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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

 

 

 

 

x

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

 

For the quarterly period ended June 30, 2013

or

 

 

 

 

o

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

 

For the transition period from __________________ to __________________________

 

Commission file number: 000-54395

 

GREEN ENVIROTECH HOLDINGS CORP.

(Exact name of registrant as specified in its charter)

 

 

 

DELAWARE

 

32-0218005

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

210 S. Sierra Ave Suite A

Oakdale, CA

 

95361

(Address of principal executive offices)

 

(Zip Code)

 

(209) 848-4384

(Registrant's telephone number, including area code)

 

N/A

(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.  Yesx  Noo

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yesx  Noo

 

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 the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

 

 

 

 

Large accelerated filero

 

Accelerated filer o

Non-accelerated filero

(Do not check if smaller reporting company)

 

 

Smaller reporting companyx

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)   Yeso Nox

 

Indicated the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date; 3,801,211 shares of common stock are issued and outstanding as of July 29, 2013.

 

i

 

TABLE OF CONTENTS

 

 

 

 

 

 

Page

 No. 

PART I. - FINANCIAL INFORMATION

Item 1.

Financial Statements.

1

 

Condensed Consolidated Balance Sheets as of June 30, 2013(Unaudited) and December 31, 2012

 

2

 

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2013 and 2012(Unaudited)

 

3

 

Condensed Consolidated Statements of Cash Flows for the Six months ended June 30, 2013 and 2012 (Unaudited)

 

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

7

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

13

Item 4T

Controls and Procedures.

13

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings.

14

Item 1A.

Risk Factors.

14

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

14

Item 3.

Defaults Upon Senior Securities.

14

Item 4.

Mine Safety Disclosures.

14

Item 5.

Other Information.

14

Item 6.

Exhibits.

15

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

  

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

 

-1-

 

 

 

PART 1. - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

GREEN ENVIROTECH HOLDINGS CORP.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED BALANCE SHEETS

     
 

JUNE 30,

DECEMBER 31,

 

2013

2012

ASSETS

 
     

CURRENT ASSETS

   Cash

 $                       18,179

 $                       1,986

   Other current assets

                          10,119

                          4,784

                                                    Total current assets

                          28,298

                          6,770

 

Fixed Assets

  Plant Equipment, not yet placed in service

                        133,012

                      125,000

 

Other Assets

  Investment-Petrosonics Joint Venture

                        268,000

                                 -

 

   

 

TOTAL ASSETS

 $                     429,310

 $                   131,770

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

CURRENT LIABILITIES

   Accounts payable

 $                     895,369

 $                   749,144

   Accounts payable- related party

                               262

                          4,975

   Accrued expenses

                     2,925,714

                   2,513,872

   Secured debentures payable

                        305,000

                      305,000

   Loan payable - other, net of discount of $32,144

                        939,206

                      840,750

   Loan payable - related party

                          29,287

                        44,187

                                                    Total current liabilities

                     5,094,838

                   4,457,928

 

TOTAL LIABILITIES

                     5,094,838

                   4,457,928

 

STOCKHOLDERS' EQUITY (DEFICIT)

   Preferred stock, $0.001 par value, 25,000,000 shares authorized,

      0 shares issued and outstanding

                                  -   

                               -   

   Common stock, $0.001 par value, 250,000,000 shares authorized,

      3,801,211 and  2,499,585 shares issued and outstanding

                            3,801

                          2,500

   Additional paid in capital

                          9,113,810

                     6,130,525

   Deficit accumulated during development stage

             (13,783,139)

                  (10,459,183)

                                                    Total stockholders' equity (deficit)

                  (4,665,528)

                     (4,326,158)

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 $                     429,310

 $                   131,770

 

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


-2-


GREEN ENVIROTECH HOLDINGS CORP.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

AND FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012 AND

FOR THE PERIOD OCTOBER 6, 2008 (INCEPTION) THROUGH JUNE 30, 2013

    
        

OCTOBER 6, 2008

        

(INCEPTION)

  

SIX MONTHS

SIX MONTHS

 

THREE MONTHS

THREE MONTHS

 

THROUGH

  

JUNE 30, 2013

JUNE 30, 2012

 

JUNE 30, 2013

JUNE 30, 2012

 

