Green Technology Solutions, Inc. - FORM 10-Q

Attached files

file	filename
EX-31.1 - EX-31.1 - Green Technology Solutions, Inc.	ex31-1.htm
EX-32.1 - EX-32.1 - Green Technology Solutions, Inc.	ex32-1.htm
EXCEL - IDEA: XBRL DOCUMENT - Green Technology Solutions, Inc.	Financial_Report.xls

UNITED STATES

SECURITY AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

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

For the quarterly period ended September 30, 2014

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: 1-11248

GREEN TECHNOLOGY SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Nevada		84-0938688
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification Number)

2880 Zanker Road, Suite 203 San Jose, CA		95134
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: (408) 432-7285

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 þ 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 þ 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	Smaller reporting company	þ
(Do not check is smaller reporting company)

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

As of November 19, 2014, the registrant had 469,901 shares of common stock are issued and outstanding.

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TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION	4
Item 1. Financial Statements	4
Consolidated Balance Sheets (Unaudited)	4
Consolidated Statements of Operations (Unaudited)	5
Consolidated Statement of Stockholders’ Deficit (Unaudited)	6
Consolidated Statements of Cash Flows (Unaudited)	7
Notes to the Unaudited Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3. Quantitative and Qualitative Disclosures about Market Risk	15
Item 4. Controls and Procedures	16

PART II — OTHER INFORMATION	17
Item 1. Legal Proceedings	17
Item 1A. Risk Factors	17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3. Defaults upon Senior Securities	17
Item 4. Mine Safety Disclosures	17
Item 5. Other Information	17
Item 6. Exhibits	18

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements in this report contain or may contain forward-looking statements. These statements, identified by words such as “plan”, “anticipate”, “believe”, “estimate”, “should”, “expect” and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements are subject to known and unknown risks, uncertainties and other factors, which may cause actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward - looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to secure suitable financing to continue with our existing business or change our business and conclude a merger, acquisition or combination with a business prospect, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this report in its entirety, including but not limited to our financial statements and the notes thereto and the risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013. We advise you to carefully review the reports and documents we file from time to time with the Securities and Exchange Commission (the “SEC”), particularly our quarterly reports on Form 10-Q and our current reports on Form 8-K. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

OTHER PERTINENT INFORMATION

When used in this report, the terms, “we,” the “Company,” “GTSO,” “our,” and “us” refers to Green Technology Solutions, Inc., a Nevada corporation.

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GREEN TECHNOLOGY SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	September 30, 2014			December 31, 2013
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	9,221		$	4,198
Total current assets		9,221			4,198

Deposit		25,000			—
TOTAL ASSETS	$	34,221		$	4,198

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	224,550		$	123,001
Advances payable		76,695			31,250
Current portion of convertible notes payable		153,771			—
Current portion of accrued interest payable		58,788			—
Total current liabilities		513,804			154,251

Convertible notes payable, net of discount of $157,850 and $442,118, respectively		5,096			81,958
Accrued interest payable		4,106			34,823
TOTAL LIABILITIES		523,006			271,032

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ DEFICIT
Preferred stock, $0.001 par value; 20,000,000 shares authorized; 1,000,000 shares and 0 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively		1,000			—
Common stock, $0.001 par value; 480,000,000 shares authorized; 392,411 shares and 208,087 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively		392			208
Additional paid-in capital		14,616,956			11,048,162
Common stock payable		5,000			5,000
Accumulated deficit		(15,112,133	)		(11,320,204	)
Total stockholders’ deficit		(488,785	)		(266,834	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	34,221		$	4,198

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

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GREEN TECHNOLOGY SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Nine months ended September 30,						Three months ended September 30,
	2014			2013			2014			2013

OPERATING EXPENSES
General and administrative expenses		3,620,561			239,211			3,119,177			70,426

LOSS FROM OPERATIONS		(3,620,561	)		(239,211	)		(3,119,177	)		(70,426	)

OTHER INCOME (EXPENSE)
Interest expense		(171,368	)		(419,385	)		(52,644	)		(167,014	)
Impairment on investment		—			(50,000	)		—			(50,000	)
Total Other Income (Expense)		(171,368	)		(469,385	)		(52,644	)		(217,014	)

NET LOSS	$	(3,791,929	)		(708,596	)		(3,171,821	)		(287,440	)

NET LOSS PER COMMON SHARE – Basic and diluted	$	(13.73	)		(3.97	)	$	(9.36	)	$	(1.61	)

COMMON SHARES OUTSTANDING – Basic and diluted		276,115			178,624			338,794			178,846

On July 28, 2014, the Company reincorporated in Nevada. Shareholders received one share in the new company for every 300 shares they held in the old company. All share and per share numbers have been restated to reflect the reincorporation.

