Form 10-Q Green Envirotech Holdings Corp.

Quarterly report [Sections 13 or 15(d)]

Published: 2019-08-14 13:02:29
Submitted: 2019-08-14
Period Ending In: 2019-06-30
ENT> 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 June 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.)

 

14699 Holman Mtn Rd., Jamestown, CA 95327
 
95361
(Address of principal executive offices)
 
(Zip Code)

 

(209) 881-3523

(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: 598,854,986 shares of common stock are issued and outstanding as of August 10, 2019.

 

 

 

 
 

 

TABLE OF CONTENTS

 

 
 

Page

No.

PART I. - FINANCIAL INFORMATION
Item 1.
Financial Statements.
 
 
4
 
5
 
6
 
7
 
8
Item 2.
18
Item 3.
22
Item 4
23
Item 1.
23
Item 1A.
23
Item 2.
24
Item 3.
24
Item 4.
24
Item 5.
25
Item 6.
25

 

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 guarantees 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

 

 
 
June 30, 2019
 
 
December 31, 2018
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
Cash
 
$
12,646
 
 
$
1,180
 
Prepaid expenses
 
 
5,000
 
 
 
2,000
 
Total current assets
 
 
17,646
 
 
 
3,180
 
 
 
 
 
 
 
 
 
 
TOTAL ASSETS
 
$
17,646
 
 
$
3,180
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
 
 
 
Accounts payable
 
$
834,682
 
 
$
842,563
 
Accrued expenses
 
 
2,921,164
 
 
 
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
 
 
320,825
 
 
 
222,860
 
Loan Payable-other-non-convertible
 
 
713,000
 
 
 
713,000
 
Series B 12% Convertible Cumulative Preferred Stock; $0.001 par value, $1.00 stated value, 300,000 shares authorized, none and 60,910 shares issued and outstanding as of June 30, 2019 and December 31, 2018 respectively
 
 
-
 
 
 
34,820
 
Derivative liability
 
 
111,847
 
 
 
60,004
 
Total current liabilities
 
 
6,626,910
 
 
 
5,862,607
 
 
 
 
 
 
 
 
 
 
Loan payable-other-convertible, long term
 
 
-
 
 
 
38,203
 
 
 
 
 
 
 
 
 
 
TOTAL LIABILITIES
 
 
6,626,910
 
 
 
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, 544,513,986 and 156,952,606 shares issued and outstanding
 
 
544,514
 
 
 
156,952
 
Additional paid in capital
 
 
23,716,480
 
 
 
23,650,375
 
Accumulated deficit
 
 
(30,870,258
)
 
 
(29,704,957
)
Total GreenEnvirotech Holdings Corp. Stockholders’ deficit
 
 
(6,609,264
)
 
 
(5,897,630
)
 
 
 
 
 
 
 
 
 
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
$
17,646
 
 
$
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

 

 
 
SIX MONTHS
 
 
SIX MONTHS
 
 
THREE MONTHS
 
 
THREE MONTHS
 
 
 
June 30, 2019
 
 
June 30, 2018
 
 
June 30, 2019
 
 
June 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Wages and professional fees
 
$
701,723
 
 
$
974,515
 
 
$
359,611
 
 
$
524,279
 
General and administrative
 
 
31,311
 
 
 
52,658
 
 
 
21,437
 
 
 
23,553
 
Total operating expenses
 
 
733,034
 
 
 
1,027,173
 
 
 
381,048
 
 
 
547,832
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total net loss from operating expenses
 
 
(733,034
)
 
 
(1,027,173
)
 
 
(381,048
)
 
 
(547,832
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
 
(377,263
)
 
 
(200,418
)
 
 
(135,306
)
 
 
(121,198
)
Gain (loss) in fair value of derivative
 
 
(55,004
)
 
 
298,431
 
 
 
107,121
 
 
 
53,869
 
Total non-operating expenses
 
 
(432,267
)
 
 
98,013
 
 
 
(28,185
)
 
 
(67,329
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NET LOSS
 
 
(1,165,301
)
 
 
(929,160
)
 
 
(409,233
)
 
 
(615,161
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends applicable to preferred stock
 
 
(2,397
)
 
 
(4,532
)
 
 
-
 
 
 
(3,788
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss applicable to commons stock holders
 
