NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1
Basis of Presentation and Accounting Policies:
The
consolidated financial statements include the accounts of our Company and our new subsidiary, Smart Fuel Solutions, Inc. On September
28, 2016, the Company acquired a controlling interest in Smart Fuel Solutions, Inc., (Smart Fuel) a Florida Corporation, established
and staffed as a service company. Smart Fuel will undertake and/or assist with the operational responsibilities of the Company.
Smart Fuel is a private company, majority owned by us. Our management will continue to focus on business development as its major
priority. We will utilize Smart Fuel’s abilities to assist us with management, engineering and development of proposed plant
projects and promotion of the Company. The ownership interest in Smart Fuel, held by third parties, are presented in the consolidated
balance sheet within the equity section as a line item identified as “non-controlling interest”, separate from the
parent’s equity. All significant inter-company balances and transactions have been eliminated in the consolidation. Please
refer to note 5 for further information concerning Smart Fuel Solutions, Inc.
The
Financial Statements presented herein have been prepared by us in accordance with the accounting policies described in our December
31, 2015 and 2014 audited financial statements included in Form 10-K and should be read in conjunction with the Notes to the Financial
Statements which appear in that report.
The
preparation of these unaudited financial statements in conformity with accounting principles generally accepted in the United
States requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including related
intangible assets, income taxes, insurance obligations and contingencies and litigation. We base our estimates on historical experience
and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual
results may differ from these estimates under different assumptions or conditions.
In
the opinion of management, the information furnished in these interim unaudited financial statements reflect all adjustments necessary
for a fair statement of the financial position and results of operations and cash flows as of and for the nine-months - ended
September 30, 2016, and 2015. All such adjustments are of a normal recurring nature. The results of operations for the interim
period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which
would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period,
as reported in the Form 10-K, have been omitted.
Certain
reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation.
Note
2 Going Concern
These
financial statements have been prepared on a going concern basis which assumes we will be able to realize our assets and discharge
our liabilities in the normal course of business for the foreseeable future. For the nine months ended September 30, 2016, we
had a net loss of $1,441,647. The majority of this loss consisted of $763,241 in warrants issued for services rendered; it also
included $126,870 in losses from debt being converted into common stock of the Company. We also have a working capital deficit
of $2,655,896. This deficit represents a decrease in the working capital deficit from last quarter ended June 30, 2016 by $1,650,143.
This reduction of working capital deficit from the previous quarter was due to accrued wages of current and past employees being
converted into common stock warrants. It also included $152,905 of notes payable being converted into common stock. We have accumulated
a deficit of $22,035,630 since inception. This factor raises doubt about our ability to continue as a going concern.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
These
financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts,
or amounts and classification of liabilities that might result from a future uncertainty. Our working capital deficit is dropping
and and our note holders are receptive to converting debt for equity in our Company when certain milestones are met. We have already
converted $152,904 of our notes payable into our common stock. We are also receiving positive feedback from our old vendors interested
in converting into our stock for their debt. Please see the note on subsequent events. We already have commitments to convert
$144,845 in accounts payable into our common stock.
Note
3 Loan Payable – Related Party
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, 2016. Balance of the line of credit at September 30, 2016 was $385,677
with accrued interest in the amount of $115,572. We also have an agreement with H.E. Capital wherein we pay $5,000 monthly for
financial services. As of September 30, 2016, $45,000 was due under these terms. H. E. Capital during the year assigned $215,405
of its debt to third parties of which $115,405 was converting into 1,154,054 shares of the Company’s stock. A schedule of
the H. E. Capital loan activity with use for 2016 is as follows:
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
H.
E. Capital S.A. transactions for 2016
|
|
September
30, 2016
|
|
|
December
31, 2015
|
|
|
|
|
|
|
|
|
Beginning
Balance
|
|
$
|
241,582
|
|
|
$
|
127,482
|
|
Proceeds
|
|
|
352,000
|
|
|
|
121,700
|
|
Vendors
paid direct on behalf of the Company
|
|
|
-
|
|
|
|
2,400
|
|
Consulting
fees
|
|
|
45,000
|
|
|
|
60,000
|
|
Assignments
|
|
|
(215,405
|
)
|
|
|
(70,000
|
)
|
Conversions
to stock
|
|
|
(37,500
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Ending
Balance
|
|
$
|
385,677
|
|
|
$
|
241,582
|
|
On
May 18, 2016, the Company issued an eight percent (8%) Note Payable to Smart Fuel Solutions, Inc. a private company for
$53,500. Smart Fuel satisfied an accrued liability for the Company in the amount of $25,000 and paid $28,500 to the Company
which was 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.
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. We approved the request and 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. To date these shares have not been issued. As of September 30, 2016, the accrued interest on
this note was $759.
