10-Q 1 v223783_10q.htm QUARTERLY REPORT Unassociated Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2011
 
o 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  x No  o
 
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  o No  o
 
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 o Accelerated Filer o
     
  Non-Accelerated Filer o Smaller Reporting Company x
 
(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 o No x
 
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 16, 2011, the registrant had 1,276,281,923 shares of its $0.001 par value common stock issued and outstanding. There are no shares of Series A and B preferred stock, and 14,286 shares of Series C 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, 2010
 
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
    28  
             
Item 3.
 
Quantitative and Qualitative Disclosures About Market Risk
    34  
             
Item 4(T)
 
Controls and Procedures
    34  
             
PART II:
 
OTHER INFORMATION
    35  
             
Item 1.
 
Legal Proceedings
    35  
             
Item 1A.
 
Risk Factors
    36  
             
Item 2.
 
Unregistered Sales of Equity Securities and Use of Proceeds
    36  
             
Item 3.
 
Defaults upon Senior Securities
    38  
             
Item 4.
 
Removed and Reserved
    38  
             
Item 5.
 
Other Information
    38  
             
Item 6.
 
Exhibits
    39  
             
   
Certifications
       
             
   
Signature
    40  
 
 
2

 
 
PART I FINANCIAL INFORMATION
 
ITEM 1 – FINANCIAL STATEMENTS
 
EGPI FIRECREEK, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2011 AND DECEMBER 31, 2010
 
    Unaudited     Audited  
   
3/31/2011
   
12/31/2010
 
ASSETS
           
Current assets:
           
Cash
  $ 14,048     $ 9,272  
Accounts receivable
    69,899       14,835  
Inventory
    19,134       -  
Prepaid expenses
    5,903       5,900  
Notes  receivables
    100,000       -  
Current assets related to discontinued operations
               
Cash
    -       658  
Accounts receivable
    -       111,568  
Inventory
    -       -  
Prepaid expenses
    -       3,165  
Total current assets related to discontinued operations
    -       115,391  
Total current assets
    208,984       145,398  
                 
Other assets:
               
Investment in  Terra Telecom, Inc.
    -       18,000  
Goodwill
    22,119       -  
Intangible assets – net
    369,135       -  
Fixed assets – net
    657,164       568,560  
Oil and natural gas properties – proved reserves - net
    3,783,615       163,500  
Other assets related to discontinued operations
               
Intangible assets – net
    -       743,420  
Goodwill
    -       2,001,840  
Fixed assets – net
    -       21,469  
Total other assets related to discontinued operations
    -       2,766,729  
Total other assets
    4,832,033       3,516,789  
                 
Total assets
  $ 5,041,017     $ 3,662,187  
                 
 LIABILITIES AND SHAREHOLDERS' DEFICIT
               
                 
Current liabilities:
               
Accounts payable & accrued expenses
  $ 671,680     $ 558,489  
Notes payable
    3,198,833       3,307,224  
Convertible notes, net of discount
    209,867       44,490  
Capital lease obligation
    56,872       56,872  
Advances & notes payable - related parties
    232,418       188,718  
Derivative Liabilities
    871,015       823,846  
Asset retirement obligation
    13,743       5,368  
Current liabilities related to discontinued operations
               
Accounts payable & accrued expenses
    -       2,209,128  
Total current liabilities
    5,254,428       7,194,135  
                 
Commitments and contingencies:
               
Series D preferred stock subscription payable, 2.5 million authorized, par value $0.001, convertible into common shares, none outstanding, 2,500 shares subscribed but unissued
    3,736,387       -  
Total commitments and contingencies
    3,736,387       -  
                 
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; 14,286 and 14,286 shares outstanding at March 31, 2011 and December 31, 2010, respectively
    14       14  
Common stock- $0.001 par value, authorized 3,000,000,000 shares, issued and outstanding, 482,800,926 at March 31, 2011 and 51,915,345 at December 31, 2010, respectively
    482,801       51,915  
Additional paid in capital
    26,967,359       25,899,464  
Other comprehensive income
    142,350       219,209  
Common stock subscribed
    1,498,874       1,448,250  
Contingent holdback
    2,000       2,000  
Accumulated deficit
    (33,043,196 )     (31,152,800 )
Total shareholders' deficit
    (3,949,798 )     (3,531,948 )
Total liabilities & shareholders' deficit
  $ 5,041,017     $ 3,662,187  
 
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, 2011 AND MARCH 31, 2010
 
   
For the three
months ended
   
For the three
months ended
 
   
3/31/2011
   
3/31/2010
 
Revenues
           
Gross revenue from sales
  $ 25,142     $ -  
Gross revenues from oil and gas sales
    35,117       -  
Cost of sales
    (38,902 )     -  
Well operation costs
    (43,109 )     -  
Gross Margin
    (21,752 )     -  
                 
General and administrative expenses:
               
General administration
    (300,685 )     (718,078 )
Total general & administrative expenses
    (300,685 )     (718,078 )
Net loss from operations
    (322,437 )     (718,078 )
Other revenues and expenses:
               
Interest expense
    (118,735 )     (110,014 )
Gain (Loss) on settlement of debt
    (666,637 )     -  
Gain (Loss) on retirement of debt
    -       (34,246 )
Gain (Loss) on asset disposal
    31,970       -  
Gain (Loss) on derivatives
    (211,672 )     68,801  
Net loss before provision for income taxes
    (1,287,511 )     (793,537 )
Provision for income taxes
    -       -  
Loss from continuing operations
    (1,287,511 )     (793,537 )
Loss from discontinued operations net of tax
    (602,885 )     (336,992 )
                 
Net loss
  $ (1,890,396 )   $ (1,130,529 )
                 
Foreign currency translation
    (76,859 )     (67,279 )
Net comprehensive loss
    (1,813,537 )     (1,063,250 )
Basic and diluted net loss per common share:
               
Basic and diluted loss per common share from continuing operations
  $ (0.01 )   $ (0.02 )
                 
