NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2015 AND 2014
NOTE
1-
ORGANIZATION AND BASIS OF PRESENTATION
Green
EnviroTech Holdings Corp. (the “Company”) was incorporated on June 26, 2007 under the name Wolfe Creek Mining, Inc.
under the laws of the State of Delaware. On November 20, 2009, the Company completed a reverse merger transaction pursuant to
which it acquired Green EnviroTech Corp., a Nevada corporation. Wolfe Creek Mining, Inc. up until November 20, 2009 was primarily
engaged in the acquisition and exploration of mining properties. Green EnviroTech Corp was incorporated on October 6, 2008 and
was engaged in plastics recovery. The financial statements included herein are the financials of Green EnviroTech Holdings Corp.
and subsidiary from October 6, 2008 to current.
Green
EnviroTech Holdings Corp. is an innovative pre revenue-stage technology company that has developed a high grade oil conversion
process utilizing a mixture of plastic and tires earmarked for disposal. The “GETH Process” revolutionizes the recapture
of waste tires and plastic and cleans up our landfills. The proprietary conversion process uses established pyrolysis technology
with additional distillation applications. We have already received a contract from Conoco for the oil produced from our first
plant.
Going
Concern
These
consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize
its assets and discharge its liabilities in the normal course of business for the foreseeable future. For the year ended December
31, 2015, the Company had a net loss of $711,599. The Company also had a working capital deficit of $3,981,588 and it had accumulated
a deficit of $20,595,353. Further losses are anticipated in the development of the Company’s business of raising substantial
doubt and its ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company
generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its
liabilities when they come due from normal business operations. Management intends to finance operating costs over the next twelve
months with loans and/or private placement of common stock.
The
continuation of the Company as a going concern is dependent upon the continued financial support from our shareholders and our
ability to obtain necessary equity financing to continue toward funding our first operation.
The
Company has had very little operating history to date. These consolidated financial statements do not include any adjustments
to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. These factors raise substantial doubt regarding its ability to continue
as a going concern.
Besides
generating revenues from proposed operations, the Company may need to raise additional funds to expand operations to the point
at which it can achieve profitability. The terms of new debt or equity that may be raised may not be on terms acceptable to the
Company. If it fails to raise adequate funds from unrelated third parties, its officers and directors may need to contribute additional
funds to sustain operations.
NOTE
2-
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and its interest in Green EnviroTech CA1, LLC, joint venture,
which had no operations for the year. Intercompany balances and transactions were eliminated between the Company and the joint
venture. The Company owns 99% of the Joint Venture. There is no specific operational use for the Joint Venture at present.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2015 AND 2014
Reclassification-Certain
reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash
and Cash Equivalents
We
consider cash equivalents when purchased to be all highly liquid debt instruments and other short-term investments with maturity
of three months or less.
We
maintain cash and cash equivalent balances at one financial institution that is insured by the Federal Deposit Insurance Corporation.
We do not have any cash equivalents as of December 31, 2015 and 2014, respectively.
Fixed
Assets
Fixed
assets are stated at cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated
useful lives of the related assets. Costs of maintenance and repairs will be charged to expense as incurred.
Recoverability
of Long-Lived Assets
We
will review long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate
a possible impairment. The assessment for potential impairment will be based primarily on our ability to recover the carrying
value of our long-lived assets from expected future cash flows from our operations on an undiscounted basis.
If
such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds
the fair value of the assets. Fixed assets to be disposed of by sale will be carried at the lower of the then current carrying
value or fair value less estimated costs to sell.
Income
Taxes
We
account for income taxes in accordance with Accounting Standards Codification (“ASC”) 740,
Income Taxes
. There
are two major components of income tax expense, current and deferred. Current income tax expense approximates cash to be paid
or refunded for taxes for the applicable period. Deferred tax assets and liabilities are determined based upon the difference
between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates, which will be in
effect when these differences reverse. Deferred tax expense or benefit is the result of changes between deferred tax assets and
liabilities.