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

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GREEN TECHNOLOGY SOLUTIONS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

(UNAUDITED)

	Preferred stock				Common stock				Additional paid in			Common stock		Accumulated
	Shares		Amount		Shares		Amount		capital			payable		deficit			Total

BALANCE, December 31, 2013		—	$	—		208,087	$	208	$	11,048,162		$	5,000	$	(11,320,204	)	$	(266,834	)

Common stock issued for:
Cash and services		—		—		100,000		100		329,900			—		—			330,000
Conversion of notes payable		—		—		54,001		54		60,286			—		—			60,340
Share rounding on reverse split		—		—		30,323		30		(30	)		—		—			—
Preferred stock issued for services		1,000,000	$	1,000		—		—		3,009,644			—		—			3,010,644
Beneficial conversion discount on convertible note		—		—		—		—		162,946			—		—			162,946
Imputed interest expense		—		—		—		—		6,048			—		—			6,048
Net loss		—		—		—		—		—			—		(3,791,929	)		(3,791,929	)

BALANCE, September 30, 2014		1,000,00	$	1,000		392,411	$	392	$	14,616,956		$	5,000	$	(15,112,133	)	$	(488,785	)

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

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GREEN TECHNOLOGY SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine months ended September 30,
	2014			2013

CASH FLOW FROM OPERATING ACTIVITIES:
Net loss	$	(3,791,929	)	$	(708,596	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of discount on convertible note payable		125,386			371,265
Imputed interest expense		6,048			23,651
Impairment of investment in joint venture		—			50,000
Preferred stock issued for services		3,010,644			—
Common stock issued for services		300,000			—
Accrued interest payable		39,934			24,469
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities		101,549			17,353
NET CASH USED IN OPERATING ACTIVITIES		(208,368	)		(221,858	)

CASH FLOWS FROM INVESTING ACTIVITIES
Deposit paid for acquisition of Mother Parker		(25,000	)		—
Investment in joint venture		—			(50,000	)
NET CASH USED IN INVESTING ACTIVITIES		(25,000	)		(50,000	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock		30,000			—
Proceeds from advances		208,391			312,310
NET CASH PROVIDED BY FINANCING ACTIVITIES		238,391			312,310

NET INCREASE (DECREASE) IN CASH		5,023			40,452

CASH, at the beginning of the period		4,198			872

CASH, at the end of the period	$	9,221		$	41,324

Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	—		$	—
Taxes	$	—		$	—

Noncash investing and financing transaction:
Refinance of advances into convertible notes payable	$	162,946		$	575,958
Beneficial conversion on convertible note payable	$	162,946		$	—
Conversion of convertible notes payable.	$	60,340		$	415,351

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

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GREEN TECHNOLOGY SOLUTIONS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

Note 1. General Organization and Business

Company History

Green Technology Solutions, Inc. (“GTSO”, “we”, “us”, “our” or the “Company”) was incorporated as XCL Sunrise, Inc. in the State of Delaware on April 1, 1991. We changed our name to Sunrise Energy Resources, Inc. on November 1, 2004. On October 26, 2010, we changed our name to Green Technology Solutions, Inc.

On September 20, 2012, GTSO formed two subsidiaries, which may be used to hold GTSO’s urban and traditional mining operations. The new subsidiaries are GTSO Urban Mining LLC and GTSO Resources LLC.