$
(1,167,698
)
 
$
(933,692
)
 
$
(409,233
)
 
$
(618,949
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING BASIC AND DILUTED
 
 
453,976,829
 
 
 
41,793,313
 
 
 
461,017,241
 
 
 
40,508,947
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NET (LOSS) PER COMMON SHARE-BASIC AND DILUTED:
 
$
(0.00
)
 
$
(0.02
)
 
$
(0.00
)
 
$
(0.02
)

 

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 MONTHS ENDED MARCH 31, 2018 AND THE THREE MONTHS ENDED JUNE 30, 2018

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND THE THREE MONTHS ENDED JUNE 30, 2019

UNAUDITED

 

 
 
 
 
 
Additional
 
 
 
 
 
Total
 
 
 
Common Stock
 
 
Paid-In
 
 
Accumulated
 
 
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 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 contributed 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 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Settlement of derivative liability as a result of 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
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
 
 
(84,839
)
 
 
-
 
 
 
55,275
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conversion of accrued interest for common stock
 
 
6,029,166
 
 
 
6,029
 
 
 
2,642 
 
 
-
 
 
 
8,671
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
)

 

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

 

6
 

 

GREEN ENVIROTECH HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOW

UNAUDITED

 

   FOR THE   FOR THE 
   SIX MONTHS ENDED   SIX MONTHS ENDED 
   June 30, 2019   June 30, 2018 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(1,165,301)  $(929,160)
           
Adjustments to reconcile net loss to net cash used in operating activities:          
Amortization of debt and derivative discount   173,337    50,915 
Initial loss on derivative   -    40,354 
Change in fair value of derivatives   55,004    (298,431)
Penalty interest   41,479    - 
           
Change in assets and liabilities          
Decrease (Increase) in deposits and other current assets   (3,000)   (8,000)
Decrease in accounts payable and accrued expenses   740,861    879,314 
Net cash used in operating activities   (157,620)   (265,008)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Net cash used in 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   214,886    140,000 
Preferred shares issued for cash   -    125,000 
Preferred shares redeemed for cash   (47,300)   - 
Payments on accounts payable-related party   -    (19,175)
Net cash provided by financing activities   169,086    259,925 
           
NET INCREASE (DECREASE) IN CASH   11,466    (5,083)
           
CASH - BEGINNING OF PERIOD   1,180    6,054 
           
CASH - END OF PERIOD  $12,646   $971 
           
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  $15,230   $- 
Accrued salary contributed to equity  $-   $1,684,711 
Additions to construction in progress in accounts payable  $-   $85,130 
Additions to construction in progress in accrued interest  $-   $24,748 
Conversion of accounts payable for common stock  $-   $5,000 
Debt principal converted to common stock  $202,533   $100,000 
Debt principal converted to common stock-related party  $77,000   $- 
Preferred stock converted into common stock  $13,610   $- 
Preferred stock dividend converted to common stock  $817   $- 
Derivative liability from tainted warrants, preferred stock and notes  $141,316   $188,223 
Settlement of derivative liability as a result of debt and convertible preferred stock settlement  $144,477   $52,697 

 

 

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 six months ended June 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 six months ended June 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 six months ended June 30, 2019, we had a net loss. We also have a working capital deficit and an accumulated deficit since inception. 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 six months ended June 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 June 30, 2019, this note had a balance of $54,100 and accrued interest in the amount of $14,368.

 

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 June 30, 2019, these two LOCs had an outstanding balance in the amount of $1,000,000 with $120,000 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:

 

9
 

 

 
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 June 30, 2019, the accrued interest on this note was $31,360.

 

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 June 30, 2019 was $172,292 with accrued interest in the amount of $89,276. For the six months ended June 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 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 June 30, 2019, these secured debentures have an outstanding balance of $305,000 and accrued interest in the amount of $329,838. 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 June 30, 219, the note balance is $100,000 with accrued interest in the amount of $26,389.

 

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 June 30, 219, this note had accrued interest in the amount of $11,831.

  

10
 

 

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 June 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 six months ended June 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 six months ended June 30, 2019 and the balance of the debt discount was written off to interest expense. As of June 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 was reduced by $36,089 as a result of the conversion and amortization of the debt discount amounted to $17,744 for the six months ended June 30, 2019. As of June 30, 2019, the note had a balance of $17,485 with accrued interest in the amount of $871 and no debt discount balance.
This note is in default.

