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 March 31, 2014

 

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.  Yes x  No o

 

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).   Yes x  No o

 

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

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

 

Indicated the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date; 10,539,124 shares of common stock are issued and outstanding as of May 14, 2014.

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TABLE OF CONTENTS [to be revised]

 

		Page  No.
PART I. - FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
	Condensed Consolidated Balance Sheets as of March 31, 2014(Unaudited) and December 31, 2013	3
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2014 and 2013(Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013 (Unaudited)	5
	Consolidated Statements of Changes in Shareholder Equity for the three months ended March 31, 2014 and 2013 (Unaudited)	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
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
Item 1.	Legal Proceedings.	15
Item 1A.	Risk Factors.	15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	15
Item 3.	Defaults Upon Senior Securities.	16
Item 4.	Mine Safety Disclosures.	16
Item 5.	Other Information.	16
Item 6.	Exhibits.	16

 

 

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.

 

 

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PART 1. - FINANCIAL INFORMATION 

Item 1. Financial Statements.

 

GREEN ENVIROTECH HOLDINGS CORP.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
	March 31,	December 31,
	2014	2013
CURRENT ASSETS
Cash	$                                    31,349	$                                      185
Other current assets	10,369	10,119
Total current assets	41,718	10,304
Other Assets:
Engineering Costs	30,833	30,833
	30,833	30,833
TOTAL ASSETS	$                                    72,551	$                                 41,137
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable	$                                  767,478	$                               686,538
Accrued expenses	3,324,426	3,119,084
Secured debentures payable	305,000	305,000
Loan payable - other	761,772	1,115,572
Loan payable - related party	12,287	12,287
Total current liabilities	5,170,963	5,238,481
TOTAL LIABILITIES	5,170,963	5,238,481
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,
8,093,016 and  5,904,688 shares issued and outstanding	8,093	5,905
Additional paid in capital	12,371,478	11,009,932
Deficit accumulated during development stage	(17,477,983)	(16,213,181)
Total stockholders' equity (deficit)	(5,098,412)	(5,197,344)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$                                    72,551	$                                 41,137

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

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GREEN ENVIROTECH HOLDINGS CORP.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 AND

FOR THE PERIOD OCTOBER 6, 2008 (INCEPTION) THROUGH MARCH 31, 2014 (UNAUDITED)

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

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

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

-6-

GREEN ENVIROTECH HOLDINGS CORP.

 (A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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, 2013 and 2012 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 three-months period ended March 31, 2014 and 2013. 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 $5,129,245 and has accumulated deficit of $17,477,983 as of March 31, 2014. 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.

 

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GREEN ENVIROTECH HOLDINGS CORP.

 (A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 3

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, 2014.  Balance of the loan at March 31, 2014 was $12,287 with accrued interest in the amount of $30,584.  

Note 4

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, 2014.  Balance of the loans at March 31, 2014 was $414,272 with accrued interest in the amount of $60,380.  A schedule of the H. E. Capital loans is as follows:

-8-

GREEN ENVIROTECH HOLDINGS CORP.

 (A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

The Company issued a promissory note in the amount of $150,000 at 8% on March 19, 2013 to a private investor. This note is extended to December 31, 2014. The Company used the proceeds from this note for working capital.   As of March 31, 2014 this loan has an outstanding balance of $150,000 and accrued interest in the amount of $8,055.

On January 24, 2011, the Company entered into a series of securities purchase agreements with accredited investors pursuant to which the Company sold an aggregate of $380,000 in 12% secured debentures.  The Debentures are secured by the assets of the Company pursuant to security agreements entered into between the Company and the investors.  As of March 31, 2014 these secured debentures have an outstanding balance of $305,000 and accrued interest in the amount of $134,943.  These debentures are in default and the Company is in negotiations with the holders for extensions.

The Company also has three other notes outstanding for $7,500, $170,000, and $20,000 respectively. The total in loans payable as of March 31, 2014 was $1,066,772 and accrued interest was $256,930.

