NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
NOTE
1-
ORGANIZATION AND BASIS OF PRESENTATION
Green
EnviroTech Holdings Corp. (the “Company”) was incorporated on June 26, 2007 under the name Wolfe Creek Mining, Inc.
under the laws of the State of Delaware. On November 20, 2009, the Company completed a reverse merger transaction pursuant to
which it acquired Green EnviroTech Corp., a Nevada corporation. Wolfe Creek Mining, Inc. up until November 20, 2009 was primarily
engaged in the acquisition and exploration of mining properties. Green EnviroTech Corp was incorporated on October 6, 2008 and
was engaged in plastics recovery. The financial statements included herein are the financials of Green EnviroTech Holdings Corp.
and subsidiaries from October 6, 2008 to current.
Green
EnviroTech Holdings Corp. is an innovative technology company that has developed a patent pending oil conversion process utilizing
a mixture of plastic and tires. The “GETH Process” revolutionizes the disposal of plastic waste and tires and cleans
up our landfills by producing a high grade of oil.
The
proprietary conversion process uses established pyrolysis technology with additional distillation applications.
Going
Concern
These
consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize
its assets and discharge its liabilities in the normal course of business.
The
Company has generated minimal revenues since inception and has generated losses since inception and needs to raise additional
funds to carry out the business plan.
For the year ended December 31, 2014, the Company had a net loss.
The Company also has a working capital deficit and has an accumulated deficit.
The
continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders and the
ability of the Company to obtain necessary equity financing to continue and expand operations.
The
Company has had very little operating history to date. These consolidated financial statements do not include any adjustments
to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. These factors raise substantial doubt regarding the ability of the Company
to continue as a going concern.
Besides
generating revenues from proposed operations, the Company may need to raise additional funds to expand operations to the point
at which the Company can achieve profitability. The terms of new debt or equity that may be raised may not be on terms acceptable
by the Company. If the Company fails to raise adequate funds from unrelated third parties, the Company’s officers and directors
may need to contribute additional funds to sustain operations.
NOTE
2-
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and its interest in Green EnviroTech CA1, LLC, a joint venture
which had no operations for the year. Intercompany balances and transactions were eliminated between the Company and the joint
venture. The Company owns 99% of the Joint Venture. There is no specific operational use for the Joint Venture at present.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results could differ from those estimates.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
Cash
and Cash Equivalents
The
Company considers all highly liquid debt instruments and other short-term investments with maturity of three months or less, when
purchased, to be cash equivalents.
The
Company maintains cash and cash equivalent balances at one financial institution that is insured by the Federal Deposit Insurance
Corporation. The Company does not have any cash equivalents as of December 31, 2014 and 2013, respectively.
Fixed
Assets
Fixed
assets are stated at cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated
useful lives of the related assets. Costs of maintenance and repairs will be charged to expense as incurred. The Company through
December 31, 2013, incurred some engineering and design costs on a facility they were planning to build or purchase to refurbish.
All of these costs were written off at December 31, 2014 as impairment.
Recoverability
of Long-Lived Assets
The
Company reviews long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate
a possible impairment. The assessment for potential impairment will be based primarily on the Company’s ability to recover
the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis.
If
such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds
the fair value of the assets. Fixed assets to be disposed of by sale will be carried at the lower of the then current carrying
value or fair value less estimated costs to sell.
Income
Taxes
The
Company accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) 740,
Income Taxes
.
There are two major components of income tax expense, current and deferred. Current income tax expense approximates cash to be
paid or refunded for taxes for the applicable period. Deferred tax assets and liabilities are determined based upon the difference
between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates, which will be in
effect when these differences reverse. Deferred tax expense or benefit is the result of changes between deferred tax assets and
liabilities.
A
valuation allowance is established when, based on an evaluation of objective verifiable evidence, it is more likely than not that
some portion or all of deferred tax assets will not be realized.
