ex-99.1

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PROMET THERAPEUTICS, LLC

FINANCIAL STATEMENTS

FOR THE YEAR ENDED

DECEMBER 31, 2016 AND THE PERIOD

FROM AUGUST 31, 2015 (INCEPTION)

THROUGH DECEMBER 31, 2015

TABLE OF CONTENTS


	Page

INDEPENDENT AUDITORS’ REPORT	1

FINANCIAL STATEMENTS
Balance Sheets	2
Statements of Operations	3
Statement of Members’ Equity (Deficit)	4
Statements of Cash Flows	5

NOTES TO THE FINANCIAL STATEMENTS	6-9

Independent Auditors’ Report

Promet Therapeutics, LLC

Hanover, MD

Report on Financial Statements

We have audited the accompanying balance sheets of Promet Therapeutics, LLC (“the Company”) as of December 31, 2016 and 2015, and the related statements of operations, members’ equity (deficit) and cash flows for the year ended December 31, 2016 and the period from August 31, 2015 (inception) through December 31, 2015, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Promet Therapeutics, LLC as of December 31, 2016 and 2015, and the results of its operations and its cash flows for the year ended December 31, 2016 and the period from August 31, 2015 (inception) through December 31, 2015 in accordance with accounting principles generally accepted in the United States of America.

BD & Company, Inc.

Owings Mills, MD

September 15, 2017

Promet Therapeutics, LLC

Balance Sheets

December 31, 2016 and 2015


	December 31,		December 31,
	2016		2015

ASSETS
Current Assets
Cash	$	1,071,894	$	-
Certificates of deposit		1,019,294		-
Vendor deposit		227,657		-
Prepaid expenses		18,147		1,869
Total Current Assets		2,336,992		1,869

Property And Equipment
Equipment		8,445		-
Software		15,330		-
Total Cost		23,775		-
Less: accumulated depreciation		1,381		-
Property and equipment, net		22,394		-

Other Assets
Security deposit		5,535		-
Total Other Assets		5,535		-
Total Assets	$	2,364,921	$	1,869

LIABILITIES and MEMBERS’ EQUITY (DEFICIT)
Current Liabilities
Accounts payable	$	14,593	$	10,886
Due to related party		95		69,474
Accrued expenses		83,004		7,214
Total Current Liabilities		97,692		87,574
Total Liabilities		97,692		87,574

Members’ Equity (Deficit)
Class A member interests		3,000,000		-
Class B member interests		1,270,000		-
Accumulated deficit		(2,002,771)		(85,705)
Total Members' Equity (Deficit)		2,267,229		(85,705)
Total Liabilities and Members' Equity (Deficit)	$	2,364,921	$	1,869

The information in the notes is an integral part of these financial statements.

Promet Therapeutics, LLC

Statements of Operations

Year ended December 31, 2016 and the Period from

August 31, 2015 (Inception) through December 31, 2015


	December 31,		August 31, 2015 through December 31,
	2016		2015

Operating Expenses	$	1,953,847	$	85,705
Operating Loss		(1,953,847)		(85,705)

Other Income
Administrative services		32,327		-
Interest income		4,454		-
Other Income		36,781		-
Net Loss	$	(1,917,066)	$	(85,705)

The information in the notes is an integral part of these financial statements.

Promet Therapeutics, LLC

Statement of Members’ Equity (Deficit)

Year Ended December 31, 2016 and the Period from

August 31, 2015 (inception) through December 31, 2015


	Members' Equity (Deficit)
	Class A		Class B		Accumulated Deficit		Total

Balance, August 31, 2015	$	-	$	-	$	-	$	-
Net Loss		-		-		(85,705)		(85,705)

Balance, December 31, 2015		-		-		(85,705)		(85,705)
Members' Contributions - January 1, 2016		3,000,000		-		-		3,000,000
Members’ Contributions - July 1, 2016		-		1,270,000		-		1,270,000
Net Loss		-		-		(1,917,066)		(1,917,066)

Balance, December 31, 2016	$	3,000,000	$	1,270,000	$	(2,002,771)	$	2,267,229

The information in the notes is an integral part of these financial statements.

