UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For Quarterly Period Ended June 30, 2012

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:

000-10210

 

TREE TOP INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

 

NEVADA		83-0250943
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

511 Sixth Avenue, Suite 800,

New York, NY  10011

(Address of principal executive offices) (Zip Code)

(775) 261-3728

Registrant's telephone number, including area code

(Former name, former address and former fiscal year, if changed since last report)

 

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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One).

 

Large accelerated filer	¨		Accelerated filer	¨
Non-accelerated filer	¨		Smaller reporting company	x
(Do not check if a smaller reporting company)

 

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.

 

As of August 9, 2012, the number of shares outstanding of the registrant’s class of common stock was 349,602,201.

 

  

TABLE OF CONTENTS

 

			Pages
PART I.     FINANCIAL INFORMATION			3
Item 1.	Financial Statements		3
	Unaudited Condensed Consolidated Balance Sheets at June 30, 2012 and December 31, 2011		3
	Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2012 and 2011, and From Inception of the Development Stage on August 1, 2007 through June 30, 2012		4
	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2012 and 2011, and From Inception of the Development Stage on August 1, 2007 through June 30, 2012		5
	Notes to Unaudited Condensed Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		15
Item 4.	Controls and Procedures		15
PART II     OTHER INFORMATION			16
Item 1.	Legal Proceedings		16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		17
Item 3.	Defaults Upon Senior Securities		17
Item 5.	Other Information		17
Item 6.	Exhibits		17
SIGNATURES			18

 

  

PART I.                      FINANCIAL INFORMATION

 

Item 1.    Financial Statements

 

TREE TOP INDUSTRIES, INC.

(A Development Stage Company)

Condensed Consolidated Balance Sheets

 

ASSETS
		June 30,				December 31,
		2012				2011
		(Unaudited)
CURRENT ASSETS
Cash and cash equivalents		$	93			$	517
Total Current Assets			93				517
PROPERTY AND EQUIPMENT (NET)			23,136				39,518
INVESTMENTS AT COST			95,256				0
TOTAL ASSETS		$	118,485			$	40,035
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses			677,818				676,853
Accrued interest			149,396				134,179
Due to officers and directors			3,592,873				3,186,130
Convertible Notes (Net of discount)			32,917				50,000
Notes payable- in default			597,860				597,860
Total Current Liabilities			5,050,864				4,645,022
Total Liabilities			5,050,864				4,645,022
STOCKHOLDERS' DEFICIT
Common stock, par value $0.001 per share,
1,000,000,000 shares authorized; 389,602,201 and 379,380,276
issued, 349,602,201 and  339,380,276 outstanding, respectively			389,602				379,380
Additional paid-in-capital			140,835,115				140,263,974
Unearned ESOP shares			(1,700,000	)			(1,700,000	)
(Deficit) Accumulated During the Development Stage			(144,457,096	)			(143,548,341	)
Total Stockholders' Deficit			(4,932,379	)			(4,604,987	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	118,485			$	40,035

 

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

 

   

Tree Top Industries, Inc.

(A Development Stage Company)

Condensed Consolidated Statements of Operations

(unaudited)

																		From Inception
																		on August 1,
		For the Three Months								For the Six Months								2007 through
		Ended June 30,								Ended June 30,								June 30,
		2012				2011				2012				2011				2012
REVENUES		$	-			$	-			$	-			$	-			$	2,967
COST OF SALES							-				-				-				-
GROSS PROFIT (LOSS)							-				-				-				2,967
OPERATING EXPENSES
General and administrative			37,828				50,644				76,416				148,642				5,800,107
Impairment of assets			-				-				-				-				2,275,000
Compensation and professional fees			264,988				220,800				752,204				496,929				136,023,147
Depreciation			8,190				8,190				16,381				16,381				143,258
Total Operating Expenses			311,006				279,634				845,001				661,952				144,241,512
LOSS FROM OPERATIONS			(311,006	)			(279,634	)			(845,001	)			(661,952	)			(144,238,545	)
OTHER INCOME (EXPENSE)
Loss on disposal of assets							-				-				-				(2,915	)
Gain on debt forgiveness							-				-				-				63,865
Interest income							-				-				-				9
Interest expense			(48,278	)			(63,854	)			(63,754	)			(91,677	)			(279,510	)
Total Other Income (Expense)			(48,278	)			(63,854	)			(63,754	)			(91,677	)			(218,551	)
NET LOSS BEFORE INCOME TAXES			(359,284	)			(343,488	)			(908,755	)			(753,629	)			(144,457,096	)
PROVISION FOR INCOME TAXES			-				-				-				-				-
NET LOSS		$	(359,284	)		$	(343,488	)		$	(908,755	)		$	(753,629	)		$	(144,457,096	)
LOSS PER SHARE - BASIC & DILUTED		$	(0.00	)		$	(0.00	)		$	(0.00	)		$	(0.00	)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING			347,781,549				272,894,752				345,220,252				272,506,792

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

 

  

Tree Top Industries, Inc.

