10-Q 1 egpt.htm EGPI FIRECREEK, INC. 10Q 2013-03-31 egpt.htm


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, 2013
 
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 3, 2013, the registrant had 4,760,734 shares of its $0.001 par value common stock issued and outstanding. There are no shares of Series A, B preferred stock issued and outstanding, 1,087,143 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, 2013
 
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
 
             
   
Signature
   
33
 
 
 
2

 
 
PART I  FINANCIAL INFORMATION
 
ITEM 1 - FINANCIAL STATEMENTS
 
EGPI FIRECREEK, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2013 AND DECEMBER 31, 2012
 
 
    Unaudited     Audited  
    March 31,     December 31,  
 ASSETS   2013     2012  
 Current assets:            
Cash
  $ 409     $ 401  
Total current assets
    409       401  
                 
Other assets:
               
Fixed assets - net
    417,277       440,096  
Oil and natural gas properties - proved reserves - net
    892,176       892,839  
Other assets related to discontinued operations
               
Fixed assets - net
    172       172  
Total other assets related to discontinued operations
    172       172  
Total other assets
    1,309,625       1,333,107  
                 
Total assets
  $ 1,310,034     $ 1,333,508  
                 
 LIABILITIES AND SHAREHOLDERS' DEFICIT
               
                 
Current liabilities:
               
Accounts payable & accrued expenses
  $ 1,594,900     $ 1,512,057  
Notes payable
    2,807,472       2,827,017  
Convertible notes, net of discount
    831,831       817,335  
Capital lease obligation
    56,872       56,872  
Advances & notes payable - related parties
    825,248       810,243  
Derivative liabilities
    643,956       637,635  
Asset retirement obligation
    12,074       11,789  
Current liabilities related to discontinued operations
               
Accounts payable & accrued expenses
    58,856       58,380  
Notes payable
    96,390       96,390  
Total current liabilities related to discontinued operations
    155,246       154,770  
Total current liabilities
    6,927,599       6,827,673  
                 
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
    1,867,913       1,867,913  
                 
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
    1,087       1,087  
Common stock $0.001 par value, authorized 5,000,000,000 shares, issued and outstanding, 4,760,734 at March 31, 2013 and December 31, 2012, respectively
    4,761       19,042,937  
Additional paid in capital
    32,973,887       13,906,687  
Other comprehensive income
    214,909       200,640  
Common stock subscribed
    1,697,866       1,697,866  
Contingent holdback
    2,000       2,000  
Accumulated deficit
    (42,379,988 )     (42,215,295 )
Total shareholders' deficit
    (7,485,478 )     (7,362,078 )
Total liabilities & shareholders' deficit
  $ 1,310,034     $ 1,333,508  
 
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, 2013 AND MARCH 31, 2012
 
   
For the three
months ended
   
For the three
months ended
 
   
March 31,
2013
   
March 31,
2012
 
Revenues
           
Gross revenue from sales
 
$
-
   
$
   
Gross revenues from oil and gas sales
   
32,774
     
18,870
 
     Total revenue
   
32,774
     
18,870
 
Cost of sales
               
Well operation costs
   
(37,697)
     
(34,668)
 
Gross margin
   
(4,923)
     
(15,798)
 
                 
General and administrative expenses:
               
General administration
   
(67,089)
     
(230,946)
 
Total general & administrative expenses
   
(67,089)
     
(230,946)
 
Net loss from operations
   
(72,012)
     
(246,744)
 
Other revenues and expenses:
               
Interest expense
   
(85,928)
     
(355,588)
 
Gain (loss) on settlement of debt
   
-
     
(140,322)
 
Other income
   
-
     
34,673
 
Gain (loss) on derivatives
   
(6,271)
     
(88,958)
 
Net loss before provision for income taxes
   
(164,211)
     
(796,939)
 
Provision for income taxes
   
-
     
-
 
Loss from continuing operations
   
(164,211)
     
(796,939)
 
Loss from discontinued operations net of tax
   
(482)
     
(43,682)
 
                 
Net loss
 
$
(164,693)
   
$
(840,621)
 
                 
Foreign currency translation
   
(14,269)
     
(24,874)
 
Net comprehensive loss
   
(150,424)
     
(815,747)
 
Basic and diluted net loss per common share:
               
Basic and diluted loss per common share from continuing operations
 
$
(0.03)
   
$
(1.50)
 
Basic and diluted loss per common share from discontinued operations
 
$
(0.00)
   
$
(0.08)
 
Basic and diluted net loss per common share
 
$
(0.03)
   
$
(1.58)
 
Weighted average of common shares outstanding:
               
Basic and fully diluted
   
4,760,734
     
530,360
 
 
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, 2013 AND MARCH 31, 2012
  
    For the three     For the three  
    months ended     months ended  
   
March 31,
2013
   
March 31,
2012
 
             
Operating Activities:            
Net income (loss)
  $ (164,693 )   $ (840,621 )
Adjustments to reconcile net loss items not requiring the use of cash:
               
Accretion of asset retirement obligation
    285       670  
Promissory notes issued for services
    -       90,000  
Imputed interest
    27,024       16,181  
Loss on change in derivative
    6,271       88,959  
Loss on settlement of debt
    -       140,322  
Depletion
    663       43,725  
Depreciation
    22,820       25,654  
Amortization of debt discount
    14,596       261,242  
Changes in other operating assets and liabilities:  
               
Accounts payable and accrued expenses
    79,607       185,377  
Accounts payable and accrued expenses - related party
    15,000       4,200  
Prepaid expenses
    -       -  
Net cash provided by (used by) operations
    1,573       15,709  
Investing Activities:        
               
Net cash used by investing activities
    -       -  
Financing Activities:
               
Principal payments on debt
    (15,834 )     (40,000 )
Borrowings on debt
    -       52,700  
Net cash provided by financing activities
    (15,834 )     12,700  
                 
Foreign currency translation
    14,269       (24,874 )
Net increase (decrease) in cash during the period
    (8 )     3,535  
Cash balance at January 1st
    401       2,696  
Cash balance at March 31st
  $ 409     $ 6,231  
                 
Supplemental disclosures of cash flow information:
               
Interest paid during the year
  $ 220     $ 13,354  
Income taxes paid during the year
    -       -  
Non-cash activities:
               
Common stock issued for:
               
Debt conversion and settlement
    -       146,123  
Services expensed in the prior period (common stock subscribed)
    -       15,000  
Preferred stock conversion
    -       3,775  
Adjustment to derivative liability due to debt conversion
    -       94,505  
Debt discount
    -       202,998  
  
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, 2013
 
                                       
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, 2012 
   
1,087,142
     
1,087
     
4,760,734
     
4,761
     
32,946,863
     
(42,215,295)
     
200,640
     
1,697,866
     
2,000
     
(7,362,078)
 
                                                                                 
Imputed interest
                                   
27,024
                                     
27,024
 
Other comprehensive loss
                                                   
14,269
                     
14,269
 
Net loss for the three months ended
                                           
(164,693)
                             
(164,693)
 
Balance at March 31, 2013
   
1,087,142
   
$
1,087
     
4,760,734
   
$
4,761
   
$
32,973,887
   
$
(42,379,988)
   
$
214,909
   
$
1,697,866
   
$
2,000
   
$
(7,485,478)
 
 
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, 2013 AND MARCH 31, 2012
 
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.
 
 
7

 
 
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.

On January 24, 2013, the Company affected a 1 share for 4,000 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, 2012.
 
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.
 
 
8

 
 
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, 2013 or December 31, 2012.
 
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 $9,635 at March 31, 2013 and $9,635 at March 31, 2012.
 
