Company Quick10K Filing
Green EnviroTech
Price0.00 EPS-0
Shares629 P/E-0
MCap0 P/FCF-0
Net Debt-0 EBIT-2
TEV-0 TEV/EBIT0
TTM 2019-09-30, in MM, except price, ratios
10-Q 2019-09-30 Filed 2019-11-14
10-Q 2019-06-30 Filed 2019-08-14
10-Q 2019-03-31 Filed 2019-05-17
10-K 2018-12-31 Filed 2019-04-18
10-Q 2018-09-30 Filed 2018-11-15
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-21
10-K 2017-12-31 Filed 2018-04-30
10-Q 2017-09-30 Filed 2017-11-20
10-Q 2017-06-30 Filed 2017-08-21
10-Q 2017-03-31 Filed 2017-05-15
10-K 2016-12-31 Filed 2017-04-07
10-Q 2016-09-30 Filed 2016-11-16
10-Q 2016-06-30 Filed 2016-07-18
10-Q 2016-03-31 Filed 2016-07-01
10-K 2015-12-31 Filed 2016-06-17
10-Q 2015-09-30 Filed 2016-06-06
10-Q 2015-06-30 Filed 2016-06-01
10-Q 2015-03-31 Filed 2016-05-26
10-K 2014-12-31 Filed 2016-04-04
10-Q 2014-09-30 Filed 2016-02-19
10-Q 2014-06-30 Filed 2014-08-14
10-Q 2014-03-31 Filed 2014-05-14
10-K 2013-12-31 Filed 2014-03-31
10-Q 2013-09-30 Filed 2013-11-14
10-Q 2013-06-30 Filed 2013-08-09
10-Q 2013-03-31 Filed 2013-05-15
10-K 2012-12-31 Filed 2013-04-16
10-Q 2012-09-30 Filed 2012-10-25
10-Q 2012-06-30 Filed 2012-08-20
10-Q 2012-03-31 Filed 2012-08-17
10-K 2011-12-31 Filed 2012-08-17
10-Q 2011-09-30 Filed 2012-04-25
10-Q 2011-03-31 Filed 2011-05-16
10-K 2010-12-31 Filed 2011-04-04
10-Q 2010-09-30 Filed 2010-11-09
10-Q 2010-06-30 Filed 2010-08-06
10-Q 2010-03-31 Filed 2010-05-12
10-K 2009-12-31 Filed 2010-04-08
8-K 2020-05-15
8-K 2020-03-27
8-K 2019-04-25
8-K 2019-04-17
8-K 2019-01-24
8-K 2019-01-15
8-K 2018-10-10
8-K 2018-01-30

GETH 10Q Quarterly Report

Note 1 Basis of Presentation and Accounting Policies
Note 2 Going Concern
Note 3 Loan Payable - Related Party and Convertible
Note 4 Secured Debentures
Note 5 Loan Payable - Other and Convertible
Note 6 Loan Payable - Other and Non - Convertible
Note 7 - Fair Value of Financial Instruments and Derivative Liabilities
Note 8 Mandatorily Redeemable Series B Preferred Stock
Note 9 Equity
Note 10 Related Party Transactions
Note 11 Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 ex31-1.htm
EX-31.2 ex31-2.htm
EX-32.1 ex32-1.htm
EX-32.2 ex32-2.htm

Green EnviroTech Earnings 2019-09-30

Balance SheetIncome StatementCash Flow
1.3-1.0-3.2-5.5-7.7-10.02012201420172020
Assets, Equity
-0.9-1.3-1.6-2.0-2.3-2.72011201220132015
Rev, G Profit, Net Income
0.60.40.2-0.1-0.3-0.52012201420172020
Ops, Inv, Fin

10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2019

 

or

 

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________________ to ________________________

 

Commission file number: 000-54395

 

GREEN ENVIROTECH HOLDINGS CORP.

(Exact name of registrant as specified in its charter)

 

DELAWARE   32-0218005

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

1400 Mt. Jefferson Rd., Suite 7-172

West Jefferson, NC 28694

  28694
(Address of principal executive offices)   (Zip Code)

 

(209) 605-1180

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
         

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [X] Smaller reporting company [X]
  Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes [  ] No [X]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 628,736,986 shares of common stock are issued and outstanding as of November 14, 2019.

 

 

 

   
   

 

TABLE OF CONTENTS

 

   

Page

No.

PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements.  
  Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018 (Unaudited) 4
  Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited) 5
  Consolidated Statements of Changes in Stockholders’ Deficit for the Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited) 6
  Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018 (Unaudited) 7
  Notes to Unaudited Consolidated Financial Statements 8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 20
Item 4 Controls and Procedures. 21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 21
Item 1A. Risk Factors. 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 22
Item 3. Defaults Upon Senior Securities. 22
Item 4. Mine Safety Disclosures. 22
Item 5. Other Information. 23
Item 6. Exhibits. 23

 

2
 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

Statements in this quarterly report on Form 10-Q may be “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not a guarantee of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this quarterly report on Form 10-Q, including the risks described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this quarterly report on Form 10-Q and in other documents which we file with the Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to our ability to raise any financing which we may require for our operations, competition, government regulations and requirements, pricing and development difficulties, our ability to make acquisitions and successfully integrate those acquisitions with our business, as well as general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and, except as may be required under applicable securities laws, we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this quarterly report on Form 10-Q.

 

3
 

 

GREEN ENVIROTECH HOLDINGS CORP.

CONSOLIDATED BALANCE SHEETS

UNAUDITED

 

   September 30,   December 31, 
   2019   2018 
ASSETS          
           
CURRENT ASSETS          
Cash  $9,494   $1,180 
Prepaid expenses   2,000    2,000 
Total current assets   11,494    3,180 
           
TOTAL ASSETS  $11,494   $3,180 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
CURRENT LIABILITIES          
Accounts payable  $838,919   $842,563 
Due to related party   11,843    - 
Accrued expenses   3,305,199    2,189,723 
Other current liabilities   60,000    60,000 
Secured debentures payable   305,000    305,000 
Loan Payable-related party-convertible   1,360,392    1,434,637 
Loan Payable-other-convertible   380,563    222,860 
Loan Payable-other-non-convertible   713,000    713,000 
Derivative liability   40,094    60,004 
Series B 12% Convertible Cumulative Preferred Stock; $0.001 par value, $1.00 stated value, 300,000 shares authorized, 0 and 60,910 shares issued and outstanding as of September 30, 2019 and December 31, 2018 respectively   -    34,820 
Total current liabilities   7,015,010    5,862,607 
           
Loan payable-other-convertible, long term   -    38,203 
           
TOTAL LIABILITIES   7,015,010    5,900,810 
           
STOCKHOLDERS’ DEFICIT          
Preferred stock, $0.001 par value, 25,000,000 shares authorized, 0 shares issued and outstanding   -    - 
Convertible Series A Preferred Stock $0.001 par value, 1,000,000 shares authorized, 0 shares issued and outstanding   -    - 
Common stock, $0.001 par value, 750,000,000 shares authorized, 628,736,986 and 156,952,606 shares issued and outstanding   628,737    156,952 
Additional paid in capital   23,649,829    23,650,375 
Accumulated deficit   (31,282,082)   (29,704,957)
Total Green Envirotech Holdings Corp. Stockholders’ deficit   (7,003,516)   (5,897,630)
           