Basic and diluted loss per common share from discontinued operations
    (0.00 )     (0.01 )
Basic and diluted net loss per common share
  $ (0.01 )   $ (0.02 )
Weighted average of common shares outstanding:
               
Basic and fully diluted
    172,965,665       66,849,412  
 
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, 2011 AND MARCH 31, 2010
  
 
   
For the three
months ended
   
For the three
months ended
 
   
3/31/2011
   
3/31/2010
 
Operating Activities:
           
Net income (loss)
  $ (1,890,396 )   $ (1,063,250 )
Adjustments to reconcile net loss items not requiring the use of cash:
               
Gain on disposal of fixed assets
    -       (1,673 )
Accretion of asset retirement obligation
    324       -  
Common shares issued for services
    20,118       287,950  
Promissory notes issued for services
    60,000       -  
Loss on disposition of SATCO
    586,924       -  
Gain on issuance of common shares to shareholders of Terra Telecom, Inc.
    (31,970 )     -  
Bad debt expense
    100,000       -  
Loss on change in derivative
    211,672       41,850  
Loss on settlement of debt
    666,040       278,737  
Depletion
    16,366       -  
Depreciation
    19,683       9,525  
Amortization of intangibles
    29,249       17,385  
Amortization of debt discount
    297,335       (26,565 )
Changes in other operating assets and liabilities:  
               
Accounts receivable
    87,822       254,723  
Inventory
    11,493       7,456  
Accounts payable and accrued expenses
    (229,119 )     (51,708 )
Accounts payable and accrued expenses - related party
    40,670       -  
Prepaid expenses
    (64 )     (3,200 )
Net cash used by operations
    (3,853 )     (248,770 )
Investing Activities:        
               
Cash acquired in acquisition of Arctic Solar Engineering
    538       -  
Net cash used by investing activities
    538       -  
Financing Activities:
               
Proceeds  from the sale of stock
    -       70,004  
Principal payments on debt
    -       (1,039,438 )
Borrowings on debt
    84,292       1,268,471  
Net cash provided by financing activities
    84,292       299,037  
                 
Foreign currency translation
    76,859       67,279  
Net increase (decrease) in cash during the period
  $ 4,118     $ (17,012 )
Cash balance at January 1st
    9,930       17,625  
Cash balance at  March 31st
  $ 14,048     $ 613  
                 
Supplemental disclosures of cash flow information:
               
Interest paid during the year
  $ 3,153     $ -  
Income taxes paid during the year
    -       -  
Non-cash activities:
               
Common stock issued for:
               
Debt conversion
    85,926       542,481  
Terra Telecom, Inc.
    18,000       -  
Debt settlement
    727,492       -  
Preferred shares subscribed to acquire oil and gas lease
    3,736,387       -  
Accounts payable converted to promissory notes
    385,581       -  
Adjustment to asset retirement obligation
    8,051       -  
Beneficial conversion feature
    267,865       -  
  
See the notes to the unaudited consolidated financial statements.
 
 
5

 
 
EGPI FIRECREEK, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2011
 
                                        Other    
Common
             
   
Preferred
   
Preferred
   
Common
   
Common
   
Paid in
   
Accumulated
   
Comprehensive
   
Stock
             
   
Shares
   
Value
   
Shares
   
Value
   
Capital
   
Deficit
   
Loss
   
Subscribed
   
Other
   
Total
 
Balance at December 31,2010 
    14,286       14       51,915,344       51,915       25,899,464       (31,152,800 )     219,209       1,448,250       2,000       (3,531,948 )
                                                                                 
Issued common shares for services
                    2,928,571       2,929       22,793                       (10,626             15,096  
Issued common shares for settlement of debt
                    328,138,446       328,137       1,040,445                       24,950               1,393,532  
Issued common shares for conversion of debt
                    98,597,222       98,599       (17,174 )                     4,500               85,925  
Acquisition of  Arctic Solar Engineering, Inc.
                                                            49,800               49,800  
Common shares issued to shareholders of Terra Telecom, Inc.
                    1,221,343       1,221       21,831                       (18,000 )             5,052  
Other comprehensive loss
                                                    (76,859 )                     (76,859 )
Net loss for the three months ended
                                            (1,890,396 )                             (1,890,396 )
Balance at March 31, 2011
    14,286     $ 14       482,800,926     $ 482, 801     $ 26,967,359     $ (33,043,196 )   $ 142,350     $ 1,498,874     $ 2,000     $ (3,949,798 )
 
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, 2011 AND MARCH 31, 2010
 
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.
 
 
7

 
 
On October 18, 2010, the Company filed a Certificate of Amendment to its Articles of Incorporation, increasing its authorized common stock, par value $0.001 per share, to 3,000,000,000 from 1,300,000,000 and is authorized to issue 60,000,000 shares of preferred stock that has a par value of $0.001 per share.
 
On November 9, 2010, the Company affected a 1 share for 50 shares reverse split of its common stock and all amounts have been retroactively adjusted for all periods presented.
 
On February 4, 2011, the Company entered into an Agreement to acquire all 100% of Arctic Solar Engineering LLC, a Missouri limited liability company located at PO Box 4391, Chesterfield, MO 63006 and the owners of Membership Interests of the Arctic Solar Engineering LLC; The FATM Partnership, a Missouri Partnership, The Frederic Sussman Living Trust. Arctic Solar Engineering, LLC, is an integrator of Solar Thermal Energy technology. For further information please see our Current Report on Form 8-K filed on February 10, 2011, and in the section on “The Business”, and “Overview” to the Management Discussion and Analysis sections, and elsewhere listed in this document.
 
On March 2, 2011 the Company obtained a consent from the majority shareholders of the Company to amend the Articles of Incorporation to i) authorize the issuance of 2,500 shares of a new D Series Preferred Stock, and ii) for the Board of Directors to be able to authorize any and all capitalization of the Company going forward without the need for shareholder approval, and further authorized for the Board of Directors to set all rights, preferences, and designations, for and in behalf of any class of the Company’s common of preferred stock, and as may be required or as necessary in the best interest of the Company.
 
