Onfolio Holdings, Inc 8-K/A, filed Feb 28, 2025
Onfolio Holdings, Inc (ONFO)
About this 8-K/A
Onfolio Holdings, Inc filed this 8-K/A on February 28, 2025, reporting on events of October 18, 2024.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
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(State or other jurisdiction of |
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incorporation or organization) |
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(Address of principal executive offices) |
| (Zip Code) |
Registrant’s telephone number, including area code (
______________________________________________
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Explanatory Note
On October 22, 2024, Onfolio Holdings, Inc. (the ”Company’’) filed with the Securities and Exchange Commission a Current Report on Form 8-K (the “Original Form 8-K“) disclosing, among other things, that on October 18, 2024 it had completed the purchase of substantially all of the assets utilized in the operation of the business of Eastern Standard, LLC (“Eastern Standard Pennsylvania”), a Pennsylvania limited liability company.
This Current Report on Form 8-K/A amends and supplements the Original Form 8-K to provide the disclosures required by Item 9.01 of Form 8-K, which were not previously filed with the Original Form 8-K, including the required financial statements of Eastern Standard Pennsylvania and the required pro forma financial statements. Except as otherwise provided herein, the other disclosures made in the Original Form 8-K remain unchanged.
Item 9.01 Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
The (i) Unaudited Financial Statements of Eastern Standard Pennsylvania for the Nine Months ended September 30, 2024 and 2023; and (ii) the Audited Financial Statements of Eastern Standard Pennsylvania for the years ended December 31, 2023 and 2022 are attached hereto as Exhibit 99.1 and incorporated herein by reference.
(b) Pro forma financial information.
The unaudited pro forma financial statements and explanatory notes relating to the Company’s acquisition of Eastern Standard Pennsylvania are attached hereto as Exhibit 99.2 and incorporated herein by reference.
(d) Exhibits.
Exhibit No. |
| Description |
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104 |
| Cover Page Interactive Data File (formatted as Inline XBRL) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ONFOLIO HOLDINGS INC. |
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Date: February 27, 2025 | By: | /s/ Dominic Wells |
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| Dominic Wells, |
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| Chief Executive Officer |
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EXHIBIT 99.1
| EASTERN STANDARD, LLC | ||||
| Table of Contents | ||||
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| Financial Statements for the Nine Months September 30, 2024 and 2023: |
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| 5-11 |
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| Financial Statements for the Years ended December 31, 2023 and 2022: |
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| EASTERN STANDARD, LLC | ||||||||
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| September 30, 2024 |
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| December 31, 2023 |
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| (Unaudited) |
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| ASSETS |
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| Current assets: |
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| Cash |
| $ | 886,997 |
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| $ | 1,169,055 |
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| Accounts receivable |
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| 508,295 |
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| 363,774 |
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| Unbilled accounts receivable |
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| 245,175 |
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| 93,306 |
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| Other current assets |
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| 43,288 |
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| - |
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| Total current assets |
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| 1,683,755 |
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| 1,626,135 |
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| Property and equipment, net |
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| 5,135 |
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| 3,154 |
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| Intangible assets, net |
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| 874 |
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| 1,011 |
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| Total assets |
| $ | 1,689,764 |
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| $ | 1,630,300 |
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| LIABILITIES AND MEMBERS' EQUITY |
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| Current liabilities: |
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| Accounts payable and other current liabilities |
| $ | 239,405 |
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| $ | 86,141 |
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| Accrued Compensation |
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| 97,890 |
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| 50,965 |
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| Note payable, current portion |
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| - |
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| 464,500 |
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| Deferred revenue |
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| 477,059 |
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| 462,968 |
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| Total current liabilities |
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| 814,354 |
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| 1,064,574 |
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| Total liabilities |
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| 814,354 |
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| 1,064,574 |
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| Commitments and contingencies (Note 7) |
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| Members' equity: |
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| Member's Equity |
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| 875,410 |
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| 565,726 |
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| Total Members' equity |
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| 875,410 |
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| 565,726 |
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| Total liabilities and members' equity |
| $ | 1,689,764 |
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| $ | 1,630,300 |
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| See the accompanying notes to these unaudited financial statements | ||||||||
| 1 |
| EASTERN STANDARD, LLC | ||||||||
| FOR THE NINE MONTHS ENDING SEPTEMBER 30, 2024 and 2023 | ||||||||
| (Unaudited) | ||||||||
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| 2024 |
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| 2023 |
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| REVENUE |
| $ | 3,453,126 |
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| $ | 2,708,156 |
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| Cost of revenue |
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| 1,684,488 |
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| 1,498,317 |
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| Gross Profit |
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| 1,768,638 |
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| 1,209,839 |
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| OPERATING EXPENSES: |
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| General and administrative |
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| 1,266,721 |
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| 1,267,994 |
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| Total operating expenses |
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| 1,266,721 |
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| 1,267,994 |
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| Net income (loss) from operations |
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| 501,917 |
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| (58,155 | ) |
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| OTHER INCOME: |
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| Other income |
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| 4,106 |
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| 3,288 |
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| Total other income |
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| 4,106 |
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| 3,288 |
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| NET INCOME (LOSS) |
| $ | 506,023 |
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| $ | (54,867 | ) |
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| See the accompanying notes to these unaudited financial statements | ||||||||
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| Eastern Standard | ||||
| FOR THE PERIOD ENDED SEPTEMBER 30, 2024 AND 2023 | ||||
| (Unaudited) | ||||
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| Total |
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| Balance, December 31, 2022 |
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| 584,428 |
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| Owner distributions |
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| (6,599 | ) |
| Net loss |
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| (54,867 | ) |
| Balance, September 30, 2023 |
| $ | 522,962 |
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| Balance, December 31, 2023 |
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| 565,726 |
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| Owner distributions |
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| (196,339 | ) |
| Net income |
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| 506,023 |
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| Balance, September 30, 2024 |
| $ | 875,410 |
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| See the accompanying notes to these unaudited financial statements | ||||
| 3 |
| Eastern Standard | ||||||||
| FOR THE NINE MONTHS ENDING SEPTEMBER 30, 2024 AND 2023 | ||||||||
| (Unaudited) | ||||||||
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| CASH FLOWS FROM OPERATING ACTIVITIES: |
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| Net income (loss) |
| $ | 506,023 |
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| $ | (54,867 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: |
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| Depreciation & Amortization |
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| 1,277 |
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| 261 |
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| Changes in operating assets and liabilities: |
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| Accounts receivable |
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| (144,521 | ) |
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| (47,782 | ) |
| Unbilled accounts receivable |
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| (151,869 | ) |
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| (114,086 | ) |
| Other current assets |
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| (43,288 | ) |
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| - |
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| Accounts payable |
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| 153,264 |
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| 195,951 |
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| Accrued compensation |
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| 46,925 |
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| 21,344 |
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| Deferred revenue |
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| 14,091 |
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| 183,916 |
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| Net cash provided by operating activities |
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| 381,902 |
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| 184,737 |
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| CASH FLOWS FROM INVESTING ACTIVITIES: |
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| Purchases of property and equipment |
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| (3,121 | ) |
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| (2,235 | ) |
| Net cash used in investing activities |
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| (3,121 | ) |
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| (2,235 | ) |
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| CASH FLOWS FROM FINANCING ACTIVITIES: |
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| Owner distributions |
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| (196,339 | ) |
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| (6,599 | ) |
| Payments on loans payable |
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| (464,500 | ) |
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| (78,337 | ) |
| Net cash used in financing activities |
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| (660,839 | ) |
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| (84,936 | ) |
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| Net change in cash |
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| (282,058 | ) |
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| 97,566 |
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| Cash at beginning of period |
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| 1,169,055 |
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| 920,014 |
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| Cash at end of period |
| $ | 886,997 |
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| $ | 1,017,580 |
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| Supplemental disclosure of cash flow information: |
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| Cash paid for interest |
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| - |
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| - |
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| Cash paid for taxes |
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| - |
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| - |
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| See the accompanying notes to these unaudited financial statements | ||||||||
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EASTERN STANDARD, LLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – NATURE OF OPERATIONS AND GOING CONCERN
Eastern Standard, LLC (which may be referred to as the “Company”, “we,” “us,” or “our”) is a Pennsylvania limited liability company. The Company provides digital marketing services, including integrated branding, and digital customer experiences.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The Company’s fiscal year end is December 31.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results could materially differ from these estimates. It is reasonably possible that changes in estimates will occur in the near term.
