Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
following is management’s discussion and analysis of financial condition and results of operations and is provided as a
supplement to the accompanying unaudited financial statements and notes to help provide an understanding of our financial condition,
results of operations and cash flows during the periods included in the accompanying unaudited financial statements.
In
this Quarterly Report on Form 10-Q, “Company,” “the Company,” “we,” “us,” and
“our” refer to Green EnviroTech Holdings Corp., a Delaware corporation, unless the context requires otherwise.
We
intend the following discussion to assist in the understanding of our financial position and our results of operations for the
three and six months ended June 30, 2017 and June 30, 2016. You should refer to the Consolidated Financial Statements and related
Notes in conjunction with this discussion.
Corporate
History
On
November 20, 2009, the Company, formerly known as Wolfe Creek Mining, Inc., entered into an Agreement and Plan of Merger (the
“Merger Agreement”) with Green EnviroTech Acquisition Corp., a Nevada corporation, and Green EnviroTech Corp. On July
20, 2010, the Company changed its name to Green EnviroTech Holdings Corp.
Overview
of Our Business
Green
EnviroTech Holdings, Inc. (GETH) is a pioneer in sustainable development. We integrate and commercialize proven technologies and
pioneer proprietary technologies to convert waste into valuable products and help to protect the planet.
Our
mission is to find and implement practical, economical solutions that will clean up the environment, create local jobs and stimulate
economic growth in the communities where we do business.
Our
first market will be to process end of life tires, starting in the USA. Our GEN 1 End of Life Tire Processing Solution is ready
for deployment and we have secured a $100 Million project finance facility that will be used to build a Carbon Finishing Plant
(CFP) in Ohio, and build two, GEN 1 End of Life Tire Processing Plants in Texas. When fully operational in early 2019, these plants
will process 100,000 tons per year of end of life tires and generate more than $40 Million of annual revenue.
Our
goal over the next five years (by 2022) is to be processing 25% of the end of life tire feedstock in the USA, which will generate
more than $200 Million in annual revenues, making GETH the market leader in the USA. In order to keep up with our five year building
program, we will be commissioning numerous tire processing plants in a number of strategic locations throughout the country. With
our expansion program, we will be constructing additional finishing lines at our central Carbon Finishing Plant in Ohio. Achieving
our goal will mean that over 800,000 tons of end-of-life tires will be diverted from landfills. We see our expansion program creating
hundreds of jobs, often in areas of low employment opportunity.
Recent
Developments
Over
the first six months of 2017, we have been consolidating the progress we made in 2016 so as to build a firm foundation from which
to launch growth. For the remainder of 2017, we will continue to be in investment mode we anticipate these investments will generate
$1 Million of revenues in the last quarter of 2017, $10 Million of revenues in 2018, and $40 Million in recurring revenues from
2019 onwards.
Management
intends to finance operating costs over the next twelve months with revenues generated in 2017, credit lines, loans and/or private
placement of common stock.
Effective
June 30, 2017, we merged Smart Fuel Solutions, Inc. (Smart Fuel) into the Company. Smart Fuel was a service company whose President
and Chief Executive Officer was Chris Bowers, who is our new President and Chief Executive Officer effective December 2016. Smart
Fuel has always promoted our Company and was assisting us with our operational responsibilities in all areas of management, including
engineering and proposed plant development sites. It was decided that merging the two companies was the best alternative going
forward. We already owned 17,000,000 of SFS’s 20,600,000 outstanding shares. The Company negotiated with Smart Fuel’s
minority shareholders to take one-for-one conversion of the Company’s shares for Smart Fuel’s shares. The 3,600,000
minority shares were valued at $360,000 based on the Company’s closing price on June 30, 2017 of $0.10 as a result of the
merger. The valued amount of $360,000 is carried on the consolidated balance sheet as stock payable. The GETH shares will be issued
during the third quarter.
The
Company’s acquisition of the minority interest of Smart Fuel was accounted as an equity transaction in accordance with ASC
810-10-45 and consequently, no gain or loss was recognized in the consolidated statements of operations. The difference in the
fair value of the consideration and the carrying amount of the noncontrolling interest of $466,128 was charged to additional paid
in capital.
On
April 11, 2017, our wholly owned subsidiary GETH CFP, Inc. signed a ten year lease with the Lawrence Economic Development Corporation
of Lawrence County, Ohio for the lease of 11,200 sq. ft. of manufacturing space for our carbon finishing plant in Ohio. The lease
has a start date of June 1, 2017 and runs to June 1, 2027. The lease has three five year extensions. The lease is $4.00 per sq.
ft. with initial payments in the amount of $3,733 per month. The second extension is at $4.50 a sq. ft. with payments in the amount
of $4,200 per month.