JUNE 30, 2013

         

REVENUE

 $                                 -

 $                                 -

 $                                   -

 $                                 -

 $                           1,950

  

COST OF REVENUES

                                    -

                                    -

 

                                      -

                                    -

                            33,633

  

GROSS PROFIT

                                    -

                                    -

 

                                      -

                                    -

                           (31,683)

  

OPERATING EXPENSES

    Wages and professional fees

                          725,309

                          608,978

                             374,885

                          293,000

                       8,226,759

    Impairment expense

                                    -

                                    -

                                      -

                                    -

                          118,783

    Bad debt expense

                                    -

                                    -

                                      -

                                    -

                          261,890

    General and administrative

                          789,957

                            95,417

 

                             504,832

                            40,761

                       1,599,634

 

Total operating expenses

                       1,515,266

                          704,395

 

                             879,717

                          333,761

                     10,207,066

  

NON-OPERATING EXPENSES/INCOME

    Amortization expense-debt discount

                            32,152

                                    -

                               32,152

                                    -

                          155,272

    Interest expense

                            56,548

                            64,046

                               29,593

                            31,240

                          373,713

    Interest expense-penalty

                                    -

                                    - 

                                      -

                                    -

                            67,750

    Interest expense-Equity Issues

                                    -

                           (56,879)

                                      -

                              1,134

                          254,337

    Loss on debt conversion

                       1,719,990

                          266,500

                          1,719,990

                                    -

                       2,310,236

 

Total non-operating expenses

                       1,808,690

                          273,667

 

                          1,781,735

                            32,374

                       3,161,308

  
  

NET (LOSS) FROM OPERATIONS

                      (3,323,956)

                         (978,062)

 

                        (2,661,452)

                         (366,135)

                    (13,400,057)

  

OTHER INCOME:

    Disposition of Riverbank Permits

                                    -

                                    -

 

 

                                    -

                          250,000

  

DISCONTINUED OPERATIONS:

    Loss on disposal of discontined operations

                                      -

                                      -

                                        -

                                      -

                         (429,066)

    Income from discontined operations

                                      -

                                      -

                                        -

                                      -

                            24,186

 

Total loss from discontinued operations

                                      -

                                      -

 

                                        -

                                      -

(404,880)

  

NET (LOSS)

 $                   (3,323,956)

 $                     (978,062)

 

 $                     (2,661,452)

 $                     (366,135)

$            (13,554,937)

  

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

                       2,569,886

                       1,792,959

 

                          2,749,085

                          937,408

 n/a

  

NET (LOSS) PER SHARE

 $                            (1.29)

 $                           (0.55)

 

 $                              (0.97)

 $                           (0.39)

 n/a

 

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

 

-3-


GREEN ENVIROTECH HOLDINGS CORP.

(A DEVELOPMENT STAGE COMPANY)

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012

FOR THE PERIOD OCTOBER 6, 2008 (INCEPTION) THROUGH JUNE 30, 2013

  
    

OCTOBER 6, 2008

    

(INCEPTION)

  

SIX MONTHS ENDED

SIX MONTHS ENDED

THROUGH

  

JUNE 30, 2013

JUNE 30, 2012

JUNE 30, 2013

CASH FLOWS FROM OPERATING ACTIVITIES:

    

   Net (loss)

 

 $                           (3,323,956)

 $                              (978,062)

 $         (13,554,937)

  
  

  

Adjustments to reconcile net (loss)

 

  

  

  to net cash used in operating activities:

 

     Common stock issued for services, net of cancelations, including shares issued

 

                                  595,300

                                    66,700

               3,320,149

        for loss on disposal of discontinued operations ($104,880)

 

     Common stock issued for services, related party

 

                                    61,500

                                            -

                    61,500

     Common stock issued to reduce and extend debt

 

                                            -

                                  296,500

336,050

     Loss on debt conversion

 

                               1,719,990

                                            -

2,167,436

     Amortization of debt discount

 

                                    32,152

                                            -

155,272

     Impairment expense

 

                                            -

                                            -

                  118,783

     Bad debt expense

 

                                            -

                  261,890

     Warrants issued as loan fees to brokers

 

