UNITED
STATES SECURITIES AND EXCHANGE COMMISSION




WASHINGTON,
D.C. 20549




FORM
10-Q/A







x Quarterly Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934




For the
quarterly period ended March 31, 2008




o Transition Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934




For the
transition period from ____________ to ____________









Energy
King, Inc.


(Exact
name of registrant as specified in its charter)





Nevada
            
            0-27454
            
            20-3161375(State
      or other jurisdiction of incorporation)
            
            (Commission
      File No.)
            
            (IRS
      Employer Identification No.)




1929
Main St., Suite 106,, Irvine, CA 92614


(Address
of principal executive offices)




(949)
468-4444


(Issuer’s
telephone number, including area code)


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 xNo
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 filero
                Accelerated
      filer oNon-accelerated
      filer o
      (Do not check if a smaller reporting company)
                Smaller
      reporting company x
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).   Yes oNo x
  On May
12, 2008 there were 107,812,850 shares of Registrant’s common stock, $.001 par
value, issued and outstanding.
  Transitional
Small Business Disclosure Format:   Yes oNo x














PART
I—FINANCIAL INFORMATION
 
 Item
1. Financial Statements


INDEX
TO FINANCIAL STATEMENTS




Page
              NumberCONSOLIDATED
      BALANCE SHEETS AS OF MARCH 31, 2008 (UNAUDITED) AND DECEMBER 31,
      2007
            
            2CONSOLIDATED
      STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND
      2007 (UNAUDITED)
            
            3CONSOLIDATED
      STATEMENT OF STOCKHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED MARCH 31,
      2008 (UNAUDITED)
            
            4CONSOLIDATED
      STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND
      2007 (UNAUDITED)
            
            5NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2008
      (UNAUDITED)
            
            6 -
      16


1




ENERGY
KING, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE
SHEETS





March
      31,
              2008
              (Unaudited)
              (Restated)
            
            
            December 31,
              2007
              (Audited)
              (Restated)ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
            
            $
            267,754
            
            
            $
            1,510,874Accounts
      receivable, less allowance for doubtful accounts of $12,000 and $12,000,
      respectively
            
            
            491,459
            
            
            
            168,231Other
      receivables
            
            
            292,746
            
            
            
            215,976Inventories
            
            
            1,060,954
            
            
            
            623,607Prepaid
      expenses
            
            
            256,827
            
            
            
            277,386Total
      current assets
            
            
            2,369,740
            
            
            
            2,796,074Property
      and equipment, net
            
            
            707,414
            
            
            
            645,628Goodwill
            
            
            6,805,885
            
            
            
            2,835,263Intangible
      assets, net
            
            
            199,257
            
            
            
            76,411Other
      assets, primarily deposits
            
            
            328,031
            
            
            
            108,738Total
      assets
            
            $
            10,410,327
            
            
            $
            6,462,114LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIES:Accounts
      payable
            
            $
            1,803,932
            
            
            $
            1,115,513Accrued
      expenses
            
            
            1,395,199
            
            
            
            1,075,300Current
      portion of notes payable and long-term debt
            
            
            1,310,619
            
            
            
            922,096Customer
      deposits and deferred revenue
            
            
            623,949
            
            
            
            374,926Total
      current liabilities
            
            
            5,133,699
            
            
            
            3,487,835Notes
      payable and long-term debt, net of current portion
            
            
            5,951,979
            
            
            
            2,510,798Total
      liabilities
            
            
            11,085,678
            
            
            
            5,998,633Commitments
      and contingencies
            
            
            —
            
            
            
            —STOCKHOLDERS’
      EQUITY:Preferred
      stock, authorized 5,000,000 shares:
              $.01
      par value, 975,086 and 975,086 shares issued and outstanding,
      respectively
            
            
            9,751
            
            
            
            9,751$10.00
      par value, 23,000 and 23,000 shares issued and outstanding,
      respectively
            
            
            230,000
            
            
            
            230,000Common
      stock, authorized 500,000,000 shares, $.001 par value; 107,812,850
      and
              105,412,850
      shares issued and outstanding, respectively
            
            
            107,813
            
            
            
            105,413Additional
      paid-in capital
            
            
            2,574,039
            
            
            
            2,413,239Accumulated
      deficit
            
            
            (3,596,954
            )
            
            
            (2,294,922
            )Total
      stockholders’ equity
            
            
            (675,351
            )
            
            
            (463,481
            )Total
      liabilities and stockholders’ equity
            
            $
            10,410,327
            
            
            $
            6,462,114




The
accompanying notes are an integral part of these consolidated financial
statements.




2




ENERGY
KING, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF
OPERATIONS


(Unaudited)




Three
      Months Ended
              March
      31,2008
              (Restated)
            
            
            2007Revenues,
      net
            
            $
            2,827,951
            
            
            $
            3,086,998Cost
      of services
            
            
            1,972,509
            
            
            
            1,707,075Gross
      profit
            
            
            855,442
            
            
            
            1,379,923Selling,
      general and administrative expenses
            
            
            1,795,377
            
            
            
            1,247,220Operating
      income (loss)
            
            
            (939,935
            )
            
            
            132,703Other
      income (expense)Interest
      income
            
            
            4,681
            
            
            
            348Other
      income
            
            
            1,361
            
            
            
            16Interest
      expense
            
            
            (365,354
            )
            
            
            (72,362
            )Total
      other income (expense)
            
            
            (359,312
            )
            
            
            (71,998
            )Income
      (Loss) before income taxes
            
            
            (1,299,247
            )
            
            
            60,705Income
      tax expense
            
            
            2,785
            
            
            
            3,039Net
      Income (Loss)
            
            $
            (1,302,032
            )
            
            $
            57,666Income
      (Loss) per share: Basic and diluted
            
            $
            (.01
            )
            
            $
            .00Shares
      used in computing income (loss) per share:Basic
            
            
            106,116,147
            
            
            
            98,548,618Diluted
            
            
            106,116,147
            
            
            
            98,548,618




The
accompanying notes are an integral part of these consolidated financial
statements.




3




ENERGY
KING, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF
STOCKHOLDERS’EQUITY


For
The Three Months Ended March 31, 2008 and The Year Ended December 31,
2007




Preferred Stock
            
            
            Common Stock
            
            
            AdditionalPaid-In
            
            
            AccumulatedShares
            
            
            Amount
            
            
            Shares
            
            
            Amount
            
            
            Capital
            
            
            Deficit
            
            
            TotalBalance
      at December 31, 2006
            
            
            998,086
            
            
            $
            239,751
            
            
            
            98,548,618
            
            
            $
            98,549
            
            
            $
            856,207
            
            
            $
            (1,216,732
            )
            
            $
            (22,225
            )Common
      stock issued in debt reduction
            
            
            —
            
            
            
            —
            
            
            
            5,440,000
            
            
            
            5,440
            
            
            
            1,149,495
            
            
            
            —
            
            
            
            1,154,935Common
      stock issued pursuant to acquisition of Barnett assets
            
            
            —
            
            
            
            —
            
            
            
            600,000
            
            
            
            600
            
            
            
            149,400
            
            
            
            —
            
            
            
            150,000Common
      stock issued for services
            
            
            —
            
            
            
            —
            
            
            
            580,091
            
            
            
            580
            
            
            
            64,431
            
            
            
            —
            
            
            
            65,011Value
      of warrants relating to first closing of convertible
      debentures
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            156,450
            
            
            
            —
            
            
            
            156,450Common
      stock issued pursuant to Trafalgar financing
            
            
            —
            
            
            
            —
            
            
            
            244,141
            
            
            
            244
            
            
            
            37,256
            
            
            
            —
            
            
            
            37,500Net
      loss (Restated)
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (1,078,190
            )
            
            
            (1,078,190
            )Balance
      at December 31, 2007 (Restated)
            
            
            998,086
            
            
            
            239,751
            
            
            
            105,412,850
            
            
            
            105,413
            
            
            
            2,413,239
            
            
            
            (2,294,922
            )
            
            
            463,481Unaudited:Common
      stock issued for services
            
            
            —
            
            
            
            —
            
            
            
            2,400,000
            
            
            
            2,400
            
            
            
            160,800
            
            
            
            —
            
            
            
            163,200Net
      loss (Restated)
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (1,302,032
            )
            
            
            (1,302,032
            )Balance
      at March 31, 2008 (Restated)
            
            
            998,086
            
            
            $
            239,751
            
            
            
            107,812,850
            
            
            $
            107,813
            
            
            $
            2,574,039
            
            
            $
            (3,596,954
            )
            
            $
            (675,351
            )




The
accompanying notes are an integral part of these consolidated financial
statements.




4




ENERGY
KING, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Unaudited)





Three
      Months Ended
              March
      31,2008
              (Restated)
            
            
            2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income (loss)
            
            $
            (1,302,032
            )
            
            $
            57,666Adjustments
      to reconcile net income (loss) to net cash provided by
      operating activities—Stock
      compensation expense
            
            
            163,200
            
            
            
            —Depreciation
      and amortization expense
            
            
            54,342
            
            
            
            31,750Interest
      expense accredited on debt discounts
            
            
            119,768
            
            
            
            —Changes
      in operating assets and liabilities, net of effects of
      acquisitions:Receivables,
      net
            
            
            (323,227
            )
            
            
            (74,829
            )Inventories
            
            
            (437,347
            )
            
            
            232Prepaid
      expenses and other current assets
            
            
            20,560
            
            
            
            (6,993
            )Accounts
      payable
            
            
            688,421
            
            
            
            32,559Accrued
      expenses
            
            
            319,899
            
            
            
            (9,246
            )Customer
      deposits and deferred revenue
            
            
            242,888
            
            
            
            86,061Net
      cash provided by (used in) operating activities
            
            
            (453,528
            )
            
            
            117,200CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchases
      of property and equipment
            
            
            (265,086
            )
            
            
            (84,720
            )Cash
      acquired (used) in connection with acquisition
            
            
            (500,000
            )
            
            
            (74,605
            )Other
      assets
            
            
            —
            
            
            
            (194,477
            )Net
      cash (used in) provided by investing activities
            
            
            (765,086
            )
            
            
            (353,802
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Increase
      (decrease) in notes payable and long-term debt
            
            
            (24,506
            )
            
            
            195,000Proceeds
      from conditional stock subscription
            
            
            —
            
            
            
            —Proceeds
      from sales of common stock
            
            
            —
            
            
            
            —Net
      cash provided by (used in) financing activities
            
            
            (24,506
            )
            
            
            195,000NET
      INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            (1,243,120
            )
            
            
            (41,602
            )CASH
      AND CASH EQUIVALENTS, beginning of period
            
            
            1,510,874
            
            
            
            337,280CASH
      AND CASH EQUIVALENTS, end of period
            
            $
            267,754
            
            
            $
            295,678Supplemental
      disclosures of cash flow information:Interest
      paid
            
            $
            162,189
            
            
            $
            72,362Income
      taxes paid
            
            $
            —
            
            
            $
            800Non-cash
      investing and financing activities:Acquisition
      of Gallagher’s Heating and Air Conditioning, Inc. partially for notes
      payable
            
            $
            3,586,668
            
            
            $
            —Acquisition
      of Energy King, Inc. Barnett assets partially for common
    stock
            
            $
            —
            
            
            $
            150,000




The
accompanying notes are an integral part of these consolidated financial
statements.