A
valuation allowance is established when, based on an evaluation of objective verifiable evidence, it is more likely than not that
some portion or all of deferred tax assets will not be realized.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2015 AND 2014
ASC
740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position
taken or expected to be taken on a tax return. Under ASC 740-10, a tax benefit from an uncertain tax position taken or expected
to be taken may be recognized only if it is “more likely than not” that the position is sustainable upon examination,
based on its technical merits. The tax benefit of a qualifying position under ASC 740-10 would equal the largest amount of tax
benefit that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority having full knowledge
of all the relevant information. A liability (including interest and penalties, if applicable) is established to the extent a
current benefit has been recognized on a tax return for matters that are considered contingent upon the outcome of an uncertain
tax position. Related interest and penalties, if any, are included as components of income tax expense and income taxes payable.
As
of January 1, 2016, we have analyzed filing positions in each of the federal and state jurisdictions where we are required to
file income tax returns, as well as all open tax years in these jurisdictions. We have identified the U.S. federal and California
as our “major” tax jurisdictions. Generally, we remain subject to Internal Revenue Service examination of our 2009
through 2015 California Franchise Tax Returns. However, we have certain tax attribute carry forwards, which will remain subject
to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect to the year in which
such attributes are utilized.
We
believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that
will result in a material change to our financial position. Therefore, no reserves for uncertain income tax position have been
recorded pursuant to ASC 740. In addition, we did not record a cumulative effect adjustment related to the adoption of ASC 740.
Related interest and penalties, if any, are included as components of income tax expense and income taxes payable.
(Loss)
Per Share of Common Stock
We
follow ASC 260,
Earnings per Share
. Basic net loss per common share is computed using the weighted average number of common
shares outstanding. Diluted earnings per share (EPS) include additional dilution from common stock equivalents, such as stock
issuable pursuant to the exercise of stock options and warrants. Common s
tock
equivalents from warrants in the amount of 3,012,800 shares at December 31, 2015 were not included in the computation of diluted
earnings per share. We are reporting a loss, to include stock equivalents would be anti-dilutive for periods presented.
Intangible
Assets
ASC
350 requires that intangible assets with finite useful lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with ASC 360, “Accounting for the Impairment or Disposal
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” Our assessment for impairment of assets involves estimating
the undiscounted cash flows expected to result from use of the asset and its eventual disposition. An impairment loss recognized
is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset, and considers year-end
the date for its annual impairment testing, unless information during the year becomes available that requires an earlier evaluation
of impairment testing. We had no impairment charges for the year ended December 31, 2015. For the ended December 31, 2014, we
incurred impairment charges in the amount of $33,333 when we wrote off the engineering costs in the amount of $30,833 which were
associated with the building permits for a plant to be built in San Francisco. The building permits would expire before funding
of the plant could be consummated. We also wrote down a Sniff Machine used for detecting vapors and odors to fair market value.
The write down was for $2,500.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2015 AND 2014
Stock-Based
Awards
ASC
718
Compensation – Stock Compensation
prescribes accounting and reporting standards for all share-based payment transactions
in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options,
and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees,
including grants of employee stock options, are recognized as compensation expense in the financial statements based on their
fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for
the award, known as the requisite service period (usually the vesting period).
We
account for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50,
Equity – Based Payments to Non-Employees.
Measurement of share-based payment transactions with non-employees is based
on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments
issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance
completion date.
We
measure the cost of employee services received in exchange for an award of equity instruments, including stock options, based
on the grant-date fair value of the award and recognizes it as compensation expense over the period the employee is required to
provide service in exchange for the award, usually the vesting period. We estimate the fair value of share-based payment awards
on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest
is recognized as expense over the requisite service periods in our statement of operations. The forfeitures are estimated at the
time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. For the fiscal
periods ended December 31, 2015 and 2014, we estimated our forfeiture rate to be 0% based on the Company’s historical experience.
There were 0 stock options granted to employees during the years ended December 31, 2015 and 2014.
During
the fiscal periods ended December 31, 2015 and 2014, we granted common stock warrants to investors, lenders, consultants and certain
officers as discussed in Note 3. The fair value of stock warrants issued in conjunction with the sale of common stock is recorded
against common stock as stock issuance cost. The fair value of stock warrants issued in conjunction with notes payable is recognized
as a discount on the related debt and amortized to interest expense over the term to maturity.
