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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2015
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies |
NOTE 3 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). PRINCIPLES OF CONSOLIDATION All significant intercompany balances and transactions were eliminated in consolidation. The financial statements for the period ended December 31, 2015, have been consolidated to include the Company’s wholly-owned subsidiaries, as well as GreenShift Corporation and its subsidiaries. The financial statements for the periods ended December 31, 2014, have been consolidated to include the Company’s wholly-owned subsidiaries. SEGMENT INFORMATION We determined our reporting units in accordance with FASB ASC 280, “Segment Reporting” (“ASC 280”). We evaluate a reporting unit by first identifying its operating segments under ASC 280. We then evaluate each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meet the definition of a business, we evaluate those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, we determine if the segments are economically similar and, if so, the operating segments are aggregated. We currently have two separate operating segments and reporting units. In our agriculture segment, we generate revenue by licensing commercially-available technologies to U.S. ethanol producers, and providing our licensees with success-driven, value-added services and other solutions based upon our expertise, know-how, technologies, and patent position. We also generate sales in our lifestyle segment by producing and selling activewear and other apparel for women and children, an important early-adopter market for wearable technologies that we are developing. No sales of any kind occur, and no costs of sales of any kind are incurred, in the absence of a license agreement in our agriculture segment. A single management team that reports to the chief operating decision maker comprehensively manages the entire business in each segment. With the exception of the segment classifications noted above, we do not operate any material separate lines of business or separate business entities with respect to our technologies, products and services; nor do we accumulate discrete financial information according to the nature or structure of any specific technology, product and/or service. Instead, management reviews the agriculture and lifestyle segments as distinct operating segments, using financial and other information rendered meaningful only by the fact that such information is presented and reviewed in the aggregate. REVENUE RECOGNITION In our lifestyle segment, we recognize revenue when the following conditions are satisfied: (i) delivery of the product has occurred and (ii) collection is reasonably assured. Under each our lifestyle segment, orders are received via national sales representatives, in house wholesale sales departments and various retail platforms. Once the order is received, they are either automatically or manually inputted into our production system. Our production system generates production orders which our production team takes and produces based on the purchase order terms. Revenue is recognized only when the orders have been shipped. Generally, all orders are paid upon shipment via credit card or wire transfer. For a small percentage, the orders are shipped on terms of less than 30 days. Revenue is recognized at the time of shipment and a related receivable is booked. We experience less than 2% of annual sales in returns. For orders where goods are considered damaged, these items are swapped with new merchandise. Under our agriculture segment, GreenShift recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collection is reasonably assured. GreenShift recognizes revenue from licensing of GreenShift’s corn oil extraction technologies when corn oil sales occur. Licensing royalties are recognized as earned by calculating the royalty as a percentage of gross corn oil sales by the ethanol plants. For the purposes of assessing royalties, the sale of corn oil is deemed to occur when shipped, which is when four basic criteria have been met: (i) persuasive evidence of a customer arrangement; (ii) the price is fixed or determinable; (iii) collectability is reasonably assured, and (iv) product delivery has occurred, which is generally upon shipment to the buyer of the corn oil. To the extent revenues are generated from GreenShift’s licensing support services, GreenShift recognizes such revenues when the services are completed and billed. GreenShift provides process engineering services on fixed price contracts. These services are generally provided over a short period of less than three months. Revenue from fixed price contracts is recognized on a pro rata basis over the life of the contract as they are generally performed evenly over the contract period. GreenShift additionally performs under fixed-price contracts involving design, engineering, procurement, installation, and start-up of oil recovery and other production systems. Revenues and fees on these contracts are recognized using the percentage-of-completion method of accounting. During 2014 and 2015, our percentage-of-completion methods included the efforts-expended percentage-of-completion method and the cost-to-cost method. The efforts-expended method utilizes using measures such as task duration and completion. The efforts-expended