5




ENERGY
KING, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2008
(Unaudited)




1
- BUSINESS AND ORGANIZATION




Energy
King, Inc. (“ENKG”), formerly Buckeye Ventures, Inc. ("BEYV"), was incorporated
in Michigan under the name World Wide Motion Pictures Corporation ("WWMO") on
December 9, 1980. Pursuant to a Share Exchange Agreement dated October 14, 2005
(which closed February 22, 2006 effective March 1, 2006), BEYV (then known as
WWMO) acquired Buckeye Ventures, Inc. ("BVI") in a "reverse acquisition"
transaction and accordingly the name was changed from WWMO to BEYV in April
2006. ENKG and collectively with its subsidiaries, the “Company”, is a national
provider of comprehensive heating, ventilation and air conditioning (“HVAC”)
installation, maintenance, repair and replacement services within the
mechanical services industry. The Company operates primarily in the residential
HVAC markets.




BVI was
incorporated in Nevada on June 24, 2005 for the purpose of acquiring and
operating businesses in the heating, ventilation and air conditioning ("HVAC")
and plumbing service industries. On September 22, 2005 (effective July 31,
2005), BVI acquired its first HVAC subsidiary.




The Share
Exchange Agreement provided for the transfer of the assets and operations of
WWMO to a WWMO subsidiary, World Wide Entertainment, whose name was subsequently
changed to World Wide Motion Pictures Corporation ("WWMPC"). WWMPC has
historically been engaged in acquiring film rights and seeking to distribute
these rights.





On July
6, 2007, BEYV (Michigan) merged with BVI (Nevada). The Nevada corporation is the
surviving entity.




Effective
February 15, 2008, Buckeye Ventures, Inc. changed its name to Energy King, Inc.
to better reflect the scope of services provided by the company.




2
- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




Principles
of consolidation




The
accompanying consolidated financial statements include the accounts of ENKG and
its wholly-owned subsidiaries. All significant inter-company accounts and
transactions have been eliminated in consolidation.





The
financial statements have been prepared on a “going concern” basis, which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. However, as of March 31, 2008, the Company had
negative working capital of $2,763,959. Further, the Company incurred net losses
of $1,302,032 and $1,078,190 for the three months ended March 31, 2008 and the
year ended December 31, 2007, respectively. These factors create uncertainty as
to the Company’s ability to continue as a going concern. The Company plans to
improve its financial condition by obtaining new financing. Also, the Company
plans to pursue certain acquisition prospects to attain profitable operations.
However, there is no assurance that the Company will be successful in
accomplishing these objectives. The financial statements do not include any
adjustments that might be necessary should the Company be unable to continue as
a going concern.




Cash
and cash equivalents




For
purposes of the consolidated financial statements, the Company considers all
liquid instruments purchased with original maturities of three months or less to
be cash equivalents.




Accounts
receivable




The
Company provides an allowance for uncollectible trade receivable balances for
all specific account balances that are considered uncollectible. The Company
performs ongoing credit evaluations of its customers and generally does not
require collateral. An appropriate allowance for doubtful accounts is included
in accounts receivable. Concentrations of credit risk with respect to accounts
receivable are limited due to the nature of the Company's
receivables.




Accounting
for Allowance for Doubtful Accounts




We are
required to estimate the collectibility of accounts receivable and provide an
allowance for doubtful accounts for receivable amounts we believe we will not
ultimately collect. This requires us to make certain judgments and estimates
involving, among others, the creditworthiness of the customer, our prior
collection history with the customer, ongoing relationships with the customer,
the aging of past due balances, our lien rights, if any, in the property where
we performed the work, and the availability, if any, of payment bonds
applicable to our contract. These estimates are re-evaluated and adjusted
as additional information is received.




6




ENERGY
KING, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2008
(Unaudited)




Inventory




Inventories
consist of parts and supplies that the Company purchases and holds for use in
the ordinary course of business and are stated at the lower of cost or market
using the first-in, first-out method.




Property
and Equipment




Property
and equipment are stated at cost, and depreciation is computed using the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are capitalized and amortized over the lesser of the expected life
of the lease or the estimated useful life of the asset. Assets are depreciated
over the following estimated useful lives:




Computers
      and equipment
            3
      to   7 yearsFurniture
      and fixtures
            3
      to   7 yearsVehicles
            3
      to   5 yearsLeasehold
      Improvements
            7
      to 10 years




Expenditures
for repairs and maintenance are charged to expense when incurred. Expenditures
for major renewals and betterments, which extend the useful lives of existing
equipment, are capitalized and depreciated over the remaining useful life of the
equipment. Upon retirement or disposition of property and equipment, the cost
and related accumulated depreciation are removed from the accounts and any
resulting gain or loss is recognized in “Loss (gain) on sale of assets” in the
statement of operations.





Goodwill




Goodwill
represents the excess of the aggregate purchase price paid by the Company in
acquisitions over the fair value of the net tangible and intangible assets
acquired.




Long-Lived
Assets




Long-lived
assets are comprised principally of goodwill, property and equipment, and
intangible assets. The Company periodically evaluates whether events and
circumstances have occurred that indicate that the remaining balances of these
assets may not be recoverable.





The
Company uses estimates of future income from operations and cash flows, as well
as other economic and business factors, to assess the recoverability of these
assets. If the sum of the expected undiscounted cash flows is less than the
carrying value of the related asset or group of assets, a loss is recognized for
the difference between the fair value and carrying value of the asset or group
of assets. Such analyses necessarily involve significant judgment.




Revenue
recognition and deferred revenue




The
Company recognizes revenue when risk of loss and title to the product is
transferred to the customer, which occurs at installation. Shipping and handling
fees are included in sales. Payments received for uninstalled products are
deferred until installation and are included in customer deposits and deferred
revenues.





Shipping
and handling fees




Shipping
and handling costs billed to customers are included in sales and the related
costs are included in cost of goods sold.  Shipping and handling costs are
charged to expense as incurred.




Concentration
of suppliers




The
Company has a wide array of vendors to purchase products from. Interruption in
the Company's supply sources would not impact the Company's ability to meet
customer demand or adversely affect future operating results.




Warranty
Costs




The
Company typically warrants labor for the first year after installation on new
HVAC systems. The Company generally warrants labor for 30 days after servicing
of existing HVAC systems. A reserve for warranty costs is estimated and recorded
based upon the historical level of warranty claims and management’s estimate of
future costs.




7




ENERGY
KING, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2008
(Unaudited)





Earnings
(loss) per share




Basic
earnings (loss) per common share (EPS) are based on the weighted average number
of common shares outstanding during each period. Diluted earnings per common
share are based on shares outstanding (computed as under basic EPS) and
potentially dilutive common shares. For the three months ended March 31,
2008, the Company had convertible notes payable and warrants outstanding, They
are potentially dilutive common shares but are not included in the computation
of diluted loss per share because their inclusion would have been
anti-dilutive.




Comprehensive
income (loss)




The
Company has no items of other comprehensive income (loss) for the three months
ended March 31, 2008 and 2007.





Income
Taxes




The
Company accounts for income taxes under the asset and liability method. Under
this method, deferred tax assets and liabilities are recognized and measured
using enacted tax rates at the balance sheet date. Deferred tax expense or
benefit is the result of changes in deferred tax assets and liabilities.
Valuation allowances are established when necessary to reduce net deferred taxes
to amounts that are more likely than not to be realized.




The
Company files a consolidated return for federal income tax purposes. Income
taxes are provided for under the liability method in accordance with SFAS
No. 109, “Accounting for Income Taxes,” which takes into account
differences between financial statement treatment and tax treatment of certain
transactions. Deferred tax assets represent the tax effect of activity that has
been reflected in the financial statements but which will not be deductible
for tax purposes until future periods. Deferred tax liabilities represent the
tax effect of activity that has been reflected in the financial statements but
which will not be taxable until future periods.




The
Company regularly evaluates valuation allowances established for deferred tax
assets for which future realization is uncertain. The Company performs this
evaluation each quarter. Estimations of required valuation allowances include
estimates of future taxable income. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which the activity underlying these assets becomes deductible. The
Company considers projected future taxable income and tax planning strategies in
making this assessment. If actual future taxable income differs from the
estimates, the Company may not realize deferred tax assets to the extent it has
estimated.




Advertising




Advertising
costs are charged to expense as incurred. Advertising costs are included in
selling, general, and administrative expenses on the accompanying consolidated
statements of operations and totaled $372,036 and $351,253 for the three months
ended March 31, 2008 and 2007, respectively.




Fair
value of financial instruments




The
carrying value of the Company's cash and cash equivalents, accounts receivable,
accounts payable, accrued expenses, and notes payable approximate fair values
due to the short-term maturity of the instruments. The carrying value of
long-term obligations approximates the fair value based on the
effective interest rates compared to current market rates.




Segment
Disclosure




Buckeye’s
activities are within the residential market of the mechanical services
industry, which is the prominent industry segment served by the
Company.





Use
of Estimates




The
preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities,
revenues and expenses, and disclosures regarding contingent assets and
liabilities. Actual results could differ from those estimates. The most
significant estimates used in the Company’s financial statements affect revenue
and cost recognition, the allowance for doubtful accounts, self-insurance
accruals, deferred tax assets, warranty accruals, and the quantification of fair
value for reporting units in connection with the Company’s goodwill and other
long-lived asset impairment testing.




8




ENERGY
KING, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2008
(Unaudited)





Concentrations
of Credit Risk




The
Company provides services in a broad range of geographic regions. The Company’s
credit risk primarily consists of receivables from a variety of customers
including general contractors, property owners and developers, and commercial
and industrial companies. The Company regularly reviews its accounts receivable
and estimates an allowance for uncollectible amounts. The Company has a diverse
customer base, with no single customer accounting for more than 1% of
consolidated accounts receivable.




