ACT CLEAN TECHNOLOGIES, INC.
(Formerly TURNAROUND PARTNERS, INC.)
FINANCIAL STATEMENTS
QUARTER ENDED MARCH 31, 2010
The financial statements included herein have not been prepared in accordance with Generally Accepted Accounting Principles due to the fact that an evaluation of derivatives has not been performed as of December 31, 2009 or 2008 in accordance with SFAS 133 and EITF No. 00-19, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock."
INDEX
Page Number
Balance Sheets as of March 31, 2010 and December 31, 2009 (Unaudited) 2 Consolidated Statements of Operations for the three months ended March 31, 2010 and 2009 (Unaudited) 3
Consolidated Statements of Changes in Shareholders’ Deficit for the periods ended March 31, 2010 (Unaudited)
4
Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2009 (Unaudited)
5 Notes to Financial Statements (Unaudited) 6 – 9
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March 31, December 31,
2010 2009
(Unaudited) (Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 15 $ 1,545
Prepaid expense and deferred financing costs 2,750 3,500
Total current assets 2,765 5,045
NONCURRENT ASSETS
Investments in unconsolidated subsidiaries, at cost 2,002,000 1,002,000
TOTAL ASSETS $ 2,004,765 $ 1,007,045
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 208,481 $ 199,334
Convertible debentures 326,855 326,855
Notes payable 131,047 112,029
Total current liabilities 666,383 638,218
Notes payable - 19,018
Accrued interest payable 92,034 86,893
Total liabilities 758,417 744,129
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' DEFICIT
Preferred Stock, par value $.01, 2,000,000 shares authorized:
Series B Convertible Preferred Stock, $.01 par value; 100,000 shares authorized;
6,666 shares issued and outstanding; no liquidation or redemption value 67 67
Series D Convertible Preferred Stock, $.01 par value; 100,000 shares authorized;
567 and 700 shares issued and outstanding; no liquidation or redemption value 6 6
Series G Convertible Preferred Stock, $.01 par value; 100,000 shares authorized;
100,000 shares issued and outstanding; no liquidation or redemption value 1,000 1,000
Series H Convertible Preferred Stock, $.01 par value; 70,000 shares authorized;
64,282 and -0- shares issued and outstanding; no liquidation or redemption value 643 -
Series I Convertible Preferred Stock, $.01 par value; 100,000 shares authorized;
100,000 and -0- shares issued and outstanding; no liquidation or redemption value 1,000 -
Common stock, $.0001 par value; 500,000,000 shares authorized;
182,784,663 and 173,404,663 shares issued and outstanding 18,278 17,340
Additional paid-in capital 3,733,820 2,735,758
Retained deficit (2,508,466) (2,491,255)
Total shareholders' deficit 1,246,348 262,916
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 2,004,765 $ 1,007,045
See accompanying Notes to Condensed Financial Statements (unaudited)
LIABILITIES AND SHAREHOLDERS' DEFICIT
ASSETS
ACT CLEAN TECHNOLOGIES, INC.
UNAUDITED CONDENSED BALANCE SHEET
(Formerly TURNAROUND PARTNERS, INC.)
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2010 2009
REVENUE
Consulting revenue $ - $ -
Marketable securities gain (loss) - 10,923
Factoring revenue - -
Fee income - 6,750
Total revenue - 17,673
General and administrative expenses 12,070 358,021
OPERATING LOSS (12,070) (340,348)
Other (income) expense:
Net change in derivative liability - -
Interest expense 5,141 132,879
Interest expense-derivatives - 279,384
Other expense - net - 14,345
Total other expenses 5,141 426,608
INCOME (LOSS) AVAILABLE TO COMMON SHARES $ (17,211) $ (766,956)
Basic and diluted loss per share: $ (0.00) $ (1.15)
Basic and diluted average shares outstanding 182,263,552 664,663
See accompanying Notes to Condensed Financial Statements (unaudited)
ACT CLEAN TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter Ended March 31,
(Formerly TURNAROUND PARTNERS, INC.)
