The accompanying notes
are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND
2015
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. formed 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.
Going Concern
These consolidated financial statements have
been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities
in the normal course of business for the foreseeable future. For the year ended December 31, 2016, the Company had a net loss.
The Company also had a working capital deficit and an accumulated deficit. Further losses are anticipated in the development of
the Company’s business of raising substantial doubt and its ability to continue as a going concern. The ability to continue
as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary
financing to meet its obligations and repay its liabilities when they come due from normal business operations. Management intends
to finance operating costs over the next twelve months with loans and/or private placement of common stock.
The continuation of the Company as a going
concern is dependent upon the continued financial support from our shareholders and our ability to obtain necessary equity financing
to continue toward funding our first operation.
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 its ability 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 it can achieve profitability. The terms
of new debt or equity that may be raised may not be on terms acceptable to the Company. If it fails to raise adequate funds from
unrelated third parties, its 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, joint venture, which had no operations for the year.
The joint venture was dissolved effective December 31, 2016. Also included in the consolidated financial statements is Smart Fuel
Solutions, Inc. formed under the laws of the state of Florida. We acquired 82.5% of Smart Fuel Solutions, Inc. on September 28,
2016; please refer to Note 8 for more detail. Intercompany balances and transactions were eliminated between the entities.
Reclassifications
Certain reclassifications have been made to
the prior period’s financial statements to conform to the current period’s presentation.
GREEN ENVIROTECH HOLDINGS
CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND
2015
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.
Cash and Cash Equivalents
We consider cash equivalents when purchased
to be all highly liquid debt instruments and other short-term investments with maturity of three months or less.
We maintain cash and cash equivalent balances
at one financial institution that is insured by the Federal Deposit Insurance Corporation. We do not have any cash equivalents
as of December 31, 2016 and 2015, 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. During the year end December 31, 2016, we incurred engineering
and design costs on our first planned GEN 1 End of Life Tire Processing Plant. The engineering and design includes process flow
diagrams, equipment specifications, building layout and piping and instrument drawings. These costs are carried in Construction
in Progress. We invested in a new subsidiary during the year, Smart Fuel Solutions, Inc. (SFS). SFS acquired carbon equipment at
a cost of $190,000 for our first carbon plant. When we acquired 82.5% ownership of SFS on September 28, 2016, we adjusted the value
of the carbon equipment to $459,935 as a result of treating the acquisition as an asset purchase. We absorbed SFS’s liabilities
and SFS’s assets which were based upon present value; please refer to Note 8 Acquisitions for more detail. The carbon equipment
was not in service during the year, nor was it in service on December 31, 2016. Since the carbon equipment was not in service,
there was no depreciation taken.
Construction in Progress
Construction in progress is stated at cost,
which includes the costs of construction and other direct costs attributable to the construction. No provision for depreciation
is made on construction in progress until such time as the relevant assets are completed and put into use. Interest on the borrowing
related to construction is capitalized in accordance with ASC 835-20
Capitalization of Interest.
During the years ended
December 31, 2016 and 2015, there was $980 and $0 interest capitalized, respectively. We had $262,980 in construction costs for
the year ended December 31, 2016 and none for the year ended December 31, 2015.
Recoverability of Long-Lived Assets
We will review 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 our ability to recover the carrying value of our long-lived assets from expected future cash
flows from our 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.
GREEN ENVIROTECH HOLDINGS
CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND
2015
Income Taxes
We account 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.
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 2016 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
We follow 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 we report
a loss because to do so would be anti-dilutive for periods presented. As of December 31, 2016 and 2015, we had outstanding common
stock warrants totaling 18,959,341 and 5,404,861 respectively. Of the common stock warrants outstanding as at December 31, 2016,
there were 50,000 common stock warrants convertible at $0.50 per warrant, 1,000 common stock warrants convertible at $10.00 per
warrant (these expire on February 9, 2017) and 1,750,342 common stock warrants convertible at $0.08. The rest of the commons stock
warrants in the amount of 17,157,999 were convertible at $0.10 per warrant. We also had convertible debt to related parties in
the amount of $1,433,937. Of this debt, $900,000, net of debt discount of $96,800 is convertible at $0.20 per share, $134,000
is convertible at $0.50 per share and the balance amounting to $496,737 is convertible at $0.10 per share. We had convertible
debt to others in the amount of $149,295. Of this amount $100,000 is convertible at $0.10 per share and $49,295 is convertible
at $0.50 per share.
GREEN ENVIROTECH HOLDINGS
CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND
2015
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.” Our 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. There
are no intangible assets and as such we had no impairment charges for the years ended December 31, 2016 and 2015.
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).
We account 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.