approach is used in situations where it is more representative of progress on a contract than the cost-to-cost or the labor-hours method (see below). GreenShift also used the cost-to-cost method which is used to determine the percentage of completion of a project based on the actual costs incurred. Earnings are recognized periodically based upon our estimate of contract revenues and costs in providing the services required under the contract. The percentage of completion method must be used in lieu of the completed contract method when all of the following are present: reasonably reliable estimates can be made of revenue and costs; the construction contract specifies the parties’ rights as to the goods, consideration to be paid and received, and the resulting terms of payment or settlement; the contract purchaser has the ability and expectation to perform all contractual duties; and the contract contractor has the same ability and expectation to perform. Under the completed contract method income is recognized only when a contract is completed or substantially completed. The asset, “costs and estimated earnings in excess of billings on uncompleted contracts,” represents revenues recognized in excess of amounts billed. The liability, “billings in excess of costs and estimated earnings on uncompleted contracts,” represents billings in excess of revenues recognized. EQUITY INVESTMENTS Equity investments in which the Company exercises significant influence but does not control and is not the primary beneficiary are accounted for using the equity method. The Company’s share of its equity method investee’s earnings or losses is included in other income in the accompanying Consolidated Statements of Operations. RECEIVABLES AND CREDIT CONCENTRATION Accounts receivable are uncollateralized, non-interest-bearing customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Accounts receivable are stated at the amount billed to the customer. Accounts receivable in excess of 90 days old are evaluated for delinquency. In addition, we consider historical bad debts and current economic trends in evaluating the allowance for bad debts. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the oldest unpaid invoices. The carrying amount of accounts receivable has been reduced by a valuation allowance that has been set up in the amount $51,000 and $10,000 as of December 31, 2015 and 2014, respectively. Management will continue to review the valuation allowance on a quarterly basis. INVENTORIES Under our agriculture segment, GreenShift maintains an inventory of equipment and components used in systems designed to extract corn oil from licensed ethanol production facilities. The inventory, which consists of equipment and component parts, is held for sale to GreenShift’s licensees on an as needed basis. Inventories are stated at the lower of cost or market, with cost being determined by the specific identification method. Inventories at December 31, 2015 consist of the following:
|  | 2015 |
Equipment inventory |  | $ | 455,000 |
During the year ended December 31, 2015, GreenShift evaluated the inventory on its books and determined that a write-down to market was necessary. As a result, GreenShift wrote down inventory by $236,896 in 2015, which was expensed under cost of goods sold as a loss on inventory valuation. Under our lifestyle segment, the Company’s inventory is stated at the lower of cost or estimated realizable value, with cost primarily determined on a weighted-average cost basis on the first-in, first-out (“FIFO”) method. The Company continuously evaluates the composition of its inventory, assessing slow-turning product. Estimated realizable value of inventory is determined based on an analysis of historical sales trends of our individual products and a forecast of future demand, giving consideration to the value of current orders in-house relating to the future sales of inventory. Estimates may differ from actual results due to quantity, quality, and mix of products in inventory, customer demand, and market conditions. The Company’s historical estimates of these costs and any provisions have not differed materially from actual results. As of December 31, 2015 and 2014, an inventory reserve had not been deemed necessary, and therefore, not recorded. As of December 31, 2015 and 2014, inventory consisted of $154,688 and $121,513 in finished goods, $7,515 and $79,923 in work in process, and $18,279 and $17,980 in raw materials. CASH AND EQUIVALENTS We consider all highly liquid investments with remaining maturities of three months or less at the date of purchase to be cash and cash equivalents. Cash and cash equivalents consist primarily of money market funds and other short-term investments with original maturities of not more than three months stated at cost, which approximates market value. PROPERTY AND EQUIPMENT Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the life of the lease or their useful lives. Gains and losses on depreciable assets retired or sold are recognized in the consolidated statement of operations in the year of disposal, and repair and maintenance expenditures are expensed as incurred. Property, plant and equipment are stated at cost. Expenditures for major renewals and improvements which extend the life or usefulness of the asset are capitalized. Once an asset has been completed and placed in service, it is transferred to the appropriate