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, 2013 and December 31, 2012, the ARO of $12,074 and $11,789 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.
 
 
9

 
 
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, 2013 on a recurring and non-recurring basis:
 
                     
Gains
 
Description
 
Level 1
   
Level 2
   
Level 3
   
(Losses)
 
Derivatives (recurring)
 
$
-
   
$
-
   
$
643,956
   
$
(6,271)
 
 
The Company has  derivative liabilities as a result of 2012 convertible promissory notes that include embedded derivatives.  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, 2012 on a recurring and non-recurring basis:
 
                     
Gains
 
Description
 
Level 1
   
Level 2
   
Level 3
   
(Losses)
 
Derivatives (recurring)
 
$
-
   
$
-
   
$
637,635
   
$
(88,959)
 
 
The Company has derivative liabilities as a result of 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
 
 
10

 
 
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.  
 
There were no intangible assets  at March 31, 2013 or December 31, 2012.
  
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.
 
 
11

 
 
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.

 
12

 
 
3. Common Stock Transactions
 
During the quarter ended March 31, 2013, the board approved a 1:4000 reverse stock split.  This reverse stock split has been recognized in these financial statements.

During the quarter ended March 31, 2013, the Company recorded an amount of $27,024 to additional paid in capital related to imputed interest 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, 2013, there were no transactions involving  preferred stock.

5. Fixed Assets
 
The following is a detailed list of fixed assets:
 
   
March 31,
2013
   
December 31,
2012
 
Property and equipment
  $ 540,307     $ 540,307  
Well equipment
    118,163       118,163  
Accumulated depreciation
    (241,193 )     (218,401 )
                 
Fixed assets - net
  $ 417,277     $ 440,069  
 
Depreciation expense was $22,820 and $25,654 for the three months ended March 31, 2013 and 2012, respectively.
 
 
13

 

6.Oil and Gas
Oil and Gas Properties:
 
March 31,
2013
   
December 31,
 2012
 
Oil and gas properties - proved reserves
  $ 944,181     $ 944,181  
Development costs
    203,646       203,646  
Accumulated depletion
    (255,651 )     (254,988 )
                 
Oil and gas properties - net
  $ 892,176     $ 892,839  
 
Depletion expense was $663and $43,725 for three months ended March 31, 2013 and March 31, 2012, 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.

 There was no warrant activity during the three months ended March 31, 2013 and no warrants were outstanding at December 31, 2012.

A listing of options and warrants outstanding at March 31, 2013 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. 
 
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, 2013:
 
Deferred Tax asset
 
$
3,782,492
 
Valuation allowance
   
(3,782,492)
 
Net deferred tax assets
   
-
 
 
The Company estimates that it has an NOL carryfoward of approximately $10,807,121 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, 2004 to December 31, 2012 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. January 1, 2013, the Company entered into a month-to-month for the same office space at a rate of $2,000 per month.  There is an unpaid balance of $6,000 at March 31, 2013.
 
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 expired December 31,2012 with a balance due of  $11,125 at March 31, 2013 and December 31, 2012.
 
 
14

 
 
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 no outstanding balance remaining.
 
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 $221,650 and $200,050 at March 31, 2013 and December 31, 2012.
 
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 $43,000 remaining at March 31, 2013 and December 31, 2012.
 
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, 2013 and December 31, 2012.
 
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, 2013 and December 31, 2012 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  March 31, 2013 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, 2013.
 
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 three months ending  March 31, 2013, the Company  made no payments to SPC, with a balance payable due in the amount of approximately $46,208.
 
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. Additional borrowings and compounded interest have brought the balance due to $595,875 at March 31, 2013.
 
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.

During the year ended December 31, 2012, the Company borrowed funds from Mondial Ventures, Inc. and repaid a portion of the amount due, leaving a remaining balance of $14,000 at December 31, 2012.

 
15

 
 
13. Notes Payable
 
At March 31, 2013, 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 (%)
   
3/31/13 ($)
 
7/1/2012
   
26
 
6/30/2015
   
12
   
$
242,731
 
12/18/2012
   
28
 
9/1/20
   
8
     
25,000
 
3/25/2012
   
4
 
12/27/2012
   
18
*
   
194.658
 
11/4/2009
   
11
 
11/4/2012
   
9
     
459,373
 
7/1/2012
   
25
 
6/30/2012
   
12
     
58,460
 
1/25/2012
   
24
 
1/25/2013
   
12
     
41,004
 
5/30/2010
   
2
 
12/31/2011
   
8
     
55,870
 
3/1/2012
   
9
 
See footnote 10
   
8
     
512,500
 
3/15/2012
   
23
 
9/15/2012
   
8
     
20,950
 
7/26/2010
   
5
 
7/26/2012
   
10
     
118,974
 
8/10/2012
   
6
 
8/1082012
   
10
     
42,708
 
8/31/2011
   
7
 
5/31/2012
   
8
     
25,000
 
8/8/2011
   
8
 
5/31/2012
   
8
     
25,000
 
7/11/2011
   
1
 
7/1/2013
   
18
     
109,000
 
2/15/2010
   
3
 
2/15/2010
   
8
     
201,500
 
2/18/2010
   
3
 
12/1/2010
   
4
     
141,350
 
3/3/2010
   
10
 
3/31/12
   
10
     
786,815
 
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
   
     
172,190 
 
6/9/2011
   
15
 
5/9/2012
   
14
     
595,875
 
6/1/2011
   
16
 
12/1/2011
   
8
     
36,652
 
8/11/2011
   
17
 
4/11/2012
   
12
     
12,500
 
10/28/2011
   
18
 
10/28/2012
   
12
     
33,000
 
8/12/2011
   
19
 
2/12/2012
   
10
     
1,000
 
9/12/2011
   
20
 
3/12/2012
   
8
     
25,000
 
9/3/2011
   
21
 
3/3/2012
   
8
     
4,130
 
10/1/2011
   
22
 
6/30/2012
   
6
     
5,974
 
10/19/2012
   
27
 
4/19/2014
   
8
     
15,000
 
Unamortized Discount
                     
(21,029
)
Total
                     
3,996,779
 
  
*
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.
 
 
16

 
 
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: As of December 31, 2012, $55,870 was recorded as a liability under this line of credit.  During  the three months ended March 31,2013 no additional borrowings were made and no payments were made leaving  a balance of $55,870 at the period end.
 
Note 3:  As of March 31,2013 the company  had a promissory note of $201,500 for which no payments were made during the period. The company also had a promissory note of $142,958 for which no payments were made during the period and included $4,208 in accrued interest added to the principal value of the note.
 
Note 4: As of March 31,2013 we had received cash proceeds for the aggregate amount of $194,658, which is payable in principal and interest with rates 18%.  No payments were made in the period.
 
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 become due and are not repaid in full, there was no Event of Default as of December 31, 2012, or thereafter. The Company evaluated the note on the date of issuance 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 year ended December 31, 2012, the debt discount was fully amortized with $106,988 being recognized during the period.  No payments were made during the three months ended March 31, 2013.
 
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. The Company evaluated the note on the date of issuance 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 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. The note was in default during the year ended December 31, 2012 and the company settled with the note holder to pay $42,708.  For the year ended December 30, 2012, the Company recognized note discount amortization of $25,996. The discount is amortized using the effective interest method. No payments were made in the quarter ended March 31,2013.
 
Note 7: On August 8, 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 8, 2012. 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 8, 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 year ended December 31, 2012, the Company recognized note discount amortization of $25,000. The discount is amortized using the effective interest method.  The note was fully converted into common stock during the year ended December 31, 2012.
 
