UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1-K
ANNUAL REPORT
PURSUANT TO REGULATION A OF THE SECURITIES ACT OF 1933
For the fiscal year ended December 31, 2016
UNATION, LLC
(Exact name of registrant as specified in its charter)
| Delaware | 27-2819085 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
12802 Tampa Oaks Blvd, Suite 405 Tampa, FL |
33637 | |
| (Address of principal executive offices) | (Zip Code) |
| (813) 349-2020 | ||
| Registrant’s telephone number, including area code |
| Series C Non-Voting Membership Units |
| (Title of each class of securities issued pursuant to Regulation A) |
TABLE OF CONTENTS
In this Annual Report, the terms “UNATION, LLC”, “UNATION”, “the company”, or “we” refers to UNATION, LLC and its subsidiary, UNATION Technologies, LLC, on a consolidated basis.
THIS ANNUAL REPORT MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THIS REPORT, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE.
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Basic Information about the Company and Overview
We founded the company in June 2010 in order to create an event-driven social platform. We believe life is a series of events and by connecting around the events of our lives, we are giving users the ability to form meaningful and relevant relationships.
Our current expansion model is focused on the State of Florida. To date, the UNATION app is available for events in Tampa, Orlando, Miami and Key West. As of March 22, 2017, we have not earned significant income from operations and still consider ourselves to be a developmental stage company.
We have one non-operating, wholly-owned subsidiary entity for the company. That entity is UNATION Technologies, LLC, a Texas organized limited liability company. We had one additional non-operating, wholly-owned subsidiary named UNATION Entertainment Group, LLC. That entity will be dissolved under the Delaware Limited Liability Company Act.
Principal Products and Services
Our core product is the UNATION app, currently available through the Apple App Store and through Google Play as well as available through our web-based app. We also have a “Check in” app to better assist people in managing their ticket events. The app allows businesses and people to create, discover, and share local events, such as concerts, nightlife, restaurant specials, festivals, date nights, and other social gatherings.
We issue updates to the app on a monthly basis, or as often as needed when responding to known, global security threats that regularly impact iPhone and Android applications. Our recent updates have also expanded the features available to our users and Brand Ambassadors (for more information on our Brand Ambassador Program, see “Brand Ambassador Program” below).
The app does more than just allowing users to view the details of events created by users. Our features allow organizers to promote and generate revenues from their events. Currently, the features of the UNATION app include:
| • | Create ticket | • | Absorb fees |
| • | Edit ticket | • | Multiple ticket levels |
| • | Buy ticket | • | Promo codes |
| • | Link your bank account | • | Add to calendar |
| • | Pass on fees | • | Registration |
| • | Reporting | • | Check in App |
| • | Ambassador Portal | • | Event marketing support |
We began generating revenue on our ticketing services in the fourth quarter of 2016 by receiving a fee on each ticket sold through the app. The app allows for event organizers and promoters to absorb the cost of the fees, or pass them on to purchasers. The majority of event creators pass on the fees to the ticket purchasers as that is industry standard and expected by the end user. Either way, whether the fee is passed on or absorbed, UNATION still collects that fee as revenue. So far, the revenues were nominal but demonstrated the potential available for generating revenue through the UNATION app. In the first quarter of 2017, UNATION introduced promoted content as our second revenue stream. This feature allows event creators to pay UNATION to promote their content on our App, over social media, email, etc. The revenue on this feature is nominal to date but has proved another revenue source.
In the future, we plan to introduce premium application services as and additional source of revenue to UNATION.
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Since event organizers of any size, from farmers’ markets to Taylor Swift concerns, are able to create events on the UNATION app, we have created a curated Top List of events in a user’s geographic area to help navigate the events created on the app.
Marketing/Business Development
When we open in a new city or region, we focus on building our user base by engaging with people who will help us promote the UNATION app. We do this through targeting of Brand Ambassadors and Influencers, creating partnerships with large event organizers, digital marketing campaigns, and engaging with colleges. Our current marketing focus is being done through our Brand Ambassador Program and our College Initiative. These efforts typically result in user acquisition at a cost of $1 per user, with some campaigns only costing approximately $0.33 per user.
Brand Ambassador Program
As it is people that drive attendance to events, one means we have used to market the UNATION app is through our Brand Ambassador Program. Each person that signs up under the Brand Ambassador Program is entitled to a percentage of any revenue earned by a client or account that the Ambassador has introduced to UNATION. The fee structure is tiered to encourage participation by Ambassadors. Each Ambassador receives 20% of the revenue generated by the first event for a new client or account, and 10% for subsequent events. We may adjust these percentages in the future. In this way, Ambassadors are incentivized to encourage use of the app and our current primary revenue generator — ticketing services.
To assist and track the progress of our Ambassadors, we have built an admin portal within the UNATION app that allows Ambassadors to invite new users to UNATION and track revenue earned by any new user that the Ambassador has introduced.
College Initiative
According to the Florida College System Annual Report, there were over 813,000 college students in the state of Florida in 2014. The current generation of students is entrepreneurial and enjoys supplementing their online and in app experiences with in person events. In response, we developed our College Initiative to formalize the process in which we can engage with college students. Students have the ability to join as a Campus Brand Ambassador to promote the UNATION app on their campus, allowing them to earn a portion of the revenue generated through their work promoting the UNATION app. As students show promise, we intend to provide additional experience, culminating in a role as a UNATION employee for select students.
One Million Users in 100 Days
Starting on March 1, 2017, we have a launched our “One Million Users in 100 Days” campaign. The goal of this campaign is to leverage our current methods of increasing our user base to generate one million users in specific regions of Florida. We intend to do this by growing our base of Brand Ambassadors to over 100 active Ambassadors, generating over 250 active ticketing accounts, engaging with three to five strategic growth partners, expanding into Miami, FL, as well as expanding into two more colleges.
Market
We are currently focused on the Florida market for events and have established a presence in Tampa, Orlando, Miami and Key West. This is a change from our previously identified goal of having a presence in the top 26 metropolitan areas by the end of 2017. Rather than merely having a presence, we want to dominate particular markets to make the UNATION app ubiquitous and the go-to resource for event organizers and promoters.
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Our pricing model for ticketing services is based on percentage of the ticket price. As such, we are the beneficiaries of the general trend towards higher ticket prices for concerts and sporting events. For instance, the current average ticket price for a music concert is $74.25, as determined by Pollstar in its 2015 Year End Stats & Analysis. This represents an increase of $2.81, or 4% over the previous year.
Competition
We believe we offer a unique product that is not being provided by other social media services. While there are other apps and services that allows for discovery and promotion of events, we are not aware of any competitor that includes the same robust features for event organizers and users to create, promote, and discover events.
UNATION distinguishes itself in event promotion and ease of creation by adding the mobile component to the equation. Currently, an event creator is unable to create events from their phone on Eventbrite, which is arguably the top user generated event site in the United States. However, an event creator can do so on UNATION. We also differentiate in price and speed to market. Many event creators spend thousands of dollars for an event page, attached to an e-commerce engine, with the ability for tickets and registration. On UNATION, it is free to set all of that up as a user. We only make money when the event creator sells tickets.
Development Team and Network Infrastructure
We utilize in-house contractors to develop the prototype and products that UNATION brings to the market. We also have an ongoing business relationship with West Agile Labs in San Francisco, CA, which is responsible for developing the technical infrastructure supporting the UNATION app. We pay West Agile Labs based on the work performed, and all resulting intellectual property is the property of UNATION.
Additionally, we leverage cloud computing from Amazon Web Services (“AWS”) for our hardware needs. Cloud computing provides a simple way to access servers, storage, databases and a broad set of application services over the Internet. AWS owns and maintains the network-connected hardware required for these application services, while we provision and use what we need via a web application.
Employees
We currently have 23 people working for UNATION on a full time, part time, or contract basis.
Intellectual Property
In the scope of their work developing the UNATION App, any contractor hired by UNATION is required to acknowledge that the work product is the property of UNATION.
We have filed for trademark protection on three marks used by the company as a means to protect our brand and image, as well as promote the UNATION app. These marks include:
| Serial Number | Mark | Date Filed |
| 85250129 | UNATION | February 23, 2011 |
| 85379969 | It’s where you live | July 25, 2011 |
| 85379701 | Affinity Bonding | July 25, 2011 |
Legal Proceedings
We are involved in four current legal proceedings. The first is a lawsuit brought by Bridgeline Digital, Inc. against the company in Superior Court in the Commonwealth of Massachusetts in regards to a contract entered into between Bridgeline Digital, Inc. and the company. The law suit was filed in October 2012. The lawsuit alleges breach of contract and seeks monetary damages and other civil remedies. The company has challenged the claims of Bridgeline and the lawsuit is currently ongoing.