Significant estimates inherent in the preparation of the accompanying financial statements include valuation of revenue recognition and contingencies.
Risks and Uncertainties
The Company's business and operations are sensitive to general business and economic conditions in the United States and other countries that the Company operates in. A host of factors beyond the Company's control could cause fluctuations in these conditions. Adverse conditions may include recession, downturn or otherwise, local competition or changes in consumer taste. These adverse conditions could affect the Company's financial condition and the results of its operations.
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Concentration of Credit Risk
The Company maintains its cash with major financial institutions located in the United States, which it believes to be credit worthy. The Federal Deposit Insurance Corporation insures balances up to $250,000. At times, the Company may maintain balances in excess of the insured limits. As of September 30, 2024 the Company had $614,770 in excess of the insured limit.
Cash and Cash Equivalents
The Company considers short-term, highly liquid investment with original maturities of three months or less at the time of purchase to be cash equivalents. Cash consists of funds held in the Company’s checking account.
Fair Value Measurements
Generally accepted accounting principles define fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) and such principles also establish a fair value hierarchy that prioritizes the inputs used to measure fair value using the following definitions (from highest to lowest priority):
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| · | Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
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| · | Level 2 – Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means. |
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| · | Level 3 – Prices or valuation techniques requiring inputs that are both significant to the fair value measurement and unobservable. |
The Company has no assets or liabilities valued using level 1, level 2, or level 3 inputs as of September 30, 2024 or December 31, 2023.
Income Taxes
The Company accounts for income taxes as a pass through entity, where the owner pays income taxes on it’s share of taxable income. The net profits and losses of the Company are allocated to the members in proportion to each members’ capital interest in the Company. Distributions are made by the Company to the members at such times and in such amounts as the members shall determine in their sole discretion.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606 when it has satisfied the performance obligations under an arrangement with the customer reflecting the terms and conditions under which products or services will be provided, the fee is fixed or determinable, and collection of any related receivable is probable. ASC Topic 606, “Revenue from Contracts with Customers” establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements: 1) identify the contract with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to performance obligations in the contract; and 5) recognize revenue as the performance obligation is satisfied.
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The Company’s performance obligation for its revenue stream are to provide the digital website plugin to the customer, and revenues associated with completed sales are recognized at a point in time when they are provided to the customer. There is no significant financing component to the Company’s sales.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct.
Performance Obligations Satisfied Over Time
Revenue for our contracts that satisfy the criteria for over time recognition is recognized as the work progresses. The majority of our revenue is derived from website design and implementation contracts and typically span between 4 to 12 months. These contracts continuously transfer control to the customer as all of the work is completed electronically and is transferable to the customer at any point in time. Contract costs include labor, materials, and indirect costs.
We have numerous contracts that are in various stages of completion which require estimates to determine the forecasted costs at completion. Due to the nature of the work left to be performed on many of our contracts, the estimation of total cost at completion for fixed-price contracts is complex, subject to many variables and requires significant judgment. Estimates of total cost at completion are made each period and changes in these estimates are accounted for prospectively as cumulative adjustments to revenue recognized in the current period. If estimates of costs to complete fixed-price contracts indicate a loss, a provision is made through a contract write-down for the total loss anticipated.
Contract modifications are routine in the performance of our contracts. Contracts are often modified to account for changes in the contract specifications or requirements. In most instances, contract modifications are for goods or services that are not distinct, and, therefore, are accounted for as part of the existing contract.
Performance Obligations Satisfied at a Point in Time
Revenue for the Company’s contracts that do not satisfy the criteria for over time recognition is recognized at a point in time. Substantially all of the Company’s revenue recognized at a point in time is for monthly maintenance contracts. Unlike the design contracts that use a cost-to-cost input measure for performance, the monthly maintenance utilize an output measure for performance based on the completion of a unit of work. Upon fulfillment of the performance obligation, the customer is provided an invoice (or equivalent) demonstrating transfer of control or completion of service to the customer. We believe that point in time recognition remains appropriate for these contracts and will continue to recognize revenues upon completion of the performance obligation and issuance of an invoice.
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The following table presented disaggregated revenue information for the nine months ended September 30, 2024 and 2024:
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| For the nine months ended September 30, |
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| 2023 |
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| Website design and implementation |
| $ | 2,241,580 |
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| $ | 1,713,311 |
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| Website management |
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| 1,211,546 |
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| 994,845 |
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| Total revenue |
| $ | 3,453,126 |
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| $ | 2,708,156 |
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Accounts Receivable
Accounts receivables are carried at their estimated collectible amounts. Trade accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current financial condition. The Company had an allowance for doubtful accounts of $0 as of September 30, 2024 and December 31, 2023, respectively. Included in accounts receivable is $11,480 and $17,984 of unbilled fees related to website management revenue as of September 30, 2024 and December 31, 2023, respectively.
Long-lived Assets
The Company amortizes acquired definite-lived intangible assets over their estimated useful lives. Other indefinite-lived intangible assets are not amortized but subject to annual impairment tests. In accordance with ASC 360 “Property Plant and Equipment,” the Company reviews the carrying value of intangibles subject to amortization and long-lived assets for impairment throughout the year or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.
Property and equipment
Property and equipment stated at the lower of cost or estimated net recoverable amount. The cost of property, plant and equipment is depreciated using the straight-line method based on the lesser of the estimated useful lives of the assets or the lease term. Schedule of Estimated Useful Lives of Property, Plant and Equipment
Repairs and maintenance expenditures are charged to operations as incurred. Major improvements and replacements, which extend the useful life of an asset, are capitalized and depreciated over the remaining estimated useful life of the asset. When assets are retired or sold, the cost and related accumulated depreciation and amortization are eliminated and any resulting gain or loss is reflected in operations.
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Advertising
The Company expenses advertising costs as they are incurred. Advertising costs were $41,441 and $93,031 for the nine months ended September 30, 2024 and 2023, respectively.
Recent Accounting Pronouncements
The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.
NOTE 3 – CONTRACTS IN PROCESS
The net unbilled accounts receivables (deferred revenues) position for contracts in process, related to the website design and implementation services, consisted of the following:
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| September 30, |
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| December 31, |
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| 2024 |
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| 2023 |
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| Costs on uncompleted contracts |
| $ | 1,724,431 |
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| $ | 1,153,649 |
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| Estimated earnings |
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| 493,374 |
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| 218,551 |
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| Total costs and estimated profits on uncompleted contracts |
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| 2,217,805 |
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| 1,372,200 |
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| Add: unbilled amounts on completed contracts |
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| 95,277 |
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| 2,500 |
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| Less: Progress billings |
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| (2,455,656 | ) |
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| (1,694,279 | ) |
| Unbilled accounts receivables (deferred revenues), net |
| $ | (142,574 | ) |
| $ | (319,579 | ) |
The net asset (liability) position for contracts in process is included in the accompanying consolidated balance sheets as follows:
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| September 30, 2024 |
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| December 31, 2023 |
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| Unbilled accounts receivable costs and estimated earnings in excess of billings on uncompleted contracts |
| $ | 245,175 |
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| $ | 93,306 |
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| Deferred revenues - Billings in excess of costs and estimated earnings on uncompleted contracts |
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| (387,749 | ) |
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| (412,885 | ) |
| Unbilled accounts receivables (deferred revenues), net |
| $ | (142,574 | ) |
| $ | (319,579 | ) |
| 9 |
NOTE 4 – DEFERRED REVENUE
Deferred revenue as of September 30, 2024 and December 31, 2023 consisted of the following:
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| September 30, 2024 |
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| December 31, 2023 |
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| Website design and implementation |
| $ | 387,749 |
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| $ | 412,885 |
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| Website management |
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| 89,310 |
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| 50,083 |
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| Total deferred revenue |
| $ | 477,059 |
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| $ | 462,968 |
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Changes in the balance of deferred revenue for the periods presented are as follows:
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| Deferred Revenue |
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| Balance as of December 31, 2023 |
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| 462,968 |
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| Billings for the period |
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| 3,467,217 |
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| Revenue recognized |
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| (3,453,126 | ) |
| Balance as of September 30, 2024 |
| $ | 477,059 |
|
Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and non-cancelable contracts that will be invoiced and recognized as revenue in future periods ("backlog"). While deferred revenue is recorded on our balance sheet as a liability, backlog is not recorded in revenue, deferred revenue or elsewhere in our consolidated financial statements until we establish a contractual right to invoice, at which point it is recorded as revenue or deferred revenue as appropriate. As of September 30, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $387,749 in deferred revenue and $1,090,330 in backlog. As of December 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $462,968 in deferred revenue and $2,052,533 in backlog
We expect that the amount of backlog relative to the total value of our contracts will change from year to year due to several factors, including the amount invoiced early in the contract term, the timing and duration of customer agreements, varying invoicing cycles of agreements and changes in customer financial circumstances. Accordingly, we believe that fluctuations in backlog are not always a reliable indicator of future revenues, and we do not utilize backlog internally as a key management metric.
