0001493152-16-016252.txt : 20161229 0001493152-16-016252.hdr.sgml : 20161229 20161228175114 ACCESSION NUMBER: 0001493152-16-016252 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20161017 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20161229 DATE AS OF CHANGE: 20161228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: XFIT BRANDS, INC. CENTRAL INDEX KEY: 0001623554 STANDARD INDUSTRIAL CLASSIFICATION: [3949] IRS NUMBER: 471858485 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-55372 FILM NUMBER: 162073238 BUSINESS ADDRESS: STREET 1: 25731 COMMERCENTRE DRIVE CITY: LAKE FOREST STATE: CA ZIP: 92630 BUSINESS PHONE: (949) 916-9680 MAIL ADDRESS: STREET 1: 25731 COMMERCENTRE DRIVE CITY: LAKE FOREST STATE: CA ZIP: 92630 8-K/A 1 form8-ka.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) October 17, 2016

XFIT BRANDS, INC.

(Exact name of registrant as specified in its charter)

Nevada

000-55372

47-1858485

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

25731 Commercentre Drive, Lake Forest, CA		92630
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (949) 916-9680

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.below):

[ ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

On October 19, 2016, XFit Brands, Inc. (the “Company”), filed an initial Current Report on Form 8-K with the Securities and Exchange Commission (the “Original Filing”) reporting the acquisition (the “Acquisition”) of the assets of Environmental Turf Services, LLC(“EnviroTurf”) pursuant to a definitive Asset Purchase Agreement dated October 10, 2016 (the “Purchase Agreement”) between the Company and EnviroTurf.

This Current Report on Form 8-K/A is being filed to amend the Original Filing to include the financial statements and pro forma financial information required by Item 9.01 of Form 8-K.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

Financial Statements of Businesses Acquired

The following financial statements are filed with this Form 8-K and are incorporated herein by reference:

Exhibit 99.1	●	Audited balance sheet of EnviroTurf as of December 31, 2015 and 2014 and the related statements of operations andmembers’ deficit and cash flows for the years then ended;

Exhibit 99.2	●	Unaudited balance sheet of EnviroTurf as of June 30, 2016 and September 30, 2016 and the related statements of operations and members’ deficit and cash flows for the six and three month periods then ended.

Pro Forma Financial Information

The following unaudited pro forma condensed consolidated financial statements are filed with this Form 8-K as exhibit 99.3 and are incorporated herein by reference:

	●	Pro forma condensed consolidated balance sheet of the Company and EnviroTurf as of June 30, 2016 and September 30, 2016 as if the Acquisition occurred July 1, 2015;

	●	Pro forma condensed consolidated statements of operations of the Company and EnviroTurf for the year ended June 30, 2016 and the three months ended September 30, 2016 as if the Acquisition occurred July 1, 2015; and

	●	Notes to condensed pro forma consolidated statements of operations and balance sheet.

	Additional Exhibit

	Exhibit 23.1	Consent of Accell Audit & Compliance, P.A. to the incorporation of their report on the financial statements of Environmental Turf Services, LLC in the Company’s Registration Statement on Form S-8, Commission File No. 333-214891

The unaudited pro forma consolidated financial information is presented for informational purposes only. The pro forma data is not necessarily indicative of what the Company’s financial position or results of operations actually would have been had the Company completed the Acquisition as of the dates indicated. In addition, the unaudited pro forma condensed consolidated financial information does not purport to project the future financial position or operating results of the consolidated company.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	XFIT BRANDS, INC.

	(Registrant)

Date: December 28, 2016	By:	/s/ David E. Vautrin
		David E. Vautrin
		Chief Executive Officer

EX-23.1 2 ex23-1.htm

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the to the incorporation of our report on the financial statements of Environmental Turf Services, LLC dated December 28, 2016, relating to our audits of the financial statements of Environmental Turf Services, LLC for the years ended December 31, 2015 and 2014 and our reviews of the financial statements of Environmental Turf Services, LLC for the six months ended June 30, 2016 and the three months ended September 30, 2016 in the Registration Statement of XFit Brands, Inc. on Form S-8, Commission File No. 333-214891. We also consent to the reference to our firm under the caption “Experts” in such Prospectus.

/s/ Accell Audit & Compliance, P.A.
December 28, 2016

EX-99.1 3 ex99-1.htm

ENVIRONMENTAL TURF SERVICE, LLC

FINANCIAL STATEMENTS

and Independent Auditors’ Report

DECEMBER 31, 2015 and 2014

To the Members of Environmental Turf Services, LLC

We have audited the accompanying financial statements of Environmental Turf Services, LLC, including the balance sheets as of December 31, 2015 and 2014, and the related statements of operations and changes in members’ deficit and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statement

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that is free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above presents fairly, in all material respects, the financial position of Environmental Turf Services, LLC as of December 31, 2015 and 2014, in accordance with accounting principles generally accepted in the United States of America.

Tampa, Florida

December 28, 2016

/s/ Accell Audit & Compliance, P.A.

ENVIRONMENTAL TURF SERVICES, LLC

Balance Sheets

As of December 31, 2015 and 2014

	2015			2014
ASSETS
Current assets
Cash	$	4,292		$	14
Accounts receivable, net		295,230			58,053
Inventories		44,702			31,915
Total current assets		344,224			89,982

Property and equipment, net		11,596			16,288
TOTAL ASSETS		355,820			106,270

LIABILITIES AND MEMBERS’ DEFICIT
Current liabilities
Accounts payable		1,000,355			895,751
Accrued expenses and other current liabilities		17,553			18,747
Due to related party		500			-
Promissory note, related party		15,000			15,000
Note payable		-			12,198
Billings in excess of cost and estimated earnings		202,657			36,339
Total current liabilities		1,236,065			978,035

Members’ deficit		(880,245	)		(871,765	)
TOTAL LIABILITIES AND MEMBERS’ DEFICIT	$	355,820		$	106,270

See Independent Auditors’ Report and accompanying notes to the financial statements.