 
17

 
 
Note 8: 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. 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 year ended December 31, 2012, the Company recognized note discount amortization of $25,000. The discount is amortized using the effective interest method. On November 15, 2011, the Company issued an additional $25,000 convertible promissory note with the same terms and conditions, with a due date of August 17, 2012. The Company recognized note discount amortization of $25,000 in 2012. The notes are past due, but the Company has not been placed in default as of the date of this filing.
 
Note 9: On March 1, 2010 and monthly thereafter, we issued non-interest bearing, convertible notes for services, renewable annually until paid through conversions. The total debt owing under these agreements is $512,500 to two 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, 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.  No payments were made in the quarter ended March 31,2013.
 
Note 10: For the period ended December 31, 2012 we have additional balance on debt obligations owed totaling $786,875, related to the acquisition of a subsidiary in March 2010.
 
Note 11: Promissory notes totaling $295,173, which were issued in conjunction with the acquisition of SATCO. An additional legal settlement for $176,000 was also incurred as a result of the SATCO acquisition. Payments of  $ 9,833 were made in the quarter ended March 31,2013.
 
Note 12: Accounts Payable of $141,581 due to Contegra Construction by Energy Ventures One, Inc, a Company subsidiary was converted to a Note Payable in March 2011. The amount remaining to be paid on this promissory note was $133,247 at  March 31,2013. Energy Ventures One also has a Line of Credit with Masters Equipment, Inc. with a balance due of $100,000 at  March 31,2013.
 
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 loans due to the fact that the interest rate was below market.
 
Note 14:  In the quarter ended March31,2013, we  received no cash proceeds for these debt obligations of $172,190 and  no payments were made.
 
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. Amended again  July 31, 2012 to $997,551. The terms of the note are for 14% interest, with principal and interest all due on or before May 9, 2013. A portion of this loan was assumed by the purchaser of the interest in the Company’s oil and gas leases in the amount of $450,000.  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.  A total of $36,652 of this debt  remains at March 31, 2013.
 
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 because the shares issuable pursuant to the August 11, 2011 convertible note are indeterminate, 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 year ended December 31, 2012, the Company recognized note discount amortization of $17,000. The discount is amortized using the effective interest method.  During the  quarter ended March  31, 2013, no payments were made.
 
 
18

 
 
Note 18: Effective  September 12, 2012, the Company entered into a Convertible Promissory Note in the amount of $33,000. The terms of the note are 6% interest, with principal and interest all due on or  before  June 12, 2013. 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 70% discount to the fair market value of the stock price at the time of conversion.  The Company evaluated the note and determined that the shares issuable are indeterminate,  the conversion option associated with this note is deemed a derivative liability.  The September 14, 2012 value of the note of $33,000 was recorded as a note discount to be amortized over the life of the note and derivative liability. For the  quarter ended March 31, 2013, the Company recognized note discount amortization of $10,578. The discount is amortized using the effective interest rate.
 
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 as of  March 31, 2013  is $1,000.
 
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.   The discount  has been fully 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.  During the year ended December 31, 2012 , the Company settled $15,870 of the debt leaving a balance of $4,130 at March 31, 2013.
 
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. For the three months ended December 31, 2011, the Company recognized note discount amortization of $11,250. 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 interest of 12% with principal and interest due on or before July 27, 2012.  Effective March 1,2012 the Company entered into an additional Promissory Notse in the amount of $10,000and $19,000 with the same terms, due on or before September 1, 2012. During the  quarter ended March 31,2013, the Company  paid $6,000 of the debt , leaving a balance of $ 20,950 at  March 31, 2013.

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 of $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 year ended December 31, 2012, the Company recognized note discount of $18,465.  The discount is amortized using the effective interest method.

Note 25:  Effective July 1, 2012, the Company’s subsidiary, Energy Producers ,Inc. entered into a Promissory Note in the amount of $60,130.  The principal is due on or before June 30, 2015 with default interest at 12%.  In the year ended December 31, 2012, the Company has paid $1,670 leaving a balance of  $58,460. No payments were made in the quarter ended March 31, 2013.

Note 26:  Effective July 1, 2012, the Company’s subsidiary Energy Producers, Inc. entered into  a   Promissory  Note in the amount of $242.731.  The principal is due on or before June 30, 2015, with default interest at 12%.

Note 27: Effective October 19, 2012, the Company entered into a Promissory Note in the amount of $15,000.  The terms of the note  are 8% interest, with principal and interest due on or before April,19, 2014.

Note 28:  Effective December 18, 2012, the Company entered into a Promissory Note in the amount of $25,000.   The terms of the note are 8% interest, with principal and interest due on or before September 19,2013.  The promissory note is convertible into common stock of the Company using a conversion rate that is 45% of the average of the lowest three trading prices over the last 20 trading days.  The total debt discount pertaining to this promissory note is $12,054.  The Company recognized $4,018 in amortization of this discount for the  quarter ended March 31, 2013.
 
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.
  
 
19

 
 
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, 2013, 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, 2012, the fair value of the embedded derivatives included on the accompanying consolidated balance sheet was $637,685. As of March 31, 2013, the fair value of the embedded derivatives included on the accompanying consolidated balance sheet was $643,956. During the three months ended March 31, 2013, the Company recognized a loss on change in fair value of derivative liability totaling $6,271.
 
Key assumptions used in the valuation of derivative liabilities associated with the convertible notes at December 31, 2012 and March 31, 2013 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, 2012 and March 31, 2013 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 March 31, 2013 and December 31, 2012  are as follows: 
 
   
March 31,
2013
   
December 31, 
2012
 
Embedded conversion features - convertible promissory notes
 
$
639,264
   
$
632,456
 
Common stock warrants
   
-
     
-
 
Anti-dilution provisions of series D preferred stock
   
4,692
     
5,229
 
   
$
643,956
   
$
637,685
 
 
 
20

 
 
The Company had the following changes in the derivative liability:
 
Balance at December 31, 2012
 
$
637,685
 
Issuance of securities with embedded derivatives
   
-
 
Debt and preferred stock conversions
   
-
 
Derivative (gain) or loss due to mark to market adjustment
   
6,271
 
Balance at March 31, 2013
 
$
643,956
 
 
16.  Intangible Assets
 
The company had $0 of intangible assets recorded as of March 31, 2013 and December 31, 2012. 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, 2013 and December 31, 2012:
 
   
March 31,
2013
   
December31,
2012
 
Asset retirement obligation at the beginning of period
   
11,789
     
21,831
 
Liabilities incurred
   
-
     
 -
 
Revisions to previous estimates
   
 -
     
(3,860)
 
Dispositions
   
-
     
(8,644)
 
Accretion expense
   
285
     
2,432
 
Asset retirement obligation at the end of period
   
12,074
     
11,789
 
 
18.  Discontinued Operations
  
During the year ended December 31, 2012, the Company entered into a preliminary Agreement to sell 51% of its stock in Arctic Solar Engineering, LLC.  Negotiations continue on the Agreement.  Income on the discontinued portion is $32,567 and is recognized in  the financial statements on the Agreement date.  This income is primarily due to an insurance reimbursement that is recorded in other income.

All assets and liabilities of Arctic Solar are segregated in the balance sheet and appropriately labeled as held for sale in 2012, and the quarter ended March 31,2013.

On July 31, 2012, the Company completed a Purchase Agreement whereby EGPI Firecreek, Inc., through its wholly owned subsidiary Energy Producers, Inc., would sell one half (50%) of its holdings in the Tubb oil and gas leases.  The operations of the disposed portion are segregated in the statement of operations for the period ended March 31, 2012.
 