On July 28, 2014, the Company reincorporated from Delaware to Nevada. The reincorporation was approved by our board of directors and by the owners of a majority of our outstanding voting stock. Each of our shareholders as of the record date will be entitle to receive one share of the Nevada company’s common stock for each 300 shares of our common stock they owned in the Delaware company, with fractional shares be rounded up to the next whole share, and number of additional whole shares such that each shareholder will own at least five shares. The board of directors and officers of the Nevada company will consist of the same persons who are directors and officers prior to the reincorporation. Oud daily business operations will continue at the principal executive offices at 2880 Zanker Road, Suite 203, San Jose, California.

Note 2. Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial statements, the Company incurred a net loss of $3,791,929 during the nine months ended September 30, 2014. The company had negative working capital of $504,583 as of September 30, 2014.

In view of the matter described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to meet its financing requirements on a continuing basis by raising additional funds through debt or equity financing. The Company expects to satisfy its cash requirements by obtaining additional loans; however, there is no assurance that additional capital will be available to the Company when needed and on acceptable terms. The 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 be necessary should the Company be unable to continue in existence.

Note 3. Presentation of Financial Statements and Summary of Significant Accounting Policies

Interim Financial Statements

The accompanying these unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the Consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring nature. These Consolidated financial statements should be read in conjunction with the Consolidated financial statements for the fiscal year ended December 31, 2013 and notes thereto and other pertinent information contained in our Form 10-K the Company has filed with the Securities and Exchange Commission (the “SEC”).

The results of operations for the nine month period ended September 30, 2014 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2014.

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Basis of Presentation

The Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the SEC. The Financial Statements have been prepared using the accrual basis of accounting in accordance with GAAP. See Note 2 regarding the assumption that the Company is a going concern.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

For the purpose of the financial statements, cash equivalents include all highly liquid investments with maturity of three months or less. Cash and cash equivalents were $9,221 and $4,198 at September 30, 2014 and December 31, 2013, respectively.

Revenue Recognition

The Company is not currently generating revenue. However, revenue generated in the future will be recognized according to ASC 605, Revenue Recognition. The Company recognizes revenue when persuasive evidence of an arrangement exists, product delivery has occurred or the services have been rendered, the price is fixed or determinable and collectability is reasonably assured.

Earnings (Loss) per Common Share

The Company computes basic and diluted earnings per common share amounts in accordance with ASC Topic 260, Earnings per Share. The basic earnings (loss) per common share are calculated by dividing the Company’s net income available to common shareholders by the weighted average number of common shares outstanding during the year. The diluted earnings (loss) per common share are calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted as of the first of the year for any potentially dilutive debt or equity. There are no dilutive shares outstanding for any periods reported.

Income Taxes

The Company accounts for income taxes under ASC 740 Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized as of September 30, 2014 or December 31, 2013

Financial Instruments

The Company’s balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period between the origination of these instruments and their expected realization.

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FASB Accounting Standards Codification (ASC) 820 Fair Value Measurements and Disclosures (ASC 820) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2014. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include accounts receivable, other current assets, accounts payable, and accrued expenses. The fair value of the Company’s notes payable is estimated based on current rates that would be available for debt of similar terms that is not significantly different from its stated value.

Development Stage Entity

On June 10, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, which removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. The presentation and disclosure requirements in Topic 915 will no longer be required for the first annual period beginning after December 15, 2014. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. Early adoption is permitted. The Company adopted ASU 2014-10 during the nine months ended September 30, 2014, thereby no longer presenting or disclosing any information required by Topic 915.

Recently Issued Accounting Pronouncements

We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

Note 4. Deposit

On September 5, 2014, we paid a $25,000 deposit for the acquisition of Mother Parker’s Soil, LLC, a California limited liability company (“Mother Parker”). Mother Parker is a cultivator of organic soils. The total purchase price for the acquisition will be $125,000. The acquisition agreement calls for payments to be made as follows:

Date	Amount
September 5, 2014	$	25,000
September 15, 2014		25,000
October 15, 2014		25,000
November 15, 2014		10,000
December 15, 2014		10,000
January 15, 2015		10,000
February 15, 2015		10,000
March 15, 2015		10,000
Total	$	125,000

No other payments were made during the nine months ended September 30, 2014. We are behind schedule for making the payments for the acquisition, but the due dates have been verbally extended by the sellers.