 

11
 

 

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 $46,040 of the note balance and $3,198 of accrued interest into common shares of the Company. Amortization of the debt discount amounted to $12,402 for the six months ended June 30, 2019. As of June 30, 2019, the note had a balance of $52,960 with accrued interest in the amount of $1,125 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 June 30, 2019, the note had a principal balance of $47,000 and accrued interest of $1,684. It also had a debt discount balance of $12,913 after amortizing $8,433 of debt discount over the past six months ended June 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 June 30, 2019, the note had a principal balance of $44,000 and accrued interest of $831. It also had a debt discount balance of $30,062 after amortizing $5,910 of debt discount over the past six months ended June 30, 2019.

 

12
 

 

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 June 30, 2019, the note had a principal balance of $74,375 and accrued interest of $1,570. It also had a debt discount balance of $42,427 after amortizing $8,742 of debt discount over the past six months ended June 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 June 30, 2019, the note had a principal balance of $44,000 and accrued interest of $684. It also had a debt discount balance of $27,949 after amortizing $3,586 of debt discount over the past six months ended June 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 June 30, 2019, the note had a principal balance of $35,000 and accrued interest of $233. It also had a debt discount balance of $29,939 after amortizing $844 of debt discount over the past six months ended June 30, 2019.

 

13
 

 

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 June 30, 2019, the accrued interest was $40,875.

 

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 June 30, 2019, this note has an outstanding balance in the amount of $543,000 with accrued interest in the amount of $85,094.

 

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 six months ended June 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 June 30, 2019:

 

 
 
Amount
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
Embedded conversion derivative liability
 
$
111,832
 
 
$
-
 
 
$
-
 
 
$
111,832
 
Warrant derivative liabilities
 
$
15
 
 
$
-
 
 
$
-
 
 
$
15
 
Total
 
$
111,847
 
 
$
-
 
 
$
-
 
 
$
111,847
 

 

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
 

 

14
 

 

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 six months ended June, 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 June 30, 2019:

 

 
The stock price of $0.0016 to $0.0003 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 158.1% through 439% 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.

 

15
 

 

Using the results from the model, the Company recorded additional paid in capital of $144,477 from the settlement of derivative liability as a result of the conversion of $217,763 of debt and accrued interest. The derivative liability recorded for the convertible feature of new debt in the amount of $244,375 amounted to $141,316 with new debt discount of $170,805 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 loss of $55,004 to reflect the value of the derivative liability for warrants and convertible instruments as $111,847 as of June 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 June 30, 2019:

 

Balance at December 31, 2018
 
$
60,004
 
Fair value of derivative liability at issuance charged to debt discount
 
 
141,316
 
Settlement of derivative liability due to conversion
 
 
(144,477
)
Unrealized derivative loss included in other expense
 
 
55,004
 
Balance at June 30, 2019
 
$
111,847
 

 

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 six months ended June 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 June 30, 2019. 

 

16
 

 

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 ELOC 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.

 

Warrants

 

During the six months ended June 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 1.47 years. The aggregate intrinsic value of the outstanding common stock warrants as of June 30, 2019 was $0.

 

Note 10 Related Party Transactions

 

For the six months ended June 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.

 

Note 11 Subsequent Events

 

On July 5, 2019, GHS Investments, LLC converted $4,748 of principal and $143 of interest into 27,170,000 of common stock of the Company.

 

On August 1, 2019, GHS Investments, LLC converted $3,046 of principal and $215 of interest into 27,171,000 of common stock of the Company.

 

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. 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 .00014 at any time after date of issue for its holder. The $30,000 funds will be used for working capital. 

 

17
 

 

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 six months ended June 30, 2019 and 2018. You should refer to the Consolidated Financial Statements and related Notes in conjunction with this discussion.

 

Corporate History

 

On November 20, 2009, the Company, formerly known as Wolfe Creek Mining, Inc., entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Green EnviroTech Acquisition Corp., a Nevada corporation, and Green EnviroTech Corp. On July 20, 2010, the Company changed its name to Green EnviroTech Holdings Corp.