Reclassifications




Certain
reclassifications have been made in prior period financial statements to conform
to current period presentation.




3
- INVENTORY




Inventory
consists of the following:




March
      31,
              2008
            
            
            December
      31, 2007Raw
      materials
            
            $
            6,180
            
            
            $
            6,451Work
      in progress
            
            
            —
            
            
            
            —Finished
      goods
            
            
            1,054,774
            
            
            
            617,156$
            1,060,954
            
            
            $
            623,607





4 - ACQUISITIONS




BARNETT
HEATING AND AIR CONDITIONING SERVICES, INC.




Effective
January 2, 2007, EKI acquired certain assets of Barnett Heating and Air
Conditioning Services, Inc. (“Barnett”) for $300,000 cash and 600,000 shares of
ENKG common stock (valued at $150,000). Barnett was a heating and air
conditioning service company specializing in the Modesto, California residential
market.





The
identifiable net assets of Barnett at January 2, 2007 (effective date of the
acquisition) acquired by EKI consisted of:





Inventory
            
            $
            40,533Property
      and equipment
            
            
            82,650Customer
      deposits
            
            
            (47,381
            )Identifiable
      net assets
            
            $
            75,802





Goodwill
of $374,198 (excess of the $450,000 purchase price over the $75,802 identifiable
net assets of Barnett acquired) was recorded in January 2007.





The Asset
Purchase Agreement provided that in the event the fair market value on December
31, 2007 of the 600,000 shares of ENKG common stock was less than $150,000, then
EKI shall pay or cause ENKG to pay the Deficit. The agreement further provided
that the Deficit may be paid in cash, shares of ENKG common stock, or any
combination thereof. The Company determined the Deficit to be approximately
$102,000 and accordingly increased goodwill and accrued expenses payable by
$102,000 at December 31, 2007.




GALLAGHER’S
HEATING AND AIR CONDITIONING SERVICES, INC.




On
February 29, 2008, ENKG entered into a merger agreement with Gallagher's Heating
& Air Conditioning, Inc., a California corporation ("Gallagher’s"), and
certain other parties pursuant to which a wholly owned Delaware subsidiary of
ENKG was merged on February 29, 2008 with and into Gallagher’s and ENKG became
the owner of 100% of the issued and outstanding shares of
Gallagher’s.  Pursuant to the merger agreement, the shares of the
former sole stockholder of Gallagher’s were converted upon the effectiveness of
the merger into a combination of cash and promissory notes  as
follows: 1) a cash payment of $500,000; 2)  a promissory note for
$1,586,667; and 3) a convertible promissory note for $2,000,000; for a
total consideration of $4,086,667. Gallagher’s was the surviving corporation in
the merger and upon the effectiveness of the merger Gallagher’s became a
wholly-owned subsidiary of ENKG.




9




ENERGY
KING, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2008
(Unaudited)




Gallagher’s
was founded in 1989 as a residential and light commercial heating and
air-conditioning service company located in Los Molinos, CA. Gallagher’s serves
Tehama County, CA market as well as the surrounding counties of Butte, Glenn,
Mendocino, Plumas Shasta and Trinity in North Central California. Gallagher’s
currently has 38 employees.




The
identifiable net assets of Gallagher’s at February 29, 2008 (effective date of
the acquisition) acquired by EKI consisted of:





Cash
            
            $
            171,053Accounts
      receivable, net
            
            
            229,575Inventory
            
            
            221,786Prepaid
      and deposits
            
            
            24,767Property
      and equipment, net
            
            
            85,566Intangibles,
      net
            
            
            8,777Other
      assets
            
            
            109,965Accounts
      payable
            
            
            (416,320
            )Warranty
            
            
            (30,903
            )Notes
      payable
            
            
            (173,039
            )Other
      liabilities
            
            
            (115,182
            )Identifiable
      net assets
            
            $
            116,045





Goodwill
of $3,970,622 (excess of the $4,086,667 purchase price over the $116,045
identifiable net assets of Barnett acquired) was recorded in March
2008.





5 -PROPERTY AND
EQUIPMENT




Property
and equipment consists of:




March
      31,
              2008
            
            
            December
      31,
              2007Computers
      and equipment
            
            $
            631,582
            
            
            $
            333,735Vehicles
            
            
            982,552
            
            
            
            455,656Leasehold
      improvements
            
            
            181,540
            
            
            
            156,356Motion
      picture and television properties
            
            
            100,000
            
            
            
            100,000Total
            
            
            1,895,674
            
            
            
            1,045,747Accumulated
      depreciation and amortization
            
            
            (1,188,260
            )
            
            
            (400,119
            )Property
      and equipment, net
            
            $
            707,414
            
            
            $
            645,628




Depreciation
expense of $53,524 and $25,337 was recorded for the three months ended March 31,
2008 and 2007, respectively.




6
-GOODWILL




In most
businesses the Company has acquired, the consideration paid to buy the business
was greater than the value of specifically identifiable net assets in the
business. Under generally accepted accounting principles, this excess is termed
goodwill and is recognized as an asset at the time the business is acquired. It
is generally expected that future net earnings from an acquired business will
exceed the goodwill asset recognized at the time the business is bought. Under
previous generally accepted accounting principles, goodwill was required to be
amortized, or regularly charged to the Company’s operating results in its
statement of operations.




SFAS
No. 142, “Goodwill and Other Intangible Assets” requires companies to
assess goodwill asset amounts for impairment each year, and more frequently if
circumstances suggest an impairment may have occurred. Impairment must be
reflected when the value of a given business unit in excess of its tangible net
assets falls below the goodwill asset balance carried for that unit on the
Company’s books. If other business units have had increases in the value of
their respective goodwill balances, such increases may not be recorded under
SFAS No. 142. Accordingly, such increases may not be netted against
impairments at other business units.




10




ENERGY
KING, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2008
(Unaudited)




The
Company currently performs its annual impairment testing as of December 31
and any impairment charges resulting from this process are reported in the
fourth quarter. The Company segregated its operations into reporting units based
on the degree of operating and financial independence of each unit and the
Company’s related management of them. These reporting units are tested for
impairment by comparing the unit’s fair value to its carrying
value.





The fair
value of each reporting unit was estimated using a discounted cash flow model
combined with market valuation approaches. Significant estimates and assumptions
are used in assessing the fair value of reporting units. These estimates and
assumptions involved future cash flows, growth rates, discount rates, weighted
average cost of capital and estimates of market valuations for each of the
reporting units.




The
Company has not recorded goodwill impairment charges for the three months ended
March 31, 2008 and 2007.




The
changes in the carrying amount of goodwill as of March 31,2008 are as
follows:




Goodwill
      balance as of December 31, 2005
            
            $
            —Goodwill
      related to share exchange with WWMP
            
            
            —Goodwill
      related to acquisition of Energy King Sacramento
            
            
            2,359,065Impairment
      adjustment
            
            
            —Goodwill
      balance as of December 31, 2006
            
            
            2,359,065Goodwill
      related to acquisition of Barnett assets (see note 5)
            
            
            476,198Impairment
      adjustment
            
            
            —Goodwill
      balance as of December 31, 2007
            
            
            2,835,263Goodwill
      related to acquisition of Gallagher’s Heating and Air
            
            
            3,970,622Goodwill
      balance as of March 31, 2008
            
            $
            6,805,885




7 - NOTES PAYABLE AND LONG-TERM
DEBT




Notes
payable and long-term debt consist of:




March
      31,
              2008
            
            
            December
      31,
              2007Convertible
      Debenture due Trafalgar Capital Specialized Investment Fund (net of
      unamortized discounts of $79,523 and $125,159, respectively), due December
      29, 2009
            
            $
            1,330,477
            
            
            $
            1,344,841Notes
      payable to sellers of EKI (net of unamortized discounts of $1,722,006 and
      $1,841,774), interest at 5%, due January 31, 2011.
            
            
            1,577,994
            
            
            
            1,458,226Note
      payable to seller of Gallagher’s, interest at 7%, due February 28,
      2010.
            
            
            2,000,000
            
            
            
            -Note
      payable to seller of Gallagher’s, interest at 4.375% ,due in monthly
      installments form January 29,2009 to April 29, 2010.
            
            
            1,586,667
            
            
            
            -Note
      payable to investor, interest at 10%, due October 31,
2008.
            
            
            200,000
            
            
            
            200,000




11




ENERGY
KING, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2008
(Unaudited)




Note
      payable to investor, interest at 12%, due October 31,
2008.
            
            
            100,000
            
            
            
            100,000Note
      payable to related party, interest at 24%, due December 31,
      2008.
            
            
            25,000
            
            
            
            25,000Note
      payable to investor, due February 29, 2008.
            
            
            -
            
            
            
            14,478Total
      ENKG
            
            
            6,820,138
            
            
            
            3,142,545HACS
      vehicle loans payable.
            
            
            111,818
            
            
            
            118,733EKI
      notes payable (primarily vehicle loans).
            
            
            137,697
            
            
            
            148,665Gallagher’s
      vehicle loans payable
            
            
            170,354
            
            
            
            -WWMPC
      notes payable
            
            
            22,591
            
            
            
            22,951Total
            
            
            7,262,598
            
            
            
            3,432,894Less
      current portion
            
            
            (1,310,619
            )
            
            
            (922,096
            )Long-term
      debt
            
            $
            5,951,979
            
            
            $
            2,510,798





At March
31, 2008, the Convertible Debenture balance consists of:





Principal
      outstanding
            
            $
            1,410,000Debt
      discounts attributable to the value of warrants issued to lender, less
      accumulated amortization of $76,927
            
            
            (79,523
            )Balance,
      net of unamortized discounts
            
            $
            1,330,477





In
connection with the private Securities Purchase Agreement with Trafalgar Capital
Specialized Investment Fund, a Luxembourg corporation (“Trafalgar”) dated June
29, 2007 (the “Agreement”) (see Note 8), the Company agreed to grant Trafalgar
warrants to purchase 1,250,000 shares at $0.001 per share and 50,000 warrants to
purchase shares of common stock at each of the first, second and third closing
for each $100,000 in Debentures, exercisable at the lower of $0.07 per share or
the closing bid price of the Registrant’s common stock on the date prior to the
issuance of each warrant. All of the warrants are exercisable for a period of 5
years from the date of issuance. At the first closing of $1,500,000 in September
2007, the Company issued Trafalgar 1,250,000 warrants exercisable at a price of
$.001 per share (valued at $106,125) and 750,000 warrants exercisable at a price
of $.07 per share (valued at $50,325).