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The second legal proceeding involves a lawsuit brought by the company against Compuware Corp in September 2011 Circuit Court for Hillsborough County in the State of Florida in regards to a contract entered into between the company and Compuware Corp. In the lawsuit we allege that Compuware was in breach of a contract entered into with UNATION and are seeking monetary damages and other civil remedies. Compuware filed a counterclaim for services and fees UNATION is disputing. We are currently in settlement negotiations with Compuware.
In July 2016, an entity allegedly known as Apercu Global, Inc. filed suit against us in the United States District Court for the Middle District of Florida, following a dismissal of a complaint with prejudice based on jurisdictional grounds in July 2015 filed in New Jersey Superior Court. The July 2016 lawsuit was voluntarily dismissed in January 2017, at which point an entity by the name of Apercu Financial Services, Inc. filed a lawsuit against the company. We believe the complaint filed against us to be a sham pleading and will vigorously defend ourselves and aggressively prosecute appropriate counterclaims as necessary.
In December 2016 three individuals filed a complaint against the company in the United States District Court for the Middle District of Florida alleging violations of the Fair Labor Standards Act. One of the plaintiffs subsequently dropped his claim against the company. The company has challenged the claims and the lawsuit is currently ongoing.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included in this annual report and our offering circular filed on October 6, 2016. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.
Results of Operations
The UNATION App is free to download for any user. Our business model is to generate revenue primarily from taking a percentage of ticket sales and from advertising on the App. As of December 31, 2016, we were still in developmental stages of operations, having only generated nominal revenue tied to our core operations. For year-end 2016, the company had revenues of $1,972, compared to $1,544 for year-end 2015. In the first quarter of 2017, our revenues continue to be nominal.
Offsetting that revenue is the cost of operations of the company for development and support of the App along with the cost to host the App on Amazon’s servers. In 2016, we spent $460,436 on contract labor for development support of the App, compared to $492,652 in 2015. Our costs to host the App in 2016 were $45,541 compared to $67,433 in 2015. This drop was due to efficiency improvements in the use of server resources. For the first quarter of 2017, we have spent $136,850 (unaudited) for contract labor, $13,465 on App hosting (unaudited), 13,465 (unaudited) for hosting services and $49,679 (unaudited) for marketing expenses
In 2016, our operating expenses totaled $1,094,448, compared to $1,090,780 for the year-end 2015. The main component of our operating expenses for 2015 was a loan of $500,000 made to Starshop, Inc. for marketing services. Starshop subsequently breached the agreement, and collecting on the loaned amount is in question, resulting in our decision to expense the loan as a marketing expense. In contrast, we incurred $51,761 in marketing expenses for 2016, with the majority of that expense occurring in the first half of 2016. In 2015, we also incurred $370,391 in depreciation expenses. This amount increased to $622,336 for 2016.
During 2016, we also experienced a significant increase in legal and professional fees as a result of our offering under Regulation A of the Securities Act, as well as certain settlement agreements resulting from complaints against the company settled prior to 2016. In 2016, our legal and professional fees were $200,456, compared to $28,771 in 2015.
During the development stage of the company, our management is receiving limited compensation from the company. Only two of our officers, Georges Beardsley and Jody Clermont are directly compensated by the company. That compensation amounted to a total of $136,000 in 2016, compared to $89,000 in 2016.
The result of the foregoing is that we incurred a net loss of $1,617,310 in 2016, compared to a net loss of $1,667,675 in 2015, a decrease in our net loss of $50,365, or approximately 3%. If the one-time marketing expense of $500,000 incurred due to the breach of the marketing agreement by Starshop in 2015 were excluded, our net loss between 2015 and 2016 would have increased by $449,635.
Liquidity and Capital Resources
As of December 31, 2016, the company’s cash and cash equivalents on hand was $260,349, which comprises the entirety of the company’s current assets. At that time, the cash and cash equivalents on hand were not sufficient to cover the current liabilities of the company, including $532,896 in current accounts payable.
The company’s operations have largely been financed to date from its financing and pre-sales activities. Additionally, in order to continue development of the UNATION App, and support the current users of the App, the company will be required to compensate its development team working on a contract basis. We expect that the company will pay approximately $500,000 to its development team working on contract over the next 12 months, which is consistent with the amount paid in 2016 and 2015 of $460,436 and $492,652, respectively.
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In order to meet its current liabilities, the company will continue to raise funds from accredited investors. Over the course of 2016, the company raised $1,455,017 from accredited investors who purchased the Series B Units of the company. This amount was $2,275,443 in 2015.
On September 30, 2016, we were qualified by the SEC to raise up to $30,000,000, with proceeds to the company of $21,750,000 (which includes sales of up to $8.25 million by current securityholders), from investors in an offering of our Series C Membership Units under Regulation A under the Securities Act of 1933. To date, we have not actively sought investors for those securities and have not made any sales to investors of securities qualified under Regulation A.
Between the offerings of our Series B Units to accredited investors, and our Series C Units under Regulation A, we believe we will be able to obtain sufficient capital to continue our operations. If required, we may also turn to Marquesas Capital Partners, LLC to request additional funds to be loaned to the company at the same terms as have been loaned previously.
While these sources of liquidity are potentially available, there can be no assurance that the company will be able to raise funds from additional outside investors or from Marquesas Capital Partners.
Plan of Operations
Over the next 12 months we plan to generate a larger user base through our “One Million Users in 100 Days” campaign and building our Brand Ambassador and College Initiative programs. We believe these efforts will result in increased revenues for the company. As of August 2016, the UNATION App has been developed to the point that we have moved beyond the testing phases and have rolled out our ticketing services. We continue to believe that ticketing will be the primary revenue source for the Company.
Additionally, have improved the user interface for our Brand Ambassadors, which we believe will encourage greater activity on the part of Ambassadors. In the next 12 months we intend to add premium application services that will be made available to event organizers. We will charge for some of these apps that we intend to roll out. Our intent is that the premium apps will allow for event organizers to engage with their attendees on a deeper level, making it an appealing option for organizers.
The third revenue stream we intend to tap into over the next 12 months is allowing event organizers to promote their events through the UNATION App. In this way, promoted events would appear at the top of any user search for events in their area. Organizers will pay a fee to promote their event. Prior to adding these features to the App, we have introduced the ability for organizers to hire the UNATION marketing team to promote their events.
As previously discussed, we have modified our intentions regarding expanding into nationwide markets. Instead of our previously disclosed intention to expand into 26 markets in the US over the next 12 months, we intend to continue to expand our presence in Florida, with the intent to dominate that market.
Trend Information and Metrics
We care about three key metrics: active users, retention, and viral coefficient. An active user is defined as a user who joins our App and does something we would like them to do, such as follow an event or create an event. We measure active users as a percentage of total users on UNATION.
Retention is defined as a user who comes back to the App more than once a month. A strong retention rate lowers our user acquisition cost. Viral coefficient is defined as when one user is responsible for getting another user to join. We measure this based on the number of other persons a user invites to the App (i.e., a user that invites 10 friends would have a viral coefficient of 10).
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In our old UNATION web app model that was in place for beta testing from January 1, 2013 to July 31, 2013, we experienced the following metrics:
| • | Active users: 15-20% | |
| • | Retention rate: 15.5% | |
| • | Viral coefficient: Estimated at 0.25 (we were not able to accurately measure the viral coefficient at the time) |
In our new model available through iOS, Android, and the web app, we have experienced the following metrics from January 1, 2016 to June 20, 2016:
| • | Active users: 60-65% | |
| • | Retention rate (iOS): 35% | |
| • | Retention rate (Android): 37% | |
| • | Retention rate (web app): 44.5% | |
| • | Viral coefficient: 3.25 |
We also measure user engagement based on the amount of time spent in the App. In our iPhone beta release, we saw users increase the average time spent on the App from 4:38 to 11:15.