Promet Therapeutics, LLC

Statements of Cash Flows

Year Ended December 31, 2016 and the period from

August 31, 2015 (inception) through December 31, 2015


	December 31, 2016		August 31, 2015 through December 31, 2015

CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(1,917,066)	$	(85,705)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		1,381		-
Net changes in operating assets and liabilities:
Prepaid expenses		(16,278)		(1,869)
Vendor deposit		(227,657)		-
Security deposit		(5,535)		-
Accounts payable		3,707		10,886
Due to related parties		(69,379)		69,474
Accrued liabilities		75,790		7,214
Net cash used in operating activities		(2,155,037)		-

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(23,775)		-
Certificates of deposit		(1,019,294)		-
Net cash used in investing activities		(1,043,069)		-

CASH FLOWS FROM FINANCING ACTIVITIES
Contributions from members		4,270,000		-
Net cash provided by financing activities		4,270,000		-
NET INCREASE IN CASH		1,071,894		-
CASH - BEGINNING OF YEAR		-		-
CASH - END OF YEAR	$	1,071,894	$	-

The information in the notes is an integral part of these financial statements

Promet Therapeutics, LLC

Notes to Financial Statements

December 31, 2016 and 2015

NOTE 1 - NATURE OF BUSINESS

Promet Therapeutics, LLC. (Promet or “the Company”) was formed on August 31, 2015 to develop medical products for patients with unmet medical needs. The Company was organized under the laws of the state of Delaware. The Company’s operations are performed in the state of Maryland.

As the Company was formed on August 31, 2015 and Promet is still in the organizational and research and development phase of Company operations, the Company has minimal activity during 2015 and did not have any sources of revenue during 2016.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The company prepares its financial statements on the accrual basis of accounting.

Organization and Capitalization

The Company’s operating agreement provides for three classes of members: Class A, Class B and Profit Interest Members. As of December 31, 2016, the Company has authorized 6,762,000 total member units to be issued, of which 4,200,000 Class A units and 762,000 Class B units have been issued.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates also affect the reported amounts of expenses during the reporting period. Actual events and results could differ from those assumptions and estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents.

Certificates of Deposit

The certificates of deposit were purchased through an investment company and are held at multiple banks. The maturities of the certificates of deposit are typically six months or less.

Fair Market Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short-term maturity of these instruments.

Promet Therapeutics, LLC

Notes to Financial Statements

December 31, 2016 and 2015

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Related Party Administrative Fees

Administrative fees are collected from a related party, Corlyst, LLC (“Corlyst”), for shared costs and are due on demand at the beginning of each month. Receivables are stated at the invoice amount. The balances at December 31, 2016 and 2015 were $0.

Property and Depreciation

Property is stated at cost, less accumulated depreciation. Depreciation is computed under the straight-line method over the estimated useful lives of the assets. Expenditures for maintenance and routine repairs are charged to expense as incurred; expenditures for improvements and major repairs that materially extend the useful lives of assets are capitalized. Depreciation expense for the year ended December 31, 2016 and the period from August 31, 2015 (inception) through December 31, 2015 was $1,381 and $0, respectively. Following are the estimated useful lives for the various classifications of assets:


Software		3 years
Equipment		5 years

Valuation of Long-Lived Assets

The Company accounts for the valuation of long-lived assets under ASC 360 Property, Plant and Equipment. This guidance requires that long-lived assets and certain identifiable intangible assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived asset is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. 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 assets exceeds the estimated fair value of the assets. Assets to be disposed of are reportable at the lower of the carrying amount or fair value, less costs to sell. As of December 31, 2016, management does not believe any long-lived assets are impaired.

Advertising Costs

Advertising costs are recognized as expenses in the year incurred. Total advertising expense for the year ended December 31, 2016 and the period from August 31, 2015 (inception) through December 31, 2015 was $3,850 and $0, respectively.