(A Development Stage Company)

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

		For the Six Months								From Inception on August 1, 2007 through
		Ended June 30,								June 30,
		2012				2011				2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(908,755	)		$	(753,629	)		$	(144,457,096	)
Adjustments to reconcile net loss to net cash used
in operating activities:
Bad debt expense			-				-				192,000
Depreciation and amortization			16,382				16,381				143,259
Stock issued for option cancellation			-				-				115,201
Shares owed for services			-				26,800				-
Stock issued for rent			-				-				37,500
Gain on debt settlement			-				-				(63,865	)
Stock options granted for services rendered			-				-				44,870,540
Impairment of intangible assets			-				-				2,275,000
Common stock issued for services rendered			398,058				112,307				90,177,563
Imputed interest on loan			6,720				6,720				32,607
Loss on diposal of fixed assets			-				-				2,915
Amortization of debt discount			32,917				60,764				107,917
Change in operating assets and liabilities, net of acquisition:
Increase (decrease) in accounts payable and accrued expenses			365,084				377,847				3,229,786
Net Cash Used in Operating Activities			(89,594	)			(152,810	)			(3,336,673	)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash advanced on note receivable			-				-				(192,000	)
Cash received in acquisition			-				-				44,303
Cash paid for investments			(95,256	)							(95,256	)
Purchases of property and equipment			-				-				(169,310	)
Net Cash Used in Investing Activities			(95,256	)			-				(412,263	)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash contribution from shareholders			-				-				50,375
Cash received from issuance of common stock			25,000				-				1,712,700
Cash received from notes payable			100,000				75,000				659,860
Cash paid to related party loans			(40,465	)			(80,746	)			(478,671	)
Cash received from related party loans			99,891				156,160				1,804,765
Net Cash Provided by Financing Activities			184,426				150,414				3,749,029
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(424	)			(2,396	)			93
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			517				2,674				-
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	93			$	278			$	93
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest		$	-			$	-			$	-
Cash paid for income taxes		$	-			$	-			$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for acquisition of sub		$	-			$	-			$	2,275,000
Common stock issued to ESOP		$	-			$	-			$	1,700,000
Conversion of Debentures		$	50,000			$	-			$	75,000
Note discount from beneficial conversion feature		$	100,000				-			$	100,000

 

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

 

 

TREE TOP INDUSTRIES, INC.

(A Development Stage Company)

Notes to the Unaudited Condensed Consolidated Financial Statements

June 30, 2012 and 2011

 

NOTE 1 - CONDENSED FINANCIAL STATEMENTS

 

The accompanying financial statements have been prepared by Tree Top Industries, Inc. (“the Company”) without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at June 30, 2012, and for all periods presented herein, have been made.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2011 audited financial statements.  The results of operations for the period ended June 30, 2012 are not necessarily indicative of the operating results for the full year.

 

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries as disclosed in Item 2 below. All significant inter-company balances and transactions have been eliminated.

  

NOTE 2 - GOING CONCERN

 

The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

The preparation of 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 at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Beneficial Conversion Feature of Debentures and Convertible Notes Payable

In accordance with FASB ASC 470-20, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, we recognize the advantageous value of conversion rights attached to convertible debt. Such rights give the debt holder the ability to convert his debt into common stock at a price per share that is less than the trading price to the public on the day the loan is made to us. The beneficial value is calculated as the intrinsic value (the market price of the stock at the commitment date in excess of the conversion rate) of the beneficial conversion feature of the debentures and related accruing interest, and is recorded as a discount to the related debt and an addition to additional paid in capital. The discount is amortized over the remaining outstanding period of related debt using the straight line method.

 

Recent Accounting Pronouncements

No accounting pronouncements were issued during the second quarter 2012 that would have a material effect on the accounting policies of the Company when adopted.

 

Investments at Cost Held to Maturity

The Company records restricted, non-marketable securities with less than 20% ownership, at cost. These investments are reviewed periodically for impairment, and if not temporary in nature will be written down to a fair market value.

 

 

TREE TOP INDUSTRIES, INC.

(A Development Stage Company)

Notes to the Unaudited Condensed Consolidated Financial Statements

June 30, 2012 and 2011

 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Fair Value of Financial Instruments

On January 1, 2008, the Company adopted ASC 820, Fair Value Measurements. ASC 820 defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:

 

•

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

•

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

•

Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.

 

The carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The carrying value of notes payable approximates fair value because negotiated terms and conditions are consistent with current market rates as of June 30, 2012 and December 31, 2011.

