UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

☑ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2012

 

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from ____________ to____________

 

Commission File No. 000-32507

 

EGPI FIRECREEK, INC. 

(Exact name of Registrant as specified in its charter)

 

Nevada	88-0345961
(State or Other Jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

 

6564 Smoke Tree Lane

Scottsdale, Arizona 85253

 (Address of Principal Executive Offices)

 

(480) 948-6581

 (Registrant’s Telephone Number)

 

N/A

(Former name, former address and former fiscal year,

if changed since last report)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  

Yes  ☑ No   ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  

Yes  ☐ No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  :

 

 

	Large Accelerated Filer ☐	Accelerated Filer ☐
	Non-Accelerated Filer ☐	Smaller Reporting Company ☑

 

(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No  ☑

 

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.  

 

As of May 11, 2012, the registrant had 998,550,167shares of its $0.001 par value common stock issued and outstanding. There are no shares of Series A, B preferred stock issued and outstanding, 87,142 shares of its Series C preferred stock issued and outstanding at $0.001 par value for each of the Series of Preferred, 2,480 shares of its Series D preferred stock issued and outstanding, at $0.001 par value for each of the Series of Preferred, and no shares of non-voting common stock issued and outstanding.

 

 

EGPI FIRECREEK, INC

f/k/a Energy Producers, Inc.

10-Q

March 31, 2012

 

TABLE OF CONTENTS

 

				PAGE
PART 1:		FINANCIAL INFORMATION			3
Item 1.		Financial Statements - Unaudited			3
		Consolidated Balance Sheets			3
		Consolidated Statement of Operations			4
		Consolidated Statement of Cash Flows			5
		Consolidated Statement of Changes in Shareholders' Equity			6
		Notes to the Unaudited Consolidated Financial Statements			7
Item 2.		Management's Discussion and Analysis or Plan of Operation			23
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			29
Item 4(T)		Controls and Procedures			29
PART II:		OTHER INFORMATION			30
Item 1.		Legal Proceedings			30
Item 1A.		Risk Factors			31
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			31
Item 3.		Defaults upon Senior Securities			32
Item 4.		Removed and Reserved			32
Item 5.		Other Information			32
Item 6.		Exhibits			32
		Certifications
		Signature			33

 

 

 

 

 

PART I FINANCIAL INFORMATION

 

ITEM 1 – FINANCIAL STATEMENTS

 

EGPI FIRECREEK, INC.

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2012 AND DECEMBER 31, 2011

 

		Unaudited									Audited
		3/31/2012									12/31/2011
ASSETS
Current assets:
Cash		$	6,140						$	2,481
Current assets related to discontinued operations
Cash			91							215
Total current assets related to discontinued operations			91							215
Total current assets			6,231							2,696
Other assets:
Fixed assets – net			540,532							565,509
Oil and natural gas properties – proved reserves - net			1,811,648							1,849,843
Other assets related to discontinued operations
Fixed assets – net			11,772							12,449
Oil and natural gas properties – proved reserves - net			268,721							274,251
Total other assets related to discontinued operations			280,493							286,700
Total other assets			2,632,673							2,702,052
Total assets		$	2,638,904						$	2,704,748
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable & accrued expenses		$	1,133,557						$	1,001,584
Notes payable			2,501,221							2,767,589
Convertible notes, net of discount			687,143							480,221
Capital lease obligation			56,872							56,872
Advances & notes payable - related parties			482,076							477,876
Derivative liabilities			837,310							639,859
Asset retirement obligation			11,265							10,930
Current liabilities related to discontinued operations
Accounts payable & accrued expenses			81,121							64,840
Notes payable			96,390							96,390
Asset retirement obligation			11,266							10,931
Total current liabilities related to discontinued operations			188,777							172,161
Total current liabilities			5,898,223							5,607,092
Commitments and contingencies:
Series D preferred stock, 2.5 million authorized, par value $0.001, convertible into common shares, 2,485 and 2,490 shares issued at March 31, 2012 and December 31, 2011, respectively			1,868,779							1,872,554
Shareholders' deficit:
Series A preferred stock, 20 million authorized, par value $0.001,one share convertible to one common share, no stated dividend, none outstanding			-							-
Series B preferred stock, 20 million authorized, par value $0.001,one share convertible to one common share, no stated dividend, none outstanding			-							-
Series C preferred stock, 20 million authorized, par value $.001, each share has 21,200 votes per share, are not convertible, have no stated dividend; 87,142 and 87,142 shares outstanding at March 31, 2012 and December 31, 2011, respectively			87							87
Common stock- $0.001 par value, authorized 5,000,000,000 shares, issued and outstanding, 453,091,139 at March 31, 2012 and 99,648,493 at December 31, 2011, respectively			453,091							99,648
Additional paid in capital			29,681,896							29,668,977
Other comprehensive income			189,625							214,499
Common stock subscribed			1,515,909							1,466,364
Contingent holdback			2,000							2,000
Accumulated deficit			(36,970,704)							(36,130,083)
Total shareholders' deficit			(5,128,096)							(4,678,508)
Total liabilities & shareholders' deficit		$	2,638,904						$	2,704,748

 

See the notes to the unaudited consolidated financial statements.

 

 

3

 

 

 

 

 

EGPI FIRECREEK, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND MARCH 31, 2011

 

		For the three months ended				For the three months ended
		3/31/2012				3/31/2011
Revenues
Gross revenue from sales		$	-			$	12,320
Gross revenues from oil and gas sales			18,870				17,558
Total revenue			18,870				29,878
Cost of sales							(19,062)
Well operation costs			(34,668)				(21,554)
Gross margin			(15,798)				(10,738)
General and administrative expenses:
General administration			(230,946)				(257,732)
Total general & administrative expenses			(230,946)				(257,732)
Net loss from operations			(246,744)				(268,470)
Other revenues and expenses:
Interest expense			(355,588)				(117,341)
Gain (loss) on settlement of debt			(140,322)				(666,637)
Other income			34,673				-
Gain (loss) on asset disposal			-				31,970
Gain (loss) on derivatives			(88,958)				(211,672)
Net loss before provision for income taxes			(796,939)				(1,232,150)
Provision for income taxes			-				-
Loss from continuing operations			(796,939)				(1,232,150)
Loss from discontinued operations net of tax			(43,682)				(658,246)
Net loss		$	(840,621)			$	(1,890,396)
Foreign currency translation			(24,874)				(76,859)
Net comprehensive loss			(815,747)				(1,813,537)
Basic and diluted net loss per common share:
Basic and diluted loss per common share from continuing operations		$	(0.00)			$	(3.56)
Basic and diluted loss per common share from discontinued operations		$	(0.00)			$	(1.90)
Basic and diluted net loss per common share		$	(0.00)			$	(5.46)
Weighted average of common shares outstanding:
Basic and fully diluted			212,143,823				345,931

 

See the notes to the unaudited consolidated financial statements.

 

 

4

 

 

 

 

 

EGPI FIRECREEK, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND MARCH 31, 2011

  

 

		For the three				For the three
		months ended				months ended
		3/31/2012				3/31/2011
Operating Activities:
Net income (loss)		$	(840,621)				$	(1,890,396)
Adjustments to reconcile net loss items not requiring the use of cash:
Accretion of asset retirement obligation			670					324
Common shares issued for services			-					20,118
Promissory notes issued for services			90,000					60,000
Imputed interest			16,181					-
Loss on disposition of SATCO			-					586,924
Gain on issuance of common shares to shareholders of Terra Telecom, Inc.			-					(31,970)
Bad debt expense			-					100,000
Loss on change in derivative			88,959					211,672
Loss on settlement of debt			140,322					666,040
Depletion			43,725					16,366
Depreciation			25,654					19,683
Amortization of intangibles			-					29,249
Amortization of debt discount			261,242					297,335
Changes in other operating assets and liabilities:
Accounts receivable			-					87,822
Inventory			-					11,493
Accounts payable and accrued expenses			185,377					(229,119)
Accounts payable and accrued expenses - related party			4,200					40,670
Prepaid expenses			-					(64)
Net cash provided by (used by) operations			15,709					(3,853)
Investing Activities:
Cash acquired in acquisition of Arctic Solar Engineering			-					538
Net cash used by investing activities			-					538
Financing Activities:
Principal payments on debt			(40,000)					-
Borrowings on debt			52,700					84,292
Net cash provided by financing activities			12,700					84,292
Foreign currency translation			(24,874)					(76,859)
Net increase (decrease) in cash during the period			3,535					4,118
Cash balance at January 1st			2,696					9,930
Cash balance at March 31st		$	6,231				$	14,048
Supplemental disclosures of cash flow information:
Interest paid during the year		$	13,354				$	3,153
Income taxes paid during the year			-					-
Non-cash activities:
Common stock issued for:
Debt conversion and settlement			146,123					813,418
Services expensed in the prior period (common stock subscribed)			15,000
Terra Telecom, Inc.			-					18,000
Preferred stock conversion			3,775					-
Preferred shares subscribed to acquire oil and gas lease			-					3,736,387
Adjustment to derivative liability due to debt conversion			94,505					-
Accounts payable converted to promissory notes			-					385,581
Adjustment to asset retirement obligation			-					8,051
Debt discount			202,998					267,865

  

See the notes to the unaudited consolidated financial statements.

 

 

5

 

 

 

 

 

EGPI FIRECREEK, INC.

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT

FOR THE THREE MONTHS ENDED MARCH 31, 2012

 

																										Other				Common
		Preferred				Preferred				Common				Common				Paid in				Accumulated				Comprehensive				Stock
		Shares				Value				Shares				Value				Capital				Deficit				Loss				Subscribed				Other				Total
Balance at December 31,2011			87,142				87				99,648,493				99,648				29,668,977				(36,130,083)				214,499				1,466,364				2,000				(4,678,508)
Issued common shares for services											20,450,000				20,450				1,705												12,857								35,012
Issued common shares for  conversion or settlement of debt											326,742,646				326,743				(96,997)												36,688								266,434
Issued common shares for conversion of preferred stock											6,250,000				6,250				(2,475)																				3,775
Imputed interest																			16,181																				16,181
Adjustment to derivative liability due to debt conversion																			94,505																				94,505
Other comprehensive loss																											(24,874)												(24,874)
Net loss for the three months ended																							(840,621)																(840,621)
Balance at March 31, 2012			87,142			$	87				453,091,139			$	453,091			$	29,681,896			$	(36,970,704)			$	189,625			$	1,515,909			$	2,000			$	(5,128,096)

 

See the notes to the unaudited consolidated financial statements.

 

 

6

 

 

 

 

 

EGPI FIRECREEK, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED MARCH 31, 2012 AND MARCH 31, 2011

 

1. Organization of the Company and Significant Accounting Principles

 

The Company was incorporated in the State of Nevada October 1995. Effective October 13, 2004 the Company, previously known as Energy Producers Inc., changed its name to EGPI Firecreek, Inc.

 

Prior to December 2008, the Company held interests in various gas & oil wells located in the Wyoming and Texas area. In December 2008, the Company’s major creditor, Dutchess Private Equities Ltd. (Dutchess), foreclosed on the assets of the Company.  As a result, all of the Company’s oil and gas properties were transferred to Dutchess in satisfaction of debt owed.

 

In October 2008, the Company effected a 1 share for 200 shares reverse split of its common stock and all amounts have been retroactively adjusted.

 

In May 2009 the Company acquired M3 Lighting, Inc. (“M3”) as a wholly owned subsidiary via reverse triangular merger. The Company was determined to be the acquirer in the transaction for accounting purposes. M3 is a distributor of commercial and decorative lighting to the trade and direct to retailers.  As part of the Merger the Company effected a name change for its wholly owned subsidiary Malibu Holding, Inc. to Energy Producers, Inc. (“EPI”) as a conduit for its oil and gas activities.

 

In November 2009 the Company acquired all of the issued and outstanding capital stock of South Atlantic Traffic Corporation, a Florida corporation (“SATCO”). SATCO has been in business since 2001 and has several offices throughout the Southeast United States. SATCO carries a variety of products and inventory geared primarily towards the transportation industry.  SATCO offers transportation products ranging from loop sealant, traffic signal equipment, traffic and light poles, data/video systems and Intelligent Traffic Systems (ITS) surveillance systems. SATCO works closely with Department of Transportation (DOT) agencies, local traffic engineers, contractors, and consultants to customize high quality traffic control systems.

 

In December 2009, the Company’s wholly owned subsidiary Energy Producers, Inc. acquired 50% working interests and corresponding 32% net revenue interests in oil and gas leases, reserves, and equipment located in West Central Texas. The Company entered into a turnkey work program included for three wells located on the leases.

 

On March 3, 2010, the Company executed a Stock Purchase Agreement with the stockholders of Redquartz LTD (“Sellers” or “RQTZ”), a company formed and existing under the laws of the country of Ireland, whereas the Company agreed to issue 100,000 shares of its restricted common stock valued at USD $2,500 in exchange for 100% of the issued and outstanding shares of common stock, par value $0.01 per share, of RQTZ. All assets and liabilities, other than the Shareholder Notes Payable, of the RQTZ were transferred to the prior owners of Redquartz. The Notes Payable represent a debt burden to RQTZ of USD $4,464,262. This obligation is based in Euros and converted to our functional currency the dollar. Redquartz LTD was inactive in the first and second quarter of 2010 and had no income and expense that would affect the financial statements of the Company and therefore no pro-forma is necessary.

 

On June 11, 2010, the Company acquired all of the issued and outstanding stock of Chanwest Resources, Inc., (“Chanwest or CWR”) a Texas corporation. In the course of this acquisition, Chanwest stockholders exchanged all outstanding common shares for the Company’s common shares and other provisions. Chanwest Resources, Inc. was formed in 2009 and has been engaged in ramping up operations including acquiring assets related to the servicing and construction, and activities related to the acquisition, production and development for oil and gas. Chanwest has formed strategic alliances and brought key management with over 40 years experience in all facets of the oil and gas industry, to be implemented on day one of our acquisition thereof. Chanwests’ first phase of operations include Construction and Trucking, services for drill site preparation to clear and lay pipeline (gathering systems) for operators. Chanwest operations can provide for services to maintain lease roads, set power poles and clean up oilfield spills. Chanwest works with operators or lease owners by purchase order or contract with major oil fields.

 

 On October 1, 2010 EGPI Firecreek, Inc. the Company entered into a Definitive Securities Purchase/Exchange Agreement with Terra Telecom, LLC. (“Terra"). Terra is considered recognized as a leading provider of state-of-the-art communication technologies and a premier Alcatel-Lucent partner. They currently serve various sized companies and organizations that use and deploy communications systems, sales, service, and training while consolidating and optimizing the end user experience. Its goal is to provide customers value and integrity in each of these opportunities. Since 1980, Terra has focused on delivering enterprise solutions while leading with voice services and offering full turn-key solutions that consist of voice, data, video and associated applications.  As of December 31, 2010, the Company has not assumed control of this acquisition.  As a result, this company is not consolidated in the financial statements as of December 31, 2010.  On March 14, 2011, the Company sold its interest in Terra to Distressed Asset Acquisitions, Inc.