Note 5. Advances

The Company has received working capital advances in the amount of $208,391 during the nine months ended of September 30, 2014. The total advances outstanding as of September 30, 2014 was $76,695, which included advances made in prior reporting periods. These advances are non-interest bearing and payable upon demand. The Company had imputed interest on these advances in the amount $6,048 during the nine months ended of September 30, 2014. The imputed interest was recording as an increase in additional paid in capital.

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Note 6. Convertible Notes Payable

Convertible notes payable consist of the following as of September 30, 2014 and December 31, 2013:

	September 30, 2014			December 31, 2013
Convertible note payable, dated April 1, 2010, bearing interest at 10% per annum, matured on March 31, 2013 and convertible into shares of common stock at $0.01 per share. This note is in default.	$	12,493		$	11,598
Convertible note payable, dated May 15, 2010, bearing interest at 10% per annum, matured on March 31, 2013 and convertible into shares of common stock at $0.01 per share. This note is in default.		6,405			5,947
Convertible note payable, dated October 31, 2012, bearing interest at 10% per annum, matures on April 30, 2014 and convertible into shares of common stock at $0.02. This note is in default.		1,423			1,423
Convertible note payable, dated April 1, 2013, bearing interest at 10% per annum, matures on March 31, 2015 and convertible into shares of common stock at $0.01.		5,999			25,613
Convertible note payable, dated June 30, 2013, bearing interest at 10% per annum, matures on June 30, 2015 and convertible into shares of common stock at $0.01.		136,969			167,185
Convertible note payable, dated September 30, 2013, bearing interest at 10% per annum, matures on September 30, 2015 and convertible into shares of common stock at $0.01.		312,310			312,310
Convertible note payable, dated June 30, 2014, bearing interest at 10% per annum, matures on June 30, 2014 and convertible into shares of common stock at $0.01.		162,946			—
Total convertible notes payable	$	638,545		$	524,076

Less: current portion of convertible notes payable		(475,599	)		—
Less: discount on noncurrent convertible notes payable		(157,850	)		(442,118	)
Convertible notes payable, net of discount	$	5,096		$	81,958

Conversions

The holders of the $167,185 convertible note payable signed on June 30, 2013 elected to convert principal and interest as follows:

Date	Principal & Interest Converted		Common Stock Issued upon Conversion
January 27, 2014	$	20,000		6,667
January 30, 2014		20,000		6,667
September 26, 2014		170		17,000
September 26, 2014		170		17,000
Total	$	40,340		47,334

The unamortized discount related to this principal was $21,399. This amount was immediately amortized to interest expense. The converted principal and interest of $40,340 was recognized as in increase in stockholders’ equity as a result of this conversion. There was no gain or loss on the conversion, as it was effected in accordance with the terms of the convertible note payable.

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The holders of the $96,463 convertible note payable signed on April 1, 2013 elected to convert principal and interest as follows:

Date	Principal & Interest Converted		Common Stock Issued upon Conversion
January 14, 2014		20,000		6,667
Total	$	20,000		6,667

The unamortized discount related to this principal was $10,450. This amount was immediately amortized to interest expense. The converted principal and interest of $20,000 was recognized as in increase in stockholders’ equity as a result of this conversion. There was no gain or loss on the conversion, as it was effected in accordance with the terms of the convertible note payable.

Note 7. Related Party Transactions

Issuance of Preferred Stock for Services

On September 16, 2014, the board of directors designated 1,000,000 shares of Series E preferred stock. The Series E preferred stock has a par value of $0.001 and ranks subordinate to the Company’s common stock as to distributions of assets upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary. The outstanding shares of Series E preferred stock have the right to take action by written consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of common stock.

On the same date, the Company issued 1,000,000 shares of Series E preferred stock to Eastern Rim Funds, a Panama corporation, (“Eastern Rim”) for services valued at $20,000. For accounting purposes, the Series E preferred stock was valued at $3,010,644, which was the estimated market value of the shares. The estimated market value was calculated to be twice the market value of the outstanding common stock on the date of issuance since the Series E preferred stockholders have the right to vote based on twice the number of all outstanding shares of common stock. Eastern Rim owned 173,521 shares of common stock, or approximately 53% of the outstanding stock, of the Company prior to this transaction. This transaction did not result in a change in control of the Company.