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Additional Paid-in SharesAmountSharesAmountSharesAmountSharesAmountSharesAmountSharesAmountSharesAmountCapitalTotalBalance, December 31, 20076,666 67 700 7 - - - - - - - - 135,236,058 135,235 1,049,994 (5,688,320) (4,503,017) Issuance of common stock: For services - - - - - - Conversion of debentures - - - - 64,099,996 64,100 64,100 Conversion of Series E preferred stock 300,000,000 300,001 (299,999) (3) (1) Net loss- - - - - - - - - - - - - - - (1,354,426) (1,354,426) Balance, December 31, 2008 6,666 67$ 700 7$ - -$ - -$ - -$ - -$ 499,336,054 499,336$ 749,995$ (7,042,749)$ (5,793,344)$ Issuance of Series F preferred stock 60 1 (300,000,000) 1 Issuance of Series G preferred stock 465,330 465,330 Reverse stock split - 1 for 300 (198,671,391) (499,270) 499,270 - - Accumulated equity of tendered subsidiaries (232,565) 333,757 101,192 Conversion of Series D shares (66) (1) 9,240,000 924 (923) - Conversion of Series F shares (60) (1) 100,000,000 10,000 (9,999) - Issuance of Common Stock for Services 13,500,000 1,350 268,650 270,000 Stock issued for WA Holdings, Inc. 100,000 1,000 50,000,000 5,000 996,000 1,002,000 Net income- - - - - - - - - - - - - - - 4,217,737 4,217,737 Balance, December 31, 2009 6,666 67$ 634 6$ - -$ 100,000 1,000$ - -$ - -$ 173,404,663 17,340$ 2,735,758$ (2,491,255)$ 262,916$ Issuance of Series H preferred stock 64,282 643 643 Issuance of Series I preferred stock 100,000 1,000 9990001,000,000 Conversion of Series D shares (67) 9,380,000 938 -938- Net income- - - - - - - - - - - - - - - (17,211) (17,211) Balance, March 31, 2010 6,666 67$ 567 6$ - -$ 100,000 1,000$ 64,282 643$ 100,000 1,000$ 182,784,663 18,278$ 3,733,820$ (2,508,466)$ 1,246,348$ See accompanying Notes to Condensed Financial Statements (unaudited)ACT CLEAN TECHNOLOGIES, INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICITFor the Period Ended March 31, 2010(Formerly TURNAROUND PARTNERS, INC.)Retained DeficitSeries D PreferredSeries B PreferredCommon StockSeries F PreferredSeries G PreferredSeries H PreferredSeries I Preferred
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2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss before extrardinary items $ (17,211) $ (766,956)
Adjustment to reconcile net loss to net cash
provided by (used in) operating activities 15,681 731,707
Net cash used in operating activities (1,530) (35,249)
CASH FLOWS FROM INVESTING ACTIVITIES - -
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable - (5,955)
Net cash used in financing activities - (5,955)
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,530) (41,204)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,545 72,105
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 15 $ 30,901
SUPPLEMENTAL INFORMATION
Interest paid $ - $ -
Taxes paid $ - $ -
Stock issued to acquire American Bio-Tech Cleaning, Inc.:
Increase in additional paid in capital $ 999,000 $ -
Increase in preferred stock $ 1,000 $ -
See accompanying Notes to Condensed Financial Statements (unaudited)
Quarter Ended March 31,
ACT CLEAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Formerly TURNAROUND PARTNERS, INC.)
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ACT CLEAN TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Basis of Presentation
The accompanying unaudited financial statements of Act Clean Technologies, Inc. have been prepared in accordance with generally accepted accounting principles except that an evaluation of derivatives has not been performed as of December 31, 2008 or subsequently in accordance with SFAS 133 and EITF No. 00-19, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock." In the opinion of the Company’s management, the information contained herein reflects all adjustments necessary for a fair presentation of the Company’s results of operations, financial position and cash flows except as described above. All such adjustments are of a normal, recurring nature.
The unaudited Financial Statements and the notes thereto in this report should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007 (the “10-KSB”).
As used herein, the “Company”, “management”, “we” and “our” refers to Act Clean Technologies, Inc. or Act Clean Technologies, Inc. together with its subsidiaries. The Company’s fiscal year ends on December 31st.