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $11,494   $3,180 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

4
 

 

GREEN ENVIROTECH HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

 

   NINE
MONTHS
   NINE
MONTHS
   THREE MONTHS   THREE MONTHS 
   September 30, 2019   September 30, 2018   September 30, 2019   September 30, 2018 
                 
OPERATING EXPENSES                    
Wages and professional fees  $1,035,138   $1,462,355   $333,415   $487,840 
General and administrative   59,504    69,019    28,193    16,361 
Total operating expenses   1,094,642    1,531,374    361,608    504,201 
                     
Total net loss from operating expenses   (1,094,642)   (1,531,374)   (361,608)   (504,201)
                     
OTHER INCOME (EXPENSE)                    
Interest expense   (502,988)   (322,588)   (125,725)   (122,170)
Gain in fair value of derivative   20,505    455,638    75,509    157,207 
Total non-operating income (expenses)   (482,483)   133,050    (50,216)   35,037 
                     
NET LOSS   (1,577,125)   (1,398,324)   (411,824)   (469,164)
                     
Dividends applicable to preferred stock   (2,397)   (7,734)   -    (3,202)
                     
Net loss applicable to commons stock holders  $(1,579,522)  $(1,406,058)  $(411,824)  $(472,366)
                     
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING BASIC AND DILUTED   502,729,849    43,913,056    598,646,116    45,493,665 
                     
NET LOSS PER COMMON SHARE-BASIC AND DILUTED:  $(0.00)  $(0.03)  $(0.00)  $(0.01)

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

5
 

 

GREEN ENVIROTECH HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019

UNAUDITED

 

   Common Stock   Additional Paid-In   Accumulated   Total Stockholders’ 
   Shares   Amount   Capital   Deficit   Deficit 
Balance - December 31, 2017   40,126,655   $40,127   $21,604,141   $(26,629,318)  $(4,985,050)
                          
Conversion of loans payable and accrued interest for common stock   1,826,646    1,826    43,174    -    45,000 
                          
Conversion of accounts payable for common stock   250,000    250    4,750    -    5,000 
                          
Settlement of derivative liability as a result of debt conversion   -    -    33,330    -    33,330 
                          
Derivative liability from tainted warrants   -    -    (817)   -    (817)
                          
Accrued salary given as equity   -    -    1,684,711    -    1,684,711 
                          
Net loss for the three months ended
March 30, 2018
   -    -    -    (313,999)   (313,999)
Balance - March 31, 2018   42,203,301   $42,203   $23,369,289   $(26,943,317)  $(3,531,825)
                          
Conversion of loans payable and accrued interest for common stock   974,025    974    14,026    -    15,000 
                          
Conversion of loans payable for common stock-Related party   1,000,000    1,000    39,000    -    40,000 
                   15,775      
Settlement of derivative liability as a result debt conversion   -    -    19,368    -    19,368 
                          
Net loss for the three months ended
June 30, 2018
   -    -    -    (615,161)   (615,161)
Balance - June 30, 2018   44,177,326   $44,177   $23,441,683   $(27,558,478)  $(4,072,618)
                          
Conversion of loans payable and accrued interest for common stock   6,890,914    6,891    21,108    -    27,999 
                          
Conversion of preferred shares for common stock   3,835,417    3,835    15,775    -    19,610 
                          
Settlement of derivative liability as a result debt conversion   -    -    43,306    -    43,306 
                          
Net loss for the three months ended September 30, 2018                  (469,164)   (469,164)
                          
Balance - September 30, 2018   54,903,657   $54,903   $23,521,872   $(28,027,642)  $(4,450,867)
                          
Balance - December 31, 2018   156,952,606   $156,952   $23,650,375   $(29,704,957)  $(5,897,630)
                          
Conversion of loans payable for common stock   188,057,298    188,057    (40,799)   -    147,258 
                          
Conversion of preferred shares for common stock   15,121,778    15,122    (1,512)   -    13,610 
                          
Conversion of loans payable for common stock-Related party   30,000,000    30,000    47,000    -    77,000 
                          
Conversion of dividends payable for common stock   907,778    908    (91)   -    817 
                          
Conversion of accrued interest for common stock   7,332,317    7,332    (773)   -    6,559 
                          
Settlement of derivative liability as a result of debt conversion   -    -    113,900    -    113,900 
                          
Net loss for the three months ended
March 31, 2019
   -    -    -    (756,068)   (756,068)
Balance - March 31, 2019   398,371,777   $398,371   $23,768,100   $(30,461,025)  $(6,294,554)
                          
Conversion of loans payable for common stock   140,113,043    140,114    (79,349)   -    60,765 
                          
Conversion of accrued interest for common stock   6,029,166    6,029    (2,848)   -    3,181 
                          
Settlement of derivative liability as a result of debt conversion   -    -    30,577    -    30,577 
                          
Net loss for the three months ended
June 30, 2019
   -    -    -    (409,233)   (409,233)
Balance - June 30, 2019   544,513,986   $544,514   $23,716,480   $(30,870,258)  $(6,609,264)
                          
Conversion of loans payable for common stock   80,070,222    80,070    (68,879)   -    11,191 
                          
Conversion of accrued interest for common stock   4,152,778    4,153    (3,607)   -    546 
                          
Settlement of derivative liability as a result of debt conversion   -    -    5,835    -    5,835 
                          
Net loss for the three months ended September 30, 2019   -    -    -    (411,824)   (411,824)
                          
Balance - September 30, 2019   628,736,986   $628,737   $23,649,829   $(31,282,082)  $(7,003,516)

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

6
 

 

GREEN ENVIROTECH HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

 

   FOR THE   FOR THE 
   NINE MONTHS ENDED   NINE MONTHS ENDED 
   September 30,
2019
   September 30,
2018
 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(1,577,125)  $(1,398,324)
           
Adjustments to reconcile net loss to net cash used in operating activities:          
Amortization of debt discount and derivative discount   223,858    110,074 
Initial loss on derivative   -    40,354 
Change in fair value of derivatives   (20,505)   (455,638)
Penalty interest   41,479    4,000 
           
Change in assets and liabilities          
Decrease in deposits and other current assets   -    (2,000)
Increase in accounts payable and accrued expenses   1,146,521    1,435,743 
Net cash used in operating activities   (185,772)   (265,791)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Borrowing on line of credit - related party   1,500    81,100 
Principal payments on debt-related party   -    (67,000)
Borrowing from others - non-related party   244,886    140,000 
Preferred shares issued for cash   -    125,000 
Preferred shares redeemed for cash   (47,300)   - 
Payments on - due to related party   (5,000)   (19,175)
Net cash provided by financing activities   194,086    259,925 
           
NET INCREASE (DECREASE) IN CASH   8,314    (5,866)
           

CASH - BEGINNING OF PERIOD

   1,180    6,054 
           

CASH - END OF PERIOD

  $9,494   $188 
           
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES          
SUPPLEMENTAL CASH FLOW INFORMATION:          
Cash paid during the period for:          
Interest  $-   $60,000 
Income Taxes  $-   $- 
           