On March 14, 2011, the Company entered into and completed the closing of a Stock Purchase Agreement involving the sale of South Atlantic Traffic Corporation to Distressed Asset Acquisitions, Inc. For further information please see our Current Report on Form 8-K filed on March 18, 2011 and in the section on “The Business”, and “Overview” to the Management Discussion and Analysis sections, and elsewhere listed in this document.
 
On March 14, 2011, the Company entered into and completed the closing of a Stock Purchase Agreement involving the sale of Oklahoma Telecom Holdings, Inc. an Oklahoma corporation, formerly known as Terra Telecom, LLC., an Oklahoma limited liability company, 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 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.
 
Consolidation - the accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.  All significant inter-company balances have been eliminated.
 
The financial information included in this quarterly report should be read in conjunction with the consolidated financial statements and related notes thereto in our Form 10-K for the year ended December 31, 2010.
 
Use of Estimates - The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make reasonable estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses at the date of the consolidated financial statements and for the period they include.  Actual results may differ from these estimates.
 
Revenue and Cost Recognition-
 
 
Oil and gas:  Revenue is recognized from oil and gas sales in the period of delivery.  Settlement on sales occurs anywhere from two weeks to two months after the delivery date.  The Company recognizes revenue when an arrangement exists, the product has been delivered, the sales price is fixed or determinable, and collectability is reasonably assured.
 
 
Oilfield services:  Revenue from services is recognized when an arrangement exists, the services are rendered, the sales price is fixed or determinable, and collectability is reasonably assured.
 
The Company records commission revenue, usually 3% of the amount invoiced, based on contracts with suppliers, once the purchase order is placed with the supplier and the customer is invoiced.  The Company, in turn, sends an invoice to the supplier for 3% of the total order amount.  Commission sales are specialty orders drop-shipped from the manufacturer.  Accordingly, all sales are final upon delivery to the customer under the terms of the sales order.
 
Cash Equivalents -The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents. There were no cash equivalents as of March 31, 2011 or December 31, 2010.
 
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 $0 at March 31, 2011 and $207,983 at December 31, 2010.
 
 
8

 
 
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, 2011 and December 31, 2010, the ARO of $13,743 and $5,368 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, 2011 on a recurring and non-recurring basis:
 
                     
Gains
 
Description
 
Level 1
   
Level 2
   
Level 3
   
(Losses)
 
Intangibles (non-recurring)
 
$
-
   
$
-
   
$
369,135
   
$
-
 
Goodwill (non-recurring)
 
$
-
   
$
-
   
$
22,119
   
$
-
 
Derivatives (recurring)
 
$
-
   
$
-
   
$
871,015
   
$
-
 
 
The Company has goodwill and intangible assets as a result of the 2011 business combinations discussed throughout this form 10-Q. These assets were valued with the assistance of a valuation consultant and consisted of level 3 valuation techniques.
 
The following table presents assets and liabilities that are measured and recognized at fair value as of December 31, 2010 on a recurring and non-recurring basis:
 
                     
Gains
 
Description
 
Level 1
   
Level 2
   
Level 3
   
(Losses)
 
Intangibles (non-recurring)
 
$
-
   
$
-
   
$
824,000
   
$
-
 
Goodwill (non-recurring)
 
$
-
   
$
-
   
$
2,001,840
   
$
-
 
Derivatives (recurring)
 
$
-
   
$
-
   
$
823,846
   
$
-
 
 
The Company has derivative liabilities as a result of 2010 convertible promissory notes that include embedded derivatives.  These liabilities were valued with the assistance of a valuation consultant and consisted of level 3 valuation techniques.
 
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and long-term debt. The estimated fair value of cash, accounts receivable, accounts payable and accrued liabilities approximate their carrying amounts due to the short-term nature of these instruments. The carrying value of long-term debt also approximates fair value since their terms are similar to those in the lending market for comparable loans with comparable risks. None of these instruments are held for trading purposes.
 
Fixed Assets - Fixed assets are stated at cost. Depreciation expense is computed using the straight-line method over the estimated useful life of the asset. The following is a summary of the estimated useful lives used in computing depreciation expense:
 
Office equipment
3 years
Computer hardware & software
3 years
Improvements & furniture
5 years
Well equipment
7 years
 
 
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.  
 
As of March 31, 2011 and 2010, amortizable intangible assets consist of trade names and customer contracts.  These intangibles are being amortized on a straight-line basis over their estimated useful lives of 12 and 10 years, respectively. For the three months ending March 31, 2011 the Company recorded amortization of our intangibles of 29,249, and amortization of $17,385 for the three months ending March 31, 2010.  Note 15 includes the balances of all intangibles as of December 31, 2010 and March 31, 2011.  The useful lives pertaining to the intangible assets amortized are as follows:
 
Intagibles acquired in Arctic Solar Engineering, Inc.
   
Useful life
 
Patents
  5  
Customer Base
  5  
Trademarks
  5  
Non-Compete
  3  
 
Intangibles disposed of pertaining to SATCO
   
Useful life
 
Tradename
  12  
Customer Relationships
  10  
 
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.
 
 
11

 
 
Income taxes - The Company accounts for income taxes using the asset and liability method, which requires the establishment of deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  A valuation allowance is provided to the extent deferred tax assets may not be recoverable after consideration of the future reversal of deferred tax liabilities, tax planning strategies, and projected future taxable income.
 
The Company uses a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance requires the Company to recognize tax benefits only for tax positions that are more likely than not to be sustained upon examination by tax authorities.  The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement.  A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in our tax returns that do not meet these recognition and measurement standards.
 