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.  On April 1, 2012 the contracts were renewed with aggregate fees of $10,000 per month which have been accrued through the period ending  March 31, 2013. Other terms remain the same.
 
 
21

 
 
20. Concentrations and Risk
 
Customers
 
During the three months ended March 31, 2013 and March 31, 2012, 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

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 sought damages totaling $262,585 (includes principal, interest and all penalties/fees pursuant to plaintiff's initial disclosures dated 3/28/11). In July 2011, the Company and St. George Investments LLC entered into a settlement agreement where the Company agreed to pay $202,000 on various payment terms beginning with $10,000 on signing of agreement, followed by five payments beginning August through December 2011, and thereafter payments for 18 months in the amount of $6,158. St. George now claims EGPI defaulted on the payment schedule and entered a Confession of Judgment. On September 23, 2011, EGPI Firecreek, Inc. received notice that St. George Investments LLC had filed a second lawsuit arising out of the same claims. The Company is moving to set aside the Confession of Judgment on this basis and is answering and vigorously defending the second lawsuit. As of January 31, 2012, the Company entered into a Settlement Agreement with St. George Investments, LLC whereas among other terms due the Company agreed to two principal options for settlement with summary terms as follows: 1. A settlement payment in the total aggregate amount of $200,000 with $20,000 due January 21, 2012, and $10,000 per month thereafter on the 21st of each month thereafter going forward until paid or 2. A payment balloon of $100,000 paid by April 21, 2012 less $30,000 in payments as credited or $70,000 total upon which the Company or its parties shall have no further obligation to make settlement payments or pay any other amounts to St. George Investments, LLC thereafter. The Company having negotiated settlement payment is current in its payment through October 21, 2012 in accordance with recent modifications to forbearance agreements (for the August payment) having negotiated a stock payment for June and July 2012 and recently for August 2012. The Company did not timely make its August 2012 payment but has been in communication with St. George Investments, LLC as to its current position with both parties now agreed to a current status based on resumption of payments due for August 2012 by resuming payments on May 31, 2013. The entire amount owed is accrued in notes payable in the financial statements.
 
In November 2010, EGPI Firecreek Inc and South Atlantic Traffic Corp., a former wholly owned subsidiary of the Company, received a lawsuit 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. On December 17, 2010, EGPI Firecreek Inc. filed its answer to the claim and filed a counterclaim against Mr. Joyner and Mr. Hall. As of August 2011 and through April 2012, the Company is in settlement negotiations and believes the matter will be resolved for less than the amount currently accrued and included in notes payable and accrued interest, which are the subject of the lawsuit. SATCO was sold to Distressed Asset Acquisitions, Inc. in March 2012. As of July 2012 the case has been settled for $177,000 on scheduled payments over three years. The Company has made seven payments of just under $5,000 each, is current through January 2013 and due for February and March 2013, and has negotiated to bring current on two payments due May 8, 2013.

In December 2010 the Company received a lawsuit notice on behalf of our former Terra Telecom (“Terra”) subsidiary from Source Capital Group Inc (“Source”) seeking a judgment for amounts allegedly owed it from Terra in the total aggregate amount of $81,492 plus pre and post judgment interest. In June 2011, the Company filed a motion to dismiss for lack of personal jurisdiction. Additionally, the Company also filed a motion to dismiss for Sources’ failure to state a claim. In response to that motion, Source has now, as of July, 2011, dismissed its assumption argument. On October 14th, 2011, EGPI Firecreek Inc. received notice from Source Capital’s legal representation that they were seeking to withdrawal as counsel for plaintiffs in this matter. The Company believes that this development with further strengthen our position in defense of this matter and will ultimately result in the granting of our pending motions to dismiss. As of May 2013 there has been no communications received further in this matter.
 
In February 2011 the Company received a lawsuit notice on behalf of our Terra Telecom (“Terra”) subsidiary from Nu-Horizons Electronics (“Nu-Horizons”) seeking judgment for amounts allegedly owed it from Terra in the total aggregate amount of $196,620. The Company believes that it is not liable, and intends to file appeal to remove it from the motion for judgment. The Company will vigorously defend its position. As of May 2013, the Company has not received further communications with respect to Nu-Horizons.

 
22

 
 
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 July 2012 the Company attended an arbitration hearing and in August was awarded a dismissal of the case by the Arbitrator. The Plaintiff then appealed and since the appeal the matter has been settled and dismissed for a payment of $5,000 cash and 275,000 shares of the Company’s restricted common stock, which both have been tendered as of the date of this filing.

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.  In July 2012, the Company negotiated a settlement of this case for $22,000 at the rate of $2,000 per month beginning October 2012. The promissory note is recorded as a liability in the financial statements. The Company has made its first payment of $2,000 and is current at September 30, 2012 but has fallen behind in payments since, and will attempt to resume as soon as practicable.

In January, 2012 a lawsuit was filed in the Middlesex County, Massachusetts Superior Court by Joshua White, against Terra Telecom and the Company. Mr. White was a former employee of Terra Telecom and not the Company. Mr. White alleges the Company should be liable to him for the acts of Terra Telecom. A Motion to Dismiss has been filed for lack of jurisdiction on behalf of the Company, which the Company believes will be granted. In any event the Company believes it has no liability and will defend vigorously if, for some reason, the Motion to Dismiss is not granted. The Company sold its interest in Terra Telecom in March of 2011. On August 3, 2012 the Motion to Dismiss was granted by the Justice of the Superior Court.

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 Company entered negotiations for settlement and has recently made its first payment, and current for the period ended September 30, 2012, but has fallen behind on all subsequent payments. The Company has negotiated for a payment to be made by May 15, 2013. The amount is recorded as a liability in the financial statements.

In October 2012 the Company received a lawsuit behalf of Solaire Power Technologies, LLC, a subsidiary of our wholly owned subsidiary Arctic Solar Engineering LLC. Robert T Short (“RTS”) , the Plaintiff, is claiming personal injuries and damages relating to alleged fall from the City of Dardene Prairie building, in the City of Dardene Prairie MO, Solaire is one of several parties named in the proceeding. Solaire denies all liability, and is prepared to vigorously defend its position. There is no further activity related to this matter that we are aware of as as of May 2013.

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.

During the quarter ended March 31, 2013, the Company’s Board of Directors approved a 1:4,000 shares reverse stock split.  Shares have not been reissued as of March 1, 2013, but the reverse split has been recognized in these financial statements

22. Subsequent Events

The Company has been making presentations to asset-based lenders and other financial institutions for the purpose of acquiring additional projects and financing capital expenditures to build upon its infrastructure for its oil and gas operations in 2013. The Company through May 31, 2013 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 domestic focus prospects are primarily located in Texas, and in other core areas of the Permian Basin. 

The Company is pursuing certain international based oil and gas programs available in West Africa and will Report progress when appropriate.

The Company’s goal is to build our revenues, asset base and cash flow; however, the Company makes no guarantees and can provide no assurances that it will be successful in these endeavors.
  
 
23

 
 
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, 2013 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
-
   
 -
     
32,774
     
-
     
32,774
 
Depreciation & amortization
-
   
-
     
23,483
     
-
     
23,483
 
Income (loss) from operations
-
   
-
     
(72,012)
     
-
     
(72,012)
 
Interest expense
482
   
482
     
-
     
84,964
     
85,928
 
Segment assets
172
   
172
     
1,309,444
     
248
     
1,310,034
 
 
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,
 
   
2013
 
Revenues:
     
Total for reportable segments
   
32,774
 
Corporate
   
-
 
     
32,774
 
Depreciation and amortization:
       
Total for reportable segments
   
23,483
 
Corporate
   
-
 
     
23,483
 
Income (loss) from operations:
       
Total for reportable segments
   
(72,012)
 
Corporate
   
-
 
     
(72,012)
 
Interest expense:
       
Total for reportable segments
   
964
 
Corporate
   
84,964
 
     
85,928
 
Segment assets:
       
Total for reportable segments
   
1,309,786
 
Corporate
   
248
 
     
1,310,034
 
  
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 audited Consolidated Financial Statements and Notes thereto, and the other financial data appearing elsewhere in this Annual 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.