NON-CASH SUPPLEMENTAL INFORMATION:          
Accounts payable settled by a third party  $1,255   $- 
Accrued interest added to debt principal  $6,000   $- 
Accrued interest converted to common stock  $15,774   $- 
Accrued salary contributed to equity  $-   $1,684,711 
Additions to construction in progress in accounts payable  $-   $177,626 
Additions to construction in progress in accrued interest  $-   $37,931 
Conversion of accounts payable for common stock  $-   $5,000 
Debt principal converted to common stock  $213,726   $128,000 
Debt principal converted to common stock-Related Party  $77,000   $- 
Expenses paid by Related Party on behalf of the Company  $16,843   $- 
Preferred stock converted into common stock  $13,610   $19,610 
Preferred stock dividend converted to common stock  $817   $- 
Derivative liability from tainted warrants, preferred stock and notes  $150,907   $188,223 
Settlement of derivative liability as a result of debt settlement  $150,312   $96,004 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

7
 

 

GREEN ENVIROTECH HOLDINGS CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1 Basis of Presentation and Accounting Policies

 

The unaudited interim consolidated financial statements include our wholly owned subsidiary, GETH CFP, Inc. (“CFP”). CFP is a Delaware Corporation formed on February 9, 2017 for the purpose of handling and upgrading both third party carbon black and the carbon black produced by our GEN 1 End of Life Tire Processing Plants. All significant inter-company balances and transactions have been eliminated in the consolidation as of and for the nine months ended September 30, 2019.

 

The unaudited interim consolidated financial statements presented herein have been prepared by us in accordance with the accounting policies described in our December 31, 2018 and 2017 audited financial statements included in our 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 interim consolidated 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 unaudited interim consolidated 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, 2019 and 2018. 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 unaudited interim consolidated 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.

 

Reclassifications

 

Certain prior year amounts have been reclassified to conform to the current year presentation.

 

Recently Adopted Accounting Standards

 

In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-Controlling Interests with a Scope Exception”. The ASU was issued to address the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. The ASU, among other things, eliminates the need to consider the effects of down round features when analyzing convertible debt, warrants and other financing instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. The amendments are effective for fiscal years beginning after December 15, 2018, and should be applied retrospectively. Early adoption is permitted, including adoption in an interim period. The Company has no Financial Instruments with Down Round Features and as such, the adoption did not have an impact to the Company’s consolidated financial statements.

 

8
 

 

Effective January 1, 2019, the Company adopted ASU No. 2018-07, Compensation – Stock Based Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-7”), which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based payments to nonemployees under Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees. The adoption of ASU 2018-07 did not have any impact on the Company’s consolidated financial statements.

 

In February 2016, the Financial Accounting Standards Board issued ASU No. 2016-02, “Leases: Topic 842 (ASU 2016-02)”, to supersede nearly all existing lease guidance under GAAP. The guidance would require lessees to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets. ASU 2016-02 is effective for the Company as of January 1, 2019 and adoption requires using a modified retrospective approach with the option to elect certain practical expedients. The Company has determined that it does not have any leases that fall under the guidance of ASU 2016-02 and it had no impact on its consolidated financial statements.

 

Note 2 Going Concern

 

These unaudited interim consolidated 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, 2019, we had a net loss. We also have a working capital deficit and an accumulated deficit. These factors raise substantial doubt about our ability to continue as a going concern.

 

These unaudited interim consolidated 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. The Company plans to continue funding itself through the generation of revenues and raising capital through loans and new equity.

 

Note 3 Loan Payable – Related Party and Convertible

 

On March 3, 2017, we approved a new working capital line of credit loan with our former CEO, Chris Bowers in the amount up to $150,000 with interest at 8% which matured on December 31, 2017. The maturity date was extended to December 31, 2018 and was not extended further. The note is in default. The note has conversion rights for our common shares at $0.10 per share. In the nine months ended September 30, 2019, the Company had no borrowings on the LOC and had no repayments. The Company evaluated this convertible LOC for Beneficial Conversion Features (BCF) and concluded that the LOC incurred a Beneficial Conversion Features (BCF) when it was issued. The BCF resulted in a debt discount in the amount of $35,300 of which the full amount was amortized in 2017. As of September 30, 2019, this note had a balance of $54,100 and accrued interest in the amount of $15,459.

 

On August 15, 2016, we accepted a Line of Credit (LOC) in the amount of $500,000 from our former CEO Chris Bowers. On November 14, 2016, we accepted a second Line of Credit (LOC) in the amount of $500,000 from our former CEO. As of September 30, 2019, these two LOCs had an outstanding balance in the amount of $1,000,000 with $150,000 in accrued interest. The due date for both of these loans were extended to December 31, 2018, but were not extended further and are in default. The funds were used for working capital in 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, referred to above, 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.
  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 the addendums under ASC 470-50 and concluded that these addendums did not qualify for debt modification.

 

The Company also has an outstanding note payable to our former CEO Chris Bowers for $134,000. The note is subject to annual interest of eight percent (8%), convertible at $0.50 per share and matured on December 31, 2017. The maturity date was extended to December 31, 2018, but was not extended and is in default. As of September 30, 2019, the accrued interest on this note was $34,062.

 

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 maturity date of the line of credit was extended to December 31, 2019. This line of credit has a $0.10 per common share conversion rate. Balance of the line of credit at September 30, 2019 was $172,292 with accrued interest in the amount of $92,798. For the nine months ended September 30, 2019, the Company borrowed $1,500 from the LOC and another $1,255 when the LOC paid that amount in accounts payable for the Company. H.E. Capital converted $77,000 of the LOC for 30,000,000 shares of our common stock.

 

Note 4 Secured Debentures

 

On January 24, 2011, we entered into a series of securities purchase agreements with 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, 2019, these secured debentures have an outstanding balance of $305,000 and accrued interest in the amount of $339,192. These debentures are in default.

 

Note 5 Loan Payable – Other and Convertible

 

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 recorded 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. In January 2018, the maturity date of the Line of Credit was extended to December 31, 2018, but was not extended there- after. The note is in default. As of September 30, 2019, the note balance is $100,000 with accrued interest in the amount of $28,405.

 

On July 1, 2016, we entered into a note with a private individual in the amount of $49,295. This new note has $0.50 conversion rights attached to it and accrues interest at 8%. In January 2018, the maturity date was extended to June 30, 2018. This note is presently in default. As of September 30, 2019, this note had accrued interest in the amount of $12,825.

 

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On July 20, 2017, we entered into an equity purchase agreement for up to $5,000,000 of our common stock with Peak One Opportunity Fund, LP (Peak One). In connection with that same agreement, we also entered into a related registration rights agreement. We issued a non-interest bearing convertible debenture on July 20, 2017 in the amount of $75,000 to Peak One. This debenture matures on July 20, 2020 and was issued as a commitment fee in connection with the agreement, as well as agreed to issue 300,000 shares of our common stock as commitment shares. On July 25, 2017, we issued these shares valued at $27,000. Conversion price is 90% of the lowest closing bid price of the last 20 days prior to the conversion date. The note had a derivative discount in the amount of $75,000 at issue and at September 30, 2019 has none remaining. The derivative discount was written off to interest expense when the balance of the note in the amount of $41,700 was converted into the Company’s common stock during the nine months ended September 30, 2019.

