Galenfeha, Inc.
CONSOLIDATED
STATEMENTS OF
OPERATIONS
(Unaudited)
|
|
Three Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
3,363
|
|
|
1,885
|
|
|
4,410
|
|
|
6,197
|
|
Payroll expenses
|
|
5,563
|
|
|
8,074
|
|
|
5,764
|
|
|
16,148
|
|
Professional fees
|
|
28,532
|
|
|
18,376
|
|
|
56,515
|
|
|
36,671
|
|
Total operating expenses
|
|
37,458
|
|
|
28,335
|
|
|
66,689
|
|
|
59,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
(37,458
|
)
|
|
(28,335
|
)
|
|
(66,689
|
)
|
|
(59,016
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
-
|
|
|
-
|
|
|
-
|
|
|
6
|
|
Royalty income
|
|
5,000
|
|
|
-
|
|
|
5,000
|
|
|
-
|
|
Miscellaneous income
|
|
7
|
|
|
2,682
|
|
|
939
|
|
|
2,682
|
|
Realized gain on sale of investments
|
|
1,804
|
|
|
-
|
|
|
1,804
|
|
|
-
|
|
Unrealized gain on trading securities
|
|
6,248
|
|
|
-
|
|
|
6,248
|
|
|
-
|
|
Interest expense
|
|
(6,463
|
)
|
|
(3,557
|
)
|
|
(6,463
|
)
|
|
(11,430
|
)
|
Loss on derivative instruments
|
|
-
|
|
|
(475,311
|
)
|
|
-
|
|
|
(648,891
|
)
|
Total other income (expense)
|
|
6,596
|
|
|
(476,186
|
)
|
|
7,528
|
|
|
(657,633
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
(30,862
|
)
|
|
(504,521
|
)
|
|
(59,161
|
)
|
|
(716,649
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
-
|
|
|
(190,985
|
)
|
|
(27,645
|
)
|
|
(284,720
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(30,862
|
)
|
$
|
(695,506
|
)
|
$
|
(86,806
|
)
|
$
|
(1,001,369
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share, basis and diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
Discontinued operations
|
|
(0.00
|
)
|
|
(0.00
|
)
|
|
(0.00
|
)
|
|
(0.00
|
)
|
Net loss
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding, basic and diluted
|
|
61,798,690
|
|
|
86,126,100
|
|
|
62,635,330
|
|
|
86,126,100
|
|
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
Galenfeha, Inc.
CONSOLIDATED
STATEMENT OF
CHANGES IN STOCKHOLDERS DEFICIT
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
Balance December 31,
2016
|
|
27,347,563
|
|
$
|
27,348
|
|
|
69,318,537
|
|
$
|
69,318
|
|
$
|
3,384,950
|
|
$
|
(3,491,907
|
)
|
$
|
(10,291
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock returned to
Company
and cancelled
|
|
-
|
|
|
-
|
|
|
(500,000
|
)
|
|
(500
|
)
|
|
500
|
|
|
-
|
|
|
-
|
|
Forfeiture of unvested
shares issued for
service
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(12,750
|
)
|
|
-
|
|
|
(12,750
|
)
|
Related party gain on sale
of
pump assets
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
52,291
|
|
|
-
|
|
|
52,291
|
|
Common stock converted to
preferred stock
|
|
7,568,537
|
|
|
7,568
|
|
|
(7,568,537
|
)
|
|
(7,568
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
Preferred stock converted
to
common stock
|
|
(818,537
|
)
|
|
(818
|
)
|
|
818,537
|
|
|
818
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(86,806
|
)
|
|
(86,806
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2017
|
|
34,097,563
|
|
$
|
34,098
|
|
|
62,068,537
|
|
$
|
62,068
|
|
$
|
3,424,991
|
|
$
|
(3,578,713
|
)
|
$
|
(57,556
|
)
|
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
Galenfeha, Inc.