We measure 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 recognize
it as compensation expense over the period the employee is required to provide service in exchange for the award, usually the vesting
period. We estimate 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
our 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, 2016 and 2015, we estimated our forfeiture
rate to be 0% based on the Company’s historical experience. There were no stock options granted to employees during the years
ended December 31, 2016 and 2015.
During the fiscal periods ended December 31,
2016 and 2015, we granted common stock warrants to investors, lenders, consultants 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 consultants,
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,
we have 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, 2016 AND
2015
Fair Value Measurements
We have 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:
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Level 1 inputs: Quoted prices for identical instruments in active markets.
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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.
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Level 3 inputs: Instruments with primarily unobservable value drivers.
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Recently Issued Accounting Standards
There were recently issued
updates 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 our financial position, results of operations or cash flows.
Related Party
The Company follows ASC 850,
“
Related Party Disclosures,”
for the identification of related parties and disclosure of related party transactions.
NOTE 3-
LOAN PAYABLE – RELATED
PARTY AND CONVERTIBLE
On December 29, 2015, we approved H.E. Capital
S.A.’s (HEC) request to assign to a private individual $12,500 of its Line of Credit Note. This approval was requested to
fulfill the $25,000 assignment to Valuecorp Trading Company requested and approved on May 18, 2016, but Valuecorp only paid H.E.
Capital $12,500. We approved the conversion of the $12,500 into shares of the Company’s common stock at the rate of $0.03
per share. When completed the conversion would be a total of 416,667 shares of free trading stock and the HEC Line of Credit Note
will be reduced by $12,500. We issued to the individual a note in the amount of $12,500 and reduced the HEC Line of Credit Note
by the same amount. This note was assigned back to H. E. Capital on .October 1, 2016.
GREEN ENVIROTECH HOLDINGS
CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND
2015
The Company at the beginning of the year 2016
had a Line of Credit with H. E. Capital, S. A. This Line of Credit accrues interest at the rate of 8% per annum and is convertible
at $0.10 per share. The due date of the loan was extended to December 31, 2017. During the year December 31, 2016, H. E. Capital,
S. A., assigned to an entity $200,000 of its debt, who converted $100,000 of the assignment amount at $0.10 per share. The entity
is still holding $100,000 of the convertible debt at December 31, 2016. H. E. Capital also assigned to a third party $10,000,
who converted the assigned amount at $0.10 per share. H. E. Capital was assigned a $7,500 note from a different third party debt
holder and $12,500 from a related party debt holder Total net of the assignments to H.E. capital from debt holders was $190,000
and $70,000 during December 31, 2016 and 2015; respectively. During the year December 31, 2016 and 2015 H.E. Capital converted
$42,905 of the debt into 720,721 common shares of which H.E. capital assigned 54,054 common shares directly to a third party.
The Company borrowed $352,000 and $121,700, during December 31, 2016 and 2015, respectively. The Company approved the assignment
of $76,060 of the Company accounts payable and accrued interest to the H.E. Capital line of credit. During December 31, 2015,
H.E. Capital paid $2,400 of expenses on behalf of the Company and increased the line of credit $121,700. During the year ended
December 31, 2015, H. E. Capital assigned $70,000 of its debt. $45,000 was assigned to Black Lion Oil Limited, a related party,
who converted the assignment into 1,500,000 shares of the Company’s common stock. $12,500 was assigned to Value Corp Trading
Company and $12,500 was assigned to another third party. For these and other financial services H.E. Capital charged the Company
$60,000 during December 31, 2016 and December 31, 2015; respectively. The balance of the loan at December 31, 2016 was $496,737
with accrued interest in the amount of $125,625 as compared to $241,582 with accrued interest in the amount of $99,719 for the
year ended December 31, 2015.
History of the H. E. Capital loans is as follows:
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December 31, 2016
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December 31, 2015
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Beginning Balance
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$
|
241,582
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$
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127,482
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Proceeds
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352,000
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121,700
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Vendors paid direct on behalf of the Company
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-
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2,400
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Reclassification from accounts payable & accruals
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76,060
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-
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Consulting fees
|
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60,000
|
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60,000
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Assignments
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(190,000
|
)
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(70,000
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)
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Non-cash conversion
|
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(42,905
|
)
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-
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Ending Balance
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$
|
496,737
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|
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$
|
241,582
|
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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 during December 31, 2015.
GREEN ENVIROTECH HOLDINGS
CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND
2015
On July 17, 2015, we
approved the assignment of $45,000 of H. E. Capital LOC loan to Black Lion Oil Limited, a related party, who converted the debt
into 1,500,000 shares of the Company’s common stock at a loss of $15,000.