Research and Development Expenses

Research and development expenditures, which are expensed as incurred, totaled $606,769 and $1,000 for 2016 and the period from August 31, 2015 (inception) through December 31, 2015, respectively.

Promet Therapeutics, LLC

Notes to Financial Statements

December 31, 2016 and 2015

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes

The Company is treated as a partnership for federal income tax purposes and does not incur income taxes. In lieu of company income taxes, the partners are taxed separately on their proportionate share of the Company’s income, deductions, losses and credits. Therefore, no provision or liability for income taxes has been included in these financial statements.

The Company determined that it was not required to record a liability related to uncertain tax positions as a result of implementing the requirements of ASC 740 Income Taxes.

Equity

Member units are comprised of three types: Class A Units, Class B Units and Profit Interest Units. Class A and Class B units are designated based on the date of share issuance - Class A units were issued on January 1, 2016, while Class B units were issued on July 1, 2016. All Units are non-transferable. As of December 31, 2016, 4,200,000 Class A Units and 762,000 Class B Units have been authorized and issued, and an additional 1,800,000 Profit Interest Units have been authorized for possible future grants to employees, board members and consultants. Profit Interest Units may be awarded to the aforementioned parties based on the Company’s officers’ discretion.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The topic of revenue recognition had become broad with several other regulatory agencies issuing standards, which lacked cohesion. The new guidance established a “comprehensive framework” and “reduces the number of requirements to which an entity must consider in recognizing revenue” and yet provides improved disclosures to assist stakeholders reviewing financial statements. The amendments in this update are effective for annual reporting periods beginning after December 15, 2018 for privately-held companies. The Company is currently in the pre-revenue stages of operations and will adopt the methodologies prescribed by this ASU by the date required. Adoption of the ASU is not expected to have a significant effect on the Company’s financial statements.

In February 2016, FASB issued ASU-2016-02, "Leases (Topic 842)." The guidance requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right of use asset representing its right to use the underlying asset for the lease term. For finance leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; interest on the lease liability will be recognized separately from amortization of the right-of-use asset in the statement of comprehensive income; and repayments of the principal portion of the lease liability will be classified within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows. For operating leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; a single lease cost will be recognized, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis; and all cash payments will be classified within operating activities in the statement of cash flows. Under Topic 842 the accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The amendments in Topic 842 are effective for the Company beginning January 1, 2020. Management is currently evaluating the impact of adopting the new guidance on the Company’s financial statements.

Promet Therapeutics, LLC

Notes to Financial Statements

December 31, 2016 and 2015

NOTE 3 - RELATED PARTY TRANSACTIONS

The Company’s largest member, Corlyst, LLC, pays Promet for administrative services performed by the Company. These administrative fees are included in other income on the Company’s statement of operations. These fees were charged beginning in October 2016 and totaled $32,327 for the year ended December 31, 2016.

During 2015 and through January 2016, Corlyst paid expenses on behalf of the Company and Promet reimbursed Corlyst at later dates. The outstanding balance the Company owed Corylst as of December 31, 2016 and 2015 was $95 and $69,474, respectively.

NOTE 4 - INCOME TAXES

The Company files income tax returns in the U.S. federal jurisdiction, Delaware and Maryland. The Company is a pass-through entity for income tax purposes whereby any income tax liabilities or benefits are attributable to its members. Any amounts paid by the Company for income taxes are treated as distributions to its members.

The Company’s federal and state income tax returns for 2015 and 2016 are subject to examination by the Internal Revenue Service and state taxing authorities, generally for three years after they were filed.