                                            -

                                      2,999

                    33,320

     Warrants issued to officers

 

                                            -

                                            -

                  234,357

    Gain/loss on derivative liability

 

                                              -

                                   (89,878)

                            -

    Loss on disposal of discontinued operations

 

                                              -

                                            -

                  429,066

    Income from discontinued operations

 

                                              -

                                            -

                   (24,186)

  

Change in assets and liabilities

 

    (Increase) in deposits and other current assets

 

                                     (5,335)

                                    70,216

                 (272,009)

    Increase in accounts payable- related party

 

                                     (4,713)

                                            -

                         262

    Increase in accounts payable and accrued expenses

 

                                  583,067

                                  422,426

               4,088,195

          Net cash (used in) operating activities

 

                                 (341,995)

                                 (209,099)

              (2,644,852)

  
  

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

   Cash paid for the acquisition of Magic Bright

 

                                              -

                                              -

                 (300,000)

   Expenditures related to purchase of equipment for Riverbank Plant

 

                                              -

                                              -

                 (125,000)

   Expenditures related to construction of building

 

                                     (8,012)

                                              -

                 (126,795)

   Invesment- Petrosonics joint venture

 

                                   (43,000)

                                              -

                   (43,000)

          Net cash (used in) investing activities

 

                                   (51,012)

                                              -

                 (594,795)

  

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

   Issuance of stock for cash

 

                                    63,000

                                  150,000

                  293,000

   Proceeds received from loan payable - related party

 

                                      2,000

                                      2,100

               1,240,956

   Payments on loan payable - related party

 

                                   (11,400)

                                   (35,910)

                 (251,792)

   Proceeds received from loan payable - other

 

                                  355,600

                                    89,000

2,172,662

   Payments on loan payable - other

 

                                            -

                                            -

                 (382,500)

   Proceeds received from loan payable - convertible

 

                                            -

                                            -

135,500

   Payments on loan payable - convertible

 

                                            -

                                            -

                              -

   Proceeds received from secured debentures

 

                                            -

                                            -

                    50,000

   Payments on secured debentures

 

                                   (75,000)

          Net cash provided by financing activities

 

                                  409,200

                                  130,190

               3,257,826

  
  

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

                                    16,193

                                   (78,909)

                    18,179

 

 

 

 

 

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD

 

                                      1,986

                                  112,103

                            -

 

 

 

 

 

CASH AND CASH EQUIVALENTS - END OF PERIOD

 

 $                                 18,179

 $                                 33,194

 $                 18,179

  

SUPPLEMENTAL CASH FLOW INFORMATION:

 

  Cash paid during the period for:

 

     Interest

 

 $                                 25,043

 $                                32,806

 $               240,204

  

NON-CASH SUPPLEMENTAL INFORMATION:

 

  Shares issued for accrued salary

 

 $                                 82,000

 $                                         -

 $               322,000

  Debt discount

 

 $                                 64,296

 $                 64,296

  Conversion of loans payable for common stock

 

 $                               355,500

$                             192,000

 $            2,089,538

  Shares issued for accounts payable

 

 $                                 20,000

 $                                         -

 $                 20,000

  Accounts payable and debt issued for investment in Petrosonics joint venture

 

 $                               225,000

 $                                         -

 $               225,000

  

 

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


-4-


GREEN ENVIROTECH HOLDINGS CORP.

 (A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1

Basis of Presentation:

 

The Financial Statements presented herein have been prepared by us in accordance with the accounting policies described in our December 31, 2012 and 2011 audited financial statements included in Form 10-K and should be read in conjunction with the Notes to Financial Statements which appear in that report.

 

The preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on going basis, we evaluate our estimates, including those related intangible assets, income taxes, insurance obligations and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results may differ from these estimates under different assumptions or conditions.

 

In the opinion of management, the information furnished in these interim financial statements reflect all adjustments necessary for a fair statement of the financial position and results of operations and cash flows as of and for the six-months period ended June 30, 2013 and 2012. All such adjustments are of a normal recurring nature. The financial statements do not include some information and notes necessary to conform with annual reporting requirements.