ASC
740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position
taken or expected to be taken on a tax return. Under ASC 740-10, a tax benefit from an uncertain tax position taken or expected
to be taken may be recognized only if it is “more likely than not” that the position is sustainable upon examination,
based on its technical merits. The tax benefit of a qualifying position under ASC 740-10 would equal the largest amount of tax
benefit that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority having full knowledge
of all the relevant information. A liability (including interest and penalties, if applicable) is established to the extent a
current benefit has been recognized on a tax return for matters that are considered contingent upon the outcome of an uncertain
tax position. Related interest and penalties, if any, are included as components of income tax expense and income taxes payable.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
As
of January 1, 2016, we have analyzed filing positions in each of the federal and state jurisdictions where we are required to
file income tax returns, as well as all open tax years in these jurisdictions. We have identified the U.S. federal and California
as our “major” tax jurisdictions. Generally, we remain subject to Internal Revenue Service examination of our 2009
through 2015 California Franchise Tax Returns. However, we have certain tax attribute carry forwards, which will remain subject
to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect to the year in which
such attributes are utilized.
We
believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that
will result in a material change to our financial position. Therefore, no reserves for uncertain income tax position have been
recorded pursuant to ASC 740. In addition, we did not record a cumulative effect adjustment related to the adoption of ASC 740.
Related interest and penalties, if any, are included as components of income tax expense and income taxes payable.
(Loss)
Per Share of Common Stock
The
company follows ASC 260,
Earnings per Share
. Basic net loss per common share is computed using the weighted average number
of common shares outstanding. Diluted earnings per share (EPS) include additional dilution from common stock equivalents, such
as stock issuable pursuant to the exercise of stock options and warrants. Common stock equivalents are not included in the computation
of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive for periods presented.
Intangible
Assets
ASC
350 requires that intangible assets with finite useful lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with ASC 360, “Accounting for the Impairment or Disposal
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” The Company’s assessment for impairment of assets
involves estimating the undiscounted cash flows expected to result from use of the asset and its eventual disposition. An impairment
loss recognized is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset, and considers
year-end the date for its annual impairment testing, unless information during the year becomes available that requires an earlier
evaluation of impairment testing. The Company during the year ended December 31, 2014 incurred impairment charges in the amount
of $33,333 when it wrote off the engineering costs in the amount of $30,833 which were associated with the building permits for
a plant to be built in San Francisco. The building permits would expire before funding of the plant could be consummated. The
Company also wrote down a Sniff Machine used for detecting vapors and odors to fair market value. The write down was for $2,500.
During the year ended December 31, 2013 incurred impairment charges in the amount of $443,000 which consisted of disposing of
damaged equipment with no potential production value to the Company when it did have value in the past. The equipment had been
carried on the books for over two years at a value of $125,000. The other deduction was the write off of $318,000 paid into or
incurred on behalf of Petrosonics, LLC in the anticipation of forming a joint venture together. The Company entered into a joint
venture agreement with Petrosonics, LLC. Pursuant to the Joint Venture Agreement, the parties agreed to the formation of an Irish
registered company for the purpose of researching, development, manufacture and commercialization of oil-industry corroborated
processes that remove sulfur from crude oil and refined fuels on a worldwide basis. The joint venture did not go forward.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
Stock-Based
Awards
ASC
718
Compensation – Stock Compensation
prescribes accounting and reporting standards for all share-based payment transactions
in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options,
and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees,
including grants of employee stock options, are recognized as compensation expense in the financial statements based on their
fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for
the award, known as the requisite service period (usually the vesting period).
The
company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC
505-50,
Equity – Based Payments to Non-Employees.
Measurement of share-based payment transactions with non-employees
is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments
issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance
completion date.
The
Company measures the cost of employee services received in exchange for an award of equity instruments, including stock options,
based on the grant-date fair value of the award and recognizes it as compensation expense over the period the employee is required
to provide service in exchange for the award, usually the vesting period. The Company estimates the fair value of share-based
payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected
to vest is recognized as expense over the requisite service periods in the Company’s statement of operations. The forfeitures
are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
For the fiscal periods ended December 31, 2014 and 2013, the Company’s estimated forfeiture rate is 0% based on the Company’s
historical experience. There were 0 stock options granted to employees during the years ended December 31, 2014 and 2013.
During
the fiscal periods ended December 31, 2014 and 2013, the Company granted common stock warrants to investors, lenders and certain
officers as discussed in Note 3. The fair value of stock warrants issued in conjunction with the issuance of common stock is recorded
against common stock as stock issuance cost. The fair value of stock warrants issued in conjunction with notes payable is recognized
as a discount on the related debt and amortized to interest expense over the term to maturity.