NOTE 5 - OPERATING LEASE OBLIGATIONS

The Company leases office space and equipment under non-cancelable operating leases. Rent expense under the current lease for the year ended December 31, 2016 was $50,997. Future annual minimum rental payments under the lease as of December 31, 2016, are as follows:


2017	$	73,843
2018		90,057
2019		76,773
2020		2,930

Total future minimum lease payments	$	243,603

NOTE 6 - CONCENTRATION OF CREDIT RISK

The Company maintains its operating cash in one commercial bank. Balances on deposit are insured by the Federal Deposit Insurance Corporation (FDIC) up to specified limits. Balances in excess of FDIC limits are insured. Total cash held by the bank was $1,068,221 and $0 at December 31, 2016 and 2015, respectively. The Company also maintains cash in a financial institution, which is not insured by the FDIC. Cash held by the financial institution was $4,860 and $0 at December 31, 2016 and 2015, respectively.

NOTE 7 - SUBSEQUENT EVENTS

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through September 15, 2017, the date the financial statements were available to be issued. During the period from January 1, 2017 through September 15, 2017, the Company did not have any material recognizable subsequent events.

Index to Financial Statements for the years ended December 31, 2015 and 2014

Heatwurx, Inc.


Reports of Independent Registered Public Accounting Firms	1

Consolidated Balance Sheets at December 31, 2015 and 2014	2

Consolidated Statements of Operations for the years ended December 31, 2015 and 2014	3

Consolidated Statements of Stockholders’ Equity (Deficit) for the period from January 1, 2014 through December 31, 2015	4

Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014	5

HEATWURX, INC.

CONSOLIDATED BALANCE SHEETS


	December 31,
	2015		2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,090	$	-
Accounts receivable		-		1,310
Prepaid expenses and other current assets		47,722		107,858
Assets held for sale		42,000		-
Inventory		-		219,203
Current assets from discontinued operations		12,350		54,648
Total current assets		104,162		383,019
EQUIPMENT, net of depreciation		159		358,956
INTANGIBLE ASSETS, net of amortization		-		1,696,430
OTHER ASSETS, from discontinued operations		-		107,457
TOTAL ASSETS	$	104,321	$	2,545,862

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	159,249	$	153,931
Accrued liabilities		95,339		94,167
Deferred revenue		-		58,165
Interest payable		161,608		7,821
Income taxes payable		200		100
Loan payable		-		56,486
Current portion of senior secured notes payable		947,361		-
Current portion of unsecured notes payable, net of discount of $967 at December 31, 2015		419,033		20,000
Current liabilities from discontinued operations		300,338		453,193
Total current liabilities		2,083,128		843,863
LONG-TERM LIABILITIES:
Loan payable		-		133,834
Unsecured notes payable, net of discount of $59,768 at December 31, 2014		-		360,232
Total long-term liabilities		-		494,066
TOTAL LIABILITIES		2,083,128		1,337,929

COMMITMENTS AND CONTINGENCIES (NOTE 12)

STOCKHOLDERS’ EQUITY (DEFICIT):
Series D preferred stock, $0.0001 par value, 178,924 shares issued and outstanding at December 31, 2015 and 2014; liquidation preference of $821,683 at December 31 2015 and $810,216 at December 31, 2014		18		18
Common stock, $0.0001 par value, 20,000,000 shares authorized; 11,017,388 issued and 11,061,414 outstanding at December 31, 2015 and 9,495,045 shares issued and 10,952,356 outstanding at December 31, 2014		1,102		1,095
Additional paid-in capital		14,322,366		14,111,944
Accumulated deficit		(14,874,680)		(11,848,818)
Stockholders’ equity (deficit) from discontinued operations		(1,427,613)		(1,056,306)
Total stockholders’ equity (deficit)		(1,978,807)		1,207,933
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	104,321	$	2,545,862

HEATWURX, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS


	For the year ended December 31, 2015		For the year ended December 31, 2014
REVENUE:
Equipment sales	$	74,599	$	101,119
Other revenue		38,826		6,120
Total revenues		113,425		107,239

COST OF GOODS SOLD		125,876		66,833
GROSS PROFIT		(12,451)		40,406

EXPENSES:
Selling, general and administrative		945,460		2,019,809
Research and development		29,246		178,085
Loss on extinguishment of debt		-		822,205
Impairment on goodwill		-		390,659
Impairment of intangible asset		1,517,859		-
Impairment of assets held for sale		186,068		-
Total expenses		2,678,633		3,410,758

