8. ASSET PURCHASES AND OIL & GAS PROPERTIES

9 Months Ended

Sep. 30, 2013

Extractive Industries [Abstract]

ASSET PURCHASES AND OIL & GAS PROPERTIES

On December 31, 2012, Tree Top and its new subsidiary, TTII Oil & Gas, Inc., a Delaware corporation, signed a binding asset purchase agreement with American Resource Technologies, Inc. (“ARUR”), a Kansas corporation, to acquire all of the assets of ARUR for a purchase price of $513,538, which was paid in the form of 466,853 shares of Tree Top’s common stock as described in the asset purchase agreement. The assets purchase from ARUR are as follows:

● 75% working interest in the Ownbey Oil & Gas leases in Chautauqua County Kansas, with associated equipment and oil field assets

● A 1 to 2 mile shut down natural gas pipeline located in Montgomery County Kansas

● Common Stock interest representing 25% of the common stock of Brasil Asset Management, Inc.

● Common Stock interest representing 25% of the common stock of Thor Geotrac.

● Common Stock interest representing 25% of the common stock of Ameribras Oklahoma.

● Account receivable from skyberCorp do Brasil (Ameribras) due1/1/2011 in the amount of $3,600,000

● Account receivable from Brasil Asset Management Projectos Limitada (BAMB) due 1/1/2012 in the amount of $3,600,000

● Promissory Note Receivable from Ameribras Energy, Inc, due 5/13/2010, in the amount of $100,000

● Promissory Note Receivable from Ameribras Energy, Inc, due 6/15/2010, in the amount of $100,000

● Promissory Note Receivable from Brasil Asset Management, Inc, due 3/26/2011, in the amount of $350,000

● Contract for Revenue with Brasil Asset Mangement, Inc. (BAMO), in the amount of $1,000,000 due and payable on or before 1/30/11.

● Gun sight patent acquired from Century Technologies, Inc.

Although no liabilities were assumed in the purchase agreement, a contingent liability is attached if the receivables are collected by the Company. The contingent liabilities are approximately $400,000. The Company has not recorded the liability because the event precipitating the liability has not occurred and is not likely to occur in the future and the fair value is zero.

The assets were purchased with the issuance of 466,853 shares and were valued at market value at the grant date as $513,538. The allocation of the purchase price is as follows:

75% working interest in Oil & Gas lease:	$	513,538
Recorded value		513,538

All accounts and notes receivable were deemed uncollectable due to the age and circumstances, and therefore were assessed no value in the asset purchase.  The equity ownerships were also deemed to be impaired due to the inactive nature of the entities, and were not allocated any value. The gun sight patent was also not readily assessable as to value and no purchase price was allocated to this asset.

Subsequent to the Company’s purchase of the assets and the termination of the operator, a mechanics lien was filed against the property claiming approximately $200,000 in fees  are due to the previous operator. The Company is aggressively defending the action, however at December 31, 2012, due to the lien and loss of title to the assets, the Company impaired the recorded cost, leaving no value associated with the acquisition. The Company recorded an impairment on long lived assets in the amount of $513,538.

Because of the mechanics lien which impaired the title to the Oil and Gas properties, the Company has not recorded any asset retirement obligations or assets related to this transaction.

During the nine months ended September 30, 2013, the company made application to the State of Kansas for recognition as a 75% working interest holder and was granted the right to continue oil production. It was determined that mechanic liens do not attach to the oil in the ground, or prevent the working interest holders from continuing operations. The Company, therefore, commenced the oil & gas operations once approval from the State was received.

During the nine months ended September 30, 2013, the Company hired an interim operator, mechanic and electrician to repair and maintain the oil & gas equipment on the Ownbey Lease. The operator was able to repair and maintain the equipment on 11 of the 13 wells, and on May 9, 2013, they were successful in getting 11 of the 13 wells operational and pumping oil. At September 30, 2013, the company had extracted 600 barrels of oil. The Company recorded oil & gas inventory and deferred revenue on their books to reflect the oil extracted not yet delivered.  The Company will have additional maintenance to perform on additional wells and water pumping systems, in order to bring all wells online.