In light of the Company’s change in control of ownership as of December 5, 2007 discussed below, the Company is contemplating a new business model. Currently, the Company believes that the new business plan going forward will be to focus on alternative and clean technologies. As a result, on January 15, 2009, the Company changed its name to ACT Clean Technologies, Inc.
On December 5, 2007 (the “Closing Date”), the Company filed on Form 8-K a Current Report, as amended on December 14, 2007 and February 20, 2008, disclosing that the Company entered into a Stock Purchase Agreement with Mr. Timothy J. Connolly, an individual and Viewpoint Capital, LLC, a Nevada limited liability company (the “Investor”) pursuant to which the Company issued to the Investor one (1) share of the Company’s Series E convertible preferred stock, par value $0.001 per share, which such Series E Preferred is convertible into Three Hundred Million Shares (300,000,000) of common stock of the Company, par value $0.001 per share in exchange for the transfer by the Investor to the Company of Four Million (4,000,000) unrestricted, free-trading shares of common stock of Asset Capital Group, Inc. (“ACGU”), a Nevada corporation having a value of Three Million Four Hundred Thousand Dollars ($3,400,000) based on the closing price of ACGU common stock as of the Closing Date as reported on the Pink Sheets, LLC. ACGU common stock trades under the symbol “ACGU.PK”. As a result of this transaction, the Investor acquired a 63.66% controlling interest in the Company’s Common Stock (“Common Stock”) by virtue of the Investor’s ownership of the Series E Preferred.
On February 13, 2008, the Investor delivered to the Company a notice to convert the one (1) shares of Series E Preferred to Three Hundred Million (300,000,000) shares of Common Stock. On February 14, 2008, the Company issued to the Investor Three Hundred Million (300,000,000) shares of Common Stock, all of which are restricted, and canceled the One (1) share of Series E Preferred. As a result of this transaction, the Investor acquired a 63.66% controlling interest in the Common Stock. In January 2009, the 300,000,000 shares of common stock were cancelled and 60 shares of Series F Preferred Stock as described in Note 6 below were issued to the Investor.
During the month of March 2008, we sold our investment in stock of ACGU for approximately $7,700.
As filed on a Current Report on Form 8-K with the Securities Exchange Commission on January 3, 2008, the Company disclosed that effective as of December 31, 2007, Corporate Strategies, Inc. (“CSI”), a Texas corporation and wholly-owned subsidiary of the Company entered into a Purchase Agreement with Natural Nutrition, Inc., a Nevada corporation (“NN”) and CSI Business Finance, Inc., a Texas corporation and wholly-owned subsidiary of NN (together with NN, the “Buyer”) pursuant to which CSI conveyed, transferred and assigned to the Buyer all of its title to and rights in CSI’s ten percent (10%) interest in the total issued and outstanding capital stock of Interactive Nutrition International, Inc. (“INII”), a company organized under the laws of Canada in exchange for the conveyance, transfer and assignment to CSI by the Buyer of certain Notes held by the Buyer (as such term is defined in the Agreement) plus a cash payment equal to One Hundred Ninety-Eight Thousand Eight Hundred Ninety-Nine Dollars and Ten Cents ($198,899.10). In addition, NN assumed payment for all of CSI’s office lease, equipment payments and any other payments related to the office space in Houston, Texas for the remainder of the lease term and any renewals.
Through June 30, 2009, we had primarily provided business restructuring, turnaround execution and business development advisory services for emerging and re-emerging public and private companies. The Company also actively trades securities and options with available cash. Many of these transactions contain a considerable amount of risk. Under our consulting agreements, we did not take positions in securities of our clients that at any one time would cause us to have an ownership interest in them of over 4.99%. We also have a limited partnership interest in a hotel in West Palm Beach, Florida.
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On July 10, 2009, with an effective date of June 30, 2009, the Company entered into an agreement with Cornell Capital, NKA Yorkville Advisors (YA) to convey all of the assets relating to the hotel in West Palm Beach, Florida in return for a complete release of all indebtedness owed by the Company to YA. The total indebtedness released was $7,772,200 plus accrued interest of $1,949,893. Both parties to the transaction executed mutual releases as part of the settlement. The transaction was recorded as an extraordinary item in the financial statements for the year ended December 31, 2009.