category and depreciation commences. The Company uses the straight line method for depreciation and depreciates equipment over the estimated useful life of the assets: office and computer equipment over 3-5 years and corn oil extraction systems over a 10 year period. Gains and losses on depreciable assets retired or sold are recognized in the statement of operations in the year of disposal, and repair and maintenance expenditures are expensed as incurred. Property and equipment are stated at cost and include amounts capitalized under capital lease obligations. INTANGIBLE ASSETS The Company accounts for its intangible assets pursuant to ASC 350-20-55-24, “Intangibles – Goodwill and Other”. Under ASC 350, intangibles with definite lives continue to be amortized on a straight-line basis over the lesser of their estimated useful lives or contractual terms. Intangibles with indefinite lives are evaluated at least annually for impairment by comparing the asset’s estimated fair value with its carrying value, based on cash flow methodology. Intangibles with definite lives are subject to impairment testing in the event of certain indicators. Impairment in the carrying value of an asset is recognized whenever anticipated future cash flows (undiscounted) from an asset are estimated to be less than its carrying value. The amount of the impairment recognized is the difference between the carrying value of the asset and its fair value. At December 31, 2015, the Company’s balance sheet included intangible assets with an aggregate carrying value of $224,589 as compared to $589,044 at December 31, 2014. LONG-LIVED ASSETS Under our agriculture segment, GreenShift assesses the valuation of components of its property and equipment and other long-lived assets whenever events or circumstances dictate that the carrying value might not be recoverable. GreenShift bases its evaluation on indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present. If such factors indicate that the carrying amount of an asset or asset group may not be recoverable, GreenShift determines whether an impairment has occurred by analyzing an estimate of undiscounted future cash flows at the lowest level for which identifiable cash flows exist. If the estimate of undiscounted cash flows during the estimated useful life of the asset is less than the carrying value of the asset, GreenShift recognizes a loss for the difference between the carrying value of the asset and its estimated fair value, generally measured by the present value of the estimated cash flows. Under our lifestyle segment, long-lived assets include equipment and intangible assets other than those with indefinite lives. We assess the carrying value of our long-lived asset groups when indicators of impairment exist and recognize an impairment loss when the carrying amount of a long-lived asset is not recoverable when compared to undiscounted cash flows expected to result from the use and eventual disposition of the asset. Indicators of impairment include significant underperformance relative to historical or projected future operating results, significant changes in our use of the assets or in our business strategy, loss of or changes in customer relationships and significant negative industry or economic trends. When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis. If carrying value exceeds projected, net, undiscounted cash flows, an additional analysis is performed to determine the fair value of the asset (or asset group), typically a discounted cash flow analysis, and an impairment charge is recorded for the excess of carrying value over fair value. PROPERTY AND EQUIPMENT Property and equipment are recorded at historical cost less accumulated depreciation, unless impaired. Depreciation is charged to operations over the estimated useful lives of the assets using the straight-line method. Upon retirement or sale, the historical cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized. Expenditures for repairs and maintenance are charged to expense as incurred. BUSINESS ACQUISITIONS Business acquisitions are accounted for under the purchase method of accounting. During 2015, the Company accounted for its acquisitions of Skipjack, Punkzgear and GreenShift and its subsidiaries on the basis that they were between entities under common control. During 2014, Bitzio accounted for all of its acquisitions under purchase method accounting. Under that method, assets and liabilities of the business acquired are recorded at their estimated fair values as of the date of the acquisition, with any excess of the cost of the acquisition over the estimated fair value of the net tangible and intangible assets acquired recorded as goodwill. We make significant judgments and assumptions in determining the fair value of acquired assets and assumed liabilities, especially with respect to acquired intangibles. Using different assumptions in determining fair value could materially impact the purchase price allocation and our financial position and results of operations. Results of operations for acquired businesses are included in the financial statements from the date of acquisition. ACCUMULATED OTHER COMPREHENSIVE INCOME Comprehensive loss includes net loss as currently reported under U.S. GAAP and other comprehensive loss. Other comprehensive loss considers the effects of additional economic events, such as foreign currency translation