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DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANT EMPLOYEES
The following table sets out the company’s officers and managing members.
| Name | Position | Age | Term of Office (if indefinite, give date appointed) | Approximate hours per week (if part-time)/full- time |
| Executive Officers: | ||||
| John Bartoletta | Chairman | 52 | June 2010 | 20 (Mr Bartoletta also serves as CEO of Highstreet Financial, LLC and is a Managing Member of Marquesas Capital Partners, LLC) |
| George Beardsley | Chief Strategy Officer | 49 | June 2010 | Full time |
| Dennis Thomas | Chief Financial Officer | 57 | June 2010 | 8 (Mr. Thomas is employed by and is the owner of Dendar Enterprises, LLC, which is the Managing Member of CPA Partners, LLC. Mr. Thomas is also a Managing Member of Marquesas Capital Partners, LLC) |
| Jody Clermont | Chief Operating Officer | 54 | December 2011 | 25 (Mr. Clermont also serves as COO of Highstreet Financial, LLC) |
| Managing Members: | ||||
| John Bartoletta | Managing Member | 52 | June 2010 | 20 |
| Dennis Thomas | Managing Member | 57 | June 2010 | 8 |
| Significant Employees: | ||||
| N/A | ||||
John Bartoletta – Founder / Chairman
Mr. Bartoletta is an impassioned entrepreneur and the founder of UNATION. His passion for mathematics and complex algorithms for financial investing, combined with recent experiences in multi-media and film, led him to a belief that there was an opportunity in communications, digital-media and branding. UNATION is the result of his dedication for the past five years.
Prior to founding UNATION, Mr. Bartoletta founded The High Street Group, LLC in Tampa, FL and was its CEO for sixteen years. High Street is an independent investment firm focused on the capital markets. Mr. Bartoletta developed and implemented High Street’s proprietary quantitative-style investment methodology known as Dynamic Style Rotation and Dynamic Trend Algorithms.
Mr. Bartoletta was a member of the American Business Conference (ABC), a finalist for the 2002 Small Business of the Year by the U.S. Congress and Small Business Administration, and a guest lecturer at the graduate-level at the University of Florida. He attended the University of Michigan, where he concentrated his studies in Economics and Finance.
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George Beardsley, III – Chief Strategy Officer, Co-Founder
Mr. Beardsley is responsible for creating, executing and sustaining product direction, as well as strategic marketing and operational initiatives. Mr. Beardsley provides over twenty years of online business and creative development experience. Prior to founding UNATION, Mr. Beardsley built and ran several successful businesses in sectors including business to consumer (B2C) Internet commerce, as well as traditional and online publishing.
Mr. Beardsley, also a former golf professional, has served on the Boards of a number of charities, including the Chair Scholars Foundation for over ten years. He has also served as guest lecturer at the graduate level at the University of South Florida and University of Tampa.
Dennis K. Thomas, CPA – Chief Financial Officer
Mr. Thomas oversees all financial aspects of the company including: preparing the financing strategy, financial and capital planning, annual budgeting and accounting policies.
In addition to joining UNATION, Mr. Thomas is the CFO of The High Street Group, LLC and the managing partner of CPA Partners, LLC., an accounting firm specializing in tax planning for closely held companies and their owners. He also provides management advisory services in areas including company sales, mergers and acquisitions, venture capital funding and international structures. Prior to establishing his own practice in 1994, Dennis was a partner with a large central Florida accounting firm and the CEO of a private company.
Mr. Thomas received his bachelor’s degree in Accounting and Finance from the University of South Florida and is licensed as a Certified Public Accountant.
Jody D. Clermont – Chief Operating Officer
Mr. Clermont is responsible for meeting our strategic operational goals and managing investor relations.
Prior to joining UNATION, Mr. Clermont spent twenty years with Syniverse Technologies, formerly GTE, and held multiple senior management positions within the Finance, Technology, Operations and CEO Staff areas. Most recently he served as, Vice President of Global Operational Excellence, Vice President of Business Integrity/Quality Assurance and Director of Six Sigma. Mr. Clermont is known for developing and leading high performance, data driven teams. Major projects include, managing the Los Angeles CA, Cellular Call box Installations, implementing Syniverse’s first Wireless Fraud Resource Center and leading the successful rollout of the US Wireless Number Portability System.
Mr. Clermont’s naval studies included two years of Electronics and one year of Business Management. He holds several certifications, including a PMP Certification in Project Management and a Six Sigma Black Belt Certification. Mr. Clermont is an active member of the Tampa Bay Technology Forum and a decorated Navy Veteran.
Legal Proceedings of Managing Members and Executive Officers
None of the Managing Members or executive officers have filed a petition under federal bankruptcy laws or any state insolvency law personally, or have had such a petition filed against them in the preceding five years. Additionally, none have been similarly involved in any bankruptcy or insolvency proceedings for any partnership, corporation, or business association in which the Managing Member or executive officer was a general partner, managing member, or executive officer in the preceding five years. Nor have any been convicted in a criminal proceeding in the previous five years.
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Compensation of Directors, Executive Officers, and Key Employees
For the fiscal year ended December 31, 2016 only two of our Managing Members and executive officers received compensation from the company. The compensation is as follows:
| Name | Capacities in which compensation was received | Cash compensation ($) | Other compensation ($) | Total compensation ($) |
| George Beardsley | Chief Strategy Officer | $52,000 | N/A | $52,000 |
| Jody Clermont | Chief Operating Officer | $84,000 | N/A | $84,000 |
For the fiscal year ended December 2015, we paid did not pay our Managing Members for their services as Managing Members.
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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS
The below table identifies the ownership and acquirable ownership of certain executive officers of the company holding more than 10 percent of any class of the company’s units as of March 31, 2017.
| Title of class | Name and address of beneficial owner | Amount and nature of beneficial ownership | Amount and nature of beneficial ownership acquirable‡ | Percent of class |
| Series A Units | John Bartoletta, 17007 Abastros De Avila, Tampa, FL 33613* | 150,000,000 Units | -- | 75.00% |
| Series A Units | Dennis Thomas, 910 Jungle Avenue N, St. Petersburg, FL 33710† | 40,000,000 Units | -- | 20.00% |
| Series B Units | John Bartoletta, 17007 Abastros De Avila, Tampa, FL 33613* | -- | 11,495,425 Units | 22.99% |
| Series B Units | Dennis Thomas, 910 Jungle Avenue N, St. Petersburg, FL 33710† | -- | 3,065,447 Units | 6.13% |
| Series C Units | John Bartoletta, 17007 Abastros De Avila, Tampa, FL 33613* | -- | 22,500,000 Units | 75.00% |
| Series C Units | Dennis Thomas, 910 Jungle Avenue N, St. Petersburg, FL 33710† | -- | 60,000,000 Units | 20.00% |
* Units are held by Marquesas Capital Partners, LLC for the benefit of John Bartoletta.
† Units are held by Marquesas Capital Partners, LLC and Centurion Enterprises, LLC for the benefit of Dennis Thomas.
‡ The amount and nature of beneficial ownership acquirable is based on the authorized but unissued Series B Units and Series C Units, as of March 31, 2017, that are deemed to be owned by the holders of Series A Units.
The final column (Percent of Class) includes a calculation of the amount the person owns now, plus the amount that person is entitled to acquire. That amount is then shown as a percentage of the outstanding amount of securities in that class if no other people exercised their rights to acquire those securities. The result is a calculation of the maximum amount that person could ever own based on their current and acquirable ownership, which is why the amounts in this column will not add up to 100%.
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INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
The company has received a loan from Marquesas Capital, LLC to fund its operations. Marquesas Capital is controlled by UNATION’s Managers. The loan was first issued to the company in the principal amount of $2.5 million in July 2013 at an annual interest rate of 12 percent. Since then, the loan has been modified from time to time. The most recent modification extended the maturity date to June 30, 2017. As of December 31, 2016, the current balance on the loan, including principal and accrued interest, is $5,258,477.
The day-to-day bookkeeping and financial records and tax reporting of the company is maintained by CPA Partners, LLC, an accounting firm owned by Dennis Thomas, who also serves as UNATION’s CFO. For the years ending December 31, 2016, 2015 and 2014, we paid $13,125, $13,450 and $13,175 to CPA Partners, LLC, respectively.
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CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2016
The consolidated balance sheets of UNATION, LLC and Subsidiaries for the fiscal year ended December 31, 2016, and the consolidated statements of operations, changes in stockholders' equity, and cash flows of UNATION, LLC and Subsidiaries for each such period have been included in this Annual Report with the Independent Auditor's Report of Kristina Helferty, CPA, independent certified public accountants, and upon the authority of said firm as experts in accounting and auditing.