The
fair value of stock-based awards to consultants, employees and directors is calculated using the Black-Scholes-Merton pricing
model. The Black-Scholes-Merton model requires subjective assumptions regarding future stock price volatility and expected time
to exercise, which greatly affect the calculated values. The expected term of options granted is derived from historical data
on employee exercises and post-vesting employment termination behavior. The risk-free rate selected to value any particular grant
is based on the U.S. Treasury rate that corresponds to the pricing term of the grant effective as of the date of the grant. The
expected volatility is based on the historical volatility of the common stock of comparable publicly traded companies. In making
this determination and finding another similar company, we have considered the industry, stage of life cycle, size and financial
leverage of such other entities. These factors could change in the future, affecting the determination of stock-based compensation
expense in future periods.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2015 AND 2014
Fair
Value Measurements
We
have adopted certain provisions of ASC Topic 820. ASC 820 defines fair value, provides a consistent framework for measuring fair
value under generally accepted accounting principles and expands fair value financial statement disclosure requirements. ASC 820’s
valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent
sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into the following hierarchy:
|
●
|
Level
1 inputs: Quoted prices for identical instruments in active markets.
|
|
|
|
|
●
|
Level
2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets
that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
|
|
|
|
|
●
|
Level
3 inputs: Instruments with primarily unobservable value drivers.
|
Recently
Issued Accounting Standards
There
were recently issued updates most of which represented technical corrections to the accounting literature or application to specific
industries and are not expected to have a material impact on our financial position, results of operations or cash flows.
NOTE
3-
STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred
Stock
The
Company has 25,000,000 preferred shares of $0.001 par value stock authorized. The Company has no preferred stock issued and outstanding.
Common
Stock
The
Company has 250,000,000 common shares of $0.001 par value stock authorized. On December 31, 2015, we had 23,926,757 common shares
outstanding as compared to 17,503,432 common shares outstanding on December 31, 2014.
Warrants
The
Company uses the Black-Scholes option pricing model in valuing options and warrants. The inputs for the valuation analysis of
the options and warrants include the market value of the Company’s common stock, the estimated volatility of the Company’s
common stock, the exercise price and the risk free interest rate.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2015 AND 2014
The
key inputs in determining grant date fair value are as follows:
|
|
Period
Ended
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Risk-free interest rate
|
|
|
1.25
|
%
|
|
|
1.25
|
%
|
Dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Expected volatility
|
|
|
110.24
|
%
|
|
|
110.24
|
%
|
Expected term (in years)
|
|
|
5.0
|
|
|
|
5.0
|
|
Weighted average grant date fair value of warrants granted during the period
|
|
$
|
0.12
|
|
|
$
|
0.34
|
|
The
following table presents the warrant activity during 2015 and 2014:
|
|
|
|
|
Weighted
Average
|
|
|
|
Warrants
|
|
|
Exercise Price
|
|
Outstanding - December 31, 2013
|
|
|
19,519
|
|
|
$
|
5.64
|
|
Granted-Oct 10, 2014
|
|
|
650,000
|
|
|
$
|
0.10
|
|
Forfeited/canceled
|
|
|
-
|
|
|
|
-
|
|
Exercised-Feb 19, 2014
|
|
|
(15,000
|
)
|
|
$
|
(1.00
|
)
|
Exercisable as of December 31, 2014
|
|
|
394,519
|
|
|
$
|
0.34
|
|
Outstanding - December 31, 2014
|
|
|
654,519
|
|
|
$
|
0.24
|
|
Granted-Jan 1, 2015
|
|
|
3,000,000
|
|
|
$
|
0.10
|
|
Granted-Feb 20, 2015
|
|
|
875,171
|
|
|
$
|
0.08
|
|
Granted-Feb 24, 2015
|
|
|
875,171
|
|
|
$
|
0.08
|
|
Exercisable as of December 31, 2015
|
|
|
3,012,800
|
|
|
$
|
0.12
|
|
Outstanding - December 31, 2015
|
|
|
5,404,861
|
|
|
$
|
0.09
|
|
The
weighted average remaining life of the outstanding common stock warrants as of December 31, 2015and 2014 was 4.52 and 4.75 years.