 

On October 18, 2010, the Company filed a Certificate of Amendment to its Articles of Incorporation, increasing its authorized common stock, par value $0.001 per share, to 3,000,000,000 from 1,300,000,000 and is authorized to issue 60,000,000 shares of preferred stock that has a par value of $0.001 per share.

 

 

On November 9, 2010, the Company affected a 1 share for 50 shares reverse split of its common stock and all amounts have been retroactively adjusted for all periods presented.

 

On February 4, 2011, the Company entered into an Agreement to acquire all 100% of Arctic Solar Engineering LLC, a Missouri limited liability company located at PO Box 4391, Chesterfield, MO 63006 and the owners of Membership Interests of the Arctic Solar Engineering LLC; The FATM Partnership, a Missouri Partnership, The Frederic Sussman Living Trust. Arctic Solar Engineering, LLC, is an integrator of Solar Thermal Energy technology. For further information please see our Current Report on Form 8-K filed on February 10, 2011, and in the section on “The Business”, and “Overview” to the Management Discussion and Analysis sections, and elsewhere listed in this document.

 

On March 2, 2011 the Company obtained a consent from the majority shareholders of the Company to amend the Articles of Incorporation to i) authorize the issuance of 2,500 shares of a new D Series Preferred Stock, and ii) for the Board of Directors to be able to authorize any and all capitalization of the Company going forward without the need for shareholder approval, and further authorized for the Board of Directors to set all rights, preferences, and designations, for and in behalf of any class of the Company’s common of preferred stock, and as may be required or as necessary in the best interest of the Company.

 

On March 14, 2011, the Company entered into and completed the closing of a Stock Purchase Agreement involving the sale of South Atlantic Traffic Corporation to Distressed Asset Acquisitions, Inc. For further information please see our Current Report on Form 8-K filed on March 18, 2011 and in the section on The Business”, and Overview” to the Management Discussion and Analysis sections, and elsewhere listed in this document.

 

On March 14, 2011, the Company entered into and completed the closing of a Stock Purchase Agreement involving the sale of Oklahoma Telecom Holdings, Inc. an Oklahoma corporation, formerly known as Terra Telecom, LLC., an Oklahoma limited liability company and Terra Telecom, Inc. (TTI”), to Distressed Asset Acquisitions, Inc. For further information please see our Current Report on Form 8-K filed on March 18, 2011 and in the section on The Business”, and Overview” to the Management Discussion and Analysis sections, and elsewhere listed in this document.

 

On July 7, 2011, the Company filed a Certificate of Amendment to its Articles of Incorporation, increasing its authorized common stock, par value $0.001 per share, to 5,000,000,000 from 3,000,000,000 and is authorized to issue 60,000,000 shares of preferred stock that has a par value of $0.001 per share.

 

On July 7, 2011, the Company affected a 1 share for 500 shares reverse split of its common stock and all amounts have been retroactively adjusted for all periods presented.

 

Consolidation - the accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.  All significant inter-company balances have been eliminated.

 

The financial information included in this quarterly report should be read in conjunction with the consolidated financial statements and related notes thereto in our Form 10-K for the year ended December 31, 2010.

 

Use of Estimates - The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make reasonable estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses at the date of the consolidated financial statements and for the period they include.  Actual results may differ from these estimates.

 

Revenue and Cost Recognition-

 

-

Oil and gas:  Revenue is recognized from oil and gas sales in the period of delivery.  Settlement on sales occurs anywhere from two weeks to two months after the delivery date.  The Company recognizes revenue when an arrangement exists, the product has been delivered, the sales price is fixed or determinable, and collectability is reasonably assured.

 

-

Oilfield services:  Revenue from services is recognized when an arrangement exists, the services are rendered, the sales price is fixed or determinable, and collectability is reasonably assured.

 

-

Product sales/installation:  Revenue from product sales or installation pertaining to solar panels and equipment are recognized when an arrangement exists, the product is delivered or installed, the sales price is fixed or determinable, and collectability is reasonably assured.

 

The Company records commission revenue, usually 3% of the amount invoiced, based on contracts with suppliers, once the purchase order is placed with the supplier and the customer is invoiced.  The Company, in turn, sends an invoice to the supplier for 3% of the total order amount.  Commission sales are specialty orders drop-shipped from the manufacturer.  Accordingly, all sales are final upon delivery to the customer under the terms of the sales order.

 

 

Cash Equivalents -The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents. There were no cash equivalents as of March 31, 2012 or December 31, 2011.

 

Accounts Receivable - The Company extends credit to its customers in the normal course of business and performs ongoing credit evaluations of its customers, maintaining allowances for potential credit losses which, when realized, have been within management's expectations. The allowance method is used to account for uncollectible amounts. The evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. Allowance for doubtful accounts was $118,473 at March 31, 2012 and $118,473 at December 31, 2011.

 

Inventory - Inventories consist of merchandise purchased for resale and are stated at the lower of cost or market using the first-in, first-out (FIFO) method.

 

Prepaid Expenses - Prepaid expenses are recorded at cost for payments for goods and services purchased during an accounting period but not used or consumed during that accounting period. The costs are amortized over time as the benefit is received onto the income statement.

 

Oil and Gas Activities - The Company uses the successful efforts method of accounting for oil and gas producing activities. Under this method, acquisition costs for proved and unproved properties are capitalized when incurred. Exploration costs, including geological and geophysical costs, the costs of carrying and retaining unproved properties and exploratory dry hole drilling costs, are expensed. Development costs, including the costs to drill and equip development wells, and successful exploratory drilling costs to locate proved reserves are capitalized.

 

Exploratory drilling costs are capitalized when incurred pending the determination of whether a well has found proved reserves. A determination of whether a well has found proved reserves is made shortly after drilling is completed. The determination is based on a process which relies on interpretations of available geologic, geophysic, and engineering data. If a well is determined to be successful, the capitalized drilling costs will be reclassified as part of the cost of the well. If a well is determined to be unsuccessful, the capitalized drilling costs will be charged to expense in the period the determination is made. If an exploratory well requires a major capital expenditure before production can begin, the cost of drilling the exploratory well will continue to be carried as an asset pending determination of whether proved reserves have been found only as long as: i) the well has found a sufficient quantity of reserves to justify its completion as a producing well if the required capital expenditure is made and ii) drilling of the additional exploratory wells is under way or firmly planned for the near future. If drilling in the area is not under way or firmly planned, or if the well has not found a commercially producible quantity of reserves, the exploratory well is assumed to be impaired, and its costs are charged to expense.

 

In the absence of a determination as to whether the reserves that have been found can be classified as proved, the costs of drilling such an exploratory well is not carried as an asset for more than one year following completion of drilling. If, after that year has passed, a determination that proved reserves exist cannot be made, the well is assumed to be impaired, and its costs are charged to expense. Its costs can, however, continue to be capitalized if a sufficient quantity of reserves is discovered in the well to justify its completion as a producing well and sufficient progress is made in assessing the reserves and the well’s economic and operating feasibility.

 

The impairment of unamortized capital costs is measured at a lease level and is reduced to fair value if it is determined that the sum of expected future net cash flows is less than the net book value. The Company determines if impairment has occurred through either adverse changes or as a result of the annual review of all fields. During 2010 after conducting an impairment analysis, the Company did not record impairment as the fair value of our reserves exceeded our net book value.

 

Asset Retirement Obligations (“ARO”).  The estimated costs of restoration and removal of facilities are accrued. The fair value of a liability for an asset's retirement obligation is recorded in the period in which it is incurred and the corresponding cost capitalized by increasing the carrying amount of the related long-lived asset. The liability is accreted to its then present value each period, and the capitalized cost is depreciated with the related long-lived asset. If the liability is settled for an amount other than the recorded amount, a gain or loss is recognized. For all periods presented, estimated future costs of abandonment and dismantlement are included in the full cost amortization base and are amortized as a component of depletion expense. At March 31, 2012 and December 31, 2011, the ARO of $22,531 and $21,861 is included in liabilities and fixed assets.

 

Development costs of proved oil and gas properties, including estimated dismantlement, restoration and abandonment costs and acquisition costs, are depreciated and depleted on a field basis by the units-of-production method using proved developed and proved reserves, respectively. The costs of unproved oil and gas properties are generally combined and impaired over a period that is based on the average holding period for such properties and the Company's experience of successful drilling.

 

Costs of retired, sold or abandoned properties that make up a part of an amortization base (partial field) are charged to accumulated depreciation, depletion and amortization if the units-of-production rate is not significantly affected. Accordingly, a gain or loss, if any, is recognized only when a group of proved properties (entire field) that make up the amortization base has been retired, abandoned or sold.

 

Stock-Based Compensation - The Company estimates the fair value of share-based payment awards made to employees and directors, including stock options, restricted stock and employee stock purchases related to employee stock purchase plans, on the date of grant

 

 

using an option-pricing model.  The value of the portion of the award that is ultimately expected to vest is recognized as an expense ratably over the requisite service periods.  We estimate the fair value of each share-based award using the Black-Scholes option pricing model. The Black-Scholes model is highly complex and dependent on key estimates by management. The estimates with the greatest degree of subjective judgment are the estimated lives of the stock-based awards and the estimated volatility of our stock price. The Black-Scholes model is also used for our valuation of warrants.

 

Earnings Per Common Share - Basic earnings per common share is calculated based upon the weighted average number of common shares outstanding for the period. Diluted earnings per common share is computed by dividing net income by the weighted average number of common shares and dilutive common share equivalents (convertible notes and interest on the notes, stock awards and stock options) outstanding during the period. Dilutive earnings per common share reflects the potential dilution that could occur if options to purchase common stock were exercised for shares of common stock.  Basic and diluted EPS are the same as the effect of our potential common stock equivalents would be anti-dilutive.

  

Fair Value Measurements -  On January 1, 2008, the Company adopted guidance which defines fair value, establishes a framework for using fair value to measure financial assets and liabilities on a recurring basis, and expands disclosures about fair value measurements. Beginning on January 1, 2009, the Company also applied the guidance to non-financial assets and liabilities measured at fair value on a non-recurring basis, which includes goodwill and intangible assets. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

 

Level 1 - Valuation is based upon unadjusted quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access.

 

Level 2 - Valuation is based upon quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable in the market.

 

Level 3 - Valuation is based on models where significant inputs are not observable. The unobservable inputs reflect the Company's own assumptions about the inputs that market participants would use.

 

The following table presents assets and liabilities that are measured and recognized at fair value as of March 31, 2012 on a recurring and non-recurring basis:

 

														Gains
Description		Level 1				Level 2				Level 3				(Losses)
Intangibles (non-recurring)		$	-			$	-			$	-			$	-
Goodwill (non-recurring)		$	-			$	-			$	-			$	-
Derivatives (recurring)		$	-			$	-			$	837,310			$	88,958

 

The Company has goodwill and intangible assets as a result of the 2011 business combinations discussed throughout this form 10-Q. These assets were valued with the assistance of a valuation consultant and consisted of level 3 valuation techniques.

 

The following table presents assets and liabilities that are measured and recognized at fair value as of December 31, 2011 on a recurring and non-recurring basis:

 

														Gains
Description		Level 1				Level 2				Level 3				(Losses)
Intangibles (non-recurring)		$	-			$	-			$	-			$	(309,816)
Goodwill (non-recurring)		$	-			$	-			$	-			$	(22,119)
Derivatives (recurring)		$	-			$	-			$	639,859			$	470,833

 

The Company has derivative liabilities as a result of 2010 convertible promissory notes that include embedded derivatives.  These liabilities were valued with the assistance of a valuation consultant and consisted of level 3 valuation techniques.

 

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and long-term debt. The estimated fair value of cash, accounts receivable, accounts payable and accrued liabilities approximate their carrying amounts due to the short-term nature of these instruments. The carrying value of long-term debt also approximates fair value since their terms are similar to those in the lending market for comparable loans with comparable risks. None of these instruments are held for trading purposes.

 

Fixed Assets - Fixed assets are stated at cost. Depreciation expense is computed using the straight-line method over the estimated

 

 

useful life of the asset. The following is a summary of the estimated useful lives used in computing depreciation expense:

 

Office equipment	3 years
Computer hardware & software	3 years
Improvements & furniture	5 years
Well equipment	7 years

 

Expenditures for major repairs and renewals that extend the useful life of the asset are capitalized.  Minor repair expenditures are charged to expense as incurred.

 

Impairment of Long-Lived Assets - The Company has adopted Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment ("ASC 360-10"). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates its long-lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.

 

Goodwill and Other Intangible Assets - The Company periodically reviews the carrying value of intangible assets not subject to amortization, including goodwill, to determine whether impairment may exist. Goodwill and certain intangible assets are assessed annually, or when certain triggering events occur, for impairment using fair value measurement techniques. These events could include a significant change in the business climate, legal factors, a decline in operating performance, competition, sale or disposition of a significant portion of the business, or other factors.  Specifically, goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The Company uses level 3 inputs and a discounted cash flow methodology to estimate the fair value of a reporting unit. A discounted cash flow analysis requires one to make various judgmental assumptions including assumptions about future cash flows, growth rates, and discount rates. The assumptions about future cash flows and growth rates are based on the Company’s budget and long-term plans. Discount rate assumptions are based on an assessment of the risk inherent in the respective reporting units. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit.  

 

As of March 31, 2012 there were no intangible assets and in 2011, amortizable intangible assets consisted of trade names and customer contracts.  These intangibles are being amortized on a straight-line basis over their estimated useful lives of 12 and 10 years, respectively. For the three months ending March 31, 2012 the Company recorded no amortization, and amortization of $29,249 for the three months ending March 31, 2011.  The useful lives pertaining to the intangible assets amortized are as follows:

 

Intangibles acquired in Arctic Solar Engineering, Inc.

		Useful life
Patents		5
Customer Base		5
Trademarks		5
Non-Compete		3

 

Foreign Currency Translation and Transaction and translation - The financial position at present for the Company’s foreign subsidiary Redquartz, LLC, established under the laws of the Country of Ireland are determined using (U.S. dollars) reporting currency as the functional currency. All exchange gains and losses from remeasurement of monetary assets and liabilities that are not denominated in U.S. dollars are recognized currently in other comprehensive income. All transactional gains and losses are part of income or loss from operations (if and when incurred) will be pursuant to current accounting literature. The Company’s functional currency is the U.S dollar. We have an obligation related to our acquisition of Redquartz as discussed in Note 7 which is denominated in Euro’s. The change in currency valuation from our reporting this obligation in U.S dollars is reported as a component of other comprehensive income consistent with the relevant accounting literature.

 

Income taxes - The Company accounts for income taxes using the asset and liability method, which requires the establishment of deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the tax basis of the

 

 

Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  A valuation allowance is provided to the extent deferred tax assets may not be recoverable after consideration of the future reversal of deferred tax liabilities, tax planning strategies, and projected future taxable income.