Derivative Financial Instruments -The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Derivative financial instruments are initially measured at their fair value. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re−valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option−based derivative financial instruments, the Company uses the Black−Scholes model to value the derivative instruments. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non−current based on whether or not net−cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
 
Recently Adopted and Recently Enacted Accounting Pronouncements
 
In January 2010, the FASB issued FASB ASU No. 2010-06, “Improving Disclosures about Fair Value Measurements,” which is now codified under FASB ASC Topic 820, “Fair Value Measurements and Disclosures.” This ASU will require additional disclosures regarding transfers in and out of Levels 1 and 2 of the fair value hierarchy, as well as a reconciliation of activity in Level 3 on a gross basis (rather than as one net number). The ASU also provides clarification on disclosures about the level of disaggregation for each class of assets and liabilities and on disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. FASB ASU No. 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the disclosures requiring a reconciliation of activity in Level 3. Those disclosures will be effective for interim and annual periods beginning after December 15, 2010. The adoption of the portion of this ASU effective after December 15, 2009, as well as the portion of the ASU effective after December 15, 2010, did not have an impact on our consolidated financial position, results of operations or cash flows.
 
In April 2010, the FASB issued FASB ASU No. 2010-17, “Milestone Method of Revenue Recognition,” which is now codified under FASB ASC Topic 605, “Revenue Recognition.” This ASU provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research and development transactions. Consideration which is contingent upon achievement of a milestone in its entirety can be recognized as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. A milestone should be considered substantive in its entirety, and an individual milestone may not be bifurcated. An arrangement may include more than one milestone, and each milestone should be evaluated individually to determine if it is substantive. FASB ASU No. 2010-17 was effective on a prospective basis for milestones achieved in fiscal years (and interim periods within those years) beginning on or after June 15, 2010, with early adoption permitted.
 
If an entity elects early adoption, and the period of adoption is not the beginning of its fiscal year, the entity should apply this ASU retrospectively from the beginning of the year of adoption. This ASU did not have any effect on the timing of revenue recognition and our consolidated results of operations or cash flows.
 
In December 2010, the FASB issued FASB ASU No. 2010-28, “When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts,” which is now codified under FASB ASC Topic 350, “Intangibles — Goodwill and Other.” This ASU provides amendments to Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not a goodwill impairment exists. When determining whether it is more likely than not an impairment exists, an entity should consider whether there are any adverse qualitative factors, such as a significant deterioration in market conditions, indicating an impairment may exist. FASB ASU No. 2010-28 is effective for fiscal years (and interim periods within those years) beginning after December 15, 2010. Early adoption is not permitted. Upon adoption of the amendments, an entity with reporting units having carrying amounts which are zero or negative is required to assess whether is it more likely than not the reporting units’ goodwill is impaired. If the entity determines impairment exists, the entity must perform Step 2 of the goodwill impairment test for that reporting unit or units. Step 2 involves allocating the fair value of the reporting unit to each asset and liability, with the excess being implied goodwill. An impairment loss results if the amount of recorded goodwill exceeds the implied goodwill. Any resulting goodwill impairment should be recorded as a cumulative-effect adjustment to beginning retained earnings in the period of adoption. This ASU is did not have an impact on our consolidated financial position, results of operations or cash flows.
 
 
12

 
 
2. Going Concern
 
The accompanying consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business.  The accompanying consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern.  The Company has experienced substantial losses, maintains a negative working capital and capital deficits, which raise substantial doubt about the Company's ability to continue as a going concern.  
 
 The Company is working to manage its current liabilities while it continues to make changes in operations to improve its cash flow and liquidity position. The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon the Company’s ability to generate revenue from the sale of its services and the cooperation of the Company’s note holders to assist with obtaining working capital to meet operating costs in addition to our ability to raise funds.
 
3. Common Stock Transactions
 
During the three months ended March 31, 2011, the Company issued 2,928,571 shares of common stock for services that were expensed in the current year in the amount of $25,722 and in the prior year of $10,626.  The value of the shares expensed in the prior year reduced the amount of common stock subscribed by $10,626 in the current period.  All shares issued were valued based upon the closing price of the Company’s common stock at the date of grant.
 
During the three months ended March 31, 2011, the Company issued 328,138,446 shares of common stock valued at $1,368,582 and recorded a common stock subscription in the amount of $24,950 to extinguish debt of $727,492 resulting in a loss on extinguishment of debt of $666,040 based upon the closing price of the Company’s common stock at the grant date less the carrying value of the debt that was exchanged.
 
During the three months ended March 31, 2011, the Company issued 98,597,222 shares of common stock valued at $81,425 and recorded a common stock subscription in the amount of $4,500 to convert debt of $85,925 resulting in no loss on extinguishment.  The stock was valued based upon the conversion terms in the convertible promissory notes.
 
During the three months ended March 31, 2011, the Company granted 6,000,000 shares of common stock as payment to acquire Arctic Solar Engineering, LLC.  The fair value of these shares was recorded based on the closing price of the Company’s common stock on the date of closing, resulting in a value of $49,800.  As of March 31, 2011, these shares have not been issued and are recorded in common stock subscribed.
 
During the three months ended March 31, 2011, the Company issued 1,221,343 shares of common stock valued at $23,052.  A portion of these shares, 6,000,000, was granted in the prior period and recorded in common stock subscribed in the amount of $18,000.  The remaining portion was granted in the three months ended March 31, 2011.  The stock was valued based upon the closing price of the Company’s common stock at the grant date.
 
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 issuable Series D preferred stock, 2.5 million shares shall be 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.  The 2,500 shares were authorized to purchase an interest in a producing oil and gas property.   The preferred stock was valued at fair value based on the use of a multinomial lattice model with computed the following assumptions: annual volatility at 238%, 20% of default at maturity, and the holder would convert at 1.5 times the conversion price decreasing as it approaches maturity.  The total fair value of these preferred shares was computed to be $3,736,377.
 
 
13

 
 
5. Fixed Assets
 
The following is a detailed list of fixed assets:
 
   
31-Mar-11
   
31-Dec-10
 
Property and Equipment
 
$715,132
   
$ 601,470
 
Accumulated depreciation
   
(57,968
)
   
(38,278
                 
Fixed assets- net
 
$
657,164
   
$
563,192
 
 
6.  Options & Warrants Outstanding
 
 All options and warrants granted are recorded at fair value using a Black-Scholes model at the date of the grant.   There is no formal stock option plan for employees.
 