 

On July 27, 2017, we received the first of three installments in connection with Peak One Opportunity LP (Peak One) purchase agreement for certain Company Convertible Debentures totaling $425,000. We issued to Peak One a three year $75,000 non-interest bearing debenture maturing on July 26, 2020. We received the 2nd installment on November 28, 2017 and issued a non-interest bearing debenture for $50,000 which will mature on November 28, 2020. The debentures had an OID (original issue discount) and derivative discounts totaling $61,200 which are amortized over the term of the debentures. The debentures are convertible into common shares of the Company with certain terms and conditions as set forth in the agreement. The Holder is entitled to, at any time or from time to time, to convert the Conversion Amount into Conversion Shares, at a conversion price for each share of Common Stock equal to the lesser of (a) $0.15 or (b) Sixty Five percent (65%) of the lowest closing bid price (as reported by Bloomberg LP) of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date of conversion of the Debentures subject in each case to equitable adjustments resulting from any stock splits, stock dividends, recapitalizations or similar events. During the year ended December 31, 2018, Peak One converted a total of $75,000 of debt and $4,000 fee for 7,232,569 shares of the Company’s common stock. The remaining balance of $50,000 was converted into the Company’s common stock during the nine months ended September 30, 2019 and the balance of the debt discount was written off to interest expense. As of September 30, 2019, the notes have no outstanding balance.

 

On May 22, 2018, we entered into a 12% interest bearing note agreement with JSJ Investments, Inc. in the amount of $75,000; the note has a $5,500 original issue discount. It was also determined at issue date, that the note had $69,500 in derivative discount. The note has a maturity date of May 22, 2019 and this note is in default. The Company may pay this note in full, together with any and all accrued and unpaid interest, plus any applicable pre-payment premium set forth in the agreement and subject to the terms of the agreement at any time on or prior to the date which occurs 180 days after the date of issue (Prepay Date). In the event the note is not prepaid in full on or before the Prepay Date, the note will incur a prepayment premium of 135% for the first 90 days, 140% from 91 days to 120 days, 145% from 121 days to 180 days and 150% until maturity date. The note has conversion rights at any time after the Prepay Date for its holder at a 40% discount to the lowest trading price during the previous twenty trading days to the date of a conversion notice. On December 3, 2018, JSJ Investments, Inc. exercised its right to convert $5,084 of the debt into 3,868,756 common shares of the Company Stock. This note had a balance of $69,916 and accrued interest in the amount of $5,551 as of December 31, 2018. It also had a $53,833 in unamortized debt discount. On February 12, 2019, JSJ Investments, Inc. assigned the note to GHS Investments, LLC in a cash buy out in an agreement approved by the Company, JSJ Investments, Inc. (JSJ) and GHS Investments, LLC (GHS). GHS assumed the note balance in the amount of $69,916 and paid JSJ $6,110 in accrued interest. GHS also paid $17,479 in penalty interest which was added to the principal balance of the note. Subsequent to GHS assuming the note, GHS has converted $69,910 of the note balance and $6,947 of accrued interest into common shares of the Company. The debt discount on this note was $53,833. As a result of the conversions and amortization of the debt discount, there is no note discount remaining. The amortization and conversion amounted to $53,833 for the nine months ended September 30, 2019. As of September 30, 2019, the note had a balance of $17,485 with accrued interest in the amount of $1,407 and no debt discount balance. This note is in default.

 

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On May 31, 2018, we entered into a 12% interest bearing note agreement with Coolidge Capital LLC in the amount of $75,000; the note has a $4,500 original issue discount. It was also determined on the date of issue, that the note had $40,366 in derivative discount. The note has a maturity date of February 28, 2019. The note is in default as of today. The Company may pay this note in full, together with any and all accrued and unpaid interest, plus any applicable pre-payment premium set forth in the agreement and subject to the terms of the agreement at any time on or prior to the date which occurs 180 days after the date of issue. The prepayment schedule of payments would be 115% for the first 30 days, 120% for the first 60 days, 125% for the first 90 days, 130% for the first 120 days, 135% for the first 150 days and 140% for the first 180 days. After 180 days from date of issue, there is no prepayment until maturity date when the Note is due with interest. The note has conversion rights at any time after 180 days after the date of issue for its holder at a 40% discount to the lowest trading price during the previous twenty trading days to the date of conversion. On December 7, 2018, Coolidge Capital LLC exercised its right to convert $5,116 of the debt into 3,279,428 common shares of the Company Stock. This note had a balance of $69,884 and accrued interest in the amount of $5,332 for the year ended December 31, 2018. It also had a $12,402 in unamortized debt discount. On February 11, 2019, Coolidge Capital LLC assigned the note to GHS Investments, LLC in a cash buy out in an agreement approved by the Company, Coolidge Capital LLC (Coolidge) and GHS Investments, LLC (GHS). Coolidge after approving the assignment, on February 15, 2019 returned the 3,279,428 shares it received on December 7, 2018 for cancelation and the Company reversed that conversion entry. GHS assumed the note balance in the amount of $75,000 and paid Coolidge $6,000 in accrued interest which was added to the principal balance. GHS also paid $24,000 in penalty interest which was also added to the principal balance of the note. Subsequent to GHS assuming the note, GHS has converted $63,231 of the note balance and $3,743 of accrued interest into common shares of the Company. Amortization of the debt discount amounted to $12,402 for the nine months ended September 30, 2019. As of September 30, 2019, the note had a balance of $41,769 with accrued interest in the amount of $1,964 and had no remaining debt discount balance. This note is past due.

 

On February 22, 2019, we entered into a 10% interest bearing note agreement with GHS Investments LLC in the amount of $47,000. The Note has a $7,000 original issue discount. It was also determined on the date of issue, that the note had $14,346 in derivative discount. The note has a 9-month maturity date. The Company may prepay this Note upon 3 business days, written notice and in accordance with the following schedule: If within 60 calendar days from the execution of this Note, 120% of all outstanding principal and interest due on each outstanding Note in one payment. On or after 60 calendar days from the execution of the Note and within 120 days from execution, 130% of all outstanding principal and interest due on each outstanding Note in one payment. Between 121 and 180 days from the date of execution, the Note may be prepaid for 135% of all outstanding amounts due on each outstanding Note in one payment. The Note has conversion rights of .0015 at any time after date of issue for its holder. The $40,000 funds were used for working capital. As of September 30, 2019, the note had a principal balance of $47,000 and accrued interest of $2,885. It also had a debt discount balance of $5,200 after amortizing $16,146 of debt discount over the past nine months ended September 30, 2019.

 

On April 2, 2019, we received $40,000 as a result of a note we entered into concerning a 10% interest bearing note agreement with GHS Investments LLC in the amount of $44,000. The Note has a $4,000 original issue discount. It was also determined on the date of issue, that the note had $31,972 in derivative discount. The note has a 9-month maturity date. The Company may prepay this Note upon 3 business days, written notice and in accordance with the following schedule: If within 60 calendar days from the execution of this Note, 120% of all outstanding principal and interest due on each outstanding Note in one payment. On or after 60 calendar days from the execution of the Note and within 120 days from execution, 130% of all outstanding principal and interest due on each outstanding Note in one payment. Between 121 and 180 days from the date of execution, the Note may be prepaid for 135% of all outstanding amounts due on each outstanding Note in one payment. The Note has conversion rights of .00072 at any time after date of issue for its holder. The $40,000 funds were used for working capital. As of September 30, 2019, the note had a principal balance of $44,000 and accrued interest of $1,956. It also had a debt discount balance of $19,385 after amortizing $16,587 of debt discount over the past nine months ended September 30, 2019.