 

Note 5

Equity

 

Common Stock

During the quarter, the Company issued 2,069,016 common shares for the conversion of $517,254 in notes payable. The Company also issued 34,312 common shares for the settlement of accounts payable of $21,864. A loss on the settlement of notes payable and accounts payable of $766,916 was recorded.

In February 2014, the Company issued 70,000 common shares for services valued at $42,700.

In February 2014, 15,000 warrants were issued at an exercise price of $1 per share for the settlement of $15,000 in payables to the warrant holder.

Note 6

Subsequent Events:

 

On April 11, the Company in accordance with the consulting agreement signed with Black Pearl Management, Inc. (Black Pearl) on January 3, 2014, wherein Black Pearl will provide on an ongoing basis corporate structuring, financial evaluation and procurement of funding for multiple domestic and international sites by identifying joint venture partners and investors and assisting with negotiations on behalf of the Company, the Company issued 300,000 restricted common shares to Black Pearl by converting $75,000 of Black Pearl consulting fees at $0.25 per share.  The agreement provides for Black Pearl to receive consulting fees in the amount of $25,000 a month commencing on January 3, 2014 until February 3, 2017.  

 

On April 25, 2014, the Company issued 821,108 shares of common stock to Gary DeLaurentiis, the Company’s chief executive officer, in exchange for the cancellation of $821,108 in debt owed to Mr. DeLaurentiis.

-9-

 

GREEN ENVIROTECH HOLDINGS CORP.

 (A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

On May 1, 2014, the Company issue restricted shares of common stock to each of the employees of the company for their dedicated service.  In accordance with the wishes of the Board, the Company issue restricted shares of common stock to the employees and one consultant of the Company as follows:  Consultant eBartonLLC was issued 50,000 restricted common shares.  Employee Gary M. De Laurentiis, CEO, was issued 200,000 restricted common shares.  Employee Aimee De Laurentiis was issued 75,000 restricted common shares.  Employee Lou Perches, COO, was issued 100,000 restricted common shares.  Employee Brenda McClendon was issued 25,000 restricted common shares.   Employee Wayne Leggett was issued 100,000 restricted common shares.  Employee Brian Roelands received 25,000 restricted common shares.    There were a total of 575,000 shares issued.

 

On May 5, 2014, the Company in accordance with the consulting agreement signed with Erastar, Inc. (Erastar) dated April 24, 2014, wherein Erastar will provide advisory and consulting services to the Company for one year through its officers, employees, consultants and other professionals.  Erastar was issued 350,000 restricted shares of the Company’s common stock for the advisory services.  

 

On May 5, 2014, the Company in accordance with an agreement signed with Sichenzia Ross Friedman Ference LLP. (SRFF) dated April 24, 2014, the Company issued 400,000 shares of restricted common stock of the Company in payment of $100,000 in accounts payable due SRFF.  

 

On May 8, 2014, the Company signed a joint venture agreement with Cenco Leasing LLC.  (Cenco)  The agreement calls for a joint venture to be formed between the Company and Cenco for the purpose of funding a GETH facility in Stockton, CA with Cenco funding the project.  The Company will own 30% (thirty percent) of the joint venture and Cenco will own 70%.  The agreement also calls for Cenco to provide two one year 8% loans to the Company with stock conversion rights.  The first loan will be $50,000 (fifty thousand) due when the agreement is signed and the second loan in the amount of $40,000 (forty thousand) is due on June 2, 2014.  

 

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

 

Overview of Our Business

 

Green EnviroTech Holdings Corp. (the “Company”) is a pre revenue-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. The Company will produce a high grade of oil from the tires and plastic. We have received a contract through Ebbros Energy LLC for sale of oil to Conoco .

 

The Company has estimated that  its capital needs will be $6.5 million to fully execute the two phases of its business model.  Phase-One involves the purchase and infrastructure of the building, working capital and the purchase and installation of one reactor with one secondary distillation and filtration process.  Phase-One will enable the Company to become operational with projected profits for the plant.  Phase-Two will start within three months after the completion of phase-one.  Phase-Two involves the installation of one reactor and one complete system which is comprised of two reactors and one secondary distillation and filtration process.  

