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| Accounts payable and accrued expenses |
| 1,053,719 |
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| (4,329,686) | |
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| Net Cash Provided by (Used in) Operating Activities |
| (28,450) |
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| 1,620,259 |
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INVESTING ACTIVITIES |
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| Repayment of loans to stockholders |
| 350,613 |
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| 271,686 | |
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| Net Cash Provided by Investing Activities |
| 350,613 |
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| 271,686 |
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FINANCING ACTIVITIES |
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| Repayment short term and installment notes payable |
| (619,521) |
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| (919,956) | |
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| Net Cash Provided by (Used in) Financing Activities |
| (619,521) |
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| (919,956) |
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NET INCREASE (DECREASE) IN CASH |
| (297,358) |
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| 971,989 | |||
CASH AT BEGINNING OF PERIOD |
| 1,565,006 |
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| 2,012,333 | |||
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CASH AT END OF PERIOD | $ | 1,267,648 |
| $ | 2,984,322 | |||
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SUPPLEMENTAL DISCLOSURES OF |
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| CASH FLOW INFORMATION |
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| CASH PAID FOR: |
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| Interest | $ | 60,173 |
| $ | 29,090 | |
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| Income taxes | $ | - |
| $ | - |
The accompanying notes are an integral part of these consolidated financial statements
3
XNERGY, INC. and Variable Interest Entity
Notes to Financial Statements
June 30, 2011
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at June 30, 2011, and for all periods presented herein, have been made.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The results of operations for the periods ended June 30, 2011 and 2010 are not necessarily indicative of the operating results for the full year.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
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 at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Recent Accounting Pronouncements
The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Companys financial position, or statements.
NOTE 3 - RELATED PARTY TRANSACTIONS
Related Party Receivables
On June 17, 2008, two of the Companys stockholders agreed to purchase the shares of another shareholder for $2,486,850. Concurrent with this agreement, the Company agreed to issue a promissory note for the payment for the stock. The liability was recorded along with notes receivable from the purchasing stockholders. The notes receivable bear interest at 3.2% and are due 60 consecutive months commencing August 1, 2008. The notes are secured by 49,750 shares of the Companys common stock. As of June 30, 2011 and December 31, 2010, the notes receivable totaled $2,239,910 and $2,590,523, respectively.
Loans and Notes Payable-Related Parties
As explained above, the Company has agreed to pay $2,486,850 for the purchase of its shares. Principal and interest payments are currently $48,456 per month. As of June 30, 2011 and December 31, 2010, the notes payable totaled $1,889,782 and $1,889,782, respectively.
4
XNERGY, INC. and Variable Interest Entity
Notes to Financial Statements
June 30, 2011
NOTE 4 - SUBSEQUENT EVENT
On September 7, 2011, the Company was acquired by Blue Earth, Inc. (BBLU). Pursuant to the terms and conditions of an Agreement and Plan of Merger (the Plan), BBLU purchased all of the capital stock of Company for a Purchase Price of $15,012,010 (the Purchase Price). BBLU issued to the two shareholders of the Company an aggregate of 4,500,000 shares of restricted common stock, valued at $3.00 per share. The shares are subject to a lock-up period whereby 1,000,000 of the shares are eligible for sale beginning one year from the closing date and the remaining 3,500,000 shares are eligible for sale commencing two years from the Closing Date. The Companys stockholders had previously acquired all of the shares of the Company owned by a former stockholder for $1,512,010 evidenced by a promissory note. BBLU paid the Companys stockholders $10.00 and other good and valuable consideration for the right to assume payment to the former stockholder. BBLU has made two payments and will continue to make payments for up to 30 months to the former stockholder. These shares are currently held in escrow and BBLU has the right to vote the shares while they are in escrow.
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