CONSOLIDATED
STATEMENTS OF
CASH FLOWS
(Unaudited)
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net loss
|
$
|
(86,806
|
)
|
$
|
(1,001,369
|
)
|
Adjustments to
reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
-
|
|
|
13,684
|
|
Non-vested
options forfeited
|
|
-
|
|
|
(26,745
|
)
|
Common shares issued for
services
|
|
(12,750
|
)
|
|
(23,041
|
)
|
Options expense
|
|
-
|
|
|
43,444
|
|
Loss on derivative instruments
|
|
-
|
|
|
648,891
|
|
Amortization of
debt discounts on convertible notes
|
|
-
|
|
|
61,806
|
|
Realized losses (gains) on
investments
|
|
(1,804
|
)
|
|
-
|
|
Unrealized
losses (gains) on investments
|
|
(6,248
|
)
|
|
-
|
|
Financing costs on convertible
note expensed
|
|
3,000
|
|
|
-
|
|
Changes in
Operating Assets and Liabilities:
|
|
|
|
|
|
|
(Increase)
Decrease in accounts receivable
|
|
14,189
|
|
|
80,176
|
|
(Increase) Decrease in accounts receivable from related party
|
|
-
|
|
|
336
|
|
(Increase)
Decrease in inventory
|
|
6,041
|
|
|
120,770
|
|
(Increase) Decrease in prepaid expenses and other assets
|
|
1,000
|
|
|
(25,567
|
)
|
Increase
(Decrease) in accounts payable and accrued liabilities
|
|
26,100
|
|
|
(108,160
|
)
|
Increase (Decrease) in accounts payable to related parties
|
|
-
|
|
|
(106,991
|
)
|
Increase
(Decrease) in deferred revenue
|
|
(11,436
|
)
|
|
-
|
|
Net cash used in operating
activities
|
|
(68,714
|
)
|
|
(322,766
|
)
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
Sales and (purchases) of investments,
net
|
|
(59,948
|
)
|
|
-
|
|
Cash received for sale
of pump assets
|
|
25,000
|
|
|
-
|
|
Net cash provided by financing activities
|
|
(34,948
|
)
|
|
-
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
Proceeds from line of
credit/notes payable
|
|
-
|
|
|
82,371
|
|
Proceeds from margin loan
|
|
17,479
|
|
|
-
|
|
Payments on note
payable
|
|
-
|
|
|
(88,980
|
)
|
Payments on liabilities due to officer
|
|
(82,500
|
)
|
|
-
|
|
Proceeds from
convertible debentures, net of original issue discounts
|
|
40,000
|
|
|
247,550
|
|
Proceeds from related party promissory
note
|
|
-
|
|
|
100,000
|
|
Payments on finance
contracts
|
|
-
|
|
|
(8,273
|
)
|
Net cash (used in) provided by financing
activities
|
|
(25,021
|
)
|
|
332,668
|
|
|
|
|
|
|
|
|
(DECREASE) INCREASE IN CASH
|
|
(128,683
|
)
|
|
9,902
|
|
CASH AT BEGINNING OF PERIOD
|
|
129,973
|
|
|
47,333
|
|
CASH AT END OF PERIOD
|
$
|
1,290
|
|
$
|
57,235
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
Interest expense
|
$
|
-
|
|
$
|
3,557
|
|
Income taxes
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
NONCASH INVESTING AND
FINANCING ACTIVITIES
|
|
|
|
|
|
|
Common stock converted to preferred
stock
|
$
|
7,568
|
|
$
|
-
|
|
Preferred stock
converted to Common stock
|
|
818
|
|
|
|
|
Gain on sale of pump division to
related party
|
|
52,291
|
|
|
-
|
|
Liabilities released
upon sale of pump division
|
|
402,291
|
|
|
-
|
|
Debt discount due to derivative
liabilities
|
|
-
|
|
|
247,550
|
|
Reclassification of
conversion option from equity to derivative liabilities
|
|
-
|
|
|
6,175
|
|
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
Galenfeha, Inc.
Notes to Unaudited Consolidated
Financial Statements
June 30, 2017
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared by the
Company without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations, and cash flows at June 30, 2017, and
for all periods presented herein, have been made.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been omitted. It is
suggested that these unaudited interim financial statements be read in
conjunction with the financial statements and notes thereto included in the
Companys December 31, 2016 audited financial statements included in its Form
10-K filed with the Securities and Exchange Commission. The results of
operations for the period ended June 30, 2017 and the same period last year are
not necessarily indicative of the operating results for the full years.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. The Company has
incurred net losses and net cash used in operations since inception. These
conditions raise substantial doubt about the Companys ability to continue as a
going concern. The Companys ability to continue as a going concern is dependent
upon the Companys ability to achieve a level of profitability. The Company
intends on financing its future development activities and its working capital
needs largely from the sale of public equity securities with some additional
funding from other traditional financing sources, including term notes until
such time that funds provided by operations are sufficient to fund working
capital requirements. The financial statements of the Company do not include any
adjustments relating to the recoverability and classification of recorded
assets, or the amounts and classifications of liabilities that might be
necessary should the Company be unable to continue as a going concern.