 

The following table presents the Company’s Notes Payable within the fair value hierarchy utilized to measure fair value on a recurring basis as of June 30, 2012 and December 31, 2011:

 

		Level 1				Level 2				Level 3
Notes payable — 2012			-0-				-0-			$	630,777
Notes payable — 2011			-0-				-0-			$	647,860

 

The following table presents a Level 3 reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs as of June 30, 2012 and December 31, 2011:

 

		Notes payable
Balance, December 31, 2011		$	647,860
Issuance of convertible notes (net of discount)			32,917
Conversion of convertible Debt			-50,000
Balance, June 30, 2012		$	630,777

 

 

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Ludicrous, Inc., BioEnergy Applied Technologies Inc., GoHealthMD, Inc., MLN, Inc., Universal Energy and Services Group, Inc. Sky Entertainment, Inc., Eye Care Centers International, Inc., GoHealthMD Nano Pharmaceuticals, Inc. and TTI Strategic Acquisitions and Equity Group, Inc. All subsidiaries of the Company currently have no financial activity. All significant inter-company balances and transactions have been eliminated.

 

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents are maintained with major financial institutions in the U S. Deposits held with these banks at times exceed $250,000 of insurance provided on such deposits. The Company has not experienced any losses in such accounts and believes that it is not exposed to any significant credit risk on cash and cash equivalents. At June 30, 2012 and 2011, no excess existed. There were no cash equivalents at June 30, 2012 and 2011.

 

Stock Based Compensation

The Company accounts for stock-based compensation in accordance with the provisions of ASC 718.  ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the reward- known as the requisite service period. No compensation cost is recognized for equity instruments for which employees do not render the requisite service. The grant-date fair value of employee share options and similar instruments are estimated using the Black Scholes option-pricing model adjusted for the unique characteristics of those instruments.

 

Equity instruments issued to non-employees are recorded at their fair values as determined in accordance with ASC 718 and ASC 595, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods and Services”, and are periodically revalued as the stock options vest and are recognized as expense over the related service period.

 

Basic and Diluted Loss per Share

The Company calculates earnings per share in accordance with ASC 260, “Computation of Earnings Per Share.” Basic loss per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share gives effect to dilutive convertible securities, options, warrants and other potential common stock outstanding during the period; only in periods in which such effect is dilutive. For 2012 and 2011, no common equivalent shares were excluded from the calculatio. The ESOP shares issued during 2012 and 2011 have also been excluded from the calculation as they were issued but not outstanding.

 

		For the Three Months Ended
		June 30,
		2012				2011
Loss (numerator)		$	(359,284	)		$	(343,488	)
Shares (denominator)			347,781,549				272,894,752
Basic and diluted loss per share		$	(0.00	)		$	(0.00	)

 

		For the Six Months Ended
		June 30,
		2012				2011
Loss (numerator)		$	(908,755	)		$	(753,629	)
Shares (denominator)			345,220,252				272,506,792
Basic and diluted loss per share		$	(0.00	)		$	(0.00	)

 

NOTE 4 - RELATED PARTY TRANSACTIONS

 

The balance due to related parties as of June 30, 2012 of $3,592,873 consisted of advances, payables and accrued wages to David Reichman, the Company’s Chief Executive Officer of $3,134,116 and accrued wages to Kathy Griffin, the Company’s President of $458,757. As of December 31, 2011, the related party balance was $3,186,130, consisting of a balance due David Reichman of $2,817,373, and a balance due Kathy Griffin of $368,757. During the six month period ended June 30, 2012, Mr. Reichman advanced the company $99,891 and was repaid $40,465. The amounts due to the officers are due on demand, have no formal agreements, and accrue interest equal to that being charged individually on the debt. Interest accrued during the six months ended June 30, 2012 was $7,316, for credit cards used on the Company’s behalf.

 

 

 

NOTE 5 - NOTES PAYABLE

 

(a)

NOTES PAYABLE

 

Notes payable consist of various notes bearing interest at rates from 5% to 9%, which are unsecured, with original due dates between August 2000 and December 2009. Five notes with maturity dates that have passed are currently in default with the remaining note due on demand and thus all notes are classified as current liabilities. At June 30, 2012 and December 31, 2011, notes payable amounted to $597,860. Below is a table summarizing the notes owed by the Company.

 

								Interest Expense
Principal				Interest Rate				6/30/2012				6/30/2011				Maturity
$	292,860				9.00	%		$	13,178			$	13,178				6/27/2010
	192,000				0	%			6,720				6,720				On Demand(1)
	18,000				6.00	%			540				540				9/1/2002
	30,000				6.00	%			900				900				9/12/2002
	25,000				5.00	%			626				626				8/31/2000
	40,000				7.00	%			1,400				1,400				7/10/2002
$	597,860							$	23,364			$	23,364

 

(1)

Imputed interest due to 0% interest rate

 

(b)

CONVERTIBLE NOTES PAYABLE:

 

During the six months ended June 30, 2012, the Company converted three remaining convertible notes into common stock of the Company. The terms of the convertible note agreements required a conversion rate at double the market value of the shares at the conversion date. Accordingly, the Company issued 2,689,874 shares for the remaining $50,000 in convertible debt and $1,584 in accrued interest. No gain or loss was recognize from the conversion.