Note 2

Going Concern

 

These 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. The Company has a working capital deficit of $5,066,540 and has accumulated deficit of $13,783,139 as of June 30, 2013. Further losses are anticipated in the development of its business raising substantial doubt about the Company’s 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 arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with loans and/or private placement of common stock. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

Note 3

Investments

 

On May 27, 2013, the Company entered into a joint venture agreement a joint venture agreement with Petrosonics, LLC.  Pursuant to the Joint Venture Agreement, the parties agreed to effectuate the formation of an Irish registered company to be named Green Power Oil, LTD for the purpose of researching, development, manufacture and commercialization of oil-industry corroborated processes that remove sulfur from crude oil and refined fuels on a worldwide basis. The Company agreed to make a capital contribution of $14,000,000 (including $2,000,000 which the Company agreed to contribute within 30 days of execution of the Joint Venture Agreement, and an additional $12,000,000 which the Company agreed to contribute within 180 days of execution of the Joint Venture Agreement) to the Joint Venture Company for a 51% interest. Petrosonics, LLC agreed to contribute certain intellectual property to the Joint Venture Company for a 49% interest.  

 

On June 26, 2013, the Company entered into a letter agreement with Petrosonics, LLC which amended the terms of the funding schedule under the joint venture agreement between the parties, such that the $2,000,000 which the Company agreed to contribute within 30 days of execution of the Joint Venture Agreement will be due within 45 days of June 26, 2013.  As of June 30, 2013, the Company has invested into this agreement $268,000.  The parties are in negotiations to restructure the balance of the obligation using a class of the Company’s preferred shares.

 

 

-5-

 

 

On June 4, the Company received approval on Articles of Organization for Green EnviroTech CA1, LLC.  This new joint venture will be the operating entity for the anticipated new plant to be built in California.   

 

The Company dissolved its subsidiary Green EnviroTech Gilroy, Inc. on June 4, 2013 to make way for the new joint venture.

Note 4

Loan Payable – Related Party

 

The Company has 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.  This loan has been extended to December 31, 2013.  Balance of the loan at June 30, 2013 was $29,287 with accrued interest in the amount of $29,981.  

Note 5

Loan Payable – Other

 

The Company has unsecured loans with H. E. Capital, S. A. in various amounts.  These loans accrue interest at the rate of 8% per annum.  The due dates of the loans have been extended to December 31, 2013.  Balance of the loans at June 30, 2013 was $643,850 with accrued interest in the amount of $115,688.  A schedule of the H. E. Capital loans is as follows:


      
     

June 30, 2013

      
      

Beginning Balance

 $663,250 

   Additions

 330,600 

   Assignments

 - 

   Non-cash conversions

 (350,000)

      

Ending Balance

 $643,850 

 

The Company issued three promissory notes in the amount of $50,000 each at 8% on March 19, 2013 to three private investors. These three notes are due on March 18, 2014. The Company used the proceeds from these notes for working capital.   As of June 30, 2013 these loans have an outstanding balance of $150,000 and accrued interest in the amount of $3,419. The Company also has two notes outstanding for $7,500 and $170,000, respectively. The total in loans payable as of June 30, 2013 was $971,350.

 

-6-

 

The Company issued 60,000 common shares to debt holders in consideration for the proceeds provided. These shares were valued at $64,296 and a discount of $64,296 was recorded on the $150,000 in proceeds received from the third parties. As of June 30, 2013, $32,152 of the discount was amortized.

 

Note 6

Equity

 

The Company issued a total of 1,301,626 common shares during the 2nd quarter ended June 30, 2013.   

 

Effective March 27, 2013, the Company completed a 1 for 100 reverse split of its common stock.  Share amounts in this report have been retroactively adjusted for the reverse split.

 

On June 3, 2013, the Company issued a Private Placement Memorandum to raise $600,000 at $1.00 per share for the purpose of working capital for the Company.  The PPM was extended and will expire on August 17, 2013. The Company sold 63,000 shares for total proceeds of $63,000 in the six months ended June 30, 2013.

 

The Company issued 750,000 unrestricted common shares to H. E. Capital, S.A. for converting $350,000 of its notes and $25,000 of its accrued interest which it was holding as obligations of the Company. A loss of $1,717,490 was recorded on the conversion of debt because the fair value of the shares issued exceeded the value of the debt.  The Company also issued 14,103 restricted common shares to settle third party debt of $5,500.