The aggregate intrinsic value of the outstanding common stock warrants as of December 31, 2015 and 2014 was $0 for both years.
During
the year ended December 31, 2014:
|
●
|
the
Company issued 680,000 common shares for services valued at $252,495 and additional 1,910,000 common shares for services valued
at $635,860 were issued to related parties.
|
|
|
|
|
●
|
the
Company issued 6,299,016 common shares to convert $967,254 of principal and interest on notes payable into equity,
|
|
|
|
|
●
|
the
Company issued 650,000 common stock warrants to an attorney, the warrants convert within 5 years of issuance @ $0.10 per warrant.
130,000 warrants vested when issued and 130,000 vested the 10th of the following four months after issue date. These warrants
were valued at $59,011 at December 31, 2014 by the Black-Sholes method.
|
|
|
|
|
●
|
the
Company issued 821,108 shares valued at $821,108 to a related party for accrued salary and conversion of note payable, 42,871
of these shares were issued to the CEO for the payoff of his note with a principal balance of $12,287 and accrued interest
of $30,584
|
|
|
|
|
●
|
the
Company issued 1,773,620 common shares to convert $417,482 of accounts payable and accruals which resulted in an operating
loss of $96,643.
|
|
|
|
|
●
|
the
Company issued 100,000 shares as a sweetener for debt holders valued at $13,000.
|
|
|
|
|
●
|
the
Company issued 15,000 common shares valued at $15,000 to convert warrants. The transaction converted
$15,000
in payables.
|
|
|
|
|
●
|
the
Company recognized a loss on conversion of debt in the amount of $1,171,121.
|
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2015 AND 2014
During
the year ended December 31, 2015:
|
●
|
the
Company issued 1,500,000 common shares to a related party for a note conversion in the amount of $45,000.
|
|
|
|
|
●
|
the
Company issued 1,298,325 common shares to convert $56,175 of accounts payable and accruals. There was a gain of $6,529 on
the transactions.
|
|
|
|
|
●
|
the
Company issued 1,500,000 common stock warrants to an engineer in January 2015. These warrants convert within 5 years of issuance
@ $0.10 per warrant. 62,500 warrants vest monthly starting the month after issuance. There were 687,500 warrants fully vested
at the end of the year. These warrants were valued at $34,926 at December 31, 2015 by the Black-Sholes method.
|
|
|
|
|
●
|
the
Company issued 1,500,000 common stock warrants to a consultant in January 2015. These warrants convert within 5 years of issuance
@ $0.10 per warrant. All of these warrants vest on February 1, 2016. These warrants were valued at $27,588 at December 31,
2015 by the Black-Sholes method.
|
|
|
|
|
●
|
the
Company issued 875,171 common stock warrants to the engineer in February 2015. These warrants convert within 5 years of issuance
@ $0.08 per warrant. 79,561 warrants vest monthly starting the month after issuance. There were 795,610 warrants fully vested
at the end of the year. These warrants were valued at $36,766 at December 31, 2015 by the Black-Sholes method.
|
|
|
|
|
●
|
the
Company issued 875,171 common stock warrants to an attorney, the warrants convert within 5 years of issuance @ $0.08 per warrant.
175,034 warrants vested when issued and 175,034 vested the next four months after issue date. These warrants were totally
vested and valued at $46,189 at December 31, 2015 by the Black-Sholes method.
|
|
|
|
|
●
|
the
Company issued 650,000 warrants in October of 2014 to an attorney, 390,000 of these warrants
vested in 2014 and were valued at $59,011. The 260,000 remaining warrants vested in 2015
and were valued at $27,090 by the Black-Sholes method.
|
|
|
|
|
●
|
the
Company issued 3,625,000 common shares to a related party to convert $145,000 in accrued salary.
|
On
January 30, 2015, in conjunction with the execution of the agreement between us and Cenco Leasing Company, Inc. (Cenco), see note
8, we entered into a mutual release agreement with a former employee who claimed to have certain technology rights of the Company.