 

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On April 16, 2019, we entered into a 10% interest bearing note agreement with GHS Investments LLC in the amount of $74,375. The Note has a $9,489 original issue discount. It was also determined on the date of issue, that the note had $41,680 in derivative discount. The note has a 9-month maturity date. The Company may prepay this Note upon 3 business days, written notice and in accordance with the following schedule: If within 60 calendar days from the execution of this Note, 120% of all outstanding principal and interest due on each outstanding Note in one payment. On or after 60 calendar days from the execution of the Note and within 120 days from execution, 130% of all outstanding principal and interest due on each outstanding Note in one payment. Between 121 and 180 days from the date of execution, the Note may be prepaid for 135% of all outstanding amounts due on each outstanding Note in one payment. The Note has conversion rights of .00096 at any time after date of issue for its holder. The $64,886 funds were used to pay-off on April 16, 2019 the last outstanding Series B Preferred Shares issued to Geneva Roth Remark Holdings, Inc. As of September 30, 2019, the note had a principal balance of $74,375 and accrued interest of $3,471. It also had a debt discount balance of $27,215 after amortizing $23,954 of debt discount over the past nine months ended September 30, 2019.

 

On May 6, 2019, we entered into a 10% interest bearing note agreement with GHS Investments LLC in the amount of $44,000. The Note has a $4,000 original issue discount. It was also determined on the date of issue, that the note had $27,535 in derivative discount. The note has a 9-month maturity date. The Company may prepay this Note upon 3 business days, written notice and in accordance with the following schedule: If within 60 calendar days from the execution of this Note, 120% of all outstanding principal and interest due on each outstanding Note in one payment. On or after 60 calendar days from the execution of the Note and within 120 days from execution, 130% of all outstanding principal and interest due on each outstanding Note in one payment. Between 121 and 180 days from the date of execution, the Note may be prepaid for 135% of all outstanding amounts due on each outstanding Note in one payment. The Note has conversion rights of .00081 at any time after date of issue for its holder. The $40,000 funds were used for working capital. As of September 30, 2019, the note had a principal balance of $44,000 and accrued interest of $1,809. It also had a debt discount balance of $19,566 after amortizing $11,969 of debt discount over the past nine months ended September 30, 2019.

 

On June 7, 2019, we entered into a 10% interest bearing note agreement with GHS Investments LLC in the amount of $35,000. The Note has a $5,000 original issue discount. It was also determined on the date of issue, that the note had $25,783 in derivative discount. The note has a 9-month maturity date. The Company may prepay this Note upon 3 business days, written notice and in accordance with the following schedule: If within 60 calendar days from the execution of this Note, 120% of all outstanding principal and interest due on each outstanding Note in one payment. On or after 60 calendar days from the execution of the Note and within 120 days from execution, 130% of all outstanding principal and interest due on each outstanding Note in one payment. Between 121 and 180 days from the date of execution, the Note may be prepaid for 135% of all outstanding amounts due on each outstanding Note in one payment. The Note has conversion rights of .00024 at any time after date of issue for its holder. The $30,000 funds were used for working capital. As of September 30, 2019, the note had a principal balance of $35,000 and accrued interest of $1,128. It also had a debt discount balance of $25,067 after amortizing $5,716 of debt discount over the past nine months ended September 30, 2019.

 

On July 16, 2019, we entered into a 10% interest bearing note agreement with GHS Investments LLC in the amount of $35,000. The Note has a $5,000 original issue discount. It was also determined on the date of issue, that the note had $9,592 in derivative discount. The note has a 9-month maturity date. The Company may prepay this Note upon 3 business days, written notice and in accordance with the following schedule: If within 60 calendar days from the execution of this Note, 120% of all outstanding principal and interest due on each outstanding Note in one payment. On or after 60 calendar days from the execution of the Note and within 120 days from execution, 130% of all outstanding principal and interest due on each outstanding Note in one payment. Between 121 and 180 days from the date of execution, the Note may be prepaid for 135% of all outstanding amounts due on each outstanding Note in one payment. The Note has conversion rights of .00014 at any time after date of issue for its holder. The $30,000 funds were used for working capital. As of September 30, 2019, the note had a principal balance of $35,000 and accrued interest of $749. It also had a debt discount balance of $10,928 after amortizing $3,664 of debt discount over the past nine months ended September 30, 2019.

 

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Note 6 Loan Payable – Other and Non-Convertible

 

On November 15, 2012, we issued a note to a private individual in the amount of $170,000 with interest accruing at 8% per annum. This note was extended to June 30, 2018. This note is presently in default. As of September 30, 2019, the accrued interest was $44,302.

 

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. We received our first advance on the commitment on October 6, 2017. The interest accrues at 9.5% and has the option for two one-year extensions. During the year ended December 31, 2018, the working capital credit facility was cancelled. As of September 30, 2019, this note has an outstanding balance in the amount of $543,000 with accrued interest in the amount of $98,276.

 

Note 7 – Fair value of Financial Instruments and Derivative Liabilities

 

The carrying value of cash, accounts payable and accrued expenses, and debt approximate their fair values because of the short-term nature of these instruments. Management believes the Company is not exposed to significant interest or credit risks arising from these financial instruments. The Carrying amount of the Company’s long-term debt approximates fair value based upon its determined derivative discounts. There was no long-term debt of the Company for the nine months ended September 30, 2019.

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable.

 

Level 1 - Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.
Level 2 - Quoted prices for similar assets and liabilities in active markets; quoted prices included for identical or similar assets and liabilities that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. These are typically obtained from readily-available pricing sources for comparable instruments.
Level 3 - Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own beliefs about the assumptions that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

 

The following table presents the derivative financial instruments, the Company’s only financial liabilities measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring basis, and their level within the fair value hierarchy as of September 30, 2019:

 

   Amount   Level 1   Level 2   Level 3 
Embedded conversion derivative liability  $40,088   $      -   $     -   $40,088 
Warrant derivative liabilities  $6   $-   $-   $6 
Total  $40,094   $-   $-   $40,094 

 

The following table presents the derivative financial instruments, the Company’s only financial liabilities measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring basis, and their level within the fair value hierarchy as of December 31, 2018:

 

   Amount   Level 1   Level 2   Level 3 
Embedded conversion derivative liability  $59,750   $      -   $       -   $59,750 
Warrant derivative liabilities  $254   $-   $-   $254 
Total  $60,004   $-   $-   $60,004 

 

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The embedded conversion feature in the convertible debt instruments that the Company issued (See Note 5), that became convertible during prior years as well as the mandatorily redeemable Series B convertible preferred stock issued during the nine months ended September, 2019 (see Note 8), qualified these as derivative instruments since the number of shares issuable under the notes and preferred shares are indeterminate based on guidance in FASB ASC 815, Derivatives and Hedging. As a result, all other equity linked instruments including outstanding warrants and fixed rate convertible debt were tainted and also required derivative accounting treatment.

 

The valuation of the derivative liability of the warrants was determined through the use of a Multinomial Lattice model that values the liability of the warrants based on a risk-neutral valuation where the price of the option is its discounted expected value. The technique applied generates a large number of possible (but random) price paths for the underlying common stock via simulation, and then calculates the associated exercise value (i.e. “payoff”) of the option for each path. These payoffs are then averaged and discounted to a current valuation date resulting in the fair value of the option.