On February 1, 2016, we issued an 8%, $134,000
Note Payable to our now, new CEO Chris Bowers for funds received. We wired these same funds to Smart Fuel Solutions, Inc. (SFS)
for a promissory note for the same amount at eight percent (8%). The funds are intended for the use of Smart Fuel Solutions. We
intend to be a majority owner SFS in the future by issuing licensing agreements for the use of our technology. In March 2016, we
requested and SFS agreed to be totally responsible for the $134,000 note. The note was assigned and accepted by SFS. The funds
were used for working capital in SFS. On September 28, 2016 when we acquired controlling interest in SFS (see Note 5) we assumed
the note. The note is convertible at $0.50 per share. As of December 31, 2016, the accrued interest on this note was $4,604.
On July 29, 2016, we approved the assignment
of a Chris Bowers 8% convertible note in the amount of $12,500 to H.E. Capital under the 2016 line of credit.
On August 15, 2016, we accepted a Line of Credit
(LOC) in the amount of $500,000 from our new CEO Chris Bowers. On November 14, 2016, we accepted a second Line of Credit (LOC)
in the amount of $500,000 from our CEO. As of the December 31, 2016, these two LOCs had an outstanding balance in the amount of
$900,000 with no accrued interest. These LOCs accrue interest at the rate of 1% per month based upon $1,000,000 total balance.
We have been paying $10,000 per month in interest on the two LOCs. The due date of the two loans is December 31, 2017. The funds
were used for working capital of the Company. The first LOC has two Addendums attached to it. Addendum A clarifies debt conversion
rights attached to the LOC at $0.20 per share of common stock. Addendum B clarifies other rights attached to the LOC. These other
rights are numbered below. (The second LOC has the same rights as that of the first LOC). The Company evaluated these convertible
LOCs for Beneficial Conversion Features (BCF) and concluded that the second LOC incurred a Beneficial Conversion Features (BCF)
when it was issued on November 14, 2016. The BCF resulted in a debt discount in the amount of $105,600 of which $8,800 was amortized
for the year ended December 31, 2016. These certain other rights in Addendum B provide for the following:
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1.
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LOC has Repayment rights: The LOC has priority principal and interest repayment rights from other sources of capital received by the Company.
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2.
|
LOC has Warrant rights: Bowers has the right to receive 500,000 (five hundred thousand) $0.10 warrants for providing the LOC and 250,000 (two hundred fifty thousand) $0.10 warrants per $100,000 drawn against the $500,000 LOC. This would be a total of 1,750,000 $0.10 warrants to be issued to Bowers and/or Assigns for providing the funding and the Company using all $500,000 LOC.
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3.
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LOC has Additional Stock Conversion rights: At any time while the LOC is outstanding, Bowers has the right to convert per $100,000 of the LOC for 500,000 shares of duly paid and non-assessable common stock of the Company at a conversion price of $0.20 per share (subject to adjustment in the event of stock splits or stock dividends) by providing a notice of conversion in a form reasonably acceptable to the Company. The full conversion of the LOC would be 2,500,000 shares of the Company common stock.
|
The Company evaluated the addendums under ASC
470-50 and concluded that these addendums did not qualify for debt modification.
GREEN ENVIROTECH HOLDINGS
CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND
2015
On May 18, 2016, the Company issued an eight
percent (8%) Note Payable to Smart Fuel Solutions, Inc. for the $53,500. This note was not convertible. These funds were used for
working capital. This note was paid in full on June 2, 2016 from an increase in the line of credit from H. E. Capital, S.A.
The Company analyzed the conversion options
in the convertible loan payables for derivative accounting consideration under ASC 815, Derivative and Hedging, and determines
that the transactions do not qualify for derivative treatment.
NOTE 4-
LOAN PAYABLE – OTHER
– NON-CONVERTIBLE
On February
25, 2010, we issued a promissory note to an individual in the amount of $20,000 at 10% interest 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. The note was extended to December 31, 2016. On October 1, 2016, the balance of this note of $7,500
with its accrued interest in the amount of $6,533 was assigned to H.E. Capital S.A.
On November 15, 2012, we issued a promissory
note to an individual in the amount of $170,000 at 8% interest. The note was extended to December 31, 2017. The Company used the
funds to pay off the convertible notes held by Asher Enterprise, Inc. As of December 31, 2016 and 2015 the loan has an outstanding
balance of $170,000 and accrued interest in the amount of $6,856 and $42,514 respectively. The accrued interest in the amount of
$49,295 reported for the $170,000 on June 30, 2016 was converted into a new note dated July 1, 2016 with $0.50 per share conversion
rights and accruing interest at 8%. The accrued interest on this new note on December 31, 2016 was $1,988. The $170,000 balance
is not convertible only the $49,295 is convertible at $0.50 per share.