On
March 29, 2017, Green EnviroTech Holdings Corp. 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 this agreement,
READS is providing an initial commitment of up to $2.5 million for the construction of the Company’s first processing line
in its centralized Carbon Finishing Plant in Ohio. Work commenced on April 4, 2017. As of the date of this filing, we have not
received funding from the facility
On
March 29, 2017, we also signed the Master Equipment and Building Related Lease Agreement. The agreement provides for up to $97.5
million in financing, subject to successful due diligence and underwriting, to be used for construction of additional facilities
in the USA. 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 purchase option requires an appraisal with the final purchase price being at
Fair Market Value based upon the appraisal. The commencement date was April 4, 2017. As of the date of this filing, we have not
received funding from the facility
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
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.
In
2016, we turned a corner as we perfected our first generation End of Life Tire Processing Solution that is financially viable
and ready for deployment. The last 12 months have been focused on completing all of the complementary steps that are required
to make a project fundable, securing partners who can help to deploy our solutions, and engaging with funding institutions financing
projects in the USA and around the world.
We
received $1,280,500 in working capital in 2016. This working capital afforded us the ability to:
|
|
●
|
Secure
a process certification for our Generation One (Gen 1) End of Life Tire Processing Solution
|
|
|
●
|
Build
a pipeline of End of Life Tire Processing projects
|
|
|
●
|
Acquire
carbon equipment at an extremely discounted price. This equipment will be used in our first Carbon Black Finishing Plant to
be built in Ohio.
|
|
|
●
|
Build
a bench scale Processing Module and open our own testing lab in order to further test the end products generated by our Gen
1 End of Life Tire Processing Technology, particularly the oil and carbon black.
|
On
December 12, 2016, we appointed Chris Bowers to the Board and appointed him as our new President and Chief Executive Officer.
Gary DeLaurentiis became our Secretary Treasurer and Executive Vice President of Business Development. Mr. DeLaurentiis also remained
our Chairman and Chief Financial Officer.
On
November 11, 2016, we filed a press release and 8-K announcing we had entered into an agreement with BHP Engineering and Construction
LP (BHP), a full-service design engineering and construction firm working with oil and gas, chemical, municipal and military clients.
BHP will serve as a strategic partner and EPC for the building of the GEN 1 End of Life Tire Processing Plants.
On
October 10, 2016, we filed a press release and 8-K announcing we had entered into an agreement with Schneider Electric, a global
specialist in energy management and automation. Under the terms of the agreement, Schneider Electric will serve as a strategic
partner to us, providing complete electrical and automation services and solutions, including design and installation services,
Square D electrical gear and Modicon M580 programmable automation controller (ePAC) platform. Schneider Electric develops connected
technologies and solutions to manage energy and process in ways that are safe, reliable, efficient and sustainable
In
September 2016, the Company received a process performance certification for their Generation 1 (Gen 1) end of life Tire Processing
Solution from BHP Engineering & Construction LP. This is a momentous achievement as the Company can now secure financing for
projects that will recycle end of life tires anywhere in the world. Not only is the Gen 1 end of life Tire Processing Solution
fundable, it also produces excellent financial returns to funding partners. We look forward to being able to announce in the near
future we have installed and been commissioned to operate a Gen1 end of life tire processing plant.
On
September 28, 2016 we established controlling interest in Smart Fuel when we received 17,000,000 shares of their common stock.
Smart Fuel is a Florida Corporation formed on November 20, 2015. We received the shares in exchange for providing the technology
and $53,710 for operating capital. Smart Fuel is a staffed service corporation working with the Company to undertake operational
responsibilities, research and development, engineering, and development of operational facilities. Smart Fuel will provide the
staffing, maintenance and management of the facilities. Smart Fuel will also provide the outlet for these facilities’ feed
stock as well as the advertising and marketing programs for the facilities multitude of products. Effective June 30, 2017, we
integrated Smart Fuel into the Company. Smart Fuel was a service company who had for its President and Chief Executive Officer,
Chris Bowers, who is our new President and Chief Executive Officer effective December 2016. Smart Fuel has always promoted our
Company and was assisting us with our operational responsibilities in all areas of management, including engineering and proposed
plant development sites. It was decided, merging the two companies was the best alternative going forward. We already owned 17,000,000
of Smart Fuel’s 20,600,000 out-standing shares. The Company negotiated with Smart Fuel’s two minority shareholders
to take one-for-one conversion of the Company’s shares for Smart Fuel’s shares.