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 2023 and 2022:
|
|
| As of |
| |||||
|
|
| September 30, |
|
| December 31, |
| ||
|
|
| 2024 |
|
| 2023 |
| ||
| Property and equipment |
| $ | 6,460 |
|
| $ | 3,340 |
|
| Fixed assets, gross |
|
|
|
|
|
|
|
|
| Less: accumulated depreciation |
|
| (1,325 | ) |
|
| (186 | ) |
| Total |
| $ | 5,135 |
|
| $ | 3,154 |
|
| 10 |
During the nine months ended September 30, 2024, and 2023 the Company recorded depreciation expense of $1,140 and $124, respectively, which is included in general and administrative expenses in the accompanying statement of operations.
NOTE 6 – NOTE PAYABLE
On November 8, 2022, the Company entered into an agreement with David Wolf, one of its members to purchase their 23.75% ownership of the Company for a purchase price of $610,000 under the Membership Interest Purchase Agreement (“MIPA”). In exchange for the purchase, the Company entered into a Note Payable (the “Note”) agreement whereby the Company agreed to repay the purchase amount in monthly installments over the next 5 years, with each payment having a required minimum monthly amount of $5,000.
On September 19, 2024, the Company entered into a settlement agreement with David Wolf, related to the outstanding Note as discussed in Note 6 above. Pursuant to the settlement agreement, the Company paid David Wolf $376,917 in full settlement of the amounts owed under the Note, and all other claims.
NOTE 7 – COMMITMENTS AND CONTINGENCIES
The Company, from time to time, may be involved with lawsuits arising in the ordinary course of business. In the opinion of the Company's management, any liability resulting from such litigation would not be material in relation to the Company's consolidated financial position, results of operations and cash flows. There is no pending or threatened litigation.
NOTE 8 – SUBSEQUENT EVENTS
Management has evaluated subsequent events through February 27, 2025, the date the financial statements were available to be issued. Based on this evaluation, no additional material events were identified which require adjustment or disclosure in the financial statements except as disclosed below.
On September 20, 2024, the Company and its owners Mark Gisi, James Keller and Vincent Giordano, entered into an Asset Purchase Agreement (“Asset Purchase Agreement”) with Onfolio Holdings Inc.’s (“Onfolio”) and it majority owned subsidiary Eastern Standard LLC (“Eastern Standard Delaware”), a Delaware limited liability company. Pursuant to the Asset Purchase Agreement, Eastern Standard Delaware will purchase from the Company substantially all of the Company’s assets utilized in the operation of its business of providing digital marketing services, including integrated branding, and digital customer experiences (the “Business Assets”).
Pursuant to the Asset Purchase Agreement, and subject to the terms and conditions contained therein, at closing, the Company agreed to sell to Eastern Standard Delaware the Business Assets, all as more fully described in the Asset Purchase Agreement. The aggregate purchase price for the Business Assets is $2,160,000. As of closing, Onfolio owns 70% of Eastern Standard Delaware in exchange for $1,250,000 payable pursuant to two secured promissory notes which are guaranteed by the Onfolio, and $410,000 of the Onfolio’s Series A Preferred Shares. The entities comprising Onfolio’s special purpose vehicle funding program own an aggregate of 20% of Eastern Standard Delaware in exchange for $500,000 payable in cash. The sellers of the Company have a 10% roll-over equity interest in Eastern Standard Delaware. The transaction closed on October 18, 2024.
| 11 |
To the Board of Directors and Stockholders
of Eastern Standard LLC
Opinion
We have audited the accompanying financial statements of Eastern Standard LLC, a Pennsylvania limited liability company, which comprise the balance sheets as of December 31, 2023 and 2022, 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.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Eastern Standard LLC as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Eastern Standard LLC and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Eastern Standard LLC’s ability to continue as a going concern within one year after the date that the financial statements are available to be issued.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
|
|
| 3702 W Spruce St #1430 • Tampa, Florida 33607 • +1.813.441.9707 |
|
|
| 12 |
In performing an audit in accordance with generally accepted auditing standards, we:
|
| · | Exercise professional judgment and maintain professional skepticism throughout the audit. |
|
|
|
|
|
| · | Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. |
|
|
|
|
|
| · | Obtain an understanding of internal control relevant to the audit 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 Eastern Standard LLC’s internal control. Accordingly, no such opinion is expressed. |
|
|
|
|
|
| · | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. |
|
|
|
|
|
| · | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Eastern Standard LLC’s ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
Tampa, Florida
February 27, 2025
| 13 |
| EASTERN STANDARD, LLC | ||||||||
| AS OF DECEMBER 31, 2023 AND 2022 | ||||||||
|
| ||||||||
|
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
|
| ||
| ASSETS |
|
|
|
|
|
| ||
| Current assets: |
|
|
|
|
|
| ||
| Cash |
| $ | 1,169,055 |
|
| $ | 920,014 |
|
| Accounts receivable, net |
|
| 363,774 |
|
|
| 344,208 |
|
| Unbilled accounts receivable |
|
| 93,306 |
|
|
| 142,748 |
|
| Total current assets |
|
| 1,626,135 |
|
|
| 1,406,970 |
|
|
|
|
|
|
|
|
|
|
|
| Property and equipment, net |
|
| 3,154 |
|
|
| - |
|
| Intangible assets, net |
|
| 1,011 |
|
|
| 1,194 |
|
| Total assets |
| $ | 1,630,300 |
|
| $ | 1,408,164 |
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND MEMBERS' EQUITY |
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable and other current liabilities |
| $ | 86,141 |
|
|
| 43,575 |
|
| Accrued compensation |
|
| 50,965 |
|
|
| 84,195 |
|
| Note payable, current portion |
|
| 464,500 |
|
|
| 70,950 |
|
| Deferred revenue |
|
| 462,968 |
|
|
| 119,300 |
|
| Total current liabilities |
|
| 1,064,574 |
|
|
| 318,020 |
|
|
|
|
|
|
|
|
|
|
|
| Note payable |
|
| - |
|
|
| 505,716 |
|
| Total liabilities |
|
| 1,064,574 |
|
|
| 823,736 |
|
|
|
|
|
|
|
|
|
|
|
| Commitments and contingencies (Note 7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Members' equity: |
|
|
|
|
|
|
|
|
| Member's Equity |
|
| 565,726 |
|
|
| 584,428 |
|
| Total Members' equity |
|
| 565,726 |
|
|
| 584,428 |
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities and members' equity |
| $ | 1,630,300 |
|
| $ | 1,408,164 |
|
|
|
|
|
|
|
|
|
|
|
| See the accompanying notes to these financial statements | ||||||||
| 14 |
| EASTERN STANDARD, LLC | ||||||||
| FOR THE YEARS ENDING DECEMBER 31, 2023 and 2022 | ||||||||
|
|
|
|
|
|
|
| ||
|
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
|
| ||
| REVENUE |
| $ | 3,497,372 |
|
| $ | 4,304,455 |
|
| Cost of revenue |
|
| 1,807,629 |
|
|
| 1,836,789 |
|
|
|
|
|
|
|
|
|
|
|
| Gross Profit |
|
| 1,689,743 |
|
|
| 2,467,666 |
|
|
|
|
|
|
|
|
|
|
|
| OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
| General and administrative |
|
| 1,714,135 |
|
|
| 1,914,308 |
|
| Total operating expenses |
|
| 1,714,135 |
|
|
| 1,914,308 |
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) from operations |
|
| (24,392 | ) |
|
| 553,358 |
|
|
|
|
|
|
|
|
|
|
|
| OTHER INCOME : |
|
|
|
|
|
|
|
|
| Other income |
|
| 4,814 |
|
|
| 9,156 |
|
| Interest income |
|