 

The Company uses a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance requires the Company to recognize tax benefits only for tax positions that are more likely than not to be sustained upon examination by tax authorities.  The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement.  A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in our tax returns that do not meet these recognition and measurement standards.

 

Derivative Financial Instruments -The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Derivative financial instruments are initially measured at their fair value. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re−valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option−based derivative financial instruments, the Company uses the Black−Scholes model to value the derivative instruments. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non−current based on whether or not net−cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

 

Recently Adopted and Recently Enacted Accounting Pronouncements

 

In January 2010, the FASB issued FASB ASU No. 2010-06, “Improving Disclosures about Fair Value Measurements,” which is now codified under FASB ASC Topic 820, “Fair Value Measurements and Disclosures.” This ASU will require additional disclosures regarding transfers in and out of Levels 1 and 2 of the fair value hierarchy, as well as a reconciliation of activity in Level 3 on a gross basis (rather than as one net number). The ASU also provides clarification on disclosures about the level of disaggregation for each class of assets and liabilities and on disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. FASB ASU No. 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the disclosures requiring a reconciliation of activity in Level 3. Those disclosures will be effective for interim and annual periods beginning after December 15, 2010. The adoption of the portion of this ASU effective after December 15, 2009, as well as the portion of the ASU effective after December 15, 2010, did not have an impact on our consolidated financial position, results of operations or cash flows.

 

In April 2010, the FASB issued FASB ASU No. 2010-17, “Milestone Method of Revenue Recognition,” which is now codified under FASB ASC Topic 605, “Revenue Recognition.” This ASU provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research and development transactions. Consideration which is contingent upon achievement of a milestone in its entirety can be recognized as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. A milestone should be considered substantive in its entirety, and an individual milestone may not be bifurcated. An arrangement may include more than one milestone, and each milestone should be evaluated individually to determine if it is substantive. FASB ASU No. 2010-17 was effective on a prospective basis for milestones achieved in fiscal years (and interim periods within those years) beginning on or after June 15, 2010, with early adoption permitted.

 

If an entity elects early adoption, and the period of adoption is not the beginning of its fiscal year, the entity should apply this ASU retrospectively from the beginning of the year of adoption. This ASU did not have any effect on the timing of revenue recognition and our consolidated results of operations or cash flows.

 

In December 2010, the FASB issued FASB ASU No. 2010-28, “When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts,” which is now codified under FASB ASC Topic 350, “Intangibles — Goodwill and Other.” This ASU provides amendments to Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not a goodwill impairment exists. When determining whether it is more likely than not an impairment exists, an entity should consider whether there are any adverse qualitative factors, such as a significant deterioration in market conditions, indicating an impairment may exist. FASB ASU No. 2010-28 is effective for fiscal years (and interim periods within those years) beginning after December 15, 2010. Early adoption is not permitted. Upon adoption of the amendments, an entity with reporting units having carrying amounts which are zero or negative is required to assess whether is it more likely than not the reporting units’ goodwill is impaired. If the entity determines impairment exists, the entity must perform Step 2 of the goodwill impairment test for that reporting unit or units. Step 2 involves allocating the fair value of the reporting unit to each asset and liability, with the excess being implied goodwill. An impairment loss results if the amount of recorded goodwill exceeds the implied goodwill. Any resulting goodwill impairment should be recorded as a cumulative-effect adjustment to beginning retained earnings in the period of adoption. This ASU is did not have an impact on our consolidated financial position, results of operations or cash flows.

 

 

2. Going Concern

 

 

The accompanying consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business.  The accompanying consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern.  The Company has experienced substantial losses, maintains a negative working capital and capital deficits, which raise substantial doubt about the Company's ability to continue as a going concern.  

 

 The Company is working to manage its current liabilities while it continues to make changes in operations to improve its cash flow and liquidity position. The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon the Company’s ability to generate revenue from the sale of its services and the cooperation of the Company’s note holders to assist with obtaining working capital to meet operating costs in addition to our ability to raise funds.

 

3. Common Stock Transactions

 

During the three months ended March 31, 2012, the Company issued 20,450,000 shares of common stock valued at $22,155 and subscribed stock in the amount of $12,857 for services. The value of these services, $15,000, was expensed in the prior year and recorded in accounts payable.  The transaction resulted in a loss on settlement of debt totaling $20,012. All shares issued were valued based upon the closing price of the Company’s common stock at the date of grant.

 

During the three months ended March 31, 2012, the Company issued 326,742,646 shares of common stock valued at $229,746 and recorded common stock subscriptions in the amount of $36,688 to extinguish debt of $146,123 resulting in a loss on extinguishment of debt of $140,322 based upon the closing price of the Company’s common stock at the grant date less the carrying value of the debt that was exchanged. For all debts that were converted within the terms of the related promissory notes, no gain or loss was recorded. Any debts converted outside of the terms resulted in a gain or loss based on the fair value of the stock on the date of conversion.

 

During the three months ended March 31, 2012, 5 shares of Series D preferred stock were converted into common shares of the Company. The shares were converted in accordance with the conversion terms of the preferred stock and no gain or loss was recorded on the transaction. A total of 6,250,000 shares of common stock were issued pursuant to this conversion.

 

During the three months ended March 31, 2012, the Company recorded an additional amount of $94,505 to additional paid in capital related to the fair market value of the conversion of debts that were included in the derivative liability on the conversion date. The Company also recorded $16,181 in imputed interest as an increase to additional paid in capital related to loans that did not carry a market rate of interest or were non-interest bearing.

 

4. Preferred Stock Series

 

Series A preferred stock: Series A preferred stock has a par value of $0.001 per share and no stated dividend preference.  The Series A is convertible into common stock at a conversion ratio of one preferred share for one common share.   Preferred A has liquidation preference over Preferred B stock and common stock.

 

Series B preferred stock: Series B preferred stock has a par value of $0.001 per share and no stated dividend preference.  The Series B is convertible into common stock at a conversion ratio of one preferred share for one common share.  The Series B has liquidation preference over Preferred C stock and common stock.

 

Series C preferred stock: The Preferred C stock has a stated value of $.001 and no stated dividend rate and is non-participatory.   The Series C has liquidation preference over common stock. Effective May 20, 2009 i) Voting Rights for each share of Series C Preferred Stock shall have 21,200 votes on the election of directors of the Company and for all other purposes, and, ii) regarding Conversion to Common Shares, Series C have no right to convert to common or any other series of authorized shares of the Company.

 

Series D preferred stock: Effective March 2, 2011 EGPI Firecreek, Inc. (the “Company”) obtained consent from the majority shareholders of the Company to amend the Articles of Incorporation to i) authorize the issuance of 2,500 shares of a new D Series Preferred Stock. The Series D preferred stock include 2.5 million shares authorized, par value $.001, and each share of Series D Preferred Stock is convertible into common shares, where such number of shares shall be equal to the greater of the number calculated by dividing the Purchase Commitment per share ($1,000) by 1) $0.003 per share, or 2) one hundred and ten percent (110%) of the lowest VWAP for the three (3) days immediately preceding a Conversion Date.  

 

During the three months ended March 31, 2012, 5 shares of Series D preferred stock were converted into common shares of the Company. The shares were converted in accordance with the conversion terms of the preferred stock and no gain or loss was recorded on the transaction. A total of 6,250,000 shares of common stock were issued pursuant to this conversion.

  

5. Fixed Assets

 

The following is a detailed list of fixed assets:

 

		3/31/2012				12/31/2011
Property and equipment		$            540,307				$            540,307
Well equipment			174,825				174,825
Accumulated depreciation			(162,828)				(137,174)
Fixed assets - net		$	552,304				577,958

 

 

6.

Oil and Gas

 

Oil and Gas Properties:	March 31, 2012			December 31, 2011
Oil and gas properties – proved reserves	$	2,053,981		$	2,053,981
Development costs		165,162			165,162
Accumulated depletion		(152,058)			(109,520)
Oil and gas properties - net	$	2,067,085		$	2,109,623

 

Depletion expense was $43,725 and $16,366 for three months ended March 31, 2012 and March 31, 2011, respectively.

 

 

7.  Options & Warrants Outstanding

 

All options and warrants granted are recorded at fair value using a Black-Scholes model at the date of the grant.   There is no formal stock option plan for employees.

 

A listing of options and warrants outstanding at March 31, 2012 is as follows.  Option and warrants outstanding and their attendant exercise prices have been adjusted for the 1 for 200 reverse split and the 1 for 50 reverse split of the common stock discussed in Note 1.

 

		Amount				Weighted Average Exercise Price				Weighted Average Years to Maturity
Outstanding at December 31, 2011			240			$	28.125000				0.978
Issued			0
Exercised			0
Expired			0
Outstanding at March 31, 2012			240			$	28.125000				0.729

 

There was no warrant activity during the three months ended March 31, 2012. The value of these warrants are included in the derivative liability at March 31, 2012 and December 31, 2011 due to the fact that the equity environment is tainted.

 

8.  Note Receivable

 

On March 14, 2011, the company received a promissory note from the sale of its interest in Terra to a third party.  The value of this promissory note is $50,000 and is due 1 year from the date of issuance, along with accrued interest at the rate of 9%.  The note includes an optional provision to extend for one additional twelve month period. An Allowance for Doubtful Accounts of $50,000 has been established for this receivable.

 

On March 14, 2011, the company received a promissory note from the sale of a subsidiary, SATCO, to a third party.  The value of this promissory note is $50,000 and is due 1 year from the date of issuance, along with accrued interest at the rate of 9%.  The note includes an optional provision to extend for one additional twelve month period. An allowance for doubtful accounts of $50,000 has been established for this receivable.

 

9. Income Tax Provision

 

Deferred income tax assets and liabilities consist of the following at March 31, 2012:

 

Deferred Tax asset		$	2,851,034
Valuation allowance			(2,851,034)
Net deferred tax assets			-

 

 

The Company estimates that it has an NOL carryfoward of approximately $8,154,812 that begins to expire in 2027.

 

After evaluating any potential tax consequence from our former subsidiary and our own potential tax uncertainties, the Company has determined that there are no material uncertain tax positions that have a greater than 50% likelihood of reversal if the Company were to be audited. The Company believes that it is current with all payroll and other statutory taxes. Our tax return for the years ended December 31, 2003 to December 31, 2011 may be subject to IRS audit.

 

12.  Related Party Transactions

 

Through May 31, 2009 the Secretary of EGPI Firecreek, Inc provided office space for the Company’s Scottsdale office free of charge. June 1, 2009 Energy Producers, Inc, a 100% owned subsidiary of the Company entered into a month to month lease for the same office space at a rate of $1,400 per month. There remains an unpaid balance of $9,900 at March 31, 2012 and $6,700 December 31, 2011.

 

In addition Energy Producers Inc. also has an Administrative Service Agreement with Melvena Alexander, CPA , which is 100% owned by Melvena Alexander, officer and shareholder of the Company, to provide services to the Company. The agreement is an open-ended, annually renewable contract for payments of $4,600 per month. The contract is currently in force with a balance due of $55,470 and $45,870 at March 31, 2012 and December 31, 2011.

 

The Company had a Service Agreement with Global Media Network USA, Inc. a company 100% owned By Dennis Alexander, to provide the services of Dennis Alexander to the Company. The contract terminated May 31, 2009 and there is an outstanding balance of $0 at December 31, 2011.

 

The above referenced contract was superseded by a month-to-month contract between Energy Producers, Inc., a 100% owned subsidiary of the Company, and Dennis Alexander, an officer and director of the Company, at a monthly payment of $15,000. There was a balance due on this contract of $304,775 and $279,950 at March 31, 2012 and December 31, 2011.

 

The Company had a Service Agreement with Tirion Group, Inc., which was owned by Rupert C. Johnson, a former director of the Company. The contract was terminated in 2007 and Mr. Johnson severed his connection to the Company in 2008. However, there is unpaid balance of $55,000 remaining at March 31, 2012 and December 31, 2011.

 

During 2010, Robert Miller, a director of the Company, made unsecured, non-interest bearing advances to M3 Lighting, Inc. a 100% owned subsidiary of the Company, for working capital of $1,500 which remains unpaid at March 31, 2012 and December 31, 2011.

 

April 1, 2010 the Company signed a 9% unsecured note with Bob Joyner a former officer and shareholder, for $27,000. The note matures June 30, 2011, and the unpaid balance at March 31, 2012 and December 31, 2011 was $21,700.

 

Chanwest Resources, Inc, a 100% owned subsidiary of the Company billed Petrolind Drilling, Inc a company in which David Taylor, a director and share holder of the Company, has a substantial interest. The invoice of $9,635 was still outstanding at December 31, 2011 and a full valuation allowance was recorded for this receivable.

 

Willoil Consulting, LLC also gave unsecured non-interest bearing advances to Chanwest Resources, Inc. of $17,825. Willoil Consulting LLC is a company in which David Taylor is a managing member with 80% control. The funds have not been repaid as of March 31, 2012.

 

Relative to the May 21, 2009 acquisition of M3 Lighting, Inc. the Company approved an Administrative Services Agreement (ASA), and amended terms thereof, with Strategic Partners Consulting, LLC (SPC).Two of the Company’s officers, directors and shareholders, David H. Ray, Director and Executive Vice President and Treasurer of the Company since May 21, 2009 and Brandon D. Ray Director and Executive Vice President of Finance of the Company, are also owners and managers of SPC. Information is listed in Exhibit 10.1 to a Current Report on form 8-K, Amendment No. 1, filed on June 23, 3009. The ASA initiated on November 4, 2009, in accordance with its terms thereof, and was billed at the rate of $20,833.33 per month. The ASA contract was canceled June 8, 2010. During the twelve months ending December 31, 2010, the Company paid $51,000 to SPC, with a balance payable due in the amount of approximately $82,058.

 

Effective May 9, 2011 the Company entered into a Promissory Note with a company controlled by a director of the Company in the amount of $210,000, and amended December 9, 2011 to $315,625. The terms of the note are for 14% interest, with principal and interest all due on or before May 9, 2013. The loan is collateralized with the oil and gas leases held in our subsidiary Energy Producers, Inc.

 

The Company’s subsidiary Arctic Solar Engineers issued promissory notes to various individuals for working capital, all maturing in 2020 at an interest rate of 2%. Additional interest expense was imputed on these loans due to the fact that the interest rate was below market. Of these loans, $5,000 was owed to the former CEO of Arctic Solar Engineering, LLC, who is currently a director of the Company.