NOTE 3 INVESTMENTS
Marketable securities are accounted for on a specific
identification basis. As of June 30, 2017 and December 31, 2016 respectively, we
held marketable securities with an aggregate fair value of $68,000 and $0
respectively. As of June 30, 2017, all of our marketable securities were
invested in publically traded equity holdings. Marketable securities were
classified as current based on the percentage of the equity controlled by the
Company as well as our intended use of the assets. The Company recognized
unrealized gains, for the three months ended June 30, 2017 and 2016 in the
amounts of $6,248 and $0, respectively and for the six months ended June 30,
2017 and 2016 in the amounts of $6,248 and $0, respectively. The Company
recognized realized gains, for the three months ended June 30, 2017 and 2016 in
the amounts of $1,804 and $0, respectively and for the six months ended June 30,
2017 and 2016 in the amounts of $1,804 and $0, respectively.
The Company's assets measured at fair value on a recurring
basis subject to the disclosure requirements of ASC 820 at June 30, 2017, was as
follows:
|
Quoted Prices in Active
Markets for Identical
Assets and Liabilities
(Level 1)
|
Significant Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Balance as of June 30,
2017
|
Assets
|
|
|
|
|
Marketable securities
|
$68,000
|
-
|
-
|
$68,000
|
NOTE 4 NOTES PAYABLE
On August 23, 2016, the Company entered into a Promissory Note
Agreement with Kevin L. Wilson, in the amount of $350,000. The note bears an
interest rate of 11 ½ % per annum from the date until the principal is paid in
full. This note may be prepaid in whole or in part, without penalty. All
outstanding principal, interest and fees shall be due and payable on or before
August 23, 2017. As of December 31, 2016, the principal and interest due on the
note is $364,336 (the accrued interest of $14,336 is presented as accounts
payable in the consolidated balance sheet). This note was assumed by the
purchaser in the sale of the Companys Daylight Pumps division. It is classified
as liabilities held for sale as of December 31, 2016. This note was assumed by
the purchaser of the pumps division on March 9, 2017. The total amount of
accrued interest due of $20,125 under the note was paid in full by the purchaser
in the sale of the Companys Daylight Pumps division.
NOTE 5 – CONVERTIBLE LOANS
Effective June 8, 2017 the Company entered into a Convertible Promissory Note (“Power Up Note”) with Power Up Lending Group, Ltd. pursuant to which the Company issued Power Up Lending Group, Ltd. a convertible note in the amount of
$43,000. The maturity date is March 20, 2018.
On June 8, 2017 the Company received consideration of $40,000. In addition, the Company paid legal fees of $3,000 associated with the entering into this agreement and thus recognized a liability of $43,000 associated with the Power Up
Note. The $3,000 of financing costs were expensed during the six months ended June 30, 2017. The Power Up Note carries an interest rate of 12% per annum from the Issue Date until the principal amount becomes due and payable, whether at maturity
or upon acceleration or by prepayment or otherwise. Any amount of principal or interest on the Power Up Note which is not paid when due shall bear interest at the rate of 22% per annum from the due date thereof until the same is paid. Interest shall
commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. The Company recognized accrued interest due under the Power Up Note totaling $6,450.
The Power Up Note provides Power Up Lending Group, Ltd. the right, to convert the outstanding balance (including accrued and unpaid interest) into shares of the Company’s common stock at 60% of the lowest trade price in the 15 trading days
previous to the conversion, additional discounts may apply in the case that conversion shares are not deliverable or if the shares are ineligible. Power Up Lending Group, Ltd. shall have the right to convert at any time during the period beginning
on the date which is one hundred eighty days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, each in respect of the remaining outstanding principal amount of this
Note. Due to the one hundred eighty day restriction; the Company didn’t record debt discounts or derivative liabilities associated with the Power Up Note.
NOTE 6 - SHAREHOLDERS’ EQUITY
PREFERRED STOCK
The authorized stock of the Company consists of 50,000,000 preferred shares with a par value of $0.001.
During 2016, four officers and directors of the Company exchanged 27,347,563 common shares for 27,347,563 preferred shares. During the first quarter of 2017, one officer and one director exchanged 7,568,537 common shares for 7,568,537 preferred
shares. During the second quarter of 2017, one officer converted 818,537 of preferred stock Series A back to same number of common stock.
As of June 30, 2017, 6,750,000 shares of the Company’s preferred stock Series A were issued and outstanding. As of December 31, 2016, zero shares of the Company’s preferred stock Series A were issued and outstanding.