Critical
Accounting Policy and Estimates
Our
Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements,
which have been prepared in accordance with generally accepted accounting principles in the United States of America. The preparation
of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition,
accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical
experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates
inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets
and liabilities which are not readily apparent from other sources.
The
following discussion of our financial condition and results of operations should be read in conjunction with our audited financial
statements for the years ended December 31, 2016 and 2015, together with notes thereto as previously filed with our Annual Report
on Form 10-K. In addition, these accounting policies are described at relevant sections in this discussion and analysis and in
the notes to the financial statements included in our Quarterly Reports on Form 10-Q for prior quarter filings.
Results
of Operations
Six
Months Ended June 30, 2017 compared to Six Months Ended June 30, 2016.
Revenues
and Cost of Revenues
The
Company is a pre revenue-stage technology company that has developed a GEN 1 End of Life Tire Processing Solution that produces
two valuable end products – Brent crude standard blend stock oil and carbon black. The Company had no operating revenues
or cost of revenues for the six months ended June 30, 2017 and 2016.
Operating
Expenses
The
salaries and professional fees for the six months ended June 30, 2017 were $657,831 as compared to $290,296 for the six months
ended June 30, 2016, an increase of $367,535, representing a 127% increase. The salaries and professional fees for the six months
ended June 30, 2017 included $90,000 in salaries, $83,750 in stock issued for services, $162,544 in warrants issued for services,
and $321,537 in professional fees. Compared to the six months ended June 30, 2016, there were $51,156 in warrants issued for services,
$89,140 in professional fees and $150,000 in salaries.
The
general and administrative expenses for the six months ended June 30, 2017 were $226,184 as compared to $39,003 for the six months
ended June 30, 2016, an increase of $187,181 representing 480% increase. The major increase was the result of an increase in the
product samples, lab rent and lab expenses of $82,476, marketing expenses of $11,000, insurance of $37,692 and travel expenses
in the amount of $38,000 for the six months ended June 30, 2017 compared to minimal expenses in these accounts for the six months
ended June 30, 2016 except for travel which amounted to $17,417.
Other
Income and Expenses
Other
income and expenses for the six months ended June 30, 2017 were $187,674 as compared to $46,309 in expenses for the six
months ended June 30, 2016, an increase of $141,365 in expenses representing an increase of 305%. We recorded for
the six months ended June 30, 2017, interest expense on our outstanding notes in the amount of $187,674 as compared to $46,309
in interest expense for the six months ended June 30, 2016. The increase was due to the increase in new debt. A detail of the
new debt can be found in the notes to the financial statement dealing with debt.
Net
Loss
As
a result of the above, the Company had a net loss of $1,071,689 for six months ended June 30, 2017 as compared to a loss of $375,608
for the six months ended June 30, 2016.
Three
Months Ended June 30, 2017 compared to Three Months Ended June 30, 2016.
The
Company is a pre revenue-stage technology company that has developed a GEN 1 End of Life Tire Processing Solution that produces
two valuable end products – Brent crude standard blend stock oil and carbon black. The Company had no operating revenues
or cost of revenues for the three months ended June 30, 2017 and 2016.
Operating
Expenses
The
wages and professional fees for the three months ended June 30, 2017 were $240,655 as compared to $136,500 for the three months
ended June 30, 2016, an increase of $104,155 and approximately 76% change. The wages and professional fees for the three months
ended June 30, 2017 included $155,968 in professional fees, $27,500 in wages, $37,500 in stock issued for services and $19,687
in warrants issued for services. For the three months ended June 30, 2016, the wages and professional fees had $61,500 in professional
fees and $75,000 in wages.
The
general and administrative expenses for the three months ended June 30, 2017 were $74,063 as compared to $18,934 for the three
months ended June 30, 2016, an increase of approximately 291%. This increase of $55,129 was the result of an increase in product
sample expenses, travel, entertainment, advertising and marketing concerning the promotion of the company.
Other
Income and Expenses
Other
income and expenses for the three months ended June 30, 2017 were $99,924 as compared to $23,848 for the three months ended
June 30, 2016, an increase of 319%. This increase of $76,076 was the result of an increase in interest expense on
the working capital notes in the amount of $99,924 as compared to $23,848 in interest expense for the three months ended June
30, 2016.
Net
Loss
As
a result of the above, the Company had a net loss of $414,642 for the three months ended June 30, 2017 as compared to a loss of
$179,282 for the three months ended June 30, 2016.