On September 14, 2009 the Company issued 50,000,000 Common Shares and 100,000 Preferred Shares for the acquisition of all of the outstanding stock of W. Anderson Holdings, Inc., a Nevada corporation.
On September 30, 2009 the Company entered into a Purchase Agreement and Mutual Release with Mr. Timothy J. Connolly (Connolly) whereby Connolly agreed to forego approximately $300,000 in salary payments due Connolly from Kipling Holdings, a former subsidiary of the Company, in order to facilitate the agreement with YA discussed above in exchange for 100% of the issued and outstanding capital stock of the Company’s subsidiary, Corporate Strategies, Inc. (CSI). The previous amounts advanced by CSI to the Company were converted from debt owed CSI by the Company into a new series of Preferred Stock of the Company to be known as Series H Convertible Preferred Stock (Series H Stock). 64,282 shares of Series H Stock were issued to Connolly at a value of $289,107.92, an amount representing the debt owed to CSI by the Company offset by amounts owed two legal firms which were issued common stock in satisfaction of amounts owed them.
On January 25, 2010, the Company authorized and issued 100,000 shares of a new Series I Preferred Stock for 80% of the issued and outstanding capital stock of American Bio-Tech Cleaning, Inc., a Nevada Corporation. The Series I Preferred Stock is convertible into $1,000,000 of the Company’s common stock.
The accompanying unaudited financial statements include the accounts of the Company and its former subsidiaries which were included in the results of operations for the quarter ended March 31, 2009. All significant inter-company balances and transactions have been eliminated.
Recently Issued Accounting Pronouncements.
In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133 (SFAS 161). This statement requires enhanced disclosures about an entity’s derivative and hedging activities and is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with earlier application encouraged. The Company will not adopt SFAS 161 as an evaluation of derivatives will not be performed for periods subsequent to June 30, 2008 as required by SFAS 133 and EITF No. 00-19, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock."
Note 2 - Income (Loss) Per Common Share
In accordance with FASB Statement of Financial Accounting Standards No. 128 (“SFAS 128”), "Earnings per Share", basic earnings per share are computed based on the weighted average shares of common stock outstanding during the periods. Diluted earnings per share are computed based on the weighted average shares of common stock plus the assumed issuance of common stock for all potentially dilutive securities.
The computations for basic and diluted net income (loss) per share consist of the following:
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2010 2009
Income (loss) from
continuing operations $ (17,211) $ (766,956)
Less effect of convertible
debenture - -
Adjusted net income (loss) $ (17,211) $ (766,956)
Basic weighted average
shares 182,263,552 664,663
Effect of dilutive
securities:
Series B, D, G, H and I
preferred stock - -
Convertible debenture - -
Diluted weighted average 182,263,552 664,663
Income (loss) per share:
Basic net income (loss) $ (0.00) $ (1.15)
Diluted net income (loss) $ (0.00) $ (1.15)
March 31,
Quarter Ended
Note 3 - Convertible Debentures - Derivative Financial Instruments
An evaluation of derivatives has not been performed as of December 31, 2008 or subsequently in accordance with SFAS 133
and EITF No. 00-19, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's
Own Stock." The discussion below is relevant to derivative financial instruments held as of June 30, 2008.
The Convertible Debentures issued from 2003 through 2007 have been accounted for in accordance with SFAS 133 and EITF No. 00-
19, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock" as of June 30,
2008.
The Company identified the following instruments have derivatives requiring evaluation and accounting under the relevant guidance
applicable to financial derivatives:
YA Global Debenture issued 5/6/04 in the face amount of $400,000
YA Global Debenture issued 6/24/04 in the face amount of $500,000
YA Global Debenture issued 9/28/04 in the face amount of $400,000
YA Global Debenture issued 4/6/05 in the face amount of $400,000
Holland et. al. Debentures issued 12/22/03 in the face amount of $250,000
Saporito Debenture issued 1/29/04 in the face amount of $100,000
Viola Debenture issued 10/12/04 in the face amount of $100,000
Highgate House issued 12/02/05 in the face amount of $6,225,000
These embedded derivatives have been bifurcated from their respective host debt contracts and accounted for as derivative liabilities
in accordance with EITF 00-19 and SFAS No. 133 through the period ended June 30, 2008.