In
accordance with Emerging Issues Task Force Issue 00-27, Application of Issue No.
98-5 to Certain Convertible Instruments ("EITF - 00-27"), and EITF 00-19,
“Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company’s Own Stock” the Company recognized the $156,450 total
value attributable to the warrants as an increase in additional paid-in capital
and a discount against the Debenture.





The
Company valued the warrants in accordance with EITF 00-27 using the
Black-Scholes pricing model and the following assumptions: contractual terms of
five years, an average risk free interest rate of 4.5%, a dividend yield of 0%
and volatility of 100%.





At March
31, 2008, the notes payable to sellers of EKI consists of:





Principal
      outstanding
            
            $
            3,300,000Debt
      discounts attributable to the contingent consideration due the sellers of
      EKI, less accumulated amortization of $177,994
            
            
            (1,722,006
            )Balance,
      net of unamortized discounts
            
            $
            1,577,994




On
November 15, 2007, the Company executed amendments to the agreement with the two
sellers of EKI. Pursuant to the amendments, the parties agreed to deem the
Purchase Price Adjustment Amount to be $0 and agreed to extend the maturity date
of the $3,300,000 outstanding notes payable (including the $1,900,000 considered
to be “contingent consideration”) to January 31, 2011. Pursuant to SFAS No. 15,
“Accounting by Debtors and Creditors for Troubled Debt Restructurings,” the
Company is accreting the $1,900,000 increase in notes payable to interest
expense using the interest method over the remaining 38.5 month term of the
notes.




12





ENERGY
KING, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2008
(Unaudited)





8 -
CONVERTIBLE DEBENTURE





The
Company entered into a private Securities Purchase Agreement with Trafalgar
Capital Specialized Investment Fund, a Luxembourg corporation (“Trafalgar”)
dated June 29, 2007 (the “Agreement”). Pursuant to the Agreement, the Company
agreed to issue to Trafalgar a 10% Secured Convertible Debenture (the
“Debenture”) in the aggregate amount of $5,000,000, to be funded as follows (i)
$1,500,000 on the first closing; $1,750,000 on the second closing; and
$1,750,000 on the third closing.




In
September 2007, the first closing for $1,500,000 occurred. In addition to
interest at 10%, the Agreement (as amended) also provides commencing December
2007, for the Company’s monthly payment of principal (totals of $30,000 in 2007,
$480,000 in 2008 and $990,000 in 2009) and redemption premiums (totals of $1,800
in 2007, $63,600 in 2008, and $251,400 in 2009) equal to 6% of principal
payments in December 2007 and 1% increases each month thereafter until the
Debenture is satisfied in full.





The
Company, at its option, has the right to redeem a portion or all of the
Debenture (provided that the last trading day’s closing bid price of ENKG common
stock is below $0.20 per share) at 120% of the amount redeemed.





The
Debenture is secured by the Company’s assets. In addition, the two principal
shareholders of the Company, co-founders, each pledged 17,857,143 million shares
of common stock which represents more than 50% of their common stock holdings.
The Debenture is convertible into shares of the Company’s common stock at the
lower of $0.20 per share or an amount equal to eighty-five percent (85%) of the
lowest volume weighted average price (“VWAP”) during the ten trading days
immediately preceding the conversion only if the closing bid price or the VWAP
for the Common Stock is at or above $0.20 per share. In the event the Company
defaults on any of its obligations under the Agreement, Trafalgar is entitled,
at its option, to convert the Debenture, plus accrued interest, into shares of
the Registrant’s common stock, even if the closing price or VWAP is less than
$0.20 per share.




In
connection with the Agreement, the Company agreed to grant Trafalgar warrants to
purchase 1,250,000 shares at $0.001 per share and 50,000 warrants to purchase
shares of common stock at each of the first, second and third closing for each
$100,000 in Debentures, exercisable at the lower of $0.07 per share or the
closing bid price of the Company’s common stock on the date prior to the
issuance of each warrant. All of the warrants are exercisable for a period of 5
years from the date of issuance.




The
Company has agreed to register the shares of Common Stock underlying the
conversion of the Debentures and the exercise of the warrants, subject to the
provisions of Rule 415 under the Securities Act of 1933. The Investor
Registration Rights Agreement provides that in the event that the Registration
Statement is not declared effective by the Securities and Exchange Commission
(the “SEC”) on or before the Scheduled Effective Date (December 20,2007, as
amended), the Company is to pay Trafalgar as liquidated damages an amount equal
to 2% of the outstanding balance for each 30 day period (or any part thereof)
after December 20, 2007 that the Registration Statement is not declared
effective by the SEC. On December 6, 2007, the Company filed a Registration
Statement with the SEC. On February 14, 2008, the Company filed Amendment No. 1
to the Registration Statement in response to a SEC comment letter. On April 29,
2008, the Company filed Amendment No. 2 to the Registration Statement. As of
March 31, 2008, failure to cause the Registration Statement to be declared
effective has resulted in total liquidated damages of $150,000, of which the
Company has paid $120,000 and has included $30,000 in accrued expenses in
the consolidated balance sheet to reflect the liability at that date. For the
three months ended March 31, 2008, selling, general and administrative expenses
include liquidated damages of $120,000.





9
- ACCRUED EXPENSES PAYABLE




Accrued
expenses payable consisted of:




March
      31,
              2008
            
            
            December
      31,
              2007Compensation
      of officers
            
            $
            335,561
            
            
            $
            287,117Other
      compensation, payroll taxes and withholdings
            
            
            239,105
            
            
            
            188,581Interest
            
            
            322,850
            
            
            
            222,314Warranty
      reserve
            
            
            111,996
            
            
            
            81,583Liability
      related to acquisition
            
            
            102,000
            
            
            
            102,000Other
            
            
            283,687
            
            
            
            193,705Total
            
            $
            1,395,199
            
            
            $
            1,075,300




13





ENERGY
KING, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2008
(Unaudited)





10
- EMPLOYEE BENEFIT PLANS




The
Company provides a qualified deferred arrangement 401(k) plan whereby employees
may contribute up to 25% of gross compensation to the plan. The Company has the
option to match employee contributions up to 4% of the employees’ wages. There
were no Company contributions during the three months ended March 31, 2008 and
2007.




11 - PREFERRED STOCK




From 1988
to 2003, WWMO issued different series of preferred stock, some $.01 par value
and some $10.00 par value, to acquire motion picture and television properties
and to compensate for services. The preferred stock ranks senior to the common
stock in respect of dividends and liquidation rights. Shares of preferred stock
are nonvoting and are not entitled to mandatory dividends. Some series of
preferred stock are convertible into common stock; other series are
not.




On
February 22, 2006, effective March 1, 2006 and pursuant to the Share Exchange
Agreement, WWMO issued 796,869 shares of preferred stock, $.01 par value,
designated Series 06-W, to BVI's two stockholders.





At March
31, 2008, preferred stock consisted of:




Series
            
            Number
      of Shares of Preferred Stock
            
            
            Number
      of Shares of Common Stock
              Convertible
      Into$.01
      par value total
            
            
            975,086
            
            
            
            255,268$10.00
      par value total
            
            
            23,000
            
            
            
            4,000Total
      Preferred Stock
            
            
            998,086
            
            
            
            259,268




12 - COMMON STOCK





On
January 28, 2008, the Company issued 1,000,000 restricted shares of its common
stock to a consultant for services rendered and has included the $40,000
estimated fair value of these shares at January 28, 2008 in selling, general and
administrative expenses in the three months ended March 31, 2008.





Effective
March 31, 2008, the Company is to issue a total of 1,400,000 restricted shares
of its common stock to two Company Officers pursuant to executed employment
agreements effective January 1, 2008 (see Note 15). The Company has included the
$123,000 estimated fair value of these shares at March 31, 2008 in selling,
general and administrative expense in the three months ended March 31,
2008.




On June
28, 2007, the Company issued a total of 3,000,000 shares of its common stock to
the two former Energy King, Inc. (EKI) stockholders. 2,500,000 shares were
issued to one of the former EKI stockholders in satisfaction of $500,000 in
notes payable to him and 500,000 shares of the Company’s common stock were
issued to the other former EKI stockholder in satisfaction of $100,000 in notes
payable to this joint tenancy.




On June
28, 2007, the Company issued a total of 2,040,000 Units of the Company’s
securities to five investors in satisfaction of $510,000 in notes payable to
such investors. Each Unit is comprised of one share of the Company’s common
stock and three warrants, each warrant exercisable into one share of common
stock at a price of $0.05 per share and expiring at dates ranging from June 21,
2008 to September 14, 2008.




On March
31, 2007, the Company issued 400,000 shares of its common stock to an investor
it was indebted to under a note payable in the amount of $162,530 at December
31, 2006. Pursuant to a verbal agreement, the note payable to this investor was
to be reduced by amounts realized from this investor’s sale of the 400,000
shares. Through September 30, 2007, this investor sold 160,900 shares of the
Company’s common stock for net proceeds of $21,025. In October 2007, the Company
repaid the remaining balance due this investor less an agreed reduction of
$23,910 for the 239,100 unsold shares.





On
January 8, 2007, the Company issued 1,000,000 shares of its common stock to
WWMPC. Since WWMPC is a wholly owned subsidiary of ENKG, this transaction was
not reflected at the date of issuance. In the three months ended June 30, 2007,
WWMPC delivered 230,000 of the 1,000,000 shares to third parties for
certain services to be rendered to WWMPC. The Company has reflected the $23,000
estimated fair value of the 230,000 shares of its common stock as an increase in
selling, general and administrative expenses.




14





ENERGY
KING, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2008
(Unaudited)





13 - INCOME TAXES




ENKG
files a consolidated income tax return with its subsidiaries for federal
reporting purposes with subsidiaries filing separate income tax returns for
state reporting purposes.