The
fair value of stock-based awards to employees and directors is calculated using the Black-Scholes-Merton pricing model. The Black-Scholes-Merton
model requires subjective assumptions regarding future stock price volatility and expected time to exercise, which greatly affect
the calculated values. The expected term of options granted is derived from historical data on employee exercises and post-vesting
employment termination behavior. The risk-free rate selected to value any particular grant is based on the U.S. Treasury rate
that corresponds to the pricing term of the grant effective as of the date of the grant. The expected volatility is based on the
historical volatility of the common stock of comparable publicly traded companies. In making this determination and finding another
similar company, the Company considered the industry, stage of life cycle, size and financial leverage of such other entities.
These factors could change in the future, affecting the determination of stock-based compensation expense in future periods.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
Fair
Value Measurements
The
Company adopted certain provisions of ASC Topic 820. ASC 820 defines fair value, provides a consistent framework for measuring
fair value under generally accepted accounting principles and expands fair value financial statement disclosure requirements.
ASC 820’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable
data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into
the following hierarchy:
|
●
|
Level
1 inputs: Quoted prices for identical instruments in active markets.
|
|
|
|
|
●
|
Level
2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets
that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
|
|
|
|
|
●
|
Level
3 inputs: Instruments with primarily unobservable value drivers.
|
Recently
Issued Accounting Standards
There
were updates recently issued, most of which represented technical corrections to the accounting literature or application to specific
industries and are not expected to have a material impact on the Company’s financial position, results of operations or
cash flows.
NOTE
3-
STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred
Stock
The
Company has 25,000,000 preferred shares of $0.001 par value stock authorized. The Company has no preferred stock issued and outstanding.
Common
Stock
The
Company has 250,000,000 common shares of $0.001 par value stock authorized. On December 31, 2014, the Company had 17,503,432 common
shares outstanding.
Effective
March 27, 2013, the Company effected a 100-for-1 reverse split of its common stock. The financial statements were adjusted to
reflect the reverse stock split for all periods as of the first day of the first period presented.
Warrants
The
Company used the Black-Scholes option pricing model in valuing options and warrants. The inputs for the valuation analysis of
the options and warrants include the market value of the Company’s common stock, the estimated volatility of the Company’s
common stock, the exercise price and the risk free interest rate. As of December 31, 2014 and 2013 total unrecognized compensation
expense related to nonvested share-based compensation arrangements was $0.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
The
key inputs in determining grant date fair value are as follows:
|
|
Period
Ended
December 31,
|
|
|
|
2014
|
|
Risk-free interest rate
|
|
|
1.25
|
%
|
Dividend yield
|
|
|
0.00
|
%
|
Expected volatility
|
|
|
110.24
|
%
|
Expected term (in years)
|
|
|
5.0
|
|
Weighted average grant date fair value of warrants granted during the period
|
|
$
|
0.10
|
|
On
February 2, 2012, the Company issued 100,000 warrants to debtholders as an incentive for the extension of the maturity date on
the notes to September 24, 2012. These warrants are exercisable for five years at an exercise price of $0.10. Their fair value
was $2,998 which was expensed in 2012. As a result of the 1 for 100 reverse common stock split on March 27, 2013, these warrants
are exercisable for 1,000 common shares at a price of $10.00 per share.
The
following table presents the warrant activity during 2013 and 2014:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
Warrants
|
|
|
Exercise Price
|
|
Outstanding
- December 31, 2012
|
|
|
|
19,519
|
|
|
$
|
5.64
|
|
Granted
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/canceled
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding - December
31, 2013
|
|
|
|
19,519
|
|
|
$
|
5.64
|
|
Granted-Oct 10, 2014
|
|
|
|
650,000
|
|
|
$
|
0.10
|
|
Forfeited/canceled
|
|
|
|
-
|
|
|
|
-
|
|
Exercised-Feb 19, 2014
|
|
|
|
(15,000
|
)
|
|
($
|
1.00
|
)
|
Outstanding - December
31, 2014
|
|
|
|
654,519
|
|
|
$
|
0.24
|
|
Exercisable as of December
31, 2014
|
|
|
|
394,519
|
|
|
$
|
0.34
|
|
The
weighted average remaining life of the outstanding common stock warrants as of December 31, 2014 and 2013 was 4.75 and 0.81 years.