Page | 2

ENVIRONMENTAL TURF SERVICES, LLC

STATEMENTS OF OPERATIONS and CHANGES IN MEMBERS’ DEFICIT

For the Years Ended December 31, 2015 and 2014

	2015			2014
Revenues	$	1,897,770		$	2,513,659

Cost of revenues		1,557,073			2,207,750
Gross profit		340,697			305,909

Operating expenses
Selling, general and administrative expense		339,989			358,833
Depreciation and amortization		5,805			8,879
Total operating expenses		345,794			367,712

Loss from operations		(5,097	)		(61,803	)

Other income (expense)
Interest expense		(3,550	)		(2,600	)
Other income		167			1,213
Other income (expense)		(3,383	)		(1,387	)

Net loss		(8,480	)		(63,190	)

Members’ deficit, beginning of period		(871,765	)		(808,575	)

Members’ deficit, end of period	$	(880,245	)	$	(871,765	)

See Independent Auditors’ Report and accompanying notes to the financial statements.

Page | 3

ENVIRONMENTAL TURF SERVICES, LLC

STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2015 and 2014

	2015			2014

Cash Flows From Operating Activities
Net loss	$	(8,480	)	$	(63,190	)
Adjustments to reconcile net loss from operating activities:
Depreciation and amortization expense		5,805			8,879
Changes in operating assets and liabilities:
Accounts receivable		(237,177	)		47,500
Inventories		(12,787	)		(11,724	)
Accounts payable		104,604			20,297
Accrued expenses and other current liabilities		(1,194	)		2,068
Billings in excess of cost and estimated earnings		166,318			11,292

Net Cash From Operating Activities		17,089			15,112

Cash Flows From Investing Activities
Acquisition of property and equipment		(1,113	)		—

Net Cash From Investing Activities		(1,113	)		—

Cash Flows From Financing Activities
Proceeds from note payable/related party payable		500			12,198
Note payable payments		(12,198	)		(35,000	)

Net Cash From Financing Activities		(11,698	)		(22,908	)

Net Change in Cash		4,278			(7,680	)

Cash - Beginning		14			7,694

Cash - Ending	$	4,292		$	14

Supplemental Disclosure of Cash Flow Information

Cash paid during the period for:
Interest	$	3,550		$	2,600
Income taxes	$	—		$	—

See Independent Auditors’ Report and accompanying notes to the financial statements.

Page | 4

ENVIRONMENTAL TURF SERVICES, LLC

NOTES TO FINANCIAL STATEMENTS

December 31, 2015 and 2014

Note 1 - Organization and Nature of Business

Nature of Operations: Environmental Turf Services, LLC (“EnviroTurf” or the “Company”) was formed on July 22, 2008 under the laws of the State of Mississippi, as a limited liability company. The Company installs, markets and sells synthetic turf materials used for residential and commercial purposes.

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation: The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial statements. The financial statements and accompanying notes are the representations of the Company’s management, who is responsible for their integrity and objectivity.

Revenue Recognition:

The Company recognizes revenues on sales and cost of sales related to long-term contracts and are accounted for under the percentage-of-completion method. Sales under fixed-type contracts are generally recognized upon passage of title to the customer, which usually coincides with physical delivery or customer acceptance as specified in contractual terms. Such sales are recorded at the cost of items delivered or accepted plus a proportion of profit expected to be realized on a contract, based on the ratio of such costs to total estimated costs at completion. Sales, including estimated earned fees, under cost reimbursement-type contracts are recognized as costs are incurred.

Profits expected to be realized on contracts are based on the Company’s estimates of total contract sales value and costs at completion. These estimates are reviewed and revised periodically throughout the lives of the contracts with adjustments to profits resulting from such revisions being recorded on a cumulative basis in the period in which the revisions are made. When management believes the cost of completing a contract, excluding general and administrative expenses, will exceed contract-related revenues, the full amount of the anticipated contract loss is recognized.

Revenues recognized in excess of amounts billed are classified as current assets under ’‘Cost and earnings in excess of estimated billings.’’ Amounts billed to clients in excess of revenues recognized to date are classified as current liabilities under ’‘Billings in excess of costs and estimated earnings.’’

Page | 5

ENVIRONMENTAL TURF SERVICES, LLC

NOTES TO FINANCIAL STATEMENTS

December 31, 2015 and 2014

Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and assumptions. The Company’s significant estimates relate to the allowance for doubtful accounts, depreciation and amortization periods related to long-lived assets, evaluation of impairment of long-lived assets: property and equipment and sales return reserve.

Cash Concentration: The Companies maintain their cash and cash equivalents in bank depository accounts with major financial institutions. At times, cash balances may exceed insurance limits provided by the Federal Deposit Insurance Corporation. The Companies do not believe the concentration is subject to any unusual financial risk beyond the normal risk associated with commercial banking.

Concentrations: Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable. The Company manages credit risk through credit evaluations and monitoring procedures, and generally does not require collateral or other security on accounts receivable.

From time to time, the Company has certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable.

For the years ended December 31, 2015 and 2014, five and three customers accounted for 86% and 55%, respectively, of the net revenues.

At December 31, 2015 and 2014, one and two customers accounted for 86% and 100%, respectively, of the accounts receivable, net.