As of June 30, 2017 and December 31, 2016, 27,347,563 shares of the Company’s preferred stock Series B were issued and outstanding.
As of June 30, 2017, 34,097,563 shares of the Company’s preferred stock were issued and outstanding.
On December 20, 2016, shareholders of the company approved an amendment to the Bylaws for the creation of preferred stock. The preferred class of stock will consist of two (2) series, Series A, and Series B. All affiliates of the company who
purchased stock during the formation of the company and who purchased stock for financing activities at prices below market will move their common shares into the Series B preferred stock, effective immediately. The Series B votes 1:1; is subject to
all splits the same as common; converts back to common 1:1; and cannot be converted back to common for resale in the open market until a 30 day VWAP (volume weighted average price) of $.45 cents has been met in the Company’s public trading
market. All future sales of company securities by affiliates will adhere to rules and regulations of the Commission.
Affiliates who purchased stock at offering prices that were current at the time of purchase, and affiliates who make open market purchases and are directly responsible for a merger/acquisition that brings retained earnings to the company, can
convert these common shares 1:1 into Series A preferred stock. Series A votes 1:1; converts back to common 1:1; is not subject to splits in order to facilitate mergers, acquisitions, or meeting the requirements of a listed exchange; and cannot be
converted back to common for resale in the open market until a 30 day VWAP of $3.50 per share has been met in the Company’s public trading market. All future sales of company securities by affiliates will adhere to rules and regulations of
the Commission.
COMMON STOCK
The authorized stock of the Company consists of 150,000,000 common shares with a par value of $0.001.
As of June 30, 2017 62,068,537 shares of the Company’s common stock were issued and outstanding. As of December 31, 2016, 69,318,537 shares of the Company’s common stock were issued and outstanding.
In July 2016, the Company entered into an agreement for the issuance of 1,000,000 common shares for consulting services. The shares are to be transferred in four quarterly installments of two hundred fifty thousand shares on or before the fifth day
of the following months: August 2016, October 2016, January 2017, and April
2017. On August 5, 2016, the Company issued 250,000 shares under this award. On
October 5, 2016, the Company issued another 250,000 shares under this award.
Since inception through December 31, 2016, $17,530 was expensed under this
award.
On January 18, 2017 the company extinguished the remainder of
the Consulting Agreement with Asher Oil & Gas Exploration in Natchez,
Mississippi; and Lane Murray, of Jackson, Mississippi. The Company issued a
one-time payment to the consultants of $40,000, which included the cancellation
of any additional stock issuance, and the return of the 500,000 shares of
Galenfeha common stock previously issued in Quarters 3 and 4 of 2016. The terms
of this agreement previously included a $50,000 non-refundable retainer, as well
as 1,000,000 shares of Galenfeha, Inc. (GLFH) common stock, to be issued in four
quarterly installments. As of December 31, 2016, the consultants had received
the retainer and a total of 500,000 shares of Galenfeha, Inc. common stock, per
the agreement. The 500,000 shares of Galenfeha, Inc. common stock have been
returned and cancelled; and no further stock will be issued pursuant to this
agreement. Due to the forfeiture of the unvested shares, total $12,750 expense
was reversed during the three months ended March 31, 2017. The consultants will
keep their initial $50,000 non-refundable retainer.
On January 20, 2017 an offer was extended to Mr. Ron Barranco
for the position of Chief Technology Officer. Mr. Barranco accepted this
position on January 20, 2017. Mr. Barranco converted 2,000,000 shares of common
stock to preferred stock Series A on January 20, 2017 and 818,537 shares of
common stock to preferred stock Series A on February 21, 2017. On April 18, 2017
the Company received notice that Mr. Barranco was declining our employment offer
and resigning as Chief Technology Officer. Management agreed to Mr. Barrancos
resignation terms on May 1, 2017 and pursuant to such Mr. Barranco returned
818,537 shares of preferred stock Series A back to common stock.
NOTE 7 - OPTIONS
During the year ended December 31, 2015, the Company granted an
aggregate of 2,050,000 options to a military sales representative and three
employees. Col. Ashton Naylor (Ret) received 100,000 options exercisable at
$0.25 per share, Chris Watkins received 750,000 options exercisable at $0.25 per
share, Jeff Roach received 1,000,000 options exercisable at $0.20 per share, and
Brian Nallin received 200,000 options exercisable at $0.20 per share. These
options expire on April 1, 2016; June 11, 2020, February 1, 2017, and December
31, 2017 respectively. The options granted to Brian Nallin vest immediately and
the other options vest in equal tranches over periods ranging from 2 to 5 years.
