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) May 25, 2018
ATTIS INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
New York | 001-13984 | 13-3832215 | ||
(State or other jurisdiction | (Commission File Number) | (IRS Employer | ||
of incorporation) | Identification No.) |
12540 Broadwell Road, Suite 2104
Milton, GA 30004
(Address of principal executive offices, including Zip Code)
(678) 580-5661
(Registrant's telephone number, including area code)
N/A
(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:
☐ | 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 (17CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Explanatory Note
As previously reported in a Current Report on Form 8-K filed on June 1, 2018 (the “Initial Form 8-K”), pursuant to the Securities Purchase Agreement (“SPA”) effective May 25, 2018 by and among Attis Industries Inc. (formerly known as Meridian Waste Solutions, Inc.) (the “Company”), Attis Innovations, LLC (“Innovations”), GreenShift Corporation (“GreenShift”), and GreenShift’s wholly-owned subsidiary, GS CleanTech Corporation (“CleanTech”), among others, whereby the Company acquired 80% of the membership interest units (“80% Units”) of FLUX Carbon LLC (“JVCo”), and $10,000,000 of GreenShift’s subordinate secured debt amongst other things. This Current Report on Form 8-K/A amends the Initial Form 8-K to present the historical financial statements and the pro forma financial information required by Item 9.01(a) and 9.01 (b) of Form 8-K, Rule 8-04 and Article 11 of Regulation S-X and should be read in conjunction with the Initial Form 8-K.
Item 9.01 Financial Statements and Exhibits.
PRO FORMA FINANCIAL STATEMENTS
The unaudited pro forma consolidated balance sheet at December 31, 2017, combines our historical consolidated balance sheet with the historical condensed balance sheets of the Company and its subsidiaries as if the closing under the SPA (“JVCo Acquisition Transaction”) had occurred on January 1, 2017. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2018, and for the year ended December 31, 2017, combine our historical consolidated statements of operations with the consolidated statements of operations of the Company and its subsidiaries as if the JVCo Acquisition Transaction had occurred on January 1, 2017. Historical financial information is adjusted in the unaudited pro forma combined financial information to give effect to pro forma events that are: (i) directly attributable to the JVCo Acquisition Transaction, (ii) factually supportable, and (iii) with respect to the combined statements of operations, expected to have a continuing impact on our combined results. Under the acquisition method of accounting outlined in ASC 805, the identifiable assets acquired and liabilities assumed in the JVCo Acquisition Transaction are recorded at their acquisition date fair values, and are included in the Company’s consolidated financial position. Our unaudited pro forma adjustments are preliminary in nature and based on the estimates of fair value for all assets acquired and liabilities assumed to illustrate the estimated effect of the JVCo Acquisition Transaction on our consolidated balance sheet at March 31, 2018. Accordingly, the unaudited pro forma purchase price allocation is subject to further adjustments as additional information becomes available and as additional analyses are performed. The primary area that is not yet finalized relates to our estimated fair value of identifiable intangible assets. There can be no assurances that any final valuations will not result in material adjustments to our preliminary estimated purchase price allocation.
This unaudited pro forma financial information is not necessarily indicative of the expected financial position or results of the Company’s operations for any future period. Differences could result from numerous factors, including future changes in the Company’s portfolio of investments, changes in interest rates, changes in the Company’s capital structure, and for other reasons.
This unaudited financial information is filed as Exhibit 99.3 to this Current Report on Form 8-K/A and is incorporated herein by reference.
1 |
(d) Exhibits
* filed herewith
± Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on June 1, 2018.
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SIGNATURE
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.
ATTIS INDUSTRIES INC. | ||
Date: July 24, 2018 | By: | /s/ Jeffrey Cosman |
Name: Jeffrey Cosman | ||
Title: Chief Executive Officer |
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Exhibit 99.1
FLUX CARBON LLC
FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017
TABLE OF CONTENTS
Page No | ||
Financial Statements as of and for the Period January 3, 2017 (inception) to December 31, 2017 | ||
Report of Independent Registered Public Accounting Firm | 1 | |
Balance Sheet as of December 31, 2017 | 2 | |
Statements of Operations for the period from January 3, 2017 (inception) to December 31, 2017 | 3 | |
Statements of Changes in Members’ Deficit for the period from January 3, 2017 (inception) to December 31, 2017 | 4 | |
Statements of Cash Flows for the period from January 3, 2017 (inception) to December 31, 2017 | 5 | |
Notes to Financial Statements | 6 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Members and the Board of Directors’ of:
Flux Carbon, LLC
Opinion on the Consolidated Financial Statements
We have audited the accompanying balance sheet of Flux Carbon, LLC (the “Company”) as of December 31, 2017, the related statements of operations, changes in members deficit and cash flows for the period January 3, 2017 (inception) to December 31, 2017, and the related notes (collectively referred to as the ” financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and the results of its operations and its cash flows for the period January 3, 2017 (inception) to December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has a net loss and lack of working capital. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan in regards to these matters are described in Note 2 of the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. Accordingly, we express no such opinion. As part of our audits, we are required to obtain an understanding of internal controls over financial reporting, but not for the purposes of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures including examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also include evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/ Liggett & Webb, P.A.
LIGGETT & WEBB, P.A.
Certified Public Accountants
We have served as the Company’s auditor since 2018.
Boynton Beach, Florida
July 19, 2018
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FLUX CARBON LLC
BALANCE SHEET
AS OF DECEMBER 31, 2017
December 31, 2017 | ||||
CURRENT ASSETS | ||||
TOTAL ASSETS | $ | -- | ||
CURRENT LIABILITIES AND MEMBERS’ DEFICIT | ||||
TOTAL LIABILITIES | -- | |||
MEMBERS’ DEFICIT | ||||
Member Equity | 90 | |||
Accumulated deficit | (90 | ) | ||
TOTAL MEMBERS’ DEFICIT | -- | |||
TOTAL LIABILITIES AND MEMBERS’ DEFICIT | $ | -- |
See accompanying notes to the Financial Statements.
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FLUX CARBON LLC
STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 3, 2017 (INCEPTION) TO DECEMBER 31, 2017
December 31, 2017 | ||||
Operating expenses | ||||
General and administrative expenses | 90 | |||
Total operating expenses | 90 | |||
Loss from Operations | (90 | ) | ||
Net loss | $ | (90 | ) |
See accompanying notes to the Financial Statements.
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FLUX CARBON LLC
statement of MEMBERs’ DEFICIT
FOR THE PERIOD JANUARY 3, 2017 (inception) TO DECEMBER 31, 2017
Member Equity | Accumulated Deficit | Members’ Deficit | ||||||||||
Balance at January 3, 2017 | $ | -- | $ | -- | $ | -- | ||||||
Capital contribution | 90 | -- | 90 | |||||||||
Net loss | -- | (90 | ) | (90 | ) | |||||||
Balance at December 31, 2017 | $ | 90 | $ | (90 | ) | $ | -- |
See accompanying notes to the Financial Statements.
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FLUX CARBON LLC
STATEMENT OF CASH FLOWS
FOR THE PERIOD JANUARY 3, 2017 (INCEPTION) TO DECEMBER 31, 2017
December 31, 2017 | ||||
CASH FLOW FROM OPERATING ACTIVITIES | ||||
NET LOSS | $ | (90 | ) | |
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: | ||||
Change | -- | |||
Net cash used in operating activities | (90 | ) | ||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||
Proceeds from capital contributions | 90 | |||
Net cash provided by financing activities | 90 | |||
Net increase (decrease) in cash | -- | |||
Cash at beginning of period | -- | |||
Cash at end of period | $ | -- | ||
Supplemental Disclosures of Cash Flow Information: | ||||
Cash paid during the period for: | ||||
Income taxes | $ | -- | ||
Interest | $ | -- |
The notes to the Financial Statements are an integral part of these statements.
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FLUX CARBON LLC
NOTES TO FINANCIAL STATEMENT
FOR THE PERIOD JANUARY 3, 2017 (INCEPTION) TO DECEMBER 31, 2017
NOTE 1 | DESCRIPTION OF BUSINESS |
REFERENCES TO THE COMPANY
References to “we,” “our,” “us,” “JVCo,” or the “Company” in the financial statements and in these notes to the financial statements refer to FLUX Carbon LLC, a Delaware limited liability company.
DESCRIPTION OF THE BUSINESS
The Company was formed in Delaware on January 3, 2017, as a holding company for various investments and intellectual property rights. The Company’s sole purpose as of December 31, 2017, is a holding company for such investments and rights. The Company’s operations are accordingly negligible, however, they remain subject to significant risks and uncertainties to the extent inasmuch as the Company’s intellectual properties may not be commercially viable, and, if they are, they will be subject to infringement and other commercialization risks.
NOTE 2 | GOING CONCERN |
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company does not have any sources of revenue and a limited operating history. The only recurring expenses associated with the Company are annual filing fees, which are minimal and will be covered in the future through recurring management fee revenue. There can be no assurance that such a plan will be successful. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Accordingly, the accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 3 | BASIS OF PRESENTATION |
SEGMENT INFORMATION
We determined our reporting units in accordance with FASB ASC 280, “Segment Reporting” (“ASC 280”). We evaluate a reporting unit by first identifying its operating segments under ASC 280. We then evaluate each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meet the definition of a business, we evaluate those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, we determine if the segments are economically similar and, if so, the operating segments are aggregated.
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REVENUE RECOGNITION
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collection is reasonably assured. The Company recognizes revenue from management fees payable under the JVCo operating and management agreements upon receipt of payment. The Company anticipates generating revenue in the future from third parties in addition to management fees, resulting in revenue from technology royalties and related services and products. If they occur in the future, licensing royalties will be recognized as earned by calculating the royalty as a percentage of gross sales by licensees. For the purposes of assessing royalties, the licensee’s sales will be deemed to occur when shipped, which is when four basic criteria have been met: (i) persuasive evidence of a customer arrangement; (ii) the price is fixed or determinable; (iii) collectability is reasonably assured, and (iv) product delivery has occurred, which is generally upon shipment to the buyer of the products produced with the licensed technology. To the extent revenues are generated from the Company’s licensing support services in the future, the Company will recognize such revenues when the services are completed and billed. Any such services will be provided on fixed price contracts. Revenue from any such contracts will be recognized on a pro rata basis over the life of the contract as they are generally performed evenly over the contract period. The Company additionally anticipates performing services under fixed-price contracts involving design, engineering, procurement, installation, and start-up of production systems based on the Company’s technologies. Revenues and fees on these contracts will be recognized using the percentage-of-completion method of accounting. Our percentage-of-completion methods may further include the efforts-expended percentage-of-completion method and the cost-to-cost method. The efforts-expended method utilizes using measures such as task duration and completion. The efforts-expended approach is used in situations where it is more representative of progress on a contract than the cost-to-cost or the labor-hours method. The Company will use the cost-to-cost method to determine the percentage of completion of a project based on the actual costs incurred. Earnings will be recognized periodically based upon our estimate of contract revenues and costs in providing the services required under the contract. The percentage of completion method must be used in lieu of the completed contract method when all of the following are present: reasonably reliable estimates can be made of revenue and costs; the construction contract specifies the parties’ rights as to the goods, consideration to be paid and received, and the resulting terms of payment or settlement; the contract purchaser has the ability and expectation to perform all contractual duties; and the contract contractor has the same ability and expectation to perform. Under the completed contract method income will be recognized only when a contract is completed or substantially completed. The asset, “costs and estimated earnings in excess of billings on uncompleted contracts,” in such instances will represent revenues recognized in excess of amounts billed. Likewise, the liability, “billings in excess of costs and estimated earnings on uncompleted contracts,” will represent billings in excess of revenues recognized.
FINANCIAL INSTRUMENTS
The carrying values of accounts receivable, other receivables, accounts payable and accrued expenses approximate their fair values due to their short term maturities.
EQUITY INVESTMENTS
Equity investments in which the Company exercises significant influence but does not control and is not the primary beneficiary are accounted for using the equity method. The Company’s share of its equity method investee’s earnings or losses is included in other income in the accompanying Statements of Operations.
RECEIVABLES AND CREDIT CONCENTRATION
Accounts receivable are uncollateralized, non-interest-bearing customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Accounts receivable are stated at the amount billed to the customer. Accounts receivable in excess of 90 days old are evaluated for delinquency. In addition, we consider historical bad debts and current economic trends in evaluating the allowance for bad debts. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the oldest unpaid invoices. The Company had no accounts receivable as of December 31, 2017 and 2016.
INVENTORIES
The Company can be expected to maintain an inventory of equipment and components from time to time consisting of equipment and component parts that are held for sale to third party licensees on an as needed basis. Inventories are stated at the lower of cost or market, with cost being determined by the specific identification method.
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CASH AND EQUIVALENTS
The Company considers cash and equivalents to be cash and short-term investments with original maturities of three months or less from the date of acquisition. The Company had no cash or cash equivalents as of December 31, 2017 and 2016.
PROPERTY AND EQUIPMENT
Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the life of the lease or their useful lives. Gains and losses on depreciable assets retired or sold are recognized in the statement of operations in the year of disposal, and repair and maintenance expenditures are expensed as incurred. Property, plant and equipment are stated at cost. Expenditures for major renewals and improvements which extend the life or usefulness of the asset are capitalized. Once an asset has been completed and placed in service, it is transferred to the appropriate category and depreciation commences. The Company uses the straight line method for depreciation and depreciates equipment over the estimated useful life of the assets: office and computer equipment over 3-5 years and corn oil extraction systems over a 10 year period. Gains and losses on depreciable assets retired or sold are recognized in the statement of operations in the year of disposal, and repair and maintenance expenditures are expensed as incurred. Property and equipment are stated at cost and include amounts capitalized under capital lease obligations.
INTANGIBLE ASSETS
The Company accounts for its intangible assets pursuant to ASC 350-20-55-24, “Intangibles – Goodwill and Other”. Under ASC 350, intangibles with definite lives continue to be amortized on a straight-line basis over the lesser of their estimated useful lives or contractual terms. Intangibles with indefinite lives are evaluated at least annually for impairment by comparing the asset’s estimated fair value with its carrying value, based on cash flow methodology. Intangibles with definite lives are subject to impairment testing in the event of certain indicators. Impairment in the carrying value of an asset is recognized whenever anticipated future cash flows (undiscounted) from an asset are estimated to be less than its carrying value. The amount of the impairment recognized is the difference between the carrying value of the asset and its fair value.
LONG-LIVED ASSETS
The Company assesses the valuation of components of its property and equipment and other long-lived assets whenever events or circumstances dictate that the carrying value might not be recoverable. The Company bases its evaluation on indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present. If such factors indicate that the carrying amount of an asset or asset group may not be recoverable, the Company determines whether an impairment has occurred by analyzing an estimate of undiscounted future cash flows at the lowest level for which identifiable cash flows exist. If the estimate of undiscounted cash flows during the estimated useful life of the asset is less than the carrying value of the asset, the Company recognizes a loss for the difference between the carrying value of the asset and its estimated fair value, generally measured by the present value of the estimated cash flows.
INCOME TAXES
As a limited liability company, taxable income or loss flows through to the members on their individual tax returns. The 2015-2017 returns are open for audit by federal and state taxing authorities.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the financial statements, and (iii) the reported amounts of revenues and expenses during the reporting period. We use estimates and assumptions in accounting for significant matters, such as valuation of intellectual property, among others. Actual results may differ from previously estimated amounts, and such differences may be material to our consolidated financial statements. The Company periodically review estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made. The revisions to estimates or assumptions during the periods presented in the accompanying consolidated financial statements were not considered to be significant.