 

Overview of Our Business

 

Green EnviroTech Holding Corp. (OTC:PINK:GETH) is first and foremost a technology company. Our mission is to find, develop and implement practical, economical solutions to address environmental issues associated with the production of waste, energy, water and food; and to create jobs and stimulate economic growth in the local communities where we operate as we strive to achieve this mission.

 

Our first market will be to process end of life tires, starting in the USA. Our GEN 1 End of Life Tire Processing Solution is ready for deployment and we are working to secure our first project finance facility that will be used to build a Carbon Finishing Plant (CFP) and build two, GEN 1 End of Life Tire Processing Plants. Whether or not the CFP will be a standalone facility or combined with GEN 1 End of Life Tire Processing Plant is still to be determined. When fully operational, we expect these plants to process 100,000 tons per year of end of life tires and generate more than $40 Million of annual revenue.

 

18
 

 

Our goal over the next five years (by 2024) is to be processing 15-20% of the end of life tire feedstock in the USA, which would generate more than $200 Million in annual revenues, making GETH the market leader in the USA. In order to keep up with our five year building program, we expect to be commissioning numerous tire processing plants in a number of strategic locations throughout the country. With our expansion program, we intend to construct additional finishing lines at our Carbon Finishing Plant, which is to be determined. Achieving our goal would mean that over 800,000 tons of end-of-life tires will be diverted from landfills. We see our expansion program creating hundreds of jobs, often in areas of low employment opportunity.

 

Recent Developments

 

Over the last year and the first six months of 2019, we have been pushing through the slowed progress which was a result of stalled funding we incurred in 2017 and 2018. Our focus is to secure funding to build the Carbon Finishing Plant and a Tire Processing Plant or a combination of both as one unit. These discussions are progressing going forward, but we have not signed a definitive agreement to finance a Processing Plant to date. As a result, the execution of our business plan has slipped by several months, and we now forecast the Carbon Finishing Plant. For the remainder of 2019, we will continue to be in an investment mode for which we anticipate these investments to generate revenues starting in late 2019 and/or into the first quarter of 2020. The goal is to reach our forecasted revenue of $1 Million to $2 Million in 2020, and an estimated $15 Million in recurring revenues from 2021 onwards.

 

Management intends to finance operating costs over the next twelve months with credit lines, loans and/or private placement of common stock.

 

On March 27, 2018, our CEO, Secretary and Treasurer and four managers, agreed to waive payment of their accrued salaries that were outstanding as of December 31, 2017, which was accounted for as a contribution to equity.

 

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. 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 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. As of the six months ended June 30, 2019, none of the shares of our Series B Convertible Preferred Stock were outstanding.

 

On October 10, 2018, the Company held a meeting with shareholders concerning its Proxy Statement requesting shareholders’ approval to extend the authorized common shares of the Company from 250,000,000 to 750,000,000. It was approved. The Company at the time of the approval had outstanding 48,609,224 common shares and needed approval from 24,304,613 shareholders to proceed. The Proxy Statement was approved by the shareholders and the Certificate of Amendment was stamped approved by the state of Delaware on October 12, 2018.

 

On January 24, 2019, the Company’s board voted on and approved what it had determined to be its present outstanding stock condition in the market. The Company’s stock was moving at such a conversion speed by certain note holders to the point the Company was going to be unable to accommodate the reserve shares requirement from its unissued shares. The Company did not have the financial resources to repay the note holders at this time nor enough time to facilitate new funding to stop the conversions which continues to lower the price of the stock in the market which increases the reserves needed to supply the conversions. The Company’s 750,000,000 authorized common shares would be consumed rapidly if something is not accomplished. Therefore, it was in the consensus of the board to recommend that the shareholders authorize a reverse stock split to increase the price of the stock in the market and to reduce the shares outstanding. Accordingly, the board recommended that the shareholders act to authorize the board to effect a reverse split of the Company’s common stock in any amount up to 200 to one at any time within one year of the date of this authorization, at the board’s discretion. The Company’s shareholders, acting by majority written consent, acted on January 24, 2019, to authorize the board to implement the reverse split on those terms. Presently, the board has not yet voted to implement the authorized reverse stock.

 

19
 

 

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

 

Six Months Ended June 30, 2019 compared to Six Months Ended June 30, 2018.

