STRATEAN INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
As of June 30, 2016
Historical | Pro-forma Adjustments | Pro-forma Combined | ||||||||||||||||||||||
June 30, 2016 | June 30, 2016 | |||||||||||||||||||||||
Stratean Inc. | CleanSpark, LLC | |||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Current assets | ||||||||||||||||||||||||
Cash | $ | 81,854 | $ | 4,421 | $ | 86,275 | ||||||||||||||||||
Accounts receivable | — | 7,500 | 7,500 | |||||||||||||||||||||
Prepaid expense | 11,912 | — | 11,912 | |||||||||||||||||||||
Deposits | 589 | — | 589 | |||||||||||||||||||||
Total current assets | 94,355 | 11,921 | — | 106,276 | ||||||||||||||||||||
Commercial microgrid | — | 82,973 | 82,973 | |||||||||||||||||||||
Fixed Assets | 635,495 | 190,047 | 825,542 | |||||||||||||||||||||
Cleanspark software | — | — | (a) | 35,629,245 | 35,629,245 | |||||||||||||||||||
Tenant improvements | — | — | — | |||||||||||||||||||||
Intangible assets | 51,175 | 81,557 | 132,732 | |||||||||||||||||||||
— | ||||||||||||||||||||||||
Total assets | 781,025 | 366,498 | 35,629,245 | 36,776,768 | ||||||||||||||||||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||||||||||||||||
Current liabilities | ||||||||||||||||||||||||
Accounts payable and accrued liabilities | $ | 60,189 | $ | 234,297 | $ | — | $ | 294,486 | ||||||||||||||||
Accounts payable related parties | 1,473 | — | — | 1,473 | ||||||||||||||||||||
Billings in excess of earnings | — | — | — | — | ||||||||||||||||||||
Accrued interest payable | — | 216,270 | — | 216,270 | ||||||||||||||||||||
Convertible Notes related party | — | 568,200 | (b) | (568,200 | ) | — | ||||||||||||||||||
Convertible Notes | — | 777,000 | (b) | (777,000 | ) | — | ||||||||||||||||||
Total current liabilities | 61,662 | 1,795,767 | (1,345,200 | ) | 512,229 | |||||||||||||||||||
Total liabilities | 61,662 | 1,795,767 | (1,345,200 | ) | 512,229 | |||||||||||||||||||
Stockholders' equity (deficit) | ||||||||||||||||||||||||
Common stock; $0.001 par value; | 21,086 | — | 6,000 | 27,086 | ||||||||||||||||||||
Preferred stock; $0.001 par value; | 1,000 | — | — | 1,000 | ||||||||||||||||||||
Additional paid-in capital | 4,987,424 | 6,238,006 | (a)(b) | 36,968,445 | 48,193,875 | |||||||||||||||||||
Accumulated earnings (deficit) | (4,290,147 | ) | (7,667,275 | ) | (11,957,422 | ) | ||||||||||||||||||
Total stockholders' equity (deficit) | 719,363 | (1,429,269 | ) | 36,974,445 | 36,264,539 | |||||||||||||||||||
Total liabilities and stockholders' equity (deficit) | $ | 781,025 | $ | 366,498 | $ | 35,629,245 | $ | 36,776,768 |
The accompanying notes are an integral part of these financial statements.
1 |
STRATEAN INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 2016
Historical | Pro-forma Adjustments | Pro-forma Combined | ||||||||||||
June 30, 2016 | June 30, 2016 | |||||||||||||
Stratean Inc. | CleanSpark, LLC | |||||||||||||
Revenues | $ | — | $ | 3,750 | $3,750 | |||||||||
Cost of revenues | — | — | - | |||||||||||
Gross profit | — | 3,750 | 3,750 | |||||||||||
Operating expenses | - | |||||||||||||
Payroll expense | — | 90,396 | 90,396 | |||||||||||
Rent expense | — | 9,313 | 9,313 | |||||||||||
Professional fees | 54,403 | 128 | 54,531 | |||||||||||
Research and development | 50,000 | 8,167 | 58,167 | |||||||||||
General and administrative expenses | 15,674 | 85,127 | 100,801 | |||||||||||
Depreciation and amortization | 13,426 | 21,396 | 34,822 | |||||||||||
Total operating expenses | 133,503 | 214,527 | 348,030 | |||||||||||
Loss from operations | (133,503 | ) | (210,777 | ) | (344,280) | |||||||||
Other income (expense) | ||||||||||||||
Interest expense | — | (26,830 | ) | (26,830) | ||||||||||
Impairment expense | — | (274,293 | ) | (274,293) | ||||||||||
Gain on sale of assets | — | 952 | 952 | |||||||||||
Total other income (expense) | — | (300,171 | ) | (300,171) | ||||||||||
Net income (loss) | $ | (133,503 | ) | $ | (510,948 | ) | $(644,451) |
The accompanying notes are an integral part of these financial statements.