TABLE OF CONTENTS
| Page | |
| INDEPENDENT AUDITORS' REPORT | 14 - 15 |
| Financial Statements for the Years Ended December 31, 2016: | |
| Balance Sheet | 16 |
| Statement of Operations | 17 |
| Statement of Changes in Members’ Equity | 18 |
| Statement of Cash Flows | 19 |
| Notes to Financial Statements | 20 - 29 |
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Board of Managers
UNATION, LLC
Tampa, FL
We have audited the accompanying financial statements of UNATION, LLC (a developmental stage Company), which comprise the Balance Sheet as of December 31, 2016, and the related Statements of Operations, Changes in Members’ Equity, and Cash Flows for the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements 7are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the UNATION, LLC as of December 31, 2016, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
4500 140th Ave N, Suite 120, Clearwater, FL 33762 * (727) 310-2000 * Fax (727) 310-2001
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Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial statements, the Companyhas suffered losses from operations, which raises substantial doubt about its ability to continue as a going concern. Management is taking steps to raise additional funds to address its operating and financial cash requirements to continue operations. The Company’s ability to continue as a going concern is dependent upon raising additional funds through equity financing and generating revenue. There are no assurances the Company will receive the necessary funding or generate revenue necessary to fund operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter.
The financial statements contain no adjustments for the outcome of this uncertainty.
/s/ Kristina Helferty, CPA
Kristina Helferty, CPA
March 22, 2017
4500 140th Ave N, Suite 120, Clearwater, FL 33762 * (727) 310-2000 * Fax (727) 310-2001
| 15 |
| UNATION, LLC | |||
| BALANCE SHEET | |||
| DECEMBER 31, 2016 | |||
| ASSETS | |||
| Current Assets | ||||
| Cash and Cash Equivalents | $ | 260,349 | ||
| Total Current Assets | 260,349 | |||
| Property and Equipment, Net | 4,856,699 | |||
| Other Assets | ||||
| Intangible Assets, Net | 11,194 | |||
| Total Other Assets | 11,194 | |||
| Total Assets | $ | 5,128,242 | ||
| LIABILITIES AND MEMBERS' EQUITY | ||||
| Current Liabilities | ||||
| Accounts Payable | $ | 532,896 | ||
| Accrued Litigation Reserve | 100,000 | |||
| Total Current Liabilities | 632,896 | |||
| Long-Term Liabilities | ||||
| Long-Term Note Payable | 4,069,729 | |||
| Accrued Interest | 1,188,748 | |||
| Total Long-Term Liabilities | 5,258,477 | |||
| Total Liabilities | 5,891,373 | |||
| Members' Equity | (763,131 | ) | ||
| Total Liabilities and Members' Equity | $ | 5,128,242 | ||
| 16 |
| UNATION, LLC | ||
| STATEMENT OF OPERATIONS | ||
| YEAR ENDED DECEMBER 31, 2016 | ||
| Revenues | $ | 1,972 | ||
| Cost of Operations | ||||
| Contract Labor | 460,436 | |||
| Hosting Services | 45,541 | |||
| Software Subscriptions | 18,857 | |||
| Total Cost of Operations | 524,834 | |||
| Gross Loss | (522,862 | ) | ||
| General and Administrative Expenses | ||||
| Depreciation Expense | 622,336 | |||
| Legal and Professional Fees | 200,456 | |||
| Management Fees | 136,000 | |||
| Rent Expense | 58,611 | |||
| Advertising and Marketing Expense | 51,761 | |||
| Other Expenses | 19,917 | |||
| Office Expenses | 4,173 | |||
| Amortization Expense | 1,194 | |||
| Total General and Administrative Expenses | 1,094,448 | |||
| Net Loss | $ | (1,617,310 | ) |
| 17 |
| UNATION, LLC | ||
| STATEMENT OF CHANGES IN MEMBERS' EQUITY | ||
| YEAR ENDED DECEMBER 31, 2016 | ||
| Total | ||||
| Balance, December 31, 2015 | $ | (600,838 | ) | |
| Contributions | 1,455,017 | |||
| Net Loss | (1,617,310 | ) | ||
| Balance, December 31, 2016 | $ | (763,131 | ) | |
| 18 |
| UNATION, LLC | |||||
| STATEMENT OF CASH FLOWS | |||||
| YEAR ENDED DECEMBER 31, 2016 | |||||
| Cash Flows from Operating Activities: | ||||
| Net Loss | $ | (1,617,310 | ) | |
| Adjustments to Reconcile Net Loss to Net Cash | ||||
| Used in Operating Activities: | ||||
| Depreciation | 622,336 | |||
| Amortization | 1,194 | |||
| Increase (Decrease) in: | ||||
| Accounts Payable | 279,285 | |||
| Accrued Interest Capitalized | 105,566 | |||
| Net Cash Used in Operating Activities | (608,929 | ) | ||
| Cash Flows from Investing Activities | ||||
| Purchases of Property and Equipment | (1,269,698 | ) | ||
| Net Cash Used in Investing Activities | (1,269,698 | ) | ||
| Cash Flows from Financing Activities | ||||
| Net Change in Notes Payable | 660,000 | |||
| Contributions | 1,455,017 | |||
| Net Cash Provided by Financing Activities | 2,115,017 | |||
| Net Increase in Cash | 236,390 | |||
| Cash at Beginning of Year | 23,959 | |||
| Cash at End of Year | $ | 260,349 |
| 19 |
Notes to Financial Statements
December 31, 2016
Note A – Nature of Company
UNATION, LLC (a developmental stage Company) is organized as a Delaware Limited Liability Company. The intention of the Company is to operate as a social engagement Internet platform that will allow a business/brand or person to create meaningful and relevant events, built around their unique brand. Using the event structure, a business can more effectively identify and engage their best customers, while at the same time extend brand recognition by enabling the proper context of sharing and recommending to their customers’ relevant friends.
From an individual user perspective, the Company’s “network” makes it extremely easy to find something to do, while at the same time build relationships with people who share the same interest. Also, an individual user can create private “lifecycle” events, such as birthday parties, graduations, etc. The power user can further leverage the Company’s technology to add tickets and registration to their event, while accessing robust administrative reporting features, such as “attendee reports,” “ticket reports,” “payment reports,” “check in reports,” and much more. Users access the network through the proprietary owned iPhone App, Android App, Web App, and Check in App.
The Company currently maintains its corporate office in Tampa, Florida.
Note B – Summary of Significant Accounting Policies
| 1. | Basis of Presentation |
The financial statements of the Company have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (US GAAP).
| 2. | Use of Estimates |
Management uses estimates and assumptions in preparing these financial statements in accordance with accounting principles generally accepted in the United States of America. These estimates and assumptions affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses. Actual results could vary from the estimates that were used.
| 20 |
UNATION, LLC
Notes to Financial Statements
December 31, 2016
Note B – Summary of Significant Accounting Policies – Continued
| 3. | Fair Value Measurement |
The financial statements are prepared in accordance with US GAAP standards for all financial assets and liabilities and for nonfinancial assets and liabilities recognized or disclosed at fair value in the financial statements or on a recurring basis (at least annually). The standard defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on a measurement date. The standard also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
| 4. | Fair Value of Financial Instruments |
At December 31, 2016, the following methods, assumptions, and accounting principles are used to estimate the fair value of each of the following classes of financial instruments for which it was practical to estimate that value:
Cash - The carrying amount reported in the balance sheets approximates fair value because of the short maturity of those instruments.
Accounts Payable –The carrying amount reported in the balance sheets approximated fair value because of the short maturity of those instruments.
Long-Term Note Payable and Accrued Interest– The carrying value reported in the balance sheets approximates fair value due to market interest rates associated with the payable.
| 5. | Cash Accounts |
For purposes of the statement of cash flows, cash includes cash held in bank accounts with maturities of three months or less. The financial instruments that potentially subject the Company to credit risk are the cash balances, that at times during the years ended December 31, 2016, may have exceeded the federally insured limit. However, the Company has not experienced and does not expect to incur any losses in such accounts.
| 21 |
UNATION, LLC
Notes to Financial Statements
December 31, 2016
Note B – Summary of Significant Accounting Policies – Continued
| 6. | Property and Equipment |
Property and equipment are recorded at cost when acquired and are held for use. Depreciation is computed on the straight-line basis over the estimated useful lives of the assets. Improvements are capitalized and maintenance and repairs are charged to operations when incurred. Software developed is being capitalized during the developmental stages. Interest accrued on loans acquired to develop the software is also being capitalized under US GAAP requirements. SeeNote E. The lives used in computing depreciation are as follows:
| Years | |
| Computer Equipment | 5 |
| Software Acquired | 3 |
| Software Developed | 15 |
Expenditures for maintenance, repairs, minor renewals, and betterments which do not improve or extend the useful life of the respective asset are expensed. All other expenditures for renewals and betterments are capitalized. The assets and related depreciation accounts are adjusted for property retirements and disposals with the resulting gain or loss included in income. Fully depreciated assets remain in the accounts until retired from service.