It was agreed wherein the employee would release to the company any claim to any and all rights to certain technology concerning
the pyrolysis and refining of certain materials into oil. Included in the agreement was a provision in which the former employee
would forfeit all of their accrued salary in the amount of $721,749 the Company was carrying as a liability to the former employee.
The Company will recognize an equity adjustment from the write off of the accrued salary. In exchange for the forfeiture of the
accrued salary, Cenco had entered into a separate agreement with the former employee wherein the former employee would receive
certain licensed territorial rights given to Cenco.
NOTE
4-
LOAN PAYABLE – RELATED PARTY
The
Company had an unsecured, loan payable in the form of a line of credit with its CEO. The CEO had provided a line of credit up
to $1,000,000 at 4% interest per annum to the Company to cover various expenses and working capital infusions until the Company
received sufficient other funding. This loan was extended to December 31, 2015. The loan was paid in full when it was converted
on April 16, 2014 by issuing 42,871 shares of restricted common stock of the Company at a conversion rate of $1.00 per share The
shares represented $12,287 of principal and $30,584 of accrued interest.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2015 AND 2014
NOTE
5-
LOAN PAYABLE – OTHER
The
Company at the beginning of the year 2015 had a Line of Credit with H. E. Capital, S. A. This Line of Credit accrues interest
at the rate of 8% per annum. The due date of the loan was extended to December 31, 2016. Balance of the loan at December 31, 2015
was $241,582 with accrued interest in the amount of $99,719 as compared to $127,482 with accrued interest in the amount of $85,031
for the year ended December 31, 2014
History
of the H. E. Capital loans is as follows:
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
127,482
|
|
|
$
|
616,772
|
|
Proceeds
|
|
|
121,700
|
|
|
|
170,700
|
|
Vendors paid direct on behalf of the Company
|
|
|
2,400
|
|
|
|
19,510
|
|
Reclassification from accounts payable
|
|
|
-
|
|
|
|
53,000
|
|
Consulting fees
|
|
|
60,000
|
|
|
|
60,000
|
|
Assignments
|
|
|
(70,000
|
)
|
|
|
(445,000
|
)
|
Non-cash conversion
|
|
|
-
|
|
|
|
(347,500
|
)
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
241,582
|
|
|
$
|
127,482
|
|
The
Company on February 25, 2010 issued a promissory note to an individual in the amount of $20,000 at 10% interest due on demand.
This interest rate was increased to 12% beginning in 2012. The Company repaid $10,000 of this note on August 10, 2010. The Company
also repaid $2,500 of this note on April 13, 2011. The note is extended to December 31, 2016. As of December 31, 2015 and 2014
the loan has an outstanding balance of $7,500 and accrued interest in the amount of $5,857 and $4,957, respectively.
The
Company issued a promissory note on November 15, 2012 to an individual in the amount of $170,000 at 8% interest. The note was
extended to December 31, 2016. The Company used the funds to pay off the convertible notes held by Asher Enterprise, Inc. As of
December 31, 2015 and 2014 the loan has an outstanding balance of $170,000 and accrued interest in the amount of $42,514 and $28,914
respectively.
The
Company issued a promissory note on March 19, 2013 to an individual in the amount of $150,000 at 8% interest due on March 18,
2014. This note is extended to December 31, 2016. The Company used the funds for working capital. As of December 31, 2015 and
2014 the loan has an outstanding balance of $150,000 and accrued interest in the amount of $34,356 and 19,356 respectively.