The aggregate intrinsic value of the outstanding common stock warrants as of December 31, 2014 and 2013 was $0 for both years.
During
the year ended December 31, 2013:
|
●
|
the
Company issued 1,047,864 common shares for services valued at $1,221,360. Of this amount, 42,000 shares were for related parties
valued at $69,960
|
|
|
|
|
●
|
the
Company issued 1,606,251 common shares to convert $682,250 of principal and $119,324 of interest on notes payable into equity.
|
|
|
|
|
●
|
the
Company issued 216,198 shares valued at $216,198 to its President for accrued salary and the Company issued 260,000 common
shares valued at $82,200 for accrued salary of employees
|
|
|
|
|
●
|
the
Company issued 151,757 common shares to convert $73,468 of accounts payable
|
|
|
|
|
●
|
the
Company sold 63,000 common shares for cash proceeds of $63,000
|
|
|
|
|
●
|
the
Company issued 60,000 shares as a sweetener for a debt holder valued at $64,286. The relative fair value was recorded as a
discount to the note and was fully amortized during the year.
|
|
|
|
|
●
|
the
Company issued 33 common shares to replace fractional shares as a result of the 100 for 1 reverse stock split dated March
27, 2013
|
|
|
|
|
●
|
the
Company recognized a loss on conversion of debt, accrued salaries, and accounts payable of $2,360,727
|
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
During
the year ended December 31, 2014:
|
●
|
the
Company issued 680,000 common shares for services valued at $252,495 and additional 1,910,000 common shares for services valued
at $635,860 were issued to related parties.
|
|
|
|
|
●
|
the
Company issued 6,299,016 common shares to convert $967,254 of principal and interest on notes payable into equity,
|
|
|
|
|
●
|
the
Company issued 650,000 common stock warrants to an attorney, the warrants convert within 5 years of issuance @ $0.10 per warrant.
130,000 warrants vested when issued and 130,000 vested the 10th of the following four months after issue date. These warrants
were valued at $59,011 at December 31, 2014 by the Black-Sholes method.
|
|
|
|
|
●
|
the
Company issued 821,108 shares valued at $821,108 to a related party for accrued salary and conversion of note payable, 42,871
of these shares were issued to the CEO for the payoff of his note with a principal balance of $12,287 and accrued interest
of $30,584
|
|
|
|
|
●
|
the
Company issued 1,773,620 common shares to convert $417,482 of accounts payable and accruals which resulted in an operating
loss of $96,643.
|
|
|
|
|
●
|
the
Company issued 100,000 shares as a sweetener for debt holders valued at $13,000.
|
|
|
|
|
●
|
the
Company issued 15,000 common shares valued at $15,000 to convert warrants.
|
|
|
|
|
●
|
the
Company recognized a loss on conversion of debt in the amount of $1,171,121.
|
NOTE
4-
LOAN PAYABLE – RELATED PARTY
The
Company had an unsecured, loan payable in the form of a line of credit with its CEO. The CEO had provided a line of credit up
to $1,000,000 at 4% interest per annum to the Company to cover various expenses and working capital infusions until the Company
received sufficient other funding. This loan was extended to December 31, 2015 at the end of the previous year. The loan was paid
in full when it was converted on April 16, 2014 by issuing 42,871 shares of restricted common stock of the Company at a conversion
rate of $1.00 per share The shares represented $12,287 of principal and $30,584 of accrued interest. A reconciliation of the loan
is as follows:
|
|
December 31, 2014
|
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
12,287
|
|
|
$
|
44,187
|
|
Proceeds
|
|
|
-
|
|
|
|
7,000
|
|
Payments on accounts payable
|
|
|
-
|
|
|
|
2,000
|
|
Repayments
|
|
|
-
|
|
|
|
(30,700
|
)
|
Repayment by HE Capital
|
|
|
-
|
|
|
|
(4,700
|
)
|
Stock Conversion
|
|
|
(12,287
|
)
|
|
|
(5,500
|
)
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
-
|
|
|
$
|
12,287
|
|
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
NOTE
5-
LOAN PAYABLE – OTHER
In
2013, the Company converted $682,250 of principal and $119,324 of accrued interest in notes held by to H. E. Capital, S. A. into
1,592,148 shares of the Company’s common stock. The conversion occurred at conversion prices lower than the market price
at the time resulting in a $2,360,727 loss on debt conversion. Two of three debt instruments with H. E. Capital, S. A. were eliminated
in the conversions.