2 |
STRATEAN INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Nine Months Ended June 30, 2016
Historical | Pro -forma Adjustments | Pro-forma Combined | ||||||||||||||
June 30, 2016 | June 30, 2016 | |||||||||||||||
Stratean Inc. | CleanSpark, LLC | |||||||||||||||
Revenues | $ | — | $ | 1,892,625 | $ | 1,892,625 | ||||||||||
Cost of revenues | — | 1,829,697 | 1,829,697 | |||||||||||||
Gross profit | — | 62,928 | 62,928 | |||||||||||||
Operating expenses | — | |||||||||||||||
Payroll expense | — | 1,608,862 | 1,608,862 | |||||||||||||
Rent expense | — | 86,048 | 86,048 | |||||||||||||
Professional fees | 268,560 | 446,108 | 714,668 | |||||||||||||
Research and development | 51,826 | 34,224 | 86,050 | |||||||||||||
General and administrative expenses | 42,293 | 363,019 | 405,312 | |||||||||||||
Depreciation and amortization | 33,911 | 70,898 | 104,809 | |||||||||||||
Total operating expenses | 396,590 | 2,609,159 | 3,005,749 | |||||||||||||
Loss from operations | (396,590 | ) | (2,546,231 | ) | (2,942,821 | ) | ||||||||||
Other income (expense) | ||||||||||||||||
Interest expense | — | (81,890 | ) | (81,890 | ) | |||||||||||
Impairment expense | — | (274,293 | ) | (274,293 | ) | |||||||||||
Gain on sale of assets | 721 | 952 | 1,673 | |||||||||||||
Interest income | 39 | 39 | ||||||||||||||
Total other income (expense) | 721 | (355,192 | ) | — | (354,471 | ) | ||||||||||
Net income (loss) | $ | (395,869 | ) | $ | (2,901,423 | ) | $ | (3,297,292 | ) |
The accompanying notes are an integral part of these financial statements.
3 |
STRATEAN INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Year Ended September 30, 2015
Historical | Pro-forma Adjustments | Pro-Forma Combined | ||||||||||||
September 30, 2015 | ||||||||||||||
Stratean Inc. | CleanSpark, LLC | |||||||||||||
Revenues | $ | — | $ | 547,211 | $547,211 | |||||||||
Cost of revenues | — | 534,063 | 534,063 | |||||||||||
Gross profit | — | 13,148 | 13,148 | |||||||||||
Operating expenses | - | |||||||||||||
Payroll expense | — | 2,375,182 | 2,375,182 | |||||||||||
Rent expense | — | 126,687 | 126,687 | |||||||||||
Professional fees | 3,377,956 | 343,336 | 3,721,292 | |||||||||||
Research and development | 52,288 | 37,632 | 89,920 | |||||||||||
General and administrative expenses | 46,815 | 348,326 | 395,141 | |||||||||||
Depreciation and amortization | 2,800 | 63,328 | 66,128 | |||||||||||
Total operating expenses | 3,479,859 | 3,294,491 | 6,774,350 | |||||||||||
Loss from operations | (3,479,859 | ) | (3,281,343 | ) | (6,761,202) | |||||||||
Other income (expense) | ||||||||||||||
Interest expense | (5,144 | ) | (110,400 | ) | (115,544) | |||||||||
Impairment expense | — | 75,000 | 75,000 | |||||||||||
Interest income | — | 154 | 154 | |||||||||||
Total other income (expense) | (5,144 | ) | (35,246 | ) | (40,390) | |||||||||
Net income (loss) | $ | (3,485,003 | ) | $ | (3,316,589 | ) | $(6,801,592) |
The accompanying notes are an integral part of these financial statements.
4 |
STRATEAN INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements give effect to the asset purchase transaction (the "Transaction"). On July 1, 2016, Stratean, Inc. and Cleanspark II, LLC, a wholly-owned subsidiary of Stratean, Inc. (together, the “Buyer”), entered into an Asset Purchase Agreement, as amended (the “Purchase Agreement”) with CleanSpark Holdings LLC, CleanSpark LLC, CleanSpark Technologies LLC and Specialized Energy Solutions, Inc. (together, the “Seller”). The closing of the transactions contemplated by the Purchase Agreement, as amended, occurred on July 1, 2016 (the “Closing Date”).