The
Company issued a promissory note in the amount of $171,300 on October 1, 2013 to a vendor in exchange for converting accounts
payable. The note accrues interest at 8% and is due on September 30, 2014. As of December 31, 2013 this note had an outstanding
balance of $171,300 and accrued interest in the amount of $3,454. On February 18, 2014, the note was converted into 685,200 shares
of common stock. There was a conversion loss in the amount of $246,672.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2015 AND 2014
During
the fourth quarter 2014, the Company was faced with satisfying a disputed obligation with one of its vendors by issuing 150,000
free trading shares of the Company. The debt had not matured for the amount of time required for the obligation to receive free
trading shares. In order to satisfy the debt, the Company entered into an agreement with H. E. Capital, S.A. to convert $30,000
of its Line of Credit Note with the Company into 150,000 free trading shares of the Company. H. E. Capital S.A. converted the
required portion of its debt from the Company into the shares needed and issued 25,000 free trading shares in December 2014 and
the balance of 125,000 free trading shares in February 2015. The Company was contingently liable for the vendor debt on December
31, 2014 and until it was totally satisfied in February 2015. The Company incurred an operating loss of $25,706 as a result of
the transaction in 2014.
On May 18, 2015, we approved the Debt Assignment
Agreement dated 5/18/2015 between H.E. Capital S.A. (HEC) and Valuecorp Trading Company. We also approved the Debt Settlement
Agreement dated 5/19/2015 between the Company and Valuecorp Trading Company. We will issue 833,333 shares of common stock to Valuecorp
Trading Company at $0.03 per share to satisfy $25,000 of the debt dated 12/3/2010. However, on June 8, 2015 Valuecorp only paid
$12,500 of the assignment to HEC and a note was issued to Valuecorp in the amount of $12,500 and HEC letter of credit note was
reduced by the same amount. It is approved for Valuecorp to receive only 416,667 shares of the Company’s common stock for
the conversion of its $12,500 note when presented to the Company for conversion. To date, this note has not been presented. This
note was outstanding at December 31, 2015 with $567 in accrued interest.
On December 29, 2015, we approved H.E. Capital
S.A.’s (HEC) request to assign to a private individual $12,500 of its Line of Credit Note. This approval was requested to
fulfill the $25,000 assignment to Valuecorp Trading Company requested and approved on May 18, 2016, but Valuecorp only paid H.E.
Capital $12,500. We approved the conversion of the $12,500 into shares of the Company’s common stock at the rate of $0.03
per share. When completed the conversion would be a total of 416,667 shares of free trading stock and the HEC Line of Credit Note
will be reduced by $12,500. We issued to the individual a note in the amount of $12,500 and reduced the HEC Line of Credit Note
by the same amount. To date these shares have not been issued. This note was outstanding at December 31, 2015 with $8 in accrued
interest.
NOTE
6-
SECURED DEBENTURES
On
January 24, 2011, the Company entered into a series of securities purchase agreements with accredited investors (the “Investors”),
pursuant to which the Company sold an aggregate of $380,000 in 12% secured debentures (the “Debentures”). Legend Securities,
Inc. a broker dealer which is a member of FINRA, received a commission of $45,600 and 19,000 warrants at an exercise price of
$0.40 in connection with the sale of the Debentures. The Debentures were initially due at the earlier of 6 months from the date
of issuance or upon the Company receiving gross proceeds from subsequent financings in the aggregate amount of $1,000,000. The
Debentures bear interest at the rate of 12% per annum, payable upon maturity. The Debentures are secured by the assets of the
Company pursuant to security agreements entered into between the Company and the Investors. As a result of the 1 for 100 reverse
common stock split on March 27, 2013, the warrants issued to Legend Securities, Inc. are exercisable for 190 common shares at
a price of $40.00 per share.
The
Company also issued to the Investors on January 24, 2011 five-year warrants to purchase an aggregate of 190,000 shares of common
stock at an exercise price of $0.40, which may be exercised on a cashless basis. As a result of the 1 for 100 reverse common stock
split on March 27, 2013, these warrants are exercisable for 1,900 common shares at a price of $40.00 per share.
On
February 2, 2012, the Company issued 10,001 shares of common stock valued at $30,000 to the Secured Debenture Holders for extending
the maturity date of the debentures to September 24, 2012. The Company by direction of Legend Securities, Inc. also issued to
the holders of the Secured Debentures five-year warrants to purchase 100,000 shares of common stock at an exercise price of $0.10
per share which said warrants were originally issued to certain employees of Legend Securities, Inc. per a previous Legend Agreement.