The
Company at the beginning of the year 2014 had a Line of Credit with H. E. Capital, S. A. This Line of Credit accrues interest
at the rate of 8% per annum. The due date of the loan was extended to December 31, 2016. Balance of the loan at December 31, 2014
was $127,482 with accrued interest in the amount of $85,031 as compared to $616,772 with accrued interest in the amount of $50,473
for the year ended December 31, 2013
History
of the H. E. Capital loans is as follows:
|
|
December 31, 2014
|
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
616,772
|
|
|
$
|
663,250
|
|
Proceeds
|
|
|
170,700
|
|
|
|
464,400
|
|
Vendors paid direct on behalf of the Company
|
|
|
19,510
|
|
|
|
-
|
|
Reclassification from accounts payable
|
|
|
53,000
|
|
|
|
-
|
|
Consulting fees
|
|
|
60,000
|
|
|
|
136,172
|
|
Joint Venture Investment paid direct
|
|
|
-
|
|
|
|
125,000
|
|
Repayment to related party
|
|
|
-
|
|
|
|
4,700
|
|
Allocation Green Power Energy
|
|
|
-
|
|
|
|
(100,000
|
)
|
Assignments
|
|
|
(445,000
|
)
|
|
|
-
|
|
Non-cash conversion
|
|
|
(347,500
|
)
|
|
|
(676,750
|
)
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
127,482
|
|
|
$
|
616,772
|
|
The
Company on February 25, 2010 issued a promissory note to an individual in the amount of $20,000 at 10% due on demand. This interest
rate was increased to 12% beginning in 2012. The Company repaid $10,000 of this note on August 10, 2010. The Company also repaid
$2,500 of this note on April 13, 2011. As of December 31, 2014 and 2013 the loan has an outstanding balance of $7,500 each year
and accrued interest in the amount of $4,957 and $4,057, respectively.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
The
Company issued a promissory note on November 15, 2012 to an individual in the amount of $170,000 at 8% due on November 16, 2013.
The note was extended to November 15, 2016. This note was reassigned from HE Capital. The Company used the funds to pay off the
convertible notes held by Asher Enterprise, Inc. As of December 31, 2014 this loan has an outstanding balance of $170,000 and
accrued interest in the amount of $28,914 as compared to $170,000 outstanding balance and accrued interest in the amount of $15,314
for the year ended December 31, 2013.
The
Company issued a promissory note on March 19, 2013 to an individual in the amount of $150,000 at 8% due on March 18, 2014. The
Company used the funds for working capital. As of December 31, 2014 this loan has an outstanding balance of $150,000 and accrued
interest in the amount of $19,356. Compared to December 31, 2013 this loan had an outstanding balance of $150,000 and accrued
interest in the amount of $4,356.
The
Company issued a promissory note in the amount of $171,300 on October 1, 2013 to a vendor in exchange for converting accounts
payable. The note accrues interest at 8% and is due on September 30, 2014. As of December 31, 2013 this note has an outstanding
balance of $171,300 and accrued interest in the amount of $3,454. On February 18, 2014, the note was converted into 685,200 shares
of common stock. There was a conversion loss in the amount of $246,672.
During
the fourth quarter 2014, the Company was faced with satisfying a disputed obligation with one of its vendors by issuing 150,000
free trading shares of the Company. The debt had not matured for the amount of time required for the obligation to receive free
trading shares. In order to satisfy the debt, the Company entered into an agreement with H. E. Capital, S.A. to convert $30,000
of its Line of Credit Note with the Company into 150,000 free trading shares of the Company. H. E. Capital S.A. converted the
required portion of its debt from the Company into the shares needed and issued 25,000 free trading shares in December 2014 and
the balance of 125,000 free trading shares in February 2015. The Company was contingently liable for the vendor debt on December
31, 2014 and until it was totally satisfied in February 2015. The Company incurred an operating loss of $25,706 as a result of
the transaction.