| 7. | Intangible Assets |
In accordance with accounting standards, if an intangible asset is determined to have an indefinite useful life, it shall not be amortized until its useful life is determined to be no longer indefinite. Intangible assets are being amortized over the life of the related asset, on a straight-line basis.
| 8. | Revenue Recognition |
Revenue of the Company consists of advertising and ticketing percentages. The Company recognizes revenue when earned. The Company is still in the developmental stages and therefore have minimal revenues for the years ended December 31, 2016.
| 22 |
UNATION, LLC
Notes to Financial Statements
December 31, 2016
Note B – Summary of Significant Accounting Policies – Continued
| 9. | Advertising |
The Company expenses advertising and marketing costs as they are incurred. Advertising and marketing expense was $51,761 for the year ended December 31, 2016.
| 10. | Income Tax Status |
The Company has elected to be taxed as a partnership under the regulations of the Internal Revenue Code. As such, the members are taxed individually on the Company's taxable income or loss. Therefore, no provision for income taxes is presented in these financial statements.
| 11. | Uncertain Tax Positions |
The Company accounts for the effect of any uncertain tax positions based on a “more likely than not” threshold to the recognition of the tax positions being sustained based on the technical merits of the position under scrutiny by the applicable taxing authority. If a tax position or positions are deemed to result in uncertainties of those positions, the unrecognized tax benefit is estimated based on a “cumulative probability assessment” that aggregates the estimated tax liability for all uncertain tax positions. The Company has identified its tax status as a pass-through entity as its only significant tax position; however, The Company has determined that such tax position does not result in an uncertainty requiring recognition.
The Company is not currently under examination by any taxing jurisdiction. The Company’s federal returns are generally open for examination for three years following the date filed.
| 23 |
UNATION, LLC
Notes to Financial Statements
December 31, 2016
Note B – Summary of Significant Accounting Policies – Continued
| 12. | Recent Accounting Pronouncements |
In June 2014, the FASB issued Accounting Standards Update (ASU) 2014-10 which eliminated the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and stockholders’ equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. This ASU is effective for annual reporting periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015. Early application is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued. Upon adoption, entities will no longer present or disclose any information required by Topic 915. The Company has early adopted the new standard effective immediately.
In August 2014, the FASB issued ASU 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this update provide such guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this update are effective for public and nonpublic entities for annual periods ending after December 15, 2016. Early adoption is permitted. The Company has not elected to early adopt this pronouncement.
Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.
| 24 |
UNATION, LLC
Notes to Financial Statements
December 31, 2016
Note C – Property and Equipment
A summary of the major classifications of property and equipment at December 31, 2016 consist of the following:
| Computer Equipment | $ | 66,485 | ||
| Software Acquired | 211,132 | |||
| Software Developed | 6,939,043 | |||
| 7,216,659 | ||||
| Less Accumulated Depreciation | (2,359,960 | ) | ||
| $ | 4,856,699 |
Note D – Intangible Assets
A summary of the major classifications of intangible assets at December 31, 2016 consist of the following:
| Trademarks & Web Domains | $ | 17,913 | ||
| Less Accumulated Amortization | (6,719 | ) | ||
| $ | 11,194 |
Aggregate amortization expense is estimated as follows:
| Year Ending | ||||
| December 31, | Amount | |||
| 2017 | $ | 1,194 | ||
| 2018 | 1,194 | |||
| 2019 | 1,194 | |||
| 2020 | 1,194 | |||
| 2021 | 1,194 | |||
| Thereafter | 5,223 | |||
| $ | 11,194 | |||
| 25 |
UNATION, LLC
Notes to Financial Statements
December 31, 2016
Note E – Long-Term Note Payable
At December 31, 2015 and 2014, a note payable consisted of the following outstanding loan agreement from January 31, 2013, with its primary member, Marquesas Capital Partners, LLC also controlled by the Company’s Managers in the amount $2,500,000 accruing interest at a rate of 12%, with an original maturity date of January 31, 2015. The Loan was modified by a Modification Agreement and extended the maturity date to June 30, 2017. No principal payments are required until maturity. The loan is secured by a blanket lien on all of the Company’s assets. The Loan, from its inception, has been at various times extended, had its terms modified and/or has been increased or decreased responsive to the needs for additional operating capital by the Company or the ability of the Company to retire, in part, some of the extensions of credit lent thereto. The Company plans to retire the note with proceeds from the Reg A+ capital raise. The balance outstanding on December 31, 2015 and 2014 are respectively:
| Long- Term Note Payable | $ | 4,069,729 | ||
| Accrued Interest | 1,188,748 | |||
| $ | 5,258,477 |
Note F – Members’ Equity
The Company’s equity interest is composed of four series of membership units. Series A (voting), Series B (restricted non-voting), Series B Profits Only (restricted non-voting) and Series C (non-voting).
On March 31, 2016, the Company granted to financial investors (as represented by Series B units attendant to an Investor PPM) a 3:1 split. It includes all Series B Financial Investors until the Regulation A+ Offering is active and as of the date these financials were issued equaled approximately 1,570,888 units and are reflected in the total outstanding below.
In furtherance of the planned Regulation A+ Offering with a maximum capital raise of $30,000,000, on April 25, 2016 the Company amended its operating agreement to add 3,000,000 Series C membership units.
On December 31, 2016, the Company declared a 10:1 unit split for all four series of membership units. Accordingly, the unites presented below reflect the 10:1 split.
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UNATION, LLC
Notes to Financial Statements
December 31, 2016
Note F – Members’ Equity - Continued
The authorized and outstanding amounts of the respective membership units are as follows:
| Authorized | Outstanding | |||||||
| Series A* | 20,000,000 | 20,000,000 | ||||||
| Series B** | 40,000,000 | 25,897,070 | ||||||
| Series B Profits Only *** | 10,000,000 | 7,677,497 | ||||||
| Series C**** | 30,000,000 | -0- | ||||||
*The Series A membership units have voting rights and also have a 10:1 conversion provision into Series C units as outlined in the Company’s Amended and Restated Operating Agreement. Additionally, all unissued Series B and C units are also deemed to be owned by the Series A members.
**The Series B membership units remain non-voting and still have a transfer restriction pursuant to Article VIII of the Company’s Amended and Restated Operating Agreement. These Units no longer have a 10:1 conversion provision by the Series A members. Additionally, all unissued Series B units are also deemed to be owned by the Series A member.
***The Series B Profits Only membership units (previously identified as an effective bifurcated unit class within the “Series B” that were issued pursuant to a “Service Providers or Settlement Agreement”) remain non-voting and still have a transfer restriction pursuant to Article VIII of the Company’s Amended and Restated Operating Agreement. These Units no longer have a 10:1 conversion provision by the Series A members. Additionally, all unissued Series B units were also deemed to be owned by the Series A member.
****The Series C membership units are non-voting but do not have a transfer restriction. They do have a 10:1 conversion provision by the Series A members as outlined in the Company’s Amended and Restated Operating Agreement. Additionally, all unissued Series C units are also deemed to be owned by the Series A members.
Note G – Related Parties
A related party, through direct ownership, manages the Company’s day to day operations and is paid a fee for these services. Another related party, through ownership, provides accounting services and is paid a fee for these services.
The Company’s majority member, Marquesas Capital Partners, LLC is also controlled by the Company’s Managers.
SeeNote E regarding Note Payable to related party.
| 27 |
UNATION, LLC
Notes to Financial Statements
December 31, 2016
Note H – Commitments and Contingencies
Lease Agreement:The Company leases office space in Tampa, Florida from an unrelated party. The Agreement started on July 25, 2014 and continues for a period of twenty-four months. The Company paid rent in the amount of $55,227 as of December 31, 2016. The lease expires July 31, 2017.
| Year Ending | ||||
| December 31, | Amount | |||
| 2017 | $ | 25,037 | ||
Litigation: From time to time, the Company may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. Except as set forth below, the Company is not currently aware of any such legal proceedings or claims that the Company believes will have a material adverse effect on the business, financial condition or operating results. Included in the Company’s financial statements is an accrued reserve management has estimated:
| 2016 | ||||
| Accrued Litigation Reserve | $ | 100,000 | ||
Note I – Risks and Uncertainties
In the normal course of business, the Company encounters economic risk, mainly comprised of credit and market risk. Credit risk is the risk of default on the Company’s accounts receivable balances from the customers’ inability or unwillingness to make contractually required payments. Market risk reflects the risk that conditions in which the Company sells its products could change such that a significant effect on the Company’s operations could occur.