The warrants were issued to the holders of the Secured Debentures simultaneously with the issuance of the above mentioned stock
and were valued at $2,998. As a result of the 1 for 100 reverse common stock split on March 27, 2013, these warrants are exercisable
for 1,000 common shares at a price of $10.00 per share.
The
balance of these Debentures on December 31, 2015 and 2014 was $305,000. The accrued interest for the years ended December 31,
2015 and 2014 were $200,010 and $162,902 respectively. These notes are in negotiation for extension.
The
Company entered into two new note agreements with Cenco Leasing Company during the second quarter of 2014 and these notes were
secured by the assets of the Company and common stock of the Company. Both notes are for one year at 8% interest. The first note
was issued on May 5, 2014 for $50,000 and the second note was issued on June 2, 2014 for $40,000. These notes were satisfied on
January 30, 2015 in the Cenco licenses agreement. Please refer to the commitment note 8.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2015 AND 2014
NOTE
7-
PROVISION FOR INCOME TAXES
Deferred
income taxes are determined using the liability method for the temporary differences between the financial reporting basis and
income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected
to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities
are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts
of assets and liabilities and their respective tax bases. Availability of loss usage is subject to change of ownership limitations
under Internal Revenue Code 382.
Net
Deferred Tax Assets consisted of the following components as of December 31, 2015 and 2014:
|
|
2015
|
|
|
2014
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
NOL Carryover Tax Advantage
|
|
$
|
3,479,500
|
|
|
$
|
3,394,400
|
|
Valuation allowance
|
|
|
(3,479,500
|
)
|
|
|
(3,394,400
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The
income tax provision differs from the amount of income tax determined by applying the U.S. Federal Income tax rate to pretax income
from continuing operations for the years ended December 31, 2015 and 2014.
At
December 31, 2015, the Company had a net operating loss carry forward in the amount of approximately $10,234,000 available to
offset future taxable income through 2033. The Company established valuation allowances equal to the full amount of the deferred
tax assets due to the uncertainty of the utilization of the operating losses in future periods.
NOTE
8-
COMMITMENTS
During
2013, the Company entered into an agreement with Black Lion Oil Limited (Black Lion) whose primary focus is on emerging energy
technology with broad applications. Under the agreement, the Company granted to Black Lion exclusive rights to the “waste
to oil” process in specific territories outside of the United States. In return Black Lion paid $100,000 in cash to the
Company as a fee and agreed to pay the Company royalties amounting to ten percent (10.0%) of Black Lion’s gross sales. The
Company used the fee for working capital. As of December 31, 2015, Black Lion has not opened its first plant.
On
June 1, 2013 the Company signed a three-year lease for office space and opened its corporate offices in Oakdale, CA. The office
was staffed by the CEO, COO and two office personnel. The office space was approximately 3,300 sq. ft. The lease calls for lease
payments in the amount of $3,300 per month the first year, $3,738 per month the 2
nd
year and $3,841 per month the 3
rd
year. For the years ended December 31, 2015 and 2014, we incurred rent expense in the amount of $16,244 and $77,461 respectively.
The Company negotiated with the landlord during the third quarter of 2015 for the landlord to accept stock as settlement to let
the Company out of its office lease. The Company issued to the landlord 1,233,031 common shares to settle $45,075 in obligations.
The Company’s offices are currently located at 14699 Holman Mtn Rd, Jamestown, CA 95327. The space is provided by the CEO
of the Company at no cost.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2015 AND 2014
The
Company on September 30, 2014 settled a claim in New York courts from a vendor for unpaid fees, MicroCap vs Green EnviroTech,
by agreeing to deliver 25,000 shares a month for six months to the plaintiff. All the shares were delivered. On or about June
18, 2015, Microcap asked the court for a judgment alleging a default of the stipulation of settlement. Microcap’s position
was that what was delivered was unsellable as the Company had not made timely filings of its Securities and Exchange Commission
filings. The Company filed a Statement in opposition on June 23, 2015. On June 29, 2015, the Court entered a judgment in the amount
of $42,111 in favor of Microcap. The Company recorded the judgment as a liability. The Company has the right to appeal this judgment
for a period of one year from the date of judgment and is reserving its right to appeal.