NOTE
6-
SECURED DEBENTURES
On
January 24, 2011, the Company entered into a series of securities purchase agreements with accredited investors (the “Investors”),
pursuant to which the Company sold an aggregate of $380,000 in 12% secured debentures (the “Debentures”). Legend Securities,
Inc. a broker dealer which is a member of FINRA, received a commission of $45,600 and 19,000 warrants at an exercise price of
$0.40 in connection with the sale of the Debentures. The Debentures were initially due at the earlier of 6 months from the date
of issuance or upon the Company receiving gross proceeds from subsequent financings in the aggregate amount of $1,000,000. The
Debentures bear interest at the rate of 12% per annum, payable upon maturity. The Debentures are secured by the assets of the
Company pursuant to security agreements entered into between the Company and the Investors. As a result of the 1 for 100 reverse
common stock split on March 27, 2013, these warrants are exercisable for 190 common shares at a price of $40.00 per share.
The
Company also issued to the Investors on January 24, 2011 five-year warrants to purchase an aggregate of 190,000 shares of common
stock at an exercise price of $0.40, which may be exercised on a cashless basis. As a result of the 1 for 100 reverse common stock
split on March 27, 2013, these warrants are exercisable for 1,900 common shares at a price of $40.00 per share.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
On
February 2, 2012, the Company issued 10,001 shares of common stock valued at $30,000 to the Secured Debenture Holders for extending
the maturity date of the debentures to September 24, 2012. The Company by direction of Legend Securities, Inc. also issued to
the holders of the Secured Debentures five-year warrants to purchase 100,000 shares of common stock at an exercise price of $0.10
per share which said warrants were originally issued to certain employees of Legend Securities, Inc. per a previous Legend Agreement.
The warrants were issued to the holders of the Secured Debentures simultaneously with the issuance of the above mentioned stock
and were valued at $2,998.
As a result of the
1 for 100 reverse common stock split on March 27, 2013, these warrants are exercisable for 1,000 common shares at a price of $10.00
per share.
The
balance of these Debentures on December 31, 2014 and 2013 was $305,000. The interest for the year ended December 31, 2014 was
$37,108 and accrued as of December 31, 2013 (12%) was $162,902. These notes are in negotiation for extension.
The
Company entered into two new note agreements with Cenco Leasing Company during the second quarter secured by the assets of the
Company and common stock of the Company. Both notes are for one year at 8% interest. The first note was issued on May 5, 2014
for $50,000 and the second note was issued on June 2, 2014 for $40,000. Of these amounts, $23,000 was paid directly to vendors
for expenses. These notes are collateralized by assets of the Company and can be repaid by common stock of the Company when presented
for payment. The Company used the proceeds from these notes for working capital. These notes were satisfied in the 1
st
Qtr of 2015. Please refer to subsequent events.
NOTE
7-
PROVISION FOR INCOME TAXES
Deferred
income taxes are determined using the liability method for the temporary differences between the financial reporting basis and
income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected
to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities
are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts
of assets and liabilities and their respective tax bases. Availability of loss usage is subject to change of ownership limitations
under Internal Revenue Code 382.
Net
Deferred Tax Assets consisted of the following components as of December 31, 2014 and 2013:
|
|
2014
|
|
|
2013
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOL Carryover Tax Advantage
|
|
$
|
3,394,400
|
|
|
$
|
3,566,500
|
|
Valuation allowance
|
|
|
(3,394,400
|
)
|
|
|
(3,566,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The
income tax provision differs from the amount of income tax determined by applying the U.S. Federal Income tax rate to pretax income
from continuing operations for the years ended December 31, 2014 and 2013.
At
December 31, 2014, the Company had a net operating loss carry forward in the amount of approximately $9,984,000 available to offset
future taxable income through 2033. The Company established valuation allowances equal to the full amount of the deferred tax
assets due to the uncertainty of the utilization of the operating losses in future periods.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
NOTE
8-
COMMITMENTS
During
2013, the Company entered into an agreement with Black Lion Oil Limited (Black Lion) whose primary focus is on emerging energy
technology with broad applications. Under the agreement, the Company granted to Black Lion exclusive rights to the waste to oil
process in specific territories outside of the United States. In return Black Lion paid $100,000 in cash to the Company as a fee
and agreed to pay the Company royalties amounting to ten percent (10.0%) of Black Lion’s gross sales. The Company used the
fee for working capital.