adjustments, that are not required to be recorded in determining net loss, but rather are reported as a separate component of stockholders’ equity (deficit). Currently the Company has no other comprehensive income. INCOME TAXES Income taxes are accounted for under the asset and liability method, whereby deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax asset will not be realized. All of the subsidiaries are consolidated for state income tax purposes. BASIC AND DILUTED INCOME (LOSS) PER SHARE Basic and diluted net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Our potentially dilutive shares, which include outstanding common stock options, common stock warrants, convertible preferred stock and convertible debentures, have not been included in the computation of diluted net loss per share attributable to common stockholders for all periods presented, as the results would be anti-dilutive. Such potentially dilutive shares are excluded when the effect would be to reduce net loss per share. There were 13,844,616 such potentially dilutive shares excluded for the year ended December 31, 2015. Due to the net loss for the year ended December 31, 2014, all such shares were excluded for that year as they would be anti-dilutive. The following is a reconciliation of weighted common shares outstanding used in the calculation of basic and diluted net income per common share:
|  | Year Ended 12/31/2015 |  |  | Year Ended 12/31/2014 |
Net income (loss) attributable to common stockholders |  | $ | 13,009,764 |  |  | $ | (4,040,122 | )
Adjustments for dilutive shares: |  |  |  |  |  |  |  |
Interest savings |  |  | 510,773 |  |  |  | 791,681 |
Preferred Stock dividend |  |  | 8,767 |  |  |  | — |
Reversal of derivative (gains) losses |  |  | (2,875,835 | ) |  |  | 2,044,298 |
Net income - Adjusted |  |  | 10,653,469 |  |  |  | (1,204,143 | )
Weighted average shares used for basic net income per common share |  |  | 5,722,789,471 |  |  |  | 856,939,107 |
Incremental diluted shares |  |  | 223,315,928,910 |  |  |  | — |
Weighted average shares used for diluted net income per common share |  |  | 229,038,618,381 |  |  |  | 856,939,107 |
Net income per common share: |  |  |  |  |  |  |  |
Basic |  | $ | 0.00 |  |  | $ | (0.00 | )
Diluted |  | $ | 0.00 |  |  | $ | (0.00 | )
USE OF ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the financial statements, and (iii) the reported amounts of revenues and expenses during the reporting period. We use estimates and assumptions in accounting for the following significant matters, among others:
- | Allowances for doubtful accounts;
- | Valuation of acquired assets;
- | Inventory valuation and allowances;
- | Fair value of derivative instruments and related hedged items;
- | Useful lives of property and equipment and intangible assets;
- | Asset retirement obligations;
- | Long lived asset impairments, including goodwill;
- | Contingencies;
- | Fair value of options and restricted stock granted under our stock-based compensation plans; and,
- | Tax related items
Actual results may differ from previously estimated amounts, and such differences may be material to our consolidated financial statements. We periodically review estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made. The revisions to estimates or assumptions during the periods presented in the accompanying consolidated financial statements were not considered to be significant. DEFERRED REVENUE Under our agriculture segment, deposits from customers are not recognized as revenues, but as liabilities, until the following conditions are met: revenues are realized when cash or claims to cash (receivable) are received in exchange for goods or services or when assets received in such exchange are readily convertible to cash or claim to cash or when such goods/services are transferred. When such income item is earned, the related revenue item is recognized, and the deferred revenue is reduced. To the extent revenues are generated from GreenShift’s licensing support services, GreenShift recognizes such revenues when services are completed and billed. FINANCIAL INSTRUMENTS The carrying values of accounts receivable, other receivables, accounts payable and accrued expenses approximate their fair values due to their short term maturities. The carrying values of the Company’s long-term debt approximate their fair values based upon a comparison of the interest rate and terms of such debt to the rates and terms of debt currently available to the Company. It was not practical to estimate the fair value of the convertible debt. In order to do so, it would be necessary to obtain an independent valuation of these unique instruments. The cost of that valuation would not be justified in light of the materiality of the instruments to the Company. DERIVATIVE FINANCIAL INSTRUMENTS Certain of the Company’s debt and equity instruments include embedded derivatives that require bifurcation from the host contract under the provisions of ASC 815-40, Derivatives and Hedging. Under the provisions of these statements, the Company records the related derivative liabilities at fair value and records the accounting gain or loss resulting from the change in fair values at the end of each reporting period. Change in the derivatives instruments resulted in gain of $3,916,310 for the year ended December 31, 2015. In connection with the Company’s Convertible Notes beginning in November 2013, the