 
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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. 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 (see additional information in the Section on “The Business”, “Recent Developments”, “Description of Properties” and elsewhere in this document.
 
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 (see additional information in the Section on “The Business” and in our Current Report on Form 8-K filed on June 16, 2010, and information contained in our Form 10-Q filed November 22, 2010, and elsewhere in this document.
 
In July 2010 the Company toward addressing growth possibilities for the ITS/DOT line of business entered into a Definitive Stock Purchase Agreement with E-Views Safety Systems, Inc. ("E-Views") to be operated through its new subsidiary unit EGPI Firecreek Acquisition Company, Inc. Initially the Company has a “Dealer Agreement” with rights to acquire up to 51% of E-Views (see Exhibit 10.1 and 10.2 to our Report on Form 10-Q for the period ended June 30, 2010 filed on August 20, 2010, incorporated herein by reference). The Stock Purchase Agreement provides for up to a 51% interest in E-Views and exclusive distribution and sales rights in various states. The Company has initially solidified rights for the states of Alabama, Florida, Louisiana and North Carolina. They have also obtained international rights in the countries of Ireland and the United Kingdom. These states were initially chosen because of our subsidiary Southern Atlantic Traffic Corporation's, established clientele, and therefore potential abilities to penetrate these markets with E-Views patented technology and state-of-the-art products. Although there is still potential for this transaction; we were not able to implement the strategic plan to incrementally acquire E-Views stock interests.
 
 
25

 
 
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 and its member interests as 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 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. Through 2012 a deal Arctic Solar Engineering LLC had pursued with W2 Energy, Inc. failed to consummate in a 50-50 joint venture, and since has been inactive throughout the year. We are evaluating remaining potentials or any future for this division with a view to complete the review by end of second quarter 2013.

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. For further discussion see the Section on “Recent Developments”, “The Business”, and elsewhere in this document.

 
26

 
 
On July 31, 2012, the Company entered into and completed the closing of a Stock Purchase Agreement involving the sale of oil and gas interests to Mondial Ventures, Inc., assignee of CUBO Energy PLC. The interests sold were in our J.B. Tubb Leasehold Estate along and included our entering into a Participation Agreement (Turnkey Drilling, Re Entry, and Multiple Wells) granting certain rights in and to interests for additional development on the J.B. Tubb Leasehold Estate.  For further information please see our Current Report on Form 8-K filed on August 3, 2012 and elsewhere in this report in the section on the Business.

On October 30, 2012, the Company through our wholly owned subsidiary Energy Producers, Inc. (“EGPI”) and Mondial Ventures, Inc. as the assignee of CUBO Energy PLC entered into a Linear Short Form Agreement involving the development and acquisition of oil and gas interests subject to certain requirements. The interests relating to 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 Shackelford Counties, West Central Texas. For further information see the section on the “Business” listed in this Report.

The Company is again pursuing to a lesser extent oil and gas programs on an international basis.
 
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 2013. 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. The Company is continuing to evaluate and clean up non productive segments and infrastructure as delineated below. Through 2012  the Company  has refocused on building its oil and gas operations domestically, and in 2013 plans will include to a lesser extent pursuing potential internationally based oil and gas programs.
 
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.
 
 
27

 
 
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”). M3 was unsuccessful in its strategy to acquire a series of businesses in this industry and during the year ended December 31, 2011 was inactive. Further 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. Subsequent to the acquisition of Redquartz, LTD, the Company’s Intelligent Traffic Systems related business has ceased and its SATCO subsidiary has been sold. Redquartz is inactive and does not generate any revenue for 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. The acquisition of Terra is not reflected in the accompanying financial statements of the Company due to the fact that the Company did not obtain control of the assets and liabilities of Terra or have operational control of the Terra leading up until the subsequent disposition on March 14, 2011. As a result of these facts and the fact that the business was subsequently shut down and entered bankruptcy, no earn-out is owed by the Company. 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.
 
 
28

 
 
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 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.

Completion and Entry into a Definitive Agreement with Mondial Ventures, Inc. for Sale of Oil and Gas Interests and Rights in J.B. Tubb Leasehold Estate, Ward and Jones County Texas

On July 31, 2012, the Company through our wholly owned subsidiary Energy Producers, Inc. (“EGPI”) and Mondial Ventures, Inc. as the assignee of CUBO Energy PLC entered into and completed the closing of an Assignment and Bill of Sale and Stock Purchase Agreement (“SPA”). The interests sold were oil and gas interests in the J.B. Tubb Leasehold Estate located outside of Odessa Texas in Ward and Jones County. The Agreement included our entering into a Participation Agreement (Turnkey Drilling, Re Entry, and Multiple Wells) granting certain rights in and to interests for additional development on the J.B. Tubb Leasehold Estate. The Company presently owns 37.5% working interest ("WI"), 28.125% net revenue interest ("NRI") in the oil and gas interests, and pro rata oil & gas revenue and reserves for all depths below the surface to at least 8500 ft. including all related assets, fixtures, equipment, three well heads and three well bores. The field is located in the Permian Basin and the Crawar Field, directly adjacent to property operated by Chevron Corporation in Ward County, Texas (12 miles southeast of Monahans and 30 miles west of Odessa in West Texas). For further information see the section on the “Business” and “Description of Properties” listed in this Report.

Completion and Entry into a Definitive Short Form Agreement with Mondial Ventures, Inc. for Evaluation and Potential Acquisition of 50% Oil and Gas Working Interests, Callahan, Stephens, and Shackelford Counties, Texas

On October 30, 2012, the Company through our wholly owned subsidiary Energy Producers, Inc. (“EGPI”) and Mondial Ventures, Inc. as the assignee of CUBO Energy PLC entered into a Linear Short Form Agreement involving the development and acquisition of oil and gas interests subject to certain requirements. The interests relating to 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 Shackelford Counties, West Central Texas. While this agreement has expired, the two companies plan to pursue this venture in the future.  For further information see the section on the “Business” listed in this Report.

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:
 
 
29

 
 
- 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, 2013 and March 31, 2012.
 
Results of Continuing and Discontinued Operations
 
Three months ended March 31, 2013 compared to the three months ended March 31, 2012.
 
Total revenue for sales of oil and gas during the three months ended March 31, 2013 as compared to March 31, 2012 was $32,774 and $18,870, respectively.  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.
 
There was no revenue for the sale and installation of solar equipment for the three months ended March 31, 2013 or March 31,2012. 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:
 
   
March 31,
2013
   
March 31,
2012
 
Advertising & promotion
 
$
616
   
$
4,072
 
Administration
   
5,990
     
7,661
 
Consulting
   
410
     
120,614
 
Depreciation/Amortization
   
23,768
     
16,913
 
Professional fees
   
30,305
     
77,486
 
Rent/Utilities
   
6,000
     
4,200
 
Total
 
$
67,089
   
$
230,946
 
 
For the three months ended March 31, 2013, promotional fees of $616 were incurred in stock promotional activities as compared to $4,072 for the three months ended March 31, 2012.
 