NOTE 5-
LOAN PAYABLE – OTHER
–CONVERTIBLE
On March
19, 2013, we issued a promissory note to an individual in the amount of $150,000 at 8% interest due on March 18, 2014. This note
was extended to December 31, 2016. We used the funds for working capital. On December 1, 2016, this note with its accrued interest
in the amount of $48,123 was converted into 396,246 shares of our common stock.
On May 18, 2015, we approved the Debt Assignment
Agreement dated March 18, 2015 between H.E. Capital S.A. (HEC) and Valuecorp Trading Company. We also approved the Debt Settlement
Agreement dated March 19, 2015 between the Company and Valuecorp Trading Company. We 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 December 3, 2010. However, on June 8, 2015
Valuecorp only paid $12,500 of the assignment to HEC and a note was issued to Valuecorp in the amount of $12,500 and HEC letter
of credit note was reduced by the same amount. It is approved for Valuecorp to receive only 416,667 shares of the Company’s
common stock for the conversion of its $12,500 note when presented to the Company for conversion. This note was converted on December
7, 2016.
On May 16, 2016, we approved H.E. Capital S.A.’s
(HEC) request to assign to a private company $200,000 of its Line of Credit Note. We approved the request and reduced HEC’s
Line of Credit Note for that amount and record a new note. On July 19, 2016, the private company converted $100,000 of its note
into 1,000,000 common shares of the Company’s stock. The note bears interest at 8%, is convertible at $0.10 per share and
is due on December 31, 2016. The note was extended to December 31, 2017. As of December 31, 2016, the balance of this loan is $100,000
with accrued interest in the amount of $6,422.
On July 1,
216, we issued a convertible promissory note to an individual in the amount of $49,295 at 8% interest due on December 31, 2016.
This note is convertible at $0.50 per share. This note was extended to December 31, 2017. This note represents the accrued interest
on the $170,000 note we owe the individual. This note was generated at their request. On December 31, 2016, this note had accrued
interest in the amount of $1,988.
GREEN ENVIROTECH HOLDINGS
CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND
2015
On August 16, 2016, we
approved H.E. Capital S.A.’s (HEC) request to assign to an individual $10,000 of its Line of Credit Note. We approved the
request and reduced HEC’s Line of Credit Note for that amount and record a new note. On August 16, 2016, the individual converted
the $10,000 into 100,000 common shares of the Company’s stock.
The Company analyzed the conversion options
in the convertible loan payables for derivative accounting consideration under ASC 815, Derivative and Hedging, and determines
that the transactions do not qualify for derivative treatment. The Company then analyzed these convertible notes for Beneficial
Conversion Features (BCF) and concluded there were no BCF on these loan payable convertible notes.
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, the warrants issued to Legend Securities, Inc. are exercisable for 190 common shares at a price of $40.00 per share.
These warrants expired during the year ended December 31, 2016.
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. These warrants are set to expire on February 2, 2017.
The balance of these Debentures on December
31, 2016 and 2015 was $305,000. The accrued interest for the years ended December 31, 2016 and 2015 were $237,220 and $200,010
respectively. These notes are in negotiation for extension.
The Company entered into two new note agreements
with Cenco Leasing Company during the second quarter of 2014 and these notes were 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. These notes were satisfied on January 30, 2015 in the Cenco licenses agreement.
Please refer to the commitment note.
GREEN ENVIROTECH HOLDINGS
CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND
2015
NOTE 7-
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, 2016, we had 28,517,597 common shares outstanding as compared to 23,926,757
common shares outstanding on December 31, 2015.
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 uses 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, 2016 and 2015 total unrecognized compensation expense related to non-vested share-based
compensation arrangements was $0.