| 7,475 |
|
|
| - |
|
| Total other income |
|
| 12,289 |
|
|
| 9,156 |
|
|
|
|
|
|
|
|
|
|
|
| NET INCOME (LOSS) |
| $ | (12,103 | ) |
| $ | 562,514 |
|
|
|
|
|
|
|
|
|
|
|
| See the accompanying notes to these financial statements | ||||||||
| 15 |
| EASTERN STANDARD, LLC | ||||
| FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 | ||||
|
|
|
|
| |
|
|
| Total |
| |
|
|
|
|
| |
| Balance, December 31, 2021 |
| $ | 800,384 |
|
| Owner cash distributions |
|
| (168,470 | ) |
| Repurchase of ownership interest |
|
| (610,000 | ) |
| Net income |
|
| 562,514 |
|
| Balance, December 31, 2022 |
|
| 584,428 |
|
| Owner distributions |
|
| (6,599 | ) |
| Net loss |
|
| (12,103 | ) |
| Balance, December 31, 2023 |
| $ | 565,726 |
|
|
|
|
|
|
|
| See the accompanying notes to these financial statements | ||||
| 16 |
| EASTERN STANDARD, LLC | ||||||||
| FOR THE YEARS ENDING DECEMBER 31, 2023 AND 2022 | ||||||||
|
|
|
|
|
| ||||
|
|
| 2023 |
|
| 2022 |
| ||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
| Net income (loss) |
| $ | (12,103 | ) |
| $ | 562,514 |
|
| Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
|
|
|
|
|
|
|
| Gain on sale of equipment |
|
| - |
|
|
| (7,229 | ) |
| Depreciation and amortization |
|
| 369 |
|
|
| 11,530 |
|
| Bad debt expense |
|
| - |
|
|
| 88,114 |
|
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Accounts receivable |
|
| (19,566 | ) |
|
| 37,693 |
|
| Unbilled accounts receivable |
|
| 49,442 |
|
|
| (52,679 | ) |
| Other current assets |
|
| - |
|
|
| 24,267 |
|
| Accounts payable and other current liabilities |
|
| 42,566 |
|
|
| (264,612 | ) |
| Accrued compensation |
|
| (33,230 | ) |
|
| 44,225 |
|
| Deferred revenue |
|
| 343,668 |
|
|
| (589,090 | ) |
| Net cash provided by (used in) operating activities |
|
| 371,146 |
|
|
| (145,267 | ) |
|
|
|
|
|
|
|
|
|
|
| CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
| Purchases of property and equipment |
|
| (3,340 | ) |
|
| (11,049 | ) |
| Proceeds from sale or property and equipment |
|
| - |
|
|
| 11,184 |
|
| Net cash provided by (used in) investing activities |
|
| (3,340 | ) |
|
| 135 |
|
|
|
|
|
|
|
|
|
|
|
| CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
| Owner distributions |
|
| (6,599 | ) |
|
| (168,470 | ) |
| Repayments on note payable |
|
| (112,166 | ) |
|
| (33,334 | ) |
| Net cash provided by financing activities |
|
| (118,765 | ) |
|
| (201,804 | ) |
|
|
|
|
|
|
|
|
|
|
| Net change in cash |
|
| 249,041 |
|
|
| (346,936 | ) |
|
|
|
|
|
|
|
|
|
|
| Cash at beginning of period |
|
| 920,014 |
|
|
| 1,266,950 |
|
|
|
|
|
|
|
|
|
|
|
| Cash at end of period |
| $ | 1,169,055 |
|
| $ | 920,014 |
|
|
|
|
|
|
|
|
|
|
|
| Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
| Cash paid for interest |
|
| - |
|
|
| - |
|
| Cash paid for taxes |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Supplemental disclosure of noncash financing transactions |
|
|
|
|
|
|
|
|
| Buy-out of equity member through promissory note |
| $ | - |
|
| $ | 610,000 |
|
|
|
|
|
|
|
|
|
|
|
| See the accompanying notes to these financial statements | ||||||||
| 17 |
EASTERN STANDARD, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2023 and 2022
NOTE 1 – NATURE OF OPERATIONS
Eastern Standard, LLC (which may be referred to as the “Company,” “we,” “us,” or “our”) is a Pennsylvania limited liability company. The Company provides digital marketing services, including integrated branding, and digital customer experiences.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The Company’s fiscal year end is December 31.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results could materially differ from these estimates. It is reasonably possible that changes in estimates will occur in the near term.
Significant estimates inherent in the preparation of the accompanying financial statements include valuation of revenue recognition and contingencies.
Risks and Uncertainties
The Company's business and operations are sensitive to general business and economic conditions in the United States and other countries that the Company operates in. A host of factors beyond the Company's control could cause fluctuations in these conditions. Adverse conditions may include recession, downturn or otherwise, local competition or changes in consumer taste. These adverse conditions could affect the Company's financial condition and the results of its operations.
Concentration of Credit Risk
The Company maintains its cash with major financial institutions located in the United States, which it believes to be credit worthy. The Federal Deposit Insurance Corporation insures balances up to $250,000. At times, the Company may maintain balances in excess of the insured limits. As of December 31, 2023, the Company had $911,456 more than the insured limit.
| 18 |
Cash and Cash Equivalents
The Company considers short-term, highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. Cash consists of funds held in the Company’s checking account.
Fair Value Measurements
Generally accepted accounting principles define fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) and such principles also establish a fair value hierarchy that prioritizes the inputs used to measure fair value using the following definitions (from highest to lowest priority):
|
| · | Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
|
|
|
|
|
| · | Level 2 – Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means. |
|
|
|
|
|
| · | Level 3 – Prices or valuation techniques requiring inputs that are both significant to the fair value measurement and unobservable. |
The Company has no assets or liabilities valued using level 1, level 2, or level 3 inputs as of December 31, 2023, or 2022.
Income Taxes
The Company accounts for income taxes as a pass-through entity, where the owner pays income taxes on its share of taxable income. The net profits and losses of the Company are allocated to the members in proportion to each member’s capital interest in the Company. Distributions are made by the Company to the members at such times and in such amounts as the members shall determine in their sole discretion.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606 when it has satisfied the performance obligations under an arrangement with the customer reflecting the terms and conditions under which products or services will be provided, the fee is fixed or determinable, and collection of any related receivable is probable. ASC Topic 606, “Revenue from Contracts with Customers” establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements: 1) identify the contract with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to performance obligations in the contract; and 5) recognize revenue as the performance obligation is satisfied.
| 19 |
The Company’s performance obligation for its revenue stream is to provide the digital website plugin to the customer, and revenues associated with completed sales are recognized at a point in time when they are provided to the customer. There is no significant financing component to the Company’s sales.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct.
Performance Obligations Satisfied Over Time
Revenue for our contracts that satisfy the criteria for overtime recognition is recognized as the work progresses. The majority of our revenue is derived from website design and implementation contracts and typically span between 4 to 12 months. These contracts continuously transfer control to the customer as all the work is completed electronically and is transferable to the customer at any point in time. Contract costs include labor, materials, and indirect costs.