Note 8. Stockholders’ Equity

Reincorporation and reverse split

On July 28, 2014, the Company reincorporated from Delaware to Nevada. The reincorporation was approved by our board of directors and by the owners of a majority of our outstanding voting stock. Each of our shareholders as of the record date received one share of the Nevada company’s common stock for each 300 shares of our common stock they owned in the Delaware company, with fractional shares be rounded up to the next whole share, and number of additional whole shares such that each shareholder will own at least five shares. This effectively resulted in a one-for-300 reverse split. All share and per share amounts have been restated to reflect the reverse split.

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Issuance of Common Stock for Cash

On February 6, 2014, the Company received a stock purchase agreement from Eastern Rim Funds Inc., a significant shareholder of the Company, to purchase 100,000 shares of common stock of the Company for $30,000 in cash. The Company also received a cash payment of $30,000. The par value of the common stock was included in stock payable on the balance sheet as of March 31, 2014.

The Company recorded stock compensation expense in the amount of $300,000, which represented the difference in the fair market value of the common stock as of February 6, 2014 and the price paid by Eastern Rim Funds Inc.

On May 27, 2014, our board of directors approved the issuance of these shares. Accordingly, the par value of the common stock was removed from common stock payable on our balance sheet and added to our common stock.

The issuance of these shares resulted in Eastern Rim Funds Inc. holding a total of 173,521 shares of the Company’s common stock. Eastern Rim Funds Inc. held approximately 53% of the outstanding stock of the Company after the issuance.

Issuance of Common Stock for Convertible Note Conversion

Date	Principal & Interest Converted		Common Stock Issued upon Conversion
January 14, 2014	$	20,000		6,667
January 27, 2014		20,000		6,667
January 30, 2014		20,000		6,667
September 26, 2014		170		17,000
September 26, 2014		170		17,000
Total	$	60,340		54,001

Imputed Interest

The Company has imputed interest on advances in the amount of $6,048 for the nine months ended September 30, 2014. The imputed interest was recorded as an increase in additional paid-in capital.

Net Loss

The company recorded a net loss of $3,791,929 for the nine months ended September 30, 2014. This is reflected in loss accumulated during the development period.

Note 9. Subsequent Events

On November 3, 2014, we closed the acquisition of Mother Parker. See Note 4. On November 7, 2014, we made an additional payment of $25,000 towards the total purchase price of $125,000. The Company is in the process of determining the allocation of the purchase price for Mother Parker.

On October 10, 2014 the holders of the convertible promissory note signed October 31, 2012 elected to convert interest of $340 into 34,000 shares of common stock. No gain or loss was recognized on the transaction, as it occurred within the terms of the debt agreement. The unamortized discount related to the converted principal was immediately amortized to interest expense.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

GTSO is in the business trying to keep the world a greener place to live. Having a greener environment is what we strive to provide so that we may live healthier lives. We strive to identify and acquire rights in early stage, breakthrough green technologies, with the plan to develop these technologies into marketable products. We are shifting our focus to improving health and wellness, specifically through supporting the health and wellness sub-market of medical cannabis. Our product focus within this area can be categorized into three parts: (1) business and support services; (2) developing more efficient ways to utilize hemp delivery systems; and (3) products, methods, or services supporting the actual producers of the product in the industry.

Plan of Operations

As a part of establishing our new line of business, we acquired Mother Parker’s Soils on November 3, 2014. This will allow us to support the horticultural side of the medical cannabis industry. Our next step will be to seek out more efficient lighting systems.

Critical Accounting Policies

We prepare our consolidated financial statements in conformity with GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends, and other factors that management believes to be important at the time the condensed Consolidated financial statements are prepared. On a regular basis, we review our accounting policies and how they are applied and disclosed in our condensed consolidated financial statements.

While we believe that the historical experience, current trends and other factors considered support the preparation of our condensed consolidated financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.

For a full description of our critical accounting policies, please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the year ended December 31, 2013 on Form 10-K.

Results of Operations

Nine months ended September 30, 2014 compared to the nine months ended September 30, 2013.

General and Administrative Expenses

We recognized general and administrative expenses in the amount of $3,620,561 and $239,211 for the nine months ended September 30, 2014 and 2013, respectively. The increase is primarily the result of stock based compensation expense in the amount of $3,310,644 for the nine months ended September 30, 2014.