Liquidity
and Capital Resources
On
June 30, 2017, we had a balance of cash in the bank in the amount of $9,538. We had other current assets in the amount of $45,596.
Included in other current assets is $5,812 in prepaid expenses and $37,500 in deposits and $2,284 in other assets. Our construction
in progress account totaled $1,034,201 which included $459,935 in carbon equipment acquired in SFS asset acquisition in prior
year. We had $930,781 in accounts payable to vendors, we had $353,610 in accrued interest on our note obligations. We also
had $360,000 in other current liabilities for the issue of our stock to acquire the minority interest in Smart Fuel on June 30,
2017. These shares will be issued in the third quarter. We had secured debentures payable in the amount of $305,000 explained
in detail below. We had loan payable –related party-convertible in the amount of $1,624,741 explained in detail below. We
had loan payable-other-convertible in the amount of $401,920 explained in detail below and we had loan payable-other-non-convertible
in the amount of $170,000 explained in detail below.
We
had negative cash flows from operations for the six months ended June 30, 2017 in the amount of ($527,076) as compared to the
same period ended June 30, 2016 in the amount of ($140,166). The main reason for the increase in the negative cash flows had to
do with the amortization of the prepaid expense in the amount of $163,357 in relation with the consulting agreement with the Caro
Partners LLC and warrants issued for service in the amount of $162,544. We had cash provided of $441,950 in financing activities
for the three months ended June 30, 2017 as compared to $187,000 for the same period ended June 30, 2016. This increase had to
do with an increase in loan payable-related party in the amount of $189,800 net of $45,200 paid in principal to related party.
We also had an increase in loans payable others in the amount of $252,150.
On
May 16, 2017, we received working capital funds in the amount of $74,650 from EMA Financial LLC. The note is in the amount of
$77,500 with an original issue discount (OID) in the amount of $2,850 has an interest rate of 10% and is due May 1, 2018. The
note has prepayment conditions. The note can be prepaid any time during the period beginning on the Issue Date and ending on the
date which is six months following the Issue Date. If paid within 90 days from the Issue Date, the payment is at 125% of the unpaid
principal balance including interest. If the note is prepaid at any time during the period beginning the day which is ninety-
one (91) days following the Issue Date and ending on the date which is one hundred eighty (180) days following the Issue Date,
the payment is at 135% of the unpaid principal balance plus interest. After the expiration of one hundred eighty (180) days following
the date of the Note, the Company shall have no right of prepayment. The note has a variable conversion price feature per the
agreement. The conversion feature starts on August 1, 2017. The conversion price hereunder shall equal the lower of: (i) the closing
sale price of the Common Stock on the Principal Market on the Trading Day immediately preceding the Closing Date, and (ii) 55%
of either the lowest sale price for the Common Stock on the Principal Market during the twenty-five (25) consecutive Trading Days
immediately preceding the Conversion Date or the closing bid price, whichever is lower. As of June 30, 2017, the note had accrued
interest in the amount of $1,295. The note also had an OID balance in the amount of $2,375 after amortizing $475 to interest expense.
On
May 5, 2017, we received working capital funds in the amount of $77,500 from Auctus Fund LLC. The note has an interest rate of
10% and is due February 5, 2018. The note has prepayment conditions. The note can be prepaid any time during the period beginning
on the Issue Date and ending on the date which is ninety (90) days following the Issue Date at 125% of the unpaid principal balance
including interest. The note can be prepaid at any time during the period beginning the day which is ninety- one (91) days following
the Issue Date and ending on the date which is one hundred eighty (180) days following the Issue Date at 135% of the unpaid principal
balance plus interest. After the expiration of one hundred eighty (180) days following the date of the Note, the Borrower shall
have no right of prepayment. The note has a variable conversion price feature per the agreement. The conversion feature starts
on August 5, 2017. The conversion price shall equal the lesser of (i) the average of the two (2) lowest Trading Prices during
the previous twenty-five (25) Trading Day period ending on the latest complete Trading Day prior to the date of this Note and
(ii) the Variable Conversion Price. The Variable Conversion Price shall mean 55% multiplied by the Market Price, representing
a discount rate of 45%. Market Price means the average of the two (2) lowest Trading Prices for the Common Stock during the twenty-five
(25) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. As of June 30, 2017, the note
had accrued interest in the amount of $1,205.
On
April 12, 2017, we received working capital funds in the amount of $100,000 from a private company. The note is convertible to
common stock three months after the issuance date of the note. The note has an interest rate of 8% and is due on April 11, 2018.