Accounts Receivable: Accounts receivable consists of amounts billed to customers under normal trade terms. Management determines when accounts are past due on the contractual terms of the sale or from payment history on the account. Historically, the Company has had little bad debt expense. As of December 31, 2015 and 2014, the Company’s allowance for doubtful accounts was $33,742.

Page | 6

ENVIRONMENTAL TURF SERVICES, LLC

NOTES TO FINANCIAL STATEMENTS

December 31, 2015 and 2014

Inventories: Inventory primarily consists of installation materials used in the installation of the turf. Costs are derived utilizing the first-in, first out method and are stated at the lower of cost or market. Write-downs are recorded if the net realizable value falls below cost and provides for slow moving or obsolete inventory. As of December 31, 2015 and 2014; respectively, the allowance for obsolete inventory was zero.

Property and Equipment: Property and equipment is recorded at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets.

	Useful Life
Equipment	5-7 Years
Vehicles	5 Years
Furniture and office equipment	5-7 Years
Computer and software	3 Years

Repairs and maintenance expenditures not anticipated to extend asset lives and/or productive functionality are expenses as incurred. Upon retirement or disposal, the asset’s carrying value and related accumulated depreciation or amortization are eliminated with a corresponding gain or loss recorded from operations.

Long-Lived Assets: The Company periodically assesses whether there has been impairment in the value of its long-lived assets whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount to the undiscounted future net cash flows, expected to be generated by the asset. If such assets are deemed to be impaired, the amount of impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair market value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair market value, less costs to sell the Assets.

Fair Value of Financial Instruments: The Company have determined that the carrying value of the Company’s cash, accounts receivable and accounts payable and accrued expenses as of December 31, 2015 and 2014 approximate fair value due to their short maturities. The Company’s debt bear market rates of interest.

Income Taxes: The Company is a limited liability company which is treated as partnerships under the provisions of the Internal Revenue Code. Income and losses are passed through to the members and, accordingly, there is no provision for federal income taxes. Management has evaluated tax positions in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 740, Income Taxes, and has not identified any tax positions, other than electing to be taxed as a pass-through entity, that require disclosure.

Page | 7

ENVIRONMENTAL TURF SERVICES, LLC

NOTES TO FINANCIAL STATEMENTS

December 31, 2015 and 2014

The Company’s federal and state income tax returns are subject to examination by the Internal Revenue Service, generally three years after the tax returns were filed.

Advertising: Advertising costs are expensed as incurred. For the years ended December 31, 2015 and 2014, the Company incurred minimal advertising costs.

Warranties: The Company warrants its products against defects in installation, but not for the defects in manufacturing, as these are warranted by the manufacturer. A provision for estimated future costs related to warranty expense is not recorded since these costs have been deemed insignificant by management.

Note 3 – accounts receivable

As of December 31, 2015 and 2014, accounts receivables consisted of the following:

	2015			2014
Amounts billed:
Completed contracts	$	328,972		$	91,795

Less: Allowance for doubtful accounts		(33,742	)		(33,742	)
	$	295,230		$	58,053

Page | 8

ENVIRONMENTAL TURF SERVICES, LLC

NOTES TO FINANCIAL STATEMENTS

December 31, 2015 and 2014

Note 4 – Costs and estimated earnings on uncompleted contracts

Costs and estimated earnings on uncompleted contracts and related amounts billed as of December 31, 2015, and December 31, 2014, are as follows:

	2015		2014
Costs incurred on uncompleted contracts	$	273,872	$	325,774
Estimated earnings		395,558		105,998

Less: Billings to date		466,773		395,433
	$	202,657	$	36,339

Such amounts are included in the accompanying balance sheets at December 31, 2015 and 2014, under the following captions:

	2015		2014

Billings in excess of costs and estimated earnings	$	202,657	$	36,339
	$	202,657	$	36,339

note 5 – property and equipment

As of December 31, 2015 and 2014, property and equipment consisted of the following:

	2015			2014
Automobiles	$	37,557		$	37,557
Computers		2,745			1,632
Equipment		2,629			2,629
Furniture and fixtures		2,541			2,541
		45,472			44,359

Less: accumulated depreciation		(33,876	)		(28,071	)
	$	11,596		$	16,288

Page | 9

ENVIRONMENTAL TURF SERVICES, LLC

NOTES TO FINANCIAL STATEMENTS

December 31, 2015 and 2014

Depreciation expense was $5,805 and $8,879 for the years ended December 31, 2015 and 2014, respectively.

Note 6 – Note Payable, Promissory note payable and due to related party

On March 3, 2014 the Company entered into a short-term note payable with a financial institution. The note was due June 3, 2014 and interest is stated at 5%. The principal and interest are due upon maturity. As of December 31, 2015 and 2014, the outstanding principal balance on the note was $0 and $12,198; respectively.

The Company entered into a promissory note payable with a family member of a former managing member as part of specified royalties owed as part of the acquisition of the former managing member’s equity interest. As of December 31, 2015 and 2014, the total outstanding balance on this note was $15,000.

The Company was advanced proceeds from its managing member during 2015 at a zero stated interest rate. As of December 31, 2015 and 2014, the outstanding balance on the advance was $500 and $0; respectively.

Note 7 - Commitments And Contingencies

Leases: The Companies lease a warehouse facility on a month to month basis. Total rent expense for the years ended December 31, 2015 and 2014 was $23,197 and $18,903, respectively.