 

During the three months ended June 30, 2012, the Company engaged in a note agreement with a Company for $100,000. The note is convertible into common shares of the Company at a rate of $.005, to include all fees and interest. The Company has recorded a $100,000 discount on the Convertible Note due to this beneficial conversion feature. The discount will be accreted over the term of the note which is 8 months. The note was originated on April 12, 2012. During the second quarter, the Company amortized the note discount in the amount of $32, 917, thus the net note balance at June 30, 2012 is $32,917.

 

The beneficial conversion feature was calculated by computing the number of shares the note would convert into upon conversion times the market price of the stock on the date of the note issuance, less the note amount. The beneficial conversion feature amount is the difference between the note amount and the value of the shares to be issued upon conversion. The beneficial conversion feature was valued at $350,000, however the note discount cannot exceed the face amount of the note, therefore the discount was limited to and recorded at $100,000.

 

 

TREE TOP INDUSTRIES, INC.

(A Development Stage Company)

Notes to the Unaudited Condensed Consolidated Financial Statements

June 30, 2012 and 2011

 

NOTE 6 - STOCKHOLDERS' DEFICIT

 

ISSUANCES OF COMMON STOCK

 

On February 6, 2012, the Board of Directors authorized the issuance of 1,500,000 shares of common stock to a consultant for services performed. The shares were valued at the market price on the day of issuance, in the amount of $60,000.

 

On February 14, 2012, the Board of Directors authorized the issuance of 2,689,874 shares to convert three convertible notes totaling $50,000 in principal and $1,584 in accrued interest. The number of shares issued were within the terms of the convertible note agreement therefore no gain or loss was recorded on the conversion.

 

Also on February 14, 2012, the Board of Directors authorized the issuance of 1,282,051 shares for cash of $25,000, pursuant to the Adesso agreement described in Item 2.

 

On March 2, 2012, the Board of Directors authorized the issuance of 750,000 shares of common stock to a consultant for services performed. The shares were valued at the market price on the day of issuance, in the amount of $30,000.

 

On March 28, 2012, the Board of Directors authorized the issuance of 1,500,000 shares of common stock to a consultant for services performed. The shares were valued at the market price on the day of issuance, in the amount of $60,000.

 

During the quarter ended March 31, 2012, the Company recorded the vesting of deferred stock compensation as earned. The company recorded $151,859 in professional fees from these deferrals.

 

On June 6, 2012, the Board of Directors authorized the issuance of 2,500,000 shares of common stock to an investor relation firm for services performed. The Company recorded $87,500 in professional fees for these services. The shares were valued at the market price on the day of issuance.

 

During the quarter ended June 30, 2012, the Company recorded the vesting of deferred stock compensation as earned, in the amount of $8,700. The shares earned were valued at the closing market price on June 30, 2012.

 

During the six months ended June 30, 2012, the Company recorded imputed interest on a non-interest bearing note in the amount of $6,720, with an increase in paid in capital.

 

During the three and six months ended June 30, 2012, the Company did not issue any stock options or warrants.

 

NOTE 7 - INVESTMENTS AT COST

 

In April 2012, the Company made an investment in an LLC organized to purchase pre-IPO shares of Facebook (FB). The buy-in price was $100,000, and required a 5% initiation fee. The membership interest was then convertible into shares of Facebook six months after the IPO at a rate of 1 to 1. The Company has recorded this investment as an investment at cost due to the restricted nature, and the fact that the shares must convert to FB shares before they can be classified as marketable securities and be recorded at Fair Market Value. The 5% fee was subtracted from the original cost and the investment is recorded on the books at $95,256.

 

NOTE 8 - LEGAL ACTIONS

 

In April 2012, the Company filed suit in Los Angeles Superior Court against GeoGreen Biofuels, Inc. and related parties, relating to GeoGreen's failure to repay $192,000 advanced by TTI pursuant to a Bridge Loan Term Sheet.  In June 2012 GeoGreen filed a cross-complaint against TTI and related parties.  Although litigation is inherently unpredictable, TTI is confident in its position, and intends to vigorously pursue the action and defend the cross-complaint.   

 

NOTE 9 – SUBSEQUENT EVENTS

 

In accordance with ASC 855-10 Company management reviewed all material events through the date of this report and there are no material subsequent events to report, except as follows:

 

 

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Cautionary Statements

 

This Form 10-Q may contain "forward-looking statements," as that term is used in federal securities laws, about Tree Top Industries, Inc.'s financial condition, results of operations and business. These statements include, among others:

 

o

statements concerning the potential benefits that Tree Top Industries, Inc. ("TTI" , “Tree Top”, “we”, “our”, “us”, the “Company”, “management”) may experience from its business activities and certain transactions it contemplates or has completed; and

 

o

statements of TTI's expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts. These statements may be made expressly in this Form 10-Q. You can find many of these statements by looking for words such as "believes," "expects," "anticipates," "estimates," "opines," or similar expressions used in this Form 10-Q. These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause TTI's actual results to be materially different from any future results expressed or implied by TTI in those statements. The most important facts that could prevent TTI from achieving its stated goals include, but are not limited to, the following:

 

(a)

volatility or decline of TTI's stock price;

 

(b)

potential fluctuation of quarterly results;

 

(c)

failure of TTI to earn revenues or profits;

 

(d)

inadequate capital to continue or expand its business, and inability to raise additional capital or financing to implement its business plans;

 

(e)

failure to commercialize TTI's technology or to make sales;

 

(f)

decline in demand for TTI's products and services;

 

(g)

rapid adverse changes in markets;

 

(h)

litigation with or legal claims and allegations by outside parties against TTI, including but not limited to challenges to TTI's intellectual property rights;

 

(i)

insufficient revenues to cover operating costs;

 

(j)

failure of the BAT technology to function properly

 

 

There is no assurance that TTI will be profitable, TTI may not be able to successfully develop, manage or market its products and services, TTI may not be able to attract or retain qualified executives and technology personnel, TTI may not be able to obtain customers for its products or services, TTI's products and services may become obsolete, government regulation may hinder TTI's business, additional dilution in outstanding stock ownership may be incurred due to the issuance of more shares, warrants and stock options, or the exercise of outstanding warrants and stock options, and other risks inherent in TTI's businesses.

 

Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. TTI cautions you not to place undue reliance on the statements, which speak only as of the date of this Form 10-Q. The cautionary statements contained or referred to in this section should be considered in connection with any subsequent written or oral forward-looking statements that TTI or persons acting on its behalf may issue. TTI does not undertake any obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this Form 10-Q, or to reflect the occurrence of unanticipated events.

 

Current Overview and History

 

Tree Top Industries, Inc. (TTI”, Tree Top”, we”. our”, us”, the Company”, management”) is a Nevada corporation which has been operating under several different names since 1980.

 

Western Exploration, Inc., a Nevada corporation, was formed on July 24, 1980. In 1990, Western Exploration, Inc. changed its name to Nugget Exploration, Inc.  On November 10, 1999, a wholly owned subsidiary of Nugget Exploration, Inc., Nugget Holdings Corporation merged with and into GoHealthMD, Inc., a Delaware corporation.  Shortly thereafter, Nugget Exploration, Inc. changed its name to GoHealthMD, Inc. a Nevada corporation.

 

On August 18, 2004, GoHealthMD, Inc., the Nevada Corporation, changed its name to Tree Top Industries, Inc.  GoHealthMD, Inc. continues to exist as a Delaware corporation and wholly owned subsidiary of Tree Top Industries, Inc. MLN, Inc., BioEnergy Applied Technologies, Inc. (BAT”), Universal Energy and Services Group, Inc. Sky Entertainment, Inc., Eye Care Centers International, Inc., GoHealthMD Nano Pharmaceuticals, Inc. and TTI Strategic Acquisitions and Equity Group, Inc. are also wholly owned subsidiaries of Tree Top Industries, Inc. Several of these subsidiaries have been formed by Tree Top in the anticipation of technologies, products or services being acquired. Not all subsidiaries are currently active.

 

Effective August 12, 2009, Tree Top completed a stock exchange with BAT, BioEnergy Systems Management Inc., Wimase Limited and Energetic Systems Inc., LLC. whereby Tree Top acquired 100% of the issued and outstanding stock of BAT.   BAT is the originator of various proprietary, clean-tech, environmentally friendly technologies and intellectual properties in the areas of hazardous waste destruction, energetic materials, chemical recycling processes, and coal gasification.  BAT also maintains unique electrolytic technology that simplifies the production of bio fuels, specifically biodiesel and its byproducts.   Tree Top acquired all of the issued and outstanding shares of BAT.  Tree Top issued 3,500,000 shares of its common stock, par value $.001 per share, to the stockholders of BAT in exchange for the transfer of all of the issued and outstanding shares of common stock of BAT by such stockholders.

 

BAT was acquired to exploit its key intellectual properties, which have been applied to the construction of systems and equipment designed to facilitate the destruction of pharmaceutical, medical, biological, chemical, red bag and other hazardous wastes, with clean reusable energy produced as a byproduct.  The system utilizes cold plasma technology to initiate a chemical reaction inside the unit.  The chemical reaction causes enough heat to facilitate the waste destruction, resulting in a drastically reduced carbon footprint, as no incineration is needed.   The energy needed to start the process is the equivalent of only five light bulbs, resulting in a significantly lower cost of operation.  The unit is relatively compact, can be retrofitted into existing structures or made mobile for smaller venues, and can be scaled up to meet the hazardous waste destruction needs of almost any user.  Tree Top is actively engaged in developing a business platform to showcase the BAT technologies, and will spend the majority of its resources in support of this opportunity.