The
provision for income taxes consists of the following:




Three
      Months EndedMarch
      31,
              2008
            
            
            March
      31,
              2007Current—Federal
            
            $
            —
            
            
            $
            —State
            
            
            2,785
            
            
            
            3,039Total
      current
            
            
            2,785
            
            
            
            3,039


Deferred—Federal
            
            
            (406,404
            )
            
            
            18,989State
            
            
            (103,940
            )
            
            
            4,856Valuation
      allowance
            
            
            510,344
            
            
            
            (23,845
            )Total
      deferred
            
            
            —
            
            
            
            —Total
      income taxes
            
            $
            2,785
            
            
            $
            3,039




A
reconciliation of the expected income tax expense (benefit) to reported income
taxes follows:




Three
      Months EndedMarch
      31,
              2008
            
            
            March
      31,
              2007Federal
      income tax at 34%
            
            
            (441,744
            )
            
            
            20,640State
      income tax, net
            
            
            (65,815
            )
            
            
            6,244Change
      in valuation allowance
            
            
            510,344
            
            
            
            (23,845
            )Total
            
            $
            2,785
            
            
            $
            3,039




Management
has not determined it to be more likely than not that any portion of the
deferred tax asset attributable to the future utilization of the net operating
loss carryforwards as of March 31, 2008 will be realized. Accordingly, the
Company has provided a 100% allowance against the deferred tax asset in the
financial statements at March 31, 2008. The Company will continue to review this
valuation allowance and make adjustments as appropriate. The net operating
loss carryforwards are available in varying amounts through year 2028 to offset
future taxable income. Current tax laws limit the amount of loss available to be
offset against future taxable income when a substantial change in ownership
occurs. Therefore, the amount available to offset future taxable income will be
limited.




14 - COMMITMENTS AND
CONTINGENCIES




Operating
leases:




ENKG
leased its office space (approximately 400 square feet) under a
non-cancelable lease agreement executed June 12, 2006 and which expired December
31, 2007. The lease has been continued as a month-to-month lease agreement
executed on January 3, 2008. The lease provides for monthly rental payments of
$2,038.




HACS
leases its office space (approximately 12,000 square feet) under a
non-cancelable lease agreement executed January 26, 2005 with a lessor partially
owned by the General Manager of HACS. The lease provides for monthly rental
payments of $7,500 through January 2010. EKI leases its office space
(approximately 4,000 square feet) under a month-to-month lease with a rental of
$2,700 per month at Sacramento and $1,800 per month for its Riverbank
operations, and negotiations are underway to extend the leases. WWMPC leases its
office space under a one year lease expiring December 2007 at rentals of $776
per month and has been extended on a month-to-month basis. HACS leases truck
vehicles under month to month lease agreements.





15





ENERGY
KING, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2008
(Unaudited)




Gallagher’s
Heating and Air Conditioning (GHAC) rents its Los Molinos, CA facility
(approximately 4,000 square feet) from Tim Gallagher at $2,500 per month. The
lease is through December 31, 2009. GHAC rents a facility in Yuba City, CA
(approximately 2,000 square feet) at $1,900 per month on a month-to-month
lease.





For the
three months ended March 31, 2008 and 2007, rent expense under operating leases
consisted of:




March
      31,
              2008
            
            
            March
      31,
              2007ENKG
      Corporate office space
            
            $
            6,114
            
            
            $
            3,849HVAC
      office space
            
            
            43,239
            
            
            
            36,000HVAC
      truck vehicles
            
            
            25,842
            
            
            
            26,923WWMPC
      office space
            
            
            2,657
            
            
            
            2,533Total
            
            $
            77,852
            
            
            $
            69,305





At
December 31, 2007, the aggregate future minimum lease payments under
non-cancelable lease agreements were as follows:




Year
      Ended December 31,
            
            Operating
            
            
            Capital2008
            
            $
            152,075
            
            
            $
            13,0562009
            
            
            137,326
            
            
            
            12,1602010
            
            
            27,014
            
            
            
            13,2852011
            
            
            4,798
            
            
            
            14,5132012
            
            
            —
            
            
            
            14,254Total
      Future Minimum Payments
            
            $
            321,213
            
            
            
            67,268Less:
      Executory and Interest Costs
            
            
            
            
            
            
            20,287Net
      Present Value of Future Minimum Lease Payments
            
            
            
            
            
            $
            46,981




Employment
Agreements:




On
February 29, 2008, ENKG entered into an employment agreement with Tim Gallagher
as its General Manger of Gallagher’s operations. The term of the agreement is
from February 29, 2008 through December 31, 2009 at an annual salary of
$150,000.




Contingency:




Claims
and Lawsuits




The
Company is subject to certain claims and lawsuits arising in the normal course
of business. The Company maintains various insurance coverages to minimize
financial risk associated with these claims.




The
Company estimates and provides accruals for probable losses and related legal
fees associated with litigation. While the Company cannot predict the outcome of
proceedings, in management’s opinion and based on reports of counsel, any
liability arising from these matters individually and in the aggregate will not
have a material effect on the Company’s operating results or financial
condition, after giving effect to provisions already recorded.




16


ENERGY
KING, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2008
(Unaudited)





15– SUBSEQUENT EVENTS




On April
1, 2008, ENKG entered into an employment agreement with its Vice President of
Operations with an effective date of January 1, 2008. The agreement runs through
December 31, 2009. His salary is set at $120,000 per year with a 5% minimum
annual increase each January 1st . Pursuant to the agreement, the employee is to receive 700,000 shares
of ENKG common stock effective March 31, 2008 and subject to completion of
certain conditions be awarded stock options to purchase up to 3,000,000 shares
of ENKG common stock at prices ranging from $0.25 to $0.50 per
share.





On April
1, 2008, ENKG entered into an employment agreement with its Vice President and
Chief Financial Officer with an effective date of January 1, 2008. The agreement
runs through December 31, 2009. His salary was set at $120,000 per year with a
5% minimum annual increase each January 1st . Pursuant to the agreement,
the employee was to receive 700,000 shares of ENKG common stock effective March
31, 2008 and subject to completion of certain conditions be awarded stock
options to purchase up to 3,000,000 shares of ENKG common stock at prices
ranging from $0.25 to $0.50 per share.  On August 29, 2008, ENKG
accepted the resignation of its Vice President and Chief Financial
Officer.





On May
23, 2008, Mr. Jeffrey R. Hultman was appointed by the Board as CEO, pursuant to
meetings of Board members and executives, interviews by Board members and a
Board vote held May 17, 2008 for a term of two years. Mr. Hultman will
receive cash compensation for his services as CEO in the amount of $175,000
annually.  Cash compensation shall be accrued until a financing of at
least $2,000,000 (“Financing”) is completed. In addition, Mr. Hultman will
receive (1) employee stock options to purchase shares of the Company’s common
stock pursuant to a to be approved Company Stock Option Plan ("Plan"), with
an exercise price equal to the closing price of the Company’s common stock on
the grant date of the option, as reported by the OTC Bulletin Board, and (2)
options to purchase shares of the Company’s common stock equal to 5.0% of the
outstanding Common Shares after the Financing is completed. These options shall
vest over a three-year period with 1/12 of the total vesting on the last day of
each quarter starting from the Effective Date of the employment
agreement.  Vested shares subject to the options will be subject to
the terms and conditions of the Plan and any associated stock option
agreement.





Effective
July 1, 2008, ENKG sold WWMPC for $1. The loss on sale of WWMPC will be included
in discontinued operations in the three months ended September 30, 2008 and,
excluding disputed items, is expected to approximate $45,758, as
follows:




Sale
      price
            
            $
            1Net
      assets of WWMPC at June 30, 2008:Cash
      and cash equivalents
            
            
            112,511Property
      and equipment, net
            
            
            80,504Accounts
      payable
            
            
            (3,025
            )Accrued
      expenses
            
            
            (21,880
            )Current
      portion of notes payable and long-term debt
            
            
            (18,641
            )Customer
      deposits and deferred revenue
            
            
            (140,000
            )Notes
      payable and long-term debt, net of current portion
            
            
            (3,750
            )Net
      assets
            
            
            5,719Fair
      value of 770,000 shares of ENKG common stock at July 1, 2008 (to be
      retained by WWMPC) (see note 12)
            
            
            40,040Expected
      loss on sale of WWMPC
            
            $
            (45,758
            )




WWMPC and
Paul Hancock have advised ENKG that ENKG is and has been obligated to pay Paul
Hancock a monthly salary (ranging from $9,166 to $15,833 per month through
February 28, 2012) pursuant to an amended Employment Contract dated March 1,
2006. WWMPC also has advised ENKG that ENKG is and has been obligated to pay
WWMPC a monthly expense allowance ($6,500 per month through February 28, 2012)
pursuant to an Operating Agreement dated March 1, 2006. ENKG advised WWMPC and
Paul Hancock that, commencing January 1, 2008, ENKG was no longer responsible
for such payments. The total disputed amount at June 30, 2008, which has not
been accrued, is approximately $100,000. Further, WWMPC has advised ENKG that
ENKG is obligated to issue and deliver an additional 2,000,000 shares of ENKG
common stock to WWMPC pursuant to the Operating Agreement dated March 1, 2006
(which ENKG disputes).





On July
2, 2008, the Company issued 2,000,475 shares of its restricted common stock in
settlement of liabilities accrued at December 31, 2007.




17





ENERGY
KING, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2008
(Unaudited)





16– RESTATEMENT OF PREVIOIUSLY ISSUED
FINANCIAL STATEMENTS





The
Company has restated its consolidated financial statements at March 31, 2008 and
for the three months then ended (which were previously included in the Company’s
Form 10-QSB filed with the SEC on May 15, 2008) in order to correct an error
relating to the accounting for the November 15, 2007 amendments to the agreement
with the two sellers of EKI (see note 7).





As
previously reported, the Company recorded the November 15, 2007 resolution of
the $1,900,000 contingent consideration (and extension of the maturity date of
the outstanding notes payable) relating to the EKI acquisition as a $1,900,000
addition to goodwill and notes payable. As restated, pursuant to SFAS No. 15,
the Company reflected the $1,900,000 as a discount on the notes payable and has
accreted $119,768 (of the $1,900,000) as interest expense for the three months
ended March 31, 2008.