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NOTE 4 | RECENT ACCOUNTING PRONOUCEMENTS |
Revenue Recognition. In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)”. The objective of this amendment is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying this amendment, companies will perform a five-step analysis of transactions to determine when and how revenue is recognized. This amendment applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. An entity should apply the amendments using either the full retrospective approach or retrospectively with a cumulative effect of initially applying the amendments recognized at the date of initial application. In July 2015, the FASB issued ASU 2015-14 which deferred May 25, 2018 of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company has not yet selected which transition method it will apply upon adoption. Historically, the Company has not generated any revenue. The Company will continue to evaluate and will quantify the impact, if any, the adoption of ASU 2014-09 will have on our revenue streams when they occur. When our evaluations do occur, The Company does not expect material changes to its accounting policies.
Statement of Cash Flows. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), which is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are classified in the statement of cash flows. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, Restricted Cash (Topic 230) (ASU 2016-18), which requires the inclusion of restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-15 and ASU 2016-18 are both effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, provided that all of the amendments are adopted in the same period. The amendments will be applied using a retrospective transition method to each period presented. The Company adopted this guidance in the first quarter of 2018 and it did not have a significant impact on its financial statements.
Financial Instruments. In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01), which requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income. The ASU also impacts financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. Entities will have to assess the realizability of such deferred tax assets in combination with the entities other deferred tax assets. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017 and for interim periods within that reporting period. In the first quarter of 2018, the Company will elect to adopt the measurement alternative, which will apply this ASU prospectively, for its equity investments that do not have readily determinable fair values. The Company adopted this guidance in the first quarter of 2018 and it did not have a significant impact on its financial statements.
NOTE 5 | RELATED PARTY TRANSACTIONS |
The Company is subject to a first priority lien granted in favor of CANDENT CORPORATION (“Candent”) on February 18, 2015, under a guaranty agreement executed on January 3, 2017, by the Company in connection with the issuance of a $15 million secured loan (“Senior Loan”) to Candent by EXO OPPORTUNITY FUND LLC (“EXO”), the parent company of the Company’s former parent, FLUX CARBON MITIGATION FUND LLC (“FCMF”). The note has a due date of February 18, 2021 and is currently not in default.
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NOTE 6 | MEMBERS’ EQUITY |
The Company was formed by FCMF in Delaware on January 3, 2017, in the original name of FLUX CARBON MITIGATION FUND II LLC, as a holding company for various investments. The Company’s name was changed on March 14, 2018, to FLUX CARBON LLC. The Company’s equity is represented by 100 membership interest units. As of December 31, 2017, 100% of the Company’s equity was owned by FCMF. During 2017, the member contributed $90 of capital for expenses.
NOTE 7 | COMMITMENTS AND CONTINGENCIES |
The Company is subject to a first priority lien granted in favor of Candent on February 18, 2015, under a guaranty agreement executed on January 3, 2017, by the Company in connection with the issuance of a $15 million secured loan to Candent by EXO, the parent company of the Company’s former parent, FCMF.
NOTE 8 | SUBSEQUENT EVENTS |
Effective May 25, 2018 (the “Closing Date”), Attis Industries Inc. (the “Attis”), Attis’s wholly-owned subsidiary, Attis Innovations, LLC (“Innovations”), GreenShift Corporation (“GreenShift”), and GreenShift’s wholly-owned subsidiary, GS CleanTech Corporation (“CleanTech”), among others, entered into a Securities Purchase Agreement (“SPA”) and related transaction documents pursuant to which Attis acquired 80% of the membership interest units (“80% Units”) of FLUX Carbon LLC (“Company”), and $10,000,000 of GreenShift’s subordinate secured debt, in exchange for an earn-out based purchase price equal to the greater of (i) $18,000,000 (“Floor Price”); (ii) five (5) times Company’s Consolidated EBITDA during 2018, 2019, and 2020; (iii) four (4) times Company’s Consolidated EBITDA during 2021, 2022, and 2023; (iv) three (3) times Company’s Consolidated EBITDA during 2024 and 2025; (iv) two (2) times Company’s Consolidated EBITDA during 2026; or (iv), one (1) times Company’s Consolidated EBITDA during 2027. The agreements additionally call for Attis to pay $200,000 over sixty days, and for GreenShift to pay certain working capital surplus equal to about $200,000 to the Company. An initial payment against the SPA purchase price was paid at Closing in the form of 2,000,000 restricted shares of Attis’s common stock and 180,000 shares of Attis’s Series G Stock. GreenShift is required to use the first proceeds received upon sale of the shares to pay or refinance its senior secured debt.
The SPA transaction documents also include an Amended and Restated Limited Liability Attis Operating Agreement and a Management Agreement (“Company Agreements”) under which GreenShift and CleanTech have in essence ‘outsourced’ its operations to the Company, which the parties have agreed to fully capitalize to meet a number of specific objectives, including servicing the continuing and future needs of licensees, investing in growth with the parties’ combined intellectual properties, protecting GreenShift’s intellectual properties, and supporting all pending and future litigation for infringement and related matters. The Company agreements further require that no distributions shall be paid by the Company prior to the date on which GreenShift’s senior secured lender is fully paid.
On and subject to the terms and conditions of the SPA and related transaction documents, at the Closing, GreenShift issued to Attis a subordinate secured convertible debenture in the original principal amount of $10,000,000 (“Debenture”). Commencing November 22, 2018, the Debenture shall be convertible into GreenShift’s common stock at the sole and exclusive option of the holder in one or more installments up to 9.9% of the GreenShift’s issued and outstanding common stock at the time of conversion (when taken with any other shares of GreenShift common stock held by the holder at the time of conversion). The Debenture converts into GreenShift common stock at the greater of (i) $0.10 per share or (ii) 100% of the lowest closing market price per share for the GreenShift common stock for the thirty (30) Trading Days preceding conversion. The Debenture shall accrue interest at the lesser of 2% or the minimum allowable rate under applicable law, and shall be waived if the GreenShift Debenture is converted or otherwise fully paid on or before June 30, 2028. The Debenture shall be exclusively paid in the form of GreenShift common stock, provided, however, that the principal balance due under the Debenture shall be reduced on a dollar for dollar basis in an amount equal to any distributions paid as provided for in the SPA and Company Agreements.
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Exhibit 99.2
FLUX CARBON LLC
FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2018
TABLE OF CONTENTS
Financial Statements | Page No | |
Balance Sheets as of March 31, 2018 (unaudited) and December 31, 2017 | 2 | |
Unaudited Statements of Operations for the three months ended March 31, 2018 and 2017 | 3 | |
Unaudited Statements of Cash Flows for the three months ended March 31, 2018 and 2017 | 4 | |
Unaudited Notes to Financial Statements | 5 |
FLUX CARBON LLC
CONDENSED BALANCE SHEET
AS OF MARCH 31, 2018 AND DECEMBER 31, 2017
March 31, 2018 | December 31, 2017 | |||||||
(Unaudited) | ||||||||
CURRENT ASSETS | ||||||||
TOTAL ASSETS | $ | -- | $ | -- | ||||
CURRENT LIABILITIES AND MEMBERS’ DEFICIT | ||||||||
TOTAL LIABILITIES | -- | -- | ||||||
MEMBERS’ DEFICIT | ||||||||
Member Equity | 180 | 90 | ||||||
Accumulated deficit | (180 | ) | (90 | ) | ||||
TOTAL MEMBERS’ DEFICIT | -- | -- | ||||||
TOTAL LIABILITIES AND MEMBERS’ DEFICIT | $ | -- | $ | -- |
See accompanying unaudited notes to the Condensed Financial Statements.
2 |
FLUX CARBON LLC
CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
(UNAUDITED)
Three Months Ended March 31, 2018 | Three Months Ended March 31, 2017 | |||||||
Operating expenses | ||||||||
General and administrative expenses | 90 | 90 | ||||||
Total operating expenses | 90 | 90 | ||||||
Loss from Operations | (90 | ) | (90 | ) | ||||
Net loss | $ | (90 | ) | $ | (90 | ) |
See accompanying unaudited notes to the Financial Statements.
3 |
FLUX CARBON LLC
CONDENSED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
(UNAUDITED)
Three Months Ended March 31, 2018 | Three Months Ended March 31, 2017 | |||||||
CASH FLOW FROM OPERATING ACTIVITIES | ||||||||
NET LOSS | $ | (90 | ) | $ | (90 | ) | ||
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: | ||||||||
Change in balance sheet | -- | -- | ||||||
Net cash used in operating activities | (90 | ) | (90 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from capital contribution | 90 | 90 | ||||||
Net cash provided by financing activities | 90 | 90 | ||||||
Net increase (decrease) in cash | -- | -- | ||||||
Cash at beginning of period | -- | -- | ||||||
Cash at end of period | $ | -- | $ | -- | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid during the period for: | ||||||||
Income taxes | $ | -- | $ | -- | ||||
Interest | $ | -- | $ | -- |
See accompanying unaudited notes to the Financial Statements.
4 |
FLUX CARBON LLC
UNAUDITED NOTES TO FINANCIAL STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 2018
NOTE 1 | DESCRIPTION OF BUSINESS |
REFERENCES TO THE COMPANY
References to “we,” “our,” “us,” “JVCo,” or the “Company” in the financial statements and in these notes to the financial statements refer to FLUX Carbon LLC, a Delaware limited liability company.
DESCRIPTION OF THE BUSINESS
The Company was formed in Delaware on January 3, 2017, as a holding company for various investments and intellectual property rights. The Company’s sole purpose is a holding company for such investments and rights. The Company’s operations are accordingly negligible, however, they remain subject to significant risks and uncertainties to the extent inasmuch as the Company’s intellectual properties may not be commercially viable, and, if they are, they will be subject to infringement and other commercialization risks.
NOTE 2 | GOING CONCERN |
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company does not have any sources of revenue and a limited operating history. The only recurring expenses associated with the Company are annual filing fees, which are minimal and will be covered in the future through recurring management fee revenue. There can be no assurance that such a plan will be successful. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Accordingly, the accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 3 | BASIS OF PRESENTATION |
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim information Regulation S-K. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments consisting of a normal and recurring nature considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2018 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2018.
These condensed financial statements should be read in conjunction with the financial statements and related disclosures of the Company as of December 31, 2017 and for the year then ended.
SEGMENT INFORMATION
We determined our reporting units in accordance with FASB ASC 280, “Segment Reporting” (“ASC 280”). We evaluate a reporting unit by first identifying its operating segments under ASC 280. We then evaluate each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meet the definition of a business, we evaluate those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, we determine if the segments are economically similar and, if so, the operating segments are aggregated.
5 |
REVENUE RECOGNITION
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collection is reasonably assured. The Company recognizes revenue from management fees payable under the JVCo operating and management agreements upon receipt of payment. The Company anticipates generating revenue in the future from third parties in addition to management fees, resulting in revenue from technology royalties and related services and products. If they occur in the future, licensing royalties will be recognized as earned by calculating the royalty as a percentage of gross sales by licensees. For the purposes of assessing royalties, the licensee’s sales will be deemed to occur when shipped, which is when four basic criteria have been met: (i) persuasive evidence of a customer arrangement; (ii) the price is fixed or determinable; (iii) collectability is reasonably assured, and (iv) product delivery has occurred, which is generally upon shipment to the buyer of the products produced with the licensed technology. To the extent revenues are generated from the Company’s licensing support services in the future, the Company will recognize such revenues when the services are completed and billed. Any such services will be provided on fixed price contracts. Revenue from any such contracts will be recognized on a pro rata basis over the life of the contract as they are generally performed evenly over the contract period. The Company additionally anticipates performing services under fixed-price contracts involving design, engineering, procurement, installation, and start-up of production systems based on the Company’s technologies. Revenues and fees on these contracts will be recognized using the percentage-of-completion method of accounting. Our percentage-of-completion methods may further include the efforts-expended percentage-of-completion method and the cost-to-cost method. The efforts-expended method utilizes using measures such as task duration and completion. The efforts-expended approach is used in situations where it is more representative of progress on a contract than the cost-to-cost or the labor-hours method. The Company will use the cost-to-cost method to determine the percentage of completion of a project based on the actual costs incurred. Earnings will be recognized periodically based upon our estimate of contract revenues and costs in providing the services required under the contract. The percentage of completion method must be used in lieu of the completed contract method when all of the following are present: reasonably reliable estimates can be made of revenue and costs; the construction contract specifies the parties’ rights as to the goods, consideration to be paid and received, and the resulting terms of payment or settlement; the contract purchaser has the ability and expectation to perform all contractual duties; and the contract contractor has the same ability and expectation to perform. Under the completed contract method income will be recognized only when a contract is completed or substantially completed. The asset, “costs and estimated earnings in excess of billings on uncompleted contracts,” in such instances will represent revenues recognized in excess of amounts billed. Likewise, the liability, “billings in excess of costs and estimated earnings on uncompleted contracts,” will represent billings in excess of revenues recognized.
FINANCIAL INSTRUMENTS
The carrying values of accounts receivable, other receivables, accounts payable and accrued expenses approximate their fair values due to their short term maturities.
EQUITY INVESTMENTS
Equity investments in which the Company exercises significant influence but does not control and is not the primary beneficiary are accounted for using the equity method. The Company’s share of its equity method investee’s earnings or losses is included in other income in the accompanying Statements of Operations.
RECEIVABLES AND CREDIT CONCENTRATION
Accounts receivable are uncollateralized, non-interest-bearing customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Accounts receivable are stated at the amount billed to the customer. Accounts receivable in excess of 90 days old are evaluated for delinquency. In addition, we consider historical bad debts and current economic trends in evaluating the allowance for bad debts. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the oldest unpaid invoices. The Company had no accounts receivable as of March 31, 2018.
INVENTORIES
The Company can be expected to maintain an inventory of equipment and components from time to time consisting of equipment and component parts that are held for sale to third party licensees on an as needed basis. Inventories are stated at the lower of cost or market, with cost being determined by the specific identification method.
CASH AND EQUIVALENTS
The Company considers cash and equivalents to be cash and short-term investments with original maturities of three months or less from the date of acquisition. The Company had no cash or cash equivalents as of March 31, 2018.
6 |
PROPERTY AND EQUIPMENT
Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the life of the lease or their useful lives. Gains and losses on depreciable assets retired or sold are recognized in the statement of operations in the year of disposal, and repair and maintenance expenditures are expensed as incurred. Property, plant and equipment are stated at cost. Expenditures for major renewals and improvements which extend the life or usefulness of the asset are capitalized. Once an asset has been completed and placed in service, it is transferred to the appropriate category and depreciation commences. The Company uses the straight line method for depreciation and depreciates equipment over the estimated useful life of the assets: office and computer equipment over 3-5 years and corn oil extraction systems over a 10 year period. Gains and losses on depreciable assets retired or sold are recognized in the statement of operations in the year of disposal, and repair and maintenance expenditures are expensed as incurred. Property and equipment are stated at cost and include amounts capitalized under capital lease obligations.
INTANGIBLE ASSETS
The Company accounts for its intangible assets pursuant to ASC 350-20-55-24, “Intangibles – Goodwill and Other”. Under ASC 350, intangibles with definite lives continue to be amortized on a straight-line basis over the lesser of their estimated useful lives or contractual terms. Intangibles with indefinite lives are evaluated at least annually for impairment by comparing the asset’s estimated fair value with its carrying value, based on cash flow methodology. Intangibles with definite lives are subject to impairment testing in the event of certain indicators. Impairment in the carrying value of an asset is recognized whenever anticipated future cash flows (undiscounted) from an asset are estimated to be less than its carrying value. The amount of the impairment recognized is the difference between the carrying value of the asset and its fair value.