Page | 10

ENVIRONMENTAL TURF SERVICES, LLC

NOTES TO FINANCIAL STATEMENTS

December 31, 2015 and 2014

Litigation, Claims and Assessments: From time to time, the Company is subject to various litigation and other claims in the normal course of business. The Company establishes liabilities in connection with legal actions that management deems to be probable and estimable. No amounts have been accrued in the consolidated financial statements with respect to any matters.

Note 8 – members’ equity (deficit)

Members’ equity consists of Class A and B Units. As of December 31, 2015 and 2014; respectively, the Company had zero Class A Units issued and 691.27 of Class B Units issued. The Class A Units were designated as financial interest holders, but had no provisions for governance and the Class B Units contain provisions for rights of voting and governance, as defined in the Company’s Operating Agreement.

Note 9 - Subsequent Events

The Company has evaluated subsequent events through December 28, 2016, the date the financial statements were available to be issued and has determined the following subsequent events require disclosure in the financial statements:

On October 14, 2016 but effective as of October 10, 2016, XFit Brands, Inc. (“XFit” or the “Company”) acquired the assets of the Company pursuant to a definitive Asset Purchase Agreement dated October 10, 2016 (the “Purchase Agreement”) between XFit and the Company. The acquired assets consisted of inventory, accounts receivable, equipment and vehicles, the registered trademark “ENVIROTURF” and the associated goodwill. The acquisition was completed on October 14, 2016 upon delivery and acceptance of the schedules to the Purchase Agreement.

At the closing of the Acquisition, XFit paid and issued to EnviroTurf a total purchase price of $346,000 as follows: (i) assumption of $200,000 of EnviroTurf’s accounts payable and (ii) 2,000,000 restricted shares of XFit Common Stock (the “Purchase Price Shares”), which were valued at the closing price on the date of XFit’s Common Stock on the date of the Acquisition. XFit will fund the non-share purchase price and the costs and expenses of the Acquisition through a combination of cash on hand and internally-generated working capital.

The Purchase Agreement contains customary representations, warranties and covenants by the parties.

Page | 11

EX-99.2 4 ex99-2.htm

ENVIRONMENTAL TURF SERVICE, LLC

FINANCIAL STATEMENTS

and Accountants’ Review Report

As of and For the Six and Three Months Ended

June 30, 2016 and September 30, 2016

To the Members of Environmental Turf Service, LLC

We have reviewed the accompanying financial statements of Environmental Turf Service, LLC, which comprise the balance sheets as of June 30, 2016 and September 30, 2016, and the related statements of operations and changes in members’ deficit and cash flows for the six months ended June 30, 2016 and three months ended September 30, 2016 and the related notes to the financial statements. A review includes primarily applying analytical procedures to management’s financial data and making inquiries of company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement whether due to fraud or error.

Accountant’s Responsibility

Our responsibility is to conduct the review engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. We believe that the results of our procedures provide a reasonable basis for our conclusion.

Accountant’s Conclusion

Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in accordance with accounting principles generally accepted in the United States of America.

Tampa, Florida

December 28, 2016

/s/ Accell Audit & Compliance, P.A.

ENVIRONMENTAL TURF SERVICES, LLC

Balance Sheets

As of June 30, 2016 and September 30, 2016

	June 30, 2016			September 30, 2016
ASSETS
Current assets
Cash	$	14		$	15,740
Accounts receivable, net		200,108			247,097
Inventories		63,611			54,702
Total current assets		263,733			317,539

Property and equipment, net		24,315			24,696
TOTAL ASSETS		288,048			342,235

LIABILITIES AND MEMBERS’ DEFICIT
Current liabilities
Accounts payable		1,036,894			1,242,509
Accrued expenses and other current liabilities		5,041			3,163
Note payable, related party		500			-
Promissory note payable, related party		15,000			15,000
Billings in excess of cost and estimated earnings		126,558			26,767
Total current liabilities		1,183,993			1,287,439

Members’ deficit		(895,945	)		(945,204	)
TOTAL LIABILITIES AND MEMBERS’ DEFICIT	$	288,048		$	342,235

See Accountant’s Review Report and accompanying notes to the financial statements .

Page | 2

ENVIRONMENTAL TURF SERVICES, LLC

STATEMENTS OF OPERATIONS and CHANGES IN MEMBERS’ DEFICIT

For the Six and Three Month Periods Ended June 30, 2016 and September 30, 2016

	Six months ended June 30, 2016			Three months ended September 30, 2016
Revenues	$	1,011,992		$	432,023

Cost of revenues		843,107			364,910
Gross profit		168,885			67,113

Operating expenses
Selling, general and administrative expense		179,983			114,027
Depreciation and amortization		2,900			1,450
Total operating expenses		182,883			115,477

Loss from operations		(13,998	)		(48,364	)

Other income (expense)
Interest expense		(1,800	)		(900	)
Other income		98			5
Other income (expense)		(1,702	)		(895	)

Net loss		(15,700	)		(49,259	)

Members’ deficit, beginning of period		(880,245	)	$	(895,945	)

Members’ deficit, end of period	$	(895,945	)	$	(945,204	)

See Accountant’s Review Report and accompanying notes to the financial statements.