 

The Company issued 40,000 restricted common shares to employees of the Company for converting $80,000 of accrued salary.  A loss of $2,000 was recorded on the conversion of related party debt because the fair value of the shares issued exceeded the value of the debt.

 

The Company issued 124,750 restricted common shares valued at $237,025 to an advisor and consultant for public relations and relation with financial professionals.  The Company issued an additional 25,000 restricted common shares valued at $51,250 to the same consultant for an anti-dilution clause in the agreement which gives the consultant 4.99% of the outstanding common shares of the Company.  All of the shares issued to this consultant were valued at $288,275.

 

The Company issued to other consultants 184,750 restricted common shares valued at $307,025 for services.   Pursuant to an agreement with one of the consultants, the Company is obligated to issue a total of 40,000 shares over a period of sixteen months.

 

The Company issued to related parties as a bonus 30,000 restricted common shares valued at $61,500.

 

The Company issued 10,000 common shares valued at $20,000 to a third party to settle payables for legal services.

Note 7

Subsequent Events:

 

On July 23, 2013, the Company entered into a two year agreement with a consultant to provide website and social media services in exchange for 200,000 shares of restricted common stock of the Company.



-7-

 

 

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

 

              Green EnviroTech Holdings Corp. (the “Company”), formerly known as Wolfe Creek Mining, Inc., was incorporated in the State of Delaware on June 26, 2007. On November 20, 2009, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Green EnviroTech Acquisition Corp., a Nevada corporation, and Green EnviroTech Corp. (“Green EnviroTech”), a plastics recovery, separation, cleaning, and recycling company. Green EnviroTech is a Nevada corporation formed on October 6, 2008 under the name EnviroPlastics Corporation. On October 21, 2009, Enviroplastics Corporation changed its name to Green EnviroTech Corp. and on July 20, 2010, the Company changed its name to Green EnviroTech Holdings Corp.

 

Pursuant to the Merger Agreement, on November 20, 2009 (the “Closing Date”), Green EnviroTech Acquisition Corp. merged with and into Green EnviroTech, resulting in Green EnviroTech becoming a wholly-owned subsidiary of the Company (the “Merger”). As a result of the consummation of the Merger Agreement, the Company issued approximately 450,000 shares of its common stock to the shareholders of Green EnviroTech, representing approximately 45% of the issued and outstanding common stock of the Company following the closing of the Merger. Further, the outstanding shares of common stock of Green EnviroTech were cancelled. The acquisition of Green EnviroTech is treated as a reverse acquisition, and the business of Green EnviroTech became the business of the Company. Immediately prior to the reverse acquisition, Wolfe Creek was not engaged in any active business.

 

Recent Developments

 

Effective March 27, 2013, the Company completed a 1 for 100 reverse split of its common stock.  Share amounts in this report have been retroactively adjusted for the reverse split.

 

On June 26, 2013, the Company entered into a letter agreement with Petrosonics, LLC which amended the terms of the funding schedule under the joint venture agreement between the parties, such that the $2,000,000 which the Company agreed to contribute within 30 days of execution of the Joint Venture Agreement will be due within 45 days of June 26, 2013.  As of June 30, 2013, the Company has invested into this agreement $268,000.  The parties are in negotiations to restructure the balance of the obligation using a class of the Company’s preferred shares.

 

Overview of Our Business

 

Green EnviroTech Holdings Corp. is a development-stage technology company that has developed a patent pending oil conversion process utilizing a mixture of plastic and tires. The "GETH Process" revolutionizes the disposal of plastic waste and tires and cleans up our landfills by producing a high grade of oil.

 

The Company has determined its capital needs will be $16 Million to execute phase-one of three phases of its business model.  There is no assurance such funding will be available on terms acceptable to the Company, or at all. Phase-one involves construction of the plant and the purchase and installation of three GETH process systems which will enable the Company to become operational with projected profits.  Phase-two will start within two months after the completion of phase-one.  Phase-two involves the installation of three more systems at a cost of $5 Million.  Phase three will be started three months after the completion of phase-two.  Phase-three involves the installation of six more systems at a cost of $10 Million.   Other phases will be continued as determined by the availability of feed stock.  The Company is in negotiations with a New York lending institution for a $12 Million loan with a lien against the plant and equipment. The Company has applied for Permits needed to operate and construct the plant and the Company does not anticipate any complications with its applications.  The plant’s operating systems are considered a closed system with zero emissions.  The estimated time to close funding is 60 days with an estimated seven months to complete construction and outfit the plant.