Note J – Going Concern
The Company’s financial statements are prepared using generally accepted accounting principles in the United States, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. Because the Company has limited history and relatively few sales, no certainty of continuation can be stated. The accompanying financial statements for the years ended December 31, 2016 have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
| 28 |
UNATION, LLC
Notes to Financial Statements
December 31, 2016
Note J – Going Concern - Continued
The Company has suffered losses from operations, which raises substantial doubt about its ability to continue as a going concern. Management is taking steps to raise additional funds to address its operating and financial cash requirements to continue operations. The Company’s ability to continue as a going concern is dependent upon raising additional funds through equity financing and generating revenue. There are no assurances the Company will receive the necessary funding or generate revenue necessary to fund operations. The financial statements contain no adjustments for the outcome of this uncertainty.
Note K – Subsequent Events
Management has evaluated subsequent events through March 22, 2017, the date on which the financial statements were available to be issued. The Company is not aware of any subsequent events which would require recognition or disclosure in the financial statements.
| 29 |
CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDING DECEMBER 31, 2015 AND DECEMBER 31, 2014
The consolidated balance sheets of UNATION, LLC and Subsidiaries for the fiscal years ended December 31, 2015 and 2014, and the consolidated statements of operations, changes in stockholders' equity, and cash flows of UNATION, LLC and Subsidiaries for each such period have been included in this Annual Report with the Independent Auditor's Report of Kristina Helferty, CPA, independent certified public accountants, and upon the authority of said firm as experts in accounting and auditing.
TABLE OF CONTENTS
| Page | |
| INDEPENDENT AUDITORS' REPORT | 31 - 32 |
Financial Statements for the Years Ended December 31, 2015 and 2014: | |
| Balance Sheet | 33 |
| Statement of Operations | 34 |
| Statement of Changes in Members’ Equity | 35 |
| Statement of Cash Flows | 36 |
| Notes to Financial Statements | 37 - 46 |
| 30 |
Board of Managers
UNATION, LLC
Tampa, FL
We have audited the accompanying financial statements of UNATION, LLC (a developmental stage Company), which comprise the Balance Sheets as of December 31, 2015 and 2014, and the related Statements of Operations, Changes in Members’ Equity, and Cash Flows for the years then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements 7are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the UNATION, LLC as of December 31, 2015 and 2014, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
13575 58th Street N, Clearwater, FL 33760 * (727) 310-2000 * Fax (727) 310-2001
| 31 |
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial statements, the Companyhas suffered losses from operations, which raises substantial doubt about its ability to continue as a going concern. Management is taking steps to raise additional funds to address its operating and financial cash requirements to continue operations. The Company’s ability to continue as a going concern is dependent upon raising additional funds through equity financing and generating revenue. There are no assurances the Company will receive the necessary funding or generate revenue necessary to fund operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter.
The financial statements contain no adjustments for the outcome of this uncertainty.
/s/ Kristina Helferty, CPA
Kristina Helferty, CPA
May 10, 2016
13575 58th Street N, Clearwater, FL 33760 * (727) 310-2000 * Fax (727) 310-2001
| 32 |
| UNATION, LLC | |||||
| BALANCE SHEETS | |||||
| DECEMBER 31, 2015 AND 2014 | |||||
| ASSETS | |||||
| 2015 | 2014 | |||||||
| Current Assets | ||||||||
| Cash and Cash Equivalents | $ | 23,959 | $ | 18,326 | ||||
| Total Current Assets | 23,959 | 18,326 | ||||||
| Property and Equipment, Net | 4,209,337 | 3,749,330 | ||||||
| Other Assets | ||||||||
| Intangible Assets, Net | 12,388 | 13,582 | ||||||
| Total Other Assets | 12,388 | 13,582 | ||||||
| Total Assets | $ | 4,245,684 | $ | 3,781,238 | ||||
| LIABILITIES AND MEMBERS' EQUITY | ||||||||
| 2015 | 2014 | |||||||
| Current Liabilities | ||||||||
| Accounts Payable | $ | 253,611 | $ | 329,920 | ||||
| Payroll Taxes Payable | - | 430 | ||||||
| Accrued Litigation Reserve | 100,000 | 400,000 | ||||||
| Total Current Liabilities | 353,611 | 730,350 | ||||||
| Long-Term Liabilities | ||||||||
| Long-Term Note Payable | 3,409,729 | 3,586,500 | ||||||
| Accrued Interest | 1,083,182 | 672,994 | ||||||
| Total Long-Term Liabilities | 4,492,911 | 4,259,494 | ||||||
| Total Liabilities | 4,846,522 | 4,989,844 | ||||||
| Members' Equity | (600,838 | ) | (1,208,606 | ) | ||||
| Total Liabilities and Members' Equity | $ | 4,245,684 | $ | 3,781,238 | ||||
| 33 |
| UNATION, LLC | ||||
| STATEMENTS OF OPERATIONS | ||||
| YEARS ENDED DECEMBER 31, 2015 AND 2014 | ||||
| 2015 | 2014 | |||||||
| Revenues | $ | 1,544 | $ | 11,994 | ||||
| Cost of Operations | ||||||||
| Contract Labor | 492,652 | 501,251 | ||||||
| Hosting Services | 67,433 | 112,407 | ||||||
| Software Subscriptions | 18,354 | 20,232 | ||||||
| Total Cost of Operations | 578,439 | 633,890 | ||||||
| Gross Loss | (576,895 | ) | (621,896 | ) | ||||
| General and Administrative Expenses | ||||||||
| Advertising and Marketing Expense | 521,279 | - | ||||||
| Depreciation Expense | 370,391 | 363,998 | ||||||
| Management Fees | 89,000 | 48,000 | ||||||
| Rent Expense | 54,137 | 76,188 | ||||||
| Legal and Professional Fees | 28,771 | 14,850 | ||||||
| Other Expenses | 16,921 | 73,777 | ||||||
| Office Expenses | 9,087 | 9,276 | ||||||
| Amortization Expense | 1,194 | 1,194 | ||||||
| Total General and Administrative Expenses | 1,090,780 | 587,283 | ||||||
| Net Loss | $ | (1,667,675 | ) | $ | (1,209,179 | ) | ||
| 34 |
| UNATION, LLC | ||
| STATEMENT OF CHANGES IN MEMBERS' EQUITY | ||
| YEARS ENDED DECEMBER 31, 2015 AND 2014 | ||
| Total | ||||
| Balance, December 31, 2013 | $ | (344,569 | ) | |
| Contributions | 528,988 | |||
| Prior Period Adjustment | (183,846 | ) | ||
| Net Loss | (1,209,179 | ) | ||
| Balance, December 31, 2014 | (1,208,606 | ) | ||
| Contributions | 2,275,443 | |||
| Net Loss | (1,667,675 | ) | ||
| Balance, December 31, 2015 | $ | (600,838 | ) | |
| 35 |
| UNATION, LLC | |||||||
| STATEMENTS OF CASH FLOWS | |||||||
| YEARS ENDED DECEMBER 31, 2015 AND 2014 | |||||||
| 2015 | 2014 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net Loss | $ | (1,667,675 | ) | $ | (1,209,179 | ) | ||
| Adjustments to Reconcile Net Loss to Net Cash | ||||||||
| Used in Operating Activities: | ||||||||
| Depreciation | 370,391 | 363,998 | ||||||
| Amortization | 1,194 | 1,194 | ||||||
| Increase (Decrease) in: | ||||||||
| Accounts Payable | (76,309 | ) | 46,195 | |||||
| Accrued Interest Capitalized | 410,188 | 672,994 | ||||||
| Payroll Taxes Payable | (430 | ) | 338 | |||||
| Accrued Litigation Reserve | (300,000 | ) | - | |||||
| Net Cash Used in Operating Activities | (1,262,641 | ) | (124,460 | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchases of Property and Equipment | (830,398 | ) | (1,026,994 | ) | ||||
| Net Used in Investing Activities | (830,398 | ) | (1,026,994 | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Net Change in Notes Payable - Short Term | (176,771 | ) | 591,500 | |||||
| Contributions | 2,275,443 | 528,988 | ||||||
| Net Cash Provided by Financing Activities | 2,098,672 | 1,120,488 | ||||||
| Net Increase (Decrease) in Cash | 5,633 | (30,966 | ) | |||||
| Cash at Beginning of Year | 18,326 | 49,292 | ||||||
| Cash at End of Year | $ | 23,959 | $ | 18,326 | ||||
| 36 |
Notes to Financial Statements
December 31, 2015 and 2014
Note A – Nature of Company
UNATION, LLC (a developmental stage Company) is organized as a Delaware Limited Liability Company. The intention of the Company is to operate as a social engagement Internet platform that will allow a business/brand or person to create meaningful and relevant events, built around their unique brand. Using the event structure, a business can more effectively identify and engage their best customers, while at the same time extend brand recognition by enabling the proper context of sharing and recommending to their customers’ relevant friends.