The
effect of the restatement adjustments on the consolidated balance sheet at March
31, 2008 follows:




As
      Previously Reported
              
              
              Adjustments
              
              
              As
      RestatedASSETSTotal
      current assets
              
              $
              2,369,740
              
              
              $
              --
              
              
              $
              2,369,740Goodwill
              
              
              8,705,885
              
              
              
              (1,900,000
              )
              
              
              6,805,885Other
      non-current assets
              
              
              1,234,702
              
              
              
              --
              
              
              
              1,234,702Total
      assets
              
              $
              12,310,327
              
              
              $
              (1,900,000
              )
              
              $
              10,410,327LIABILITIES AND STOCKHOLDERS'
      EQUITYTotal
      current liabilities
              
              $
              5,133,699
              
              
              $
              --
              
              
              $
              5,133,699Notes
      payable and long-term debt, net of current portion
              
              
              7,673,985
              
              
              
              (1,722,006
              )
              
              
              5,951,979Total
      liabilities
              
              
              12,807,684
              
              
              
              (1,722,006
              )
              
              
              11,085,678Stockholders'
      equity
              
              
              (497,357
              )
              
              
              (177,994
              )
              
              
              (675,351
              )Total
      liabilities and stockholders' equity
              
              $
              12,310,327
              
              
              $
              (1,900,000
              )
              
              $
              10,410,327




The
effect of the restatement adjustments on the consolidated statement of
operations for the three months ended March 31, 2008 follows:





As
      Previously Reported
              
              
              Adjustments
              
              
              As
      RestatedOperating
      income (loss)
              
              $
              (939,935
              )
              
              $
              --
              
              
              $
              (939,935
              )Interest
      income
              
              
              4,681
              
              
              
              --
              
              
              
              4,681Other
      income
              
              
              1,361
              
              
              
              --
              
              
              
              1,361Interest
      expense
              
              
              (245,586
              )
              
              
              (119,768
              )
              
              
              (365,354
              )Income
      (loss) before income taxes
              
              
              (1,179,479
              )
              
              
              (119,768
              )
              
              
              (1,299,247
              )Income
      tax expense
              
              
              2,785
              
              
              
              --
              
              
              
              2,785Net
      income (loss)
              
              $
              (1,182,264
              )
              
              $
              (119,768
              )
              
              $
              (1,302,032
              )Income
      (loss) per share; basic and diluted
              
              $
              (.01
              )
              
              $
              (.00
              )
              
              $
              (.01
              )




18





Item 2. Management's Discussion and Analysis or Plan
of Operation




Management's
discussion and analysis of financial condition and results of operations should
be read in conjunction with the consolidated financial statements and related
notes. This discussion may contain forward-looking statements that could involve
risks and uncertainties.





DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS AND MANAGEMENT'S STATEMENT REGARDING
INTERIM PERIOD ADJUSTMENTS




The
statements which are not historical facts contained in this Form 10-QSB are
"forward looking statements" that involve risks and uncertainties. The words
"anticipate", "believes", "expect", "intend", "may" or similar expressions used
in this Form 10-QSB as they relate to the Company or its Management are
generally intended to identify such forward looking statements. These risks and
uncertainties contained in this Form 10-QSB include but are not limited to,
product demand and market acceptance risks, the effect of economic conditions
generally and retail/wholesale in the heating, ventilation, air
conditioning, plumbing, motion picture and television industry and marketing
conditions specifically, the impact of competition, labor shortages, increase in
wage rates, unexpected increases in general operating costs, technological
difficulties, capacity and supply constraints or difficulties, the results of
financing efforts, changes in consumer preferences and trends, the effect of the
Company's accounting policies, weather conditions, acts of God, and other risks
detailed in the Company's Securities and Exchange Commission filings. The
Company's management has made all the adjustments relative to the fiscal year
end statements and the interim period herein, which in the opinion of
management are necessary in order to make the financial statements and any
forward looking statements not misleading.





Forward-looking
statements are based on current information and expectations and are made in
good faith but we assume no obligation to update them at
any stage. Therefore, our actual experience and results achieved
during the period covered by any particular forward-looking statement may
differ substantially from those anticipated. Consequently, the inclusion of
forward-looking statements should not be regarded as a representation by us
or any other person that these estimates will be realized, and actual
results may vary materially. We cannot offer any assurance that any of
these expectations will be realized or that any of the forward-looking
statements contained herein will prove to be accurate.





RESULTS
OF OPERATIONS




Comparison
of Results of Operations for the three months ended March 31, 2008 and
2007





CONSOLIDATED
OVERVIEW




Energy
King (the "Company") reported consolidated revenues of $2,827,951 for the first
three months of 2008 which is a decrease of 8.4% or $259,047 over the $3,086,998
reported in the first three months of 2007.  This first quarter of
2008 reflects the economic concerns of residential homeowners across the
country. Still, at current operational levels, and accounting for the
traditional lower sales volume during the first quarter of the year, management
feels sales are on track to reach $22 million or more by year end 2008. On
February 29, 2008, Galalgher’s Heating and Air Conditioning, Inc. (GHAC) was
acquired. It is located in Los Molinos, CA which is about 2 hours north
east of Sacramento, CA. GHAC is expected to bring approximately $6.5 million in
revenues to the company in 2008. The Company expects revenue growth to continue
in proportion to future acquisitions’ revenue streams. The heating ventilation
and air conditioning (HVAC) industry has cyclical components. Sales
traditionally decline in the middle of the fourth quarter through the first
quarter of the new year. The Company believes that positive factors such as
greater consumer awareness of energy conservation through better HVAC equipment
utilization as well as higher consumer confidence and increased home sales will
help it overcome rising fuel costs. The Company continues to remain focused on
acquisitions, top-line sales growth, and increased customer retention. With the
opportunity of combining locally acquired HVAC businesses in specific regions
across the United States with the logo and name Energy King, a nationally
recognized brand name is getting closer to reality.




OPERATIONS
REVIEW




Currently
there are five operational HVAC locations providing direct HVAC installation and
repair services; Heating & Air Conditioning Services, Inc. ("HACS") and
Energy King, Inc.-Sacramento, California ("EKIS"), Energy King, Inc.’s Barnett
Heating and Air near Modesto, California (“EKIB”), Energy King, Inc.-Fresno,
California ("EKIS"), and Gallagher’s Heating and Air Conditioning, Inc. in Los
Molinos, CA.




19









The HVAC
operations reflect the seasonal nature of heating and cooling. Overall, the
integration plan used with HACS is providing positive operational results there
as well as with the California locations. The same plan will be tailored to
future acquisitions to improve marketing, administration and sales efforts. The
integration plan is comprised of a team of professionals with experience in the
HVAC industry who work with the acquired company's management and field staff to
develop and train their people in techniques to improve sales. Key components of
the integration include, standardized reporting of operations, customer
awareness and support, lead generation and follow through, focused marketing,
employee training and pricing strategies. The following table illustrates the
performance of each HVAC location through the first three months of 2008.





Three
      months Ended March 31, 2008


HVAC
            
            101
              HACS
            
            
            102
              EKIS
            
            
            103
              EKIB
            
            
            104
              EKIF
            
            
            105
              GHAC-LM
            
            
            TOTAL
      HVACRevenues
            
            $
            850,941
            
            
            $
            1,038,409
            
            
            $
            524,787
            
            
            $
            77,219
            
            
            $
            336,595
            
            
            $
            2,827,951Gross
      Profit
            
            
            99,618
            
            
            
            397,957
            
            
            
            186,373
            
            
            
            22,838
            
            
            
            148,655
            
            
            
            855,441Gross
      Profit Percentage
            
            
            11.71%
            
            
            
            38.32%
            
            
            
            35.51%
            
            
            
            29.58%
            
            
            
            44.16%
            
            
            
            30.25%Income
      (Loss) from Operations
            
            
            (122,754
            )
            
            $
            23,053
            
            
            $
            (72,068
            )
            
            $
            (29,102
            )
            
            $
            (44,555
            )
            
            $
            (245,426
            )Income
      (Loss) from Operations Percentage of Revenues
            
            
            -14.43%
            
            
            
            2.22%
            
            
            
            -13.73%
            
            
            
            -37.69%
            
            
            
            -13.24%
            
            
            
            -8.68%




Sales of
the HVAC operations continue to increase. With the upcoming hotter weather
throughout the United States, all locations are expected to improve their
revenues and net income from operations starting with Spring through the Summer.
The introduction of windows as a product available through HVAC in California
have shown unexpected acceptance and sales. The windows that are offered help
insulate the home thereby saving on heating and cooling bills. We are looking to
improve theGreen  image of our HVAC operations through windows and other
similar energy conservation measures. Offering more energy saving air
conditioning units along with similar green heating units will improve the image
of the Company and the industry. While helping increase sales through theGreen  approach
for our customers, we are looking to make a positive difference in the
environment as well.




The
following table presents selected HVAC, MEDIA, Corporate and Consolidated
financial data for the period indicated.




Three
      months Ended March 31, 2008HVAC
            
            
            Media
            
            
            Corporate
            
            
            ConsolidatedRevenues
            
            $
            2,827,951
            
            
            $
            ---
            
            
            $
            ---
            
            
            $
            2,827,951COS
      and expenses
            
            
            3,073,367
            
            
            
            33,142
            
            
            
            746,547
            
            
            
            3,853,056Income
      (Loss) from Operations
            
            
            (245,418
            )
            
            
            (33,142
            )
            
            
            (746,547
            )
            
            
            (1,025,106
            )Cash
      and cash equivalents
            
            
            65,222
            
            
            
            146,277
            
            
            
            56,255
            
            
            
            267,754Current
      assets
            
            
            2,160,771
            
            
            
            146,277
            
            
            
            62,692
            
            
            
            2,369,740Total
      assets
            
            
            4,073,078
            
            
            
            251,313
            
            
            
            7,985,936
            
            
            
            12,310,327Current
      liabilities
            
            
            2,567,002
            
            
            
            165,322
            
            
            
            2,401,375
            
            
            
            5,133,699Total
      liabilities
            
            $
            2,891,096
            
            
            $
            165,322
            
            
            $
            9,751,265
            
            
            $
            12,807,683




Consolidated
loss from operations for the first three months of 2008 is at 36% of net sales.
The driving force behind the loss was twofold; first, sales declined 8.4% over
the same three month period in 2007, and secondly, Corporate interest expenses
increased from 2.3% to 8.7 % of sales for the three months ended March 31, 2007
and 2008 respectively.




20




Sales
decreased $259,047 in the first three months of 2008 compared to the same period
of 2007. This decline was initially seen in December of 2007 as the economic
conditions of homeowners began to be impacted by a depressed mortgage industry.
We see this as a short-term condition which should be reversed by the end of the
second quarter of 2008.





Cost of
services increased $265,434 or over 15.5% during the first quarter of 2008 over
the same three months of 2007. The operational plan implemented by Energy King
Management to combat the declining sales and rising cost of services stressed
cost reductions without layoffs. Although the cost of equipment saw the
traditional New Year’s prices increases, it was the cost of fuel that made the
greatest impact by increasing to 2.3% of sales during the first three months of
2008 from an average of less than 1% in 2007. The HVAC operations absorbed most
increases in costs to secure new sales. A focused effort on cost controls and
strategic vendor alliances has helped reduce the effect of the apparent economic
downturn. With more acquisitions and greater economies of scales, management is
confident that future such economic obstacles can be more easily
absorbed.