 

The Company has applied for a portion of the permits needed to operate and construct the plant and 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 after the close of funding to complete upgrades to the infrastructure and installation of the equipment. The Company is in negotiations with three financial institutions located in California and New York for a $3 million investment in a combination of debt and equity that will be secured by the equipment. There is no assurance such funding will be available on terms acceptable to the Company, or at all.

 

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

 

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 September 30, 2013, the Company has invested cash into this agreement in the amount of $268,000.  Due to various delays in due diligence production that resulted in funding deferments, the parties have agreed to terminate the initial Joint Venture Agreement, effective as of September 3, 2013, with the understanding that a new Joint Venture Agreement may be entered into at a later date.  The parties have also agreed verbally to enter into a termination agreement wherein the Company will be reimbursed the funds raised in exchange for a release of the IP that was assigned in advance to the entity formed for the Joint Venture.  A Form 8-K was filed on September 6, 2013. The patents currently reside in Black Lion Oil Limited, formed and located in Ireland.  The reimbursed portion of the investment in exchange for the patents is still in negotiations.

 

On March 27, 2013, the Company completed a 1 for 100 reverse split of its common stock.  Share amounts in this report and previous reports subsequent to the reverse split have been retroactively adjusted where needed.

 

On May 8, 2014, the Company signed an agreement with Cenco Leasing LLC (“Cenco”)  The agreement calls for a joint venture to be formed between the Company and Cenco for the purpose of funding a GETH facility in Stockton, CA with Cenco funding the project.  The Company will own 30% (thirty percent) of the joint venture and Cenco will own 70%.  The agreement also calls for Cenco to provide two one year 8% loans to the Company with stock conversion rights.  Funding for the first loan will be $50,000 and provided when the definitive joint venture agreement is signed and funding for the second loan for the amount of $40,000 shall be provided on June 2, 2014. 

  

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

 

The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements for the year ended December 31, 2013, 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

 

Three Months Ended March 31, 2014 compared to Three Months Ended March 31, 2013.

 

Revenues and Cost of Revenues

 

The Company is a pre revenue-stage technology company that has developed a patent pending oil conversion process utilizing a mixture of plastic and tires. The Company will produce a high grade of oil from the tires and plastic. As a result, tThe Company had no operating revenues or cost of revenues for the three months ended March 31, 2014 and 2013.

 

Operating Expenses

 

The salaries and professional fees for the three months ended March 31, 2014 were $349,382 as compared to $350,424 for the three months ended March 31, 2013. The salaries and professional fees for the three months ended March 31, 2014 included $130,382 in professional fees and $219,000 in salaries.  

 

The general and administrative expenses for the three months ended March 31, 2014 were $121,078 as compared to $285,070 for the three months ended March 31, 2013, a decrease of approximately 57.5%. This decrease of $163,992 was the result of a decrease in advertising and marketing concerning the promotion of the company and travel expenses.

 

Non-Operating Expenses

 

Non operating expenses for the three months ended March 31, 2014 were $794,342 as compared to $27,010 for the three months ended March 31, 2013.  This change in 2014 was primarily the result of the Company incurring a loss of $766,916 in a debt conversion transaction pursuant to which the Company issued shares of common stock to pay off $517,254 in notes payable and accrued interest.  The interest expense on the outstanding notes was $27,426 for the three months ended March 31, 2014 as compared to $27,010 in interest expense for the three months ended March 31, 2013. 

 

 

 

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Net Loss

 

As a result of the above, the Company had a net loss of $1,264,802 for the three months ended March 31, 2014 as compared to a loss of $662,504 for the three months ended March 31, 2013.

 

Liquidity and Capital Resources

 

On March 31, 2014, the Company had a balance of cash in the bank in the amount of $31,349. The Company had no accounts receivable and no inventory on March 31, 2014.  The Company had other current assets in the amount of $10,369. The Company had accounts payable to vendors and accrued expenses in the amount of $4,091,904.