 

The Company also owns NetThruster, Inc., a Nevada corporation (NetThruster”), which was formally known as Ludicrous, Inc. (Ludicrous”).  On January 28, 2011, the Board of Directors of Tree Top adopted resolutions approving the disposition by the Company of all of the common stock of its wholly-owned subsidiary, NetThruster, Inc., a Delaware corporation (NetThruster”), in a spin-off to Tree Top’s shareholders on a pro rata basis (the Spin-Off”).  Thereafter, NetThruster would be owned by Tree Top’s shareholders. David Reichman, the CEO of Tree Top was named Chairman of the Board, CEO and CFO of NetThruster.  Kathy M. Griffin was named a Director and corporate secretary. The Board of Directors of NetThruster is comprised of David Reichman and Kathy Griffin. Pursuant to a subsequent Board of Directors meeting,  it was approved that the Company will indefinitely postpone the spin-out of Net Thruster.

 

 

On April 18, 2011, Tree Top signed a non-binding term sheet agreement with Sky Corporation, doo, a Belgrade, Serbia based event production and management company. Sky Corporation is a distributor of professional musical equipment across the Adriatic region, and is the largest retailer of musical instruments and equipment in Serbia. Sky Corporation is a distributor for over 80 brands in the fields of music and light equipment. Sky Solutions doo, a division of Sky Corporation, is one of the largest production companies in Eastern Europe. Adriatic Region Distribution doo, a division of Sky Corporation, is a regional distribution company for musical and sound/light equipment. Sky Music, doo is another division of Sky Corporation. Sky Music, doo’s main activity is selling professional audio and light equipment, as well as installing it in discothèques, clubs, public institutions, venues, and concert halls. Sky Corporation’s growth plan calls for double digit growth over the next three years and a planned expansion into the rest of Eastern Europe and eventually to Western Europe. The term agreement expired on July 18, 2011, but Tree Top and Sky Corporation signed an extension to the Letter of Intent on November 15, 2011. The extension has expired.

  

On May 25, 2011, Tree Top signed a two year licensing agreement with WorldWithoutBlindness (WWB”) for the right to market and sell their patented eye screening equipment on a global basis outside the United States, for a period of two years. Eye Care Centers International, Inc . was formed to support the further growth and development of (WWB”), an organization whose primary mission is to bring patented eye screening equipment to the developing world. The WWB technology uses objective parameters instead of traditional subjective eye chart examinations, to screen children as young as six months old. The screening can accurately indicate predisposition for glaucoma and other eye diseases which can lead to blindness, as well as a host of other possible diseases, completely unrelated to eyesight. Tree Top’s management, upon approval by the board of directors, made a trip to Canar, Ecuador, among other cities, to observe how how the test markets would be set up.

 

On October 12, 2011, Tree Top signed a binding term sheet agreement with Adesso Biosciences, Ltd. to acquire 93% of the outstanding stock of Adesso Diagnostics, LLC and 47.5% of the outstanding stock of Adeda Therapeutics, Ltd., both subsidiaries of Adesso Biosciences Ltd. Adesso Diagnostics is the holder of an exclusive license with Columbia University for two patents in the fields of molecular science and nanoscience. Adeda Therapeutics is involved in the development of a novel sinus medication system. Tree Top and Adesso Biosciences are presently engaged in the mutual due diligence phase of the acquisition, with an expected close during the third quarter of 2012.

 

 

Critical Accounting Policies

 

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements 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. We monitor our estimates on an on-going basis for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate.

 

Certain of our accounting policies are particularly important to the portrayal and understanding of our financial position and results of operations and require us to apply significant judgment in their application. As a result, these policies are subject to an inherent degree of uncertainty. In applying these policies, we use our judgment in making certain assumption and estimates. Our critical accounting policies are described in our Annual Report on Form 10-K for the year ended December 31, 2011. There have been no material changes to our critical accounting policies as of June 30, 2012 and for the six months then ended.

 

Results of Operations for the Three Months Ended June 30, 2012 Compared to Three Months Ended June 30, 2011

 

We had no revenues in the three months ended June 30, 2012 and 2011. Our operating expenses increased from $279,634 to $311,006 during these periods.  The increase is primarily due to the increase in compensation and professional fees recorded from the market value of shares issued to consultants to the Company.    Our net loss was $(359,284) in the three months ended June 30, 2012 as compared to a net loss of $(343,488) in the same period of 2011. The decrease in interest expense of $15,576 for the three months ended June 30, 2012 as compared to June 30, 2011, was due to the decreased amount of accretion of the note discounts created by beneficial conversion features on convertible debt issued in March of 2011 versus April 2012.

 

Results of Operations for the Six Months Ended June 30, 2012 Compared to Six Months Ended June 30, 2011

 

We had no revenues in the six months ended June 30, 2012 and 2011. Our operating expenses increased from $661,952 to $845,001 during these periods.  The increase is primarily due to the increase in compensation and professional fees recorded from the market value of shares issued to consultants to the Company.    Our net loss was $(908,755) in the six months ended June 30, 2012 as compared to a net loss of $(753,629) in the same period of 2011. The decrease in interest expense of $27,923 for the six months ended June 30, 2012 as compared to June 30, 2011, was due to the decrease in accretion of the note discounts created by beneficial conversion features on convertible debt issued in March of 2011 versus April 2012.