On
June 1, 2013 the Company signed a three-year lease for office space and opened its corporate offices in Oakdale, CA. The office
is staffed by the CEO, COO and two office personnel. The office space is approximately 3,300 sq ft. The lease calls for lease
payments in the amount of $3,300 per month the first year, $3,738 per month the 2
nd
year and $3,841 per month the 3
rd
year. The Company negotiated with the landlord during the third quarter of 2015 for the landlord to accept stock as settlement
to let the Company out of its office lease. The Company issued to the landlord 1,233,031 common shares to settle $49,321 in obligations.
The Company’s offices are currently located at 14699 Holman Mtn Rd, Jamestown, CA 95327. The space is provided by the CEO
of the Company at no cost.
NOTE
9-
JOINT VENTURE AGREEMENT WITH PETROSONICS, LLC. AND ITS TERMINATION
On
May 27, 2013, the Company entered into a joint venture agreement with Petrosonics, LLC. Pursuant to the Joint Venture Agreement,
the parties agreed to the formation of an Irish registered company for the purpose of researching, development, manufacture and
commercialization of oil-industry corroborated processes that remove sulfur from crude oil and refined fuels on a worldwide basis.
The Company agreed to make a capital contribution of $14,000,000 (including $2,000,000 which the Company agreed to contribute
within 30 days of execution of the Joint Venture Agreement, and an additional $12,000,000 which the Company agreed to contribute
within 180 days of execution of the Joint Venture Agreement to the Joint Venture Company for a 51% interest. Petrosonics agreed
to contribute certain intellectual property to the Joint Venture Company for a 49% interest. During the Company’s due diligence
production, it incurred various delays which resulted in funding deferments. The parties agreed to terminate the initial Joint
Venture Agreement, effective as of September 3, 2013, with the understanding that a new Joint Venture Agreement may be entered
into at a later date. The parties have also agreed verbally to enter into a termination agreement wherein the Company will be
reimbursed a portion of the funds raised in exchange for a release of the IP that was assigned in advance to the entity formed
for the Joint Venture. The Company had invested $318,000 into the agreement before its termination.
NOTE
10-
SUBSEQUENT EVENTS
On
January 30, 2015, the Company entered into a license agreement with Cenco Leasing Company, Inc. (Cenco) wherein the Company has
given exclusive license rights to Cenco for the states of California, Oklahoma, Kansas, Arkansas, Nebraska, Missouri, Colorado,
North Dakota, South Dakota, Iowa, New Mexico, Nevada, Utah and the entire country of Mexico. The agreement gives exclusive rights
to Cenco to utilize certain technology of the Company to design, construct, own and operate pyrolysis and refining plants in the
above defined territories. The agreement calls for Cenco over certain periods of time as detailed in the agreement to construct
plants in these territories. The agreement also calls for Cenco to pay royalties from the revenues generated from these plants.
Such royalties in some states are calculated at a three percent (3%) rate and other states at a five and one half percent (5.5%).
It was also agreed that the two notes Cenco is holding in the amount of $90,000 against the Company will be returned to the Company.
Cenco would also pay the Company an additional $25,000 as a license fee for another state.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
On
January 30, 2015, in conjunction with the execution of the agreement between the Company and Cenco, the Company entered into a
mutual release agreement with a former employee who claimed to have certain technology rights of the Company. It was agreed wherein
the employee would release to the company any claim to any and all rights to certain technology concerning the pyrolysis and refining
of certain materials into oil. Included in the agreement was a provision in which the former employee would forfeit all of their
accrued salary the Company was carrying as a liability to the former employee. The Company will recognize equity adjustment from
the write off of the accrued salary. In exchange for the forfeiture of the accrued salary, Cenco had entered into a separate agreement
with the former employee wherein the former employee would receive certain territorial rights given to Cenco.