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Critical Accounting Policy and Estimates

 

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources.

 

The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements for the year ended December 31, 2012, together with notes thereto as previously filed with our Annual Report on Form 10-K.  In addition, these accounting policies are described at relevant sections in this discussion and analysis and in the notes to the financial statements included in our Quarterly Reports on Form 10-Q for prior quarter filings.

 

Results of Operations

 

Six Months Ended June 30, 2013 compared to Six Months Ended June 30, 2012.

 

Revenues

 

The Company had no operating revenues for the six months ended June 30, 2013 and for the six months ended June 30, 2012.  

 

Cost of Revenues

 

The Company had no cost of revenue for the six months ended June 30, 2013 and for the six months ended June 30, 2013.  

 

Operating Expenses

 

The wages and professional fees for the six months ended June 30, 2013 were $725,309 as compared to $608,978 for the six months ended June 30, 2012. The wages and professional fees for the six months ended June 30, 2013 included $227,551 in professional fees and $497,758 in wages.  

 

The general and administrative expenses for the six months ended June 30, 2013 were $789,957 as compared to $95,417 for the six months ended June 30, 2012, an increase of approximately 728%. This increase of $694,540 was the result of an increase in stock compensation for consultants, travel, entertainment, advertising and marketing concerning the promotion of the company.

 

Non-Operating Expenses

 

The non operating expenses for the six months ended June 30, 2013 were $1,808,690 as compared to $273,667 for the six months ended June 30, 2012. There was an amortization expense for the discounted value of the new $150,000 in notes in the amount of $32,152 relating to the 60,000 shares of common stock issued with the notes for the 2013 period.  There was no interest expense-penalty and there were no interest expense-equity issues for the 2013 period.  There was a loss of $1,719,990 in debt conversion for the six months ended June 30, 2013. There was no amortization of debt discount and no interest expense-penalty for the six months ended June 30, 2012.  The interest expense on the working capital notes was $56,548 for the six months ended June 30, 2013 as compared to $64,046 in interest expense for the six months ended June 30, 2012.  The overall increase in non-operating expense was $1,535,023.  This was the result of the Company recording a loss of $1,719,990 on debt conversion when the Company issued shares of common stock to pay off $350,000 in notes held by H.E. Capital and $25,000 in its accrued interest.  The Company using the Black-Sholes calculation to figure the Derivative Liability on convertible notes issued to Asher Enterprises, Inc. for the six months ended June 30, 2012, calculated a Derivative Liability in the amount of $61,860; this resulted in the Company recording a credit in the amount of $56,879 against the interest expense related to equity issues when adjusting the Derivative Liability on these convertible notes for the six months ended June 30, 2012.  

 

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Three Months Ended June 30, 2013 compared to Three Months Ended June 30, 2012.

 

Revenues

 

The Company had no operating revenues for the three months ended June 30, 2013 and 2012.

 

Cost of Revenues

 

 The Company had no cost of revenues for the three months ended June 30, 2013 and 2012.

 

Operating Expenses

 

The wages and professional fees for the three months ended June 30, 2013 were $374,885 as compared to $293,000 for the three months ended June 30, 2012. The wages and professional fees for the three months ended June 30, 2013 included $124,628 in professional fees and $250,257 in wages.  

 

The general and administrative expenses for the three months ended June 30, 2013 were $504,832 as compared to $40,761 for the three months ended June 30, 2012, an increase of approximately 1,138%. This increase of $464,071 was the result of an increase in stock compensation for consultants, travel, entertainment, advertising and marketing concerning the promotion of the company.