We have numerous contracts that are in various stages of completion which require estimates to determine the forecasted costs at completion. Due to the nature of the work left to be performed on many of our contracts, the estimation of total cost at completion for fixed-price contracts is complex, subject to many variables and requires significant judgment. Estimates of total cost at completion are made each period and changes in these estimates are accounted for prospectively as cumulative adjustments to revenue recognized in the current period. If estimates of costs to complete fixed-price contracts indicate a loss, a provision is made through a contract write-down for the total loss anticipated.
Contract modifications are routine in the performance of our contracts. Contracts are often modified to account for changes in the contract specifications or requirements. In most instances, contract modifications are for goods or services that are not distinct, and, therefore, are accounted for as part of the existing contract.
Performance Obligations Satisfied at a Point in Time
Revenue for the Company’s contracts that do not satisfy the criteria for overtime recognition is recognized at a point in time. Substantially all of the Company’s revenue recognized at a point in time is for monthly maintenance contracts. Unlike the design contracts that use a cost-to-cost input measure for performance, the monthly maintenance utilizes an output measure for performance based on the completion of a unit of work. Upon fulfillment of the performance obligation, the customer is provided an invoice (or equivalent) demonstrating transfer of control or completion of service to the customer. We believe that point in time recognition remains appropriate for these contracts and will continue to recognize revenues upon completion of the performance obligation and issuance of an invoice.
| 20 |
The following table presented disaggregated revenue information for the years ended December 31, 2023 and 2022:
|
|
| For the years ended December 31, |
| |||||
|
|
| 2023 |
|
| 2022 |
| ||
| Website design and implementation |
| $ | 2,179,012 |
|
| $ | 3,012,708 |
|
| Website management |
|
| 1,318,360 |
|
|
| 1,291,747 |
|
| Total revenue |
| $ | 3,497,372 |
|
| $ | 4,304,455 |
|
Accounts Receivable
Accounts receivable are carried at their estimated collectible amounts. Trade accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current financial condition. The Company had an allowance for doubtful accounts of $0 and $88,114 as of December 31, 2023 and 2022, respectively. Included in accounts receivable is $17,984 and $17,889 of unbilled fees related to website management revenue as of December 31, 2023 and 2022, respectively.
Long-lived Assets
The Company amortizes acquired definite-lived intangible assets over their estimated useful lives. Other indefinite-lived intangible assets are not amortized but subject to annual impairment tests. In accordance with ASC 360 “Property Plant and Equipment,” the Company reviews the carrying value of intangibles subject to amortization and long-lived assets for impairment throughout the year or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.
Property and equipment
Property and equipment stated at the lower of cost or estimated net recoverable amount. The cost of property, plant and equipment is depreciated using the straight-line method based on the lesser of the estimated useful lives of the assets or the lease term. Schedule of Estimated Useful Lives of Property, Plant and Equipment
Repairs and maintenance expenditures are charged to operations as incurred. Major improvements and replacements, which extend the useful life of an asset, are capitalized and depreciated over the remaining estimated useful life of the asset. When assets are retired or sold, the cost and related accumulated depreciation and amortization are eliminated and any resulting gain or loss is reflected in operations.
| 21 |
Advertising
The Company expenses advertising costs as they are incurred. Advertising costs were $109,913 and $60,898 for the year ended December 31, 2023 and 2022, respectively.
Recent Accounting Pronouncements
The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.
NOTE 3 – CONTRACTS IN PROCESS
The net unbilled accounts receivables (deferred revenues) position for contracts in process, related to the website design and implementation services, consisted of the following:
|
|
| December 31, |
|
| December 31, |
| ||
|
|
| 2023 |
|
| 2022 |
| ||
| Costs on uncompleted contracts |
| $ | 1,153,649 |
|
| $ | 643,034 |
|
| Estimated earnings |
|
| 218,551 |
|
|
| 408,912 |
|
| Total costs and estimated profits on uncompleted contracts |
|
| 1,372,200 |
|
|
| 1,051,946 |
|
| Add: unbilled amounts on completed contracts |
|
| 2,500 |
|
|
| - |
|
| Less: Progress billings |
|
| (1,694,279 | ) |
|
| (970,423 | ) |
| Unbilled accounts receivables (deferred revenues), net |
| $ | (319,579 | ) |
| $ | 81,523 |
|
The net asset (liability) position for contracts in process is included in the accompanying consolidated balance sheets as follows:
|
|
| December 31, 2023 |
|
| December 31, 2022 |
| ||
| Unbilled accounts receivable costs and estimated earnings in excess of billings on uncompleted contracts |
| $ | 93,306 |
|
| $ | 142,747 |
|
| Deferred revenues - Billings in excess of costs and estimated earnings on uncompleted contracts |
|
| (412,885 | ) |
|
| (61,224 | ) |
| Unbilled accounts receivables (deferred revenues), net |
| $ | (319,579 | ) |
| $ | 81,523 |
|
| 22 |
NOTE 4 – DEFERRED REVENUE
Deferred revenue as of December 31, 2023 and 2022 consisted of the following:
|
|
| For the years ended December 31, |
| |||||
|
|
| 2023 |
|
| 2022 |
| ||
| Website design and implementation |
| $ | 412,885 |
|
| $ | 61,224 |
|
| Website management |
|
| 50,083 |
|
|
| 58,076 |
|
| Total deferred revenue |
| $ | 462,968 |
|
| $ | 119,300 |
|
Changes in the balance of deferred revenue for the periods presented are as follows:
|
|
| Deferred Revenue |
| |
| Balance as of December 31, 2021 |
| $ | 708,390 |
|
| Billings for the period |
|
| 3,715,365 |
|
| Revenue recognized |
|
| (4,304,455 | ) |
| Balance as of December 31, 2022 |
|
| 119,300 |
|
| Billings for the period |
|
| 3,841,040 |
|
| Revenue recognized |
|
| (3,497,372 | ) |
| Balance as of December 31, 2023 |
| $ | 462,968 |
|
Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and non-cancelable contracts that will be invoiced and recognized as revenue in future periods ("backlog"). While deferred revenue is recorded on our balance sheet as a liability, backlog is not recorded in revenue, deferred revenue or elsewhere in our consolidated financial statements until we establish a contractual right to invoice, at which point it is recorded as revenue or deferred revenue as appropriate. As of December 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $462,968 in deferred revenue and $2,052,533 in backlog. As of December 31, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $119,300 in deferred revenue and $651,084 in backlog.
We expect that the amount of backlog relative to the total value of our contracts will change from year to year due to several factors, including the amount invoiced early in the contract term, the timing and duration of customer agreements, varying invoicing cycles of agreements and changes in customer financial circumstances. Accordingly, we believe that fluctuations in backlog are not always a reliable indicator of future revenues and we do not utilize backlog internally as a key management metric.
| 23 |
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 2023 and 2022:
|
|
| As of |
| |||||
|
|
| December 31, |
|
| December 31, |
| ||
|
|
| 2023 |
|
| 2022 |
| ||
| Property and equipment |
| $ | 3,340 |
|
| $ | - |
|
| Less: accumulated depreciation |
|
| (186 | ) |
|
| - |
|
| Total |
| $ | 3,154 |
|
| $ | - |
|
During the years ended December 31, 2023 and 2022 the Company recorded depreciation expense of $186 and $11,347, which is included in general and administrative expenses in the accompanying statement of operations.
During the year ended December 31, 2022, the Company sold all of the office equipment on hand for cash proceeds of $11,184 which resulted in a gain on the sale of $7,229.
NOTE 6 – NOTE PAYABLE
On November 8, 2022, the Company entered into an agreement with David Wolf, one of its members to purchase their 23.75% ownership of the Company for a purchase price of $610,000 under the Membership Interest Purchase Agreement (“MIPA”). In exchange for the purchase, the Company entered into a Note Payable (the “Note”) agreement whereby the Company agreed to repay the purchase amount in monthly installments over the next 5 years, with each payment having a required minimum monthly amount of $5,000. As of December 31, 2023 the balance on the note was $464,500, all of which was current and as of December 31, 2022 the balance on the note was $576,666, of which $70,950 was current.