During
the first quarter of 2015, the Company entered into a consulting service agreement with a consultant, wherein the consultant will
provide analysis for and identify potential tire pyrolysis locations for future plants of the Company. The consultant will also
participate in product discussions and contribute financial models and other materials for presentation as requested. The consultant
will continue to work with the Company on product identify specifications for carbon black and oil outputs, suggest methods to
increase the values of carbon char and tire oil from Company processes and suggest methods of carbon black and oil finishing equipment
solutions and other services related to tire pyrolysis as requested. The agreement will expire on February 1, 2016 at which time
the consultant will receive as compensation 1,500,000 (one million and five hundred thousand) vested warrants for Company’s
stock at $0.10 a share. The warrants will be 100% vested on the day of issuance.
During
the first quarter of 2015, the Company issued 65,294 common shares to settle $11,100 of accounts payable. There was no loss on
the accounts payable conversion. The Company issued warrants. The Company issued 1,500,000 five year warrants for professional
services exercisable at $0.10 per share and vesting 62,500 shares per month starting on the 1
st
day of the month for
the next twenty-four months following the date of issuance on January 1, 2015. The Company issued 875,170 five year warrants for
professional services exercisable at $0.08 per share and vesting 175,034 shares per month starting on the 1
st
day of
the month for the next five months following the date of issuance on February 20, 2015. The Company signed an addendum to this
agreement on December 17, 2015 to accelerate all warrants not already vested, will be totally vested on February 1, 2016.
On
May 13, 2015, the Company and EraStar agreed to resolve the outstanding balance of $120,000 owed to EraStar by GETH for an amount
of $20,000 or in the form of $20,000 free trading shares on or before 12/30/15.
On
October 1, 2015, the Company and EraStar agreed to an amendment to the May 13, 2015 Settlement Agreement wherein 350,000 shares
currently issued to EraStar for services, GETH may cancel and reissue a total of 370,000 shares to EraStar or assigns as directed
for full consideration of contractual obligations.
On
May 18, 2015, the Company approved the Debt Assignment Agreement dated 5/18/2015 between H.E. Capital S.A. and Valuecorp Trading
Company. The Company also approved the Debt Settlement Agreement dated 5/19/2015 between the Company and Valuecorp Trading Company.
The Company will issue 833,333 shares of common stock to Valuecorp Trading Company at $0.03 per share to satisfy $25,000 of the
debt dated 12/3/2010.
On
June 12, 2015, the Company and Cenco Leasing Company, Inc. agreed to an extension to the performance clause in the agreement between
the Company and Cenco dated January 30, 2015 by executing an amendment to that agreement.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
The
Company on September 30, 2014 settled a claim in New York courts from a vendor for unpaid fees, MicroCap vs Green EnviroTech,
by agreeing to deliver 25,000 shares a month for six months to the plaintiff. All the shares were delivered.
On
or about June 18, 2015, Microcap asked the court for a judgment alleging a default of the stipulation of settlement. Microcap’s
position was that what was delivered was unsellable as the Company had not made timely filings of its Securities and Exchange
Commission filings. The Company filed a Statement in opposition on June 23, 2015. On June 29, 2015, the Court entered a judgment
in the amount of $42,111 in favor of Microcap. The Company has the right to appeal this judgment for a period of one year from
the date of judgment and is reserving its right to appeal.
During
the third quarter of 2015, the Company issued 1,500,000 common shares for the conversion of $45,000 in notes payable. The Company
also issued 3,625,000 restricted common shares to its Director and CEO for the conversion of $145,000 of debt at $0.04 per share.
The Company issued 1,233,031 common shares to settle $98,643 in accounts payable. There was no loss on the accounts payable or
note conversions.
During
the first quarter of 2016, the Company issued 1,500,000 warrants for Company’s stock at $0.10 per share in settlement of
a service agreement dated January 1, 2015. These warrants were fully vested on the date of issuance. The Company issued 1,500,000
warrants to another consultant for Company’s stock at $0.10 per share for services rendered for the past eighteen months.
These warrants fully vested on the date of issuance.
During
the first quarter of 2016, the Company issued a Note Payable to an individual in the amount of $134,000 at an interest rate of
eight percent (8%) for the amount the individual wired into the Company account. The Company did forward the same funds to a third
party company for a promissory note for the same amount at eight percent (8%). The funds are intended for the use of the third
party company. The Company intends to be a majority owner of this third party company in the future by issuing licensing agreements
for the use of its technology.