 

 

13. Notes Payable

 

At March 31, 2012, the Company was liable on the following Promissory notes:

 

(see notes to the accompanying table)

 

Date of					Date Obligation		Interest				Balance Due
Obligation		Notes			Matures		Rate (%)				3/31/12 ($)
9/17/2009			4		9/17/2010			12			$	11,350
5/29/2009			4		9/17/2010			12	*			29,111
9/17/2009			4		9/17/2010			18	*			3,830
3/25/2012			4		4/1/2012			18				10,000
11/4/2009			11		11/4/2012			9				98,391
11/4/2009			11		11/4/2012			9				98,391
11/4/2009			11		11/4/2012			9				98,391
5/30/2010			2		12/31/2011			8				209,420
3/1/2010			9		See footnote 10			0				475,000
4/1/2010			3		6/30/2011			9				21,700
7/26/2010			5		7/26/2012			10				118,974
8/10/2010			6		8/10/2012			10				29,542
8/31/2011			7		5/31/2012			8				25,000
7/1/2011			1		7/1/2013			18				149,000
2/18/2010			3		12/1/2010			4				136,150
2/15/2010			3		2/15/2010			8				201,500
3/3/2010			10		3/31/12			10				858,900
3/4/2011			12		9/8/2011			14				133,247
3/4/2011			12		9/22/2011			14				100,000
8/1/2010			13		12/3/2020			2				137,000
3/24/2010			13		12/31/2020			2				42,000
8/1/2010			13		12/31/2020			2				5,000
8/1/2010			13		12/31/2020			2				5,000
5/31/2011			14		5/31/2013			8				124,290
6/9/2011			15		5/9/2011			14				315,626
6/1/2011			16		12/1/2011			8				67,352
8/11/2011			17		4/11/2012			12				27,000
10/28/2011			18		10/28/2012			12				13,300
8/12/2011			19		2/12/2012			10				42,500
9/12/2011			20		3/12/2012			8				25,000
9/3/2011			21		3/3/2012			8				18,300
10/1/2011			22		6/30/2012			6				5,974
11/15/2011			8		8/17/2012			8				25,000
1/27/2012			23		7/27/2012			8				13,700
3/1/2012			23		9/1/2012			8				10,000
3/15/2012			23		9/5/2012			8				19,000
1/25/2012			24		1/25/2013			12				42,800
3/28/2012			22		3/28/2013			15				20,000
3/30/2012			8		On Demand			10				25,000
Unamortized Discount												(207,947	)
Total												3,667,449

 

  

*	Compounded

 

Notes:

 

Other than as described at Notes 1, 6, 7, 8, 9, 17, 18, 19, 22, 23, 24, and 25 none of the other notes had conversion options.

 

Note 1: On January 15, 2010, the Company issued an $86,000 Convertible Promissory Note (“Convertible Note”) and a registration rights agreement (“RRA”) to an investor for making a $1,000,000 cash loan.  The Convertible Note has no specified interest rate and was scheduled to mature six months from the closing date.  At the investor’s option, the outstanding principal amount, including all accrued and unpaid interest and fees, may be converted into shares of common stock at the conversion price, which is 75% of the

 

 

lower of (a) $0.08 per share; or (b) the lowest three-day common stock volume weighted average price during the prior twenty business days. In addition, if the Company sells common shares or securities convertible into common shares, the Conversion Price shall become the lower of: (a) the conversion price in effect immediately prior to the sale of securities; or (b) the conversion price of the securities sold.   

 

The RRA provides both mandatory and piggyback registration rights.  The Company was obligated to (a) file a registration statement for 40,000 common shares (subject to adjustment) no later than 14 days after the closing date, and (b) have it declared effective no later than the earlier of (i) five days after the SEC notifies the Company that it may be declared effective or (ii) 90 days from the closing date.  The Company was obligated to pay the investor a penalty of $100 for each day that it is late in meeting these obligations. The Company’s registration statement was filed late and on March 18, 2010 it was withdrawn.

 

Upon occurrence of an Event of Default (various specified events), the Lender may (a) declare the unpaid principal balance and all accrued and unpaid interest thereon immediately due and payable; (b) at anytime after January 31, 2010, immediately draw on the LOC to satisfy EGPI’s obligations; and (c) interest will accrue at the rate of 18%.

 

Upon occurrence of a Trigger event: (a) the outstanding principal amount will increase by 25%; and (b) interest will accrue at the rate of 18%. The Trigger Event effects shall not be applied more than two times. There are various Trigger Events, including (a) the five-day common stock VWAP declines below $0.04; (b) the ten-day average daily trading volume declines below $5,000; (c) a judgment against EGPI in excess of $100,000; (d) failure to file a registration statement on time; (e) failure to cause a registration statement to become effective on time; (f) events of default; and (g) insufficient authorized common shares.

 

During the first quarter of 2010, the Company tripped two trigger events and incurred resulting penalties and incremental debt obligation. These events increased the outstanding principal amount of the Convertible Note by approximately $22,000 and $27,000 of trigger penalties.

 

 It was determined that the Convertible Note’s conversion option, plus other existing equity instruments (warrants outstanding; see Notes 2 and 7 below) of the Company, were required to be (re)classified as derivative liabilities as of January 15, 2010, because (a) the Convertible Note provides conversion price protection; and (b) the quantity of shares issuable pursuant to the conversion option is indeterminate.  The conversion option and the related instruments were initially valued at $63,080 (expected term of 0.5 years; risk-free rate of 0.15%; and volatility of 95%) and this amount was recorded as a note discount and derivative liability. The derivative liabilities were then marked to the market to an aggregate value of $16,158 (expected term of 0.3 years; risk-free rate of 0.16%; and volatility of 95%) at December 31, 2010.

 

On May 12, 2010, the parties to the Convertible Note executed a Waiver of Trigger Event, which stipulated: (1) the principal outstanding on the Convertible Note was fixed at $147,500 as of May 12, 2010; (2) the remaining impact of the trigger events and failure to register the shares was waived; (3) the interest rate was reset at 9%; (4) the number of shares issuable under the conversion option was capped at 150 million shares; (5) the repricing provision of the conversion option was eliminated; and (6) the maturity date of the note was revised to August 15, 2010.  In addition, if the market price of the Company’s common stock declines such that the conversion option would be capped at the agreed 150 million shares, the repayment date is accelerated and the outstanding balance on the note is immediately due and payable.  As a result of the above, the conversion option and related instruments were revalued as of May 12, 2010 and were reclassified to paid-in-capital (equity) in the amount of $50,303 (expected term of 0.3 years; risk-free rate of 0.16%; and volatility of 95%).

 

Effective August 3, 2010 the Company entered into a Promissory Note in the amount of $153,046 with an entity that had acquired and then exchanged the Debt described above. The terms of the Promissory Note are for 8% interest, with principal and interest all due on or before August 3, 2012. In July 2011 a judgment was issued for $202,000 to be paid over two years with no interest, except if there is a default, then interest of 18% will accrue. As a result of defaults by the Company under the agreed upon settlement terms, another settlement agreement was entered into on January 31, 2012. This settlement required the payment of monthly amounts of $10,000 by the Company over 18 months and no default interest is owed until the Company defaults on a payment under these newly agreed upon terms. Default interest of 18% will accrue in the event of default. A total of $40,000 in payments were issued during the three months ended March 31, 2012, reducing the balance of the amount due to $149,000.

 

Note 2: For the three months ended March 31, 2012, we have received no cash proceeds for these debt obligations, settled $63,480 in debt for common stock, yielding a balance of $209,420 at the period end.

 

Note 3: For the three months ended March 31, 2012 the Company has a debt obligation of $21,700 for which no payments were made during the period.   The company also had a promissory note of $201,500 for which no payments were made during the period.  The company also had a promissory note of $136,150 for which no payments were made during the period and included $2,600 in accrued interest added to the principal value of the note.

 

Note 4:  During 2009 we received cash proceeds for the aggregate amount of $41,307, which is payable in principal and interest with rates ranging from 12-18%.

 

Note 5: On July 26, 2010, we issued a $165,000 secured convertible promissory note that is convertible at the election of the holder any time after issuance, or upon an Event of Default, or when due in 24 months on July 26, 2012. While the notes have not yet become

 

 

due or repaid, there was no Event of Default as of March 31, 2011, or thereafter. The Company evaluated the note and determined that the shares issuable pursuant to the conversion option were indeterminate and therefore this conversion option and all other dilutive securities would be classified as a derivative liability as of July 26, 2010. This note also contains conversion price reset provisions which also factor into the derivative value.  The July 26, 2010 value of the conversion option of $165,000 was recorded as a note discount, to be amortized over the life of the note, and derivative liability.  For the three months ended March 31, 2012, the Company recognized note discount amortization of $35,319.  The discount is amortized using the effective interest method.

 

Note 6: On August 10, 2010, we issued a $35,000 convertible promissory note that is convertible at the election of the holder any time after issuance, or upon an Event of Default, or when due in 24 months on August 10, 2012. While the notes have not yet become due or repaid, there was no Event of Default as of March 31, 2011, or thereafter. The Company evaluated the note and determined that, because the shares issuable pursuant to the July 26, 2010 convertible note are indeterminate, the conversion option associated with this note is deemed to be a derivative liability.  This note also contains conversion price reset provisions which also factor into the derivative value.  The August 10, 2010 value of the note of $35,000 was recorded as a note discount, to be amortized over the life of the note, and derivative liability.  For the three months ended March 31, 2012, the Company recognized note discount amortization of $6,556.  The discount is amortized using the effective interest method.

 

Note 7: On August 31, 2011, we issued a $25,000 convertible promissory note that is convertible at the election of the holder any time after issuance, or upon an Event of Default, or when due in 9 months on May 31, 2012. While the notes have not yet become due or repaid, there was no Event of Default as of March 31, 2012, or thereafter.  The Company evaluated the note and determined that, because the shares issuable pursuant to the convertible note are indeterminate, the conversion option associated with this note is deemed to be a derivative liability. This note also contains conversion price reset provisions which also factor into the derivative value.  The August 31, 2011 value of the note of $25,000 was recorded as a note discount, to be amortized over the life of the note, and derivative liability.  For the three months ended March 31, 2012, the Company recognized note discount amortization of $9,621.  

 

Note 8: On November 15, 2011, we issued a $25,000 convertible promissory note that is convertible at the election of the holder any time after issuance, or upon an Event of Default, or when due in 9 months on August 17, 2012. While the notes have not yet become due or repaid, there was no Event of Default as of March 31, 2012, or thereafter.  The Company evaluated the note and determined that, because the shares issuable pursuant to the convertible note are indeterminate, the conversion option associated with this note is deemed to be a derivative liability. This note also contains conversion price reset provisions which also factor into the derivative value.  The November 15, 2011 value of the note of $25,000 was recorded as a note discount, to be amortized over the life of the note, and derivative liability.  For the three months ended March 31, 2011, the Company recognized note discount amortization of $4,914.  The discount is amortized using the effective interest method. In March of 2012, the Company entered into an additional note for $25,000 with the same terms, except the new note was due on demand. The $25,000 was recorded as a note discount and expensed immediately due to the fact that the note is due on demand.

  

Note 9:  On March 1, 2010, we issued non-interest bearing, convertible notes for services, renewable annually until paid through conversions.  The total debt owing under these agreements is $180,000, which is composed of two $90,000 debts owed to two professional service firms.  During the three months ended March 31, 2012, an additional $90,000 in promissory notes were issued to these firms for services provided.  These notes can be converted at 50% of the closing price of the stock on the day preceding the conversion date.  The Company evaluated the note and determined that the conversion option associated with this note is deemed to be a derivative liability.  During the three months ended March 31, 2012, $7,500 of these notes were settled by the issuance of common stock.

 

Note 10:  For the period ended March 31, 2012 we have balance on debt obligations owed totaling $858,900, related to the acquisition of a subsidiary in March 2010.  A total of $8,375 of this debt was settled by the issuance of stock during the three months ended March 31, 2012.

 

Note 11:  Promissory notes totaling $295,173, which were issued in conjunction with the acquisition of SATCO.

 

Note 12:  Accounts Payable of $133,247 due to Contegra Construction by Energy Ventures One, Inc, a Company subsidiary was converted to a Note Payable in March 2011.  Energy Ventures One also has a Line of Credit with Masters Equipment, Inc. with a balance due of $100,000 at March 31, 2012.

 

Note 13:  The Company’s subsidiary Arctic Solar Engineering, LLC issued promissory notes to various individuals for working capital, all maturing in 2020 at an interest rate of 2%.  Additional interest expense was imputed on these balances.

 

Note 14: The balance owed under these debt obligations is $124,290 as of March 31, 2012.

 

Note 15: Effective May 9, 2011 the Company entered into a Promissory Note in the amount of $210,000, and amended December 9, 2011 to $315,625. The terms of the note are for 14% interest, with principal and interest all due on or before May 9, 2013. The loan is collateralized with the oil and gas leases held in our subsidiary Energy Producers, Inc.

 

Note 16: Effective June 1, 2011 the Company entered into a Promissory Note in the amount of $39,000. The terms of the note are for 8% interest only, with principal and interest all due on or before December 1, 2011. Effective September 2, 2011, the Company entered into an additional Promissory Note in the amount $20,500 with same terms due on or before March 2 2012. Also on

 

 

September 28, 2011, the Company entered into an additional Promissory Note in the amount of $8,000, same terms, due on or before March 28, 2012. A fourth Promissory Note of $17,500 entered into on October 24, 2011 under the same terms, brings the total owed to $85,000 at December 31, 2011. In the three months ended March 31, 2012, the Company settled $17,648 on this note by issuing common stock, leaving a balance of $67,352 at March 31, 2012.

 

Note 17: Effective August 11, 2011, the Company entered into a Convertible Promissory Note in the amount of $10,000. The terms of the note are 12% interest, with principal and interest all due on or before August 11, 2012. October 28, 2011, the Company entered into a Convertible Promissory Note in the amount of $17,000. The terms of the note are 12% interest, with principal and interest all due on or before June 11, 2012. On or after the maturity date, the notes may be converted based on the outstanding and unpaid principal and interest amount into fully paid and non-assessable shares of common stock at a 50% discount to the fair market value of the stock price at the time of conversion. The Company evaluated the notes and determined that the conversion option associated with this note is deemed a derivative liability. This note also contains conversion price reset provisions which factor into the derivative value. The August 11, 2011 and October 28, 2011 values of the notes of $10,000 and $17,000 were recorded as a note discount, to be amortized over the life of the note, and derivative liability. For the quarter ended March 31, 2012, the Company recognized note discount amortization of $6,024. The discount is amortized using the effective interest method.

 

Note 18: Effective October 28, 2011, the Company entered into a Convertible Promissory Note in the amount of $50,000. The terms of the note are 12% interest, with principal and interest all due on or before October 28, 2012. On or after the maturity date, the note may be converted based on the outstanding and unpaid principal and interest amount into fully paid and non-assessable shares of common stock at a 50% discount to the fair market value of the stock price at the time of conversion. The Company evaluated the note, and determined that because the shares issuable are indeterminate, the conversion option associated with this note is deemed a derivative liability. The October 28, 2011 value of the note of $50,000 was recorded as a note discount to be amortized over the life of the note and derivative liability. For the quarter ended March 31, 2012, the Company recognized note discount amortization of $4,484. The discount is amortized using the effective interest method.