The embedded derivatives are marked-to-market each reporting period with changes in fair value recorded to the Company's income
statement as "Net change in derivative liability". The Company has utilized a third party to fair value the embedded derivatives using
a layered discounted probability-weighted cash flow approach. This valuation was prepared by the third party valuation firm that
developed the original model that the Company used to value its derivatives.
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The fair value of the derivative liabilities are subject to the changes in the trading value of the Company's common stock, as well as other factors. As a result, our financial statements may fluctuate from quarter-to-quarter based on factors, such as the price of our stock at the balance sheet date and the amount of shares converted by debenture holders. Consequently, our financial position and results of operations may vary from quarter-to-quarter based on conditions other than our operating revenues and expenses.
During the first quarter of 2007, certain individuals converted debentures into our Common Stock. As a result, we recorded a gain on extinguishment of debt in the amount of $450,000 for the quarter ended March 31, 2007.
Note 4 – Investment in Unconsolidated Entities
Through our wholly-owned subsidiary, Kipling Holdings, Inc., we owned a 35% limited partnership interest in a partnership that owns a Hilton hotel in West Palm Beach, Florida prior to the conveyance discussed in Note 1 above. Because we did not control the partnership entity, we carried our investment in unconsolidated entities at cost, plus our equity in net earnings or losses, less distributions received since the date of acquisition and any adjustment for impairment. Our equity in net earnings or losses was adjusted for the straight-line depreciation, over the lower of 25 years or the remaining life of the venture, of the difference between our cost and our proportionate share of the underlying net assets at the date of acquisition. We periodically reviewed our investment in unconsolidated entities for other than temporary declines in fair value. Any decline that was not expected to be recovered in the next 12 months was considered other than temporary and an impairment was recorded as a reduction in the carrying value of the investment. For the year ended December 31, 2007, we recorded an impairment on our investment in real estate partnership in the amount of $ 540,000. Estimated fair values are based on our projections of cash flows. Since we were a limited partner, we did not make management decisions in this partnership and were subject to the decisions made by the general partner of this unconsolidated entity.
Note 5 – Preferred and Common Stock
The Company authorized and issued 60 shares of Series F Preferred Stock, par value $.01 in January 2009. Each share of Series F Preferred Stock shall be entitled to receive dividends or distributions on his share of Series F Preferred Stock on an “as converted” basis. On November 3, 2009 the Series F shares were converted into 100,000,000 shares of Common Stock.
On January 12, 2009, the Company effectuated a 1-for-300 reverse stock split of its common stock and changed the par value of the common stock from $0.001 to $0.0001.
On September 14, 2009 the Company issued 50,000,000 Common Shares and 100,000 of a new Series G Preferred Stock, par value $.01 at a value of $1,000,000.00 for the acquisition of all of the outstanding stock of W. Anderson Holdings, Inc., a Nevada corporation. Each share of Series G Preferred Stock shall be entitled to receive dividends or distributions on his share of Series G Preferred Stock on an “as converted” basis. Each share of Series G Preferred Stock shall be convertible at the option of the holder thereof at any time based upon the issuance price above into the Company’s Common Stock at the lowest closing price of the Company’s common stock during the 10 trading days prior to the conversion request.
In January, 2010, the Company authorized 70,000 shares and issued 64,282 of a new Series H Preferred Stock to a former officer of the Company in settlement of amounts due from a former subsidiary of the Company. The Series H Stock shall be convertible into common stock of the Company at the lowest closing price of the Company’s common stock during the 10 trading days prior to any conversion request.
On January 25, 2010, the Company authorized and issued 100,000 shares of a new Series I Preferred Stock for 80% of the issued and outstanding capital stock of American Bio-Tech Cleaning, Inc., a Nevada Corporation. The Series I Preferred Stock is convertible into $1,000,000 of the Company’s common stock.