The following table shows the estimated future maturities of the Note as of December 31, 2023.
| Fiscal Year Ending |
| Minimum Principal |
| |
| December 31, |
| payments |
| |
| 2024 |
| $ | 464,500 |
|
| 2025 - 2028 |
|
| - |
|
| Total future payments |
|
| 464,500 |
|
| Less current portion of Note Payable |
|
| (464,500 | ) |
| Long-term portion of Note Payable |
| $ | - |
|
NOTE 7 – COMMITMENTS AND CONTINGENCIES
The Company, from time to time, may be involved with lawsuits arising in the ordinary course of business. In the opinion of the Company's management, any liability resulting from such litigation would not be material in relation to the Company's consolidated financial position, results of operations and cash flows. There is no pending or threatened litigation.
| 24 |
NOTE 8 – SUBSEQUENT EVENTS
Management has evaluated subsequent events through February 27, 2025, the date the financial statements were available to be issued. Based on this evaluation, no additional material events were identified which require adjustment or disclosure in the financial statements except as disclosed below.
On September 20, 2024, the Company and its owners Mark Gisi, James Keller and Vincent Giordano, entered into an Asset Purchase Agreement (“Asset Purchase Agreement”) with Onfolio Holdings Inc.’s (“Onfolio”) and it majority owned subsidiary Eastern Standard LLC (“Eastern Standard Delaware”), a Delaware limited liability company. Pursuant to the Asset Purchase Agreement, Eastern Standard Delaware will purchase from the Company substantially all of the Company’s assets utilized in the operation of its business of providing digital marketing services, including integrated branding, and digital customer experiences (the “Business Assets”).
Pursuant to the Asset Purchase Agreement, and subject to the terms and conditions contained therein, at the closing, the Company agreed to sell to Eastern Standard Delaware the Business Assets, all as more fully described in the Asset Purchase Agreement. The aggregate purchase price for the Business Assets is $2,160,000. As of the closing, Onfolio owns 70% of Eastern Standard Delaware in exchange for $1,250,000 payable pursuant to two secured promissory notes which are guaranteed by the Onfolio, and $410,000 of the Onfolio’s Series A Preferred Shares. The entities comprising Onfolio’s special purpose vehicle funding program own an aggregate of 20% of Eastern Standard Delaware in exchange for $500,000 payable in cash. The sellers of the Company own a 10% roll-over equity interest in Eastern Standard Delaware. The transaction closed on October 18, 2024.
On September 19, 2024, the Company entered into a settlement agreement with David Wolf, related to the outstanding Note as discussed in Note 6 above. Pursuant to the settlement agreement, the Company paid David Wolf $376,917 in full settlement of the amounts owed under the Note, after required payments made during 2024, and all other claims.
| 25 |
EXHIBIT 99.2
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial data are presented to illustrate the effect the October 18, 2024 acquisition by Onfolio Holdings, Inc. (the “Company”), from Eastern Standard, LLC, substantially all of the Seller’s assets utilized in the operation of the business of digital marketing services, including integrated branding, and digital customer experiences, which will be known as “Eastern Standard” (the “Eastern Standard Acquisition” or the “Acquired Business”);
The following unaudited pro forma combined balance sheet data as of September 30, 2024 is presented as if the Eastern Standard Acquisition had occurred on September 30, 2024. The following unaudited pro forma combined statement of operations data for the nine months ended September 30, 2024 and the year ended December 31, 2023 is presented as if the Acquisitions occurred on January 1, 2023.
The pro forma adjustments are based upon available information and certain assumptions that the Company believes are reasonable under the circumstances; however, the actual results could differ. The pro forma adjustments are directly attributable to the Acquisition and are expected to have a continuing impact on the results of operations of the Company. Management believes that all adjustments necessary to present fairly the unaudited pro forma combined financial statements have been made. The unaudited pro forma combined financial statements are presented for informational purposes only and are not necessarily indicative of the results of operations that would have resulted had the Acquisition been consummated on the dates indicated, and should not be construed as being representative of the Company’s future results of operations or financial position.
The Acquired Business assets, liabilities and results of operations presented herein were derived from the audited financial statements of the Acquired Business for the years ended December 31, 2023 and 2022, the unaudited interim financial statements for the nine months ended September 30, 2024 (the “Acquired Business Financial Statements”).
The unaudited pro forma combined financial statement data should be read in conjunction with (a) the historical consolidated financial statements and accompanying notes thereto of the Company for the year ended December 31, 2023, which were included in the Company’s Form 10K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on April 24, 2024, (b) the historical unaudited consolidated quarterly financial statements and accompanying notes thereto of the Company for the nine months ended September 30, 2024, which were included in the Company’s Form 10-Q for the nine months ended September 30, 2024, as filed with the Securities and Exchange Commission on November 14, 2024 and (c) the Acquired Business Financial Statements, which are included as Exhibit 99.1, to this Current Report on Form 8-K/A of which these Unaudited Pro Forma Combined Financial Statements are included as Exhibit 99.2.
The unaudited pro forma combined financial statements included herein constitute forward-looking information and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. See the sections titled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Information” in the Annual Report and the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, as filed with the Commission on November 14, 2024.
| 1 |
ONFOLIO HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2024
|
|
| Consolidated Historical |
|
|
|
| Estern Standard Pro Forma |
|
| Combined Pro Forma |
| |||||
|
|
| September 30, 2024 |
|
| Eastern Standard |
|
| Adjustments ( See Notes) |
|
| September 30, 2024 |
| ||||
| ASSETS |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Current Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Cash and cash equivalents |
| $ | 363,244 |
|
| $ | 886,997 |
|
|
| (886,997 | )(a) |
| $ | 363,244 |
|
| Accounts receivable, net |
|
| 226,664 |
|
|
| 508,295 |
|
|
| (152,724 | )(c) |
|
| 582,235 |
|
| Unbilled accounts receivable |
|
|
|
|
|
| 245,175 |
|
|
| - |
|
|
| 245,175 |
|
| Inventory |
|
| 55,330 |
|
|
| - |
|
|
| - |
|
|
| 55,330 |
|
| Prepaid expenses and other current assets |
|
| 155,305 |
|
|
| 43,288 |
|
|
| (43,288 | )(c) |
|
| 155,305 |
|
| Total current assets |
|
| 800,543 |
|
|
| 1,683,755 |
|
|
| (1,083,009 | ) |
|
| 1,401,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fixed Assets, net |
|
| - |
|
|
| 5,135 |
|
|
| - |
|
|
| 5,135 |
|
| Intangible assets |
|
| 4,069,795 |
|
|
| 874 |
|
|
| 1,129,126 | (d) |