From an individual user perspective, the Company’s “network” makes it extremely easy to find something to do, while at the same time build relationships with people who share the same interest. Also, an individual user can create private “lifecycle” events, such as birthday parties, graduations, etc. The power user can further leverage the Company’s technology to add tickets and registration to their event, while accessing robust administrative reporting features, such as “attendee reports,” “ticket reports,” “payment reports,” “check in reports,” and much more. Users access the network through the proprietary owned iPhone App, Android App, Web App, and Check in App.
The Company currently maintains its corporate office in Tampa, Florida.
Note B – Summary of Significant Accounting Policies
| 1. | Basis of Presentation |
The financial statements of the Company have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (US GAAP).
| 2. | Use of Estimates |
Management uses estimates and assumptions in preparing these financial statements in accordance with accounting principles generally accepted in the United States of America. These estimates and assumptions affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses. Actual results could vary from the estimates that were used.
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UNATION, LLC
Notes to Financial Statements
December 31, 2015 and 2014
Note B – Summary of Significant Accounting Policies – Continued
| 3. | Fair Value Measurement |
The financial statements are prepared in accordance with US GAAP standards for all financial assets and liabilities and for nonfinancial assets and liabilities recognized or disclosed at fair value in the financial statements or on a recurring basis (at least annually). The standard defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on a measurement date. The standard also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
| 4. | Fair Value of Financial Instruments |
At December 31, 2015 and 2014, the following methods, assumptions, and accounting principles are used to estimate the fair value of each of the following classes of financial instruments for which it was practical to estimate that value:
Cash - The carrying amount reported in the balance sheets approximates fair value because of the short maturity of those instruments.
Accounts Payable –The carrying amount reported in the balance sheets approximated fair value because of the short maturity of those instruments.
Long-Term Note Payable and Accrued Interest– The carrying value reported in the balance sheets approximates fair value due to market interest rates associated with the payable.
| 5. | Cash Accounts |
For purposes of the statement of cash flows, cash includes cash held in bank accounts with maturities of three months or less. The financial instruments that potentially subject the Company to credit risk are the cash balances, that at times during the years ended December 31, 2015 and 2014, may have exceeded the federally insured limit. However, the Company has not experienced and does not expect to incur any losses in such accounts.
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UNATION, LLC
Notes to Financial Statements
December 31, 2015 and 2014
Note B – Summary of Significant Accounting Policies – Continued
| 6. | Property and Equipment |
Property and equipment are recorded at cost when acquired and are held for use. Depreciation is computed on the straight-line basis over the estimated useful lives of the assets. Improvements are capitalized and maintenance and repairs are charged to operations when incurred. Software developed is being capitalized during the developmental stages. Interest accrued on loans acquired to develop the software is also being capitalized under US GAAP requirements. SeeNote E. The lives used in computing depreciation are as follows:
| Years | |
| Computer Equipment | 5 |
| Software Acquired | 3 |
| Software Developed | 15 |
Expenditures for maintenance, repairs, minor renewals, and betterments which do not improve or extend the useful life of the respective asset are expensed. All other expenditures for renewals and betterments are capitalized. The assets and related depreciation accounts are adjusted for property retirements and disposals with the resulting gain or loss included in income. Fully depreciated assets remain in the accounts until retired from service.
| 7. | Intangible Assets |
In accordance with accounting standards, if an intangible asset is determined to have an indefinite useful life, it shall not be amortized until its useful life is determined to be no longer indefinite. Intangible assets are being amortized over the life of the related asset, on a straight-line basis.
| 8. | Revenue Recognition |
Revenue of the Company consists of advertising and ticketing percentages. The Company recognizes revenue when earned. The Company is still in the developmental stages and therefore have minimal revenues for the years ended December 31, 2015 and 2014.
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UNATION, LLC
Notes to Financial Statements
December 31, 2015 and 2014
Note B – Summary of Significant Accounting Policies – Continued
| 9. | Advertising |
The Company expenses advertising and marketing costs as they are incurred. Advertising and marketing expense was $500,779 and $-0- for the years ended December 31, 2015 and 2014.
The Company loaned StarShop, Inc. a total of $500,000 during 2015 consisting of three separate Promissory Notes at 6% interest with a maturity date of August 2017. These loans were part of a marketing agreement with the Company. The Notes included a cancellation provision, if Starshop, Inc. performed specific duties of their agreement with the Company, including the Starshop application being downloaded or preloaded on Ten Million (10,000,000) cell phones, smart phones, mobile devices, or tablets. On March 2, 2016, the Company issued a default notice due to StarShop’s breach of the marketing agreement. Accordingly, the collectability of the Notes are questionable, so the Company has decided to expense the advances as a marketing expense for 2015.
| 10. | Income Tax Status |
The Company has elected to be taxed as a partnership under the regulations of the Internal Revenue Code. As such, the members are taxed individually on the Company's taxable income or loss. Therefore, no provision for income taxes is presented in these financial statements.
| 11. | Uncertain Tax Positions |
The Company accounts for the effect of any uncertain tax positions based on a “more likely than not” threshold to the recognition of the tax positions being sustained based on the technical merits of the position under scrutiny by the applicable taxing authority. If a tax position or positions are deemed to result in uncertainties of those positions, the unrecognized tax benefit is estimated based on a “cumulative probability assessment” that aggregates the estimated tax liability for all uncertain tax positions. The Company has identified its tax status as a pass-through entity as its only significant tax position; however, The Company has determined that such tax position does not result in an uncertainty requiring recognition.
The Company is not currently under examination by any taxing jurisdiction. The Company’s federal returns are generally open for examination for three years following the date filed.
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UNATION, LLC
Notes to Financial Statements
December 31, 2015 and 2014
Note B – Summary of Significant Accounting Policies – Continued
| 12. | Recent Accounting Pronouncements |
In June 2014, the FASB issued Accounting Standards Update (ASU) 2014-10 which eliminated the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and stockholders’ equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. This ASU is effective for annual reporting periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015. Early application is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued. Upon adoption, entities will no longer present or disclose any information required by Topic 915. The Company has early adopted the new standard effective immediately.
In August 2014, the FASB issued ASU 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this update provide such guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this update are effective for public and nonpublic entities for annual periods ending after December 15, 2016. Early adoption is permitted. The Company has not elected to early adopt this pronouncement.
Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.