 

 

Liquidity and Capital Resources

 

The Company's cash position was $93 at June 30, 2012 compared to $517 at December 31, 2011. As of June 30, 2012, the Company had current assets of $93 and current liabilities of $5,050,864 compared to $517 and $4,645,022 respectively as of December 31, 2011.  This resulted in a working capital deficit of $5,050,771 at June 30, 2012 and $4,644,505 at December 31, 2011.

 

Net cash used in operating activities amounted to $89,594 for the six month period ended June 30, 2012, as compared to $152,810 of net cash used in operations for the six month period ended June 30, 2011.  Net cash used in operating activities decreased by $63,216.

 

Net cash used in investing activities amounted to $95,256 and $0 for the six months ended June 30, 2012 and 2011, respectively. The Company purchased a restricted membership interest in an LLC for $95,256 after fees. The membership interest will convert to free trading common stock of Facebook after six months.

 

Net cash provided by financing activities amounted to $184,426 and $150,414 for the six months ended June 30, 2012 and 2011, respectively. The increase from 2011 to 2012 resulted primarily from the increase in cash received from notes payable and common stock, with a decrease in related party loans.

 

The Company does not have sufficient capital to meet its current cash needs, which include the costs of compliance with the continuing reporting requirements of the Securities Exchange Act of 1934, as amended.  The Company intends to seek additional capital and long-term debt financing to attempt to overcome its working capital deficit.  The Company will need between $150,000 and $200,000 annually to maintain its reporting obligations.  Financing options may be available to the Company either via a private placement or through the public sale of stock.  The Company will seek to raise sufficient capital to market the BAT technology and to sustain monthly operations.  There is no assurance, however, that the available funds will be available or adequate.  Its need for additional financing is likely to persist.

 

Going Concern Qualification

 

The Company has incurred significant losses from operations, and such losses are expected to continue.  The Company's auditors have included a "Going Concern Qualification" in their report for the year ended December 31, 2011. In addition, the Company has limited working capital.  The foregoing raises substantial doubt about the Company's ability to continue as a going concern. Management's plans include seeking additional capital and/or debt financing. There is no guarantee that additional capital and/or debt financing will be available when and to the extent required, or that if available, it will be on terms acceptable to the Company.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.  The "Going Concern Qualification" may make it substantially more difficult to raise capital.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

 

Not Applicable.

 

Item 4.     Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information we are required to disclose is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Commission.  David Reichman, our Chief Executive Officer and our Principal Accounting Officer, is responsible for establishing and maintaining our disclosure controls and procedures.

 

Under the supervision and with the participation of our management, including the Chief Executive Officer and Principal Accounting Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report.  Based on that evaluation, the Chief Executive Officer and Principal Accounting Officer has concluded that, as of June 30, 2012 these disclosure controls and procedures were ineffective to ensure that all information required to  be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rule and forms; and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Principal Accounting Officer, as appropriate to allow timely decisions regarding required disclosure. The Company’s controls are not effective due to a lack of the segregation of duties. The Company lacks the appropriate personnel to handle all the varying recording and reporting tasks on a timely basis.   The Company plans to address these material weaknesses as resources become available by hiring additional professional staff, such as a Chief Financial Officer, as funding becomes available, outsourcing certain aspects of the recording and reporting functions, and separating responsibilities. The Company believes that it would require approximately $250,000 per year in available funds in order to retain the qualified personnel required for effective disclosure controls and procedures.

 

  

The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the registrant’s principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant’s board of directors, management and other personnel, 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 and includes those policies and procedures that:

 

¨

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;

 

¨

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and

 

¨

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant’s assets that could have a material effect on the financial statements.

 

Changes in Internal Controls over Financial Reporting

 

There were no additional changes in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2012 that has materially affected, or is reasonably likely to materially affect, our  internal control over financial reporting.

 

Inherent Limitations over Internal Controls

 

TTI’s management does not expect that its disclosure controls or its internal control over financial reporting will prevent or detect all error and all fraud.  A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within TTI have been detected.  These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or management override of the controls.  The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks.  Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

 

Our disclosure controls and procedures are designed to provide reasonable assurance of that our reports will be accurate. Our Chief Executive Officer and Principal Accounting Officer concludes that our disclosure controls and procedures were ineffective at that reasonable assurance level, as of the end of the period covered by this Form 10-Q.  Our future reports shall also indicate that our disclosure controls and procedures are designed for this reason and shall indicate the related conclusion by the Chief Executive Officer and Principal Accounting Officer as to their effectiveness.