LOSS FROM CONTINUING OPERATIONS, before taxes		(2,691,084)		(3,370,352)

OTHER INCOME AND EXPENSE
Loss on disposal of assets		(60,743)		-
Interest income		4,651		155
Interest expense, including amortization of debt discount		(235,644)		(315,304)
Total other income and expense		(291,736)		(315,149)

LOSS BEFORE INCOME TAXES		(2,982,820)		(3,685,501)
Income taxes		(100)		(100)
LOSS FROM CONTINUED OPERATIONS, net of tax		(2,982,920)		(3,685,601)
LOSS FROM DISCONTINUED OPERATIONS, net of tax		(371,307)		(840,649)
NET LOSS	$	(3,354,227)	$	(4,526,250)

Preferred Stock Cumulative Dividend and Deemed Dividend	$	42,942	$	1,502,891
Net loss applicable to common stockholders	$	(3,397,169)	$	(6,029,141)
Net loss per common share basic and diluted from continuing operations		(0.27)		(0.59)
Net loss per common share basic and diluted from discontinued operations		(0.03)		(0.09)
Net loss per common share basic and diluted	$	(0.31)	$	(0.68)
Weighted average shares outstanding used in calculating net loss per common share		11,012,565		8,857,815

HEATWURX, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE YEAR’S ENDED DECEMBER 31, 2015 AND 2014


	Series B Preferred Stock		Series C Preferred Stock		Series D Preferred Stock		Common Stock		Additional Paid-In Capital	Accumu- lated Deficit	Total
	Shares	$	Shares	$	Shares	$	Shares	$	$	$	$
Balance at December 31, 2013	177,000	18	101,000	10	727,648	73	8,082,000	808	8,483,727	(6,813,758)	1,670,878
Preferred stock conversion to common shares	(177,000)	(18)	(101,000)	(10)	(16,332)	(2)	294,332	29	-	-	-
Issued pursuant to private placement dated June 22, 2013	-	-	-	-	171,987	17	-	-	515,946	-	515,963
Share issuance costs	-	-	-	-	-	-	-	-	(6,000)	-	(6,000)
Shares issued in the Acquisition of Dr. Pave, LLC	-	-	-	-	-	-	58,333	6	174,994	-	175,000
Preferred stock conversion to common shares issued in private placement dated October 1, 2014	-	-	-	-	(704,379)	(70)	1,207,491	121	(50)	-	-
Inducement premium on preferred stock conversion to common	-	-	-	-	-	-	-	-	1,332,376	(1,332,376)	-
Debt conversion in private placement dated October 1, 2014	-	-	-	-	-	-	1,100,876	110	2,506,872	-	2,506,982
Issuance of commons stock and warrants	-	-	-	-	-	-	209,324	21	366,303	-	366,324
Stock-based compensation	-	-	-	-	-	-	-	-	231,524	-	231,524
Dividends accrued on Series C shares	-	-	-	-	-	-	-	-	-	(2,200)	(2,200)
Beneficial conversion feature on Series D	-	-	-	-	-	-	-	-	51,110	(51,110)	-
Dividends paid or accrued on Series D shares	-	-	-	-	-	-	-	-	-	(179,430)	(179,430)
Warrants issued in connection with debt offering	-	-	-	-	-	-	-	-	455,142	-	455,142
Net loss from continuing operations	-	-	-	-	-	-	-	-	-	(3,685,601)	(3,685,601)
Net loss from discontinued operations	-	-	-	-	-	-	-	-	-	(840,649)	(840,649)
Balance at December 31, 2014	-	-	-	-	178,924	18	10,952,356	1,095	14,111,944	(12,905,124)	1,207,933
Shares and warrants issued pursuant to private placement dated October 1, 2014	-	-	-	-	-	-	50,285	5	87,995	-	88,000
Adjustment for shares issued pursuant to private placement dated October 1, 2014	-	-	-	-	-	-	(253)	-	-	-	-
Stock issued for consulting services	-	-	-	-	-	-	15,000	2	25,498	-	25,500
Stock-based compensation (options)	-	-	-	-	-	-	-	-	96,929	-	96,929
Dividends accrued on Series D shares	-	-	-	-	-	-	-	-	-	(42,942)	(42,942)
Net loss from continuing operations	-	-	-	-	-	-	-	-	-	(2,982,920)	(2,982,920)
Net loss from discontinued operations	-	-	-	-	-	-	-	-	-	(371,307)	(371,307)
Balance at December 31, 2015	-	-	-	-	178,924	18	11,017,388	1,102	14,322,366	(16,302,293)	(1,978,807)