The key inputs in determining grant date fair
value are as follows:
|
|
|
Period
Ended December 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Risk-free interest rate
|
|
|
1.28
|
%
|
|
|
1.25
|
%
|
|
Dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
Expected volatility
|
|
|
276.00
|
%
|
|
|
110.24
|
%
|
|
Expected term (in years)
|
|
|
3.0
|
|
|
|
5.0
|
|
|
Weighted average grant date fair value of warrants granted during the period
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
The following table presents the warrant activity
during 2016 and 2015:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
Warrants
|
|
|
Exercise Price
|
|
|
Outstanding - December 31, 2014
|
|
|
654,519
|
|
|
$
|
0.24
|
|
|
Granted-Jan 1, 2015
|
|
|
3,000,000
|
|
|
$
|
0.10
|
|
|
Granted-Feb 20, 2015
|
|
|
875,171
|
|
|
$
|
0.08
|
|
|
Granted-Feb 24, 2015
|
|
|
875,171
|
|
|
$
|
0.12
|
|
|
Exercisable as of December 31, 2015
|
|
|
3,012,800
|
|
|
$
|
0.12
|
|
|
Outstanding - December 31, 2015
|
|
|
5,404,861
|
|
|
$
|
0.10
|
|
|
Expired-Jan 24, 2016
|
|
|
(2,090
|
)
|
|
$
|
24.16
|
|
|
Granted-Feb 1, 2016
|
|
|
1,500,000
|
|
|
$
|
0.10
|
|
|
Expired-Aug 1, 2016
|
|
|
(1,429
|
)
|
|
$
|
24.16
|
|
|
Granted-Aug 1, 2016
|
|
|
4,675,000
|
|
|
$
|
0.10
|
|
|
Granted-Aug 28, 2016
|
|
|
1,860,000
|
|
|
$
|
0.10
|
|
|
Granted-Aug 31, 2016
|
|
|
600,000
|
|
|
$
|
0.10
|
|
|
Granted-Sept 2, 2016
|
|
|
1,380,000
|
|
|
$
|
0.10
|
|
|
Granted-Sept 28, 2016
|
|
|
2,493,000
|
|
|
$
|
0.10
|
|
|
Granted-Oct 7, 2016
|
|
|
1,000,000
|
|
|
$
|
0.10
|
|
|
Granted-Nov 15, 2016
|
|
|
50,000
|
|
|
$
|
0.50
|
|
|
Exercisable as of December 31, 2016
|
|
|
18,959,342
|
|
|
$
|
0.10
|
|
|
Outstanding - December 31, 2016
|
|
|
18,959,342
|
|
|
$
|
0.10
|
|
GREEN ENVIROTECH HOLDINGS
CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND
2015
The weighted average remaining life of the
outstanding common stock warrants as of December 31, 2016 and 2015 was 2.92 and 4.52 years. The aggregate intrinsic value of the
outstanding common stock warrants as of December 31, 2016 and 2015 was $2,713,758 and $0 respectively.
Stock and Warrant issues during the year ended
December 31, 2015:
Stock Issues:
|
|
●
|
we issued 1,500,000 common shares to a related party for a note conversion in the amount of $45,000.
|
|
|
|
|
|
|
●
|
we issued 1,298,325 common shares to convert $56,175 of accounts payable and accruals. There was a gain of $6,529 on the transactions.
|
|
|
|
|
|
|
●
|
we issued 3,625,000 common shares to a related party to convert $145,000 in accrued salary.
|
Warrant Issues:
|
|
●
|
we issued 1,500,000 common stock warrants to an engineer in January 2015. These warrants convert within 5 years of issuance @ $0.10 per warrant. 62,500 warrants vest monthly starting the month after issuance. There were 687,500 warrants fully vested at the end of the year. These warrants were valued at $34,926 at December 31, 2015 by the Black-Sholes method.
|
|
|
|
|
|
|
●
|
we issued 1,500,000 common stock warrants to a consultant in January 2015. These warrants convert within 5 years of issuance @ $0.10 per warrant. All of these warrants vest on February 1, 2016. These warrants were valued at $27,588 at December 31, 2015 by the Black-Sholes method.
|
|
|
|
|
|
|
●
|
we issued 875,171 common stock warrants to the engineer in February 2015. These warrants convert within 5 years of issuance @ $0.08 per warrant. 79,561 warrants vest monthly starting the month after issuance. There were 795,610 warrants fully vested at the end of the year. These warrants were valued at $36,766 at December 31, 2015 by the Black-Sholes method.
|
|
|
|
|
|
|
●
|
we issued 875,171 common stock warrants to an attorney, the warrants convert within 5 years of issuance @ $0.08 per warrant. 175,034 warrants vested when issued and 175,034 vested the next four months after issue date. These warrants were totally vested and valued at $46,189 at December 31, 2015 by the Black-Sholes method.
|
|
|
|
|
|
|
●
|
We issued 650,000 warrants in October of 2014 to an attorney, 390,000 of these warrants vested in 2014 and were valued at $59,011. The 260,000 remaining warrants vested in 2015 and were valued at $27,090 by the Black-Sholes method.
|
Stock and Warrant issues during the year ended
December 31, 2016:
Stock Issues:
|
|
●
|
we issued 1,000,000 common shares in July at $0.10 a share to settle a note in the amount of $100,000. There was a loss of $50,000 on this conversion.
|
|
|
|
|
|
|
●
|
we issued 820,721 common shares in August to settle $52,905 of debt including which, 720,721 shares were issued to a related party H.E. Capital. There was a loss of $76,870 on the conversion.
|
|
|
|
|
|
|
●
|
we issued 125,000 common shares in August for consulting services valued at $18,750.
|
|
|
|
|
|
|
●
|
we issued 439,070 common shares in December to convert $229,535 of accounts payable. There was a gain of $102,249 on the transactions.