LONG-LIVED ASSETS
The Company assesses the valuation of components of its property and equipment and other long-lived assets whenever events or circumstances dictate that the carrying value might not be recoverable. The Company bases its evaluation on indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present. If such factors indicate that the carrying amount of an asset or asset group may not be recoverable, the Company determines whether an impairment has occurred by analyzing an estimate of undiscounted future cash flows at the lowest level for which identifiable cash flows exist. If the estimate of undiscounted cash flows during the estimated useful life of the asset is less than the carrying value of the asset, the Company recognizes a loss for the difference between the carrying value of the asset and its estimated fair value, generally measured by the present value of the estimated cash flows.
INCOME TAXES
As a limited liability company, taxable income or loss flows through to the members on their individual tax returns. The 2015-2017 returns are open for audit by federal and state taxing authorities.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the financial statements, and (iii) the reported amounts of revenues and expenses during the reporting period. We use estimates and assumptions in accounting for significant matters, such as valuation of intellectual property, among others. Actual results may differ from previously estimated amounts, and such differences may be material to our consolidated financial statements. The Company periodically review estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made. The revisions to estimates or assumptions during the periods presented in the accompanying consolidated financial statements were not considered to be significant.
7 |
NOTE 4 | RECENT ACCOUNTING PRONOUCEMENTS |
Revenue Recognition. In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)”. The objective of this amendment is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying this amendment, companies will perform a five-step analysis of transactions to determine when and how revenue is recognized. This amendment applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. An entity should apply the amendments using either the full retrospective approach or retrospectively with a cumulative effect of initially applying the amendments recognized at the date of initial application. In July 2015, the FASB issued ASU 2015-14 which deferred May 25, 2018 of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company has not yet selected which transition method it will apply upon adoption. Historically, the Company has not generated any revenue. The Company will continue to evaluate and will quantify the impact, if any, the adoption of ASU 2014-09 will have on our revenue streams when they occur. When our evaluations do occur, The Company does not expect material changes to its accounting policies.
Statement of Cash Flows. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), which is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are classified in the statement of cash flows. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, Restricted Cash (Topic 230) (ASU 2016-18), which requires the inclusion of restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-15 and ASU 2016-18 are both effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, provided that all of the amendments are adopted in the same period. The amendments will be applied using a retrospective transition method to each period presented. The Company adopted this guidance in the first quarter of 2018 and it did not have a significant impact on its financial statements.
Financial Instruments. In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01), which requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income. The ASU also impacts financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. Entities will have to assess the realizability of such deferred tax assets in combination with the entities other deferred tax assets. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017 and for interim periods within that reporting period. In the first quarter of 2018, the Company will elect to adopt the measurement alternative, which will apply this ASU prospectively, for its equity investments that do not have readily determinable fair values. The Company adopted this guidance in the first quarter of 2018 and it did not have a significant impact on its financial statements.
NOTE 5 | RELATED PARTY TRANSACTIONS |
The Company is subject to a first priority lien granted in favor of CANDENT CORPORATION (“Candent”) on February 18, 2015, under a guaranty agreement executed on January 3, 2017, by the Company in connection with the issuance of a $15 million secured loan (“Senior Loan”) to Candent by EXO OPPORTUNITY FUND LLC (“EXO”), the parent company of the Company’s former parent, FLUX CARBON MITIGATION FUND LLC (“FCMF”). The note has a due date of February 18, 2021 and is currently not in default.
8 |
NOTE 6 | MEMBERS’ EQUITY |
The Company was formed by FCMF in Delaware on January 3, 2017, in the original name of FLUX CARBON MITIGATION FUND II LLC, as a holding company for various investments. The Company’s name was changed on March 14, 2018, to FLUX CARBON LLC. The Company’s equity is represented by 100 membership interest units. As of December 31, 2017, 100% of the Company’s equity was owned by FCMF. During 2018, the member contributed $90 of capital for expenses.
NOTE 7 | COMMITMENTS AND CONTINGENCIES |
The Company is subject to a first priority lien granted in favor of Candent on February 18, 2015, under a guaranty agreement executed on January 3, 2017, by the Company in connection with the issuance of a $15 million secured loan to Candent by EXO, the parent company of the Company’s former parent, FCMF. The note has a due date of February 18, 2021 and is currently not in default.
NOTE 8 | SUBSEQUENT EVENTS |
Effective May 25, 2018 (the “Closing Date”), Attis Industries Inc. (the “Attis”), Attis’s wholly-owned subsidiary, Attis Innovations, LLC (“Innovations”), GreenShift Corporation (“GreenShift”), and GreenShift’s wholly-owned subsidiary, GS CleanTech Corporation (“CleanTech”), among others, entered into a Securities Purchase Agreement (“SPA”) and related transaction documents pursuant to which Attis acquired 80% of the membership interest units (“80% Units”) of FLUX Carbon LLC (“Company”), and $10,000,000 of GreenShift’s subordinate secured debt, in exchange for an earn-out based purchase price equal to the greater of (i) $18,000,000 (“Floor Price”); (ii) five (5) times Company’s Consolidated EBITDA during 2018, 2019, and 2020; (iii) four (4) times Company’s Consolidated EBITDA during 2021, 2022, and 2023; (iv) three (3) times Company’s Consolidated EBITDA during 2024 and 2025; (iv) two (2) times Company’s Consolidated EBITDA during 2026; or (iv), one (1) times Company’s Consolidated EBITDA during 2027. The agreements additionally call for Attis to pay $200,000 over sixty days, and for GreenShift to pay certain working capital surplus equal to about $200,000 to the Company. An initial payment against the SPA purchase price was paid at Closing in the form of 2,000,000 restricted shares of Attis’s common stock and 180,000 shares of Attis’s Series G Stock. GreenShift is required to use the first proceeds received upon sale of the shares to pay or refinance its senior secured debt.
The SPA transaction documents also include an Amended and Restated Limited Liability Attis Operating Agreement and a Management Agreement (“Company Agreements”) under which GreenShift and CleanTech have in essence ‘outsourced’ its operations to the Company, which the parties have agreed to fully capitalize to meet a number of specific objectives, including servicing the continuing and future needs of licensees, investing in growth with the parties’ combined intellectual properties, protecting GreenShift’s intellectual properties, and supporting all pending and future litigation for infringement and related matters. The Company agreements further require that no distributions shall be paid by the Company prior to the date on which GreenShift’s senior secured lender is fully paid.
On and subject to the terms and conditions of the SPA and related transaction documents, at the Closing, GreenShift issued to Attis a subordinate secured convertible debenture in the original principal amount of $10,000,000 (“Debenture”). Commencing November 22, 2018, the Debenture shall be convertible into GreenShift’s common stock at the sole and exclusive option of the holder in one or more installments up to 9.9% of the GreenShift’s issued and outstanding common stock at the time of conversion (when taken with any other shares of GreenShift common stock held by the holder at the time of conversion). The Debenture converts into GreenShift common stock at the greater of (i) $0.10 per share or (ii) 100% of the lowest closing market price per share for the GreenShift common stock for the thirty (30) Trading Days preceding conversion. The Debenture shall accrue interest at the lesser of 2% or the minimum allowable rate under applicable law, and shall be waived if the GreenShift Debenture is converted or otherwise fully paid on or before June 30, 2028. The Debenture shall be exclusively paid in the form of GreenShift common stock, provided, however, that the principal balance due under the Debenture shall be reduced on a dollar for dollar basis in an amount equal to any distributions paid as provided for in the SPA and Company Agreements.
9 |
Exhibit 99.3
The following financials summarize our consolidated results of operations for the year ended December 31, 2017 as well as the three month period ending March 31, 2018, as though the acquisition of 80% of the membership interest units of Flux Carbon LLC had occurred on December 31, 2017:
ATTIS INDUSTRIES AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2017
Attis Industries | Flux Carbon LLC et al | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||
Assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 400,223 | $ | -- | $ | - | $ | 400,223 | ||||||||
Accounts receivable, net of allowance | 861,031 | -- | - | 861,031 | ||||||||||||
Prepaid expenses | 334,603 | -- | - | 334,603 | ||||||||||||
Other current assets | 6,450 | -- | - | 6,450 | ||||||||||||
Current assets held for sale | 8,714,497 | -- | - | 8,714,497 | ||||||||||||
Total current assets | 10,316,804 | -- | -- | 10,316,804 | ||||||||||||
Property, plant and equipment, at cost net of accumulated depreciation | 333,499 | -- | - | 333,499 | ||||||||||||
Other assets: | ||||||||||||||||
Contract deposits | 536,076 | -- | - | 536,076 | ||||||||||||
Other deposits | 162,206 | -- | - | 162,206 | ||||||||||||
Goodwill | 5,279,207 | -- | - | 5,279,207 | ||||||||||||
Capitalized software | 108,767 | -- | - | 108,767 | ||||||||||||
Patents | 3,141,796 | -- | - | 3,141,796 | ||||||||||||
Intangibles | -- | -- | 17,634,854 | 17,634,854 | ||||||||||||
Customer list, net of accumulated amortization | 2,718,300 | -- | - | 2,718,300 | ||||||||||||
Note receivable – long term | -- | -- | 10,000,000 | 10,000,000 | ||||||||||||
Website, net of accumulated amortization | 27,117 | -- | - | 27,117 | ||||||||||||
Total other assets | 11,973,469 | -- | 27,634,854 | 39,608,323 | ||||||||||||
Total noncurrent assets held for sale | 80,932,386 | -- | - | 80,932,386 | ||||||||||||
Total assets | $ | 103,556,158 | $ | -- | $ | 27,634,854 | $ | 131,191,012 | ||||||||
Liabilities and Shareholders’ Equity (Deficit) | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 1,777,355 | $ | -- | $ | - | $ | 1,777,355 | ||||||||
Accrued expenses | 820,458 | -- | - | 820,458 | ||||||||||||
Notes payable, related parties | 6,891 | -- | - | 6,891 | ||||||||||||
Deferred compensation | - | -- | - | - | ||||||||||||
Derivative and other fair value liabilities | 2,307,363 | -- | - | 2,307,363 | ||||||||||||
Current portion - capital leases payable | 25,999 | -- | - | 25,999 | ||||||||||||
Current portion - long-term debt | 8,502,387 | -- | - | 8,502,387 | ||||||||||||
Current liabilities held for sale | 84,227,518 | -- | - | 84,227,518 | ||||||||||||
Total current liabilities | 97,667,971 | -- | - | 97,667,971 | ||||||||||||
Long-term liabilities: | ||||||||||||||||
Contingent consideration liability | 1,957,226 | -- | - | 1,957,226 | ||||||||||||
Deferred tax liability | 14,337 | -- | - | 14,337 | ||||||||||||
Deferred rent | 53,418 | -- | - | 53,418 | ||||||||||||
Long-term debt, net of current | 1,977,707 | -- | - | 1,977,707 | ||||||||||||
Noncurrent liabilities held for sale | 17,307,998 | -- | - | 17,307,998 | ||||||||||||
Total long-term liabilities | 21,310,686 | -- | - | 21,310,686 | ||||||||||||
Total liabilities | 118,978,657 | -- | 118,978,657 | |||||||||||||
- | ||||||||||||||||
Preferred Series C stock redeemable, cumulative, stated value $100 per share, par value $.001, 67,361 shares authorized, 35,750 and 0 shares issued and outstanding, respectively | - | - | - | - | ||||||||||||
Preferred Series E stock, cumulative, stated value $100 per share, par value $.001, 300,000 shares authorized, 300,000 and 0 shares issued and outstanding, respectively | 1,253,476 | - | - | 1,253,476 | ||||||||||||
Shareholders’ equity (deficit): | ||||||||||||||||
Preferred Series A stock, par value $.001, 51 shares authorized, issued and outstanding | - | - | - | - | ||||||||||||
Preferred Series B stock, par value $.001, 71,210 shares authorized, 0 and 71,210 issued and outstanding | - | - | - | - | ||||||||||||
Preferred Series D stock, cumulative, stated value $100 per share, par value $.001, 67,361 shares authorized, 35,750 and 0 shares issued and outstanding, respectively | 531,691 | - | - | 531,691 | ||||||||||||
Common stock, par value $.025, 75,000,000 shares authorized, 14,658,979 and 1,712,471 shares issued and 6,932,744 and 14,647,749 shares outstanding, respectively | 366,156 | - | - | 366,156 | ||||||||||||
Common stock to be issued | 720,147 | - | - | 720,147 | ||||||||||||
Treasury stock, at cost, 11,500 shares | (224,250 | ) | - | - | (224,250 | ) | ||||||||||
Additional paid in capital | 65,532,467 | 2,090 | 28,000,000 | 93,532,467 | ||||||||||||
Accumulated deficit | (85,061,593 | ) | (2,090 | ) | (365,146 | ) | (85,426,739 | ) | ||||||||
Total Attis Industries Inc.. shareholders’ deficit | (18,135,382 | ) | - | 27,634,854 | 9,499,471 | ) | ||||||||||
Noncontrolling Interest | 1,459,407 | - | - | 1,459,407 | ||||||||||||
Total shareholders’ equity (deficit) | (16,675,975 | ) | - | 27,634,854 | 10,958,879 | |||||||||||
Total liabilities and shareholders’ equity (deficit) | $ | 103,556,158 | $ | - | $ | 27,634,854 | $ | 131,191,012 |
The accompanying notes are an integral part of these consolidated financial statements.
2
ATTIS INDUSTRIES AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2017
Attis Industries | Flux Carbon LLC et al | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||
Revenue | ||||||||||||||||
Services | $ | 890,258 | $ | - | $ | - | $ | 890,258 | ||||||||
Total revenue | 890,258 | - | - | 890,258 | ||||||||||||
Cost and expenses: | ||||||||||||||||
Operating | 691,415 | - | - | 691,415 | ||||||||||||
Depreciation and amortization | 223,977 | - | - | 223,977 | ||||||||||||
Impairment expense | 221,146 | - | - | 221,146 | ||||||||||||
Selling, general and administrative | 13,198,096 | 490 | - | 13,198,586 | ||||||||||||
Total cost and expenses | 14,334,634 | 490 | - | 14,335,124 | ||||||||||||
Other income (expenses): | ||||||||||||||||
Unrealized loss on change in fair value of derivative and other fair value liabilities | (992,115 | ) | - | - | (992,115 | ) | ||||||||||
Unrealized gain from change in fair value of contingent consideration | 263,458 | - | - | 263,458 | ||||||||||||
Gain on extinguishment of debt | 2,911,417 | - | - | 2,911,417 | ||||||||||||
Gain on contingent liability | - | - | - | - | ||||||||||||
Loss on equity method investment | -- | - | (365,146 | ) | (365,146 | ) | ||||||||||
Interest income | 7,644 | - | - | 7,644 | ||||||||||||
Interest expense | (620,923 | ) | - | - | (620,923 | ) | ||||||||||
Total other income (expenses) | 1,569,481 | - | (365,146 | ) | 1,204,335 | |||||||||||
Loss before income taxes | (11,874,895 | ) | (490 | ) | (365,146 | ) | (12,240,531 | ) | ||||||||
Provision for income taxes | (14,337 | ) | - | - | (14,337 | ) | ||||||||||
Loss from continuing operations | $ | (11,889,232 | ) | $ | (490 | ) | $ | (365,146 | ) | $ | (12,254,868 | ) | ||||
Discontinued Operations, net of tax Loss from operations of discontinued operations | |
$ |
(27,148,257 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(27,148,257 |
) |
Consolidated Net Loss | $ | (39,037,489 | ) | $ | (490 | ) | $ | (365,146 | ) | $ | (39,403,125 | ) | ||||
Net income attributable to noncontrolling interest | $ | 123,523 | $ | - | $ | - | $ | 123,523 | ||||||||
Net loss available to common shareholders | $ | (39,161,012 | ) | $ | (490 | ) | $ | (365,146 | ) | $ | (39,526,648 | ) | ||||
Deemed dividend related to beneficial conversion feature and accretion of a discount on Series C Preferred Stock | $ | (2,115,317 | ) | $ | - | $ | - | $ | (2,115,317 | ) | ||||||
Stock dividend related to Series C Preferred Stock | $ | (135,072 | ) | $ | - | $ | - | $ | (135,072 | ) | ||||||
Deemed dividend related to issuance of Series D Preferred Stock | $ | (531,692 | ) | $ | - | $ | - | $ | (531,692 | ) | ||||||
Stock dividend related to issuance of Series D Preferred Stock | $ | (106,874 | ) | $ | - | $ | - | $ | (106,874 | ) | ||||||
Deemed dividend related to issuance of Series E Preferred Stock | $ | (1,253,476 | ) | $ | - | $ | - | $ | (1,253,476 | ) | ||||||
Stock dividend related to issuance of Series E Preferred Stock | $ | (703,168 | ) | $ | - | $ | - | $ | (703,168 | ) | ||||||
Net loss attributable to common stockholders | $ | (44,006,611 | ) | $ | (490 | ) | $ | (365,146 | ) | $ | (44,372,247 | ) | ||||
Earnings per common share (basic and diluted): | ||||||||||||||||
Loss from continuing operations | (1.77 | ) | (1.77 | ) | ||||||||||||
Loss from discontinued operations | (2.86 | ) | (2.86 | ) | ||||||||||||
Net loss per common share | $ | (4.63 | ) | $ | $ | $ | (4.63 | ) | ||||||||
Weighted average number of shares outstanding | ||||||||||||||||
(Basic and Diluted) | 9,547,042 | 9,547,042 |
The accompanying notes are an integral part of these consolidated financial statements.