Company became contingently obligated to issue shares in excess of the 4.2 billion authorized by shareholders. Consequently, the ability to settle these obligations with shares would be unavailable causing these obligations to potentially be settled in cash. This condition creates a derivative liability. Based on ASC 815-10-15-74, Series E shares to EXO and Series F shares, are not considered by the company as a derivative, as the conversion option underlying the Series E shares issued to TCA is not a “tainted” derivative. They are convertible preferred stock for which the conversion option is more akin to equity and as such is being classified in stockholders’ equity as a standalone instrument. In addition, based on ASC 718, Stock-based Compensation and ASC 505-50, Equity-based Payments to Non-Employees, the company excluded the employee options from the derivative liability accounting. The Company has a sequencing policy regarding share settlement wherein instruments with the earliest issuance date would be settled first. The sequencing policy also considers contingently issuable additional shares, such as those issuable upon a stock split, to have an issuance date to coincide with the event giving rise to the additional shares. Using this sequencing policy, all instruments convertible into common stock, including warrants and the conversion feature of notes payable, issued subsequent to November 18, 2013 are derivative liabilities with the exception of the noted Series E and F preferred shares (that were issued in conjunction with the acquisition of GreenShift) and any employee and director options, for which other accounting guidance is applicable. FAIR VALUE INSTRUMENTS Effective July 1 2009, the Company adopted ASC 820, Fair Value Measurements and Disclosures. This topic defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This guidance supersedes all other accounting pronouncements that require or permit fair value measurements. The Company accounted for the convertible debentures in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in the convertible debentures could result in the note principal and related accrued interest being converted to a variable number of the Company’s common shares. Effective July 1 2009, the Company adopted ASC 820-10-55-23A, Scope Application to Certain Non-Financial Assets and Certain Non-Financial Liabilities, delaying application for non-financial assets and non-financial liabilities as permitted. ASC 820 establishes a framework for measuring fair value, and expands disclosures about fair value measurements. In January 2010, the FASB issued an update to ASC 820, which requires additional disclosures about inputs into valuation techniques, disclosures about significant transfers into or out of Levels 1 and 2, and disaggregation of purchases, sales, issuances, and settlements in the Level 3 roll forward disclosure. ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:
Level 1 | quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active exchange-traded securities and exchange-based derivatives
Level 2 | inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges
Level 3 | unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. Financial assets and liabilities utilizing Level 3 inputs include infrequently-traded, non-exchange-based derivatives and commingled investment funds, and are measured using present value pricing models
The fair value of certain of the embedded conversion liabilities was determined using the present value model calculating fair value based on the conversion discount as well as the present value based on term and bond rate. During the year ended December 31, 2014, following assumptions were used: (1) conversion discounts of 10% to 50%; (2) term of less than one year to 8 years and (3) bond rate of 10%. During the year ended December 31, 2015, the following assumptions were used: (1) conversion discounts of 10%; (2) term of less than one year to 7 years and (3) bond rate of 10%. Fluctuations in the conversion discount percentage have the greatest effect on the value of the conversion liabilities valuations during each reporting period. As the conversion discount percentage increases for each of the related conversion liabilities instruments, the change in the value of the conversion liabilities increases, therefore increasing the liabilities on the Company’s balance sheet. The higher the conversion discount percentage, the higher the liability. A 10% change in the conversion discount percentage would result in more than a $2,088,439 change in our Level 3 fair value. The fair value of embedded conversion feature of 320,000 shares of Series E Preferred Stock determined using a Black-Scholes Simulation. This model requires the input of highly subjective assumptions, including the expected price volatility, which is based on the historical volatility of a peer group of publicly traded companies. Changes in the subjective input assumptions can materially affect the estimate of fair value of the warrants and the Company’s results of operations could be impacted. The following assumptions were used in calculations of the Black-Scholes model for the year ended December 31, 2015 and 2014:
|  | For the Year Ended December 31, 2015 |  |  | For the Year Ended December 31, 2014 |
Annual dividend yield |  |  | -% |  |  |  | -% |
Expected life (years) |  |  | 1.00 |  |  |  | - |