On
February 1, 2016, we issued an 8%, $134,000 Note Payable to an individual for the funds wired into our account. We then wired
these same funds to Smart Fuel Solutions, Inc. 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 of Smart Fuel Solutions in the future by issuing
licensing agreements for the use of our technology. In March 2016, we requested and Smart Fuel Solutions agreed to be totally
responsible for the $134,000 note. The note was assigned and accepted by Smart Fuel Solutions. On September 28, 2016 when we acquired
controlling interest in Smart Fuel Solutions, Inc. (see Note 6) we assumed the note again. As of September 30, 2016, the accrued
interest on this note was $6,902.
On
August 15, 2016, we agreed to a line of credit with a private individual and related party for an amount of $500,000 paying interest
at the rate of 1% per month. The funds will be used for working capital. Through September 30, 2016, we had received $400,000
on the line of credit. There was no accrued interest. $10,000 in interest expense had been paid by September 30, 2016.
The
total in loans payable to related party as of September 30, 2016 was $932,177, and accrued interest was $123,233.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note
4 Loan Payable – Other
We
issued an 8% promissory note in the amount of $150,000 on March 19, 2013 to a private investor. This note is extended to December
31, 2016. The Company used the proceeds from this note for working capital. As of September 30, 2016 this loan has an outstanding
balance of $150,000 and accrued interest in the amount of $45,616.
On
January 24, 2011, we entered into a series of securities purchase agreements with accredited investors pursuant to which we sold
an aggregate of $380,000 in 12% secured debentures. The Debentures are secured by the assets of the Company pursuant to security
agreements entered into between us and the investors.
As
of September 30, 2016 these secured debentures have an outstanding balance of $305,000 and accrued interest in the amount of $227,867.
These debentures are in default and the Company is in negotiations with the holders for extensions.
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. As of September 30, 2016, the accrued interest
on this note was $4,427.
On May 18, 2015, we approved the
Debt Assignment Agreement dated 5/18/2015 between H.E. Capital S.A. and Valuecorp Trading Company (Valuecorp). We also approved
the Debt Settlement Agreement dated 5/19/2015 between the Company and Valuecorp wherein the Company will settle its debt of $12,500
to Valuecorp by issuing 416,667 shares of common stock to Valuecorp at $0.03 per share. To date, this note has not been presented
for conversion. As of September 30, 2016, the accrued interest on this note was $1,318.
We have two other notes outstanding.
We issued note in the amount of $7,500 on February 25, 2010 and the other note for $170,000 was issued on November 16, 2012. These
notes are to private parties and accrue interest at the rate of 8%. Both notes have been extended to December 31, 2016. As of
September 30, 2016, their accrued interest was $6,533 and $4,422 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 under the same conditions as the original note,
accruing interest at 8%.
The
total in loans payable as of September 30, 2016 was $794,295, and accrued interest was $290,183.
Note
5 Commitment and Contingency
During
the fourth quarter 2014, we were faced with satisfying a disputed obligation with one of our 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, we entered into an agreement with H. E. Capital, S.A. to convert $30,000 of its Line of Credit Note
with us into 150,000 of our free trading shares. H. E. Capital S.A. converted the required portion of its debt from us 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. We accrued the $30,000 liability on our books until the debt was totally satisfied in February 2015. On or about June 18,
2015, the Plaintiff moved for a judgment alleging we defaulted under the terms of the Settlement Agreement. The Plaintiff’s
position was that the Settlement Shares were unsellable since we were delinquent in our periodic filings under the Securities
Exchange Act of 1934, as amended. On June 23, 2015, we filed an opposition to the Plaintiff’s pleadings. On June 29, 2015
the Court entered a judgment in favor of the Plaintiff in the amount of $42,111. GETH intends to appeal the judgement as Defendant
has satisfied the outstanding amount.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 31, 2016. On October 1, 2015, we agreed with
EraStar to an amendment to the May 13, 2015 Settlement wherein for the 350,000 shares currently issued to EraStar for services
rendered, GETH may cancel these shares and reissue a total of 370,000 shares to EraStar or its assigns as directed for full consideration
of contractual obligations. To date these shares have not been issued. These shares will be issued in the fourth quarter 2016.
On
August 17, 2016, we were notified we had won a judgement against Naranza Capital Partners, LLC and/or Lee V. Partee in the amount
of $170,661. On November 23, 2010, we signed a lease agreement with Naranza for equipment to be used in our Riverbank, CA plant
being developed at that time. We invested $261,890 in the lease of the equipment and recorded the lease on our financial statements.
When it became apparent we were not going to get the equipment or the refund of our deposit, we provided all our transaction information
to the authorities. We wrote off the deposit during the year ended December 31, 2012, which was reflected on our financial statements
for that year. We will record the settlement amount as other income when we receive it.
Note
6 Acquisitions
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 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 these countries. 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.