 

The valuation of the derivative liability attached to the convertible debt and the preferred shares was arrived at through the use of a Multinomial Lattice model that values the derivative liability within the notes. The technique applied generates a large number of possible (but random) price paths for the underlying (or underlyings) via simulation, and then calculates the associated payment value (cash, stock, or warrants) of the derivative features. The price of the underlying common stock is modeled such that it follows a geometric Brownian motion with constant drift, and elastic volatility (increasing as stock price decreases). The stock price is determined by a random sampling from a normal distribution. Since the underlying random process is the same, for enough price paths, the value of the derivative is derived from path dependent scenarios and outcomes. The features in the notes that were analyzed and incorporated into the model included the conversion features with the reset provisions, the call/redemption/prepayment options, and the default provisions. Based on these features, there are six primary events that can occur; payments are made in cash; payments are made with stock; the note holder converts upon receiving a redemption notice; the note holder converts the note; the issuer redeems the note; or the Company defaults on the note. The model simulates the underlying economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms that would be in effect at the time (i.e. stock price, conversion price, etc.). Probabilities were assigned to each variable such as redemption likelihood, default likelihood, and timing and pricing of reset events over the remaining term of the notes based on management projections. This led to a cash flow simulation over the life of the note. A discounted cash flow for each simulation was completed, and it was compared to the discounted cash flow of the note without the embedded features, thus determining a value for the derivative liability.

 

The following assumptions were used for the valuation of the derivative liability related to the Notes, Preferred Shares and subset to the Warrants as of September 30, 2019:

 

  The stock price of $0.0003 to $0.0002 in this period (variable conversion price; reset provisions; and upon redemption or default penalties) would fluctuate with the Company’s projected volatility;
  An event of default adjusting the interest rate would occur 0% of the time for all notes –some of the notes are in default;
  The projected volatility curve from an annualized analysis for each valuation period was based on the historical volatility of comparable companies and the term remaining for each note was from 171.1% through 392.4% at issuance, conversion, and quarters ends;
  The company would redeem the notes (with the corresponding penalty) projected initially at 0% of the time for all notes; and
  The projected reset events for the new GHS note are quarterly triggering the adjustments at 50% of market
  For the variable rate (some notes include conversion rate ceilings – the lessor of variable rates and a fixed rate) and fixed rate Notes, the Holder would convert (after 0 days) at maturity based on ownership and trading volume limits; and
  The Holder would automatically convert the note or exercise early at a multiple of the conversion/exercise or the stock price if the registration was effective (after 0 days) and the Company was not in default.

 

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Using the results from the model, the Company recorded additional paid in capital of $150,312 from the settlement of derivative liability as a result of the conversion of $229,500 of debt and accrued interest. The derivative liability recorded for the convertible feature of new debt in the amount of $279,375 amounted to $150,907 with new debt discount of $185,397 which is being amortized over the remaining term of the instrument using the effective interest rate method, and is classified as convertible debt on the balance sheet. The Company recorded the change in the fair value of the derivative liability as a gain of $20,505 to reflect the value of the derivative liability for warrants and convertible instruments as $40,094 as of September 30, 2019.

 

The following table provides a summary of the changes in fair value, including net transfers in and/or out, of the derivative financial instruments, measured at fair value on a recurring basis using significant unobservable inputs as of September 30, 2019:

 

Balance at December 31, 2018  $60,004 
Fair value of derivative liability at issuance charged to debt discount   150,907 
Settlement of derivative liability due to conversion   (150,312)
Unrealized derivative gain included in other expense   (20,505)
Balance at September 30, 2019  $40,094 

 

The following table provides a summary of the changes in fair value, including net transfers in and/or out, of the derivative financial instruments, measured at fair value on a recurring basis using significant unobservable inputs as of December 31, 2018:

 

Balance at December 31, 2017  $511,237 
Fair value of derivative liability at issuance charged to debt discount   245,361 
Settlement of derivative liability due to conversion   (173,346)
Unrealized derivative gain included in other expense   (523,248)
Balance at December 31, 2018  $60,004 

 

Note 8 Mandatorily Redeemable Series B Preferred Stock

 

Preferred Stock

 

On March 8, 2018, we filed with the state of Delaware, Division of Corporations, a Certificate of Designations of Preferences, Rights and Limitations for 300,000 shares of a Series B Convertible Preferred Stock. The Certificate of Designations was approved by the Division of Corporations. These Series B Convertible Preferred shares are senior to Common Shareholders in reference to liquidation dividends and are junior to the Series A Convertible Preferred shares. The Series B Convertible Preferred Shares have an annual 12% dividend with a stated value of $1.00 and have no voting rights. The redemption options for these shares are 105% for the first 30 days, 110% for the first 60 days, 115% for the first 90 days, 120% for the first 120 days, 125% for the first 150 days and 130% for the first 180 days, then after no redemption rights. Twelve months from the issue date, the Company has a “mandatory redemption date” to redeem the outstanding shares not converted. The shares have conversion rights to convert at 75% of the average of the two lowest common stock prices ten days before the date of conversion.

 

On December 31, 2018, the Company had outstanding 60,910 shares of our Series B Convertible Preferred Stock with a debt discount of $26,090. During the nine months ended September 30, 2019, 13,610 of these shares and $817 of dividend were converted into 16,029,556 shares of our common stock and $4,890 of the debt discount was expensed to interest due to conversion. This left a balance of $47,300 which the Company bought back on April 16, 2019 by paying Geneva Roth Remark Holdings, Inc. an amount of $64,886 which included $17,586 in interest. None of the Company’s Preferred shares are outstanding as of September 30, 2019.

 

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Note 9 Equity

 

Common Stock

 

On February 15, 2019, Coolidge Capital LLC returned the 3,279,428 shares it received on December 7, 2018, for cancelation and the Company reversed that conversion entry and increased the Coolidge note by 5,116. (see Note 5)

 

During the quarter ended March 31, 2019, H.E. Capital S.A. converted a total of $77,000 of its Line of Credit into 30,000,000 shares of the Company’s common stock.

 

During the quarter ended March 31, 2019, Peak One exercised its right to convert a total of $41,700 to complete the payment of the $75,000 LOC debenture for 57,916,663 shares of the Company’s common stock.

 

During the quarter ended March 31, 2019, Peak One exercised its right to convert the $50,000 debenture it was holding for 62,202,380 shares of the Company’s common stock.

 

During the quarter ended March 31, 2019, GHS Investments LLC exercised its right to convert $67,233 of principal and interest into 78,550,000 of common stock of the Company.

 

During the quarter ended March 31, 2019, Geneva Roth exercised its right to convert a total of 13,610 of the 60,910 shares of Series B Convertible Preferred Stock of the Company it purchased during 2018 and was holding on December 31, 2018 leaving 47,300 of these shares outstanding on March 31, 2019. The conversion also included $817 of dividends. The conversion was for 16,029,556 shares of common stock.

 

During the quarter ended June 30, 2019, GHS Investments LLC exercised its right to convert $63,945 of principal and interest into 146,142,209 of common stock of the Company.