Marketing
and selling expenses remained steady in the face of declining sales. At
$372,036, marketing and selling expenses for the first three months of 2008 were
less than 1% over the same period in 2007. Marketing costs represented 19.8% of
total expenses and 13.2% of net revenues for the first quarter of 2008 compared
to 10.1% and 11.9%, respectively, in the first three months of 2007. The impact
of this increased marketing effort per dollar of sales is expected to generate
returns in the second and third quarters of 2008. Of the variety of marketing
efforts used, nearly 80% of all marketing funds went to a combination of
television, yellow pages, direct mailing, radio and newspaper
efforts.





General
and administrative (G&A) expenses increased 43.5% in the first quarter of
2008 over the same period of 2007, and represents 44.6% of net revenues in the
first quarter of 2008 as compared with the first three months of the year in
2007 where G&A expenses represented only 28.5% of revenues.
Non-cost-of-service salaries and related costs were 33.7% of total expenses in
the first quarter of 2008 and right at 35% for the same period in 2007.
Accounting, legal and other professional costs actually decreased $78,470 to
approximately 14.7% of total expenses and 9.8% of net revenues for the three
months ended March 31, 2008 over the first quarter 2007 which saw the same
expenses representing right at 9.8% and 11.5% of total expenses and net
revenues, respectively. As a percent of total G&A expenses, rent expense
decreased $86,135 to 1.8% of costs in the first quarter of 2008. Insurance
decreased $102,601 in the first quarter of 2008 over the same quarter of 2007 to
represent 3.1% of total costs for the first quarter of 2008.




Interest
expense increased $292,992 to $365,354 in the first quarter of 2008 or 13.1% of
total expenses for the three months ended March 31, 2008.




In the
midst of declining sales, Energy King increased its marketing efforts,
maintained its level of salesmen, technicians and installers and is poised to
emerge in the second and third quarters of 2008 with increased HVAC sales and
profits. Revenues are expected to increase to $22 million by the end of 2008.
With management’s philosophy of controlling costs of services as well as
selling, general and administrative expenses, the efficacy of Energy King’s
business philosophy is strong. It is a philosophy designed to bring proven
techniques for increasing leads which result in sales. A philosophy of cost
controls and cost consciousness at all levels of the company. A philosophy of
training the salesmen, installers and technicians in better techniques. The fact
that Energy King is entering the second quarter of 2008 with well trained
employees who were not laid off to cut costs, a solid HVAC marketing effort that
has been working for the entire first quarter and the February 29, 2008
acquisition of Gallagher’s Heating and Air in Los Molinos, CA is in support of
management’s sound business decisions in the identification of prime candidates
for acquisition, negotiating the best deal possible for all parties
involved and increasing the consolidated results as a consequence of the
acquisitions. The soundness of the Energy King mission is clear.




At
Energy King, our mission is to become the leading national brand of residential
comfort services contractors by acquiring the industry's most outstanding
operators, sharing best practices, offering the most ethical and professional
services and providing solutions that meet our customers' needs and exceed
their expectations.




21




General




The terms
“Energy King,” “ENKG,” ”EKI,” “Buckeye Ventures,” “BEYV,” ”BVI,” “we,” “us,” or
“the Company” refer to Energy King, Inc. and its consolidated subsidiaries, as
appropriate in the context.




Energy
King, Inc. was formed in July 2005 for the purpose of becoming a consolidator of
independent local and regional providers of residential heating, ventilating,
air conditioning and plumbing ("HVAC/Plumbing") services and replacement
equipment through the United States.




The
Company's goal is to become a leading HVAC/Plumbing service provider in each of
the markets in which it operates or will operate. The Company's management is
comprised of executives and operators with extensive experience in the
HVAC/Plumbing industry generally as well as experience in HVAC/Plumbing service
consolidation, management and operations, including large multi-location,
national, regional and local HVAC/Plumbing companies.




The
Company believes that by pursuing its plan of combining local and regional
HVAC/Plumbing service providers into a well-managed national organization, the
Company should be able to create a national HVAC/Plumbing service provider with
brand name recognition throughout the HVAC/Plumbing service industry. We believe
that with national recognition the Company will be able to strengthen and
consolidate its customer bases and improve overall operating efficiency,
utilizing centralized management expertise and strong local presences in each
market.




Energy
King, Inc., a Nevada corporation, provides comprehensive heating,
ventilation and air conditioning (“HVAC”) installation, maintenance, repair and
replacement services within the mechanical services industry in 5 locations in
the United States. We operate primarily in the residential HVAC markets, and
perform most of our services within residential homes. In addition to standard
HVAC services, certain locations also provide specialized applications such as
improved home insulation through window installations. Approximately 80% of our
consolidated revenues were derived from residential installation customers with
approximately 15% of the revenues attributable to maintenance, repair and
replacement services and 5% attributable to windows installation.




Buckeye
Ventures, Inc. ("BEYV") was incorporated in Michigan under the name World Wide
Motion Pictures Corporation ("WWMO") on December 9, 1980. Pursuant to a Share
Exchange Agreement dated October 14, 2005 (which closed February 22, 2006,
effective March 1, 2006), BEYV (then known as WWMO) acquired Buckeye Ventures,
Inc. ("BVI") in a "reverse acquisition" transaction and accordingly the
trading symbol was changed from WWMO to BEYV in April
2006.




BVI was
incorporated in Nevada on June 24, 2005 for the purpose of acquiring and
operating businesses in the heating, ventilation and air conditioning ("HVAC")
and plumbing service industries. On September 22, 2005 (effective July 31,
2005), BVI acquired its first HVAC subsidiary located in the Boston, MA
region.





Effective
February 15, 2008, Buckeye Ventures, Inc. officially changed its name to Energy
King, Inc. and accordingly the trading symbol was changed from BEYV to ENKG to
better reflect the new name.





Our
present and future focus is on the HVAC service and replacement markets for
residential and small commercial customers because it is our management's
belief, based upon years of industry experience, that the service and
replacement market offers higher margins and exposes us to a reduced
level of credit risk compared to the levels of risk usually associated with
larger scale new construction projects. In addition, we believe that the
HVAC/Plumbing service and replacement market offers more attractive pricing due
to demands by both residential and small commercial customers in local markets
for prompt, convenient and reliable service that can be offered by local
HVAC/Plumbing service providers.




Our
Internet address ishttp://www.enkg.com. We make available free of charge on or through our
website our annual report on Form 10-KSB, quarterly reports on
Form 10-QSB, current reports on Form 8-K, and amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of
the Exchange Act as soon as reasonably practicable after we electronically file
such material with, or furnish it to, the Securities and Exchange Commission, or
the Commission.




22




GENERAL
DESCRIPTION OF THE HEATING, VENTILATION AND AIR CONDITIONG SERVICES
INDUSTRY




The
HVAC/Plumbing service industry is highly fragmented and the Company estimates,
based upon industry data, that there are at least 80,000 HVAC/Plumbing companies
in the US, mostly privately held companies that operate from a single location.
We believe based upon published industry data estimates that the market for the
service and replacement of HVAC/Plumbing systems in existing homes is in excess
of $50 billion annually.




Generally,
local HVAC/Plumbing companies are small, owner-operated, independent contractors
who serve customers in local markets, with limited access to capital for
investment in infrastructure, technology and expansion. We believe that
HVAC/Plumbing businesses are typically closely-held, single-center operators
that serve a limited geographic area and are heavily dependent upon referrals
to generate business. We also believe that, in many cases, these
small-sized service providers are operated by former service technicians who
lack the management experience and marketing expertise necessary to expand their
businesses, generate profitable operations and compete effectively with larger
operators in their local market as well as regional operators competing in their
market.




Our
management believes that larger HVAC/Plumbing contractors are generally better
able to operate efficiently and cost-effectively, offer customers a broader
array of HVAC/Plumbing related products and services and provide a higher level
of customer service than smaller operators. We believe that these competitive
advantages are the result of greater managerial and financial resources as well
as economies of scale in purchasing and marketing expenses, which factors should
enable us to promote a trend toward consolidation in the HVAC/Plumbing industry
and present an opportunity for well-capitalized operators, including
public companies such as us, to acquire additional operators on
favorable terms.





At
present, we serve the greater Sacramento, Los Molinos, Modesto, and Fresno, CA
and Boston, MA metropolitan area markets, principally providing renovation and
replacement service to residential and small business customers rather than new
construction HVAC/Plumbing installations. It is the view of our management,
based upon their experience and continuing HVAC/Plumbing industry analysis, that
many metropolitan and suburban areas in the U.S. have experienced significant
growth in residential HVAC/Plumbing renovation and replacement activity over the
last several years as a result of the past several years of strong residential
housing market nationally. We believe, even with the recent slowing in new
residential construction and the slowing of sale price increases in
residential home that the demographic trends indicate continued growth in the
areas of HVAC/Plumbing renovation and replacement as homeowners seek ways to add
value to their homes.




The
HVAC/Plumbing service industry is influenced by seasonal factors, which
generally result in lower activity during winter months than in other periods.
This factor is especially apparent in northern and mid-western regions of the
U.S. As a result, we expect that revenues and profits from our Sacramento, Los
Molinos, Modesto, and Fresno, CA and Boston, MA area operations and other such
markets in which we make acquisitions will generally be lower in the first and
fourth quarters of each fiscal year, and higher in the second and third
quarters. As we make acquisitions in the south and southwest areas of the U.S.,
seasonal factors will become less apparent in our consolidated
operations.




HVAC
systems provide the primary method of circulating fresh air in residences during
peak periods of heat and cold climate conditions. In many instances, replacing
an aging system with a modern, energy-efficient HVAC system significantly
reduces a home's heating and cooling costs and improves air quality and HVAC
system effectiveness. Older residential HVAC systems often have poor air quality
as well as inadequate air conditioning, and older HVAC systems result in
significantly higher energy costs than do modern systems. These factors cause
many residential owners to consider replacing older systems before the end of
their functioning lives. More than fifty percent of the HVAC systems replaced
are operational at the time of replacement.




Many
factors positively affect HVAC industry growth, particularly (i) population
growth, which has increased the need for residential space, (ii) an aging
installed base of HVAC equipment, (iii) increasing sophistication,
complexity, and efficiency of HVAC systems, (iv) growing emphasis on indoor
air quality, (v) reduction or elimination of the refrigerants commonly used
in older HVAC systems, and (vi) increasingly stringent regulations on
minimum HVAC and house ducting systems efficiency standards. We believe these
factors should increase demand for the reconfiguration or replacement
of existing HVAC systems and may also mitigate, to some extent, the effect
on the HVAC industry of the cyclicality inherent in the traditional construction
industry.