3
ATTIS INDUSTRIES AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2018
Attis Industries | Flux Carbon LLC et al | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||
Assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 1,013,180 | $ | -- | $ | - | $ | 1,013,180 | ||||||||
Accounts receivable, net of allowance | 731,085 | -- | - | 731,085 | ||||||||||||
Prepaid expenses | 505,083 | -- | - | 505,083 | ||||||||||||
Other current assets | 6,450 | -- | - | 6,450 | ||||||||||||
Current assets held for sale | 9,513,601 | -- | - | 9,513,601 | ||||||||||||
Total current assets | 11,769,399 | -- | -- | 11,769,399 | ||||||||||||
Property, plant and equipment, at cost net of accumulated depreciation | 3,029,066 | -- | - | 3,029,066 | ||||||||||||
Other assets: | ||||||||||||||||
Contract deposits | - | -- | - | - | ||||||||||||
Other deposits | 152,544 | -- | - | 152,544 | ||||||||||||
Goodwill | 5,279,207 | -- | - | 5,279,207 | ||||||||||||
Capitalized software | 97,516 | -- | - | 97,516 | ||||||||||||
Patents | 4,894,470 | -- | - | 4,894,470 | ||||||||||||
Intangibles | -- | 17,634,854 | (37,856 | ) | 17,596,998 | |||||||||||
Customer list, net of accumulated amortization | 2,447,250 | -- | - | 2,447,250 | ||||||||||||
Note receivable – long term | 10,000,000 | 10,000,000 | ||||||||||||||
Website, net of accumulated amortization | 25,582 | -- | - | 25,582 | ||||||||||||
Total other assets | 22,896,569 | 17,634,854 | (37,856 | ) | 40,493,567 | |||||||||||
Total noncurrent assets held for sale | 87,042,249 | -- | - | 87,042,249 | ||||||||||||
Total assets | $ | 124,737,283 | $ | 17,634,854 | $ | (37,856 | ) | $ | 142,334,281 | |||||||
Liabilities and Shareholders’ Equity (Deficit) | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 2,004,208 | $ | -- | $ | - | $ | 2,004,208 | ||||||||
Accrued expenses | 3,267,275 | -- | - | 3,267,275 | ||||||||||||
Notes payable, related parties | 6,891 | -- | - | 6,891 | ||||||||||||
Deferred compensation | -- | -- | - | -- | ||||||||||||
Derivative and other fair value liabilities | 11,180,347 | -- | - | 11,180,347 | ||||||||||||
Current portion - capital leases payable | 21,455 | -- | - | 21,455 | ||||||||||||
Current portion - long-term debt | 4,820,629 | -- | - | 4,820,629 | ||||||||||||
Current liabilities held for sale | 17,423,578 | -- | - | 17,423,578 | ||||||||||||
Total current liabilities | 38,724,383 | -- | - | 38,724,383 | ||||||||||||
Long-term liabilities: | ||||||||||||||||
Contingent consideration liability | 1,929,936 | -- | - | 1,929,936 | ||||||||||||
Deferred tax liability | 14,337 | -- | - | 14,337 | ||||||||||||
Deferred rent | 53,055 | -- | - | 53,055 | ||||||||||||
Long-term debt, net of current | 8,364,660 | -- | - | 8,364,660 | ||||||||||||
Noncurrent liabilities held for sale | 90,704,394 | -- | - | 90,704,394 | ||||||||||||
Total long-term liabilities | 101,066,382 | -- | - | 101,066,382 | ||||||||||||
Total liabilities | 139,790,765 | -- | 139,790,765 | |||||||||||||
Preferred Series E stock, cumulative, stated value $100 per share, par value $.001, 300,000 shares authorized, 300,000 and 0 shares issued and outstanding, respectively | 2,676,892 | - | - | 2,676,892 | ||||||||||||
Shareholders’ equity (deficit): | ||||||||||||||||
Preferred Series A stock, par value $.001, 51 shares authorized, issued and outstanding | - | - | - | - | ||||||||||||
Preferred Series B stock, par value $.001, 71,210 shares authorized, 0 and 71,210 issued and outstanding | - | - | - | - | ||||||||||||
Preferred Series D stock, cumulative, stated value $100 per share, par value $.001, 67,361 shares authorized, 35,750 and 0 shares issued and outstanding, respectively | 1,269,511 | - | - | 1,269,511 | ||||||||||||
Common stock, par value $.025, 75,000,000 shares authorized, 14,658,979 and 1,712,471 shares issued and 6,932,744 and 14,647,749 shares outstanding, respectively | 429,299 | - | - | 429,299 | ||||||||||||
Common stock to be issued | 39,479 | - | - | 39,479 | ||||||||||||
Treasury stock, at cost, 11,500 shares | (224,250 | ) | - | - | (224,250 | ) | ||||||||||
Additional paid in capital | 65,539,399 | 18,002,180 | - | 83,541,579 | ||||||||||||
Accumulated deficit | (88,247,178 | ) | (367,326 | ) | (37,856 | ) | (88,652,360 | ) | ||||||||
Total Attis Industries Inc. shareholders’ deficit | (21,193,740 | ) | 17,634,854 | (37,856 | ) | (3,596,742 | ) | |||||||||
Noncontrolling Interest | 3,463,366 | - | - | 3,463,366 | ||||||||||||
Total shareholders’ equity (deficit) | (17,730,374 | ) | 17,634,854 | (37,856 | ) | (133,376 | ) | |||||||||
Total liabilities and shareholders’ equity (deficit) | $ | 124,737,283 | $ | 17,634,854 | $ | (37,856 | ) | $ | 142,334,281 |
The accompanying notes are an integral part of these consolidated financial statements.
4
ATTIS INDUSTRIES AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2018
Attis Industries | Flux Carbon LLC et al | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||
Revenue | ||||||||||||||||
Services | $ | 788,218 | $ | 788,218 | ||||||||||||
Total revenue | 788,218 | 788,218 | ||||||||||||||
Cost and expenses: | ||||||||||||||||
Operating | 856,490 | 856,490 | ||||||||||||||
Depreciation and amortization | 717,231 | 717,231 | ||||||||||||||
Impairment expense | 432,480 | 432,480 | ||||||||||||||
Selling, general and administrative | 3,609,142 | 490 | 3,609,632 | |||||||||||||
Total cost and expenses | 5,615,343 | 5,615,343 | ||||||||||||||
Other income (expenses): | ||||||||||||||||
Unrealized loss on change in fair value of derivative and other fair value liabilities | 2,316,360 | - | - | 2,316,360 | ||||||||||||
Unrealized gain from change in fair value of contingent consideration | 27,290 | - | - | 27,290 | ||||||||||||
Gain on extinguishment of debt | - | - | - | |||||||||||||
Loss on equity method investment | -- | - | (37,856 | ) | (37,856 | ) | ||||||||||
Interest income | 1,892 | - | - | 1,892 | ||||||||||||
Interest expense | (301,729 | ) | - | - | (301,729 | |||||||||||
Total other income (expenses) | 2,043,813 | - | (37,856 | ) | (2,005,957 | ) | ||||||||||
Loss before income taxes | (2,783,312 | ) | (490 | ) | (37,856 | ) | (2,821,1658 | ) | ||||||||
Provision for income taxes | - | - | - | - | ||||||||||||
Loss from continuing operations | $ | (2,783,312 | ) | $ | (490 | ) | $ | (37,856 | ) | $ | (2,821,658 | ) | ||||
Discontinued Operations, net of tax Loss from operations of discontinued operations | |
$ |
(544,145 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(544,145 |
) |
Consolidated Net Loss | $ | (3,327,457 | ) | $ | (490 | ) | $ | (37,856 | ) | $ | (3,365,803 | ) | ||||
Net income attributable to noncontrolling interest | $ | (141,872 | ) | $ | - | $ | - | $ | (141,872 | ) | ||||||
Net loss available to common shareholders | $ | (3,185,585 | ) | $ | (490 | ) | $ | (37,856 | ) | $ | (3,223,931 | ) | ||||
Deemed dividend related to beneficial conversion feature and accretion of a discount on Series C Preferred Stock | $ | -- | $ | - | $ | - | $ | -- | ||||||||
Deemed dividend related to Series A and B warrants down round provisions | $ | (9,648 | ) | $ | - | $ | - | $ | (9,648 | ) | ||||||
Deemed dividend related to issuance of Series D and E warrants down round provisions | $ | (234,912 | ) | $ | - | $ | - | $ | (234,912 | ) | ||||||
Deemed dividend related to extinguishment of Series D and E Preferred Stock | $ | (2,626,873 | ) | $ | - | $ | - | $ | (2,626,873 | ) | ||||||
Deemed dividend related to conversion of Series D Preferred Stock | (212,230 | ) | (212,230 | ) | ||||||||||||
Deemed dividend related to conversion of Series E Preferred Stock | $ | (386,978 | ) | $ | - | $ | - | $ | (386,978 | ) | ||||||
Stock dividend related to issuance of Series F Preferred Stock | $ | (4,214,073 | ) | $ | - | $ | - | $ | (4,214,073 | ) | ||||||
Net loss attributable to common stockholders | $ | (10,870,299 | ) | $ | (490 | ) | $ | (37,856 | ) | $ | (10,908,645 | ) | ||||
Earnings per common share (basic and diluted): | ||||||||||||||||
Loss from continuing operations | (0.60 | ) | - | (0.60 | ) | |||||||||||
Loss from discontinued operations | (0.03 | ) | - | (0.03 | ) | |||||||||||
Net loss per common share | $ | (0.63 | ) | $ | - | $ | $ | (0.63 | ) | |||||||
Weighted average number of shares outstanding | ||||||||||||||||
(Basic and Diluted) | 17,358,891 | - | 17,358,891 |
The accompanying notes are an integral part of these consolidated financial statements.
5
PRO FORMA ADJUSTMENTS
The financial statements included herein present the effect on Attis Industries Inc. as if the FLUX Carbon LLC acquisition had occurred on January 3, 2017 (inception) rather than the actual purchase date of May 25, 2018.
For the year ended December 31, 2017 the effect would have been a net increase in intangible assets of $17,634,854, an increase in notes receivable – long term of $10,000,00, an increase in Additional Paid in Capital of $28,002,090, and an increase in expenses of $490 of SG&A costs, plus $365,146, which represents the allocable equity method investment loss in Genarex FD, LLC.
For the three months ended March 31, 2018 the effect would have been an increase in expenses of $490 of SG&A costs, plus $37,856, which represents the allocable equity method investment loss in Genarex FD, LLC.
Other than adjustments listed above there are no other material pro forma effects related to the FLUX Carbon, LLC acquisition.
6
Exhibit 99.4
GENAREX FD, LLC
FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017 AND 2016
TABLE OF CONTENTS
Page No | ||
Financial Statements as of and for the Year Ended December 31, 2017 and 2016 | ||
Balance Sheets as of December 31, 2017 and 2016 | 2 | |
Statements of Operations for the years ended December 31, 2017 and 2016 | 3 | |
Statements of Changes in Members’ Deficit for the years ended December 31, 2017 and 2016 | 4 | |
Statements of Cash Flows for the years ended December 31, 2017 and 2016 | 5 | |
Notes to Combined Financial Statements | 6 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Members and the Board of Directors’ of:
Genarex FD, LLC
Opinion on the Consolidated Financial Statements
We have audited the accompanying balance sheets of Genarex FD, LLC (the “Company”) as of December 31, 2017 and 2016, the related statements of operations, changes in members deficit and cash flows for the years ended December 31, 2017 and 2016, and the related notes (collectively referred to as the “ financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016 and the results of its operations and its cash flows for the years ended December 31, 2017 and 2016 in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has a net loss and lack of working capital. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan in regards to these matters are described in Note 2 of the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. Accordingly, we express no such opinion. As part of our audits, we are required to obtain an understanding of internal controls over financial reporting, but not for the purposes of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures including examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also include evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/ Liggett & Webb, P.A.
LIGGETT & WEBB, P.A.
Certified Public Accountants
We have served as the Company’s auditor since 2018.
Boynton Beach, Florida
July 19, 2018
1 |
GENAREX FD, LLC
BALANCE SHEETS
AS OF DECEMBER 31, 2017 AND 2016
December 31, 2017 | December 31, 2016 | |||||||
CURRENT ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 536 | $ | 2,466 | ||||
Total current assets | 536 | 2,466 | ||||||
TOTAL ASSETS | $ | 536 | $ | 2,466 | ||||
CURRENT LIABILITIES AND MEMBERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 92,069 | $ | 39,141 | ||||
Loan payable – related party | 272,792 | 117,615 | ||||||
Total current liabilities | 364,861 | 156,756 | ||||||
TOTAL LIABILITIES | 364,861 | 156,756 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
MEMBERS’ DEFICIT | ||||||||
Member Equity | 2,924,013 | 2,388,851 | ||||||
Accumulated deficit | (3,288,338 | ) | (2,543,141 | ) | ||||
TOTAL MEMBERS’ DEFICIT | (364,325 | ) | (154,290 | ) | ||||
TOTAL LIABILITIES AND MEMBERS’ DEFICIT | $ | 536 | $ | 2,466 |
See accompanying notes to the Financial Statements.
2 |
GENAREX FD, LLC
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
December 31, 2017 | December 31, 2016 | |||||||
Operating expenses | ||||||||
Research and development | $ | 170,748 | $ | 514,884 | ||||
General and administrative expenses | 574,449 | 658,677 | ||||||
Total operating expenses | 745,197 | 1,173,561 | ||||||
Loss from Operations | (745,197 | ) | (1,173,561 | ) | ||||
Net loss | $ | (745,197 | ) | $ | (1,173,561 | ) |
See accompanying notes to the Financial Statements.