 

Note 19: Effective August 12, 2011 the Company entered into a Convertible Promissory Note in the amount of $50,000. The terms of the note are for 10% interest, with principal and interest all due on or before February 12, 2012. On, or after, the maturity date, the note may be converted based on the outstanding and unpaid principal and interest amount into fully paid and non-assessable shares of common stock at a 50% discount to the fair market value of the stock price at the time of conversion. The Company evaluated the note, and determined that because the shares issuable are indeterminate, the conversion option associated with this note is deemed a derivative liability. The August 12, 2011 value of the note of $50,000 was recorded as a note discount to be amortized over the life of the note, and derivative liability. The balance owing at March 31, 2012 is $42,500. For the three months ended March 31, 2012, the Company recognized note discount amortization of $12,376. The discount is amortized using the effective interest method.

 

Note 20: Effective September 12, 2011 the Company entered into a Convertible Promissory Note in the amount of $25,000. The terms of the note are for 8% interest, with principal and interest all due on or before March 12, 2012. On or after the maturity date, the note may be converted based on the outstanding and unpaid principal and interest amount into fully paid and non-assessable shares of common stock at a 50% discount to the fair market value of the stock price at the time of conversion. The Company evaluated the note and determined that because issuable shares are indeterminate, the conversion option associated with this note is deemed a derivative liability. For the three months ended March 31, 2012, the Company recognized note discount amortization of $10,766. The discount is amortized using the effective interest method.

 

Note 21: Effective September 3, 2011 the Company entered into an Unsecured Promissory Note in the amount of $20,000. The terms of the note are for 8% per annum interest, with principal and interest all due on or before March 3, 2012.

 

Note 22: Effective October 1, 2011, the Company entered into a Convertible Promissory Note in the amount of $11,250. The terms of the note are for 6% interest with principal and interest due on demand. The note may be converted based on the outstanding and unpaid principal and interest amount into fully paid and non-assessable shares of common stock at a 50% discount to the fair market value of the stock price at the time of conversion. The Company evaluated the note and determined that because the shares issuable are indeterminate, the conversion option associated with this note is deemed a derivative liability. The October 1, 2011 value of the note of $11,250 was recorded as a note discount to be amortized over the life of the note and derivative liability. In March 2012 an additional note for $20,000 was issued bearing the same terms. For the three months ended March 31, 2012, the Company recognized note discount amortization of $20,000. The discount is amortized using the effective interest method.

 

Note 23: Effective January 27, 2012, the Company entered into a Promissory Note in the amount of $13,700. The terms of the note are for 8% interest, with principal and interest all due on or before July 27, 2012. Effective March 1, 2012 the Company entered into an additional Promissory Note in the amount of $10,000 with the same terms due on or before September 1, 2012 Effective March 5, 2012, the Company entered into an additional Promissory Note in the amount of $19,000 with the same terms due on or before September 5, 2012.

 

Note 24: Effective January 25, 2012, the Company entered into a Convertible Promissory Note in the amount of $50,000. The terms of the note are for interest of 12% with principal and interest due on or before January 25, 2013. The note may be converted based on the outstanding and unpaid principal and interest amount into fully paid and non-assessable shares of common stock at a 60% discount to the fair market value of the stock at the time of conversion. The Company evaluated the note and determined that because the shares issuable are indeterminate, the conversion option associated with this note is deemed a derivative liability. The January 25, 2012

 

 

value of the note for $50,000 was recorded as a note discount to be amortized over the life of the note and derivative liability. On March 28, 2012 an additional note for $20,000 was issued bearing the same terms. For the three months ended March 31, 2012, the Company recognized note discount of $20,000. The discount is amortized using the effective interest rate.

 

Although a portion of our debt is not due within 12 months, given our working capital deficit and cash positions and our ability to service the debt on a long term basis is questionable, the notes are all effectively in default and treated as current liabilities.

  

14.  Capital Lease Obligation

 

During the year ended December 31, 2010, the Company entered into a lease for equipment which included the promise to make monthly payments of $5,000 for 12 months with a bargain purchase option at the end of the lease.  This lease is accounted for as a capital lease in which the present value of the future payments is recorded as a liability of $56,872.  The discount rate is 10%.  As of March 31, 2012, there were no payments made on this lease and the entire balance is classified as a current liability.

 

15. Derivative Liability

 

The Company evaluated the conversion feature embedded in the convertible notes to determine if such conversion feature should be bifurcated from its host instrument and accounted for as a freestanding derivative. Due to the note not meeting the definition of a conventional debt instrument because it contained a diluted issuance provision, the convertible notes were accounted for in accordance with ASC 815. According to ASC 815, the derivatives associated with the convertible notes were recognized as a discount to the debt instrument, and the discount is being amortized over the life of the note and any excess of the derivative value over the note payable value is recognized as additional expense at issuance date.

 

The Company also issued 2,500 series D convertible preferred stock which included reset provisions which are considered derivatives in accordance with ASC 815. The fair market value of these reset provisions were bifurcated and recorded as derivative liabilities.

 

Further, and in accordance with ASC 815, the embedded derivatives are revalued at each balance sheet date and marked to fair value with the corresponding adjustment as a gain or loss on change in fair value of derivatives” in the consolidated statement of operations. As of December 31, 2011, the fair value of the embedded derivatives included on the accompanying consolidated balance sheet was $639,859. As of March 31, 2012, the fair value of the embedded derivatives included on the accompanying consolidated balance sheet was $837,310. During the three months ended March 31, 2012, the Company recognized a loss on change in fair value of derivative liability totaling $88,958.

 

Key assumptions used in the valuation of derivative liabilities associated with the convertible notes at December 31, 2011 and March 31, 2012 were as follows:

 

• The stock price would fluctuate with an annual volatility ranging from 264% to 520% based on the historical volatility for the company. 
• An event of default would occur 5% of the time, increasing 0.10% per quarter to a maximum of 25%. 
• Alternative financing for the convertible notes would be initially available to redeem the note 0% of the time and increase quarterly by 1% to a maximum of 20%. 
• The trading volume would average $265,308 to $291,990 and would increase at 1% per quarter. 
• The holder would automatically convert the notes at a stock price of the greater of the initial exercise price multiplied by two and the market price for the convertible notes if the registration was effective and the company was not in default. 

 

Key assumptions used in the valuation of derivative liabilities associated with the reset provisions of the series D preferred stock at December 31, 2011 and March 31, 2012 were as follows:

 

• The stock price would fluctuate with an annual volatility ranging from 258% to 615% based on the historical volatility for the company.
• An event of default that requires the Company to redeem the stock would be 0% increasing 2% per period to a maximum of 20% at maturity. 
• The Holder would automatically convert at a stock price of $0.0045 if the Company was not in default. 

The Company classifies the fair value of these securities under level three of the fair value hierarchy of financial instruments. The fair value of the derivative liability was calculated using a lattice model that values the compound embedded derivatives based on a probability weighted discounted cash flow model. This model is based on future projections of the various potential outcomes. The embedded derivatives that were analyzed and incorporated into the model included the conversion feature with the full ratchet reset, and the redemption options.

 

The components of the derivative liability on the Company’s balance sheet at December 31, 2011 and 2010 are as follows: 

 

 

		March 31, 2012				December 31, 2011
Embedded conversion features - convertible promissory notes		$	818,497			$	626,953
Common stock warrants			-				-
Anti-dilution provisions of series D preferred stock			18,813				12,906
		$	837,310			$	639,859

 

The Company had the following changes in the derivative liability:

 

Balance at December 31, 2011		$	639,859
Issuance of securities with embedded derivatives			252,039
Debt and preferred stock conversions			(94,505	)
Derivative (gain) or loss due to mark to market adjustment			(39,917	)
Balance at March 31, 2012		$	837,310

 

16.  Intangible Assets

 

The company had $0 of intangible assets recorded as of March 31, 2012 and December 31, 2011. In the year ended December 31, 2011, all intangible assets were fully impaired.

 

17.  Asset Retirement Obligation (ARO)

 

The ARO is recorded at fair value and accretion expense is recognized as the discounted liability is accreted to its expected settlement value. The fair value of the ARO liability is measured by using expected future cash outflows discounted at the Company’s credit adjusted risk free interest rate.

 

Amounts incurred to settle plugging and abandonment obligations that are either less than or greater than amounts accrued are recorded as a gain or loss in current operations.  Revisions to previous estimates, such as the estimated cost to plug a well or the estimated future economic life of a well, may require adjustments to the ARO and are capitalized as part of the costs of proved oil and natural gas property.

 

The following table is a reconciliation of the ARO liability for continuing operations for the three months ended March 31, 2011 and 2010:

 

		3/31/2011				12/31/2011
Asset retirement obligation at the beginning of period			21,861				5,368
Liabilities incurred			-				-
Revisions to previous estimates			-				11,876
Dispositions			-				-
Accretion expense			670				4,617
Asset retirement obligation at the end of period			22,531				21,861

 

18.  Discontinued Operations

  

On March 14, 2011, the Company entered into and completed a definitive Stock Purchase Agreement whereby EGPI Firecreek, Inc. would sell 100% of the common shares of SATCO to Distressed Asset Acquisitions, Inc.

 

The consideration being paid by Distressed Asset Acquisitions, Inc. consists of a $50,000 in the form of a promissory note (the Purchase Price”). The promissory note is to be paid to the Company on or before March 14, 2012 in lawful money of the United States of America and in immediately available funds the principal sum of $50,000, together with interest on the unpaid principal of this Note from the date hereof at the interest rate of Nine Percent (9%). The Note can be extended for one additional twelve month period. The loss on disposal is $586,924 and is recognized in the financial statements on the disposal date. Please refer to the Form 8-K filed with the SEC on March 18, 2011.

 

On February 29, 2012, the Company entered into a Linear Short Form Agreement (the “AGREEMENT”), with Success Oil Co., Inc. located at 8306 Wilshire Blvd. #566 Beverly Hills, Ca. 90211, (“Success” or “Operator”) and CUBO Energy, PLC and or its assignee, a public limited corporation organized under the laws of Great Britain (“CUBO”, “Assignee”, or “Participant”), whereas the Company will sell 50% of its interests in certain oil and gas properties and interests to CUBO known as the North 40 Interests of the A.J. Tubb Leasehold Estate located in Ward County Texas to CUBO as approved by Operator, along with granting certain participation rights in further Option Rights for new proposed Drilling and Development in the South 40 of the A.J. Tubb Leasehold Estate. The total consideration to be given is $1.15 million in CUBO stock reduced by any liabilities assumed by CUBO that are collateralized by the North 40 Interests. For further information please see our Current Report on Form 8-K filed on March 7, 2012, incorporated herein by reference. As of the date of this filing, this transaction has not closed. The Company included the assets and liabilities of the portion of the interests that may be sold in assets and liabilities available for sale and discontinued operations.

 

 

On March 12, 2012 the Company announced that it entered into a Letter of Intent to sell 51% majority interest in its Arctic Solar Engineering, LLC ("ASE") to Canada based W2 Energy, Inc. (“W2”) via a Securities Exchange Agreement and subject to the approvals of the Board of Directors of both the Company and W2. As of the date of this filing, this transaction has not closed. The Company included the assets and liabilities of the portion of the interests that may be sold in assets and liabilities available for sale and discontinued operations.

 

19.  Professional Service Agreements

 

On March 1, 2010, the Company entered into two professional service agreements (the Agreements”) which are intended to be automatically renewable annually. Aggregate fees pursuant to the Agreements are comprised of (a) $20,000 in cash per month which has been accrued through the period ended December 31, 2010; (b) a one-time issuance of 120,000 shares of restricted common stock; and (c) three-year warrants, which vest six months from the grant date, to purchase for $20,000 the lower of (i) shares of common stock representing 1% of the Company’s outstanding common stock; or (ii) shares of common stock representing a fair market value of $150,000. In addition, the vendors are entitled to convert any unpaid cash fees into common stock at a 50% discount to the fair market value of the stock on the date of conversion. On April 1, 2011 the contracts were renewed with aggregate fees of $30,000 per month which have been accrued through the period ended December 31, 2011. In this renewal, the warrants were cancelled no longer exercisable. All amounts accrued as part of the $30,000 monthly accrual are done so pursuant to convertible promissory notes due on demand. They are convertible at a 50% discount to the fair market value of the stock on the date of conversion.

 

20. Concentrations and Risk

 

Customers

 

During the three months ended March 31, 2012 and March 31, 2011, revenue generated under the top five customers accounted for 100% of the Company’s total revenue. Concentration with a single or a few customers may expose the Company to the risk of substantial losses if a single dominant customer stops conducting business with the Company.  Moreover, the Company may be subject to the risks faced by these major customers to the extent that such risks impede such customers’ ability to stay in business and make timely payments.

 

 21. Contingencies

 

The Company is subject to various claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. Management believes that any liability that may ultimately result from the resolution of these matters will not have a material adverse effect on the financial condition or results of operations of the Company.

 

In October 2010 we received notice of a lawsuit filed against the Company by St. George Investments LLC relating to certain Agreements entered on January 15th, 2010 by EGPI Firecreek Inc. and St. George Investments LLC which include: i) Note Purchase Agreement, ii) Convertible Promissory Note, iii) Judgment by Confession and iv) Registration Rights Agreement. St. George Investments LLC believes that EGPI Firecreek is in breach of terms agreed upon pursuant to the aforementioned agreements and is seeking damages totaling $262,584.61 (includes principal, interest and all penalties/fees pursuant to plaintiff's initial disclosures dated 3/28/11). EGPI Firecreek's management is confident that the Company is not liable and intends to defend this matter vigorously. The amount of principal and interest due is currently recorded in notes payable and accrued expenses, respectively.  No additional accrual for additional damagaes above accrued principal and interest has been accrued as of March 31, 2011.  Management believes that it does not owe any additional amounts in excess of the amounts already accrued.  Additionally, the Company is currently exploring counter-suit options for claims against potential damages caused by St. George Investments LLC to the company as a result of this transaction.

 

In November 2010, EGPI Firecreek, Inc. and South Atlantic Traffic Corp. received a lawsuit notice from two of the former owners of SATCO, Mr. Jesse Joyner and Mr. James Stewart Hall. Mr. Joyner and Mr. Hall have subsequently resigned from their positions with the company.   The former owners of SATCO are suing for payment of promissory notes that are currently recorded in the financial statements, along with accrued interest and penalties and seeking damages for breach of their employment contracts.  On December 17, 2010, EGPI Firecreek, Inc. filed its answer to the claim and filed a counterclaim against Mr. Joyner and Mr. Hall. It is management's position that the Company is not liable and is currently exploring all defense and counter-suit options, and the Company will vigorously defend its position.

 

In May 2011 the Company received a lawsuit by Edelweiss Enterprises Inc. dba The Small Business Money Store (“SMBS”) seeking a judgment to collect amounts allegedly owed it relating to an account receivable factoring agreement, to the former subsidiary SATCO, in the total aggregate amount of $48,032. The Company believes that it is not liable, and will vigorously defend its position.