The aggregate fair value of the option grants was determined to be $430,839
using the Black-Scholes Option Pricing Model and the following assumptions:
volatilities between 218% and 396%, risk free rates between .27% and 1.74%,
expected terms between 1 and 5 years and zero expected dividends. The fair value
of the award is being expensed over the vesting periods. $65,360 and $295,553
was expensed during the year ended December 31, 2016 and December 31, 2015,
respectively, $91,519 was reversed from option expense due to non-vested options
forfeited for the year ended December 31, 2016, and $0 remains to be expensed
over the remaining vesting period.
During 2016, 1,750,000 of these options were forfeited. As of
December 31, 2016, there were 300,000 options outstanding which were
exercisable.
The exercise price and remaining weighted average life of the
options outstanding at December 31, 2016 were $0.25 and 0.08 years,
respectively. The aggregate intrinsic value of the outstanding options at
December 31, 2016 was $0. All options mentioned above are for employees that are
no longer with the company, by either termination because of discontinued
operations, or leaving the company of their own accord. At the time of this
filing, there were no options outstanding which are exercisable.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company leases space in Fort Worth, Texas for corporate
facilities for $99 monthly or $1,188 per year. The terms of this lease are month
to month.
Year Ended
|
|
Amount
|
|
2017
|
$
|
-
|
|
2018
|
|
-
|
|
2019
|
|
-
|
|
2020
|
|
-
|
|
2021
|
|
-
|
|
|
$
|
-
|
|
From time to time the Company may be a party to litigation
matters involving claims against the Company. Management believes that there are
no current matters that would have a material effect on the Companys financial
position or results of operations.
The Company received a letter on May 17, 2016 from the
Caddo-Shreveport Sales and Use Tax Commission informing them of a parish sales
and use tax audit scheduled to begin on June 28, 2016. The audit period covered
is January 1, 2013 through May 31, 2016. The audit is currently under way and no
judgments or assessments have been issued. Management is of the opinion that
this audit will not result in any material change in the Companys financial
results.
NOTE 9 – RELATED PARTY TRANSACTIONS
On November 16, 2016, the Company entered into an agreement with Fleaux Services, LLC for the sale of the company’s battery and stored energy division, which includes, but is not limited to, all inventory, support equipment, and office
operations located at 9204 Linwood Avenue, Suite 104 and 105, Shreveport, LA 71106. Mr. Trey Moore is the President/CEO of Fleaux Services, and also is a Director of Galenfeha, Inc. The sale is for a cash consideration of $350,000 USD; plus a 3%
royalty on all Galenfeha-style batteries sold over the course of the next two years from the date this purchase agreement was executed. The cash consideration was for $175,000 in inventory and $175,000 for business good-will and was provided
directly by Fleaux Services in cash. The sale includes all future sales, future purchase orders resulting from previous negotiations, and all intellectual property related to Galenfeha, Inc. battery manufacturing and distribution. Fleaux Services,
LLC will assume responsibility for expenses related to the Galenfeha, Inc. battery division that includes previous expenses incurred for sales meetings that secured future purchase orders. All contractual agreements between the Galenfeha Inc.
battery division and outside parties, including, but not limited to, consultants, suppliers, distributors, and sales representatives, become the responsibility of Fleaux Services, LLC. This includes all suppliers’ outstanding invoices for
materials not yet delivered and support equipment that will be relinquished to Fleaux Services, LLC upon the execution of this agreement. Galenfeha, Inc. will retain payments on all current outstanding purchase orders invoiced before the date of
this purchase agreement. A gain on the sale of the battery and stored energy division of $15,008 was recognized as a capital transaction during 2016. During the six months ending June 30, 2017, the Company received royalty payments of $5,000
from Fleaux Services, LLC relating to the sale of Galenfeha-style batteries.
On November 4, 2016, Mr. James Ketner, Galenfeha’s Chairman and CEO made a cash contribution to the Company in the amount of $100,000 in exchange for a note that has a fixed repayment of $110,000. The note bears no interest, and can be
repaid by the Company when the funds become available. The note can be renegotiated between Galenfeha and Mr. Ketner if both parties agree to the terms. There were no principal repayments on the note for the twelve months ending December 31, 2016,
and the principal balance due under the note as of December 31, 2016 was $110,000. Principal repayments made under the note for the six months ending June 30, 2017 totaled $82,500, and the principal balance due under the note as of June 30,
2017 was $27,500.