On
January 30, 2015, the Company entered into a license agreement with Cenco Leasing Company, Inc. (Cenco) wherein the Company has
given exclusive license rights to Cenco for the states of California, Oklahoma, Kansas, Arkansas, Nebraska, Missouri, Colorado,
North Dakota, South Dakota, Iowa, New Mexico, Nevada, Utah and the entire country of Mexico. The agreement gives exclusive rights
to Cenco to utilize certain technology of the Company to design, construct, own and operate pyrolysis and refining plants in the
above defined territories. The agreement calls for Cenco over certain periods of time as detailed in the agreement to construct
plants in these territories. The agreement also calls for Cenco to pay royalties from the revenues generated from these plants.
Such royalties in some states are calculated at a three percent (3%) rate and other states at a five and one half percent (5.5%).
As part of the agreement, the two notes to Cenco in the amount of $90,000 with accrued interest in the amount of $5,028 were returned
to us. Cenco also paid us an additional $25,000 as a license fee for another state. The total amount of $120,028 was recorded
in the statement of operations as a territorial license fee.
On
June 12, 2015, the Company and Cenco Leasing Company, Inc. agreed to an extension to the performance clause in the agreement between
the Company and Cenco dated January 30, 2015 by executing an amendment to that agreement. The original agreement called for Cenco
to demonstrate to the Company that it had obtained funding in the amount of $2,800,000 on or before June 30, 2015. The performance
date was extended to July 31, 2015 in the amendment. The amendment also provided the failure to demonstrate the benchmark dollar
amount by the extended due date, the territorial exclusivity rights in the original agreement would be lost. It was agreed in
the amendment for Cenco to assign all of its rights and obligations in the license agreement to GEN2 WTE, LLC. (GEN2). Neither
Cenco nor GEN2 performed before the extension due date. The exclusive right was lost for non-performance.
On
May 13, 2015, we agreed with EraStar, one of our vendors, to resolve the outstanding balance of $120,000 owed to EraStar by us
for an amount of $20,000 or issue 20,000 free trading shares on or before 12/30/15. The due date for the issue of the free trading
shares was extended to December 31, 2016. On October 1, 2015, the Company and EraStar agreed to an amendment to the May 13, 2015
Settlement Agreement. The amendment was requested by EraStar in order for EraStar to assign all of its 350,000 shares it is currently
holding including the 20,000 shares we will issue to settle the payable. EraStar will turn in the shares it is currently holding
and we will issue a total of 370,000 shares to EraStar’s assignee on or before December 31, 2016.
On
July 1, 2015, we accepted a 98% interest in a California Limited Liability Company which will operate as a partnership. We previously
owned 1% of the LLC, but will now own 99%. The Company’s CEO previously owned 99%, but will now retain 1% ownership. The
purpose of the LLC is for future operational purposes. To date there are no operating activities in the LLC.
GREEN
ENVIROTECH HOLDINGS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2015 AND 2014
NOTE
9-
SUBSEQUENT EVENTS
During
the first quarter 2016, the Company issued 1,500,000 warrants to another consultant for Company’s stock at $0.10 per share
for services rendered for the past eighteen months. These warrants fully vested on the date of issuance.
During
the first quarter of 2016, the Company issued a Note Payable to an individual in the amount of $134,000 at an interest rate of
eight percent (8%). for the amount the individual wired into the Company account. The Company forwarded these funds to a third
party company for a promissory note for the same amount at eight percent (8%). The funds are intended for the use of the third
party company. The Company intends to be a majority owner of this third party company in the future by issuing licensing agreements
for the use of our technology. In March 2016, we requested and the third party company agreed to be totally responsible for the
$134,000 note to the individual and the note was assigned and accepted by the third party company with the individual note holder’s
approval.
On
May 18, 2016, the Company issued an eight percent (8%) Note Payable to a private company for the $53,500 funds it received on
the same date. These funds were used for working capital. This note was paid in full on June 2, 2016 from an increase in the line
of credit from H. E. Capital, S.A.