 

In August 2011, the Company received a lawsuit notice on behalf of our wholly owned subsidiary Energy Ventures One Inc whereas Contegra Construction Company LLC (“CCC”) is seeking a judgment to collect amounts owed it relating to a promissory note in the amount of $157,767, which includes interest and late fees. The amount is recorded as a liability in the financial statements.

 

In August 2011, the Company received a lawsuit notice on behalf of itself and our wholly owned subsidiary Energy Ventures One Inc. and Arctic Solar, LLC by Masters Equipment Services, Inc. (“Masters”) seeking a judgment to collect amounts allegedly owed it

 

 

relating to a promissory note in the amount of $110,153, including interest and late fees. The Company is one of several parties named in the proceeding and is prepared to vigorously defend its position. The promissory note is recorded as a liability in the financial statements.

 

In February 2012 the Company received a lawsuit notice on behalf of itself by Morrell Saffa Craige, PC (“Morrell”) seeking the recovery of legal fees in the approximate sum of $25,000 owed to the Plaintiff in connection with its successful defense of a lawsuit styled Thermo Credit, LLC v. EGPI, et al. The Company owes the above fees and intends on paying the bill in full. The amount is recorded in the financial statements in accounts payable.

 

In May, 2012 a lawsuit was filed in the Clark County, Nevada District Court by Lakeview Consulting, LLC (“Lakeview”), against the Company and other various Does 1-V and Roes corporations V1-X. Lakeview alleges the Company failed or refused to convert shares on a Convertible Note in the amount of $35,000 and therefore the sum plus interest, damages, etc. The Company is one of several parties named in the proceeding and is prepared to vigorously defend its position. The amount is recorded as a liability in the financial statements.

 

As noted in our business combination footnote our SATCO acquisition contained certain make whole provisions that may impact us in the future.  In accordance with the make whole provision of the acquisition agreement pertaining to SATCO, $988,720 has been recorded in common stock subscribed for additional contingent consideration that is owed as of December 31, 2009.  The make whole provision provided that the owners of SATCO would be protected from decreases in the stock price of the Company for 1 year subsequent to the acquisition date.  The one year anniversary of the acquisition is November 4, 2010.  As of this date, the total fair value of the amount of contingent consideration owed in common shares is $1,119,580.  In accordance with ASC 805-30-35 pertaining to subsequent measurement of contingent consideration pursuant to a business combination, the additional $130,860 is not recorded due to the fact that this consideration is recorded in equity.  This amount will be recognized upon issuance of the shares in settlement of the amount owed.

 

As noted in our debt footnote above, we have certain notes that may become convertible in the future and potential result in further dilution to our common shareholders.

 

In July 2010 our Chanwest Resources, Inc. subsidiary operation (“CWR”) entered into a purchase lease agreement with Circle D Trucking of Texas which includes a right to purchase the leased equipment valued at $164,500.

 

22. Subsequent Events

 

In April 2012 the Company issued 30,952,381 shares of common stock, as reclassified, to various consultants for services rendered.

 

In April 2012 the Company issued 190,537,376 shares of common stock, as reclassified, to reduce debt owed to a debt holder.

 

In April 2012 the Company issued 286,466,667 shares of common stock, as reclassified, to reduce debt on promissory notes and convertible promissory notes.

 

In May 2012 the Company issued 37,500,000 shares to reduce debt on convertible promissory notes.

 

On April 3, 2012 the Company announced a Letter of Intent aimed to prepare and conduct drilling programs in the Barnett Formation located in West Central Texas with U.K.-based Cubo Energy, PLC or its assignee. Initial plans in negotiation and discussion are to conduct a 3-D Seismic study for 240 acres covering the Boyette property, in Shackelford County, Texas.

 

On April 30, 2012 accredited and institutional investors have reserved and instructed a third party broker dealer to set aside cash in the amount of $1,000,000, which funds are currently segregated, by certain entities not affiliated with the third party broker dealer, that are desirous to roll up into a senior Convertible purchase of shares of Preferred Stock in EGPI Firecreek, Inc. (“EGPI”). Any share purchase agreement is to be negotiated in good faith between EGPI and those investors whose funds are segregated for this purpose through an Investors Advisor, and any such Share Purchase Agreement will be accomplished through an Intermediary Agreement. Should the Company not consummate a transaction with the Investors through the Intermediary Agreement the Company will be required to pay as compensation to the Investors a Breakup fee to repay the Investors for the loss of income from their segregated funds as follows: $300,000 per annum (the “Breakup Fee”), in cash divided monthly for each month that the funds are segregated for this transaction. The capital segregation shall have been initiated on the date of the signatures on this Agreement for purposes of assigning Breakup fees.

 

As of May 1, 2012 the Company and Caddo have mutually agreed in writing to extend the completion time for the long form Agreement with a goal to be completed by September 30, 2012. Summarily, on July 19, 2011, the Company entered into a linear short form of Securities Exchange Agreement with the principal shareholders owning 67% of Caddo International, Inc., (“CADDO”) a corporation organized under the laws of the state of Nevada with its principal place of business located at PO Box 608, Oil City, Louisiana 70161. The Caddo acquisition is subject to completion of all required SEC filings and shall be structured as a share exchange based on independent third party valuations of the two entities and will include the requirement for audited financials of Caddo to be completed prior to the formal closing announcement.  The expected time for these processes is has been increased to

 

 

September 30, 2012 due to preparatory work time needed by CADDO and Company scheduling time needed for its continued review and due diligence. As of the date of this filing, the transaction has not closed.

 

In May, 2012 a lawsuit was filed in the Clark County, Nevada District Court by Lakeview Consulting, LLC (“Lakeview”), against the Company and other various Does 1-V and Roes corporations V1-X. Lakeview alleges the Company failed or refused to convert shares on a Convertible Note in the amount of $35,000 and therefore the sum plus interest, damages, etc. The Company is one of several parties named in the proceeding and is prepared to vigorously defend its position. The amount is recorded as a liability in the financial statements.

  

23.  Segment Reporting

 

We classify our operations into two main business lines: (1) Solar Thermal Energy, and (2) Oil and Gas. This segmentation best describes our business activities and how we assess our performance. Information about the nature of these segment services, geographic operating areas and customers is described in the Company’s 2010 Annual Report. Summarized financial information by business segment for the three months ending March 31, 2012 is presented below. All segment revenues were derived from external customers. As more fully disclosed in the Company’s fiscal year 2010 Annual Report, we had no operations in these business segments until our acquisitions of Arctic Solar Engineering, LLC on February 4, 2011 (Solar Thermal Energy), and the beginning operations of Energy Producers, Inc. (Oil and Gas).

 

	Discontinued Operations		Solar Thermal Energy				Oil & Gas				All Other (a)				Totals
Revenues	18,870							18,870				-				37,739
Depreciation & amortization	26,568							26,568				277,485				330,621
Income (loss) from operations	(43,682)			32,090				(77,082)				(751,947)				(840,621)
Interest expense	-			482				-				355,588				356,070
Segment assets	280,493			518				2,352,180				5,713				2,638,904

 

The following are reconciliations of reportable segment revenues, results of operations, assets and other significant items to the Company’s consolidated totals (amounts stated in thousands):

 

Three Months Ended March 31,
		2012
Revenues:
Total for reportable segments			37,739
Corporate			-
			37,739
Depreciation and amortization:
Total for reportable segments			53,136
Corporate			277,485
			330,621
Income (loss) from operations:
Total for reportable segments			(88,674)
Corporate			(751,947)
			(840,621)
Interest expense:
Total for reportable segments			482
Corporate			355,588
			356,070
Segment assets:
Total for reportable segments			2,633,191
Corporate			5,713
			2,638,904

  

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

You should read the following discussion and analysis in conjunction with the Consolidated Financial Statements in Form 10-K, as

 

 

amended, and the other financial data appearing elsewhere in this Form 10-Q Report.

 

The information set forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, including, among others (i) expected changes in the Company’s revenues and profitability, (ii) prospective business opportunities and (iii) the Company’s strategy for financing its business. Forward-looking statements are statements other than historical information or statements of current condition. Some forward-looking statements may be identified by use of terms such as “believes”, “anticipates”, “intends” or “expects”. These forward-looking statements relate to the plans, objectives and expectations of the Company for future operations. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of its knowledge of its business and operations, in light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this report should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved. In light of these risks and uncertainties, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. The foregoing review of important factors should not be construed as exhaustive. The Company undertakes no obligation to release publicly the results of any future revisions it may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

 

The Company has been focused on oil and gas activities for development of interests held that were acquired in Texas and Wyoming for the production of oil and natural gas through December 2, 2008.  The Company throughout 2008 was seeking to continue expansion and growth for oil and gas development in its core projects. EGPI Firecreek Inc. was formerly known as Energy Producers, Inc., an oil and gas production company focusing on the recovery and development of oil and natural gas. This strategy is centered on rehabilitation and production enhancement techniques, utilizing modern management and technology applications in upgrading certain proven reserves. Historically in its 2005 fiscal year, the Company initiated a program to review domestic oil and gas prospects and targets.  As a result, EGPI acquired non-operating oil and gas interests in a project titled Ten Mile Draw (“TMD”) located in Sweetwater County, Wyoming USA for the development and production of natural gas. In July, 2007, the Company acquired and began production of oil at the 2,000 plus acre Fant Ranch Unit in Knox County, Texas. This was followed by the acquisition and commencement in March, 2008 of oil and gas production at the J.B. Tubb Leasehold Estate located in the Amoco Crawar Field in Ward County, Texas. The Company as a result, successfully increased oil and gas production and revenues derived from its properties.

and in late 2008, the Company was able to retire over 90% of its debt through the disposition of those improved properties.

 

In early 2009, based on the economic downturn, struggling financial markets and the implementation of the federal stimulus package for infrastructure projects, the Company embarked on a transition from an emphasis on the oil and gas focused business to that of an acquisition strategy focused on the transportation industry serving federal DOT and state/local DOT agencies. In addition, the acquisition targets being reviewed by the Company also had a presence in the telecommunications and general construction industries. The acquisition strategy focuses on vertically integrating manufacturing entities, distributors and construction groups. In May 2009, the Company acquired M3 Lighting Inc. (M3) as the flagship subsidiary with key additional management team to begin this process, and as a result on November 4, 2009, the Company acquired all of the capital stock of South Atlantic Traffic Corporation, a Florida corporation, which distributes a variety of products geared primarily towards the transportation industry where it derives its revenues.

 

Through 2009 and in addition to activities discussed above, we continued our previous decisions to limit and wind down the historical pursuit of our oil and gas projects overseas in Central Asian and European countries and sold off our then oil and gas subsidiary unit Firecreek Petroleum, Inc., but did retain certain first right of refusal to overseas projects (see discussion further in this report). In late 2009 and in 2010, the Company began pursuing a reentry to the oil and gas industry on a domestic basis as the Company’s second line of business and which was part of our ongoing strategic plans. The Company became a party to a pending agreement to acquire an entity that owns approximately 2,100 miles of a pipeline system initially used as a crude oil transportation system by Koch Industries, As of December 31, 2010 we have not concluded this transaction and have not received notice of termination or other correspondence. In addition, on December 31, 2009, the Company, through its wholly-owned subsidiary, Energy Producers, Inc., effectively acquired a 50% working interest and corresponding 32% revenue interest in certain oil and gas leases, reserves and equipment located in West Central Texas. As of December 31, 2010 we have not yet produced commercial oil or gas through these non operated interests. The turnkey manager, partner, and project operator encountered an abundance of weather related and non reported down hole maintenance issues in its attempts in 2010 to bring one or more wells on line. For 2011 both the operator and Company are in agreement and are currently moving forward for the recompletion of the McWhorter and Boyette proven zones in their respective wells. Additionally, plans are to have the Young #1 well, which adjoins the McWhorter, convert into a salt water disposal well to support the McWhorter production operations and economics. We are planning in-depth technical evaluations to be conducted on the two undeveloped Barnett Shale locations situated on the Boyette lease at the 5,500 ft. depth.  Recent successes in the local Barnett wells have encouraged both management and its operator, to advance the timing on the Barnett evaluation.

 

Moving forward, in early 2010 again as a part of our business strategy for a line of business focusing on the transportation industry serving federal DOT and state/local DOT agencies the Company entered into a pending agreement to acquire all of the issued and outstanding capital stock of Southwest Signal, Inc., a Florida corporation. Southwest Signal, Inc. was established in 2000 and is engaged in all facets of the United States Intelligent Traffic Systems (ITS) / Department of Transportation (DOT) Industry activities. Ultimately this acquisition was never consummated due to a failed financial arrangement. In addition, working side by side at the time of SWSC to implement our strategy for SATCO and pair the activities of the two units due the similar nature of business, on March 3, 2010,

 

 

the Company executed a Stock Purchase Agreement with the stockholders of Redquartz LTD, a company formed and existing under the laws of the country of Ireland.  Redquartz LTD business had been active for 45 years, is known internationally and we sought this acquisition as our entrance into the European markets with respect to Intelligent Traffic Systems (ITS) and the transportation industry as well as expanding our relationship recently established with an overseas entity business relationship with the principals of Redquartz, known as Cordil, Inc., to assist for the products sold by South Atlantic Traffic Corporation (SATCO), a wholly owned subsidiary of the Company. For further information please see our Current Report on Form 8-K filed on March 11, 2010,  and as provided elsewhere in this document. The Redquartz LTD business unit purchased by the Company had no assets and resulted in additional debt burden to the Company.

 

Toward further development of our oil and gas line of business, in June 2010, the Company acquired all of the issued and outstanding stock of Chanwest Resources, Inc., (“Chanwest or CWR”) a Texas corporation. In the course of this acquisition, Chanwest stockholders exchanged all outstanding common shares for the Company’s common shares. Chanwest will provide services for drill site preparation to clear and lay pipeline (gathering systems) for operators. Chanwest operations can provide for services to maintain lease roads, set power poles and clean up oilfield spills. Chanwest works with operators or lease owners by purchase order or contract with major oil fields. The Company will continue to work with Chanwest to develop its plans for new growth for 2011. For further information please see our Current Report on Form 8-K filed on June 16, 2010, and information contained in our Form 10-Q filed November 22, 2010.

 

In October 2010, the Company (“Purchaser”) executed a Securities Purchase / Exchange Agreement (“SPA”) with the owners (“Sellers”) of Terra Telecom, LLC, an Oklahoma limited liability company, located at 4510 South 86th East Ave, Tulsa, Oklahoma, 74145 ( “Terra”) to acquire all of the outstanding stock of Terra, and 100% of the total LLC membership units existing thereof. For more information on Terra, please see our Current Report on Form 8-K and Exhibit 10.1 thereto filed on August 7, 2010, as amended.