 

Non-Operating Expenses

 

The non operating expenses for the three months ended June 30, 2013 were $1,781,735 as compared to $32,374 for the three months ended June 30, 2012. There was an amortization expense for the discounted value of the new $150,000 in notes in the amount of $32,142 relating to the 60,000 shares of common stock issued with the notes for the 2013 period.  There was no interest expense-penalty and there were no interest expense-equity issues for the 2013 period.  There was a loss of $1,720,000 in debt conversion for the three months ended June 30, 2013. There was no amortization of debt discount and no interest expense-penalty for the three months ended June 30, 2012.  The interest expense on the working capital notes was $29,593 for the three months ended June 30, 2013 as compared to $31,240 in interest expense for the three months ended June 30, 2012.  The overall increase in non-operating expense was $2,201,509.  This was the result of the Company recording a loss of $1,719,990 on debt conversion when the Company issued shares of common stock to pay off $350,000 in notes held by H.E. Capital and $25,000 in its accrued interest.  The Company using the Black-Sholes calculation to figure the Derivative Liability on convertible notes issued to Asher Enterprises, Inc. for the six months ended June 30, 2012, calculated a Derivative Liability in the amount of $61,860; this resulted in the Company recording a credit in the amount of $56,879 against the interest expense related to equity issues when adjusting the Derivative Liability on these convertible notes for the six months ended June 30, 2012.  

 

As a result of the above, the Company had a net loss of $3,323,956 for the six months ended June 30, 2013 compared to a loss of $978,062 for the six months ended June 30, 2012.

 

Liquidity and Capital Resources

 

Green EnviroTech Holdings Corp on June 30, 2013 had a balance of cash in the bank in the amount of $18,179. The Company had no accounts receivable and no inventory on June 30, 2013.  The Company had other current assets in the amount of $10,119. The Company had accounts payable to vendors and accrued expenses in the amount of $3,821,345.

 

The Company has 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. This note has been extended to December 31, 2013.  The CEO has advanced $1,240,956 from inception through June 30, 2013 and the Company has repaid $1,209,669 of these advances.  The Company converted $754,377 of these advances into shares of common stock on May 11, 2010 at $1.00 per share and converted $200,000 into shares of common stock on December 1, 2011 at $0.005 per share.  The remaining principal under this loan due as of June 30, 2013 is $29,287.  $29,981 of interest is accrued on the loan at June 30, 2013.

 

 

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The Company has outstanding unsecured loans from H. E. Capital, S. A. in different amounts.  These loans accrue interest at the rate of 8% per annum.  The due dates of the loans have been extended to December 31, 2013.  Balance of the loans at June 30, 2013 was $643,850 with accrued interest in the amount of $115,688.  History of the H. E. Capital loans is as follows:

       
    

June 30, 2013

 

December 31, 2012

       
       

Beginning Balance

 $663,250 

 

 $769,750 

   Additions

 330,600 

 

 450,500 

   Repayments

 - 

 

 - 

   Assignments

 - 

 

 (170,000)

   Non-cash conversions

 (350,000)

 

 (387,000)

       

Ending Balance

 $643,850 

 

 $663,250 

 

The Company also received a loan payable from an individual in the amount of $20,000 at 10% due on demand. The Company repaid $10,000 of this note on August 10, 2010.  As of June 30, 2013 the loan has an outstanding balance of $7,500.   Interest expense for the six months ended June 30, 2013 and 2012, was $446 and $446 respectively.  The interest expense for the six months ended June 30, 2013 is now calculated at 12%.  Accrued interest as of June 30, 2013 was $3,603.

  

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 1,900 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 Company raised $380,000 from the investors. The Company agreed to issue to the Investors five-year warrants to purchase an aggregate of 1,900 shares of common stock at an exercise price of $0.40, which may be exercised on a cashless basis. 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.

 

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The $380,000 in proceeds from the financing transaction was allocated to the debt features and the warrants based upon their fair values.  The value of the warrants ($123,120) was recorded as a debt discount on the secured debentures. This discount was amortized over the life of the secured debentures, nine months.

 

The estimated fair value of the 1,900 warrants to the investors at issuance on January 24, 2011 was $141,362 and has been classified in Additional Paid In Capital on the Company’s condensed consolidated balance sheet. The estimated fair value of the warrants was determined using the Black-Scholes option-pricing model.

