Non-Controlling Interest and Variable Interest Entities

3 Months Ended

Mar. 31, 2024

NON-CONTROLLING INTEREST AND VARIABLE INTEREST ENTITIES

Note 5 – NON-CONTROLLING INTEREST AND VARIABLE INTEREST ENTITIES

Grand Woods is accounted for as a consolidated VIE. The Company owns an 80.37% interest in Grand Woods in the form of 47.08 Class A units and 546,735 Class C units, with the remaining non-controlling interests held by other members, including 8.72% owned by executive officers of the Company. Grand Woods holds approximately 26.56 acres of undeveloped real estate in northeast Oklahoma City.

The Company is the only guarantor of $1,200,000 of a note payable held by Grand Woods. See Note 6 for terms and guaranty of debt held by Grand Woods, which is included in the consolidated balance sheets. As a result of the Company’s guaranty of $1,200,000 of Grand Woods debt, the note holder has partial recourse to the Company for the consolidated VIE’s liabilities.

TWS is accounted for as a consolidated VIE. The Company entered into a Joint Venture Agreement ("the Agreement") with TWS South, LLC, a Texas limited liability company, on March 19, 2021, to form a water well drilling company where the Company would provide funding for equipment and operations, with TWS South, LLC providing industry expertise for operations and securing customers in the central Texas region. Equipment and vehicles totaling $330,000 were purchased by the Company and operating cash of $70,000 was made available to begin operations. The Agreement provided that the Company receive all net profits until a total of $300,000 plus 1.2 times any additional funding was reached. Since the effective date of the Agreement, the Company has contributed $1,160,000 toward the joint venture with losses totaling $315,269 as of March 31, 2024.

Subsequent Event:

The Agreement states that if net profits received by the Company do not reach $300,000 plus 1.2 times any additional funding within twelve months of the effective date, the Company has the right to terminate the Agreement. The Agreement also states that TWS South, LLC would devote substantially all time and attention to this joint venture. Following the discovery that TWS South, LLC breached the Agreement by assuming ownership and operating another drilling company, the Company terminated the Agreement on April 19, 2024. The Company is in the initial stages of determining treatment of the assets, and is evaluating all available information to determine the impact of the termination of the Agreement on the consolidated financial statements.

As of March 31, 2024, TWS South, LLC assets consisted of a drilling rig, various equipment and vehicles with net book value of $296,687 and accounts receivable of $536,568. The Company has contractual rights to those assets, or the proceeds from the sale of the assets per the Agreement. Management has performed an assessment of the assets and did not identify any indicators of impairment which would suggest that the recorded value of the TWS assets were potentially impaired.

The following table presents the summarized assets and liabilities of Grand Woods and TWS included in the consolidated balance sheets as of March 31, 2024, and December 31, 2023. The assets of Grand Woods and TWS in the table below may only be used to settle obligations of Grand Woods or TWS, respectively.

The assets and liabilities in the table below include third party assets and liabilities only and exclude intercompany balances that eliminate in consolidation.


	March 31, 2024
	Grand Woods		TWS		Total
Assets:
Cash	$	69,276	$	56,283	$	125,559
Accounts Receivable	—		536,568		536,568
Total Current Assets	69,276		592,851		662,127
Other Investments (Land)	2,171,828		—		2,171,828
Other Property and Equipment, at Cost	—		483,934		483,934
Less – Accumulated Depreciation	—		(187,247)		(187,247)
Other Property and Equipment, Net	—		296,687		296,687
Total Assets	$	2,241,104	$	889,538	$	3,130,642

Liabilities:
Accounts Payable	$	—	$	44,807	$	44,807
Note Payable, Current Portion	143,704		—		143,704
Total Current Liabilities	143,704		44,807		188,511
Note Payable, Less Current Portion	1,122,104		—		1,122,104
Total Liabilities	$	1,265,808	$	44,807	$	1,310,615


	December 31, 2023
	Grand Woods		TWS		Total
Assets:
Cash	$	138,690	$	154,653	$	293,343
Accounts Receivable	—		640		640
Total Current Assets	138,690		155,293		293,983
Other Investments (Land)	2,171,828		—		2,171,828
Other Property and Equipment, at Cost	—		471,219		471,219
Less – Accumulated Depreciation	—		(168,274)		(168,274)
Other Property and Equipment, Net	—		302,945		302,945
Total Assets	$	2,310,518	$	458,238	$	2,768,756

Liabilities:
Accounts Payable	$	—	$	398	$	398
Note Payable, Current Portion	142,136		—		142,136
Total Current Liabilities	142,136		398		142,534
Note Payable, Less Current Portion	1,158,736		—		1,158,736
Total Liabilities	$	1,300,872	$	398	$	1,301,270