Risk-free interest rate |  |  | 0.65% |  |  |  | -% |
Expected volatility |  |  | 334% |  |  |  | -% |
The following table presents the embedded derivatives, the Company’s only financial assets or liabilities measured and recorded at fair value on the Company’s Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy during the year ended December 31, 2015:
Embedded derivative liabilities as of December 31, 2015 |  |  |  |
Level 1 |  | $ | — |
Level 2 |  |  | — |
Level 3 |  |  | 11,185,625 |
Total |  | $ | 11,185,625 |
The following table reconciles, for the period ended December 31, 2015, the beginning and ending balances for financial instruments that are recognized at fair value in the consolidated financial statements:
Balance of embedded derivative as of December 31, 2013 |  | $ | 827,158 |
Additions related to embedded conversion features of convertible debt issued |  |  | 777,150 |
Change in fair value of conversion features |  |  | 2,044,298 |
Reductions in fair value due to principal conversions |  |  | (436,406 | )
Balance of embedded derivatives at December 31, 2014 |  |  | 3,212,200 |
Additions related to embedded conversion features of convertible debt issued |  |  | 13,343,898 |
Change in fair value of conversion features |  |  | (2,820,677 | )
Reductions in fair value due to repayments/redemptions |  |  | (1,669,533 | )
Change in fair value of conversion features |  |  | (368,674 | )
Reductions in fair value due to principal conversions |  |  | (511,589 | )
Balance at December 31, 2015 |  | $ | 11,185,625 |
STOCK BASED COMPENSATION The Company accounts for stock, stock options and stock warrants issued for services and compensation by employees under the fair value method. For non-employees, the fair market value of the Company’s stock is measured on the date of stock issuance or the date an option/warrant is granted as appropriate under ASC 718 “Compensation – Stock Compensation”. The Company determined the fair market value of the warrants/options issued under the Black-Scholes Pricing Model. Effective July 1, 2006, the Company adopted the provisions of ASC 718, which establishes accounting for equity instruments exchanged for employee services. Under the provisions ASC 718, share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant). COMMON CONTROL On December 31, 2015, FLUX Carbon Corporation (“FCC”) transferred its ownership interest in Viridis Capital LLC (“Viridis”) to the Company in exchange for an 80% equity interest in Bitzio. Viridis was the owner of 800,115 shares of GreenShift Corporation (“GreenShift”) Series D Preferred Stock at the time of the transfer. On the same date, the Company acquired the beneficial ownership interest in 187,029 shares of GreenShift Series D Preferred Stock from EXO Opportunity Fund LLC (“EXO”) in exchange for 200,000 shares of the Company’s Series E Preferred Stock. On December 31, 2015, the Company acquired 100,000 shares of GreenShift’s Series G Preferred Stock for $2.5 million in cash, plus an additional 700,000 shares of GreenShift’s Series G Preferred Stock in exchange for the surrender of Bitzio’s beneficial ownership interest in 987,144 shares of GreenShift’s Series D Preferred Stock. At the completion of the foregoing transactions, the Company was the beneficial owner of 800,000 shares of GreenShift’s Series G Preferred Stock, and FCC was the beneficial owner of 800,000 shares of the Company’s Series F Preferred Stock. FCC is owned by Kevin Kreisler, our Chairman and Chief Executive Officer, as well as the Chairman and Chief Executive Officer of GreenShift prior to and after closing of the above. Mr. Kreisler was additionally the manager of 112359 Factor Fund LLC (“Factor Fund”), the Company’s lender and collateral agent in respect of the Company’s secured loans at the time these transactions were completed. The Company accordingly accounted for these transactions on the basis that they were between entities under common control. On February 26, 2015, Lexi –Luu Designs, Inc. entered a Securities Purchase Agreement with Skipjack Dive and Dancewear Inc. where Lexi –Luu Designs, Inc. acquired 100% of the outstanding capital Stock of Skipjack Dive and Dancewear Inc. in exchange for $100,000. This amount was booked as accounts payable to Hubert J.Blanchette. In addition on March 3, 2015, Lexi –Luu Designs, Inc. entered a securities purchase agreement with Punkz Gear, Inc. where Lexi –Luu Designs, Inc. acquired 100% of the outstanding capital Stock of Punkz Gear Inc. in exchange for a $200,000 Subordinated Secured Convertible Debenture (Note) convertible at the rate of $0.10 per share into 2,000,000 million shares of Buyer common stock. This Note was payable to Hubert J. Blanchette. Hubert J. Blanchette was and is the CEO of Lexi- Luu Designs, Inc at the time of the above transactions and as of December 31, 2015. In both the Skipjack Dive and Dancewear Inc and Punkz Gear acquisitions, the sole selling shareholder of these entities Hubert J. Blanchette was also the CEO of the buying company, Lexi-Luu Designs. Lexi-Luu Designs Inc was the also the issuing entity, and its CEO of Lexi-Luu Designs Inc. and the CEO of Skipjack Dive and Dancewear Inc. and Punkz Gear, Inc. was and is Hubert J. Blanchette, who retained control of the board and management at the time of the acquisition. As a result, both of these acquisitions were deemed between entities under common control.

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