Page | 3

ENVIRONMENTAL TURF SERRVICES, LLC

STATEMENTS OF CASH FLOWS

For the Six and Three Month Periods Ended June 30, 2016 and September 30, 2016

	Six months ended June 30, 2016			Three months ended September 30, 2016

Cash Flows From Operating Activities
Net loss	$	(15,700	)	$	(49,259	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense		2,900			1,450
Changes in operating assets and liabilities:
Accounts receivable		95,122			(46,989	)
Inventories		(18,909	)		8,909
Accounts payable		36,539			205,615
Accrued expenses and other current liabilities		(12,512	)		(1,878	)
Billings in excess of cost and estimated earnings		(76,099	)		(99,791	)

Net Cash From Operating Activities		11,341			18,057

Cash Flows From Investing Activities
Acquisition of property and equipment		(15,619	)		(1,831	)

Net Cash From Investing Activities		(15,619	)		(1,831	)

Cash Flows From Financing Activities
Note payable payments		-			(500	)

Net Cash From Financing Activities		-			(500	)

Net Change in Cash		(4,278	)		15,726

Cash – Beginning		4,292			14

Cash – Ending	$	14		$	15,740

Supplemental Disclosure of Cash Flow Information

Cash paid during the period for:
Interest	$	1,800		$	900
Income taxes	$	--		$	--

See Accountant’s Review Report and accompanying notes to the financial statements.

Page | 4

ENVIRONMENTAL TURF SERVICES, LLC

NOTES TO FINANCIAL STATEMENTS

For the Six and Three Month Periods Ended June 30, 2016 and September 30, 2016

Note 1 - Organization and Nature of Business

Note 2 - Summary of Significant Accounting Policies

Revenue Recognition:

The Company recognizes revenues on sales and cost of sales related to long-term contracts are accounted for under the percentage-of-completion method. Sales under fixed-type contracts are generally recognized upon passage of title to the customer, which usually coincides with physical delivery or customer acceptance as specified in contractual terms. Such sales are recorded at the cost of items delivered or accepted plus a proportion of profit expected to be realized on a contract, based on the ratio of such costs to total estimated costs at completion. Sales, including estimated earned fees, under cost reimbursement-type contracts are recognized as costs are incurred.

Page | 5

ENVIRONMENTAL TURF SERVICES, LLC

NOTES TO FINANCIAL STATEMENTS

For the Six and Three Month Periods Ended June 30, 2016 and September 30, 2016

For the six an three months period ended June 30, 2016 and September 30, 2016, three customers accounted for 86% and 90%, respectively, of the net revenues.

At June 30, 2016 and September 30, 2016, two customers accounted for 90% of the accounts receivable, net.

Accounts Receivable: Accounts receivable consists of amounts billed to customers under normal trade terms. Management determines when accounts are past due on the contractual terms of the sale or from payment history on the account. Historically, the Company has had little bad debt expense. As of June 30, 2016 and September 30, 2016, the Company’s allowance for doubtful accounts was $33,742.

Page | 6

ENVIRONMENTAL TURF SERVICES, LLC

NOTES TO FINANCIAL STATEMENTS

For the Six and Three Month Periods Ended June 30, 2016 and September 30, 2016

Inventories: Inventory primarily consists of installation materials used in the installation of the turf. Costs are derived utilizing the first-in, first out method and are stated at the lower of cost or market. Write-downs are recorded if the net realizable value falls below cost and provides for slow moving or obsolete inventory. As of June 30, 2016 and September 30, 2016; respectively, the allowance for obsolete inventory was zero.

Property and Equipment: Property and equipment is recorded at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets.

		Useful Life
Equipment		5-7 Years
Vehicles		5 Years
Furniture and office equipment		5-7 Years
Computer and software		3 Years

Fair Value of Financial Instruments: The Company has determined that the carrying value of the Company’s cash, accounts receivable and accounts payable and accrued expenses as of June 30, 2016 and September 30, 2016 approximate fair value due to their short maturities. The Company’s debt bear market rates of interest.

Page | 7

ENVIRONMENTAL TURF SERVICES, LLC

NOTES TO FINANCIAL STATEMENTS

For the Six and Three Month Periods Ended June 30, 2016 and September 30, 2016

The Company’s federal and state income tax returns are subject to examination by the Internal Revenue Service, generally three years after the tax returns were filed.

Advertising: Advertising costs are expensed as incurred. For the six and three months period ended June 30, 2016 and September 30, 2016, the Company incurred minimal advertising costs.

Note 3 – accounts receivable

As of June 30, 2016 and September 30, 2016, accounts receivables consisted of the following:

	June 30, 2016			September 30, 2016
Amounts billed:
Completed contracts	$	233,850		$	280,839
Less: Allowance for doubtful accounts		(33,742	)		(33,742	)
	$	200,108		$	247,097

Page | 8

ENVIRONMENTAL TURF SERVICES, LLC

NOTES TO FINANCIAL STATEMENTS

For the Six and Three Month Periods Ended June 30, 2016 and September 30, 2016

Note 4 – Costs and estimated earnings on uncompleted contracts

Costs and estimated earnings on uncompleted contracts and related amounts billed as of June 30, 2016 and September 30, 2016 are as follows:

	June 30, 2016		September 30, 2016
Costs incurred on uncompleted contracts	$	534,706	$	594,147
Estimated earnings		100,125		100.125

Less: Billings to date		508,273		667,505
	$	126,558	$	26,767

Such amounts are included in the accompanying balance sheets as of June 30, 2016 and September 30, 2016 under the following captions:

	June 30, 2016		September 30, 2016

Billings in excess of costs and estimated earnings	$	126,558	$	26,767
	$	126,558	$	26,767

Note 5 – Property and Equipment

As of June 30, 2016 and September 30, 2016 property and equipment consisted of the following:

	June			Sept
Automobiles	$	50,277		$	50,277
Computers		2,745			2,745
Equipment		4,104			5,935
Furniture and fixtures		1,065			1,065
		58,191			58,572

Less: accumulated depreciation		(33,876	)		(35,326	)
	$	24,315		$	24,696

Depreciation expense was $2,900 and $1,450 for the six and three months period ended June 30, 2016 and September 30, 2016, respectively.