 

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

 

Operating Expenses

 

The salaries and professional fees for the six months ended June 30, 2019 were $701,723 as compared to $974,515 for the six months ended June 30, 2018, a decrease of $272,792, representing a 28% decrease. The salaries and professional fees for the six months ended June 30, 2019 included $633,752 in accrued salaries and $67,971 in professional fees. Compared to the six months ended June 30, 2018, there were $798,750 in accrued salaries and $175,765 in professional fees.

 

The general and administrative expenses for the six months ended June 30, 2019 were $31,311 in general overhead expenses as compared to $52,658 for the six months ended June 30, 2018, a decrease of $21,347 representing a 41% decrease. The major decrease was the result of a decrease in the costs of our stock review in the amount of $13,000, a decrease of $5,000 in our travel expenses and the balance was a decrease in our general overhead expenses in the amount of $3,347.

 

Other Income and Expenses

 

Other income and expenses for the six months ended June 30, 2019 was ($432,267) as compared to $98,013 for the six months ended June 30, 2018, an increase of $530,280 in expenses representing an increase of 541%. We recorded for the six months ended June 30, 2019, ($55,004) in a loss in fair value of derivatives and a gain in fair value of derivatives of 298,431 for the six months ended June 30, 2018. We recorded for the six months ended June 30, 2019 $354,134 in interest expense on our outstanding notes as compared to $200,418 in interest expense for the six months ended June 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 statement dealing with debt.

 

20
 

 

Net Loss

 

As a result of the above, the Company had a net loss of $1,165,301 for six months ended June 30, 2019 as compared to a loss of $929,160 for the six months ended June 30, 2018.

 

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

 

The Company is a pre revenue-stage technology company that has developed a GEN 1 End of Life Tire Processing Solution that produces two valuable end products – Brent crude standard blend stock oil and carbon black. The Company had no operating revenues or cost of revenues for the three months ended June 30, 2019 and 2018.

 

Operating Expenses

 

The wages and professional fees for the three months ended June 30, 2019 were $359,611 as compared to $524,279 for the three months ended June 30, 2018, a decrease of $164,668 or approximately 31%. The wages and professional fees for the three months ended June 30, 2019 included $38,292 in professional fees and $321,319 in accrued wages. For the three months ended June 30, 2018, the wages and professional fees included $122,784 in professional fees and $401,495 in accrued wages.

 

The general and administrative expenses for the three months ended June 30, 2019 were $21,437 as compared to $23,553 for the three months ended June 30, 2018, a decrease of approximately 9%. This decrease of $2,116 was the result of a decrease in overhead expenses.

 

Other Income and Expenses

 

Other income and expenses for the three months ended June 30, 2019 were $28,185 as compared to $67,329 for the three months ended June 30, 2018, a decrease of 58%. This decrease of $39,144 was the result of our interest expense on the working capital notes amounting to $135,306 as compared to $121,198 in interest expense for the three months ended June 30, 2018 and an increase in gain in fair value of derivatives in the amount of $107,121 for the three months ended June 30, 2019 as compared to $53,869 for the three months ended June 30, 2018.

 

Net Loss

 

As a result of the above, the Company had a net loss of $409,233 for the three months ended June 30, 2019 as compared to a loss of $615,161 for the three months ended June 30, 2018.

 

Liquidity and Capital Resources

 

On June 30, 2019, we had a balance of cash in the bank in the amount of $12,646. Included in other current assets is $5,000 in prepaid expenses. We had $834,682 in accounts payable to vendors, we had $756,029 in accrued interest on our note obligations and $2,165,135 in accrued payroll. We also had $60,000 in stock payable in connection with our acquisition of the minority interest in Smart Fuel on June 30, 2017.

 

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 $320,825. 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 $111,847. Please refer to our notes to the financials for further information concerning note liabilities.

 

21
 

 

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 six months ended June 30, 2019 in the amount of ($157,620) as compared to the same period ended June 30, 2018 in the amount of ($265,008). We had cash provided of $169,086 in financing activities for the six months ended June 30, 2019 as compared to $259,925 for the same period ended June 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 $214,886 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 June 30, 2018. We had no payments in accounts payable to a related party for the six months ended June 30, 2019, where we did pay $19,175 in accounts payable to a 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.

 

22
 

 

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, 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 six months ended June 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.

