Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 2011, for Broadleaf Capital Partners, Inc. (Note: The input metadata referenced "Red Cat Holdings," but the filing text explicitly identifies the registrant as Broadleaf Capital Partners, Inc., a Nevada corporation). The Company is a publicly traded diversified investment holding company. Its primary active asset is a 1% limited partnership interest in Canyon Shadows, a real estate project. Most other subsidiaries are inactive or have been discontinued. The Company is classified as a smaller reporting company and is not a shell company.
Key Financial Metrics
| Metric | Q1 2011 (Unaudited) | Q1 2010 (Unaudited) |
|---|---|---|
| Revenues | $1,899 | $1,899 |
| Net Loss | $(27,158) | $(11,470) |
| Net Cash Used in Operating Activities | $(28,764) | $(2,326) |
| Cash and Cash Equivalents (End of Period) | $32,716 | $29,016 |
| Total Assets | $77,700 | $86,464 |
| Total Liabilities | $1,065,607 | $1,057,213 |
| Stockholders' Equity (Deficit) | $(987,907) | $(970,749) |
| Accumulated Deficit | $(15,054,286) | $(15,027,128) |
| Notes Payable (Current) | $660,801 | $640,801 |
| Accrued Interest | $194,020 | $184,376 |
Material Changes vs. Prior Period
- Net Loss Increase: Net loss increased by $15,788 (137%) compared to Q1 2010. This was driven primarily by a $15,203 increase in General and Administrative (G&A) expenses.
- Expense Drivers: G&A expenses rose from $4,225 to $19,428. The increase included $4,500 in wages for the interim president and $13,500 in professional fees for accounting, auditing, and strategic planning to bring records up to date.
- Interest Expense: Interest expense increased slightly from $9,144 to $9,644 due to the reclassification of certain debt into notes payable.
- Liquidity: Cash decreased by $8,764 during the quarter. The Company utilized a $20,000 reclassification of notes payable in financing activities to offset operating cash outflows.
- Equity Issuance: The Company issued 2,000,000 shares of common stock valued at $10,000 for consulting services (non-cash transaction).
Outlook, Risks, and Contingencies
- Going Concern: The filing includes a "Going Concern" warning. The Company has an accumulated deficit of over $15 million and current liabilities exceeding current assets by approximately $1.03 million. Continued operations depend on obtaining additional capital through stock sales, debt conversions, or acquisitions.
- Debt Status: The Company is in default on two notes payable. While note holders have not pursued legal action, the Company has significant accrued interest ($194,020) and judgments payable ($39,372).
- Internal Controls: Management concluded that disclosure controls and internal controls over financial reporting were ineffective as of March 31, 2011. Material weaknesses exist due to limited personnel, lack of segregation of duties, and absence of an audit committee.
- Investment Strategy: The Company is seeking joint ventures or acquisitions in real estate and finance to utilize its Net Operating Loss (NOL) carryforwards (approx. $14.36 million) to offset future taxable income.
- Legal Proceedings: No open or pending legal proceedings were reported, though prior judgments remain recorded as liabilities.
Key Facts for Investor Verification
- Identity Discrepancy: Verify the correct registrant name. The metadata suggested "Red Cat Holdings," but the document is for "Broadleaf Capital Partners, Inc."
- Capital Adequacy: Confirm the Company's ability to fund operations given the $32,716 cash balance against $1.06 million in current liabilities.
- Debt Default: Investigate the status of the defaulted notes payable and the risk of acceleration or legal action by creditors.
- Internal Control Weaknesses: Assess the risk of financial misstatement given the admitted lack of effective internal controls and segregation of duties.
- Asset Valuation: Review the valuation of the sole significant investment (Canyon Shadows), which is carried at cost less distributions ($44,984), as there is no active market for this interest.