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. The term of this line of credit has been extended to December 31, 2014.  The CEO has advanced $1,246,456 from inception through March 31, 2014 and the Company has repaid $1,234,169 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 $0.50 per share.  The remaining principal balance on this loan on March 31, 2014 was $12,287 with accrued interest in the amount of $30,584.  

The Company has an outstanding unsecured line of credit from H. E. Capital, S. A. This loan accrues interest at the rate of 8% per annum.  The maturity date of the line of credit has been extended to December 31, 2014.  The balance of the advances at March 31, 2014 was $414,272 with accrued interest in the amount of $60,380.  The use of proceeds for the H. E. Capital loans are as follows:

 

			March 31, 2014	December 31, 2013
Beginning Balance			$616,772	$663,250
Cash Proceeds			145,000	317,000
Consulting Fees			15,000	60,000
Accounts Payable assigned to note			-	182,342
Joint Venture Investment paid direct				165,000
Company liabilities paid direct				5,930
Allocation Green Power Energy				(100,000)
Assignments			(115,000)	-
Non-cash conversions			(247,500)	(676,750)
Ending Balance			$414,272	$616,772

-13-

The Company also received a loan payable from an individual in the amount of $20,000 at 10% due on demand. The Company has made payments on this loan and repaid $10,000 of this note on August 10, 2010.  As of March 31, 2014 the loan has an outstanding balance of $7,500.   Interest expense for each three month period ended March 31, 2014 and 2013, was $222.  The interest expense is now calculated at 12%.  Accrued interest as of March 31, 2014 was $4,279.

  

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.

 

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 nine-month term of the secured debentures.  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 was 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 March 31, 2014 was $305,000.  Interest incurred for the three months ended March 31, 2014 and 2013 were $9,150 and $9,150 respectively. Interest accrued through March 31, 2014 was $134,943.  The Company is presently negotiating an extension on the debentures.

 

On March 19, 2013, the Company issued a promissory note in the amount of $150,000 at 8% to a private investor. The note had no accrued interest for the first six months.  The note has been extended to December 31, 2014. The Company used the proceeds from the note for working capital.   As of March 31, 2014 this loan had an outstanding balance of $150,000 and accrued interest in the amount of $8,055.

 

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

 

Cash provided by financing activities for the three months ended March 31, 2014 was $145,000 as compared to $159,200 for the nine months ended September 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 $31,349 as of March 31, 2014. 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.

 

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.

 

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable for a smaller reporting company.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosures and Procedures

 

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the reports we file pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our Chief Executive Officer (“CEO”) (principal executive 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 three months ended March 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

The Company is party to one legal proceeding.  MicroCap vs Green EnviroTech is a claim being litigated in New York for the breach of contract.  The case is being vigorously defended and the Company expects the resolution of the case to be in its favor.

 

Item 1A. Risk Factors.

 

Not required for a smaller reporting company.

 

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

 

During the quarter ended March 31, 2014, the Company converted $517,254 of notes payable and accrued interest into  2,069,016 shares of common stock.  The Company recognized a loss on conversion of $766,916.

 

During the quarter ended March 31, 2014, the Company issued to consultants 70,000 shares of common stock for services valued at $42,700.   

 

 

 

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During the quarter ended March 31, 2014, the Company issued 34,312 shares of common stock to settle $21,864 of accounts payables.

 

During the quarter ended March 31, 2014, the Company issued 15,000 shares of common stock to redeem 15,000 warrants.

 

In connection with the foregoing, the Company relied upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, for transactions not involving a public offering.

 

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 the date of this filing is $439,943.

 

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.LAB			XBRL TAXONOMY EXTENSION LABELS LINKBASE
EX-101.PRE			XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

 

 

 

 

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SIGNATURES

 

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

 

 

	Green EnviroTech Holdings Corp.
Date:  May 14, 2014	By:	/s/ Gary DeLaurentiis
		Gary DeLaurentiis
		Chief Executive Officer (principal executive and financial officer)

 

 

 

 

 

 

 

 

 

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