For the three months ended March 31, 2013, consulting fees of $410 were incurred for business advisory services as compared to $120,614 for the three months ended March 31, 2012.

For the three months ended March 31, 2013, professional fees of $30,305 were incurred in regards to management advisory, legal costs, and accounting, for new subsidiaries as compared to $77,486 for the three months ended March 31, 2012.
 
After deducting general and administrative expenses, the Company experienced a loss from operations of $72,012 for the three months ended March 31, 2013 compared to a loss of $246,744 for the same period last year.  
 
The loss from discontinued operations for the three months ended March 31, 2013 and March 31, 2012 was $482 and $43,682, respectively. For the three months ended March 31, 2013 and March 31, 2012, 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.
 
Interest expense for the three months ended March 31, 2013 was $85,928 compared with $355,588 for the same period last year.
 
Fully diluted income (loss) per share was ($0.03) per share for the three months ended March 31, 2013, for continuing operations, compared to a loss of ($1.58) per share for the three months ended March 31, 2012.
  
Discussion of Financial Condition:  Liquidity and Capital Resources
 
Cash on hand at March 31, 2013 was $409 compared to $401 at December 31, 2012. The Company had working capital deficit of $6,927,190 at March 31, 2013 compared to a working capital deficit of $6,827,272 at December 31, 2012.
 
Total assets decreased to $1,310,034 at March 31, 2013 compared to $1,333,508 at December 31, 2012 mainly as a result of   depreciation and depletion.
 
 
30

 
 
Shareholders’ equity increased to a deficit of $7,485,478 at March 31, 2013 from $7,362,078 at December 31, 2012. There were no shares issued during the three months ended March 31,2013.
  
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 2013.
 
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 2013.   
  
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, 2012.
 
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 2012 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.
 
 
31

 
 
(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 sought damages totaling $262,585 (includes principal, interest and all penalties/fees pursuant to plaintiff's initial disclosures dated 3/28/11). In July 2011, the Company and St. George Investments LLC entered into a settlement agreement where the Company agreed to pay $202,000 on various payment terms beginning with $10,000 on signing of agreement, followed by five payments beginning August through December 2011, and thereafter payments for 18 months in the amount of $6,158. St. George now claims EGPI defaulted on the payment schedule and entered a Confession of Judgment. On September 23, 2011, EGPI Firecreek, Inc. received notice that St. George Investments LLC had filed a second lawsuit arising out of the same claims. The Company is moving to set aside the Confession of Judgment on this basis and is answering and vigorously defending the second lawsuit. As of January 31, 2012, the Company entered into a Settlement Agreement with St. George Investments, LLC whereas among other terms due the Company agreed to two principal options for settlement with summary terms as follows: 1. A settlement payment in the total aggregate amount of $200,000 with $20,000 due January 21, 2012, and $10,000 per month thereafter on the 21st of each month thereafter going forward until paid or 2. A payment balloon of $100,000 paid by April 21, 2012 less $30,000 in payments as credited or $70,000 total upon which the Company or its parties shall have no further obligation to make settlement payments or pay any other amounts to St. George Investments, LLC thereafter. The Company having negotiated settlement payment is current in its payment through October 21, 2012 in accordance with recent modifications to forbearance agreements (for the August payment) having negotiated a stock payment for June and July 2012 and recently for August 2012. The Company did not timely make its August 2012 payment but has been in communication with St. George Investments, LLC as to its current position with both parties now agreed to a current status based on resumption of payments due for August 2012 by resuming payments on May 31, 2013. The entire amount owed is accrued in notes payable in the financial statements.

In November 2010, EGPI Firecreek Inc and South Atlantic Traffic Corp., a former wholly owned subsidiary of the Company, received a lawsuit 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. On December 17, 2010, EGPI Firecreek Inc. filed its answer to the claim and filed a counterclaim against Mr. Joyner and Mr. Hall. As of August 2011 and through April 2012, the Company is in settlement negotiations and believes the matter will be resolved for less than the amount currently accrued and included in notes payable and accrued interest, which are the subject of the lawsuit. SATCO was sold to Distressed Asset Acquisitions, Inc. in March 2012. As of July 2012 the case has been settled for $177,000 on scheduled payments over three years. The Company has made seven payments of just under $5,000 each, is current through January 2013 and due for February and March 2013, and has negotiated to bring current on two payments due May 8, 2013.

In December 2010 the Company received a lawsuit notice on behalf of our former Terra Telecom (“Terra”) subsidiary from Source Capital Group Inc (“Source”) seeking a judgment for amounts allegedly owed it from Terra in the total aggregate amount of $81,492 plus pre and post judgment interest. In June 2011, the Company filed a motion to dismiss for lack of personal jurisdiction. Additionally, the Company also filed a motion to dismiss for Sources’ failure to state a claim. In response to that motion, Source has now, as of July, 2011, dismissed its assumption argument. On October 14th, 2011, EGPI Firecreek Inc. received notice from Source Capital’s legal representation that they were seeking to withdrawal as counsel for plaintiffs in this matter. The Company believes that this development with further strengthen our position in defense of this matter and will ultimately result in the granting of our pending motions to dismiss. As of May 2013 there has been no communications received further in this matter.
 
In February 2011 the Company received a lawsuit notice on behalf of our Terra Telecom (“Terra”) subsidiary from Nu-Horizons Electronics (“Nu-Horizons”) seeking judgment for amounts allegedly owed it from Terra in the total aggregate amount of $196,620. The Company believes that it is not liable, and intends to file appeal to remove it from the motion for judgment. The Company will vigorously defend its position. As of May 2013, the Company has not received further communications with respect to Nu-Horizons.

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 July 2012 the Company attended an arbitration hearing and in August was awarded a dismissal of the case by the Arbitrator. The Plaintiff then appealed and since the appeal the matter has been settled and dismissed for a payment of $5,000 cash and 275,000 shares of the Company’s restricted common stock, which both have been tendered as of the date of this filing.

 
32

 
 
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.  In July 2012, the Company negotiated a settlement of this case for $22,000 at the rate of $2,000 per month beginning October 2012. The promissory note is recorded as a liability in the financial statements. The Company has made its first payment of $2,000 and is current at September 30, 2012 but has fallen behind in payments since, and will attempt to resume as soon as practicable.

In January, 2012 a lawsuit was filed in the Middlesex County, Massachusetts Superior Court by Joshua White, against Terra Telecom and the Company. Mr. White was a former employee of Terra Telecom and not the Company. Mr. White alleges the Company should be liable to him for the acts of Terra Telecom. A Motion to Dismiss has been filed for lack of jurisdiction on behalf of the Company, which the Company believes will be granted. In any event the Company believes it has no liability and will defend vigorously if, for some reason, the Motion to Dismiss is not granted. The Company sold its interest in Terra Telecom in March of 2011. On August 3, 2012 the Motion to Dismiss was granted by the Justice of the Superior Court.

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 Company entered negotiations for settlement and has recently made its first payment, and current for the period ended September 30, 2012, but has fallen behind on all subsequent payments. The Company has negotiated for a payment to be made by May 15, 2013. The amount is recorded as a liability in the financial statements.

In October 2012 the Company received a lawsuit behalf of Solaire Power Technologies, LLC, a subsidiary of our wholly owned subsidiary Arctic Solar Engineering LLC. Robert T Short (“RTS”) , the Plaintiff, is claiming personal injuries and damages relating to alleged fall from the City of Dardene Prairie building, in the City of Dardene Prairie MO, Solaire is one of several parties named in the proceeding. Solaire denies all liability, and is prepared to vigorously defend its position. There is no further activity related to this matter that we are aware of as as of May 2013.