 

During the quarter ended September 30, 2019, GHS Investments LLC exercised its right to convert $11,737 of principal and interest into 84,223,000 of common stock of the Company.

 

Warrants

 

During the nine months ended September 30, 2019, there were no warrants issued, exercised or forfeited. We had 24,358,342 common stock warrants outstanding which have a weighted average exercise price of $0.10 and weighted average remaining years of 1.21 years. The aggregate intrinsic value of the outstanding common stock warrants as of September 30, 2019 was $0.

 

Note 10 Related Party Transactions

 

For the nine months ended September 30, 2019, the Company borrowed $1,500 from the LOC we have with H.E. Capital and another $1,255 when the H.E. Capital paid that amount in accounts payable for the Company. H.E. Capital converted $77,000 of the LOC for 30,000,000 shares of our common stock.

 

We owed our CEO $11,843 as due to related party as of September 30, 2019. During the nine months ended September 30, 2019, the CEO paid expenses on behalf of the Company of $16,843, and was repaid $5,000. These amounts are unsecured, non-interest bearing, and due on demand.

 

Note 11 Subsequent Events

 

On October 21, 2019, the Company approved November 30, 2019 as the effective date for the 200 to 1 common stock reverse split approved by majority vote of the Company’s Shareholders on January 18, 2019. The shareholders approved a reverse common stock split of up to 200 per one common stock. No shareholder will be required to return their stock certificate(s) for a new certificate as a result of the reverse stock split. The reverse split is not yet effective as of the filing of these financial statements pending approval from FINRA.

 

The Company’s Common Stock closed at a price of $0.0001 on November 1, 2019 and the Company approved on that date a new Preferred Stock Series C for the purpose of issuing a Super Majority voting Preferred Stock of the Company. The Preferred Stock Series C will be issued to “The 2016 DeLaurentiis Family Trust”. The CEO will convert a total of $42,000, made up as a combination of amounts due to the CEO and the balance taken from his accrued salary, into 42,000 shares of Preferred Stock Series C with a stated value of $1.00 per share and with conversion rights per share of 10,000 shares of Common Stock of the Company with a bases of $0.0001 per share. The Preferred Stock Shares C will have Super Majority voting rights. This new Preferred Stock Series C Super Majority designation still has to have final stamped approval by State of Delaware. Therefore, none of these shares have been issued.

 

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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 for the following discussion to assist in the understanding of our financial position and our results of operations for the nine months ended September 30, 2019 and 2018. You should refer to the Consolidated Financial Statements and related Notes in conjunction with this discussion.

 

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, 2018 and 2017, 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

 

Nine Months Ended September 30, 2019 compared to Nine Months Ended September 30, 2018.

 

The Company had no operating revenues or cost of revenues for the nine months ended September 30, 2019 and 2018.

 

Operating Expenses

 

The salaries and professional fees for the nine months ended September 30, 2019 were $1,035,138 as compared to $1,462,355 for the nine months ended September 30, 2018, a decrease of $427,217, representing a 29% decrease. The salaries and professional fees for the nine months ended September 30, 2019 included $943,129 in accrued salaries and $92,009 in professional fees. Compared to the nine months ended September 30, 2018, there were $1,198,125 in accrued salaries and $264,230 in professional fees.

 

The general and administrative expenses for the nine months ended September 30, 2019 were $59,504 in general overhead expenses as compared to $69,019 for the nine months ended September 30, 2018, a decrease of $9,515 representing a 14% decrease. The major decrease was the result of a decrease in the costs of our stock in the amount of $10,400.

 

Other Income and Expenses

 

Other income and (expenses) for the nine months ended September 30, 2019 was ($482,483) as compared to $133,050 for the nine months ended September 30, 2018, an increase of $615,533 in expenses representing an increase of 463%. We recorded for the nine months ended September 30, 2019, $20,505 in a gain in fair value of derivatives and a gain in fair value of derivatives of $455,638 for the nine months ended September 30, 2018. We recorded for the nine months ended September 30, 2019 $502,988 in interest expense on our outstanding notes as compared to $322,588 in interest expense for the nine months ended September 30, 2018. 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 statements.

 

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Net Loss

 

As a result of the above, the Company had a net loss of $1,577,125 for nine months ended September 30, 2019 as compared to a loss of $1,398,324 for the nine months ended September 30, 2018.

 

Three Months Ended September 30, 2019 compared to Three Months Ended September 30, 2018.

 

The Company had no operating revenues or cost of revenues for the three months ended September 30, 2019 and 2018.

 

Operating Expenses

 

The wages and professional fees for the three months ended September 30, 2019 were $333,415 as compared to $487,840 for the three months ended September 30, 2018, a decrease of $154,425 or approximately 32%. The wages and professional fees for the three months ended September 30, 2019 included $24,038 in professional fees and $309,377 in accrued wages. For the three months ended September 30, 2018, the wages and professional fees included $88,465 in professional fees and $399,375 in accrued wages.

 

The general and administrative expenses for the three months ended September 30, 2019 were $28,193 as compared to $16,361 for the three months ended September 30, 2018, an increase of approximately 72%. This increase of $11,832 was the result of an increase in overhead expenses.

 

Other Income and Expenses

 

Other income and expenses for the three months ended September 30, 2019 were ($50,216) in expenses as compared to $35,037 in income for the three months ended September 30, 2018, an increase of 243% in expenses. This increase of $85,253 in expenses was the result of our interest expense on the working capital notes amounting to $125,725 as compared to $122,170 in interest expense for the three months ended September 30, 2018. The gain in fair value of derivatives was $75,509 for the three months ended September 30, 2019 as compared to $157,207 for the three months ended September 30, 2018 which resulted in a decrease in the amount of $81,698.

 

Net Loss

 

As a result of the above, the Company had a net loss of $411,824 for the three months ended September 30, 2019 as compared to a loss of $469,164 for the three months ended September 30, 2018.

 

Liquidity and Capital Resources

 

On September 30, 2019, we had a balance of cash in the bank in the amount of $9,494. Included in other current assets is $2,000 in prepaid expenses. We had $838,919 in accounts payable to vendors, we have $11,843 in due to related party, we had $830,687 in accrued interest on our note obligations and $2,474,512 in accrued payroll. We also had $60,000 in stock payable in connection with our acquisition of the minority interest in Smart Fuel.

 

We had secured debentures payable in the amount of $305,000. We had loan payable–related party-convertible in the amount of $1,360,392. We had loan payable-other-convertible in the amount of $380,563. We had $713,000 in loan payable-other-non-convertible. We had no liability as a result of sales of our preferred shares. We had derivative liability in the amount of $40,094. Please refer to our notes to the financials for further information concerning note liabilities.

 

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Our loans with conversion features became impacted with derivative measurements as a result of two of our loans becoming qualified for conversion rights during the third quarter of 2017. These two loans’ conversion features are considered variable in direct relation with the market price of our stock. This feature tainted all of our convertible loans, which triggered a direct discount to these loans and a new balance sheet account recording listed as Derivative Liability. Please refer to Note 7 dealing with Derivatives in our notes to the financials for further information.