Page | 9

ENVIRONMENTAL TURF SERVICES, LLC

NOTES TO FINANCIAL STATEMENTS

For the Six and Three Month Periods Ended June 30, 2016 and September 30, 2016

Note 6 – promissory Note Payable, related party and due to related party

The Company entered into a promissory note payable with a family member of a former managing member as part of specified royalties owed as part of the acquisition of the former managing member’s equity interest. As of June 30, 2016 and September 30, 2016, the total outstanding balance on this note was $15,000.

The Company was advanced proceeds from its managing member during 2015 at a zero stated interest rate. As of June 30, 2016 and September 30, 2016, the outstanding balance on the advance was $500 and $0; respectively.

Note 7 - Commitments And Contingencies

Leases: The Companies lease a warehouse facility on a month to month basis. Total rent expense for the six and three months period ended June 30, 2016 and September 30, 2016 were approximately $9,000 and $3,000; respectively.

NOTE 8 – MEMBERS’ EQUITY (DEFICIT)

Members’ equity consists of Class A and B Units. As of June 30, 2016 and September 30, 2016; respectively, the Company had zero Class A Units issued and 691.27 of Class B Units issued. The Class A Units were designated as financial interest holders, but had no provisions for governance and the Class B Units contain provisions for rights of voting and governance, as defined in the Company’s Operating Agreement.

Note 9 - Subsequent Events

Page | 10

ENVIRONMENTAL TURF SERVICES, LLC

NOTES TO FINANCIAL STATEMENTS

For the Six and Three Month Periods Ended June 30, 2016 and September 30, 2016

The Purchase Agreement contains customary representations, warranties and covenants by the parties.

Page | 11

EX-99.3 5 ex99-3.htm

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

For the year ended June 30, 2016 and the three months ended September 30, 2016

Further to the Form 8-K dated October 19, 2016, on October 10, 2016 XFit Brands, Inc. (“XFit” or the “Company”) acquired the assets of Environmental Turf Services, LLC (“EnviroTurf”) pursuant to a definitive Asset Purchase Agreement dated October 10, 2016 (the “Purchase Agreement”) between the Company and EnviroTurf. The acquired assets consisted of inventory, accounts receivable, equipment and vehicles, the registered trademark “ENVIROTURF” and the associated goodwill. The acquisition was completed on October 14, 2016 upon delivery and acceptance of the schedules to the Purchase Agreement (the “Acquisition”).

The accompanying unaudited pro forma combined financial statements present the pro forma consolidated financial position and results of operations of the combined company based upon XFIT’s and EnviroTurf’s historical financial statements, after giving effect to XFit’s acquisition of EnviroTurf and the adjustments described in the following footnotes, and are intended to reflect the impact of this acquisition on XFit on a pro forma basis.

The unaudited pro forma combined balance sheets as of December 31, 2015 and 2014 reflect the acquisition of EnviroTurf as if it had been consummated on that date and includes historical information as reported by the separate companies as well as adjustments that give effect to events that are directly attributable to the Acquisition and that are factually supportable.

The unaudited pro forma combined statements of operations for the year ended June 30, 2016 and for the three months ended September 30, 2016 give effect to the Acquisition as if it had been consummated on July 1, 2015 and include historical information as reported by the separate companies as well as adjustments that give effect to events that are directly attributable to the Acquisition, are expected to have a continuing impact and are factually supportable.

The accompanying unaudited pro forma combined financial statements are presented for illustrative purposes only. They do not purport to represent what XFit’s consolidated results of operations and financial position would have been had the Acquisition actually occurred as of the dates indicated, and they do not purport to project XFit’s future consolidated results of operations or financial position. The unaudited pro forma combined statements of operations and income do not reflect any adjustments for the effect of non-recurring items that XFit may realize as a result of the Acquisition. The unaudited pro forma combined financial statements include certain reclassifications to conform the historical financial information of EnviroTurf to the presentation of XFit.

Pro forma adjustments are necessary to reflect the estimated purchase price and to reflect the amounts related to tangible and intangible assets and liabilities acquired at an amount equal to the preliminary estimate of their fair values. The pro forma adjustments reflecting the completion of the Acquisition are based upon the acquisition method of accounting in accordance with Accounting Standards Codification 805, “Business Combinations” (“ASC 805”), and the assumptions set forth in the notes to the unaudited pro forma combined financial statements. Management has made a preliminary allocation of the purchase price to the tangible and intangible assets acquired and liabilities assumed based on various preliminary estimates. The allocation of the purchase price is preliminary pending finalization of various estimates and valuation analyses.

The pro forma adjustments are based on the preliminary information available at the time of the preparation of this document.

Unaudited Pro forma Condensed Consolidated Balance Sheet

As of June 30, 2016

	XFIT Brands, Inc.			Environmental Turf Services, LLC				Pro forma Adjustment			Pro forma Balance Sheet

ASSETS
Current assets
Cash	$	6,829		$	14						$	6,843
Accounts receivable, net		179,636			200,108							379,744
Prepaid expenses		114,060			-							114,060
Inventory		288,184			63,611							351,795
Total current assets		588,709			263,733				-			852,442

Property and equipment, net		37,676			24,315							61,991
Deposits		23,467			-							23,467
Intangibles assets, net		13,640			-							13,640
Goodwill		-			-		(A)		278,597			278,597
TOTAL ASSETS		663,492			288,048				278,597			1,230,137