Interest Expense

Interest expense decreased from $419,385 for the nine months ended September 30, 2013 to $171,368 for the nine months ended September 30, 2014. Interest expense for the nine months ended September 30, 2014 included amortization of discount on convertible notes payable in the amount of $125,386, compared to $371,265 for the comparable period of 2013. The decrease was due to fewer conversions of convertible notes in the current quarter.

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Net Loss

We incurred a net loss of $3,791,929 for the nine months ended September 30, 2014 as compared to $708,596 for the comparable period of 2013. The increase in the net loss was primarily the result of the aforementioned decrease in professional fees and interest expense.

Three months ended September 30, 2014 compared to the three months ended September 30, 2013.

General and Administrative Expenses

We recognized general and administrative expenses in the amount of $3,119,177 and $70,426 for the three months ended September 30, 2014 and ended 2013, respectively. The increase is primarily the result of stock based compensation expense in the amount of $3,010,644 for the three months ended September 30, 2014.

Interest Expense

Interest expense decreased from $167,014 for the three months ended September 30, 2013 to $52,644 for the nine months ended September 30, 2014. Interest expense for the nine months ended September 30, 2014 included amortization of discount on convertible notes payable in the amount of $35,767, compared to $152,073 for the comparable period of 2013. The decrease is due to fewer conversions of convertible notes in the current quarter.

Net Loss

We incurred a net loss of $3,171,821 for the three months ended September 30, 2014 as compared to $287,440 for the comparable period of 2013. The decrease in the net loss was primarily the result of the aforementioned decrease in professional fees and interest expense.

Going Concern

Liquidity and Capital Resources

At September 30, 2014, we had cash on hand of $9,221. The company has negative working capital of $504,583. Net cash used in operating activities for the nine months ended September 30, 2014 was $208,368. Cash on hand is adequate to fund our operations for less than six months. We do not expect to achieve positive cash flow from operating activities in the near future. We will require additional cash in order to implement our business plan. There is no guarantee that we will be able to attain fund when we need them or that funds will be available on terms that are acceptable to the Company. We have no material commitments for capital expenditures as of September 30, 2014.

Additional Financing

Additional financing is required to continue operations. Although actively searching for available capital, the Company does not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.

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 to a smaller reporting company.

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ITEM 4. CONTROLS AND PROCEDURES

Management’s Report on Internal Control over Financial Reporting

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2014. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2014, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

As of September 30, 2014, we did not maintain effective controls over the control environment. Specifically we have not developed and effectively communicated to our employees our accounting policies and procedures. This has resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

As of September 30, 2014, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.

Our management, including our principal executive officer and principal financial officer, who is the same person, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

Change in Internal Controls Over Financial Reporting

There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us.

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 has defaulted on the convertible promissory note dated April 1, 2010. The note matured on March 31, 2013. The remaining principal balance is $12,493; there is no accrued interest payable.

The Company has defaulted on the convertible promissory note dated May 15, 2010. The note matured on May 15, 2013. The remaining principal balance is $6,405; there is no accrued interest payable.

The Company has defaulted on the convertible promissory note dated December 31, 2010. There is no remaining principal balance; there is accrued interest payable of $18,174.

The Company has defaulted on the convertible promissory note dated October 31, 2012. The note matured on April 30, 2014. The remaining principal balance is $1,423 and the remaining accrued interest payable is $170.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

3.11	Amended and Restated Certificate of Incorporation of the Company
3.21	Bylaws of the Company
31.13	Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer and principal financial and account officer.
32.13	Section 1350 Certification of principal executive officer and principal financial accounting officer.
1012,3	XBRL data files of Financial Statement and Notes contained in this Quarterly Report on Form 10-Q.

(1)	Incorporated by reference from the Form SB-2 filed on September 15, 2006.

(2)	In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”

(3)	Filed or furnished herewith

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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 Technology Solutions, Inc.


Date: November 21, 2014	BY: /s/ Wallace Browne
	Wallace Browne
	President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer and Director

Green Technology Solutions, Inc. - FORM 10-Q - November 21, 2014

Attached files

Green Technology Solutions, Inc. Reports