3 |
GENAREX FD, LLC
statement of MEMBERs’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2017 AND December 31, 2016
Member Equity | Accumulated Deficit | Total Equity | ||||||||||
Balance at December 31, 2015 | $ | 1,248,536 | $ | (1,369,580 | ) | $ | (121,044 | ) | ||||
Members cash contribution | 751,582 | -- | 751,582 | |||||||||
Members services contribution | 388,733 | -- | 388,733 | |||||||||
Net loss | -- | (1,173,561 | ) | (1,173,561 | ) | |||||||
Balance at December 31, 2016 | $ | 2,388,851 | $ | (2,543,141 | ) | $ | (154,290 | ) | ||||
Members cash contribution | 427,015 | -- | 427,015 | |||||||||
Members services contribution | 108,147 | -- | 108,147 | |||||||||
Net loss | -- | (745,197 | ) | (745,197 | ) | |||||||
Balance at December 31, 2017 | $ | 2,924,013 | $ | (3,288,338 | ) | $ | (364,325 | ) |
See accompanying notes to the Financial Statements.
4 |
GENAREX FD, LLC
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
December 31, 2017 | December 31, 2016 | |||||||
CASH FLOW FROM OPERATING ACTIVITIES | ||||||||
NET LOSS | $ | (745,197 | ) | $ | (1,173,561 | ) | ||
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: | ||||||||
Services contributed by member | 108,147 | 388,733 | ||||||
Change in accounts payable | 52,928 | (11,783 | ) | |||||
Net cash used in operating activities | (584,122 | ) | (796,611 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from Loan Payable – Related Party | 155,177 | 45,257 | ||||||
Proceeds from subscription receivable | 427,015 | 751,582 | ||||||
Net cash provided by financing activities | 582,192 | 796,839 | ||||||
Net increase (decrease) in cash | (1,930 | ) | 228 | |||||
Cash at beginning of period | 2,466 | 2,238 | ||||||
Cash at end of period | $ | 536 | $ | 2,466 | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid during the period for: | ||||||||
Income taxes | $ | -- | $ | -- | ||||
Interest | $ | -- | $ | -- |
The notes to the Financial Statements are an integral part of these statements.
5 |
GENAREX FD, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
Note 1 – Business Organization and Nature of Operations
Genarex FD, LLC (“The Company”) was formed on March 27, 2015, in Delaware by GENAREX LLC (“GX”), a wholly-owned subsidiary of GreenShift Corporation to facilitate a $3,000,000 investment by Sutra Sails, LLC (“Sutra”) in the continued development of technologies-developed GX (“Genarex IP”). Effective April 1, 2015, for and in consideration of the sum of $10.00 and other good and valuable consideration, the receipt and sufficiency of which were accepted by GX, GX assigned 100% of its right, title and interest in, to and under the Genarex IP to GFD.
GFD was formed as a research and development platform for developing sustainable bio-based products for the plastics industry. GFD takes low cost by-products from the corn ethanol industry and has developed cost effective additives for the plastics industry. This drives the cost of plastics down using renewable non-fossil fuel-based feedstock.
Note 2 – Going Concern Note
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. Although the Company has sustained losses in recent years, historical capital contributions have enabled operations to continue uninterrupted. Currently, there are no expenses associated with Genarex FD. The Company is currently seeking licensing agreements to generate revenues, but until an agreement is in place there will be no revenues or associated expenses. Also, no licensing agreement will be entered into that does not provide positive cash flow for the Company. There can be no assurance that such a plan will be successful. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Accordingly, the accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 3 – Summary of Significant Accounting Policies
CASH AND EQUIVALENTS
The Company considers cash and equivalents to be cash and short-term investments with original maturities of three months or less from the date of acquisition. The Company had no cash equivalents at December 31, 2016 and December 31, 2017.
INTANGIBLE ASSETS
The Company accounts for its intangible assets pursuant to ASC 350-20-55-24, “Intangibles – Goodwill and Other”. Under ASC 350, intangibles with definite lives continue to be amortized on a straight-line basis over the lesser of their estimated useful lives or contractual terms. Intangibles with indefinite lives are evaluated at least annually for impairment by comparing the asset’s estimated fair value with its carrying value, based on cash flow methodology. Intangibles with definite lives are subject to impairment testing in the event of certain indicators. Impairment in the carrying value of an asset is recognized whenever anticipated future cash flows (undiscounted) from an asset are estimated to be less than its carrying value. The amount of the impairment recognized is the difference between the carrying value of the asset and its fair value. The Company has not capitalized any intangible assets as of December 31, 2017 and 2016.
INCOME TAXES
As a limited liability company, taxable income or loss flows through to the members on their individual tax returns. The 2015-2017 tax returns are open for review by federal and state taxing authorities.
6 |
FINANCIAL INSTRUMENTS
The carrying values of accounts receivable, other receivables, accounts payable and accrued expenses approximate their fair values due to their short- term maturities.
REVENUE RECOGNITION
Historically, the Company has not generated revenue. If they occur in the future, licensing royalties will be recognized as earned by calculating the royalty as a percentage of gross sales by licensees. For the purposes of assessing royalties, the licensee’s sales will be deemed to occur when shipped, which is when four basic criteria have been met: (i) persuasive evidence of a customer arrangement; (ii) the price is fixed or determinable; (iii) collectability is reasonably assured, and (iv) product delivery has occurred, which is generally upon shipment to the buyer of the products produced with the licensed technology. To the extent revenues are generated from the Company’s licensing support services in the future, the Company will recognize such revenues when the services are completed and billed. Any such services will be provided on fixed price contracts. Revenue from any such contracts will be recognized on a pro rata basis over the life of the contract as they are generally performed evenly over the contract period.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the financial statements, and (iii) the reported amounts of revenues and expenses during the reporting period. We use estimates and assumptions in accounting for the following significant matters, among others:
- | Valuation of intellectual property |
Actual results may differ from previously estimated amounts, and such differences may be material to our financial statements. The Company periodically review estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made. The revisions to estimates or assumptions during the periods presented in the accompanying financial statements were not considered to be significant.
Note 4 – Recent Accounting Pronouncements
Revenue Recognition. In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)”. The objective of this amendment is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying this amendment, companies will perform a five-step analysis of transactions to determine when and how revenue is recognized. This amendment applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. An entity should apply the amendments using either the full retrospective approach or retrospectively with a cumulative effect of initially applying the amendments recognized at the date of initial application. In July 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company has not yet selected which transition method it will apply upon adoption. Historically, the Company has not generated any revenue. The Company will continue to evaluate and will quantify the impact, if any, the adoption of ASU 2014-09 will have on our revenue streams when they occur. When our evaluations do occur, The Company does not expect material changes to its accounting policies.
7 |
Statement of Cash Flows. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), which is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are classified in the statement of cash flows. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, Restricted Cash (Topic 230) (ASU 2016-18), which requires the inclusion of restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-15 and ASU 2016-18 are both effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, provided that all of the amendments are adopted in the same period. The amendments will be applied using a retrospective transition method to each period presented. The Company adopted this guidance in the first quarter of 2018 and it did not have a significant impact on its financial statements.
Financial Instruments. In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01), which requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income. The ASU also impacts financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. Entities will have to assess the realizability of such deferred tax assets in combination with the entities other deferred tax assets. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017 and for interim periods within that reporting period. In the first quarter of 2018, the Company will elect to adopt the measurement alternative, which will apply this ASU prospectively, for its equity investments that do not have readily determinable fair values. The Company adopted this guidance in the first quarter of 2018 and it did not have a significant impact on its consolidated financial statements.
Note 5 – Related Party Transactions
Genarex FD LLC “The Company”) was formed on March 27, 2015, in Delaware by GENAREX LLC (“GX”), a wholly-owned subsidiary of GreenShift, Corporation to facilitate a $3,000,000 investment by Sutra Sails, LLC in the continued development of technologies-developed GX (“Genarex IP”). Effective April 1, 2015, for and in consideration of the sum of $10.00 and other good and valuable consideration, the receipt and sufficiency of which were accepted by GX, GX assigned 100% of its right, title and interest in, to and under the Genarex IP to GFD.
Sutra contributed services in the amount of $108,147 and $388,733 as of December 31, 2017 and 2016, respectively.
As of December 31 2017, GS CleanTech Corporation (“GSCT”), a subsidiary of GreenShift Corporation, has funded $2,404,776 towards operations and research and development of LLC, of which $2,131,984 had been reimbursed. As of December 31 2016, GSCT, a subsidiary of GreenShift Corporation, has funded $1,768,015 towards operations and research and development of LLC, of which $1,650,400 had been reimbursed. Interest is not being charged on the advances and all amounts are due on demand.
8 |
Note 6 – Member’s Equity
Historically, on April 30, 2015, the Company signed a Limited Liability Company Management and Operating Agreement with GX, GV and Sutra. Under the agreement, GV contributed all of its right, title and interest in the Genarex IP in exchange for 12.25% of 1,225 Units. GX contributed all of its right, title and interest in the Genarex IP in exchange for 36.75% or 3,675 Units. Sutra contributed all of its right, title and interest in the Genarex IP in exchange for 51% or 5,100 Units.
Under the Genarex FD LLC Subscription Agreement dated May 1, 2015, Sutra Sails originally purchased 100 Membership Interest Units of the Company for $3,000,000 (“the Purchase Price”). As of December 31, 2017, $2,924,013 has been paid to the Company of which $2,080,416 was paid in cash and $843,597 was paid through research and development services provided by Sutra. As of December 31, 2016, $2,388,851 has been paid to the Company of which $1,652,401 was paid in cash and $736,450 was paid through research and development services provided by Sutra.
Note 7 – Commitments and Contingencies
In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position or results of operations.
Note 8 – Subsequent Events
Effective May 25, 2018, Attis Industries, Inc. acquired 4,900 membership interest units of GENAREX FD LLC (“GFD”) corresponding to 49% of the issued and outstanding equity of GFD. The remaining 51% of the Company is owned by SUTRA SAILS L.L.C. (“Sutra”), which entity holds the super-majority voting and management control of the Company.
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Exhibit 99.5
GENAREX FD, LLC
FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2018
TABLE OF CONTENTS
Page No | ||
Financial Statements | ||
Balance Sheets as of March 31, 2018 (unaudited) and December 31, 2017 | 2 | |
Unaudited Statements of Operations for the three months ended March 31, 2018 and 2017 | 3 | |
Unaudited Statements of Cash Flows for the three months ended March 31, 2018 and 2017 | 4 | |
Unaudited Notes to Financial Statements | 5 |
GENAREX FD, LLC
CONDENSED BALANCE SHEETS
AS OF MARCH 31, 2018 AND DECEMBER 31, 2017
March 31, 2018 | December 31, 2017 | |||||||
(Unaudited) | ||||||||
CURRENT ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 501 | $ | 536 | ||||
Total current assets | 501 | 536 | ||||||
TOTAL ASSETS | $ | 501 | $ | 536 | ||||
CURRENT LIABILITIES AND MEMBERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 101,461 | $ | 92,069 | ||||
Loan Payable – related party | 340,622 | 272,792 | ||||||
Total liabilities | 442,083 | 364,861 | ||||||
MEMBERS’ DEFICIT | ||||||||
Members Equity | 2,924,013 | 2,924,013 | ||||||
Accumulated deficit | (3,365,595 | ) | (3,288,338 | ) | ||||
TOTAL MEMBERS’ DEFICIT | (441,582 | ) | (364,325 | ) | ||||
TOTAL LIABILITIES AND MEMBERS’ DEFICIT | $ | 501 | $ | 536 |
See accompanying unaudited notes to the Financial Statements.
2 |
GENAREX FD, LLC
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
(UNAUDITED)
Three Months Ended March 31, | Three Months Ended March 31, | |||||||
Operating expenses | ||||||||
Research and development | $ | 1,500 | $ | 42,557 | ||||
General and administrative expenses | 75,757 | 162,280 | ||||||
Total operating expenses | 77,257 | 204,837 | ||||||
Loss from Operations | (77,257 | ) | (204,837 | ) | ||||
Net loss | $ | (77,257 | ) | $ | (204,837 | ) |
See accompanying unaudited notes to the Financial Statements.
3 |
GENAREX FD, LLC
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
(UNAUDITED)
Three Months Ended March 31, 2018 | Three Months Ended March 31, 2017 | |||||||
CASH FLOW FROM OPERATING ACTIVITIES | ||||||||
NET LOSS | $ | (77,257 | ) | $ | (204,837 | ) | ||
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVIES: | ||||||||
Change in accounts payable and accrued expenses | 9,392 | 15,994 | ||||||
Net cash used in operating activities | (67,865 | ) | (188,843 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from loan payable – related party | 67,830 | (1,734 | ) | |||||
Proceeds from subscription receivable | -- | 188,843 | ||||||
Net cash provided by financing activities | 67,830 | 187,110 | ||||||
Net (decrease) in cash | (35 | ) | (1,734 | ) | ||||
Cash at beginning of period | 536 | 2,466 | ||||||
Cash at end of period | $ | 501 | $ | 734 | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid during the period for: | ||||||||
Income taxes | $ | -- | $ | -- | ||||
Interest | $ | -- | $ | -- |
See accompanying unaudited notes to the Financial Statements.
4 |
GENAREX FD, LLC
UNAUDITED NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2018
Note 1 – Business Organization and Nature of Operations
Genarex FD LLC (“The Company”) was formed on March 27, 2015, in Delaware by GENAREX LLC (“GX”), a wholly-owned subsidiary of GreenShift, Corporation to facilitate a $3,000,000 investment by Sutra Sails, LLC in the continued development of technologies-developed GX (“Genarex IP”). Effective April 1, 2015, for and in consideration of the sum of $10.00 and other good and valuable consideration, the receipt and sufficiency of which were accepted by GX, GX assigned 100% of its right, title and interest in, to and under the Genarex IP to GFD.
GFD was formed as a research and development platform for developing sustainable bio-based products for the plastics industry. GFD takes low cost by-products from the corn ethanol industry and has developed cost effective additives for the plastics industry. This drives the cost of plastics down using renewable non-fossil fuel-based feedstock.
Note 2 – Going Concern Note
The accompanying condensed financial statements have been prepared assuming the Company will continue as a going concern. Although the Company has sustained losses in recent years, historical capital contributions have enabled operations to continue uninterrupted. Currently, there are no expenses associated with Genarex FD. The Company is currently seeking licensing agreements to generate revenues, but until an agreement is in place there will be no revenues or associated expenses. Also, no licensing agreement will be entered into that does not provide positive cash flow for the Company. There can be no assurance that such a plan will be successful. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Accordingly, the accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 3 – Summary of Significant Accounting Policies
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim information Regulation S-K. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments consisting of a normal and recurring nature considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2018 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2018.
These condensed financial statements should be read in conjunction with the financial statements and related disclosures of the Company as of December 31, 2017 and for the year then ended.
CASH AND EQUIVALENTS
The Company considers cash and equivalents to be cash and short-term investments with original maturities of three months or less from the date of acquisition. The Company had no cash or cash equivalents at March 31, 2018.
5 |
RECEIVABLES AND CREDIT CONCENTRATION
Accounts receivable are uncollateralized, non-interest-bearing customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Accounts receivable are stated at the amount billed to the customer. Accounts receivable in excess of 90 days old are evaluated for delinquency. In addition, we consider historical bad debts and current economic trends in evaluating the allowance for bad debts. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the oldest unpaid invoices. The Company had no accounts receivable as of March 31, 2018.