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, 2012, 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
 
During the last three years, the registrant has issued unregistered securities to the persons, as described below. None of these transactions involved any underwriters, underwriting discounts or commissions, except as specified below, or any public offering, and the registrant believes that each transaction was exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(2) thereof and/or Regulation D promulgated thereunder. All recipients had adequate access, though their relationships with the registrant, to information about the registrant.
 
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:

(*)(**) On November 7, by 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 person for services rendered.
 
Name
Date
Share
Amount(****)
Type of
 Consideration
Fair Market Value of
Consideration
                     
Steven Antebi (***)(****)(1)
10550 Fontenelle Way,
Los Angeles, California, 90077
11/7/12
   
2,000,000,000
 
Consultant/Advisory
 
$
200,000
 
 
 
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(*) 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.
 
(**) $200,000 worth of common stock in the immediately preceding table was used primarily in consideration of services rendered to the Company.
 
 
(1)
Steven Antebi provides other Business Consulting and advisory services, and is not currently a director, or officer of the Registrant.
 
(***) 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.
 
(****) The shares are to be included for registration in a registration statement on a best efforts basis by the Registrant in accordance with the terms of agreement.

I. (i) (ii) On August 20, 2012, by majority consent of the Board of Directors and Shareholders, the Company approved the following issuances of its restricted common, par value $0.001 per share for common and preferred, to the following persons in consideration of services rendered, including for and as incentive to continue to assist and provide services to the Company or its subsidiaries.
 
Name and Address (iii)
 
Date
 
Series C Preferred StockShare Amt
 
Type of Consideration
 
Fair Market Value of Consideration
                 
Global Media Network USA, Inc. 1/ c/o 6564 Smoke Tree Lane Scottsdale, Arizona 85253
   
8/20/2012
     
*200,000
   
For services rendered to the Company, and Subsidiaries and Incentive
 
$
(Note 1)
 
                             
David H. Ray 2/c/o 6564 Smoke Tree Lane Scottsdale, Arizona 85253
   
8/20/2012
     
**
   
For services rendered to the Company, and Subsidiaries and Incentive
 
$
(Note 1)
 
                             
Brandon D. Ray 3/c/o 6564 Smoke Tree Lane Scottsdale, Arizona 85253
   
8/20/2012
     
**
   
For services rendered to the Company, and Subsidiaries and Incentive
 
$
(Note 1)
 
                             
Strategic Partners Consulting, LLC. 4/c/o 6564 Smoke Tree Lane Scottsdale, Arizona 85253
   
8/20/2012
     
**200,000
   
For services rendered to the Company, and Subsidiaries and Incentive
 
$
(Note 1)
 
                             
David A. Taylor 5/8411 Sterling Street, Irving, Texas 75063
   
8/20/2012
     
200,000
   
For services rendered to the Company, and Subsidiaries and Incentive
 
$
(Note 1)
 
                             
BVR, Inc. 6/c/o 3472 Pointview Circle, Gainsville, GA30506
   
8/20/2012
     
200,000
   
For services rendered to the Company, and Subsidiaries and Incentive
 
$
(Note 1)
 
                             
Michael Trapp 7/c/o 6564 Smoke Tree Lane, Scottsdale, Arizona 85253
   
 8/20/2012
     
200,000
   
For services rendered to the Company, and Subsidiaries and Incentive
 
$
(Note 1)
 
  
(Note 1): 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. We have only used a nominal par value for our listed valuation which is subject to further adjustment. As example only: During the year ended December 31, 2011, 72,856 shares of Series C preferred stock were issued for services rendered. The preferred stock was valued at $75,000 based on an estimate of fair market value on the date of grant. The holders of Series C preferred stock represent a controlling voting interest in the Company. As a result, a determination of the control premium was determined to estimate the value of the shares. The control premium is based on publicly traded companies or comparable entities which have been recently acquired in arm’s length transactions.
 
(i) Issuances are approved, subject to such persons being entirely responsible for their own personal, Federal, State, and or relevant single or multi jurisdictional income taxes, as applicable. Unless otherwise indicated, each person named in the table above has the sole voting and investment power with respect to his shares of our common and or preferred stock beneficially owned.
 
(ii) All of the financing proceeds (see also Note 1) in the immediately preceding table was used as listed in the table above primarily in consideration of bonus for services rendered and or in exchange for accrued services rendered to the Company and/or one or more of its subsidiaries, and incentive.
 
(1)
* Global Media Network USA, Inc. is 100% owned by Dennis R. Alexander who provides day to day operational services and business consulting services to the Company, EGPI Firecreek, Inc., Energy Producers, Inc., and is a shareholder, Chairman, director, and an officer (CEO, CFO) of the Company.
   
(2)
**David H. Ray, for business and consulting, accounting, and advisory services; Mr. Ray is a shareholder indirectly through Strategic Partners Consulting, LLC, a director, and an officer (Executive Vice President and Treasurer) of the Company.
 
 
34

 
(3) 
**Brandon D. Ray, for business, and consulting and financial advisory services; He is a shareholder indirectly though Strategic Partners Consulting, LLC. , and an officer, (Executive Vice President of Finance) and director of the Company.
   
(4) 
**Strategic Partners Consulting, LLC, is indirectly owned by David H. Ray (66.7%) and Brandon D. Ray (33.3%) providing for each of their day to day operational services and business provisions, accounting, and financial advisory.
 
(5) 
David A. Taylor is a shareholder and a director of the Company, and an officer and director of Chanwest Resources, Inc., a wholly owned subsidiary of the Company.
   
(6)
BVR, Inc. is indirectly owned by Billy V. Ray Jr. and Jonathan Ray. BVR, Inc. Mr. Ray, and Jonathan Rayare shareholders and not an officer or director of the Company. 
   
(7)
Mike Trapp is a director of the Company. Mr. Trapp is also a shareholder. 
 
(iii) Each share of Series C preferred stock shall have 21,200 votes on the election of our directors and for all other purposes.
 
II.  (i) (ii) (iii) On August 27, 2012, by majority consent of the Board of Directors, the Company approved the following issuances of its restricted common, par value $0.001 per share for common and preferred, to the following persons in consideration of bonus for services rendered and or in exchange for accrued services rendered to the Company and/or one or more of its subsidiaries, and incentive.
 
Name and Address (iii)
Date
 
Restricted
Common
Share Amt
 
Type of
Consideration
Fair Market
Value of
Consideration
             
Jeffrey M. Proper 1/
c/o 6564 Smoke Tree Lane
Scottsdale, Arizona 85253
8/27/12
   
600,000,000
 
Bonus for services rendered to the Company, and Subsidiaries and Incentive
$
60,000
                 
Thomas J. Richards 2/
c/o 6564 Smoke Tree Lane
Scottsdale, Arizona 85253
8/27/12
   
500,000,000
 
Bonus for services rendered to the Company, and Subsidiaries, and Incentive
$
50,000
                 
Larry W. Trapp 3/
c/o 6564 Smoke Tree Lane
Scottsdale, Arizona 85253
8/27/12
   
500,000,000
 
Bonus for services rendered to the Company, and Subsidiaries, and Incentive
$
50,000
                 
Melvena Alexander CPA 4/
c/o 6564 Smoke Tree Lane
Scottsdale, Arizona 85253
8/27/12
   
600,000,000
 
In exchange for services rendered to the Company, and Subsidiaries
$
60,000
                 
Joanne M. Sylvanus 5/
c/o 6564 Smoke Tree Lane
Scottsdale, Arizona 85253
8/27/12
   
725,000,000
 
Bonus for services rendered to the Company, and Subsidiaries
$
72,500
                 
Global Media Network USA, Inc. 6/
c/o 6564 Smoke Tree Lane
Scottsdale, Arizona 85253
8/27/12
   