A listing of options and warrants outstanding at March 31, 2011 is as follows.  Option and warrants outstanding and their attendant exercise prices have been adjusted for the 1 for 200 reverse split and the 1 for 50 reverse split of the common stock discussed in Note 1.
 
   
   
Amount
   
   
Weighted Average Exercise Price
   
   
Weighted Average Years to Maturity
   
Outstanding at December 31, 2010
   
649,262
   
$
11.197329
     
1.87
 
                         
Issued
   
4,308,856
                 
Exercised
   
0
                 
Expired
   
0
                 
                         
Outstanding at March 31, 2011
   
4,958,118
   
$
1.466282
     
1.914
 
 
The changes in the number of warrants issued above is due to two identical consulting contracts.  Each agreement allows the Holder of the warrant to be able to purchase .5% of the Company’s common stock.  The number of warrants to be issued under this agreement is increased each period and included in the derivative liability due to the fact that the derivative is caused by an indeterminate number of shares issuable upon conversion of certain convertible promissory notes.  There was an increase of 4,308,856 in shares to be issued under this warrant during the three months ended March 31, 2011.  As of December 31, 2010, 519,262 shares were issuable under these warrant contracts.  The warrants expire two and one half (2.5) years from the date of vesting.  The agreements also cap the total of the fair market value of the shares to be given at $150,000 per consulting firm, for a total cap of $300,000.  The value of these warrants are included in the derivative liability at March 31, 2011 and December 31, 2010.
 
 7. Arctic Solar Engineering LLC (ASE)
 
2011
 
 
i) 
On February 4, 2011, the Company entered into a stock exchange and purchase agreement between Arctic Solar Engineering, LLC, FATM Partnership, and Fredrick Sussman Living Trust, (the “Sellers”) and EGPI Firecreek, Inc. (the “Purchaser”).  The Sellers exchanged 100 % of their ownership interests in the three (3) selling entities for 6,000,000 shares of our restricted common stock.  In addition, the Purchase Agreement  contains   an “Earn-out Provision “  which requires cash and/or stock payments based on financial performance over a period of 36 months. In each twelve (12) month period, the Sellers are entitled to 50% of the Company’s audited net income after taxes; payable in 50% cash and 50% restricted common stock, ten (10) days after the filing of the annual audited report.  This stock Earn-out consideration will be valued at 90 % of the last trade price on the filing date for the calendar year of operations
 
The Agreement calls for the following material terms:
 
In addition to the Purchase Price, the Sellers shall, for a period of thirty-six (36) months following the Closing Date (the "EARN-OUT TERM"), be entitled to receive payment in the form of cash and additional shares of Restricted Common Stock (the “Earn-out Provision” or “Earn-out”) based upon the financial performance of the Company set forth below:
 
 
(a) 
The Earn-out Provision will be based on the audited Net Income After Tax of the Company.
 
 
(b)
For each twelve month period during the Earn-out Term, the Sellers will be entitled to Fifty Percent (“50%”) of the Company’s Net Income After Tax payable half in Cash (the “Cash Earn-out Consideration”) and half in Restricted Common Stock of the Purchaser (the “Stock Earn-out Consideration”) Ten (“10”) Days after the filing date of the Purchaser’s audited annual report.
 
 
14

 
 
A breakdown of the purchase price for Arctic Solar Engineering, Inc. is as follows:
 
Common stock subscribed
$
49,800
 
         
Final Purchase Price Allocation:
       
         
Cash
 
$
538
 
Accounts receivable
   
131,660
 
Inventory
   
30,627
 
Fixed assets - net
   
337
 
Other assets
   
3
 
Patents/IP/Technology
 
135,000
 
Customer base
   
76,000
 
Trade-name/Marks
   
151,000
 
Non-compete
   
19,000
 
Goodwill
   
22,119
 
Liabilities assumed
   
(516,484)
 
   
$
49,800
 
 
The following pro-forma assumes the acquisition of Arctic Solar Engineering, Inc. occurred as of the beginning of the period presented as if it would have been reported for the period below.
 
   
Historic
   
Pro Forma
 
   
EGPI Firecreek, Inc.
Twelve Months
Ended
December 31,
2010
   
Arctic Solar
Engineering
Twelve Months
Ended
December 31,
2010
   
Adjustments
     
Combined
 
ASSETS
                         
Current assets
                         
Cash and cash equivalents
  $ 9,272     $ 988             $ 10,260  
Accounts receivable, net
    14,835       131,660               146,495  
Prepaid expenses
    5,900       -               5,900  
Other receivables
    -       -               -  
Inventory
            30,627               30,627  
Current assets held for sale
                               
Cash
    658       -               658  
Accounts receivable
    111,568       -               111,568  
Inventory
    -       -               -  
Prepaid expenses
    3,165       -               3,165  
Total current assets held for sale
    115,391       -       -         115,391  
Total current assets
    145,398       163,275       -         252,868  
                                   
 Other assets:
                                 
Investment in Terra Telecom, Inc.
    18,000       -                 18,000  
Fixed assets – net
    568,560       337                 568,897  
Oil and natural gas properties – proved reserves
    163,500       -                 163,500  
                                   
Other assets held for sale
                                 
Intangible Assets – net of amortization
    743,420       -                 743,420  
Goodwill
    2,001,840       -       380,221   A     2,382,061  
Fixed assets - net
    21,469       -                 21,469  
Total other assets
    3,516,789       337       380,221         3,897,347  
TOTAL ASSETS
  $ 3,662,187     $ 163,612     $ 380,221       $ 4,206,020  
                                   
LIABILITIES AND SHAREHOLDERS' DEFICIT
                                 
Current liabilities:
                                 