HEATWURX, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS


	For the year ended December 31, 2015		For the year ended December 31, 2014
OPERATING ACTIVITIES:
Net loss	$	(3,354,227)	$	(4,526,250)
Less: Loss from discontinued operations, net of tax		371,307		840,649
Loss from continuing operations		(2,982,920)		(3,685,601)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:
Depreciation expense		60,251		71,029
Amortization of intangible assets		178,571		357,142
Amortization of discount on note payable		58,801		153,617
Loss on extinguishment of debt		-		822,205
Impairment of assets held for sale		186,068		-
Impairment of intangible asset		1,517,859		-
Loss on disposal of equipment		60,743		-
Bad debt expense		5,148		-
Impairment of goodwill		-		390,659
Stock-based compensation		96,929		231,524
Shares exchanged for services		25,500		-
Changes in current assets and liabilities:
Decrease in receivables		(3,838)		17,890
Decrease (increase) in prepaid expenses and other current assets		105,136		(27,472)
Increase in inventory		(7,065)		(73,085)
Increase in income taxes payable		100		-
Increase in accounts payable		5,318		76,904
Decrease in accrued liabilities		(41,774)		(311,025)
(Decrease) increase in deferred revenue		(58,165)		58,165
Increase in interest payable		153,788		6,009
Net cash used in operating activities from continuing operations		(639,500)		(1,912,039)
Net cash used in operating activities from discontinued operations		(231,356)		(779,599)
Net cash used in operating activities		(871,906)		(2,691,638)

INVESTING ACTIVITIES:
Purchases of property and equipment		(1,399)		(11,007)
Proceeds from sale of property and equipment		31,100		-
Net cash used in investing activities from continuing operations		29,701		(11,007)
Net cash used in investing activities from discontinued operations		10,503		(33,937)
Net cash used in investing activities		40,204		(44,944)

FINANCING ACTIVITIES:
Proceeds from issuance of unsecured notes payable		-		2,244,003
Proceeds from issuance of senior secured notes payable		753,000		-
Repayment of senior subordinated note payable		-		(500,000)
Proceeds from issuance of common shares with warrants		88,000		366,324
Proceeds from issuance of Series D preferred shares		-		509,963
Repayment on equipment loan payable		(19,902)		(45,528)
Net cash provided by financing activities from continuing operations		821,098		2,574,762
Net cash provided by financing activities from discontinued operations		-		-
Net cash provided by financing activities		821,098		2,574,762

NET CHANGE IN CASH AND CASH EQUIVALENTS		(10,604)		(161,820)
CASH AND CASH EQUIVALENTS, beginning of period, including discontinued operations		25,044		186,864
CASH AND CASH EQUIVALENTS, Continuing Operations, end of period		2,090		-
CASH AND CASH EQUIVALENTS, Discontinued Operations, end of period	$	12,350	$	25,044

Index to Financial Statements for the years ended December 31, 2016 and 2015

Heatwurx, Inc.


Consolidated Balance Sheets at December 31, 2016 and 2015	1

Consolidated Statements of Operations for the years ended December 31, 2016 and 2015	2

Consolidated Statements of Stockholders’ Equity (Deficit) for the period from January 1, 2015 through December 31, 2016	3

Consolidated Statements of Cash Flows for the years ended December 31, 2016 and 2015	4

HEATWURX, INC.