|
GREEN ENVIROTECH HOLDINGS
CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND
2015
|
|
●
|
we issued 693,636 common shares during October 2016-December 2016 for consulting services valued at $153,143.
|
|
|
|
|
|
|
●
|
we issued 650,000 common shares in December for future consulting services valued at $188,435 and recorded as prepaid expenses which is being amortized over six months.
|
|
|
|
|
|
|
●
|
we issued 862,413 common shares in December to settle $162,500 of debt and $49,608 of accrued interest. There was a loss of $42,661 on the conversion.
|
Warrant Issues:
|
|
●
|
we issued 1,500,000 common stock warrants in February for services rendered valued at $30,000 by the Black-Sholes method. These warrants were fully vested and have an exercise price of $0.10 per share, and expire on February 1, 2021.
|
|
|
|
|
|
|
●
|
we had 3,519 common stock warrants expire in July 2016.
|
|
|
|
|
|
|
●
|
we issued an aggregate of 3,675,000 common stock warrants in August including which 2,000,000 warrants were issued to Chris Bowers, the current CEO, for providing lines of credit and for services rendered and 1,500,000 warrants were issued to other related parties; HE Capital received 1,250,000 warrants for services rendered and Wayne Leggett received 250,000 warrants for services rendered. The rest of the warrants were also issued to entities for services rendered. All of the warrants issued were valued at $584,289 by the Black-Sholes method. All of these warrants were fully vested. 3,625,000 of these warrants have an exercise price of $0.10 per share, and expire on December 31, 2019. 50,000 of these warrants have an exercise price of $0.50 per share, and expire on August 15, 2019.
|
|
|
|
|
|
|
●
|
we issued 1,000,000 common stock warrants in August to Gary DeLaurentiis, our former CEO and a related party, for his service as a director in 2016. These warrants were valued at $148,952 by the Black-Sholes method. These warrants were fully vested and have an exercise price of $0.10 per share, and expire on December 31, 2019.
|
|
|
|
|
|
|
●
|
we issued an aggregate of 3,840,000 common stock warrants during August and September to a total of five current and former employees settle $2,154,135 in accrued and unpaid salary. This included 600,000 warrants to Gary DeLaurentiis for $417,100 in accrued and unpaid salary. These warrants were fully vested and have an exercise price of $0.10 per share, and expire on December 31, 2019.
|
|
|
|
|
|
|
●
|
we issued 1,050,000 common stock warrants in October and November for services rendered valued at $168,722 by the Black-Sholes method. 50,000 of these warrants were fully vested when issued and have an exercise price of $0.50 per warrant expiring on November 15, 2019. The remaining warrants in the amount of 1,000,000 were fully vested when issued and have an exercise price of $0.10 per warrant expiring on December 31, 2019.
|
A recap of our common shares issued for the
year ended December 31, 2016; we issued 818,636 common shares for services rendered valued at $171,892 and we issued 2,683,134
common shares to convert $315,405 of debt and $49,608 of accrued interest. We issued 439,070 common shares to convert $229,535
of accounts payable. We also issued 650,000 common shares for future consulting services valued at $188,435 and recorded as prepaid
expenses.
A recap of our common stock warrants issued
for the year ended December 31, 2016; we issued 6,225,000 warrants for services valued at $783,011. Of this amount Chris Bowers
our new CEO received 2,000,000 for making loans to the Company and providing services in the capacity as a financial consultant.
These warrants were valued at $300,000. Gary DeLaurentiis, our former CEO, received 1,000,000 for services as a director valued
at $148,952. Other related parties received 1,500,000 valued at $225,000. We also issued 3,840,000 warrants to convert $2,154,135
in accrued salaries to former and current employees which included $417,100 accrued salary to Gary DeLaurentiis our former CEO.
Mr. DeLaurentiis received 600,000 warrants valued at $59,266.
Smart Fuel Solutions, Inc. (SFS) issued 2,493,000
warrants on September 28, 2016 for services rendered in the amount of $249,300. 1,568,000 of these warrants were to related parties.
We included $2,730 of this amount in our general and administrative expenses as a result of our consolidating SFS operations on
December 31, 2016.
GREEN ENVIROTECH HOLDINGS
CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND
2015
On January 30, 2015,
in conjunction with the execution of the agreement between us and Cenco, we 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 in the amount
of $721,749 the Company was carrying as a liability to the former employee. The Company will recognize an 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.
Note 8 Related
Party Transactions
On July 17, 2015, the Company issued 1,500,000
common shares to a related party for a note conversion in the amount of $45,000.
On July 20, 2015, the Company issued 3,625,000
common shares to a related party to convert $145,000 in accrued salary.
On August 1, 2016, we issued warrants valued
at $148,952 to purchase 1,000,000 shares of the Company’s common stock to our then CEO for his service as a director in 2016.