|
| 5,199,795 |
|
| Goodwill |
|
| 3,112,987 |
|
|
|
|
|
|
| 1,141,178 | (e) |
|
| 4,254,165 |
|
| Due from related party |
|
| 126,013 |
|
|
| - |
|
|
| - |
|
|
| 126,013 |
|
| Investment in unconsolidated joint ventures, cost method |
|
| 188,007 |
|
|
| - |
|
|
| - |
|
|
| 188,007 |
|
| Investment in unconsolidated joint ventures, equity method |
|
| 267,483 |
|
|
| - |
|
|
| - |
|
|
| 267,483 |
|
| Other assets |
|
| 10,323 |
|
|
| - |
|
|
| - |
|
|
| 10,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
| TOTAL ASSETS |
|
| 8,575,151 |
|
|
| 1,689,764 |
|
| 1,187,295 |
|
|
| 11,452,210 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accounts payable and other current liabilities |
|
| 786,716 |
|
|
| 239,405 |
|
|
| (239,405 | )(c) |
|
| 786,716 |
|
| Accrued compensation |
|
| - |
|
|
| 97,890 |
|
|
| (97,890 | )(c) |
|
| - |
|
| Dividends payable |
|
| 87,248 |
|
|
| - |
|
|
| - |
|
|
| 87,248 |
|
| Notes Payable, current |
|
| 311,577 |
|
|
|
|
|
|
| 1,250,000 | (b) |
|
| 1,561,577 |
|
| Contingent consideration |
|
| 1,929,000 |
|
|
| - |
|
|
| - |
|
|
| 1,929,000 |
|
| Deferred Revenue |
|
| 235,321 |
|
|
| 477,059 |
|
|
| - |
|
|
| 712,380 |
|
| Total current liabilities |
|
| 3,349,862 |
|
|
| 814,354 |
|
|
| 912,705 |
|
|
| 5,076,921 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Notes payable |
|
| 840,000 |
|
|
| - |
|
|
| - |
|
|
| 840,000 |
|
| Notes payable, related parties |
|
| 199,000 |
|
|
| - |
|
|
| - |
|
|
| 199,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities |
|
| 4,388,862 |
|
|
| 814,354 |
|
|
| 912,705 |
|
|
| 6,115,921 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net parent investment |
|
| - |
|
|
| 875,410 |
|
|
| (875,410 | )(c) |
|
| - |
|
| Preferred stock |
|
| 118 |
|
|
| - |
|
|
| 16 | (b) |
|
| 134 |
|
| Common stock |
|
| 5,128 |
|
|
| - |
|
|
| - |
|
|
| 5,128 |
|
| Additional paid-in capital |
|
| 21,877,261 |
|
|
| - |
|
|
| 409,984 | (b) |
|
| 22,287,245 |
|
| Accumulated other comprehensive income |
|
| 105,617 |
|
|
| - |
|
|
| - |
|
|
| 105,617 |
|
| Retained earnings (accumulated deficit) |
|
| (18,106,474 | ) |
|
| - |
|
| - |
|
|
| (18,106,474 | ) | |
| Total Onfolio Inc. stockholders equity |
|
| 3,881,650 |
|
|
| 875,410 |
|
|
| (465,410 | ) |
|
| 4,291,650 |
|
| Non-Controlling Interest |
|
| 304,639 |
|
|
|
|
|
|
| 740,000 | (b) |
|
| 1,044,639 |
|
| Total Stockholders' Equity |
|
| 4,186,289 |
|
|
| 875,410 |
|
|
| 274,590 |
|
|
| 5,336,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
| $ | 8,575,151 |
|
| $ | 1,689,764 |
|
| $ | 1,187,295 |
|
| $ | 11,452,210 |
|
| 2 |
ONFOLIO HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024
|
|
| Consolidated |
|
|
|
|
| Eastern Standard |
|
| Combined |
| ||||
|
|
| September 30, 2024 |
|
| Eastern Standard |
|
| Pro Forma Adjustments | September 30, 2024 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Revenues |
| $ | 5,325,273 |
|
| $ | 3,453,126 |
|
| $ | - |
|
| $ | 8,778,399 |
|
| Cost of revenues |
|
| 2,139,831 |
|
|
| 1,684,488 |
|
|
| - |
|
|
| 3,824,319 |
|
| Gross profit |
|
| 3,185,442 |
|
|
| 1,768,638 |
|
|
| - |
|
|
| 4,954,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Selling, general and administrative expenses |
|
| 4,316,089 |
|
|
| 1,266,721 |
|
|
| 255,375 | (f) |
|
| 5,838,185 |
|
| Professional Fees |
|
| 595,056 |
|
|
| - |
|
|
| - |
|
|
| 595,056 |
|
| Acquisition costs |
|
| 122,266 |
|
|
| - |
|
|
| - |
|
|
| 122,266 |
|
| Impairment of goodwill and intangible assets |
|
| 4,678 |
|
|
| - |
|
|
| - |
|
|
| 4,678 |
|
| Total operating expenses |
|
| 5,038,089 |
|
|
| 1,266,721 |
|
|
| 255,375 |
|
|
| 6,560,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) from operations |
|
| (1,852,647 | ) |
|
| 501,917 |
|
|
| (255,375 | ) |
|
| (1,606,105 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Equity Method Income |
|
| (5,560 | ) |
|
| - |
|
|
| - |
|
|
| (5,560 | ) |
| Dividend Income |
|
| 5,844 |
|
|
| - |
|
|
| - |
|
|
| 5,844 |
|
| Interest income (expense), net |
|
| (60,564 | ) |
|
| - |
|
|
| (75,000 | )(g) |
|
| (135,564 | ) |
| Other income |
|
| 2,934 |
|
|
| 4,106 |
|
|
| - |
|
|
| 7,040 |
|
| Total other income (expense) |
|
| (57,346 | ) |
|
| 4,106 |
|
|
| (75,000 | ) |
|
| (128,240 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) before income taxes |
|
| (1,909,993 | ) |
|
| 506,023 |
|
|
| (330,375 | ) |
|
| (1,734,345 | ) |
| Income tax benefit |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Net income (loss) |
|
| (1,909,993 | ) |
|
| 506,023 |
|
|
| (330,375 | ) |
|
| (1,734,345 | ) |
| Net loss attributable to noncontrolling interest |
|
| 9,961 |
|
|
| - |
|
|
| (257,889 | )(h) |
|
| (247,928 | ) |
| Net loss attributable to Onfolio Holdings Inc. |
|
| (1,900,032 | ) |
|
| 506,023 |
|
|
| (588,264 | ) |
|
| (1,982,273 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dividends on Preferred stock |
|
| (253,833 | ) |
|
| - |
|
|
| (36,900 | )(i) |
|
| (290,733 | ) |
| Net income (loss) available to Common Shareholders |
| $ | (2,153,865 | ) |
| $ | 506,023 |
|
| $ | (625,164 | ) |
| $ | (2,273,006 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
| $ | (0.42 | ) |
|
|
|
|
|
|
|
|
| $ | (0.44 | ) |
| Diluted |
| $ | (0.42 | ) |
|
|
|
|
|
|
|
|
| $ | (0.44 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares used in computing earnings/(loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
| 5,114,767 |
|
|
|
|
|
|
|
|
|
|
| 5,114,767 |
|
| Diluted |
|
| 5,114,767 |
|
|
|
|
|
|
|
|
|
|
| 5,114,767 |
|
| 3 |
ONFOLIO HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2023
|
|
| Consolidated Historical |
|
|
|
|
| Eastern Standard Pro Forma |
|
| Combined Pro Forma |
| ||||
|
|
| December 31, 2023 |
|
| Eastern Standard |
|
| Adjustments $ |
|
| December 31, 2023 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Revenues |
| $ | 5,239,986 |
|
| $ | 3,497,372 |
|
| $ | - |
|
| $ | 8,737,358 |
|
| Cost of revenues |
|
| 1,997,155 |
|
|
| 1,807,629 |
|
|
| - |
|
|
| 3,804,784 |
|
| Gross profit |
|
| 3,242,831 |
|
|
| 1,689,743 |
|
|
| - |
|
|
| 4,932,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Selling, general and administrative expenses |
|
| 6,040,688 |
|
|
| 1,714,135 |
|
|
| 340,500 | (f) |
|
| 8,095,323 |
|
| Professional Fees |
|
| 1,160,410 |
|
|
| - |
|
|
| - |
|
|
| 1,160,410 |
|
| Acquisition costs |
|
| 3,952,433 |
|
|
| - |
|
|
| - |
|
|
| 3,952,433 |
|
| Impairment of goodwill and intangible assets |
|
| 326,899 |
|
|
| - |
|
|
| - |
|
|
| 326,899 |
|
| Total operating expenses |
|
| 11,480,430 |
|
|
| 1,714,135 |
|
|
| 340,500 |
|
|
| 13,535,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) from operations |
|
| (8,237,599 | ) |
|
| (24,392 | ) |
|
| (340,500 | ) |
|
| (8,602,491 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Equity Method Income |
|
| 13,190 |
|
|
| - |
|
|
| - |
|
|
| 13,190 |
|
| Dividend Income |
|
| 1,610 |
|
|
| - |
|
|
| - |
|
|
| 1,610 |
|
| Interest income (expense), net |
|
| 75,041 |
|
|
| 7,475 |
|
|
| (100,000 | )(g) |
|
| (17,484 | ) |
| Other income |
|
| 2,937 |
|
|
| 4,814 |
|
|
| - |
|
|
| 7,751 |
|
| Total other income (expense) |
|
| 92,778 |
|
|
| 12,289 |
|
|
| (100,000 | ) |
|
| 5,067 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) before income taxes |
|
| (8,144,821 | ) |
|
| (12,103 | ) |
|
| (440,500 | ) |
|
| (8,597,424 | ) |
| Income tax (provision) benefit |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Net income (loss) |
|
| (8,144,821 | ) |
|
| (12,103 | ) |