CONSOLIDATED BALANCE SHEETS


	December 31,
	2016		2015

ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	3,237	$	2,090
Prepaid expenses and other current assets		-		47,722
Assets held for sale		-		42,000
Current assets from discontinued operations		-		12,350
Total current assets		3,237		104,162
EQUIPMENT, net of depreciation		-		159
TOTAL ASSETS	$	3,237	$	104,321

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	166,165	$	159,249
Accrued liabilities		134,513		95,339
Interest payable		108,608		41,990
Interest payable, related party		332,566		119,618
Income taxes payable		200		200
Current portion of senior secured notes payable, related party		962,361		947,361
Current portion of unsecured notes payable, net of discount of $0 and $967 at December 31, 2016 and 2015, respectively		420,000		419,033
Revolving line of credit		91,980		-
Revolving line of credit, related party		138,000		-
Current liabilities from discontinued operations		-		300,338
Total current liabilities		2,354,393		2,083,128
TOTAL LIABILITIES		2,354,393		2,083,128

STOCKHOLDERS’ EQUITY (DEFICIT):
Series D preferred stock, $0.0001 par value, 178,924 shares issued and outstanding at December 31, 2016 and 2015; liquidation preference of $864,743 at December 31, 2016 and $821,683 at December 31, 2015		18		18
Common stock, $0.0001 par value, 20,000,000 shares authorized; 11,017,388 issued and outstanding at December 31, 2016 and 2015		1,102		1,102
Additional paid-in capital		14,329,057		14,322,366
Accumulated deficit		(15,254,917)		(14,874,680)
Stockholders’ equity (deficit) from discontinued operations		(1,426,416)		(1,427,613)
Total stockholders’ equity (deficit)		(2,351,156)		(1,978,807)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	3,237	$	104,321

HEATWURX, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS


	For the year ended December 31,
	2016		2015

REVENUE:
Equipment sales	$	5,000	$	74,599
Other revenue		-		38,826
Total revenues		5,000		113,425

COST OF GOODS SOLD		-		125,876
GROSS PROFIT		5,000		(12,451)

EXPENSES:
Selling, general and administrative		69,968		945,460
Research and development		6,558		29,246
Impairment of intangible asset		-		1,517,859
Impairment of assets held for sale		-		186,068
Total expenses		76,526		2,678,633

LOSS FROM CONTINUING OPERATIONS, before taxes		(71,526)		(2,691,084)

OTHER INCOME AND EXPENSE
Gain from debt forgiveness		4,731		-
Loss on disposal of assets		(25,000)		(60,743)
Interest income		-		4,651
Interest expense, including amortization of debt discount		(245,384)		(235,644)
Total other income and expense		(265,653)		(291,736)

LOSS BEFORE INCOME TAXES		(337,179)		(2,982,820)
Income taxes		-		(100)
LOSS FROM CONTINUED OPERATIONS, net of tax		(337,179)		(2,982,920)
LOSS FROM DISCONTINUED OPERATIONS, net of tax		1,197		(371,307)
NET LOSS	$	(335,982)	$	(3,354,227)

Preferred Stock Cumulative Dividend and Deemed Dividend	$	(43,058)	$	(42,942)
Net loss applicable to common stockholders	$	(379,040)	$	(3,397,169)
Net loss per common share basic and diluted from continuing operations		(0.03)		(0.27)
Net loss per common share basic and diluted from discontinued operations		0.00		(0.03)
Net loss per common share basic and diluted	$	(0.03)	$	(0.31)
Weighted average shares outstanding used in calculating net loss per common share		11,017,388		11,012,565

HEATWURX, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)


	Series D Preferred Stock		Common Stock		Additional Paid-In Capital	Accumulated deficit Disc- ontinued Operations	Accumu- lated Deficit	Total
	Shares	$	Shares	$	$	$	$	$