On March 9, 2017, the Company entered into an agreement with Fleaux Services, LLC for the sale of the Company’s Daylight Pumps division, which includes, but in not limited to, all inventory located at 9204 Linwood Avenue, Suite 104 and 105,
Shreveport, LA 7116, as well as all usage rights for the name “Daylight Pump.” The sale is for cash consideration of $25,000, and Fleaux Services, LLC will assume the responsibility of a promissory note held by Kevin L. Wilson in the
amount of $350,000 and all accrued interest due since the date of issuance on August 23, 2016. The sale will include all future pump sales, future purchase orders resulting from previous negotiations, and all intellectual property related to
Daylight Pumps. A gain on the sale of the Daylight Pumps division of $52,291 was recognized as a capital transaction during 2017.
NOTE 10 – DISCONTINUED OPERATIONS – STORED ENERGY AND DAYLIGHT PUMP DIVISIONS
On November 16, 2016, the Company entered into an agreement with Fleaux Services, LLC for the sale of the Company’s battery and stored energy division, which includes, but is not limited to, all inventory, support equipment, and office
operations located at 9204 Linwood Avenue, Suite 104 and 105, Shreveport, LA 71106. The sale is for a cash consideration of $350,000 USD; plus a 3% royalty on all Galenfeha-style batteries sold over the course of the next two years from the date
this purchase agreement was executed. The cash consideration was for $175,000 in inventory and $175,000 for business good-will and was provided directly by Fleaux Services in cash. The sale includes all future sales, future purchase orders
resulting from previous negotiations, and all intellectual property related to Galenfeha, Inc. battery manufacturing and distribution. Fleaux Services, LLC will assume responsibility for expenses related to the Galenfeha, Inc. battery division that
includes previous expenses incurred for sales meetings that secured future purchase orders. All contractual agreements between the Galenfeha Inc. battery division and outside parties, including, but not limited to, consultants, suppliers,
distributors, and sales representatives, become the responsibility of Fleaux Services, LLC. This includes all suppliers’ outstanding invoices for materials not yet delivered and support equipment that will be relinquished to Fleaux Services,
LLC upon the execution of this agreement. Galenfeha, Inc. will retain payments on all current outstanding purchase orders invoiced before the date of this purchase agreement. A gain on the sale of the battery and stored energy division of
$15,008 was recognized as a capital transaction.
On March 9, 2017, the Company entered into an agreement with Fleaux Services, LLC for the sale of the Company’s Daylight Pumps division, which includes, but in not limited to, all inventory located at 9204 Linwood Avenue, Suite 104 and 105,
Shreveport, LA 7116, as well as all usage rights for the name “Daylight Pump.” The sale is for cash consideration of $25,000, and Fleaux Services, LLC will assume the responsibility of a promissory note held by Kevin L. Wilson in the
amount of $350,000 and all accrued interest due since the date of issuance on August 23, 2016. The sale will include all future pump sales, future purchase orders resulting from previous negotiations, and all intellectual property related to
Daylight Pumps. During 2016, the Company recognized an aggregate impairment loss on this asset group of $443,935 to recognize the asset group at the lower of fair value or carrying value.
The Company recognized the sale of its stored energy division and Daylight Pumps division as a discontinued operation, in accordance with ASU 2014-08,
“Reporting Discontinued Operations and Disclosures of Disposals of Components of an
Entity.”
Assets and Liabilities of Discontinued Operations
The following table provides the details of the assets and
liabilities of our discontinued stored energy division:
Assets sold:
|
|
November 16, 2016
|
|
Inventory assets
|
$
|
180,681
|
|
Prepaid expenses
|
|
13,830
|
|
Property and equipment, net of
accumulated depreciation
|
|
169,275
|
|
Total assets of discontinued
operations
|
|
363,786
|
|
|
|
|
|
Consideration received:
|
|
|
|
Cash proceeds
|
|
350,000
|
|
Liabilities assumed
|
|
28,794
|
|
Total
liabilities of discontinued operations
|
|
378,794
|
|
|
|
|
|
Net assets sold
|
|
363,786
|
|
Consideration received
|
|
378,794
|
|
Related party gain recognized
as a capital transaction
|
|
15,008
|
|
The following table provides the details of the assets and
liabilities held for sale of our discontinued Daylight Pump division:
Assets sold:
|
|
March 9, 2017
|
|
Inventory assets
|
$
|
375,000
|
|
Prepaid expenses
|
|
-
|
|
Property and equipment, net of
accumulated depreciation
|
|
-
|
|
Total assets of discontinued
operations
|
|
375,000
|
|
|
|
|
|
Consideration received:
|
|
|
|
Cash proceeds
|
|
25,000
|
|
Liabilities assumed
|
|
402,291
|
|
Total
liabilities of discontinued operations
|
|
427,291
|
|
|
|
|
|
Net assets sold
|
|
375,000
|
|
Consideration received
|
|
427,291
|
|
Related party gain recognized
as a capital transaction
|
|
52,291
|
|
Income and Expenses of Discontinued Operations
The following table provides income and expenses of
discontinued operations for the six months ended June 30, 2017 and 2016,
respectively.