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable		730,026			1,036,894		(B)		(836,894	)		930,026
Related party payable		95,620			500		(B)		(500	)		95,620
Accrued expenses and other current liabilities		165,486			5,041							170,527
Customer deposits		129,201			-							129,201
Line of credit		34,999			-							34,999
Short-term financing, net of discount		108,333			15,000		(B)		(15,000	)		108,333
Billings in excess of cost and estimated earnings		-			126,558							126,558
Total current liabilities		1,263,665			1,183,993				(852,394	)		1,595,264

Note payable, net		2,478,720			-							2,478,720
Total liabilities		3,742,385			1,183,993				(852,394	)		4,073,984

Stockholders’ deficit

Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized, no shares issued and outstanding as of June 30, 2016		-			-							-
Common stock, par value $0.0001 per share, 1,250,000,000 shares authorized, 23,192,807 shares issued and outstanding as of June 30, 2016		2,119			-		(C)		200			2,319
Additional paid-in- capital		4,712,245			-		(C)		(200	)		4,712,045
Accumulated deficit		(7,793,257	)		(895,945	)	(A), (B)		1,130,991			(7,558,211	)
Total stockholders’ deficit		(3,078,893	)		(895,945	)			1,130,991			(2,843,847	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	663,492		$	288,048			$	278,597		$	1,230,137

Unaudited Pro forma Condensed Consolidated Statements of Operations

For the Year Ended June 30, 2016

	XFIT Brands, Inc.			Environmental Turf Services, LLC				Pro forma Adjustment		Pro forma Income Statement

Revenues	$	2,357,760		$	1,011,992					$	3,369,752

Cost of revenues		1,326,036			843,107						2,169,143
Gross profit		1,031,724			168,885						1,200,609

Operating expenses
General and administrative expense		1,891,832			172,503						2,064,335
Sales and marketing		353,421			10,380						363,801
Total operating expenses		2,245,253			182,883						2,428,136
Loss from operations		(1,213,529	)		(13,998	)					(1,227,527	)

Other income (expense)
Interest expense		(569,237	)		(1,800	)					(571,037	)
Other income					98						98
Other income (expense)		(569,237	)		(1,702	)					(570,939	)
Net income (loss)	$	(1,782,766	)	$	(15,700	)				$	(1,798,466	)

Loss per common share - basic and diluted	$	(0.09	)							$	(0.08	)
Weighted average shares outstanding - basic and diluted		20,558,382					(C)		2,000,000		22,558,382

Unaudited Pro forma Condensed Consolidated Balance Sheet

As of September 30, 2016

	XFIT Brands, Inc.			Environmental Turf Services, LLC				Pro forma Adjustment			Pro forma Balance Sheet

ASSETS
Current assets
Cash	$	61,096		$	15,740						$	76,836
Accounts receivable, net		91,814			247,097							338,911
Prepaid expenses		91,047			-							91,047
Inventory		373,354			54,702							428,056
Total current assets		617,311			317,539							934,850

Property and equipment, net		32,207			24,696							56,903
Deposits		23,467			-							23,467
Intangibles assets, net		5,541			-							5,541
Goodwill		-			-		(A)		278,597			278,597
TOTAL ASSETS		678,526			342,235				278,597			1,299,358

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable		755,528			1,242,509		(B)		(1,042,509	)		955,528
Related party payable		95,620			-							95,620
Accrued expenses and other current liabilities		228,454			3,163							231,617
Customer deposits		183,636			-							183,636
Line of credit		33,978			-							33,978
Short-term financing, net of discount		108,333			15,000		(B)		(15,000	)		108,333
Billings in excess of cost and estimated earnings		-			26,767							26,767
Total current liabilities		1,405,549			1,287,439				(1,057,509	)		1,635,479

Note payable, net		2,544,469			-							2,544,469
Total liabilities		3,950,018			1,287,439				(1,057,509	)		4,179,948

Stockholders’ deficit

Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized, no shares issued and outstanding as of September 30, 2016		-			-							-
Common stock, par value $0.0001 per share, 1,250,000,000 shares authorized, 23,742,806 shares issued and outstanding as of September 30, 2016		2,174			-		(C)		200			2,374
Additional paid-in- capital		4,926,015			-		(C)		(200	)		4,925,815
Accumulated deficit		(8,199,681	)		(945,204	)	(A), (B)		1,336,106			(7,808,779	)
Total stockholders’ deficit		(3,271,492	)		(945,204	)			1,336,106			(2,880,590	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	678,526		$	342,235			$	278,597		$	1,299,358

Unaudited Pro forma Condensed Consolidated Statements of Operations

For the Three Months Ended September 30, 2016

				Environmental						Pro forma
	XFIT Brands, Inc.			Turf Services, LLC				Pro forma Adjustment		Income Statement

Revenues	$	492,007		$	432,023					$924,030

Cost of revenues		277,108			364,910					642,018
Gross profit		214,899			67,113					282,012

Operating expenses
General and administrative expense		398,245			105,472					503,717
Sales and marketing		64,175			10,005					74,180
Total operating expenses		462,420			115,477				-	577,897
Loss from operations		(247,521	)		(48,364	)			-	(295,885)

Other income (expense)
Interest expense		(158,932	)		(900	)				(159,832)
Other income					5					5
Other income (expense)		(158,932	)		(895	)				(159,827)
Net income (loss)	$	(406,453	)	$	(49,259	)				$(455,712)

Loss per common share - basic and diluted	$	(0.02	)							$(0.02)
Weighted average shares outstanding - basic and diluted		21,742,806					©		2,000,000	23,742,806

XFit Brands, Inc.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

June 30, 2016 and September 30, 2016

1. Basis of Presentation

The unaudited pro forma combined financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and certain footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been omitted pursuant to such rules and regulations; accordingly, these pro forma financial statements should be read in connection with XFit Brands, Inc. (“XFit”) and EnviroTurf Group (“EnviroTurf”) historical audited and unaudited financial statements referred to above.