Balance at December 31, 2014	178,924	$18	10,952,356	1,095	14,111,944	(1,056,306)	(11,848,818)	1,207,933
Shares and warrants issued pursuant to private placement dated October 1, 2014	-	-	50,285	5	87,995	-	-	88,000
Adjustment for shares issued pursuant to private placement dated October 1, 2014	-	-	(253)	-	-	-	-	-
Stock issued for consulting services	-	-	15,000	2	25,498	-	-	25,500
Stock-based compensation (options)	-	-	-	-	96,929	-	-	96,929
Dividends accrued on Series D shares	-	-	-	-	-	-	(42,942)	(42,942)
Net loss from continuing operations	-	-	-	-	-	-	(2,982,920)	(2,982,920)
Net loss from discontinued operations	-	-	-	-	-	(371,307)	-	(371,307)
Balance at December 31, 2015	178,924	18	11,017,388	1,102	14,322,366	(1,427,613)	(14,874,680)	(1,978,807)
Stock-based compensation (options)	-	-	-	-	6,691	-	-	6,691
Dividends accrued on Series D shares	-	-	-	-	-	-	(43,058)	(43,058)
Net loss from continuing operations	-	-	-	-	-	-	(337,179)	(337,179)
Net income from discontinued operations	-	-	-	-	-	1,197	-	1,197
Balance at December 31, 2016	178,924	18	11,017,388	1,102	14,329,057	(1,426,416)	(15,254,917)	(2,351,156)

HEATWURX, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS


	For the year ended December 31,
	2016		2015

OPERATING ACTIVITIES:
Net loss	$	(335,982)	$	(3,354,227)
Less: (Income) loss from discontinued operations, net of tax		(1,197)		371,307
Loss from continuing operations		(337,179)		(2,982,920)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:
Depreciation expense		159		60,251
Gain on debt forgiveness		(4,731)		-
Amortization of intangible assets		-		178,571
Amortization of discount on note payable		967		58,801
Impairment of assets held for sale		-		186,068
Impairment of intangible asset		-		1,517,859
Loss on disposal of equipment		25,000		60,743
Bad debt expense		-		5,148
Stock-based compensation		6,691		96,929
Shares exchanged for services		-		25,500
Changes in current assets and liabilities:
Decrease in receivables		-		(3,838)
Decrease (increase) in prepaid expenses and other current assets		47,722		105,136
Increase in inventory		-		(7,065)
Increase in income taxes payable		-		100
(Decrease) increase in accounts payable		(10,343)		5,318
(Decrease) increase in accrued liabilities		686		(41,774)
(Decrease) increase in deferred revenue		-		(58,165)
Increase in interest payable		54,613		31,595
Increase in interest payable, related party		185,562		122,193
Net cash used in operating activities from continuing operations		(30,853)		(639,550)
Net cash used in operating activities from discontinued operations		(12,350)		(232,356)
Net cash used in operating activities		(43,203)		(871,906)

INVESTING ACTIVITIES:
Purchases of property and equipment		-		(1,399)
Proceeds from the sale of assets held for sale		17,000		-
Proceeds from the sale of property and equipment		-		31,100
Net cash provided by investing activities from continuing operations		17,000		29,701
Net cash provided by investing activities from discontinued operations		-		10,503
Net cash provided by investing activities		17,000		40,204

FINANCING ACTIVITIES:
Proceeds from issuance of senior secured notes payable		15,000		753,000
Proceeds from issuance of common shares with warrants		-		88,000
Repayment on equipment loan payable		-		(19,902)
Net cash provided by financing activities from continuing operations		15,000		821,098
Net cash provided by financing activities from discontinued operations		-		-
Net cash provided by financing activities		15,000		821,098

NET CHANGE IN CASH AND CASH EQUIVALENTS		(11,203)		(10,604)
CASH AND CASH EQUIVALENTS, beginning of period, including discontinued operations		14,440		25,044
CASH AND CASH EQUIVALENTS, Continuing Operations, end of period		3,237		2,090
CASH AND CASH EQUIVALENTS, Discontinued Operations, end of period	$	-	$	12,350