 

PART II    OTHER INFORMATION

 

Item 1.      Legal Proceedings

 

In April 2012, the Company filed suit in Los Angeles Superior Court against GeoGreen Biofuels, Inc. and related parties, relating to GeoGreen's failure to repay $192,000 advanced by TTI pursuant to a Bridge Loan Term Sheet.  In June 2012 GeoGreen filed a cross-complaint against TTI and related parties.  Although litigation is inherently unpredictable, TTI is confident in its position, and intends to vigorously pursue the action and defend the cross-complaint.   

 

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

 

The following shares of common stock were issued during the six months ended June 30, 2012 without registration:

 

On February 14, 2012, the Board of Directors authorized the issuance of 1,282,051 shares for cash of $25,000, pursuant to the Adesso agreement described in Item 2.

 

Item 3.     Defaults Upon Senior Securities

.

The Company has the following note payable obligations in default:

 

Note payable to RA Beeso due June 27, 2010, with interest accrued at 9% per annum, unsecured , unpaid to date and

 

In default			292,860
Note payable to Facts and Comparisons due September 1, 2002, with interest accrued at 6% per annum, unsecured, in settlement of a trade payable; unpaid to date and in default			18,000
Note payable to Luckysurf.com due September 12, 2002 with interest accrued at 6% per annum, unsecured, in settlement of a trade payable; unpaid to date and in default			30,000
Note payable to Michael Marks (a shareholder) due August 31, 2000 with interest accrued at 5% per annum, unsecured; unpaid to date and in default			25,000
Note payable to Steven Goldberg (a former consultant) due July 10, 2002, unsecured with interest of 7% accrued if unpaid at due date, in settlement of liability; unpaid to date and in default			40,000
Totals		$	405,860

 

None of these notes have been paid, and management has indicated that no demand for payment for any of these notes has been received by the Company. However, the Company received a notice of motion from Luckysurf.com dated October 22, 2002, seeking entry of a judgment for $30,000. No further information or action has been received by the Company relating to this note.

 

Item 5.     Other Information

 

Not Applicable

 

Item 6.     Exhibits

 

(a)           Exhibits

 

EXHIBIT NO.		DESCRIPTION
3.1		Articles of incorporation of Tree Top Industries, as amended (1)
3.2		By-Laws (2)
10.1		Employment Agreement, dated October 1,2007, by and between Tree Top Industries, Inc. and David Reichman (3)
10.2		Employment Agreement, dated April 1, 2009, by and between Tree Top Industries Inc. and Kathy Griffin (4)
10.3		Bridge Loan Term Sheet, dated January 11, 2010, by and between Tree Top Industries, Inc. and GeoGreen Biofuels, Inc.(5)
10.4		Business and Financial Consulting Agreement, dated February 22, 2010 by and between Tree Top Industries, Inc. and Asia Pacific Capital Corporation(6)
10.5		Distribution Agreement, by and between Tree Top Industries, Inc. and NetThruster, Inc., dated February 9, 2011(7)
10.6		Term Agreement by and between Tree Top Industries, Inc. and Sky Corporation, doo, dated April 18, 2011 (8)
10.7		Term Agreement by and between Tree Top Industries, Inc. and Adesso Biosciences, Ltd, dated October 12, 2011(9)
21.1		Subsidiaries of the registrant.

 

-1

Filed November 13, 2009, as an exhibit to a Form 10-Q and incorporated herein by reference.

 

-2

Filed July 19, 2010, as an exhibit to a Form 10-K/A and incorporated herein by reference.

 

-3

Filed November 7, 2007, as an exhibit to a Form 8-K and incorporated herein by reference.

 

-4

Filed March 25, 2010, as an exhibit to a Form 8-K and incorporated herein by reference.

 

-5

Filed January 19, 2010, as an exhibit to a Form 8-K and incorporated herein by reference.

 

-6

Filed July 19, 2010, as an exhibit to a Form 10-Q/A and incorporated herein by reference.

 

-7

Filed February 9, 2011, as an exhibit to a Form 8-K and incorporated herein by reference.

 

-8

Filed April 19, 2011, as an exhibit to a Form  8 - K and incorporated herein by reference.

 

-9

Filed October 18, 2011 as an exhibit to a Form 8 - K and incorporated herein by reference.

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated:  August 14, 2012	TREE TOP INDUSTRIES, INC.
	By:	/s/ David Reichman
		David Reichman, Chairman of the Board, Chief
		Executive Officer, Chief Financial Officer and
		Principal Accounting Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:	/s/ David Reichman		Dated: August 14, 2012
	David Reichman, Chairman of the Board, Chief
	Executive Officer, Chief Financial Officer
	and Principal Accounting Officer
By:	/s/ Kathy M. Griffin		Dated: August 14, 2012
	Kathy M. Griffin, Director, President
By:	/s/ Frank Benintendo		Dated: August 14, 2012
	Frank Benintendo, Director & Secretary
By:	/s/ Donald Gilbert, Phd.		Dated: August 14, 2012
	Donald Gilbert, Director & Treasurer
By:	/s/ Robert Hantman		Dated: August 14, 2012
	Robert Hantman, Director