 

On June 28, 2018, our former investor relations firm, Porter, Levay, & Rose, Inc., filed suit against us in the Westchester County Supreme Court of New York (Case No. 60053/2018) seeking damages of approximately $33,370, plus accrued interest, for services. Arrangements had been made to have this cleared in February 2019, but was not met. We still intend to meet our obligations. Full amount of the liability has been recorded.

 

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.

 

23
 

 

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

 

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 ELOC 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. These shares are no longer outstanding, they were redeemed on April 16, 2019. Please see Note 8 in notes to the financial statements.

 

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.

 

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 June 30, 2019, this note has an aggregate of principal and accrued interest in the amount of $634,838.

 

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 June 30, 2019, this note has an aggregate of principal and accrued interest in the amount of $210,875.

 

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 June 30, 219, this note has an aggregate of principal and accrued interest in the amount of $126,389.

 

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 June 30, 2019, this note had an aggregate of principal and accrued interest in the amount of $61,126.

 

The notes to our former CEO, Chris Bowers were in default December 31, 2018 when these notes were not extended. As of June 30, 2019, these notes had an aggregate of principal and accrued interest in the amount of $1,353,828. (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 $36,089 as a result of the conversion and amortization of the debt discount amounted to $17,744 for the six months ended June 30, 2019. As of June 30, 2019, the note had a balance of $17,485 with accrued interest in the amount of $871 and no debt discount balance. This note is in default.

 

Item 4. Mine Safety Disclosures.

 

Not Applicable

 

24
 

 

Item 5. Other Information.

 

None

 

Item 6. Exhibits.

 

No.
 
Description
31.1
 
 
 
 
31.2
 
 
 
 
32.1
 
 
 
 
32.2
 
 
 
 
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

 

25
 

 

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: August 14, 2019
By:
/s/ Gary DeLaurentiis
 
 
Gary DeLaurentiis
 
 
Principal Executive Officer

 

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

 

26
 

 

ENT> EX-31.1 2 ex31-1.htm

 

Exhibit 31.1

 

Rule 13a-14(a)/15d-14(a) Certification

 

I, Gary DeLaurentiis, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Green EnviroTech Holdings Corp.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

August 14, 2019

 

 
By:
/s/ Gary DeLaurentiis
 
 
Gary DeLaurentiis
 
 
Principal Executive Officer

 

 
 

 

ENT> EX-31.2 3 ex31-2.htm

 

Exhibit 31.2

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a-14

 

I, Chris Smith, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Green EnviroTech Holdings Corp.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 
By:
/s/ Chris Smith
Dated: August 14, 2019
 
Chris Smith
 
 
Principal Financial Officer

 

 
 

 

ENT> EX-32.1 4 ex32-1.htm

 

Exhibit 32.1

 

Section 1350 Certification

 

In connection with the Quarterly Report of Green EnviroTech Holdings Corp. (the “Company”) on Form 10-Q for the quarter ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gary DeLaurentiis, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

 
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
 
 
 
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: August 14, 2019
By:
/s/ Gary DeLaurentiis
 
 
Gary DeLaurentiis
 
 
Principal Executive Officer

 

 
 

 

ENT> EX-32.2 5 ex32-2.htm

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Green EnviroTech Holdings Corp. (the “Company”) on Form 10-Q for the quarter ended June 30, 2019, as filed with the Securities and Exchange Commission (the “Report”), I, Chris Smith Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

 

 
(1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
 
 
 
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

 
By:
/s/ Chris Smith
August 14, 2019
 
Chris Smith
 
 
Principal Financial Officer

 

 
 

Additional Files
FileSequenceDescriptionTypeSize
0001493152-19-012380.txt   Complete submission text file   2987428
geth-20190630.xml 6 XBRL INSTANCE FILE EX-101.INS 340920
geth-20190630.xsd 7 XBRL SCHEMA FILE EX-101.SCH 52696
geth-20190630_cal.xml 8 XBRL CALCULATION FILE EX-101.CAL 35020
geth-20190630_def.xml 9 XBRL DEFINITION FILE EX-101.DEF 170051
geth-20190630_lab.xml 10 XBRL LABEL FILE EX-101.LAB 286161
geth-20190630_pre.xml 11 XBRL PRESENTATION FILE EX-101.PRE 205952

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