Accounts payable & accrued expenses
  $ 558,489     $ 269,033               $ 827,522  
Notes payable
    3,307,224       -                 3,307,224  
Line of credit
    -       36,000                 36,000  
Convertible notes, net of discount
    44,490       -                 44,490  
Capital lease obligation
    56,872       -                 56,872  
Advances & notes payable - related parties
    188,718       -                 188,718  
Derivative Liabilities
    823,846       -                 823,846  
Asset retirement obligation
    5,368       -                 5,368  
Current liabilities associated with assets held for sale
                              -  
Accounts payable & accrued expenses
    2,209,128       -                 2,209,128  
Advances & notes payable - related parties
    -       -                 -  
Total current liabilities
    7,194,135       305,033       -         7,499,168  
                                   
Long-term liabilities:
                                 
Notes payable
    -       189,000                 189,000  
Total long-term liabilities
    -       189,000       -         189,000  
                                   
Shareholders equity
                                 
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; 14,286 shares outstanding at December 31, 2010
    14                         14  
Common stock - $0.001 par value, authorized 3,000,000,000 shares, issued and outstanding, 51,915,345 at December 31, 2010
    51,915       1,000       5,300   A,B,C     58,215  
Additional paid in capital
    25,899,464       105,003       (59,013 ) A,B,C     25,945,454  
Other comprehensive income
    219,209                         219,209  
Common stock subscribed
    1,448,250                         1,448,250  
Contingent holdback
    2,000                         2,000  
Accumulated deficit
    (31,152,800 )     (436,424 )     433,934   B,C     (31,155,290 )
Total shareholders' deficit
    (3,531,948 )     (330,421 )     380,221         (3,482,148 )
                                   
Total Liabilities & Shareholders' Deficit
  $ 3,662,187     $ 163,612     $ 380,221       $ 4,206,020  
 
Pro Forma Adjustments:
 
 
A: Represents the 6,000,000 shares of restricted common stock (par value $0.001; market value at acquisition date of $0.0083) issued for the acquisition of Arctic Solar Engineering, LLC pursuant to security exchange and purchase agreement.
 
B: Represents elimination entry of acquired subsidiary's equity accounts during consolidation
 
C: Represents 5% fee of the 6,000,000 shares of restricted common stock issued pursuant to security exchange and purchase agreement owed to Source Capital Group, Inc. (300,000 shares with par value of $0.001 and market value at acquisition date of $0.0083)
 
 
15

 
 
   
Historic
   
Pro Forma
 
   
EGPI Firecreek, Inc.
Three Months
Ending
March 31, 2011
   
Arctic Solar
Engineering
Three Months
Ending
March 31, 2011
   
Adjustments
   
Combined
 
Revenues
                       
Gross revenues from sales
  $ 35,117     $ 25,142     $ -     $ 60,259  
Costs of goods sold
    43,109       51,160               94,269  
Total revenue from services rendered
    (7,992 )     (26,018 )     -       (34,010 )
                                 
General and administrative expenses:
                               
General administration
    197,179       113,720               310,899  
 Total general & administrative expenses
    197,179       113,720       -       310,899  
                                 
Net loss from operations
    (205,171 )     (139,738 )     -       (344,909 )
                                 
Other revenues and expenses:
                               
Gain (loss) on asset disposal
    31,970       -               31,970  
Interest expense
    (116,001 )     (3,160 )             (119,161 )
Impairment of assets
    -       -               -  
Gain (Loss) on settlement of debt
    (666,637 )     -               (666,637 )
Gain (loss) on derivatives
    (211,672 )     -               (211,672 )
                                 
Net income (loss) before provision for income taxes
    (1,167,511 )     (142,898 )     -       (1,310,409 )
                                 
Provision for income taxes
    -       -       -       -  
                                 
Loss from continuing operations
    (1,167,511 )     (142,898 )     -       (1,310,409 )
                                 
Loss from discontinued operations net of tax
    (602,885 )                     (602,885 )
                                 
Net Loss
  $ (1,770,396 )   $ (142,898 )   $ -     $ (1,913,294 )
                                 
Other comprehensive income (loss)
                               
Gain (loss) from Foreign exchange translation
    76,859                       76,859  
Total comprehensive income (loss)
    (1,693,537 )     (142,898 )     -       (1,836,435 )
                                 
Basic & fully diluted net income (loss) per common share:
                         
Basic income (loss) per share- continuing operations
  $ (0.01 )                   $ (0.01 )
Basic income (loss) per share- discontinued operations
  $ (0.00 )                   $ (0.00 )
Basic income (loss) per share
  $ (0.01 )                   $ (0.01 )
                                 
Weighted average of common shares outstanding:
                               
Basic and diluted
    172,965,665                       172,965,665  
 
Per Share Information:
 
 
Basic and diluted net loss per share for the three months ended March 31, 2010 were computed using the historic weighted average shares of the Company's outstanding common stock, in addition to 6,000,000 shares issued for the former ASE owners as the result of the security exchange and purchase agreement between the Company and ASE.
 
 
16

 
 
   
Historic
   
Pro Forma
 
   
EGPI
Firecreek, Inc.
Three Months
Ending
March 31, 2010
   
Arctic Solar
Engineering
Three Months
Ending
March 31, 2010
   
Adjustments
   
Combined
 
Revenues
                       
Gross revenues from sales
  $ -     $ 190,683     $ -     $ 190,683  
Costs of goods sold
            167,295                  
Total revenue from services rendered
    -       23,388       -       190,683  
                                 
General and administrative expenses:
                               
General administration
    718,078       34,803               752,881  
Total general & administrative expenses
    718,078       34,803       -       752,881  
                                 
Net loss from operations
    (718,078 )     (11,415 )     -       (562,198 )
                                 
Other revenues and expenses:
                               
Gain (loss) on asset disposal
    -       -               -  
Interest expense
    (110,014 )     -               (110,014 )
Impairment of assets
    -       -               -  
Gain (loss) on settlement of debt
    (34,246 )     -               (34,246 )
Gain (loss) on derivatives
    68,801       -               68,801  
                                 