INTANGIBLE ASSETS
The Company accounts for its intangible assets pursuant to ASC 350-20-55-24, “Intangibles – Goodwill and Other”. Under ASC 350, intangibles with definite lives continue to be amortized on a straight-line basis over the lesser of their estimated useful lives or contractual terms. Intangibles with indefinite lives are evaluated at least annually for impairment by comparing the asset’s estimated fair value with its carrying value, based on cash flow methodology. Intangibles with definite lives are subject to impairment testing in the event of certain indicators. Impairment in the carrying value of an asset is recognized whenever anticipated future cash flows (undiscounted) from an asset are estimated to be less than its carrying value. The amount of the impairment recognized is the difference between the carrying value of the asset and its fair value. The Company has not capitalized any intangible assets as of March 31, 2018.
INCOME TAXES
As a limited liability company, taxable income or loss flows through to the members on their individual tax returns. The 2015-2017 returns are open for audit by federal and state taxing authorities.
FINANCIAL INSTRUMENTS
The carrying values of accounts receivable, other receivables, accounts payable and accrued expenses approximate their fair values due to their short- term maturities.
REVENUE RECOGNITION
Historically, the Company has not generated revenue. On January 1, 2018, the Company adopted FASB ASC 606, which is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company considers revenue realized or realizable and earned when all the five following criteria are met: (1) Identify the Contract with a Customer, (2) Identify the Performance Obligations in the Contract, (3) Determine the Transaction Price, (4) Allocate the Transaction Price to the Performance Obligations in the Contract, and (5) Recognize Revenue When (or As) the Entity Satisfies a Performance Obligation. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the previous accounting standards. There was no impact to revenues as a result of applying ASC 606 for the three months ended March 31, 2018, and there have not been any significant changes to our business processes, systems, or internal controls as a result of implementing the standard.
6 |
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the financial statements, and (iii) the reported amounts of revenues and expenses during the reporting period. We use estimates and assumptions in accounting for the following significant matters, among others:
- | Valuation of intellectual property |
Actual results may differ from previously estimated amounts, and such differences may be material to our financial statements. The Company periodically review estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made. The revisions to estimates or assumptions during the periods presented in the accompanying financial statements were not considered to be significant.
Note 4 – Recent Accounting Pronouncements
Statement of Cash Flows. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), which is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are classified in the statement of cash flows. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, Restricted Cash (Topic 230) (ASU 2016-18), which requires the inclusion of restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-15 and ASU 2016-18 are both effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, provided that all of the amendments are adopted in the same period. The amendments will be applied using a retrospective transition method to each period presented. The Company adopted this guidance in the first quarter of 2018 and it did not have a significant impact on its financial statements.
Financial Instruments. In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01), which requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income. The ASU also impacts financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. Entities will have to assess the realizability of such deferred tax assets in combination with the entities other deferred tax assets. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017 and for interim periods within that reporting period. In the first quarter of 2018, the Company will elect to adopt the measurement alternative, which will apply this ASU prospectively, for its equity investments that do not have readily determinable fair values. The Company adopted this guidance in the first quarter of 2018 and it did not have a significant impact on its consolidated financial statements.
Note 5 – Related Party Transactions
Genarex FD LLC (“The Company”) was formed on March 27, 2015, in Delaware by GENAREX LLC (“GX”), a wholly-owned subsidiary of GreenShift, Corporation to facilitate a $3,000,000 investment by Sutra Sails, LLC in the continued development of technologies-developed GX (“Genarex IP”). Effective April 1, 2015, for and in consideration of the sum of $10.00 and other good and valuable consideration, the receipt and sufficiency of which were accepted by GX, GX assigned 100% of its right, title and interest in, to and under the Genarex IP to GFD.
As of March 31 2018, GS CleanTech Corporation (“GSCT”), a subsidiary of GreenShift Corporation, has funded $2,476,800 towards operations and research and development of LLC, of which $2,136,178 had been reimbursed.
7 |
Note 6 – Member’s Equity
Historically, on April 30, 2015, the Company signed a Limited Liability Company Management and Operating Agreement with GX, GV and Sutra. Under the agreement, GV contributed all of its right, title and interest in the Genarex IP in exchange for 12.25% of 1,225 Units. GX contributed all of its right, title and interest in the Genarex IP in exchange for 36.75% or 3,675 Units. Sutra contributed all of its right, title and interest in the Genarex IP in exchange for 51% or 5,100 Units.
Under the Genarex FD LLC Subscription Agreement dated May 1, 2015, Sutra Sails originally purchased 100 Membership Interest Units of the Company for $3,000,000 (“the Purchase Price”). Of that amount $2,924,013 has been paid to the Company of which $2,080,416 was paid in cash and $843,597 was paid through research and development services provided by Sutra as of March 31, 2018.
Note 7 – Commitments and Contingencies
In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position or results of operations.
Note 8 – Subsequent Events
Effective May 25, 2018, Attis Industries Inc. acquired 4,900 membership interest units of GENAREX FD LLC (“GFD”) were assigned to the Company (“GFD Units”), corresponding to 49% of the issued and outstanding equity of GFD. The remaining 51% of the Company is owned by SUTRA SAILS L.L.C. (“Sutra”), which entity holds the super-majority voting and management control of the Company.
8
Exhibit 99.6
ADVANCED LIGNIN BIOCOMPOSITES LLC
FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017 AND 2016
TABLE OF CONTENTS
Page No | ||
Financial Statements as of and for the Years Ended December 31, 2017 and 2016 | ||
Report of Independent Registered Public Accounting Firm | 1 | |
Balance Sheets as of December 31, 2017 and 2016 | 2 | |
Statements of Operations for the years ended December 31, 2017 and 2016 | 3 | |
Statements of Changes in Members’ Deficit for the years ended December 31, 2017 and 2016 | 4 | |
Statements of Cash Flows for the years ended December 31, 2017 and 2016 | 5 | |
Notes to Financial Statements | 6 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Members and the Board of Directors’ of:
Advanced Lignin Biocomposites, LLC
Opinion on the Consolidated Financial Statements
We have audited the accompanying balance sheets of Advanced Lignin Biocomposites, LLC (the “Company”) as of December 31, 2017 and 2016, the related statements of operations, changes in members deficit and cash flows for the years ended December 31, 2017 and 2016, and the related notes (collectively referred to as the “ financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016 and the results of its operations and its cash flows for the years ended December 31, 2017 and 2016 in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has a net loss and lack of working capital. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan in regards to these matters are described in Note 2 of the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. Accordingly, we express no such opinion. As part of our audits, we are required to obtain an understanding of internal controls over financial reporting, but not for the purposes of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures including examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also include evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/ Liggett & Webb, P.A.
LIGGETT & WEBB, P.A.
Certified Public Accountants
We have served as the Company’s auditor since 2018.
Boynton Beach, Florida
July 19, 2018
1
ADVANCED LIGNIN BIOCOMPOSITES LLC
BALANCE SHEETS
AS OF DECEMBER 31, 2017 AND 2016
December 31, 2017 | December 31, 2016 | |||||||
CURRENT ASSETS | ||||||||
TOTAL ASSETS | $ | -- | $ | -- | ||||
CURRENT LIABILITIES AND MEMBERS’ DEFICIT | ||||||||
TOTAL LIABILITIES | $ | -- | $ | -- | ||||
MEMBERS’ DEFICIT | ||||||||
Member Equity | 1,000 | 800 | ||||||
Accumulated deficit | (1,000 | ) | (800 | ) | ||||
TOTAL MEMBERS’ DEFICIT | -- | -- | ||||||
TOTAL LIABILITIES AND MEMBERS’ DEFICIT | $ | -- | $ | -- |
See accompanying notes to the Financial Statements
2
ADVANCED LIGNIN BIOCOMPOSITES LLC
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
December 31, 2017 | December 31, 2016 | |||||||
Operating expenses | ||||||||
General and administrative expenses | $ | 200 | $ | 200 | ||||
Total operating expenses | 200 | 200 | ||||||
Loss from Operations | (200 | ) | (200 | ) | ||||
Net loss | $ | (200 | ) | $ | (200 | ) |
See accompanying notes to the Financial Statements
3
ADVANCED LIGNIN BIOCOMPOSITES LLC
statement of MEMBERs’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2017 AND December 31, 2016
Member Equity | Accumulated Deficit | Total Deficit | ||||||||||
Balance at December 31, 2015 | $ | 600 | $ | (600 | ) | $ | -- | |||||
Capital Contributions | 200 | -- | 200 | |||||||||
Net loss | -- | (200 | ) | (200 | ) | |||||||
Balance at December 31, 2016 | $ | 800 | $ | (800 | ) | $ | -- | |||||
Capital Contributions | 200 | -- | 200 | |||||||||
Net loss | -- | (200 | ) | (200 | ) | |||||||
Balance at December 31, 2017 | $ | 1,000 | $ | (1,000 | ) | $ | -- |
See accompanying notes to the Financial Statements
4
ADVANCED LIGNIN BIOCOMPOSITES LLC
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
December 31, 2017 | December 31, 2016 | |||||||
CASH FLOW FROM OPERATING ACTIVITIES | ||||||||
NET LOSS | $ | (200 | ) | $ | (200 | ) | ||
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: | ||||||||
Change in balance sheet | -- | -- | ||||||
Net cash used in operating activities | (200 | ) | (200 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from capital contribution | 200 | 200 | ||||||
Net cash provided by financing activities | 200 | 200 | ||||||
Net increase (decrease) in cash | -- | -- | ||||||
Cash at beginning of period | -- | -- | ||||||
Cash at end of period | $ | -- | $ | -- | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid during the period for: | ||||||||
Income taxes | $ | -- | $ | -- | ||||
Interest | $ | -- | $ | -- |
The notes to the Financial Statements are an integral part of these statements.
5
ADVANCED LIGNIN BIOCOMPOSITES LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
NOTE 1 | BUSINESS ORGANIZATION AND NATURE OF OPERATIONS |
The Company was formed in Delaware in May 2007, as a holding company for intellectual property rights, including rights licensed to the Company by UT-Battelle LLC, the manager and operator of Oak Ridge National Laboratory under contract with the United States Department of Energy. That license, along with the Company’s related and other intellectual property rights, are held by the Company inasmuch as the Company’s sole purpose is a holding company for such rights. The Company’s operations are accordingly negligible, however, they remain subject to significant risks and uncertainties to the extent inasmuch as the Company’s intellectual properties may not be commercially viable, and, if they are, they will be subject to infringement and other commercialization risks.
NOTE 2 | GOING CONCERN |
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. There has not been a history of recurring losses related to the Company and there is no indication that there will be losses in the future. The only recurring expenses associated with the Company are annual filing fees, which are minimal and will be absorbed in the future by FLUX Carbon LLC. There can be no assurance that such a plan will be successful. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Accordingly, the accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 3 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
REVENUE RECOGNITION
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collection is reasonably assured.
CASH AND EQUIVALENTS
The Company considers cash and equivalents to be cash and short-term investments with original maturities of three months or less from the date of acquisition. The Company had no cash or cash equivalents as of December 31, 2016 and December 31, 2017.
RECEIVABLES AND CREDIT CONCENTRATION
Accounts receivable are uncollateralized, non-interest-bearing customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Accounts receivable are stated at the amount billed to the customer. Accounts receivable in excess of 90 days old are evaluated for delinquency. In addition, we consider historical bad debts and current economic trends in evaluating the allowance for bad debts. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the oldest unpaid invoices. The Company had no accounts receivable as of December 31, 2016 and December 31, 2017.
INCOME TAXES
As a limited liability company, taxable income or loss flows through to the members on their individual tax returns. The 2015-2017 returns are open for audit by federal and state taxing authorities.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the financial statements, and (iii) the reported amounts of revenues and expenses during the reporting period. We use estimates and assumptions in accounting for significant matters, such as valuation of intellectual property, among others. Actual results may differ from previously estimated amounts, and such differences may be material to our financial statements. The Company periodically review estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made. The revisions to estimates or assumptions during the periods presented in the accompanying financial statements were not considered to be significant.
6
NOTE 4 | RECENT ACCOUNTING PRONOUCEMENTS |
Revenue Recognition. In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)”. The objective of this amendment is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying this amendment, companies will perform a five-step analysis of transactions to determine when and how revenue is recognized. This amendment applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. An entity should apply the amendments using either the full retrospective approach or retrospectively with a cumulative effect of initially applying the amendments recognized at the date of initial application. In July 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company has not yet selected which transition method it will apply upon adoption. Historically, the Company has not generated any revenue. The Company will continue to evaluate and will quantify the impact, if any, the adoption of ASU 2014-09 will have on our revenue streams when they occur. When our evaluations do occur, The Company does not expect material changes to its accounting policies.
Statement of Cash Flows. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), which is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are classified in the statement of cash flows. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, Restricted Cash (Topic 230) (ASU 2016-18), which requires the inclusion of restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-15 and ASU 2016-18 are both effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, provided that all of the amendments are adopted in the same period. The amendments will be applied using a retrospective transition method to each period presented. The Company adopted this guidance in the first quarter of 2018 and it did not have a significant impact on its financial statements.
Financial Instruments. In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01), which requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income. The ASU also impacts financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. Entities will have to assess the realizability of such deferred tax assets in combination with the entities other deferred tax assets. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017 and for interim periods within that reporting period. In the first quarter of 2018, the Company will elect to adopt the measurement alternative, which will apply this ASU prospectively, for its equity investments that do not have readily determinable fair values. The Company adopted this guidance in the first quarter of 2018 and it did not have a significant impact on its consolidated financial statements.
NOTE 5 | MEMBERS’ EQUITY |
The Company’s equity is represented by non-certificated membership interests, all of which were owned by Attis Innovations, LLC, a wholly-owned subsidiary of Attis Industries Inc. (f/k/a Meridian Waste Solutions, Inc.) as of December 31, 2017, and FLUX Carbon LLC as of May 25, 2018 (see Note 7, Subsequent Events, below). During 2017 and 2016, the member contributed capital of $200 and $200, respectively, for operating costs.
7
NOTE 6 | COMMITMENTS AND CONTINGENCIES |
The Company is party to a license agreement with UT-Battelle LLC, the manager and operator of Oak Ridge National Laboratory under contract with the United States Department of Energy. The license called for $12,500 to be paid upon execution, and an ongoing royalty of 1.5% to 2.5% of the Company’s (and/or its affiliate’s or designee’s) net sales, if applicable. The Company’s parent company as of December 31, 2017, Attis Innovations LLC, paid the execution fee in the amount of $12,500 on the Company’s behalf upon execution of the license, and released the Company from any payment obligation in connection with said amount since the license was subsequently transferred back to Attis. Neither the Company, nor any of its affiliates, have generated net sales with the intellectual properties covered by the Oakridge license.
NOTE 7 | SUBSEQUENT EVENTS |
Effective May 25, 2018, Attis Industries Inc. (“Parent”), Parent’s wholly-owned subsidiary, Attis Innovations, LLC (“Innovations”), GreenShift Corporation (“GreenShift”), and GreenShift’s wholly-owned subsidiary, GS CleanTech Corporation (“CleanTech”), and Candent Corporation (“Candent”), among others, entered into a Securities Purchase Agreement (“SPA”) and related transaction documents pursuant to which the Parent acquired 80% of the membership interest units (“80% Units”) of FLUX Carbon LLC (“JVCo”), in exchange for the Parent’s agreement to pay an earn-out payment equal to the greater of $18,000,000 or a multiple of JVCo’s EBITDA. In connection with closing under the SPA, 100% of the issued and outstanding equity of Advanced Lignin Biocomposites LLC (“ALB”) and 49% of the issued and outstanding equity of Genarex FD LLC (“GFD”) was transferred to JVCo.