*1,550,000,000
 
In exchange for services rendered to the Company, and Subsidiaries
$
155,000
   
David H. Ray 7/
c/o 6564 Smoke Tree Lane
Scottsdale, Arizona 85253
8/27/12
   
**
 
Bonus for services rendered to the Company, and Subsidiaries
$
**
                 
Brandon D. Ray 8/
c/o 6564 Smoke Tree Lane
Scottsdale, Arizona 85253
8/27/12
   
**
 
Bonus for services rendered to the Company, and Subsidiaries, and Incentive
$
**
                 
Strategic Partners Consulting, LLC. 9/
c/o 6564 Smoke Tree Lane
Scottsdale, Arizona 85253
8/27/12
   
**700,000,000
 
Bonus for services rendered to the Company, and Subsidiaries, and Incentive
$
**70,000
                 
David A. Taylor 10/
8411 Sterling Street
Irving, Texas 75063
8/27/12
   
***250,000,000
 
Bonus for services rendered to the Company, and Subsidiaries, and Incentive
$
25,000
                 
Wiloil Consulting, LLC. 11/
8411 Sterling Street
Irving, Texas 75063
8/27/12
   
***250,000,000
 
Bonus for services rendered to the Company, and Subsidiaries, and Incentive
$
25,000
                 
Frederic Sussman 12/
c/o 15361Chesterfield Pines Ln.
Chesterfield, MO 63017
8/27/12
   
325,000,000
 
Bonus for services rendered to the Company, and Subsidiaries, and Incentive
$
32,500
 
35

 
 
(i) Issuances are approved, subject to such persons being entirely responsible for their own personal, Federal, State, and or relevant single or multi jurisdictional income taxes, as applicable. Unless otherwise indicated, each person named in the table above has the sole voting and investment power with respect to his shares of our common and or preferred stock beneficially owned.
 
(ii) $600,000 of the financing proceeds in the immediately preceding table was used as listed in the table above primarily in consideration of bonus for services rendered and or in exchange for accrued services rendered to the Company and/or one or more of its subsidiaries, and incentive.
 
(iii) Further restrictions are imposed on the common restricted share issuances such that it is agreed unless approved by the Board of Directors by its written consent, such shares issued to each and every person or entity shall not be hypothecated, sold, exchanged, or otherwise disposed of for a period of 7 months from the effective date of issuance which is August 27, 2012, but transfers to family members are allowed as gifts as long as these further restrictions are disclosed and followed.
 
(1) 
Mr. Jeffrey M. Proper, Esq., for legal advisory and consulting services; Mr. Proper is a shareholder and is not a director or officer of the Company.
   
(2)
Mr. Thomas J. Richards, for business and consulting and advisory services, and loans to the Company; Mr. Richards is a shareholder and an advisor of the Company and is not a director or officer.
 
(3) 
Mr. Larry W. Trapp, for business and consulting and advisory services, and loans to the Company; He is a shareholder, and formerly an officer and director of the Company and EPI through November 1, 2011.
   
(4) 
Melvena Alexander, for day to day operational services and business provisions; Mrs. Alexander is a shareholder, and an officer (Secretary, Comptroller, and Co Treasurer) of the Company.
 
(5) 
Joanne M. Sylvanus provides accounting and advisory services to the Company, and is a shareholder of the Company.
   
(6)
* Global Media Network USA, Inc. is 100% owned by Dennis R. Alexander who provides day to day operational services and business consulting services to the Company, EGPI Firecreek, Inc., Energy Producers, Inc., and is a shareholder, Chairman, director, and an officer (CEO, CFO) of the Company.
   
(7)
**David H. Ray, for business and consulting, accounting, and advisory services; Mr. Ray is a shareholder indirectly through Strategic Partners Consulting, LLC, a director, and an officer (Executive Vice President and Treasurer) of the Company.
 
(8) 
**Brandon D. Ray, for business, and consulting and financial advisory services; He is a shareholder indirectly though Strategic Partners Consulting, LLC. , and an officer, (Executive Vice President of Finance) and director of the Company.
   
(9) 
**Strategic Partners Consulting, LLC, is indirectly owned by David H. Ray (66.7%) and Brandon D. Ray (33.3%) providing for each of their day to day operational services and business provisions, accounting, and financial advisory.
 
(10) 
***David A. Taylor is a shareholder and a director of the Company, and an officer and director of Chanwest Resources, Inc., a wholly owned subsidiary of the Company.
   
(11)
 ***Willoil Consulting, LLC is indirectly owned by David A. Taylor. Subject shares are to be issued upon completion of pending transaction with David Killian.
   
(12)
 Frederic Sussman is a consultant of the Company for Arctic Solar and Engineering, LLC.; Mr. Sussman is a shareholder and is not a director or officer of the Company.
 
 
36

 
 
(iii) 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.

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
71,760
 
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
35,880
 
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
42,360
 
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.
 
 
37

 
 
(*)(**) On May 10, 2010, by majority consent of the Board of Directors, the Company approved the following issuances of its restricted common stock, par value $0.001 per share, to the following person for and behalf of consideration as follows:
 
     
Type of
 
Fair Market 
Value of
 
Name and Address (***)
Date
Share Amount
Consideration
 
Consideration
 
             
Alan Carlquist (1)
1/28/2010
25,000
Working Capital
 
$
20,000.00
 
1110 Allgood Industrial Center
   
M3 Subsidiary
       
Marietta, GA 30066
             
 
(*) Issuances when approved, will be 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.
 
(**) $20,000 worth of common stock in the immediately preceding table used primarily in consideration of advances made for working capital requirements for the Company’s wholly owned subsidiary M3 Lighting, Inc.
 
(1) The above named individual is not an affiliate, director, or officer of the Registrant.
 
(***) The shares of common stock are to be 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.
 
I. (*)(**) On January 12, 2010, 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 as follows:
 
         
Type of
 
Fair Market Value of
 
Name and Address (***)
Date
 
Share Amount
 
Consideration
 
Consideration
 
Thomas J. Davis (1)
12/14/2009
   
14,881
 
Working Capital
 
$
25,000.00
 
99 Hawley Street Suite 216
         
SATCO Subsidiary
       
Binghamton, Ny 13901
                   
                     
Judd A. Heredos (1)
1/4/2010
   
10,420
 
Working Capital
 
$
12,504.00
 
1060 Beckingham Drive
         
SATCO Subsidiary
       
St. Augustine, FL 32092
                   
                     
Mehrdad Tabrizi (1)
12/30/2009
   
5,952
 
Working Capital
 
$
10,000.00
 
4500 Columns Drive
         
SATCO Subsidiary
       
Marietta, GA 30067
                   
                     
Herbert Jackenthal (1)
12/14/2009
   
833
 
Working Capital
 
$
1,000.00
 
37 St. James Drive
         
SATCO Subsidiary
       
Palm Beach Gardens, FL 33418
                   
                     
Geoffrey Peirce Sullivan (1)
12/30/2009
   
1,250
 
Working Capital
 
$
1,500.00
 
33 St. James Drive
         
SATCO Subsidiary
       
Palm Beach Gardens, FL 33418
                   
 
 (*) 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.
 
(**) $50,004 worth of common stock in the immediately preceding table was used primarily in consideration of working capital requirements for the Company’s wholly owned subsidiary South Atlantic Traffic Corporation (SATCO).
 
(1) The above named individuals are not affiliates, directors, or officers of the Registrant.
 
***) 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.
 
 
38

 
 
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 21, 2013, 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