On August 1, 2016, we issued warrants valued
at $300,000 to purchase 2,000,000 shares of the Company’s common stock to Chris Bowers our now current CEO for providing
the credit line and services rendered as a financial consultant. Chris Bowers became our new CEO and board member on December 12,
2016.
On August 31, 2016, we issued warrants to purchase
600,000 shares of the Company’s common stock to Gary DeLaurentiis, our then CEO for him converting $417,100 of his accrued
salary. The warrants had a fair value of $59,266. The Company recorded the gain on conversion of $357,734 as additional paid in
capital.
On September 30, 2016, we were carrying in
accounts payable $917 payable to our CEO for business expenses. The payable was paid in full during the fourth quarter ended December
31, 2016.
For the year ended December 31, 2016, we have
issued 1,250,000 warrants to related parties for services valued at $187,500. 2,000,000 warrants were issued to our new CEO for
loans to the Company and for services as a financial consultant. We also issued 3,240,000 warrants to convert $1,737,032 in accrued
salaries to former and current employees. The fair value was $393,505, the Company record a gain on settlement of $1,351,502 the
gain was recognized as additional paid in capital.
The Company’s offices are currently located
at 14699 Holman Mtn Rd, Jamestown, CA 95327. The space is provided by the Chairman of the Company at no cost.
Note 9- Asset Acquisition
On September 28, 2016 we received 17,000,000
shares of common stock of Smart Fuel Solutions, Inc. (Smart Fuel Solutions), a Florida Corporation formed on November 20, 2015.
We received the shares in exchange for providing technology for use in the US and $53,710 decrease in Smart Fuel liability to us.
Our affiliate, Black Lion Oil Limited, received 3,000,000 shares of Smart Fuel on the same date for granting licenses to use the
Green EnviroTech technology in countries outside the US. Smart Fuel Solutions also issued on September 28, 2016 600,000 shares
to an individual for an equity injection of $600,000. Smart Fuel Solutions is a staffed service corporation working with the Company
to undertake operational responsibilities, research and development, engineering, and development of operational facilities. Smart
Fuel Solutions will provide the staffing, maintenance and management of the facilities. Smart Fuel Solutions will also secure feedstock
for, and sell the end products from, the Processing Plants and Finishing Plants. On September 28, 2016 we received our shares from
Smart Fuel Solutions which represents the majority of the outstanding shares of Smart Fuel Solutions.
GREEN ENVIROTECH HOLDINGS
CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND
2015
The Company valued each of the assets acquired
(cash, accounts receivable, and property, plant and equipment) and liabilities assumed (accounts payable and accruals and notes
payable) at their cost as of the acquisition date. The acquisition was considered that of assets under FASB ASC 805-50. Since Smart
Fuel Solutions was not considered a business under ASC 805 at the date of acquisition. The Company acquired the following assets
and assumed the following liabilities in the acquisition of Smart Fuel Solutions, Inc.:
|
Cash
|
|
$
|
40,671
|
|
|
Deposits
|
|
|
5,000
|
|
|
Other assets-carbon equipment
|
|
|
459,935
|
|
|
Accounts payable and accrued expenses
|
|
|
(40,761
|
)
|
|
Due to related party: Green EnviroTech Holdings Corp.
|
|
|
(265,761
|
)
|
|
Note Payable
|
|
|
(134,000
|
)
|
|
|
|
|
|
|
|
Total Net Assets (Liabilities) before non-controlling interest
|
|
$
|
65,084
|
|
|
|
|
|
|
|
|
Less: non-controlling interest
|
|
$
|
11,374
|
|
|
|
|
|
|
|
|
Decrease of Smart Fuel’s liability to Green EnviorTech
|
|
$
|
53,710
|
|
As on September 28, 2016, the date of the Company’s
acquisition of its interest in Smart Fuel Solutions, Inc. (Smart Fuel), it was determined the acquisition of the Smart Fuel met
the criteria for the acquisition of assets under FASB ASC 805-50. Therefore, we recorded the acquisition as the purchase of equipment.
The combined result of the Company’s
operations with Smart Fuel Solutions, Inc. is part of the Company’s combined proforma financials as if the acquisition had
been completed as of the beginning of the reporting period. Adjustments were made to eliminate any inter-company transactions in
the periods presented.
NOTE 10-
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. Availability
of loss usage is also subject to audit by the Internal Revenue Service (IRS). The IRS, when they do audits, normally go back three
years, but this can be extended three more years if it can be proven income was understated by 25% or more. Years from 2012 through
2015 remain subject to review by the IRS.