|
|
June
30, 2017
|
|
|
June
30, 2016
|
|
Revenue Third Parties
|
$
|
11,435
|
|
|
371,411
|
|
Revenue Related Parties
|
|
-
|
|
|
36,384
|
|
Less: Cost of Goods Sold
|
|
6,041
|
|
|
292,164
|
|
Gross Profit
|
|
5,394
|
|
|
115,631
|
|
|
|
|
|
|
|
|
Other expenses
|
|
|
|
|
|
|
General and administrative
|
|
27,250
|
|
|
151,403
|
|
Payroll expenses
|
|
-
|
|
|
200,592
|
|
Professional fees
|
|
-
|
|
|
-
|
|
Engineering research and development
|
|
-
|
|
|
(21,213
|
)
|
Depreciation and amortization
expense
|
|
-
|
|
|
13,684
|
|
Interest expense
|
|
5,789
|
|
|
55,885
|
|
Income (loss) from
discontinued operations
|
|
(27,645
|
)
|
|
(284,720
|
)
|
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in
conjunction with the consolidated financial statements and related notes
included in this report and those in our Form 10-K filed with the Securities and
Exchange Commission on March 31, 2017. This discussion contains forward-looking
statements that involve risks and uncertainties. Our actual results may differ
materially from those anticipated in such forward-looking statements as a result
of certain factors, including but not limited to, those described under Risk
Factors included in Part II, Item IA of this report.
Background Overview
Galenfeha was incorporated on March 14, 2013 in the state of
Nevada. Our corporate office is located at 420 Throckmorton Street, Suite 200,
Ft. Worth Texas 76102, and our telephone number is 1-817-945-6448. Our website
is www.galenfeha.com.
We are an engineering, product development, and manufacturing
company that generates revenue by receiving royalties from products we
developed, providing engineering, regulatory, and business consulting services
across numerous disciplines, such as aerospace, automotive, and medical, and by
making investments in companies that our management team feels to be
undervalued.
With the recent sale of our stored energy division, and our oil
and gas equipment division, we have moved the Company in the direction our
founder originally envisioned. Our objective is to be a vehicle that assembles a
team and finances the development of groundbreaking new technology that is
resistant to adverse economic and market fluctuations.
A condensed version of our 2017 Statement of Work is as
follows:
|
1.
|
Acquire or merge a profitable private company into our
public company.
|
|
2.
|
Explore investments both private and public.
|
|
3.
|
Develop new technologies for engineering, manufacturers,
and product life cycles.
|
|
4.
|
Formulate applications for new or recently developed
technologies.
|
|
5.
|
Commercialize new technology and
products.
|
Although information for this item is not required, the company
chooses to provide the following disclosures:
CAUTIONARY NOTE TO INVESTORS:
Investing in our
securities, whether open market purchases or private transactions, comes with
the high risk that you could lose your entire investment
.
Our independent
registered public accountant has issued an audit opinion which includes a
statement expressing substantial doubt as to our ability to continue as a going
concern. We have a limited history of operations, and have to date incurred
losses since the companys inception. We recently sold all divisions of our
commercialized products, but retain royalties from some of these product
lines.
On December 21, 2016, Mr. James Ketner was formally elected by
the shareholders to assume the role of Chief Executive Officer beginning January
1, 2017. Since his reinstatement, Mr. Ketner has led the company back in the
direction he originally intended; to be a vehicle that assembles a team and
finances the development of new technology that is resistant to adverse economic
and market fluctuations.
As of the date of this filing, Galenfeha has zero options that
convert into common or preferred stock, no other notes or off balance sheet
arrangements that convert into common or preferred stock, and zero debt other
than to an affiliate.
The company has two classes of preferred stock. The preferred
class of stock consists of two (2) series, Series A, and Series B. All
affiliates of the company who purchased stock during the formation of the
company and who purchased stock for financing activities at prices below market
moved their common shares into the Series B preferred stock. The Series B votes
1:1; is subject to all splits the same as common; converts back to common 1:1;
and cannot be converted back to common for resale in the open market until a 30
day VWAP (volume weighted average price) of $.45 cents has been met in
Galenfehas public trading market. All future sales of company securities by
affiliates will adhere to rules and regulations of the Commission.