8
Exhibit 99.7
ADVANCED LIGNIN BIOCOMPOSITES LLC
FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2018
TABLE OF CONTENTS
Page No | ||
Financial Statements | ||
Balance Sheets as of March 31, 2018 (unaudited) and December 31, 2017 | 2 | |
Unaudited Statements of Operations for the three months ended March 31, 2018 and 2017 | 3 | |
Unaudited Statements of Cash Flows for the three months ended March 31, 2018 and 2017 | 4 | |
Unaudited Notes to Financial Statements | 5 |
ADVANCED LIGNIN BIOCOMPOSITES LLC
CONDENSED BALANCE SHEETS
AS OF MARCH 31, 2018 AND DECEMBER 31, 2017
March 31, 2018 | December 31, 2017 | |||||||
(Unaudited) | ||||||||
CURRENT ASSETS | ||||||||
TOTAL ASSETS | $ | -- | $ | -- | ||||
CURRENT LIABILITIES AND MEMBERS’ DEFICIT | ||||||||
TOTAL LIABILITIES | $ | -- | $ | -- | ||||
MEMBERS’ DEFICIT | ||||||||
Member Equity | 1,200 | 1,000 | ||||||
Accumulated deficit | (1,200 | ) | (1,000 | ) | ||||
TOTAL MEMBERS’ DEFICIT | -- | -- | ||||||
TOTAL LIABILITIES AND MEMBERS’ DEFICIT | $ | -- | $ | -- |
See accompanying unaudited notes to the Financial Statements
2 |
ADVANCED LIGNIN BIOCOMPOSITES LLC
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
(UNAUDITED)
Three Months Ended March 31, | Three Months Ended March 31, | |||||||
Operating expenses | ||||||||
General and administrative expenses | $ | 200 | $ | 200 | ||||
Total operating expenses | 200 | 200 | ||||||
Loss from Operations | (200 | ) | (200 | ) | ||||
Net loss | $ | (200 | ) | $ | (200 | ) |
See accompanying unaudited notes to the Financial Statements
3 |
ADVANCED LIGNIN BIOCOMPOSITES LLC
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
(UNAUDITED)
Three Months Ended March 31, | Three Months Ended March 31, | |||||||
CASH FLOW FROM OPERATING ACTIVITIES | ||||||||
NET LOSS | $ | (200 | ) | $ | (200 | ) | ||
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: | ||||||||
Change in balance sheet | -- | -- | ||||||
Net cash used in operating activities | (200 | ) | (200 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from capital contribution | 200 | 200 | ||||||
Net cash provided by financing activities | 200 | 200 | ||||||
Net increase (decrease) in cash | -- | -- | ||||||
Cash at beginning of period | -- | -- | ||||||
Cash at end of period | $ | -- | $ | -- | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid during the period for: | ||||||||
Income taxes | $ | -- | $ | -- | ||||
Interest | $ | -- | $ | -- |
See accompanying unaudited notes to the Financial Statements.
4 |
ADVANCED LIGNIN BIOCOMPOSITES LLC
UNAUDITED NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2018
NOTE 1 | BUSINESS ORGANIZATION AND NATURE OF OPERATIONS |
The Company was formed in Delaware in May 2007, as a holding company for intellectual property rights, including rights licensed to the Company by UT-Battelle LLC, the manager and operator of Oak Ridge National Laboratory under contract with the United States Department of Energy. That license, along with the Company’s related and other intellectual property rights, are held by the Company inasmuch as the Company’s sole purpose is a holding company for such rights. The Company’s operations are accordingly negligible, however, they remain subject to significant risks and uncertainties to the extent inasmuch as the Company’s intellectual properties may not be commercially viable, and, if they are, they will be subject to infringement and other commercialization risks.
NOTE 2 | GOING CONCERN |
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. There has not been a history of recurring losses related to the Company and there is no indication that there will be losses in the future. The only recurring expenses associated with the Company are annual filing fees, which are minimal and will be absorbed in the future by FLUX Carbon LLC. There can be no assurance that such a plan will be successful. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Accordingly, the accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 3 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim information Regulation S-K. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments consisting of a normal and recurring nature considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2018 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2018.
These condensed financial statements should be read in conjunction with the consolidated financial statements and related disclosures of the Company as of December 31, 2017 and for the year then ended
REVENUE RECOGNITION
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collection is reasonably assured.
CASH AND EQUIVALENTS
The Company considers cash and equivalents to be cash and short-term investments with original maturities of three months or less from the date of acquisition. The Company had no cash or cash equivalents as of March 31, 2018.
RESTRICTED CASH
The Company considers restricted cash to be funds held in escrow in which there is a likelihood of such funds being released to the Company at a future date. The Company had no restricted cash as of March 31, 2018.
RECEIVABLES AND CREDIT CONCENTRATION
Accounts receivable are uncollateralized, non-interest-bearing customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Accounts receivable are stated at the amount billed to the customer. Accounts receivable in excess of 90 days old are evaluated for delinquency. In addition, we consider historical bad debts and current economic trends in evaluating the allowance for bad debts. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the oldest unpaid invoices. The Company had no accounts receivable as of March 31, 2018.
INCOME TAXES
As a limited liability company, taxable income or loss flows through to the members on their individual tax returns. The 2015-2017 returns are open for audit by federal and state taxing authorities.
5 |
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the financial statements, and (iii) the reported amounts of revenues and expenses during the reporting period. We use estimates and assumptions in accounting for significant matters, such as valuation of intellectual property, among others. Actual results may differ from previously estimated amounts, and such differences may be material to our financial statements. The Company periodically review estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made. The revisions to estimates or assumptions during the periods presented in the accompanying financial statements were not considered to be significant.
NOTE 4 | RECENT ACCOUNTING PRONOUCEMENTS |
Revenue Recognition. In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)”. The objective of this amendment is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying this amendment, companies will perform a five-step analysis of transactions to determine when and how revenue is recognized. This amendment applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. An entity should apply the amendments using either the full retrospective approach or retrospectively with a cumulative effect of initially applying the amendments recognized at the date of initial application. In July 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company has not yet selected which transition method it will apply upon adoption. Historically, the Company has not generated any revenue. The Company will continue to evaluate and will quantify the impact, if any, the adoption of ASU 2014-09 will have on our revenue streams when they occur. When our evaluations do occur, The Company does not expect material changes to its accounting policies.
Statement of Cash Flows. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), which is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are classified in the statement of cash flows. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, Restricted Cash (Topic 230) (ASU 2016-18), which requires the inclusion of restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-15 and ASU 2016-18 are both effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, provided that all of the amendments are adopted in the same period. The amendments will be applied using a retrospective transition method to each period presented. The Company adopted this guidance in the first quarter of 2018 and it did not have a significant impact on its financial statements.
Financial Instruments. In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01), which requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income. The ASU also impacts financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. Entities will have to assess the realizability of such deferred tax assets in combination with the entities other deferred tax assets. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017 and for interim periods within that reporting period. In the first quarter of 2018, the Company will elect to adopt the measurement alternative, which will apply this ASU prospectively, for its equity investments that do not have readily determinable fair values. The Company adopted this guidance in the first quarter of 2018 and it did not have a significant impact on its consolidated financial statements.
NOTE 5 | MEMBERS’ EQUITY |
The Company’s equity is represented by non-certificated membership interests, all of which were owned by Attis Innovations, LLC, a wholly-owned subsidiary of Attis Industries Inc. (f/k/a Meridian Waste Solutions, Inc.) as of March 31, 2018, and FLUX Carbon LLC as of May 25, 2018 (see Note 7, Subsequent Events, below). During the three months ended March 31, 2018 and 2017, the member contributed capital of $200 and $200, respectively, for operating costs.
NOTE 6 | COMMITMENTS AND CONTINGENCIES |
The Company is party to a license agreement with UT-Battelle LLC, the manager and operator of Oak Ridge National Laboratory under contract with the United States Department of Energy. The license called for $12,500 to be paid upon execution, and an ongoing royalty of 1.5% to 2.5% of the Company’s (and/or its affiliate’s or designee’s) net sales, if applicable. The Company’s parent company as of March 31, 2017, Attis Innovations LLC, paid the execution fee on the Company’s behalf upon execution of the license, and released the Company from any payment obligation in connection with said amount. Neither the Company, nor any of its affiliates, have generated net sales with the intellectual properties covered by the Oakridge license.
NOTE 7 | SUBSEQUENT EVENTS |
Effective May 25, 2018, Attis Industries Inc. (“Parent”), Parent’s wholly-owned subsidiary, Attis Innovations, LLC (“Innovations”), GreenShift Corporation (“GreenShift”), and GreenShift’s wholly-owned subsidiary, GS CleanTech Corporation (“CleanTech”), and Candent Corporation (“Candent”), among others, entered into a Securities Purchase Agreement (“SPA”) and related transaction documents pursuant to which the Parent acquired 80% of the membership interest units (“80% Units”) of FLUX Carbon LLC (“JVCo”), in exchange for the Parent’s agreement to pay an earn-out payment equal to the greater of $18,000,000 or a multiple of JVCo’s EBITDA. In connection with closing under the SPA, 100% of the issued and outstanding equity of Advanced Lignin Biocomposites LLC (“ALB”) and 49% of the issued and outstanding equity of Genarex FD LLC (“GFD”) was transferred to JVCo.
6
Exhibit 99.8
APPLIED COMBUSTION RESEARCH LLC
FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017 AND 2016
TABLE OF CONTENTS
Page No | ||
Financial Statements as of and for the Years Ended December 31, 2017 and 2016 | ||
Report of Independent Registered Public Accounting Firm | 2 | |
Balance Sheets as of December 31, 2017 and 2016 | 3 | |
Statements of Operations for the years ended December 31, 2017 and 2016 | 4 | |
Statements of Changes in Members’ Deficit for the years ended December 31, 2017 and 2016 | 5 | |
Statements of Cash Flows for the years ended December 31, 2017 and 2016 | 6 | |
Notes to Financial Statements | 7 |
To the Members and the Board of Directors’ of:
Applied Combustion Research, LLC
Opinion on the Consolidated Financial Statements
We have audited the accompanying balance sheets of Applied Combustion Research, LLC (the “Company”) as of December 31, 2017 and 2016, the related statements of operations, changes in members deficit and cash flows for the years ended December 31, 2017 and 2016, and the related notes (collectively referred to as the “ financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016 and the results of its operations and its cash flows for the years ended December 31, 2017 and 2016 in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has a net loss and lack of working capital. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan in regards to these matters are described in Note 2 of the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. Accordingly, we express no such opinion. As part of our audits, we are required to obtain an understanding of internal controls over financial reporting, but not for the purposes of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures including examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also include evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/ Liggett & Webb, P.A.
LIGGETT & WEBB, P.A.
Certified Public Accountants
We have served as the Company’s auditor since 2018.
Boynton Beach, Florida
July 19, 2018
2 |
APPLIED COMBUSTION RESEARCH LLC
BALANCE SHEETS
AS OF DECEMBER 31, 2017 AND 2016
December 31, 2017 | December 31, 2016 | |||||||
CURRENT ASSETS | ||||||||
TOTAL ASSETS | $ | -- | $ | -- | ||||
CURRENT LIABILITIES AND MEMBERS’ DEFICIT | ||||||||
TOTAL LIABILITIES | $ | -- | $ | -- | ||||
MEMBERS’ DEFICIT | ||||||||
Member Equity | 1,000 | 800 | ||||||
Accumulated deficit | (1,000 | ) | (800 | ) | ||||
TOTAL MEMBERS’ DEFICIT | -- | -- | ||||||
TOTAL LIABILITIES AND MEMBERS’ DEFICIT | $ | -- | $ | -- |
See accompanying notes to the Financial Statements
3 |
APPLIED COMBUSTION RESEARCH LLC
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
December 31, 2017 | December 31, 2016 | |||||||
Operating expenses | ||||||||
General and administrative expenses | $ | 200 | $ | 200 | ||||
Total operating expenses | 200 | 200 | ||||||
Loss from Operations | (200 | ) | (200 | ) | ||||
Net loss | $ | (200 | ) | $ | (200 | ) |
See accompanying notes to the Financial Statements
4 |
APPLIED COMBUSTION RESEARCH LLC
statements of MEMBERs’ DEFICT
FOR THE YEARS ENDED DECEMBER 31, 2017 AND December 31, 2016
Member Equity | Accumulated Deficit | Total Deficit | ||||||||||
Balance at December 31, 2015 | $ | 600 | $ | (600 | ) | $ | -- | |||||
Capital contributions | 200 | -- | 200 | |||||||||
Net loss | -- | (200 | ) | (200 | ) | |||||||
Balance at December 31, 2016 | $ | 800 | $ | (800 | ) | $ | -- | |||||
Capital Contributions | 200 | -- | 200 | |||||||||
Net loss | -- | (200 | ) | (200 | ) | |||||||
Balance at December 31, 2017 | $ | 1,000 | $ | (1,000 | ) | $ | -- |
See accompanying notes to the Financial Statements
5 |
APPLIED COMBUSTION RESEARCH LLC
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
December 31, 2017 | December 31, 2016 | |||||||
CASH FLOW FROM OPERATING ACTIVITIES | ||||||||
NET LOSS | $ | (200 | ) | $ | (200 | ) | ||
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: | ||||||||
Change in balance sheet | -- | -- | ||||||
Net cash used in operating activities | (200 | ) | (200 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from capital contribution | 200 | 200 | ||||||
Net cash provided by financing activities | 200 | 200 | ||||||
Net increase (decrease) in cash | -- | -- | ||||||
Cash at beginning of period | -- | -- | ||||||
Cash at end of period | $ | -- | $ | -- | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid during the period for: | ||||||||
Income taxes | $ | -- | $ | -- | ||||
Interest | $ | -- | $ | -- |
The notes to the Financial Statements are an integral part of these statements.
6 |
APPLIED COMBUSTION RESEARCH LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
NOTE 1 | BUSINESS ORGANIZATION AND NATURE OF OPERATIONS |
The Company was formed in Delaware on April 12, 2012, as a holding company for various investments and intellectual property rights. The Company’s sole purpose is a holding company for such investments and rights. The Company’s operations are accordingly negligible, however, they remain subject to significant risks and uncertainties to the extent inasmuch as the Company’s intellectual properties may not be commercially viable, and, if they are, they will be subject to infringement and other commercialization risks.
NOTE 2 | GOING CONCERN |
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The only recurring expenses associated with the Company are annual filing fees, which are minimal and will be absorbed in the future by FLUX Carbon LLC. There can be no assurance that such a plan will be successful. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Accordingly, the accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 3 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
REVENUE RECOGNITION
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collection is reasonably assured.
CASH AND EQUIVALENTS
The Company considers cash and equivalents to be cash and short-term investments with original maturities of three months or less from the date of acquisition. The Company had no cash or cash equivalents as of December 31, 2016 and December 31, 2017.
RESTRICTED CASH
The Company considers restricted cash to be funds held in escrow in which there is a likelihood of such funds being released to the Company at a future date. The Company had no restricted cash as of December 31, 2016 and December 31, 2017.
RECEIVABLES AND CREDIT CONCENTRATION
Accounts receivable are uncollateralized, non-interest-bearing customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Accounts receivable are stated at the amount billed to the customer. Accounts receivable in excess of 90 days old are evaluated for delinquency. In addition, we consider historical bad debts and current economic trends in evaluating the allowance for bad debts. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the oldest unpaid invoices. The Company had no accounts receivable as of December 31, 2016 and December 31, 2017.
INCOME TAXES
As a limited liability company, taxable income or loss flows through to the members on their individual tax returns. The 2015-2017 returns are open for audit by federal and state taxing authorities.