Net income (loss) before provision for income taxes
    (793,537 )     (11,415 )     -       (637,657 )
                                 
Provision for income taxes
    -       -       -       -  
                                 
Loss from continuing operations
    (793,537 )     (11,415 )     -       (637,657 )
                                 
Loss from discontinued operations net of tax
    (336,992 )     -               (336,992 )
                                 
Net Loss
  $ (1,130,529 )   $ (11,415 )   $ -     $ (974,649 )
                                 
Other comprehensive income (loss)
                               
Gain (loss) from Foreign exchange translation
    67,279       -               67,279  
Total comprehensive income (loss)
    (1,063,250 )     (11,415 )     -       (907,370 )
                                 
Basic & fully diluted net income (loss) per common share:
                         
Basic income (loss) per share- continuing operations
  $ (0.02 )                   $ (0.01 )
Basic income (loss) per share- discontinued operations
  $ (0.00 )                   $ (0.00 )
Basic income (loss) per share
  $ (0.02 )                   $ (0.01 )
                                 
Weighted average of common shares outstanding:
                               
Basic and diluted
    72,849,412                       78,849,412  
 
Per Share Information:
 
 
Basic and diluted net loss per share for the three months ended March 31, 2010 were computed using the historic weighted average shares of the Company's outstanding common stock, in addition to 6,000,000 shares issued for the former ASE owners as the result of the security exchange and purchase agreement between the Company and ASE.
 
 
17

 
 
8.  Acquisition of interest in oil and gas property
 
I. Acquisition of 75% Oil and Gas Working Interests in the J.B. Tubb Leasehold Estate/Amoco Crawar Field, Ward County, Texas
 
On March 1, 2011 the Company’s through its wholly owned subsidiary Energy Producers, Inc. (“EPI”) acquired all assets of Ginzoil Inc., (“GZI”) a wholly owned subsidiary of Dutchess Private Equities Fund, Ltd., (Investors”) as described in the preliminary Assignment and Bill of Sale and summarily as follows: Under the terms of the agreement, which shall be effective March 1, 2011, EPI acquired 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 8500 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. As consideration for the transaction the Company agreed to authorize and issue and sell to Investors 2,500 shares of a new, to be authorized, Series D preferred stock to Investors for one thousand dollars ($1,000) per share, or a total in the aggregate stated value of two million five hundred thousand ($2,500,000) dollars. The acquired leases and the property to which they relate are identified below:
 
North 40 acres: J.B. TUBB “18-1”, being the W1/2 of the NW1/4 of Section 18, Block B-20, Public School Lands, Ward County, Texas, containing Forty (North 40) acres only (also listed as Exhibit “A” to Exhibit 10.1 in our Current Report on Form 8-K filed on March 7, 2011, incorporated herein by reference.
 
Well-bore loated on South 40 acres: The Highland Production Company (Crawar) #2 well-bore, API No. 42-475-33611, located on the J.B. Tubb Lease in W ½ of the NW ¼ of Sec. 18, Block B-20, Public School Lands, Ward County, Texas at 1787 FNL and 853 FWL being on the South Forty (40) acres of the J. B. Tubb Lease, Ward County, Texas.
 
The following wells are located on the leases identified, above:
 
 
1. 
Crawar #1
 
 
2. 
Tubb #18-1
 
 
3. 
Highland Production Company(Crawar) #2 well-bore only, with depth of ownership 4700’ to 4900’ft. in well bore, described as: The Highland Production Company (Crawar) #2 well-bore, API No. 42-475-33611, located on the J.B. Tubb Lease in W ½ of the NW ¼ of Sec. 18, Block B-20, Public School Lands, Ward County, Texas at 1787 FNL and 853 FWL being on the South Forty (40) acres of the J. B. Tubb Lease, Ward County, Texas.
 
Pursuant to the SPA each share of Series D Preferred Stock shall be convertible, at the sole option of the Investor or holder thereof, into share(s) of the Corporation’s Common Stock (“Conversion Shares”). The Conversion Formula at the time of any noticed and converted shall mean that the number of Conversion Shares (common stock) to be received by the holder of Series D Preferred Stock in exchange for each share of Series D Preferred Stock that such holder intends to convert pursuant to this provision, where such number of Conversion Shares shall be equal to the greater of the number calculated by dividing the Purchase Commitment per share ($1000) by i) .003 per share, ii) one hundred and ten percent (110%) of the lowest VWAP for the three (3) days immediately preceding a Conversion Date. The Company has agreed to keep a sufficient number of its common shares on hand for future conversions as listed in Section 1 of the SPA.  The preferred stock was valued at fair value based on the use of a multinomial lattice model with computed the following assumptions: annual volatility at 238%, 20% of default at maturity, and the holder would convert at 1.5 times the conversion price decreasing as it approaches maturity.  The total fair value of these preferred shares was computed to be $3,736,377.
 
 
18

 
 
Listing for the Equipment items related to the wells on the leases on the J.B. Tubb Leasehold Estate (RRC #33611) Amoco/ Crawar field are as follows:
 
The following is the current & present equipment list that Energy Producers Inc. will acquire 75% ownership rights, on the J.B. Tubb property: 2 (Two) 500 barrels metal tanks, 1(One) 500 barrel cement salt water tank- (open top), 1 (One) heater treater/oil & gas separator, all flow lines, on the north forty acres, well-heads, 2 (two) Christmas tree valve systems on well-heads, 3 (Three) well heads, three wells (well-bores). Model 320D Pumpjack Serial No. E98371M/456604, One (1) Fiberglass lined heater-treater,  One (1) Test pot,  Tubing string Rods and down hole pump.
 
*Success Oil Co., Inc. of California, and Texas Operator, visually inspected the equipment on the J.B. Tubb property RRC #33611 for the 75% Working Interests held by Energy Producers, Inc., wholly owned subsidiary of EGPI Firecreek, Inc. Based on Success Oil Co.s determination of market value we determined the following allocations of the $2,500,000 purchase price paid based on our corresponding 75% working interests held by Energy Producers, Inc., :
 
Allocation of Purchase Price for J.B. Tubb Leasehold Estate Working and Corresponding Net Revenue Interests, Amoco/Crawar Field, Ward County, Texas.
 