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UNATION, LLC
Notes to Financial Statements
December 31, 2015 and 2014
Note C – Property and Equipment
A summary of the major classifications of property and equipment at December 31, 2015 and 2014 consist of the following:
| 2015 | 2014 | |||||||
| Computer Equipment | $ | 66,485 | $ | 66,485 | ||||
| Software Acquired | 105,566 | 105,566 | ||||||
| Software Developed | 5,774,910 | 4,944,512 | ||||||
| 5,946,961 | 5,116,536 | |||||||
| Less Accumulated Depreciation | (1,737,624 | ) | (1,367,233 | ) | ||||
| $ | 4,209,337 | $ | 3,749,330 | |||||
Note D – Intangible Assets
A summary of the major classifications of intangible assets at December 31, 2015 and 2014 consist of the following:
| 2015 | 2014 | |||||||
| Trademarks & Web Domains | $ | 17,913 | $ | 17,913 | ||||
| Less Accumulated Amortization | (5,525 | ) | (4,331 | ) | ||||
| $ | 12,388 | $ | 13,582 | |||||
Aggregate amortization expense is estimated as follows:
| Year Ending | ||||
| December 31, | Amount | |||
| 2016 | $ | 1,194 | ||
| 2017 | 1,194 | |||
| 2018 | 1,194 | |||
| 2019 | 1,194 | |||
| 2020 | 1,194 | |||
| Thereafter | 6,418 | |||
| $ | 12,388 | |||
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UNATION, LLC
Notes to Financial Statements
December 31, 2015 and 2014
Note E – Long-Term Note Payable
At December 31, 2015 and 2014, a note payable consisted of the following outstanding loan agreement from January 31, 2013, with its primary member, Marquesas Capital Partners, LLC also controlled by the Company’s Managers in the amount $2,500,000 accruing interest at a rate of 12%, with an original maturity date of January 31, 2015. The Loan was modified by a Modification Agreement and extended the maturity date to June 30, 2017. No principal payments are required until maturity. The loan is secured by a blanket lien on all of the Company’s assets. The Loan, from its inception, has been at various times extended, had its terms modified and/or has been increased or decreased responsive to the needs for additional operating capital by the Company or the ability of the Company to retire, in part, some of the extensions of credit lent thereto. The Company plans to retire the note with proceeds from the Reg A+ capital raise. The balance outstanding on December 31, 2015 and 2014 are respectively:
| 2015 | 2014 | |||||||
| Long- Term Note Payable | $ | 3,409,729 | $ | 3,586,500 | ||||
| Accrued Interest | 1,083,182 | 672,994 | ||||||
| $ | 4,492,911 | $ | 4,259,494 | |||||
Note F – Members’ Equity
The Company’s equity interest is composed of two series of membership units. Series A (voting) that has 2,000,000 units authorized and Series B (restricted non-voting) that has 4,000,000 units authorized. The outstanding amounts of respective membership units are as follows:
| 2015 | 2014 | |||||||
| Series A Voting* | 2,000,000 | 2,000,000 | ||||||
| Series B Restricted Non –Voting** | 1,835,670 | 1,644,425 | ||||||
*The Series A membership units also have a 10:1 conversion provision as outlined in the Company’s Operating Agreement. Additionally, all unissued Series B units are also deemed to be owned by the Series A members. SeeNote Kfor updated information related to this series.
**The Series B membership units are non-voting and have a restriction on transfer pursuant to Article VIII of the Company’s Operating Agreement. These Units may be transferred solely in the furtherance of such Owner’s estate planning or to a legal entity controlled by the Owner for the purpose of owning such Units.
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UNATION, LLC
Notes to Financial Statements
December 31, 2015 and 2014
Note F – Members’ Equity - Continued
The Company has identified an effective bifurcated unit class within the “Series B” units. The bifurcation is as follows:
| 1) | Series B units attendant to a Unation PPM that investors acquired through an exchange of cash for units issued at various prices up to $12.00/unit. The total amount of units issued and outstanding pursuant to these purchases are approximately 675,000. The Series B units attendant to an Investor PPM. |
| 2) | Series B units so identified as pursuant to a “Service Provider or Settlement Agreement” and identified as “Series B Restricted Profits-Only Interest”. The total amount of units issued and outstanding pursuant to these units are approximately 787,000. |
Note G – Related Parties
A related party, through direct ownership, manages the Company’s day to day operations and is paid a fee for these services. Another related party, through ownership, provides accounting services and is paid a fee for these services.
The Company’s majority member, Marquesas Capital Partners, LLC is also controlled by the Company’s Managers.
SeeNote E regarding Note Payable to related party.
Note H – Commitments and Contingencies
Lease Agreement:The Company leases office space in Tampa, Florida from an unrelated party. The Agreement started on July 25, 2014 and continues for a period of twenty-four months. The Company paid rent in the amount of $50,695 as of December 31, 2015 and $50,695 as of December 31, 2014. The lease expires July 31, 2016. The next year of the lease are as follows:
| Year Ending | ||||
| December 31, | Amount | |||
| 2016 | $ | 22,890 | ||
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UNATION, LLC
Notes to Financial Statements
December 31, 2015 and 2014
Note H – Commitments and Contingencies - Continued
Litigation: From time to time, the Company may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. Except as set forth below, the Company is not currently aware of any such legal proceedings or claims that the Company believes will have a material adverse effect on the business, financial condition or operating results. Included in the Company’s financial statements is an accrued reserve management has estimated:
| 2015 | 2014 | |||||||
| Accrued Litigation Reserve | 100,000 | 400,000 | ||||||
Note I – Risks and Uncertainties
In the normal course of business, the Company encounters economic risk, mainly comprised of credit and market risk. Credit risk is the risk of default on the Company’s accounts receivable balances from the customers’ inability or unwillingness to make contractually required payments. Market risk reflects the risk that conditions in which the Company sells its products could change such that a significant effect on the Company’s operations could occur.
Note J – Going Concern
The Company’s financial statements are prepared using generally accepted accounting principles in the United States, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. Because the Company has limited history and relatively few sales, no certainty of continuation can be stated. The accompanying financial statements for the years ended December 31, 2015 and 2014 have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The Company has suffered losses from operations, which raises substantial doubt about its ability to continue as a going concern. Management is taking steps to raise additional funds to address its operating and financial cash requirements to continue operations. The Company’s ability to continue as a going concern is dependent upon raising additional funds through equity financing and generating revenue. There are no assurances the Company will receive the necessary funding or generate revenue necessary to fund operations. The financial statements contain no adjustments for the outcome of this uncertainty.
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UNATION, LLC
Notes to Financial Statements
December 31, 2015 and 2014
Note K – Subsequent Events
Management has evaluated subsequent events through April 30, 2016, the date on which the financial statements were available to be issued. The Company is not aware of any subsequent events which would require recognition or disclosure in the financial statements, except as set forth below:
On March 31, 2016, the Company granted to financial investors) as represented by Series B units attendant to an Investor PPM) a 3:1 split that will equal approximately 1,350,000 units.
In furtherance of the planned Regulation A+ Offering with a maximum capital raise of $30,000,000, accordingly, on April 25, 2016 the Company amended its operating agreement to add 3,000,000 Series C membership units.
As of the date these financials were issued, below is an analysis of outstanding amounts of respective membership units:
| 4/30/2016 | 4/30/2016 | |||||||
| Authorized | Outstanding | |||||||
| Series A* | 2,000,000 | 2,000,000 | ||||||
| Series B** | 4,000,000 | 3,298,916 | ||||||
| Series C*** | 3,000,000 | -0- | ||||||
*The Series A membership units have voting rights and also have a 10:1 conversion provision into Series C units as outlined in the Company’s Amended and Restated Operating Agreement. Additionally, all unissued Series B and C units are also deemed to be owned by the Series A members.
**The Series B membership units remain non-voting and still have a transfer restriction pursuant to Article VIII of the Company’s Amended and Restated Operating Agreement. These Units no longer have a 10:1 conversion provision by the Series A members. Additionally, all unissued Series B units are also deemed to be owned by the Series A member.
***The Series C membership units are non-voting but do not have a transfer restriction. They do have a 10:1 conversion provision by the Series A members as outlined in the Company’s Amended and Restated Operating Agreement. Additionally, all unissued Series C units are also deemed to be owned by the Series A members.
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INDEX TO EXHIBITS
| 2.1. | Amended and Restated Operating Agreement of UNATION, LLC (1) |
| 2.2 | Amendment dated December 31, 2016 to the Amended and Restated Operating Agreement (2) |
| 4. | Form of Subscription Agreement (3) |
| 6.1 | Loan Agreement with Marquesas Capital Partners, LLC (4) |
| 11.1 | Consent of Auditing Accountant, Kristina Helferty, CPA (5) |
_____________________________
| (1) | Filed as an exhibit to the Form 1-A, incorporated by reference and available here,https://www.sec.gov/Archives/edgar/data/1549679/000164460016000139/opr_agremnt.htm. |
| (2) | Filed with this Form 1-K. |
| (3) | Filed as an exhibit to the Form 1-A, incorporated by reference and available here,https://www.sec.gov/Archives/edgar/data/1549679/000164460016000139/exhibit4.htm. |
| (4) | Filed as an exhibit to the Form 1-A, incorporated by reference and available here,https://www.sec.gov/Archives/edgar/data/1549679/000164460016000139/exhibit6-1.htm. |
| (5) | Filed with this Form 1-K. |
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SIGNATURES
Pursuant to the requirements of Regulation A, the issuer has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
UNATION, LLC
By /s/ John Bartoletta
John Bartoletta, Chief Executive Officer and Managing Member
This Offering Statement has been signed by the following persons in the capacities and on the dates indicated.
/s/ John Bartoletta
John Bartoletta, Chief Executive Officer and Managing Member
Date: April 26, 2017
/s/ George Beardsley
George Beardsley, Chief Strategy Officer
Date: April 26, 2017
/s/ Dennis Thomas
Dennis Thomas, Chief Financial Officer and Managing Member
Date: April 26, 2017
/s/ Jody Clermont
Jody Clermont, Chief Operating Officer
Date: April 26, 2017
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