GREEN ENVIROTECH HOLDINGS
CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND
2015
Net Deferred Tax Assets consisted of the following
components as of December 31, 2016 and 2015:
|
Deferred Tax Assets:
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
NOL Carryover Tax Advantage
|
|
$
|
3,792,000
|
|
|
$
|
3,479,500
|
|
|
Valuation allowance
|
|
|
(3,792,000
|
)
|
|
|
(3,479,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
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, 2016 and 2015.
At December 31, 2016, the Company had a net
operating loss carry forward in the amount of approximately $11,153,000 available to offset future taxable income through 2036.
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.
NOTE 11-
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 (5.0%) of Black Lion’s gross sales. The Company used the fee for working capital. As of
December 31, 2016, Black Lion has not opened its first plant.
On June 1, 2013 the Company signed a three-year
lease for office space and opened its corporate offices in Oakdale, CA. The office was staffed by the CEO, COO and two office personnel.
The office space was 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 $45,075 in obligations. The Company’s offices are currently
located at 14699 Holman Mtn Rd, Jamestown, CA 95327. The space is provided by the Chairman of the Company at no cost.
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. Presently, the Company is current with all
of its filings with the SEC. 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 recorded the judgment as a liability as of December 31, 2016
and December 31, 2015.
GREEN ENVIROTECH HOLDINGS
CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND
2015
On January 30, 2015, we 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%). As part of the agreement, the two notes to Cenco in the amount
of $90,000 with accrued interest in the amount of $5,028 were returned to us. Cenco also paid us an additional $25,000 as a license
fee for another state. The total amount of $120,028 was recorded in the statement of operations as a territorial license fee during
the 12 months ended December 31, 2015.
On May 13, 2015, we agreed with EraStar, one
of our vendors, to resolve the outstanding balance of $120,000 owed to EraStar by us for an amount of $20,000 or issue 20,000 free
trading shares on or before December 30, 2015. The due date for the issue of the free trading shares was extended to December 31,
2016. 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 December 1, 2016, the Company settled with the vendor by issuing
20,000 shares of the Company’s common stock.
On July 1, 2015, we accepted a 98% interest
in a California Limited Liability Company which will operate as a partnership. We previously owned 1% of the LLC, but will now
own 99%. The Company’s CEO previously owned 99%, but will now retain 1% ownership. The purpose of the LLC is for future operational
purposes. To date there are no operating activities in the LLC. This Limited Liability Company was finalized on December 31, 2016
with no operational activity.
On July 14, 2016, we received the Process Certification
for our GEN 1 End of Life Tire Processing Solution from BHP Engineering & Construction, L.P.
NOTE 12
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SUBSEQUENT EVENTS
On January 12, 2017, we appointed Mr. Chris
Smith, 47, to serve as a member of our Board of Directors. Mr. Smith was a principal of HE Capital S.A. upon its founding in 2000
until he resigned in 2014, but remains as a consultant. He is a licensed financial consultant to an international clientele and
is on the Board of Black Lion Oil Ltd.
On January 25, 2017, we issued 100,000 restricted
common shares valued at $21,400 for services rendered.
On January 31, 2017, we received the final
installment of $100,000 from the $500,000 LOC2 we have with Chris Bowers our CEO. The funds were used for working capital.
On February 9, 2017, we established GETH CFP,
Inc., a wholly owned subsidiary, formed in Delaware. This subsidiary will be our new carbon finishing plant to be located in Ohio.
On
February 22, 2017, we approved the debt conversion request from H. E. Capital to convert $175,000 of our debt to H. E. Capital
into 1,750,000 shares of our common stock at $0.10 per share. On March 8, 2017, at the request of H. E. Capital, we vacated the
original agreement to convert $175,000 of our debt to H. E. Capital and entered into a new debt conversion agreement in the amount
of $130,000 to convert 1,300,000 shares of our common stock at $0.10 per share. As of the date of this filing, the shares have
not been issued by the transfer agent.
On March 3, 2017, we approved a new working
capital loan with Chris Bowers in the amount up to $150,000 at 8% due December 31, 2017. The note has conversion rights into our
common shares at $0.10 per share. On March 8, 2017, we received $100,000 of this loan. To date the remaining balance of $50,000
has not been received.
On March 29, 2017, we entered into a lease
and working capital credit facility with Caliber Capital & Leasing LLC and its assignee, Real Estate Acquisition Development
Sales, LLC (“READS”). Under the agreements, READS is providing an initial commitment of up to $2.5 million for the
construction of our first processing line in our centralized Carbon Finishing Plant in Ohio. The loan is dated for April 4, 2017
and to date we have not received our first draw.
On March 29, 2017, we also signed the Master
Equipment and Building Related Lease Agreement. The lease will have an initial term of seven years, after which we will have the
option to purchase the facility from READS or renew the lease under the same terms. The commencement date is April 4, 2017.