The unaudited pro forma combined statements of operations for the year ended June 30, 2016 and three months ended September 30, 2016 gives effect to the Acquisition as if it had been consummated on July 1, 2015 and include historical information as reported by the separate companies as well as adjustments that give effect to events that are directly attributable to the Acquisition, are expected to have a continuing impact and are factually supportable.

2. Acquisition of EnviroTurf

On October 14, 2016 but effective as of October 10, 2016, XFit Brands, Inc. (“XFit” or the “Company”) acquired the assets of Environmental Turf Services, LLC (“EnviroTurf”) pursuant to a definitive Asset Purchase Agreement dated October 10, 2016 (the “Purchase Agreement”) between the Company and EnviroTurf. The acquired assets consisted of inventory, accounts receivable, equipment and vehicles, the registered trademark “ENVIROTURF” and the associated goodwill. The acquisition was completed on October 14, 2016 upon delivery and acceptance of the schedules to the Purchase Agreement (the “Acquisition”).

At the closing of the Acquisition, the Company paid and issued to EnviroTurf a total purchase price of $346,000 as follows: (i) assumption of $200,000 of EnviroTurf’s accounts payable and (ii) 2,000,000 restricted shares of XFit Common Stock (the “Purchase Price Shares”), which were valued at the closing price on the date of XFit’s Common Stock on the date of the Acquisition. The Company will fund the non-share purchase price and the costs and expenses of the Acquisition through a combination of cash on hand and internally-generated working capital.

The Purchase Agreement contains customary representations, warranties and covenants by the parties.

The foregoing description of the Purchase Agreement and the transactions contemplated thereby is not complete and is subject and qualified in its entirety by reference to the text of the Purchase Agreement, which is filed as Exhibit 2.1 to this report and incorporated by reference in this Item 1.01. The representations and warranties of the parties in the Purchase Agreement have been made solely for the benefit of the other parties to the Purchase Agreement, and were not intended to be, and should not be, relied upon by any person other than such parties, including shareholders of the Company; should not be treated as categorical statements of fact, but rather as a way of allocating risk between the parties; in some cases have been qualified by disclosures that were made to the other parties in connection with the negotiation of the Purchase Agreement, which disclosures are not necessarily reflected in the Purchase Agreement; may apply standards of materiality in a way that may differ from standards of materiality applied by investors; and were made only as of the date of the Purchase Agreement or as of such other date or dates as may be specified in the Purchase Agreement, and are subject to developments occurring after those dates.

After giving effect to the issuance of the shares of Common Stock issued EnviroTurf at closing, EnviroTurf will beneficially own approximately 7.7% of the Company’s outstanding shares of Common Stock. In addition, pursuant to the Purchase Agreement, Jim Bateman, the majority equity owner of EnviroTurf, entered into an employment agreement with the Company for an initial term ending June 30, 2019 pursuant to which he will be President of the Sports Division and join the Board of Directors of the Company for base compensation of $72,000 per year, In addition, the Company shall also pay to Bateman (i) a commission of $0.05 per square of installed and paid turf from the EnviroTurf business; (ii) 2% of Net Sales (defined as Gross Sales less Discounts) directly generated by Bateman on the sale of any other product in the XFit Brand portfolio; and (iii) an equity bonus equivalent to 100,000 shares of XFit Common Stock or share-based equivalents (subject to adjustments for share splits and recapitalizations) for each $5,000,000 in EnviroTurf Net Sales. Finally, Bateman will be provided an equity incentive of 1,000,000 shares of XFit Common Stock following the successful sales and collection of $5,000,000 in EnviroTurf Net Sales. The foregoing description of the Employment Agreement is not complete and is subject and qualified in its entirety by reference to the text of such agreement, which is filed as Exhibit 10.1 to this report and incorporated by reference in this Item 1.01.

The purchase price was allocated to the net assets acquired based on their estimated fair values as follows:

Accounts receivable	$	247,397
Inventories		44,702
Property and equipment, net		24,696
Assumption of accounts payable		200,000

Goodwill		278,597
Total Purchase Price	$	346,000

The above allocation is preliminary and is subject to change. Because the acquisition was consummated on October 10, 2016, the Company has begun to assess the fair value of the various net assets acquired, but has not yet completed this assessment. The Company is also in the process of identifying other intangible assets, such as customer relationships and recipes that may need to be recognized apart from goodwill. Once identified, these other intangible assets, if any, will be recorded at their fair values. The Company is working to finalize the allocations as quickly as possible, and anticipates that the allocation will not be final for approximately 6 months. Any adjustments necessary may be material to the condensed consolidated balance sheet and the amount of goodwill recognized. Any resulting adjustments would have no impact to the September 30, 2016 reported operating results.

3. Pro Forma Adjustments

The following is a summary of pro forma adjustments reflected in the unaudited pro forma condensed combined financial statements based on preliminary estimates, which may change as additional information is obtained.

Pro Forma Adjustments:

The pro forma adjustments represent the following:

	A.	To record goodwill of $278,597 based on the terms of the Asset Purchase Agreement. The purchase price was designated at $346,000, net assets acquired totaled $67,403.

	B.	To reduce accounts payable to reflect the net balance assumed as of the acquisition date. The terms of the Asset Purchase Agreement stated that XFit would assume $200,000 of accounts payable balances as of the acquisition date.

	C.	To record the issuance of 2,000,0000 shares of XFit common stock issued as part of the purchase price in conjunction with the Asset Purchase Agreement.