 

Terra Telecom was considered recognized as a leading provider of state-of-the-art communication technologies and a premier Alcatel-Lucent partner. They served various sized companies and organizations that use and deploy communications systems, sales, service, and training while consolidating and optimizing the end user experience. In 2006 Terra relocated its company headquarters to a 25,000 square foot facility in Tulsa, Oklahoma. This facility provides Terra the space to continue growth and the ability to manage operations throughout the nation. Terra Telecom worked with the United Nations delivering Alcatel voice products to several countries and the Texas Dept. of Transportation, which will bring opportunities to the Company’s SATCO and M3 units and other current or future planned ITS/DOT related activities. Terra’s various ITS/DOT opportunities in place with Alcatel products. Terra employed approximately 50.  The acquisition of Terra ultimately failed due to lack of a completed funding which was to be concluded on or about February 24th, 2011. The funding that was in process for its initial order was stopped due to the actions of IRS seizure of escrow deposit funds in transit from the former Principals of Terra to the deposit account of the lender which was the requirements for the initial funding to begin. Because the funding did not begin, Terra was not able to maintain its dealership guarantees for product delivery which were pulled from clients’ orders.

 

Further regarding Terra, the Company from the time of execution of the Agreement did not have or assume control of the Terra entity’s assets, including bank accounts, nor did it establish or have effective or permanent management control of the entity. Since the economic downturn lenders have become intensely difficult to satisfy which in many cases can jeopardize transaction completions, due the time loss of substantial and excessive due diligence processes, including backing out of signed closing processes. 

 

Overall due to economic factors we entered extreme financial turbulence in the latter half to end of Q4 2010 for our new business strategy. Some of these economic factors included our subsidiary operations for SATCO being on hold numerous times (unable to complete or take on new sales) with the inability to make some or all product deliveries and installations (jobs), not being able to pay suppliers for order deliveries, and other obstacles including some suppliers backing down on agreements negotiated with negotiated terms being met by SATCO. These issues over time eventually generated an unstable environment for both South Atlantic Traffic Corporation and all entities or pending acquisitions or activities related to Intelligent Traffic Systems (ITS) / Department of Transportation (DOT) Industry serving federal DOT and state/local DOT agencies, and telecommunications industries for deployment of communications systems, sales, and/or service. The Company management and advisors reached the conclusion in late February 2011, that it was unlikely that SATCO or Terra would be able to continue operations and on March 14, 2011 sold its interests in both entities to Distressed Asset Acquisitions, Inc. We believe that if the financing established for Terra would have closed, it would have improved the cash flow status of the Company that could also have also directly and indirectly assisted our SATCO unit to rebuild and quickly re-structure and solve many of its problems and renewed growth potential. As delays were incurred time and time again from potential lenders and financial entities, realizing the potential of SATCO became less and less of a possibility. For more information please see our Current Report on Form 8-K filed on March 18, 2011.

 

In an effort to establish an alternative energy division, in February 2011, the Company entered into an Agreement to acquire all 100%  of Arctic Solar Engineering LLC, a Missouri limited liability company located at PO Box 4391, Chesterfield, MO 63006 (the “Company”), and the owners of Membership Interests of the Arctic Solar Engineering LLC; The FATM Partnership, a Missouri Partnership, The Frederic Sussman Living Trust. Arctic Solar Engineering, LLC, is an integrator of Solar Thermal Energy technology. Solar Thermal Energy (“STE”) is believed to be the most efficient and economical method of capturing and using renewable thermal energy created by the sun every day of the year. The solar collectors that are used capture all visible and non-visible wave lengths of sun light and covert the light into energy at a 90% efficiency. Energy created by ASE’s STE Systems store that energy in water (or other similarly inexpensive storage mediums) and then use that energy in its direct form to heat water, heat space and cool spaces. According to the US Department of Energy, this accounts for 70% of all energy used in commercial and residential structures in the United States.

 

In September 2010 the Company entered into a term sheet and subsequently later in March of 2011, entered into a Series D Stock Purchase Agreement (“SPA”) with Dutchess Private Equities Fund, Ltd. (“Investors”) pursuant to which the Investors and its wholly-owned subsidiary Ginzoil, Inc, (GZI) agreed to sell to the Company’s wholly owned subsidiary unit Energy Producers, Inc. (“EPI”) a majority 75% Working Interest and 56.25% corresponding Net Revenue Interest in the North 40 acres of the J.B. Tubb Leasehold Estate/Amoco Crawar field and oil and gas interests, including all related assets, fixtures, equipment, three well heads, three well bores, and pro rata oil & gas revenue and reserves for all depths below the surface to 8,500 ft. The field is located in the Permian Basin and the Crawar Field in Ward County, Texas (12 miles west of Monahans & 30 miles west of Odessa in West Texas). Included in the transaction, EPI will also acquire 75% Working Interest and 56.25% corresponding Net Revenue Interest in the Highland Production Company No. 2 well-bore located in the South 40 acres of the J.B. Tubb Leasehold Estate/Amoco Crawar field, oil and gas interests, pro rata oil & gas revenues and reserves with depth of ownership 4700 ft. to 4900 ft.

 

The Company has been making presentations to asset-based lenders and other financial institutions for the purpose of (i) expanding and supporting our growth potential by i) to a lesser extent rebuilding for the time being, the development of its line of business operations similar to it former activities related to ITS/DOT and telecommunications industries, and (ii) building new infrastructure for its oil and gas operations in 2011. The Company throughout its first quarter of operations for 2011 has been pursuing projects for acquisition and development of select targeted oil and gas proved producing properties with revenues, having upside potential and prospects for enhancement, rehabilitation, and future development. These prospects are primarily located in Eastern Texas, and in other core areas of the Permian Basin.

 

The Company’s goal is to rebuild our revenue base and cash flow; however, the Company makes no guarantees and can provide no assurances that it will be successful in these endeavors.  

 

One of the ways our plans for growth could be altered if current opportunities now available become unavailable:

 

The Company would need to identify, locate, or address replacing current potential acquisitions or strategic alliances with new prospects or initiate other existing available projects that may have been planned for later stages of growth and the Company may therefore not be ready to activate. This process can place a strain on the Company. New acquisitions, business opportunities, and alliances, take time for review, analysis, inspections and negotiations. The time taken in the review activities is an unknown factor, including the business structuring of the project and related specific due diligence factors.

 

General

 

The Company historically derived its revenues primarily from retail sales of oil and gas field inventory equipment, service, and supply items primarily in the southern Arkansas area, and from acquired interests owned in revenue producing oil wells, leases, and equipment located in Olney, Young County, Texas. The Company disposed of these two segments of operations in 2003. The Company acquired a marine vessel sales brokerage and charter business, International Yacht Sales Group, Ltd. of Great Britain in December 2003 later disposing of its operations in late 2005. The Company focused on oil and gas activities for development of interests held that were acquired in Wyoming (the Ten Mile Draw (TMD) prospect) and two programs in Texas, (the Fant Ranch unit, and J.B. Tubb Leasehold Estate) for the production of oil and natural gas through October 30 and December 2, 2008 the dates of disposal respectively. In 2009 we disposed of our wholly owned subsidiary Firecreek Petroleum, Inc. (see further information in this report and in our current Report on Form 8-K filed May 20, 2009, incorporated herein by reference). We account for or have accounted for these segments as discontinued operations in the consolidated statements of operations for the related fiscal year. 

 

Sale/Assignment of 100% Stock of FPI Subsidiary

 

Having disposed of all of the assets of FPI, on May 18, 2009, the Company and Firecreek Global, Inc., entered into a Stock Acquisition Agreement effective the 18th day of May, 2009, relating to the Assignee’s acquisition of all of the issued and outstanding shares of the capital stock of Firecreek Petroleum, Inc., a Delaware corporation. Moreover, included and inherent in the Assignment was all of the Company’s debt held in the FPI subsidiary. In addition, the Company, and Assignee executed a right of first refusal agreement attached as Exhibit to the Agreement, granting to the Company the right of first refusal, for a period of two (2) years after Closing, to participate in certain overseas projects in which Assignee may have or obtain rights related to Assignors’ previous activities in certain areas of the world. For further information please see our current Report on Form 8-K filed on May 20, 2009, incorporated herein by reference.

 

2009 Merger Acquisition with M3 Lighting, Inc.

 

On May 21, 2009, EGPI Firecreek, Inc., a Nevada corporation (the “Company” or “Registrant”), Asian Ventures Corp., a Nevada corporation (the “Subsidiary”), M3 Lighting, Inc., a Nevada corporation (“M3”), and Strategic Partners Consulting, L.L.C., a Georgia limited liability company (“Strategic Partners”) executed and closed a Plan and Agreement of Triangular Merger (the “Plan of Merger”), whereby M3 merged into the Subsidiary, a wholly-owned subsidiary of the registrant (the “Merger”).  Further information can be found along with copy of the Plan of Merger attached as an exhibit to our Current Report on Form 8-K, filed with the Commission on May 27, 2009, as amended. Amendment No. 1 and No. 2 to the May 27, 2009 current Report on Form 8-K were filed on June 24 and August 4, 2009, respectively, and additional information can be found in our Form 10-K annual report filed on April 15, 2010, and incorporated herein by reference.

 

 

Completion of South Atlantic Traffic Corporation (SATCO) Acquisition

 

 Effective as of November 4, 2009, the Company acquired all of the issued and outstanding capital stock of South Atlantic Traffic Corporation, a Florida corporation (“SATCO”). In the course of this acquisition, SATCO stockholders exchanged all outstanding common shares for cash consideration, the Company’s common shares and sellers’ notes. SATCO has been in business since 2001 and has several offices throughout the Southeast United States. Please see further discussion and information listed in “The Business”, “Description of Properties”, and “Overview” to the Management Discussion and Analysis sections, and elsewhere in this document.

 

Completion of Acquisition of 50% Oil and Gas Working Interests, Callahan, Stephens, and Shakelford Counties, Texas, Three Well Program

 

Effective December 31, 2009, the Company through its wholly owned subsidiary Energy Producers, Inc. closed an Acquisition Agreement including an Assignment of Interests in Oil and Gas Leases (the “Assignment”), with Whitt Oil & Gas, Inc., (“Whitt”) a Texas corporation acquiring 50% working interests and corresponding 32% net revenue interests in oil and gas leases representing the aggregate total of 240 acre leases, reserves, three wells, and equipment located in Callahan, Stephens, and Shakelford Counties, West Central Texas. Please see further discussion and information listed in “The Business” and “Description of Properties” and the “Overview” to the Management Discussion and Analysis sections of this report.

 

Completion of Redquartz LTD Acquisition

 

On March 3, 2010, the Company acquired Redquartz LTD, a company formed and existing under the laws of the country of Ireland.  Redquartz LTD has been in business for 45 years, is known internationally and is our entrance into the European markets with respect to Intelligent Traffic Systems (ITS) and the transportation industry as well as expanding our relationship recently established with Cordil, Inc. for the products sold by South Atlantic Traffic Corporation (SATCO), a wholly owned subsidiary of the Company. For further information please see our Current Report on Form 8-K filed on March 11, 2010,  and in the section on “The Business”, and “Overview” to the Management Discussion and Analysis sections, and elsewhere listed in this document.

 

Completion of Chanwest Resources, Inc. Acquisition

 

On June 11, 2010, the Company acquired all of the issued and outstanding stock of Chanwest Resources, Inc., (“Chanwest or CWR”) a Texas corporation. Chanwest Resources, Inc. was formed in 2009 and has been engaged in ramping up operations including acquiring assets related to the servicing, construction, production and development for oil and gas. For further information please see our Current Report on Form 8-K filed on June 16, 2010, and in the section on “The Business”, and “Overview” to the Management Discussion and Analysis sections, and elsewhere listed in this document.

 

Completion and Entry into a Definitive Agreement with Terra Telecom, LLC

 

On October 1, 2010, EGPI Firecreek, Inc. (“Purchaser”) executed a Securities Purchase / Exchange Agreement (“SPA”) with the owners (“Sellers”) of Terra Telecom, LLC, an Oklahoma limited liability company, located at 4510 South 86th East Ave, Tulsa, Oklahoma, 74145 ( “Terra”) to acquire all of the outstanding stock of Terra, and 100% of the total LLC membership units existing thereof. All assets and liabilities of Terra, other than information listed in the SPA are considered to be transferred to the Purchaser. For more information on Terra, please see our Current Report on Form 8-K, Form 8-K/A (amendment no. 1), and Form 8-K/A (amendment no. 2) filed on October 7, 2010, December 7, 2010, and March 22, 2011, respectively, and in the section on “The Business”, and “Overview” to the Management Discussion and Analysis sections, and elsewhere listed in this document.  On March 14, 2011, the Company’s interest in Terra was sold.

 

Completion and Entry into a Definitive Agreement with Arctic Solar Engineering, LLC

 

On February 4, 2011, the Company entered into an Agreement to acquire all 100%  of Arctic Solar Engineering LLC, a Missouri limited liability company located at PO Box 4391, Chesterfield, MO 63006 (the “Company”), and the owners of Membership Interests of the Arctic Solar Engineering LLC; The FATM Partnership, a Missouri Partnership, The Frederic Sussman Living Trust. Arctic Solar Engineering, LLC, is an integrator of Solar Thermal Energy technology. For further information please see our Current Report on Form 8-K filed on February 10, 2011, and in the section on “The Business”, and “Overview” to the Management Discussion and Analysis sections, and elsewhere listed in this document.

 

Completion and Entry into a Definitive Agreement with Dutchess Private Equities Fund, Ltd.

 

On March 1, 2011, the Company entered into a Series D Stock Purchase Agreement (“SPA”) with Dutchess Private Equities Fund, Ltd. (“Investors”) pursuant to which the Investors and its wholly-owned subsidiary Ginzoil, Inc, (GZI) agreed to sell to the Company’s wholly owned subsidiary unit Energy Producers, Inc. (“EPI”), a majority 75% Working Interest and 56.25% corresponding Net Revenue Interest in the North 40 acres of the J.B. Tubb Leasehold Estate/Amoco Crawar field and oil and gas interests, including all related assets, fixtures, equipment. For further information please see our Current Report on Form 8-K filed on March 7, 2011, and in the section on “The Business”, and “Overview” to the Management Discussion and Analysis sections, and elsewhere listed in this document.

 

 

The Company expects to incur an increase in operating expenses during the next year from commencing activities related to its plans for the Company’s oil and gas business through EPI, oil and gas services business through CWR, alternative energy business division through Arctic Solar Engineering, LLC, and including any new or pending acquisitions discussed herein, and those business activities and developments whether ongoing or to be concluded, as related to our M3, SATCO, and Terra strategy and operations, and ongoing potential acquisitions, including new or pending acquisitions related to signalization and lighting geared to the transportation industry. The amount of net losses and the time required for the Company to reach and maintain profitability are uncertain at this time. There is a likelihood that the Company will encounter difficulties and delays encountered with business subsidiary operations, including, but not limited to uncertainty as to development and the time and timing required for the Company’s plans to be fully implemented, governmental regulatory responses to the Company’s plans, fluctuating markets and corresponding spikes, or dips in our products demand, currency exchange rates between countries, acquisition and development pricing, related costs, expenses, offsets, increases, and adjustments. There can be no assurance that the Company will ever generate significant revenues or achieve profitability at all or on any substantial basis.