Well leases
 
$
3,623,062
 
Well property and equipment
   
113,325
 
   
$
3,736,387
 
 
Oil and Gas Properties:
 
 
 
31-Mar-11
   
31-Dec-10
 
Oil and gas properties – proved reserves
   
3,786,562
     
163,500
 
Accumulated depletion
   
(16,246
)
   
-
 
                 
Oil and gas properties - net
 
$
3,770,316
   
$
163,500
 
 
9.  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.
 
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.
 
10. Income Tax Provision
 
Deferred income tax assets and liabilities consist of the following at March 31, 2011:
 
Deferred Tax asset
 
$
661,638
 
Valuation allowance
   
(661,638
)
Net deferred tax assets
   
0
 
 
The Company estimates that it has an NOL carryfoward of approximately $8,587,063 that begins to expire in 2027.
 
After evaluating any potential tax consequence from our former subsidiary and our own potential tax uncertainties, the Company has determined that there are no material uncertain tax positions that have a greater than 50% likelihood of reversal if the Company were to be audited. The Company believes that it is current with all payroll and other statutory taxes. Our tax return for the years ended December 31, 2003 to December 31, 2010 may be subject to IRS audit.
 
11.  Related Party Transactions
 
Through May 31, 2009 the Secretary of EGPI Firecreek, Inc provided office space for the Company’s Scottsdale office free of charge.  June 1, 2009 Energy Producers, Inc, a 100% owned subsidiary of the Company entered into a month to month lease for the same office space at a rate of $1,400 per month.  There remains an unpaid balance of $800 at March 31, 2011.
 
 
19

 
 
In addition Energy Producers Inc. also has an Administrative Service Agreement with Melvena Alexander, CPA , which is 100% owned by Melvena Alexander, officer and shareholder of the Company, to provide services to the Company.  The agreement is an open-ended, annually renewable contract for payments of $4,600 per month.  The contract is currently in force with a balance due of $25,270 at March 31, 2011.
 
The Company had a Service Agreement with Global Media Network USA, Inc. a company 100% owned By Dennis Alexander, to provide the services of Dennis Alexander to the Company.  The contract terminated May 31, 2009 and there is an outstanding balance of $500 at March 31, 2011.
 
The above referenced contract was superseded by a month-to-month contract between Energy Producers, Inc., a 100% owned subsidiary of the Company, and Dennis Alexander, an officer and director of the Company, at a monthly payment of $15,000.  There was a balance due on this contract of $199,200 at March 31, 2011.
 
The Company had a Service Agreement with Tirion Group, Inc., which was owned by Rupert C. Johnson, a former director of the Company.  The contract was terminated in 2007 and Mr. Johnson severed his connection to the Company in 2008.  However, there is unpaid balance of $43,000 remaining at March 31, 2011.
 
During 2010, Robert Miller, a director of the Company, made unsecured, non-interest bearing advances to M3 Lighting, Inc. a 100% owned subsidiary of the Company, for working capital of $3,588 which remains unpaid at March 31, 2011.
 
During 2010, unsecured, non-interest bearing advances for working capital were made to South Atlantic Traffic Corporation, a 100% owned subsidiary of the Company, by some of its officers and directors. These advances have not yet been repaid and at March 31, 2011 the following were owed:  Michael Kocan - $150,685;   Robert Miller - $10,000 and Bob Joyner - $21,700.
 
South Atlantic Traffic Corporation also paid monthly car allowances of $1,200 to its officers in 2010. Balances still owing at March 31, 2011 are $21,752 to Stewart Hall, Vice President and $31,123 to Bob Joyner, Chairman.
 
April 1, 2010 the Company signed a 9% unsecured note with Bob Joyner an officer and shareholder, for $27,000.  The note matures June 30, 2011, and the unpaid balance at March 31, 2011 was $21,700.
 
Chanwest Resourses, 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 $12,635 was still outstanding at March 31, 2011. Willoil Consulting, LLC also gave unsecured non-interest bearing advances to Chanwest Resourses, Inc. of $15,092.  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, 2011.  The Company as accrued $11,180 due to Willoil Consulting, LLC as of March 31, 2011.
 
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, 2011, no payments were made to SPC, with a balance payable due in the amount of approximately $82,058.
 
During the three months ended March 31, 2011, the Company acquired Arctic Solar Engineering, Inc. and a $5,000 promissory note due to Fred Sussman, who remains an officer of Arctic Solar Engineering, Inc. after the acquisition.
 
During the three months ended March 31, 2011, the Company acquire Arctic Solar Engineering, Inc. and a $22,409 accounts payable due to Makaritos.
 
 
20

 
 
12. Notes Payable
 
At March 31, 2011, 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 (%)
   
3/31/11 ($)
 
9/17/2009
    4  
9/17/2010
    12     $ 11,350  
5/29/2009
    4  
9/17/2010
    12 *     26,654  
9/17/2009
    4  
9/17/2010
    18 *     3,303  
11/4/2009
    11  
11/4/2012
    9       98,391  
11/4/2009
    11  
11/4/2012
    9       98,391  
11/4/2009
    11  
11/4/2012
    9       98,391  
5/30/2010
    2  
12/31/2011
    8       766,590  
3/1/2010
    9  
See footnote 10
    0       187,333  
4/1/2010
    3  
6/30/2011
    9       21,700  
7/26/2010
    5  
7/26/2012
    10       131,074  
8/10/2010
    6  
8/10/2012
    10       35,000  
1/20/2011
    7  
10/24/2011
    8       32,500  
12/1/2010
    8  
9/3/2011
    9       40,000  
8/3/2010
    1  
8/3/2012
    9       153,046  
2/18/2010
    3  
12/1/2010
    4