Affiliates who purchased stock at offering prices that were
current at the time of purchase, and affiliates who make open market purchases
and are directly responsible for a merger/acquisition that brings retained
earnings to the company, can convert these common shares 1:1 into Series A
preferred stock. Series A votes 1:1; converts back to common 1:1; is not subject
to splits in order to facilitate mergers, acquisitions, or meeting the
requirements of a listed exchange; and cannot be converted back to common for
resale in the open market until a 30 day VWAP of $3.50 per share has been met in
Galenfehas public trading market. All future sales of company securities by
affiliates will adhere to rules and regulations of the Commission.
On January 23, 2017, the Company announced on Form 8-K filed
with the commission that the company entered into an agreement to sell its
entire Daylight Pump inventory to SouthVest BDC, LLC for a cash selling price of
$400,000. A majority of the proceeds of this sale were to be used to repay a note secured by the pump
inventory with Kevin L. Wilson on August 23, 2016, for $350,000 plus accrued
interest.
On March 9, 2017, the company sold its entire Daylight Pump
inventory to Fleaux Services, LLC. The sale was for a cash consideration of
$25,000 USD; and Fleaux Services, LLC will assume responsibility of a promissory
note held by Kevin L. Wilson in the amount of $350,000 and all accrued interest
this note had accumulated since issuance on August 23, 2016.
The Company currently plans to use additional revenues and
earnings generated from their investment account to cover expenses and
outstanding payable balances due. After all of the payable balances are
extinguished the Company intends to proceeds with research and development using
the gains from the investment account.
Liquidity
Assets
At June 30, 2017, we had total assets of $69,290, of which
$1,290 was in cash.
Results of Operations for the Three Months ending June 30,
2017
Revenues Discontinued Operations
Revenues for the three months ended June 30, 2017 and 2016 were
$0, and $104,374, respectively. Of the $104,374; $85,372 were to third parties
and $19,002 were to related parties. The decrease is from the Company selling
its Stored Energy and Daylight Pump division.
Cost of Revenues Discontinued Operations
Cost of Revenues for the three months ended June 30, 2017 and
2016 were $0 and $72,582, respectively. Costs were cost of materials and
manufacturing supplies with the decrease due to the sale of the Companys
battery and Daylight Pump division.
Operating Expense Continuing Operations
Total operating expenses for the three months ended June 30,
2017 and 2016 were $37,458 and $28,335, respectively.
Net Operating Loss and Net Loss
Net operating loss for the three months ended June 30, 2017 and
2016 was $30,862 and $504,521 respectively. The Company realized a lower net
operating loss because the Company paid off all convertible debenture agreements
prior to 2017.
Results of Operations for the Six Months ending June 30,
2017
Revenues Discontinued Operations
Revenues for the six months ended June 30, 2017 and 2016 were
$11,435, and $407,795, respectively. Of the $407,795; $371,411 were to third
parties and $36,384 were to related parties. All of the sales attributable to
the $11,435 were to third parties. The decrease is from the Company selling its
Stored Energy and Daylight Pump division. The one sale during the six months
ending June 30, 2017 of $11,435 was related to fulfillment of a prior customers
prepayment with respect to a battery order.
Cost of Revenues Discontinued Operations
Cost of Revenues for the six months ended June 30, 2017 and
2016 were $6,041 and $292,164, respectively. Costs were cost of materials and
manufacturing supplies with the decrease due to the sale of the Companys
battery and Daylight Pump division. The $6,041 was related to the one sale that
occurred during the six months ending June 30, 2017.
Operating Expense Continuing Operations
Total operating expenses for the six months ended June 30, 2017
and 2016 were $66,689 and $59,016, respectively.
Net Operating Loss and Net Loss
Net operating loss for the six months ended June 30, 2017 and
2016 was $59,161 and $716,652 respectively. The Company realized a lower net
operating loss because the Company paid off all convertible debenture agreements
prior to 2017.
Net loss for the six months ended June 30, 2017 and 2016 was
$86,806 and $1,001,369 respectively. The Company realized a lower net loss
because the Company paid off all convertible debenture agreements prior to
2017.
Equity Distribution
Since our incorporation, we have raised capital through private
sales of our common equity. As of June 30, 2017 we have issued 62,068,537 shares
of our common stock to various shareholders.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to investors.