The note has a variable conversion price feature per the agreement, in which, if the stock price is below $0.20 per share at conversion,
the lender can convert at a 15% discount on stock price. As of June 30, 2017, the note had accrued interest in the amount of $1,753.
This note was converted into 1,481,040 common shares on July 21, 2017. See the note on subsequent events.
On
March 3, 2017, we approved a new working capital line of credit loan (LOC) with our CEO, 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. For the six months ended June 30, 2017,
this note had accrued interest in the amount of $2,521. The Company evaluated this convertible LOC for a Beneficial Conversion
Features (BCF) and concluded that the LOC incurred a BCF when it was issued on March 3, 2017. The BCF resulted in a debt discount
in the amount of $35,300 of which $13,504 was amortized to interest expense for the six months ended June 30, 2017 leaving a balance
of $21,796 to be amortized over the remaining term of the LOC.
On
August 15, 2016, we accepted a LOC in the amount of $500,000 from our new CEO Chris Bowers. On November 14, 2016, we accepted
a second LOC in the amount of $500,000 from our CEO. As of the June 30, 2017, these two LOCs had an outstanding balance in the
amount of $1,000,000 with $10,000 in accrued interest. These LOCs accrue interest at the rate of 1% per month and are due on 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). These certain other
rights in Addendum B provide for the following:
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|
1.
|
LOC
has Repayment rights: The LOC has priority principal and interest repayment rights from other sources of capital received
by the Company.
|
|
|
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. These warrants will be accounted for once the term of the warrants is known.
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|
|
3.
|
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 these convertible LOCs for BCF and concluded that the second LOC incurred a 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. $52,800 has been amortized to interest expense for the six months ended June 30, 2017 leaving a balance of $44,000 to
be amortized over the remaining term of the LOC.
On
February 1, 2016, we issued an 8%, $134,000 Note Payable to our CEO Chris Bowers for funds received. These funds were issued to
Smart Fuel for a promissory note for the same amount at eight percent (8%). The funds were intended for the working capital needs
of Smart Fuel. On September 28, 2016, we acquired a controlling interest in SFS and consequently assumed the note. The note is
convertible at $0.50 per share and matures on December 31, 2017. As of June 30, 2017, the accrued interest on this note was $9,920.
We
have an unsecured line of credit with H. E. Capital, S. A., a related party. The line of credit accrues interest at the rate of
8% per annum. The due date of the line of credit has been extended to December 31, 2017. Balance of the line of credit at June
30, 2017 was $456,537 with accrued interest in the amount of $43,286. We previously had an agreement with H.E. Capital wherein
we paid $5,000 monthly for financial services. As of December 31, 2016, this agreement is no longer in effect. H. E. Capital’s
activity for the six months ended June 30, 2017, included advances of $35,000 to the Company and payments of $45,200. H. E. Capital
also converted $30,000 of the line of credit and $100,000 in accrued interest into 1,300,000 shares of our common stock on April
3, 2017 at a $0.10 conversion rate. A schedule of the H. E. Capital loan activity with us for the six months ended June 30, 2017
and for the year ended December 31, 2016 is as follows:
|
H. E. Capital S.A. transactions for 2017
|
|
June
30, 2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
496,737
|
|
|
$
|
241,582
|
|
|
Proceeds
|
|
|
35,000
|
|
|
|
352,000
|
|
|
Reclassification
from accounts payable & accruals
|
|
|
-
|
|
|
|
76,060
|
|
|
Consulting fees
|
|
|
-
|
|
|
|
60,000
|
|
|
Assignments
|
|
|
-
|
|
|
|
(190,000
|
)
|
|
Non-cash conversion
to stock
|
|
|
(30,000
|
)
|
|
|
(42,905
|
)
|
|
Cash
paid to H. E. Capital
|
|
|
(45,200
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
456,537
|
|
|
$
|
496,737
|
|
We
will seek to raise additional funds to meet our working capital needs principally through the generation of revenues, and through
the additional sales of our securities. However, we cannot guaranty that we will be able to obtain sufficient additional funds
when needed, or that such funds, if available, will be obtainable on terms satisfactory to us.
We
intend to pursue capital through public or private financing as well as borrowings and other sources, such as our officers, directors
and principal shareholders. We cannot guarantee that additional funding will be available on favorable terms, if at all. If adequate
funds are not available, then our ability to expand our operations may be significantly hindered. If adequate funds are not available,
we believe that our officers, directors and principal shareholders will contribute funds to pay for our expenses to achieve our
objectives over the next twelve months. However, our officers, directors and principal shareholders are not committed to contribute
funds to pay for our expenses.
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to investors.