 

We had negative cash flows from operations for the nine months ended September 30, 2019 in the amount of ($185,772) as compared to the same period ended September 30, 2018 in the amount of ($265,791). We had cash provided of $199,086 in financing activities for the nine months ended September 30, 2019 as compared to $259,925 for the same period ended September 30, 2018. We received proceeds from loan payable-related party of $1,500 where we received $81,100 in 2018. We paid no loan payable-related party, where we paid $67,000 in 2018. We received $244,886 from loans payable other, where we received $140,000 in 2018. We received no proceeds from our Preferred shares, where we received $125,000 for the same period ended September 30, 2018. We paid $47,300 to redeem 47,300 of preferred shares for the nine months ended September 30, 2019 and none for same period ended September 30, 2018. We had $5,000 payments in due to related party for the nine months ended September 30, 2019, where we paid $19,175 in due to related party for the same period in 2018.

 

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.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable for a smaller reporting company.

 

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Item 4. Controls and Procedures.

 

Evaluation of Disclosures and Procedures

 

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the reports we file pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our Chief Executive Officer (“CEO”) (principal executive), Gary DeLaurentiis and our principal financial officer, Chris Smith, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide a reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management designed the disclosure controls and procedures to provide reasonable assurance of achieving the desired control objectives.

 

We carried out an evaluation, under the supervision and with the participation of our management, including our CEO and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based upon that evaluation, the Chief Executive Officer and principal financial officer concluded that the Company’s disclosure controls and procedures are ineffective. Once the first plant is funded and the Company has operations, it will have sufficient resources to address the inefficiencies.

 

Changes in Internal Controls Over Financial Reporting

 

There have been no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the nine months ended September 30, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None.

 

Item 1A. Risk Factors.

 

Other than the new risk factor provided herein, there have been no material changes to the risk factors included in our annual report on Form 10-K for the year ended December 31, 2018.

 

Because all of our authorized but unissued shares have been reserved for the holders of our convertible securities, we are unable to issue any additional shares.

 

The holders of our convertible securities have provisions in their agreements with us that allow them to reserve a substantial number of shares. They have now reserved all of our authorized but unissued shares. Unless we are able to repay or redeem those securities, as applicable, we will be unable to issue any additional shares of common stock. This will limit our ability to enter into additional financing agreements and may require us to implement the reverse split authorized by the board of directors in January 2019 or submit a proposal to increase our authorized shares to our shareholders in order to continue operations.

 

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

During the quarter ended September 30, 2019, GHS Investments LLC exercised its right to convert $11,737 of principal and interest into 84,223,000 shares of common stock of the Company.

 

There was no general solicitation used in the above securities transactions. In each instance, these securities were issued following arms’-length negotiations in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933 and the rules and regulations promulgated thereunder as not involving any public offering.

 

Item 3. Defaults Upon Senior Securities.

 

We remain in default under promissory notes issued on January 21, 2011 for failure to make required payments of interest and principal by September 24, 2012. As of September 30, 2019, this note has an aggregate of principal and accrued interest in the amount of $644,192.

 

On November 16, 2012, we issued a note to a private individual in the amount of $170,000 with interest accruing at 8% per annum. This note was extended to June 30, 2018. This note is presently in default. As of September 30, 2019, this note has an aggregate of principal and accrued interest in the amount of $214,302.

 

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 recorded 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. In January 2018, the maturity date of the Line of Credit was extended to December 31, 2018, but was not extended there- after. The note is in default. As of September 30, 2019, this note has an aggregate of principal and accrued interest in the amount of $128,405.

 

On July 1, 2016, we issued a note to a private individual in the amount of $49,295. This new note has $0.50 conversion rights attached to it and accrues interest at 8%. In January 2018, the maturity date was extended to June 30, 2018. This note is presently in default. As of September 30, 2019, this note had an aggregate of principal and accrued interest in the amount of $62,120.

 

The notes to our former CEO, Chris Bowers were in default December 31, 2018 when these notes were not extended. As of September 30, 2019, these notes had an aggregate of principal and accrued interest in the amount of $1,387,621. (see footnote 3 to the financial statements)

 

On May 31, 2018, we entered into a 12% interest bearing note agreement with Coolidge Capital LLC in the amount of $75,000; the note had a $4,500 original issue discount. It was also determined on the date of issue, that the note had $40,366 in derivative discount. The note had a maturity date of February 28, 2019. On February 11, 2019, Coolidge Capital LLC assigned the note to GHS Investments, LLC in a cash buy out approved by the Company, Coolidge Capital LLC and GHS Investments, LLC. The note is in default as of today. (see footnote 5 to the financial statements)

 

On May 22, 2018, we entered into a 12% interest bearing note agreement with JSJ Investments, Inc. in the amount of $75,000; the note has a $5,500 original issue discount. It was also determined at issue date, that the note had $69,500 in derivative discount. The note has a maturity date of May 22, 2019 and this note is in default. The Company may pay this note in full, together with any and all accrued and unpaid interest, plus any applicable pre-payment premium set forth in the agreement and subject to the terms of the agreement at any time on or prior to the date which occurs 180 days after the date of issue (Prepay Date). In the event the note is not prepaid in full on or before the Prepay Date, the note will incur a prepayment premium of 135% for the first 90 days, 140% from 91 days to 120 days, 145% from 121 days to 180 days and 150% until maturity date. The note has conversion rights at any time after the Prepay Date for its holder at a 40% discount to the lowest trading price during the previous twenty trading days to the date of a conversion notice. On December 3, 2018, JSJ Investments, Inc. exercised its right to convert $5,084 of the debt into 3,868,756 common shares of the Company Stock. This note had a balance of $69,916 and accrued interest in the amount of $5,551 as of December 31, 2018. It also had a $53,833 in unamortized debt discount. On February 12, 2019, JSJ Investments, Inc. assigned the note to GHS Investments, LLC in a cash buy out in an agreement approved by the Company, JSJ Investments, Inc. (JSJ) and GHS Investments, LLC (GHS). GHS assumed the note balance in the amount of $69,916 and paid JSJ $6,110 in accrued interest. GHS also paid $17,479 in penalty interest which was added to the principal balance of the note. Subsequent to GHS assuming the note, GHS has converted $69,910 of the note balance and $6,947 of accrued interest into common shares of the Company. The debt discount was reduced by $53,833 as a result of the conversion and amortization of the debt discount leaving no discount balance for the nine months ended September 30, 2019. As of September 30, 2019, the note had a balance of $17,485 with accrued interest in the amount of $1,407 and no debt discount balance. This note is in default.

 

Item 4. Mine Safety Disclosures.

 

Not Applicable

 

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Item 5. Other Information.

 

None

 

Item 6. Exhibits.

 

No.   Description
31.1   Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer
     
31.2   Rule 13a-14(a)/ 15d-14(a) Certification of Chief Financial Officer
     
32.1   Section 1350 Certification of Chief Executive Officer
     
32.2   Section 1350 Certification of Chief Financial Officer
     
EX-101.INS   XBRL INSTANCE DOCUMENT
     
EX-101.SCH   XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
     
EX-101.CAL   XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
     
EX-101.LAB   XBRL TAXONOMY EXTENSION LABELS LINKBASE
     
EX-101.PRE   XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  Green EnviroTech Holdings Corp.
     
Date: November 14, 2019 By: /s/ Gary DeLaurentiis
    Gary DeLaurentiis
    Principal Executive Officer

 

  Green EnviroTech Holdings Corp.
     
Date: November 14, 2019 By: /s/ Chris Smith
    Chris Smith
    Principal Financial Officer

 

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