On the Closing Date, pursuant to the Purchase Agreement, the Company acquired all the assets (the “Assets”) and assume certain liabilities (the “Assumed Liabilities”) related to Seller and its line of business. The Assets the Buyer purchased from Seller include:
Equipment and other tangible assets;
- Domain names, websites and intellectual property;
- All rights to causes of action, lawsuits, judgments, claims and demands of any nature available to or being pursued by the Seller;
- Contracts to which Seller is bound;
- Current and future customer accounts, including accounts receivable;
- All member units in CleanSpark LLC, and any investments it may have; and
- Any other assets of any nature whatsoever that are related to or used in connection with the business of Seller and its goodwill.
Pursuant to an amendment of the Purchase Agreement, Cleanspark II, LLC was granted a 3-year exclusive option to purchase Specialized Energy Solutions, Inc. for 1,000 shares of Stratean Common Stock; and Cleanspark II, LLC was granted a 3-year exclusive option to purchase Clean Spark Technologies, LLC for 1,000 shares of Stratean Common Stock.
In exchange for the Assets, the Company assumed the Assumed Liabilities, consisting of certain accounts payable amounting to approximately $200,000 arising out of the Assets. The Company also issued to sole member of Cleanspark, LLC six million (6,000,000) shares of common stock and five-year warrants to purchase four million five hundred thousand (4,500,000) shares of common stock at an exercise price of $1.50 per share.
The unaudited pro forma condensed combined balance sheet as of June 30, 2016 is presented as if the acquisition of Cleanspark had occurred on June 30, 2016.
The unaudited pro forma condensed combined statements of operations for the three and nine months ended June 30, 2016 are presented as if the acquisition of Cleanspark had occurred on June 30, 2016 and were carried forward through each of the aforementioned periods presented.
The unaudited pro forma condensed combined statements of operations for the year ended September 30, 2015 are presented as if the acquisition of Cleanspark had occurred on September 30, 2015 and were carried forward through each of the aforementioned periods presented.
The unaudited pro forma financial statements include certain adjustments that are directly attributable to the Transaction, which are expected to have a continuing impact on Stratean, and are factually supportable, as summarized in the accompanying notes.
1. BASIS OF PRO FORMA PRESENTATION
On July 1, 2016, the Company completed the acquisition of Cleanspark pursuant to the terms of the asset purchase agreement. In connection with the closing, the Company acquired all the assets (the “Assets”) and assume certain liabilities (the “Assumed Liabilities”) related to Seller and its line of business. The Assets the Buyer purchased from Seller include:
- Equipment and other tangible assets;
- Domain names, websites and intellectual property;
- All rights to causes of action, lawsuits, judgments, claims and demands of any nature available to or being pursued by the Seller;
- Contracts to which Seller is bound;
- Current and future customer accounts, including accounts receivable;
- All member units in CleanSpark LLC, and any investments it may have; and
- Any other assets of any nature whatsoever that are related to or used in connection with the business of Seller and its goodwill.
5 |
STRATEAN INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Pursuant to an amendment of the Purchase Agreement, Cleanspark II, LLC was granted a 3-year exclusive option to purchase Specialized Energy Solutions, Inc. for 1,000 shares of Stratean Common Stock; and Cleanspark II, LLC was granted a 3-year exclusive option to purchase Clean Spark Technologies, LLC for 1,000 shares of Stratean Common Stock.
In exchange for the Assets, the Company assumed the Assumed Liabilities, consisting of certain accounts payable amounting to approximately $200,000 arising out of the Assets. The Company also issued to sole member of Cleanspark, LLC six million (6,000,000) shares of common stock and five-year warrants to purchase four million five hundred thousand (4,500,000) shares of common stock at an exercise price of $1.50 per share.
Following the closing of the Transaction and the completion of the issuance of Stratean common stock, as described above, there were 40,610,669 shares of the Company's common stock outstanding.
These pro forma financial statements are presented as a continuation of Stratean. The equity of Stratean is presented as the equity of the combined company and the capital stock account of Stratean is adjusted to reflect the par value of the issued and outstanding common stock of the Company, after giving effect to the number of shares issued in connection with the Transaction.
The unaudited pro forma condensed combined balance sheet as of June 30, 2016, and the unaudited pro forma condensed combined statements of operations for the three and nine months ended June 30, 2016, and for the year ended September 30, 2015, are based on the historical financial statements of the Company and Cleanspark after giving effect to the closing of the Transaction, and the assumptions, reclassifications and adjustments described herein.