|
| (440,500 | ) |
|
| (8,597,424 | ) |
| Net loss attributable to noncontrolling interest |
|
| - |
|
|
| - |
|
|
| (132,089 | )(h) |
|
| (132,089 | ) |
| Net loss attributable to Onfolio Holdings Inc. |
|
| (8,144,821 | ) |
|
| (12,103 | ) |
|
| (572,589 | ) |
|
| (8,729,513 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dividends on Preferred stock |
|
| (227,298 | ) |
|
| - |
|
|
| (49,200 | )(i) |
|
| (276,498 | ) |
| Net income (loss) available to Common Shareholders |
| $ | (8,372,119 | ) |
| $ | (12,103 | ) |
| $ | (621,789 | ) |
| $ | (9,006,011 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
| $ | (1.64 | ) |
|
|
|
|
|
|
|
|
| $ | (1.76 | ) |
| Diluted |
| $ | (1.64 | ) |
|
|
|
|
|
|
|
|
| $ | (1.76 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares used in computing earnings/(loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
| 5,107,395 |
|
|
|
|
|
|
|
|
|
|
| 5,107,395 |
|
| Diluted |
|
| 5,107,395 |
|
|
|
|
|
|
|
|
|
|
| 5,107,395 |
|
| 4 |
ONFOLIO HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
| 1. | DESCRIPTION OF TRANSACTIONS |
Acquisition of Eastern Standard
On September 20, 2024, Eastern Standard LLC (“Eastern Standard Delaware”), a Delaware limited liability company and Onfolio Holdings Inc.’s (the “Company”) majority owned subsidiary, entered into an Asset Purchase Agreement (“Asset Purchase Agreement”) with Eastern Standard, LLC (“Eastern Standard Pennsylvania”), a Pennsylvania limited liability company, Mark Gisi, James Keller and Vincent Giordano. Pursuant to the Asset Purchase Agreement, Eastern Standard Delaware will purchase from Eastern Standard Pennsylvania all of Eastern Standard Pennsylvania’s assets utilized in the operation of its business of providing digital marketing services, including integrated branding, and digital customer experiences (the “Acquired Business”).
Pursuant to the Asset Purchase Agreement, and subject to the terms and conditions contained therein, at the closing, Eastern Standard Pennsylvania agreed to sell to Eastern Standard Delaware the Acquired Business, all as more fully described in the Asset Purchase Agreement. The aggregate purchase price for the Acquired Business is $2,160,000. As of the closing, the Company owns 70% of Eastern Standard Delaware in exchange for $1,250,000 payable pursuant to two secured promissory notes which are guaranteed by the Company, and $410,000 of the Company’s Series A Preferred Shares. The entities comprising the Company’s special purpose vehicle funding program owns an aggregate of 20% of Eastern Standard Delaware in exchange for $500,000 payable in cash. Eastern Standard Pennsylvania owns a 10% roll-over equity interest in Eastern Standard Delaware.
The transaction closed on October 18, 2024, when consideration was transferred by Onfolio and control was obtained by Onfolio and will be accounted for as a business combination under ASC 805.
| 2. | BASIS OF PRESENTATION |
The accompanying unaudited pro forma combined financial statements are based on the Company’s and the Acquired Businesses’ historical financial as adjusted to give effect to the pro forma adjustments necessary to reflect the Acquisitions and the Company’s new equity issuance to finance the acquisition. The unaudited pro forma combined statement of operations for the nine months ended September 30, 2024 and the year ended December 31, 2023, gives effect to the Acquired Business as if it had occurred on January 1, 2024 and 2023, respectively and the pro forma combined balance sheet as of September 30, 2024 gives effect to the Acquisition as if it had occurred on September 30, 2024.
| 3. | PRELIMINARY PURCHASE PRICE ALLOCATIONS |
The preliminary purchase price for the Acquired Businesses have been allocated to the assets acquired and liabilities assumed for purposes of this pro forma financial information based on their estimated relative fair values. The purchase price allocations herein are preliminary. The final purchase price allocations for the Acquired Businesses will be determined after completion of a thorough analysis to determine the fair value of all assets acquired and liabilities assumed but in no event later than one year following completion of the Acquisitions. Accordingly, the final acquisition accounting adjustments could differ materially from the accounting adjustments included in the pro forma financial statements presented herein. Any increase or decrease in the fair value of the assets acquired and liabilities assumed, as compared to the information shown herein, could also change the portion of purchase price allocable to goodwill and could impact the operating results of the Company following the acquisition due to differences in purchase price allocation, depreciation and amortization related to some of these assets and liabilities.
| 5 |
Preliminary Purchase Price Allocation
The acquisition of Eastern Standard is being accounted for as a business combination under Financial Accounting Standards Board Accounting Standards Codification (ASC) 805. The following information summarizes the provisional purchase consideration and preliminary allocation of the fair values assigned to the assets at the purchase date:
| Preliminary Purchase Price: |
|
|
| |
|
|
|
|
| |
| Cash |
| $ | 500,000 |
|
| Promissory Note, net of discount |
|
| 1,250,000 |
|
| Preferred Shares |
|
| 410,000 |
|
| Roll-over equity |
|
| 240,000 |
|
| Total preliminary purchase consideration |
|
| 2,400,000 |
|
|
|
|
|
|
|
| Preliminary Purchase Price Allocation |
|
|
|
|
| Accounts receivable |
| $ | 355,572 |
|
| Unbilled receivables |
|
| 245,175 |
|
| Fixed assets |
|
| 5,135 |
|
| Website domains |
|
| 90,000 |
|
| Customer relationships |
|
| 490,000 |
|
| Trademarks and trade names |
|
| 530,000 |
|
| Non-compete agreement |
|
| 20,000 |
|
| Goodwill |
|
| 1,141,177 |
|
| Deferred revenues |
|
| (477,059 | ) |
|
|
|
|
|
|
| Net assets acquired |
| $ | 2,400,000 |
|
| 4. | PRO FORMA ADJUSTMENTS |
The unaudited pro forma combined statements of operations and balance sheets reflect the effect of the following pro forma adjustments:
| (a) | Net pro forma impact to cash as follows: |
| Remove historical cash of Eastern Standard |
|
| (886,997 | ) |
|
|
|
|
|
|
| Net pro forma impact to cash |
| $ | (886,997 | ) |
| (b) | Other Consideration given for asset acquisitions consisting of: |
| Note payable bearing interest at 8% per annum with a maturity date of April 18, 2025 |
| $ | 400,000 |
|
| Note payable bearing interest at 8% per annum with a maturity date of October 18, 2026 |
|
| 850,000 |
|
| Roll-over equity |
|
| 240,000 |
|
| Amount paid by SPV in exchange for equity interest |
|
| 500,000 |
|
| Preferred shares |
|
| 410,000 |
|
| Total other consideration given |
| $ | 2,400,000 |
|
| (c) | Elimination of historical assets and liabilities not acquired as part Acquired Businesses |
| (d) | Estimated Fair Value of intangible assets acquired in acquisitions |
| (e) | Estimated Fair Value of goodwill acquired in business acquisitions |
| (f) | Estimated intangible assets amortization of acquired intangible assets. |
| (g) | Estimated interest from new promissory notes issued as consideration to the sellers of the Acquired Businesses. |
| (h) | Estimated dividends from new preferred shares issued as consideration to the sellers of the Acquired Businesses. |
| (i) | Estimated net loss attributable to the non-controlling interest issued as consideration to the sellers of the Acquired Businesses. |
| 6 |