 

General Statement:  Factors that may affect future results:

 

With the exception of historical information, the matters discussed in Management’s Discussion and Analysis or Plan of Operation contain forward looking statements under the 1995 Private Securities Litigation Reform Act that involve various risks and uncertainties.  Typically, these statements are indicated by words such as “anticipates”, “expects”, “believes”, “plans”, “could”, and similar words and phrases.  Factors that could cause the company’s actual results to differ materially from management’s projections, forecasts, estimates and expectations include but are not limited to the following:

 

– Inability of the company to secure additional financing.

 

– Unexpected economic changes in the United States.

 

– The imposition of new restrictions or regulations by government agencies that affect the Company’s business activities.

 

To the extent possible, the following discussion will highlight the Company’s business activities for the quarters ended March 31, 2011 and March 31, 2010.

 

Results of Continuing and Discontinued Operations

 

Three months ended March 31, 2012 compared to the three months ended March 31, 2011.

 

Total revenue for sales of oil and gas during the three months ended March 31, 2012 as compared to March 31, 2011 was $18,870 and $17,558, respectively. In the current period an additional $18,870 of revenue related to sales of oil and gas during the three months ended March 31, 2012 were included in discontinued operations.

 

Total revenue for the sale and installation of solar equipment for the three months ended March 31, 2012 as compared to March 31, 2011 was $0 and $12,320, respectively. A portion of the overhead costs, 51%, pertaining to the subsidiary that is engaged in this business, Arctic Solar Engineering, LLC, has been classified in discontinuing operations due to the potential sale of this subsidiary.

 

Following is a breakdown of general and administrative costs for this period versus a year ago:

 

Detail of general & administrative expenses:

 

		31-Mar-12				31-Mar-11
Advertising & promotion		$	4,072			$	11,359
Administration			7,661				45,758
Consulting			120,614				61,922
Depreciation/Amortization			16,913				48,932
Professional fees			77,486				89,761
Rent/Utilities			4,200				4,200
Total		$	230,946			$	257,732

 

For the three months ended March 31, 2012, promotional fees of $4,072 were incurred in stock promotional activities as compared to $11,359 for the three months ended March 31, 2011.

 

For the three months ended March 31, 2012, consulting fees of $120,614 were incurred for business advisory services as compared to $61,922 for the three months ended March 31, 2011.

 

For the three months ended March 31, 2012, professional fees of $77,486 were incurred in regards to management advisory, legal costs, and accounting, for new subsidiaries as compared to $89,761 for the three months ended March 31, 2011.

 

After deducting general and administrative expenses, the Company experienced a loss from operations of $840,621 for the three months ended March 31, 2012 compared to a loss of $1,890,396 for the same period last year.  

 

The loss from discontinued operations for the three months ended March 31, 2012 and March 31, 2011 was $43,682 and $658,246, respectively. For the three months ended March 31, 2012 and March 31, 2011, the items composing discontinued operations included 51% of Arctic Solar Engineering, LLC and 50% of the operations of the oil and gas interests pertaining to the North 40 Interests of the Tubb Leasehold Interests. For the three months ended March 31, 2011, the loss from discontinued operations also included the operations of SATCO which was sold in the prior period.

 

Interest expense for the three months ended March 31, 2012 was $355,588 compared with $117,341 for the same period last year.

 

Fully diluted income (loss) per share was ($2.30) per share for the three months ended March 31, 2012, for continuing operations, compared to a loss of ($3.56) per share for the three months ended March 31, 2011.

  

Discussion of Financial Condition:  Liquidity and Capital Resources

 

Cash on hand at March 31, 2012 was $6,231 compared to $2,696 at December 31, 2011. The Company had working capital deficit of $5,891,922 at March 31, 2012 compared to a working capital deficit of $5,604,396 at December 31, 2011.

 

Total assets decreased to $2,638,904 at March 31, 2012 compared to $2,704,748 at December 31, 2011 mainly as a result of depreciation and depletion.

 

Shareholders’ equity increased to a deficit of $5,128,096 at March 31, 2012 from $4,678,508 at December 31, 2011. During the three months ended March 31, 2012, the Company issued 20,450,000 shares to consultants for services rendered. In addition, the Company issued 326,742,646 shares to pay debt of $161,123.

  

The Company must generally undertake certain ongoing expenditures in connection with rebuilding, expanding and developing its oil and gas business and related acquisition activity and its business acquisition activities, and for various past and present legal, accounting, consulting, and technical review, and to perform due diligence for the acquisition and development programs for both lines of business; furthering research for new and ongoing business prospects, and in pursuing capital financing for its existing available rights and proposed operations.   

  

Management has estimated that cost for initially paying down certain of the Company’s recent debt, providing necessary working capital, and activating development of its current plans for domestic oil and gas segment operations, alternative energy division, acquisition and development, and its rebuilding proposed for Telecom, ITS / DOT business operations and activities, acquisition and developments, will initially require a very minimum of $3,500,000 to $7,500,000 to a maximum of $8,000,000 to $10 million during the first six to twelve months of fiscal 2011.

 

Financing our full expansion and development plans for our oil and gas operations could require up to $50,000,000 or more. The Company may elect to reduce or increase its requirement as circumstances dictate. We may elect to revise these plans and requirements for funds depending on factors including; changes in acquisition and development estimates; interim corporate and project finance requirements; unexpected timing of markets as to cyclical aspects as a whole; currency and exchange rates; project availability with respect to interest and timing factors indicated from parties representing potential sources of capital; structure and status of our strategic alliances, potential joint venture partners, and or our targeted acquisitions and or interests.

 

The Company cannot predict that it will be successful in obtaining funding for its plans or that it will achieve profitability in fiscal 2011.   

 

Item 3 – Quantitative and Qualitative Analysis of Market Risks

 

There are no material changes in the market risks faced by us from those reported in our Annual Report on Form 10-K for the year ended December 31, 2010.

 

ITEM 4(T) – CONTROLS AND PROCEDURES

 

(a)	Evaluation of Disclosure and Procedures

 

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of March 31, 2012. This evaluation was carried out under the supervision and with the participation of our management, including our principal executive officer and principal financial officer. Based on this evaluation, these officers have concluded that there are material weaknesses in our disclosure controls and procedures and they were not effective for the following reasons:

 

 

	●	In connection with the preparation of the Original Report, we identified a deficiency in our disclosure controls and procedures related to communication with the appropriate personnel involved with our 2010 audit.  We are utilizing additional accounting consultants to assist us in improving our controls and procedures. We believe these measures will benefit us by reducing the likelihood of a similar event occurring in the future.
	●	Due to our relatively small size and not having present operations, we do not have segregation of duties which is a deficiency in our disclosure controls. We do not presently have the resources to cure this deficiency.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Principal Executive Officer and Principal Accounting Officer, to allow timely decisions regarding required disclosure. 

 

All internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements. Therefore, even those systems determined to be effective can only provide reasonable assurance with respect to financial reporting reliability and financial statement preparation and presentation. In addition, projections of any evaluation of effectiveness to future periods are subject to risk that controls become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.

 

 

(b)	Changes in Internal Controls over financial reporting

 

There have been no changes in our internal controls over financial reporting during our last fiscal quarter, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

  

PART II.  OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

 

 The Company is subject to various claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. Management believes that any liability that may ultimately result from the resolution of these matters will not have a material adverse effect on the financial condition or results of operations of the Company.

 

In October 2010 we received notice of a lawsuit filed against the Company by St. George Investments LLC relating to certain Agreements entered on January 15th, 2010 by EGPI Firecreek Inc. and St. George Investments LLC which include: i) Note Purchase Agreement, ii) Convertible Promissory Note, iii) Judgment by Confession and iv) Registration Rights Agreement. St. George Investments LLC believes that EGPI Firecreek is in breach of terms agreed upon pursuant to the aforementioned agreements and is seeking damages totaling $262,584.61 (includes principal, interest and all penalties/fees pursuant to plaintiff's initial disclosures dated 3/28/11). EGPI Firecreek's management is confident that the Company is not liable and intends to defend this matter vigorously. The amount of principal and interest due is currently recorded in notes payable and accrued expenses, respectively.  No additional accrual for additional damagaes above accrued principal and interest has been accrued as of March 31, 2011.  Management believes that it does not owe any additional amounts in excess of the amounts already accrued.  Additionally, the Company is currently exploring counter-suit options for claims against potential damages caused by St. George Investments LLC to the company as a result of this transaction.

 

In November 2010, EGPI Firecreek, Inc. and South Atlantic Traffic Corp. received a lawsuit notice from two of the former owners of SATCO, Mr. Jesse Joyner and Mr. James Stewart Hall. Mr. Joyner and Mr. Hall have subsequently resigned from their positions with the company.   The former owners of SATCO are suing for payment of promissory notes that are currently recorded in the financial statements, along with accrued interest and penalties and seeking damages for breach of their employment contracts.  On December 17, 2010, EGPI Firecreek, Inc. filed its answer to the claim and filed a counterclaim against Mr. Joyner and Mr. Hall. It is management's position that the Company is not liable and is currently exploring all defense and counter-suit options, and the Company will vigorously defend its position.

 

In May 2011 the Company received a lawsuit by Edelweiss Enterprises Inc. dba The Small Business Money Store (“SMBS”) seeking a judgment to collect amounts allegedly owed it relating to an account receivable factoring agreement, to the former subsidiary SATCO, in the total aggregate amount of $48,032. The Company believes that it is not liable, and will vigorously defend its position.

 

In August 2011, the Company received a lawsuit notice on behalf of our wholly owned subsidiary Energy Ventures One Inc whereas Contegra Construction Company LLC (“CCC”) is seeking a judgment to collect amounts owed it relating to a promissory note in the amount of $157,767, which includes interest and late fees. The amount is recorded as a liability in the financial statements.

 

 

In August 2011, the Company received a lawsuit notice on behalf of itself and our wholly owned subsidiary Energy Ventures One Inc. and Arctic Solar, LLC by Masters Equipment Services, Inc. (“Masters”) seeking a judgment to collect amounts allegedly owed it relating to a promissory note in the amount of $110,153, including interest and late fees. The Company is one of several parties named in the proceeding and is prepared to vigorously defend its position. The promissory note is recorded as a liability in the financial statements.

 

In February 2012 the Company received a lawsuit notice on behalf of itself by Morrell Saffa Craige, PC (“Morrell”) seeking the recovery of legal fees in the approximate sum of $25,000 owed to the Plaintiff in connection with its successful defense of a lawsuit styled Thermo Credit, LLC v. EGPI, et al. The Company owes the above fees and intends on paying the bill in full. The amount is recorded in the financial statements in accounts payable.

 

In May, 2012 a lawsuit was filed in the Clark County, Nevada District Court by Lakeview Consulting, LLC (“Lakeview”), against the Company and other various Does 1-V and Roes corporations V1-X. Lakeview alleges the Company failed or refused to convert shares on a Convertible Note in the amount of $35,000 and therefore the sum plus interest, damages, etc. The Company is one of several parties named in the proceeding and is prepared to vigorously defend its position. The amount is recorded as a liability in the financial statements.

  

ITEM 1A. RISK FACTORS.

 

 There have been no material changes to the risk factors disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2011, as updated by our subsequent filings on Form 10-Q (and otherwise) with the SEC.

 

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Required information has been furnished in current Report(s) on Form 8-K filings and other reports, as amended, during the period covered by this Report and additionally as listed and following:

 

Please see additional information listed in the Part II, Item 5, under the sub heading Recent Sales of Unregistered Securities, contained in our Annual Report on Form 10-K, filed on May 8, 2012, incorporated herein by reference.

 

I. (*)(**) On February 4, 2011, by majority consent of the Board of Directors, the Registrant approved the following issuances of its restricted common stock, par value $0.001 per share, to the following persons for and behalf of consideration for the Acquisition of Arctic Solar Engineering, LLC membership interests.

 

Name		Date		Share Amount		Type of Consideration		Fair Market Value of Consideration
Daniel Mark O’Neal  (***)/(1) 15316 Chesterfield Pines Lane Chesterfield, MO 63017		2/4/11		2,870,400		In consideration of Acquisition of Arctic Solar Engineering, LLC Membership Interests		$	14,064
Alvie M. Smith  (***)/(2) 15316 Chesterfield Pines Lane Chesterfield, MO 63017		2/4/11		1,435,200		In consideration of Acquisition of Arctic Solar Engineering, LLC Membership Interests		$	23,824
The Frederic Sussman Living Trust  (***)/() Frederic Sussman, Trustee 15316 Chesterfield Pines Lane Chesterfield, MO 63017		2/4/11		1,694,400		In consideration of Acquisition of Arctic Solar Engineering, LLC Membership Interests		$	11.912

 

 

 

 

(*)

Issuances are approved, subject to such persons agreeing in writing to i) comply with applicable securities laws and regulations and make required disclosures; and ii) be solely and entirely responsible for their own personal, Federal, State, and or relevant single or multi jurisdictional income taxes, as applicable.

 

(**)	$49,800 worth of common stock in the immediately preceding table was used primarily in consideration of Acquisition of Sierra Pipeline, LLC Membership Interests.

 

(1)	Daniel Mark O’Neal is a shareholder, and not currently an affiliate, director, or officer of the Registrant. He provides business and consulting services to Arctic Solar Engineering, LLC.

 

 

(2)	Alvie M. Smith is a shareholder, and not currently an affiliate, director, or officer of the Registrant. He provides business and consulting services to Arctic Solar Engineering, LLC.

 

(3)	The Frederic Sussman Living Trust, Frederic Sussman, Trustee is a shareholder, and not currently an affiliate, director, or officer of the Registrant. Frederic Sussman manages day to day operations for Arctic Solar Engineering, LLC.

 

(***)

The shares of common stock were issued pursuant to an exemption from registration as provided by Section 4(2) of the Securities Act of 1933, as amended (the “1933 Act”). All such certificates representing the shares issued by the Company shall bear the standard 1933 Act restrictive legend restricting resale.

 

 

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

 

None

  

ITEM 4 – (Removed and Reserved)

 

ITEM 5 – OTHER INFORMATION

 

Please see information listed under Item 9B, “Other Information”, and under “Recent Developments”, and “Subsequent Events” contained in our Annual Report on Form 10-K, filed on May 8, 2012, incorporated herein by reference.

 

The Company and its Firecreek unit are presently in different stages of review and discussion, gathering data and information, and any available reports on other potential acquisitions in Texas, and other productive regions and areas in the U.S.

 

From time to time Management will examine oil and gas operations in other geographical areas for potential acquisition and joint venture development.

 

ITEM 6 – EXHIBITS

 

Exhibit No.		Description
31.1		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (3)
32.1		Certification Pursuant to 18 U.S.C. SECTION 1350 (3)

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date:  May 21, 2012

 

	EGPI FIRECREEK, INC.
	By:	/s/ Dennis Alexander
	Name	Dennis Alexander
	Title:	Chairman, CEO, President, and CFO