7 |
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the financial statements, and (iii) the reported amounts of revenues and expenses during the reporting period. We use estimates and assumptions in accounting for significant matters, such as valuation of intellectual property, among others. Actual results may differ from previously estimated amounts, and such differences may be material to our financial statements. The Company periodically review estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made. The revisions to estimates or assumptions during the periods presented in the accompanying financial statements were not considered to be significant.
NOTE 4 | RECENT ACCOUNTING PRONOUCEMENTS |
Revenue Recognition. In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)”. The objective of this amendment is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying this amendment, companies will perform a five-step analysis of transactions to determine when and how revenue is recognized. This amendment applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. An entity should apply the amendments using either the full retrospective approach or retrospectively with a cumulative effect of initially applying the amendments recognized at the date of initial application. In July 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company has not yet selected which transition method it will apply upon adoption. Historically, the Company has not generated any revenue. The Company will continue to evaluate and will quantify the impact, if any, the adoption of ASU 2014-09 will have on our revenue streams when they occur. When our evaluations do occur, The Company does not expect material changes to its accounting policies.
Statement of Cash Flows. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), which is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are classified in the statement of cash flows. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, Restricted Cash (Topic 230) (ASU 2016-18), which requires the inclusion of restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-15 and ASU 2016-18 are both effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, provided that all of the amendments are adopted in the same period. The amendments will be applied using a retrospective transition method to each period presented. The Company adopted this guidance in the first quarter of 2018 and it did not have a significant impact on its financial statements.
Financial Instruments. In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01), which requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income. The ASU also impacts financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. Entities will have to assess the realizability of such deferred tax assets in combination with the entities other deferred tax assets. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017 and for interim periods within that reporting period. In the first quarter of 2018, the Company will elect to adopt the measurement alternative, which will apply this ASU prospectively, for its equity investments that do not have readily determinable fair values. The Company adopted this guidance in the first quarter of 2018 and it did not have a significant impact on its consolidated financial statements.
8 |
NOTE 5 | MEMBERS’ EQUITY |
The Company has 10 Class A and 10 Class B membership interest units outstanding, all of which were owned by EXO Opportunity Fund LLC as of December 31, 2017 and 2016 (see Note 7, Subsequent Events, below). During 2017 and 2016, the member contributed $200 and $200, respectively to fund operations. There is no difference in the rights accorded to the Class A units and the Class B units.
NOTE 6 | COMMITMENTS AND CONTINGENCIES |
On February 23, 2015, the Company and GS CleanTech Corporation (“CleanTech”) entered into a contingent litigation financing agreement (“Litigation Financing Agreement”), pursuant to which the Company agreed to cover all costs of recovery for litigation matters commenced on or before February 23, 2015 in exchange for 125% of all costs and expenses of recovery, plus a contingent recovery fee payable to CleanTech’s litigation counsel (“Litigation Counsel”) or its designee equal to 25% of all recovered amounts. To ensure payment, the Litigation Financing Agreement required the assignment of the applicable receivables, including rights to collect damages and other amounts arising upon default of underlying agreements, to the Company. The applicable damages relate further to certain disputed restricted cash and accounts receivable balances. The restricted cash relates to amounts deposited into an escrow account pending completion of settlement. That amount increases at the rate of about $125,000 per month. The accounts receivable relates to amounts in default as of February 23, 2015, but that increase on a monthly basis under applicable agreements. While litigation has not yet commenced in connection with any of the foregoing amounts, and settlement discussions are ongoing, filing suit is likely to be necessary in several instances. The Company has accordingly determined that collectability was not reasonably assured as of each relevant reporting date. The corresponding revenues were therefore not recognized. In addition, the restricted cash and accounts receivable above were otherwise deemed to be subject to a 100% valuation allowance as of December 31, 2017 and 2016.
The Company is subject to a first priority lien granted in favor of Candent Corporation (“Candent”) on February 18, 2015, under a guaranty agreement executed by the Company in connection with the issuance by the Company’s former parent company, EXO Opportunity Fund LLC (“EXO”) of a $15 million senior secured loan to Candent on the same date. Effective May 25, 2018, on and subject to applicable agreements, Candent agreed to release the foregoing first priority security interest and lien upon satisfaction by the Company’s parent company, FLUX Carbon LLC, and its affiliates of certain conditions under the SPA (see Note 7, Subsequent Events, below). The note has a due date of February 18, 2021 and is currently not in default.
NOTE 7 | SUBSEQUENT EVENTS |
On April 1, 2018, Litigation Counsel agreed to accept $450,000 in exchange for full satisfaction of all recovery costs as of April 1, 2018. On the same date, the Company agreed to waive its right to receive the 25% premium on any and all recovery costs moving forward.
Effective May 25, 2018, Attis Industries Inc. (“Parent”), Parent’s wholly-owned subsidiary, Attis Innovations, LLC (“Innovations”), GreenShift Corporation (“GreenShift”), and GreenShift’s wholly-owned subsidiary, GS CleanTech Corporation (“CleanTech”), and Candent Corporation (“Candent”), among others, entered into a Securities Purchase Agreement (“SPA”) and related transaction documents pursuant to which the Parent acquired 80% of the membership interest units (“80% Units”) of FLUX Carbon LLC (“JVCo”), in exchange for the Parent’s agreement to pay an earn-out payment equal to the greater of $18,000,000 or a multiple of JVCo’s EBITDA. In connection with closing under the SPA, 100% of the issued and outstanding equity of Advanced Lignin Biocomposites LLC (“ALB”) and 49% of the issued and outstanding equity of Genarex FD LLC (“GFD”) was transferred to JVCo.
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Exhibit 99.9
APPLIED COMBUSTION RESEARCH LLC
FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2018
TABLE OF CONTENTS
Page No | ||
Financial Statements | ||
Balance Sheets as of March 31, 2018 (unaudited) and December 31, 2017 | 2 | |
Unaudited Statements of Operations for the three months ended March 31, 2018 and 2017 | 3 | |
Unaudited Statements of Cash Flows for the three months ended March 31, 2018 and 2017 | 4 | |
Unaudited Notes to Financial Statements | 5 |
APPLIED COMBUSTION RESEARCH LLC
CONDENSED BALANCE SHEETS
AS OF MARCH 31, 2018 AND DECEMBER 31, 2017
March 31, 2018 | December 31, 2017 | |||||||
(Unaudited) | ||||||||
CURRENT ASSETS | ||||||||
TOTAL ASSETS | $ | -- | $ | -- | ||||
CURRENT LIABILITIES AND MEMBERS’ DEFICIT | ||||||||
TOTAL LIABILITIES | $ | -- | $ | -- | ||||
MEMBERS’ DEFICIT | ||||||||
Member Equity | 1,200 | 1,000 | ||||||
Accumulated deficit | (1,200 | ) | (1,000 | ) | ||||
TOTAL MEMBERS’ DEFICIT | -- | -- | ||||||
TOTAL LIABILITIES AND MEMBERS’ DEFICIT | $ | -- | $ | -- |
See accompanying unaudited notes to the Financial Statements
2 |
APPLIED COMBUSTION RESEARCH LLC
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
(UNAUDITED)
Three Months Ended March 31, 2018 | Three Months Ended March 31, 2017 | |||||||
Operating expenses | ||||||||
General and administrative expenses | $ | 200 | $ | 200 | ||||
Total operating expenses | 200 | 200 | ||||||
Loss from Operations | (200 | ) | (200 | ) | ||||
Net loss | $ | (200 | ) | $ | (200 | ) |
See accompanying unaudited notes to the Financial Statements
3 |
APPLIED COMBUSTION RESEARCH LLC
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
(Unaudited)
Three Months Ended March 31, 2018 | Three Months Ended March 31, 2017 | |||||||
CASH FLOW FROM OPERATING ACTIVITIES | ||||||||
NET LOSS | $ | (200 | ) | $ | (200 | ) | ||
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: | ||||||||
Change in balance sheet | -- | -- | ||||||
Net cash used in operating activities | (200 | ) | (200 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from capital contribution | 200 | 200 | ||||||
Net cash provided by financing activities | 200 | 200 | ||||||
Net increase (decrease) in cash | -- | -- | ||||||
Cash at beginning of period | -- | -- | ||||||
Cash at end of period | $ | -- | $ | -- | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid during the period for: | ||||||||
Income taxes | $ | -- | $ | -- | ||||
Interest | $ | -- | $ | -- |
See accompanying unaudited notes to the Financial Statements.
4 |
APPLIED COMBUSTION RESEARCH LLC
UNAUDITED NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
NOTE 1 | BUSINESS ORGANIZATION AND NATURE OF OPERATIONS |
The Company was formed in Delaware on April 12, 2012, as a holding company for various investments and intellectual property rights. The Company’s sole purpose is a holding company for such investments and rights. The Company’s operations are accordingly negligible, however, they remain subject to significant risks and uncertainties to the extent inasmuch as the Company’s intellectual properties may not be commercially viable, and, if they are, they will be subject to infringement and other commercialization risks.
NOTE 2 | GOING CONCERN |
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The only recurring expenses associated with the Company are annual filing fees, which are minimal and will be absorbed in the future by FLUX Carbon LLC. There can be no assurance that such a plan will be successful. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Accordingly, the accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 3 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim information Regulation S-K. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments consisting of a normal and recurring nature considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2018 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2018.
These condensed financial statements should be read in conjunction with the consolidated financial statements and related disclosures of the Company as of December 31, 2017 and for the year then ended
REVENUE RECOGNITION
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collection is reasonably assured.
CASH AND EQUIVALENTS
The Company considers cash and equivalents to be cash and short-term investments with original maturities of three months or less from the date of acquisition. The Company had no cash or cash equivalents as of March 31, 2018.
RECEIVABLES AND CREDIT CONCENTRATION
Accounts receivable are uncollateralized, non-interest-bearing customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Accounts receivable are stated at the amount billed to the customer. Accounts receivable in excess of 90 days old are evaluated for delinquency. In addition, we consider historical bad debts and current economic trends in evaluating the allowance for bad debts. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the oldest unpaid invoices. The Company had no accounts receivable as of March 31, 2018.
INCOME TAXES
As a limited liability company, taxable income or loss flows through to the members on their individual tax returns. The 2015-2017 returns are open for audit by federal and state taxing authorities.
5 |
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the financial statements, and (iii) the reported amounts of revenues and expenses during the reporting period. We use estimates and assumptions in accounting for significant matters, such as valuation of intellectual property, among others. Actual results may differ from previously estimated amounts, and such differences may be material to our financial statements. The Company periodically review estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made. The revisions to estimates or assumptions during the periods presented in the accompanying financial statements were not considered to be significant.
NOTE 4 | RECENT ACCOUNTING PRONOUCEMENTS |
Revenue Recognition. In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)”. The objective of this amendment is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying this amendment, companies will perform a five-step analysis of transactions to determine when and how revenue is recognized. This amendment applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. An entity should apply the amendments using either the full retrospective approach or retrospectively with a cumulative effect of initially applying the amendments recognized at the date of initial application. In July 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company has not yet selected which transition method it will apply upon adoption. Historically, the Company has not generated any revenue. The Company will continue to evaluate and will quantify the impact, if any, the adoption of ASU 2014-09 will have on our revenue streams when they occur. When our evaluations do occur, The Company does not expect material changes to its accounting policies.
Statement of Cash Flows. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), which is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are classified in the statement of cash flows. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, Restricted Cash (Topic 230) (ASU 2016-18), which requires the inclusion of restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-15 and ASU 2016-18 are both effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, provided that all of the amendments are adopted in the same period. The amendments will be applied using a retrospective transition method to each period presented. The Company adopted this guidance in the first quarter of 2018 and it did not have a significant impact on its financial statements.
Financial Instruments. In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01), which requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income. The ASU also impacts financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. Entities will have to assess the realizability of such deferred tax assets in combination with the entities other deferred tax assets. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017 and for interim periods within that reporting period. In the first quarter of 2018, the Company will elect to adopt the measurement alternative, which will apply this ASU prospectively, for its equity investments that do not have readily determinable fair values. The Company adopted this guidance in the first quarter of 2018 and it did not have a significant impact on its consolidated financial statements.
NOTE 5 | MEMBERS’ EQUITY |
The Company has 10 Class A and 10 Class B membership interest units outstanding, all of which were owned by EXO Opportunity Fund LLC as of December 31, 2017 and 2016 (see Note 7, Subsequent Events, below). During 2018 and 2017, the member contributed $200 and $200, respectively, to fund operations. There is no difference in the rights accorded to the Class A units and the Class B units.
6 |
NOTE 6 | COMMITMENTS AND CONTINGENCIES |
On February 23, 2015, the Company and GS CleanTech Corporation (“CleanTech”) entered into a contingent litigation financing agreement (“Litigation Financing Agreement”), pursuant to which the Company agreed to cover all costs of recovery for litigation matters commenced on or before February 23, 2015 in exchange for 125% of all costs and expenses of recovery, plus a contingent recovery fee payable to CleanTech’s litigation counsel (“Litigation Counsel”) or its designee equal to 25% of all recovered amounts. To ensure payment, the Litigation Financing Agreement required the assignment of the applicable receivables, including rights to collect damages and other amounts arising upon default of underlying agreements, to the Company. The applicable damages relate further to certain disputed restricted cash and accounts receivable balances. The restricted cash relates to amounts deposited into an escrow account pending completion of settlement. That amount increases at the rate of about $125,000 per month. The accounts receivable relates to amounts in default as of February 23, 2015, but that increase on a monthly basis under applicable agreements. While litigation has not yet commenced in connection with any of the foregoing amounts, and settlement discussions are ongoing, filing suit is likely to be necessary in several instances. The Company has accordingly determined that collectability was not reasonably assured as of each relevant reporting date. The corresponding revenues were therefore not recognized. In addition, the restricted cash and accounts receivable above were otherwise deemed to be subject to a 100% valuation allowance as of March 31, 2018.
The Company is subject to a first priority lien granted in favor of Candent Corporation (“Candent”) on February 18, 2015, under a guaranty agreement executed by the Company in connection with the issuance by the Company’s former parent company, EXO Opportunity Fund LLC (“EXO”) of a $15 million senior secured loan to Candent on the same date. Effective May 25, 2018, on and subject to applicable agreements, Candent agreed to release the foregoing first priority security interest and lien upon satisfaction by the Company’s parent company, FLUX Carbon LLC, and its affiliates of certain conditions under the SPA (see Note 7, Subsequent Events, below). The note has a due date of February 18, 2021 and is currently not in default.
NOTE 7 | SUBSEQUENT EVENTS |
On April 1, 2018, Litigation Counsel agreed to accept $450,000 in exchange for full satisfaction of all recovery costs as of April 1, 2018. On the same date, the Company agreed to waive its right to receive the 25% premium on any and all recovery costs moving forward.
Effective May 25, 2018, Attis Industries Inc. (“Parent”), Parent’s wholly-owned subsidiary, Attis Innovations, LLC (“Innovations”), GreenShift Corporation (“GreenShift”), and GreenShift’s wholly-owned subsidiary, GS CleanTech Corporation (“CleanTech”), and Candent Corporation (“Candent”), among others, entered into a Securities Purchase Agreement (“SPA”) and related transaction documents pursuant to which the Parent acquired 80% of the membership interest units (“80% Units”) of FLUX Carbon LLC (“JVCo”), in exchange for the Parent’s agreement to pay an earn-out payment equal to the greater of $18,000,000 or a multiple of JVCo’s EBITDA. In connection with closing under the SPA, 100% of the issued and outstanding equity of Advanced Lignin Biocomposites LLC (“ALB”) and 49% of the issued and outstanding equity of Genarex FD LLC (“GFD”) was transferred to JVCo.
7 |