 

 The maturity date of these debentures has been extended to September 24, 2012. The Company issued shares of common stock and warrants to the debenture holders for prior extensions.  The Company issued 10,000 shares of common stock with a value of $30,000 and 1,000 five year warrants exercisable at $0.10 per share valued at $2,999.  The remaining balance on the Debentures on June 30, 2013 was $305,000.  Interest incurred for the six months ended June 30, 2013 and June 30, 2012 were $18,402 and $21,429 respectively. Interest accrued through June 30, 2013 was $107,087.  The Company is presently negotiating an extension on the debentures.

 

On March 19, 2013, the Company issued three promissory notes in the amount of $50,000 each at 8% to three private investors. These three notes are due on March 18, 2014. The Company used the proceeds from these notes for working capital.   As of June 30, 2013 these loans have an outstanding balance of $150,000 and accrued interest in the amount of $3,419.

 

In June 2013, the the Company sold 63,000 shares of common stock in a private placement to accredited investors for gorss proceeds of$63,000.

 

Cash provided by financing activities for the six months ended June 30, 2013 was $409,200 as compared to $130,190 for the six months ended June 30, 2012.

We will seek to raise additional funds to meet our working capital needs principally through the additional sales of our securities.  However, we cannot guaranty that we will be able to obtain sufficient additional funds when needed, or that such funds, if available, will be obtainable on terms satisfactory to us.

 

We had cash of $18,179 as of June 30, 2013. In the opinion of management, our available funds will not satisfy our working capital requirements for the next twelve months. Our forecast for the period for which our financial resources will be adequate to support our operations involves risks and uncertainties and actual results could fail as a result of a number of factors. We will need to raise additional capital to expand our operations to the point at which we are able to generate revenues and operate profitably. The Company at the present has no operations to generate revenue.  As outlined above under “Overview of Our Business,” the Company needs to complete raising $4,000,000 in equity in order to complete the balance of $16,000,000 in financial resources to start construction of its first plant.  The Company expects increases in the legal and accounting costs and costs to obtain funding.   

 

We intend to pursue capital through public or private financing as well as borrowings and other sources, such as our officers, directors and principal shareholders. We cannot guaranty that additional funding will be available on favorable terms, if at all.  If adequate funds are not available, then our ability to expand our operations may be significantly hindered. If adequate funds are not available, we believe that our officers, directors and principal shareholders will contribute funds to pay for our expenses to achieve our objectives over the next twelve months. However, our officers, directors and principal shareholders are not committed to contribute funds to pay for our expenses.

 


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Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable for a smaller reporting company.

 

Item 4T. Controls and Procedures.

 

Evaluation of Disclosures and Procedures

 

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

 

We carried out an evaluation, under the supervision and with the participation of our management, including our CEO, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based upon that evaluation, the Chief Executive Officer concluded that the Company’s disclosure controls and procedures are ineffective.

 

Changes in Internal Controls Over Financial Reporting

 

There have been no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the six months ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

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PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

The Company is not party to any material legal proceedings.

 

Item 1A. Risk Factors.

 

Not applicable to a smaller reporting company.

 

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

 

None.

 

Item 3. Defaults Upon Senior Securities.

  

The Company is in default under promissory notes issued on January 24, 2011 for failure to make required payments of interest and principal by September 24, 2012.  The Company is currently in negotiations regarding extensions on these notes.

Aggregate principal and interest owed as of June 30, 2013 was $412,087.

 

Item 4. Mine Safety Disclosures.

 

Not Applicable

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

 

No.

Description

31.1

Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer

32.1

Section 1350 Certification of Chief Executive Officer

EX-101.INS

XBRL INSTANCE DOCUMENT

EX-101.SCH

XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT

EX-101.CAL

XBRL TAXONOMY EXTENSION CALCULATION LINKBASE

EX-101.DEF

XBRL TAXONOMY DEFINITION LINKBASE

EX-101.LAB

XBRL TAXONOMY EXTENSION LABELS LINKBASE

EX-101.PRE

XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

 

-14-

 

 

SIGNATURES

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

 

 

 

 

 

 

 

Green EnviroTech Holdings Corp.

 

 

 

 

 

Date:  August 9, 2013

By:

/s/ Gary DeLaurentiis

 

 

 

Gary DeLaurentiis

 

 

 

Chief Executive Officer (principal executive and financial officer)

 

 

 

 

 

 







 

 

 

 

 

 

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