These unaudited pro forma financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") and are expressed in US dollars. They have been compiled using the significant accounting policies as set out in the audited financial statements of Stratean Inc. for the year ended September 30, 2015. Based on the review of the accounting policies of Cleanspark and the Company, there are no material accounting differences between the accounting policies of Cleanspark and the Company.
It is management's opinion that these pro forma financial statements include all adjustments necessary for the fair presentation, in all material respects, of the proposed transaction described above in accordance with US GAAP applied on a basis consistent with the Company's accounting policies.
The unaudited pro forma condensed combined financial information is not intended to represent or be indicative of the Company's consolidated results of operations or financial position that would have been reported had the Cleanspark acquisition been completed as of the dates presented, and should not be taken as a representation of the Company's future consolidated results of operations or financial position. The unaudited pro forma combined financial information does not reflect any operating efficiencies and/or cost savings that the Company may achieve with respect to the combined companies.
The unaudited pro forma condensed combined financial statements, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with: (i) the Company's audited annual financial statements for the years ended September 30, 2015 and 2014, as contained in the Company's annual report on Form 10-K for the fiscal year ended September 30, 2015, and unaudited interim condensed financial statements for the three and nine months ended June 30, 2016 and 2015, as contained in the Company's quarterly report on Form 10-Q for the period ended June 30, 2015, and (ii) Cleanspark’s audited annual financial statements for the years ended September 30, 2015 and 2014, and unaudited interim condensed consolidated financial statements of Cleanspark for the three and nine months ended June 30, 2016 and 2015, as included elsewhere in this Form 8-K.
6 |
STRATEAN INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
2. PRO FORMA ASSUMPTIONS AND ADJUSTMENTS
The unaudited pro forma condensed consolidated financial statements incorporate the following pro forma assumptions and adjustments:
a) Upon closing of the Transaction 6,000,000 shares of the Company’s common stock and 4,500,000 warrants were issued to the Cleanspark’s sole member in exchange for all assets of Cleanspark.
b) Upon closing all convertible notes were converted and the sole member of Cleanspark assumed these liabilities and settled the debts with its ownership interest.
3. PRO FORMA SHARE CAPITAL
Pro forma shares of the Company's common stock as at June 30, 2016 have been determined as follows:
Number of Shares | Par Value | |||||||
Issued and outstanding shares of common stock of the Company | 21,056,415 | 21,086 | ||||||
Issuance of shares and to purchase common shares for acquisition | 6,000,000 | 6,000 | ||||||
Pro-forma balance, June 30, 2016 | 27,056,415 | 27,086 |
4. PRO FORMA LOSS PER SHARE
Pro-forma basic and diluted loss per share for the year ended September 30, 2015 and the three and nine months ended June 30, 2016 have been calculated based on the weighted average number of shares of the Company's common stock outstanding plus the shares of the Company's common stock to be issued and cancelled in connection with the Transaction.
Year Ended September 30, 2015 | ||||
Basic pro forma loss per share computation | ||||
Numerator: | ||||
Pro forma net loss available to stockholders | (6,801,592 | ) | ||
Denominator: | ||||
Weighted average issued and outstanding shares of common stock | 19,229,062 | |||
Shares of common stock issued to Epic stockholders per share exchange agreement | 6,000,000 | |||
Pro forma weighted average shares outstanding | 25,229,062 | |||
Basic pro forma loss per share | (0.27 | ) |
7 |
Three Months Ended June 30, 2016 | ||||
Basic pro forma loss per share computation | ||||
Numerator: | ||||
Pro forma net loss available to stockholders | (644,451 | ) | ||
Denominator: | ||||
Weighted average issued and outstanding shares of common stock | 21,058,415 | |||
Shares of common stock issued to Epic stockholders per share exchange agreement | 6,000,000 | |||
Pro forma weighted average shares outstanding | 27,058,415 | |||
Basic pro forma loss per share | (0.02 | ) |
Nine Months Ended June 30, 2016 | ||||
Basic pro forma loss per share computation | ||||
Numerator: | ||||
Pro forma net loss available to stockholders | (3,297,292 | ) | ||
Denominator: | ||||
Weighted average issued and outstanding shares of common stock | 20,842,065 | |||
Shares of common stock issued to Epic stockholders per share exchange agreement | 6,000,000 | |||
Pro forma weighted average shares outstanding | 26,842,065 | |||
Basic pro forma loss per share | (0.12 | ) |
8 |