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.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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
|
|
Note
7 Equity
Common
Stock
We
have 250,000,000 common shares of $0.001 par value stock authorized. On December 31, 2015, we had 23,926,757 common shares outstanding.
As of September 30, 2016 we had 25,872,478 common shares outstanding.
On
July 19, 2016, we issued 1,000,000 common shares 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.
On
August 1, 2016, we issued 54,054 common shares to settle $5,405 of debt. There was a loss of $2,703 on the conversion.
On
August 9, 2016, we issued 666,667 common shares to settle $37,500 of debt. There was a loss of $69,167 on the conversion.
On
August 15, 2016, we issued 125,000 common shares for consulting services valued at $18,750.
On
August 16, 2016, we issued 100,000 common shares to settle $10,000 of debt. There was a loss of $5,000 on the conversion.
Warrants
We
signed an addendum on December 17, 2015 for all outstanding common stock warrants not already vested, to be totally vested on
February 1, 2016. On December 31, 2015, we had 5,404,860 common stock warrants outstanding. As of September 30, 2016, we had 15,416,341
common stock warrants outstanding.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 2015. These warrants were valued at $34,926 at December 31, 2015 by the Black-Sholes method. These warrants were valued at
$51,458 by the Black-Sholes method on February 1, 2016 which resulted in an increase in valuation in the amount of $16,532 which
was reported in the nine months ended September 30, 2016.
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. These warrants were valued at $29,888 by the Black-Sholes method on February 1, 2016 which resulted in an
increase in valuation in the amount of $2,300 which was reported in the nine months ended September 30, 2016.
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 2015. These warrants were valued at $36,766 at December 31, 2015 by the Black-Sholes method. These warrants were valued at
$39,090 by the Black-Sholes method on February 1, 2016 which resulted in an increase in valuation in the amount of $2,324 which
was reported in the nine months ended September 30, 2016.
On
February 1, 2016, we issued 1,500,000 warrants for common stock at $0.10 per share in settlement of services rendered to assist
our CEO. These warrants were fully vested on the date of issuance and were valued at $30,000 on that date by the Black-Sholes
method.
On
July 28, 2016, we had 3,519 warrants expire for common stock purchase.
On
August 1, 2016, we issued warrants to purchase an aggregate of 4,675,000 shares of the Company’s common stock to a total
of four individuals and entities for services rendered valued at $584,288 by the Black-Sholes method. These warrants are fully
vested and have an exercise price of $0.10 per share, and expire on December 31, 2019.
On
August 1, 2016, we issued warrants to purchase 1,000,000 shares to Gary De Laurentiis, our 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 are fully vested and
have an exercise price of $0.10 per share, and expire on December 31, 2019.
From
August 28 to September 2, 2016, we issued warrants to purchase an aggregate of 3,840,000 shares of the Company’s common
stock to a total of five current and former employees for an aggregate of $2,154,135 in accrued and unpaid salary. This included
warrants to purchase 600,000 shares issued to Gary De Laurentiis for $417,100 in accrued, but unpaid salary. These warrants are
fully vested, have an exercise price of $0.10 per share, and expire on December 31, 2019.
For
the nine months ended September 30, 2016, we have issued 6,175,000 warrants for services valued at $763,241 and we issued 3,840,000
warrants to convert $2,154,135 in accrued salaries to former and current employees including Gary DeLaurentiis our CEO
Smart Fuel Solutions, Inc. issued
2,493,000 warrants on September 28, 2016 for services rendered in the amount of $249,300. The Company included $2,730 of this
expense amount in its General and Administrative expenses as a result of consolidating operations on September 30, 2016.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The
fair value for the Company’s vested warrants, were based upon the following management assumptions as of vested date:
|
●
|
Expected
dividends is 0%, Expected volatility 253% to 284%
|
|
|
|
|
●
|
Expect
term 3.0 to 5.0 years
|
|
|
|
|
●
|
Risk
free interest rate 0.78% to 1.57%
|
Note
7 Related Party Transactions
For
the nine months ended September 30, 2016, we have issued 6,175,000 warrants for services valued at $763,241 and we issued 3,840,000
warrants to convert $2,154,135 in accrued salaries to former and current employees including Gary DeLaurentiis our CEO
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
CEO for his service as a director in 2016.
On
August 31, 2016, we issued warrants to purchase 600,000 shares of the Company’s common stock to our CEO for him converting
$417,100 of his accrued salary.
On
September 30, 2016, we were carrying in accounts payable $917 payable to our CEO for business expenses. This liability is reported
as a separate item on our Balance Sheet.
Note
8 Subsequent Events
On
October 11, 2016, we received the final payment of $100,000 against our line of credit signed on August 15, 2016. Our line of
credit with a private individual is now at $500,000. These funds will be working capital for the Company.
As
of October 11, 2016, we had commitments to convert $144,845 of accounts payable into 289,690 shares of the Company’s common
stock.