HVAC/PLUMBING
SERVICES




HVAC. At present, we offer HVAC
replacement and renovation services with operations and facilities in the
Sacramento, Los Molinos, Modesto, and Fresno, CA and Boston, MA metropolitan
areas, respectively. To date these operations have generated nearly all of our
revenues. HVAC systems typically involve air duct systems and air-handling and
condenser equipment. Other equipment components of an HVAC system include:
heaters, furnaces, condensers, air handlers and blowers. A typical HVAC
replacement project for residential or small commercial projects begins with a
thorough inspection of the current equipment. Engineering calculations are
performed to determine the appropriate replacement equipment. In most cases, the
air-handling equipment and condensing equipment are replaced as well as the
refrigeration lines. When necessary, duct repairs and modifications are also
made.




23




Maintenance,
Repair and Replacement. Maintenance and repair
contracting services are generally provided on a fee per visit basis. In
addition, we provide our customers with service contracts which generally have
an annual fee with additional sums due for certain products and services.
Revenues generated from repair and maintenance contracting services historically
represent a small portion of the overall revenue of the Company.




Windows. As we acquire new
HVAC/Plumbing service providers, our window replacement services will involve
the replacement of residential windows with more energy efficient models to
provide a better seal for the residential structure. Having a better seal makes
the residence more energy efficient by cutting down on heat loss in winter
operation and heat gains in summer operation thus providing cost savings to the
homeowner. The offering of energy efficient windows in tandem with HVAC systems
enhances the Company's presentation to the homeowner as a provider of a more
complete energy solution





Plumbing. We anticipate a strong
synergy between HVAC operations and plumbing. As we acquire new HVAC/Plumbing
service providers, our plumbing services will involve the repair of residential
plumbing systems that convey domestic water throughout a home or supply natural
gas to various equipment or appliances, as well as the repair and replacement of
heaters, boilers, ovens and stoves, and kitchen and bathroom equipment. A
domestic water system typically includes separate piping for hot and
cold water as well as a number of fixtures including sinks, bathtubs,
showers and hot tubs. Substantially all of the equipment and component parts we
will install are purchased from third-party wholesale suppliers or directly from
the manufacturers or "OEMs", which equipment and components will be resold to
our customers as part of the contracted installation and
repairs.





Governmental
Regulation and Environmental Matters




Our
operations are subject to various federal, state and local laws and regulations,
including: (i) licensing requirements applicable to engineering,
construction and service technicians, (ii) building and HVAC codes and
zoning ordinances, (iii) regulations relating to consumer protection,
including those governing residential service agreements, and
(iv) regulations relating to worker safety and protection of the
environment. We believe we have all required licenses to conduct our operations
and are in substantial compliance with applicable regulatory requirements. If we
fail to comply with applicable regulations we could be subject to substantial
fines or revocation of our operating licenses.




Many
state and local regulations governing the HVAC services trades require
individuals to hold permits and licenses. In some cases, a required permit or
license held by a single individual may be sufficient to authorize specified
activities for all of our service technicians who work in the state or county
that issued the permit or license. We seek to ensure that, where possible, we
have two employees who hold any such permits or licenses that may be material to
our operations in a particular geographic region.




Our
operations are subject to the federal Clean Air Act, as amended, which governs
air emissions and imposes specific requirements on the use and handling of
chlorofluorocarbons, or CFCs, and certain other refrigerants. Clean Air Act
regulations require the certification of service technicians involved in the
service or repair of equipment containing these refrigerants and also regulate
the containment and recycling of these refrigerants. These requirements have
increased our training expenses and expenditures for containment and recycling
equipment. The Clean Air Act is intended ultimately to eliminate the use of CFCs
in the United States and to require alternative refrigerants to be used in
replacement HVAC systems. We do not believe these regulations involving CFCs
will materially affect our business on the whole because, although they require
us to incur modest ongoing training costs, our competitors also incur such
costs, and the regulations may encourage our customers to update their HVAC
systems.




INTERNAL
AND EXTERNAL SOURCES OF LIQUIDITY AND CAPITAL RESOURCES




For the
three months ended March 31, 2008, the Company experienced a net loss of
$1,302,032 after a net loss from operations of $939,935. At March 31, 2008, the
Company had $267,754 in cash and no cash equivalents.




The
Company anticipates that its existing capital resources may be adequate to
satisfy its capital requirements for the foreseeable future. However, to
accomplish its planned future activities, it will need to acquire additional
funds through public or private financings in the form of debt or
equity.




In
accordance with with Section 4(2) of the Securities Act of 1933 and subject to
Rule 144 restrictions, the Company issued 1,000,000 shares of its common stock
and no shares of its preferred stock for services in the first three months
ended March 31, 2008.




The
Company's principal liquidity at March 31, 2008 included cash of $267,754 and
$491,459 net accounts receivable. . It is anticipated that the Company's
liquidity position will be sufficient to support on-going general administrative
expense, strategic positioning, and the garnering of contracts and
relationships.




24




Item 3. Quantitative and Qualitative Disclosures About Market
Risk
  Market
risk generally represents the risk that losses may occur in the values of
financial instruments as a result of movements in interest rates, foreign
currency exchange rates and commodity prices. Since we operate exclusively in
the United States we do not have foreign currency exchange rate or commodity
price market risk.
 
 Item 4T. Controls and Procedures.
  Evaluation of Disclosure
Controls and Procedures
 
 Pursuant
to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”),
the Company carried out an evaluation, with the participation of the Company’s
management, including the Company’s Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”),of the effectiveness of the Company’s disclosure
controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act)
as of the end of the period covered by this report. Based upon that evaluation,
the Company’s CEO and CFO concluded that the Company’s disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports that the Company files or submits under the Exchange
Act, is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to the Company’s management, including the Company’s CEO and
CFO, as appropriate, to allow timely decisions regarding required
disclosure.
 
 Changes in Internal
Controls
 
 There
have been no changes in the Company's internal control over financial reporting
during the latest fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
 
 
 PART II—OTHER INFORMATION
 
 Item
1. Legal Proceedings.
 
 There are
no material pending legal proceedings to which the Company is a party or to
which any of its assets are subject.
  Various
legal actions, governmental investigations and proceedings and claims may be
instituted or asserted in the future by the Company or against the Company
and/or its subsidiaries including those arising out of alleged deficiencies in
the company's products; governmental or industry regulations relating to safety,
financial services; employment-related matters; distributor, exhibitor,
co-producer, vendor, supplier, or other contractual relationships; intellectual
property rights; product warranties and environmental matters. Some of the
foregoing matters involve or may involve compensatory, punitive or anti-trust or
other treble damage claims in varying amounts, environmental remediation
programs, sanctions or other relief which, if granted, would require varying
expenditures. Litigation is subject to many uncertainties, and the outcome of
individual litigated matters is not predictable with assurance. The Company does
not reasonably expect, based on its analysis, that any adverse outcome from such
matters would have a material effect on future consolidated financial statements
for a particular year, although such an outcome is possible.
 
 Item
1A. Risk Factors.
 
 None
  25
 
 Item
2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
 In
accordance with Section 4(2) of the Securities Act of 1933 and subject to SEC
Rule 144 restrictions, the Company issued a convertible promissory note,
2,400,000 shares of its common stock and no shares of its preferred stock to
employees, consultants and in connection with an acquisition in the first three
months ended March 31, 2008 as follows:
  Date
      of Sale
                Title
      of Security
                Number
      Sold
                Consideration
      Received and Description of Underwriting or Other Discounts to Market
      Price or Convertible Security Afforded to Purchasers
                Exemption
      from Registration Claimed
                If
      Option, Warrant or Convertible Security, Terms of Exercise or
      ConversionJanuary
      18, 2008
                Common
      Stock, $.001 par value
                1,000,000
                Services
      rendered; no commissions paid;
                Section
      4(2)
                Not
      applicableFebruary
      29, 2008
                Convertible
      Note
                1
                Acquisition;
      no commissions paid
                Section
      4(2)
                $2,000,000
      promissory note convertible to (1:1) common stock at $.20 and $.25 per
      share through February 28, 2010.March
      31, 2008
                Common
      Stock, $.001 par value
                1,400,000
                Services
      rendered; no commissions paid
                Section
      4(2)
                Not
      applicable
 
 Item
3. Defaults Upon Senior Securities.
 
 None.
 
 Item
4. Submission of Matters to a Vote of Security Holders.
 
 Item
5. Other Information.
 
 None
  26
 
 Item
6. Exhibits.




INDEX
OF EXHIBITS




Incorporated by Reference to the
      Exhibit Indicated Below and to the
      Filing with the Commission Indicated
    BelowExhibit
              Number
            
            Description
      of Exhibits
            
            Exhibit
              Number
            Filing or
      File Number10.1
            
            Employment
      Agreement of Timothy J. Gallagher
            
            10.1
            Filed
      Herewith10.2
            
            Promissory
      Note (1) between Energy King, Inc. and Timothy J. Gallagher dated February
      29, 2008
            
            10.2
            Filed
      Herewith10.3
            
            Promissory
      Note (2) between Energy King, Inc. and Timothy J. Gallagher dated February
      29, 2008
            
            10.3
            Filed
      Herewith10.4
            
            Employment
      Agreement of Stephan Kurz
            
            10.4
            Filed
      Herewith10.5
            
            Employment
      Agreement of Henry S. Leonard
            
            10.5
            Filed
      Herewith21.1
            
            List
      of Subsidiaries
            
            21.1
            Form
      10-KSB Filed 2008-03-3131.1
            
            Rule
      13a-14(a) Certification of Jeffrey R. Hultman pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002
            
            31.1
            Filed
      Herewith31.2
            
            Rule
      13a-14(a) Certification of Jeffrey R. Hultman  pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002
            
            31.2
            Filed
      Herewith32.1
            
            Section
      1350 Certification of Jeffrey R. Hultman pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002
            
            32.1
            Filed
      Herewith32.2
            
            Section
      1350 Certification of Jeffrey R. Hultman pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002
            
            32.2
            Filed
      Herewith




27




SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.




ENERGY
      KING, INC.November
      13, 2008
            By:
            /s/
      JEFFREY R. HULTMANJeffrey
      R. HultmanChief
      Executive Officer & Chief Accounting
Officer












28