Attached files

file filename
EX-21 - EX-21 - Green Technology Solutions, Inc.ex21.htm
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


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 June 30, 2015
 
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: 1-11248
 
GRAPHIC
 
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. 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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. There were 9,425,875 shares of common stock are issued and outstanding as of August 17, 2015.

 
PART I — FINANCIAL INFORMATION
4
4
4
5
6
7
8
16
17
18
   
PART II — OTHER INFORMATION
19
19
19
19
19
19
19
19
 
 
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, 2014. 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,” “our,” and “us” refers to Green Technology Solutions, Inc., a Nevada corporation.
 

 
 
 

PART I FINANCIAL INFORMATION

 
ITEM 1. FINANCIAL STATEMENTS
 
GREEN TECHNOLOGY SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
 (UNAUDITED)
 
   
June 30,
2015
   
December 31,
2014
 
ASSETS
           
             
CURRENT ASSETS
           
Cash and cash equivalents
  $ 1,448     $ 15,173  
Total current assets
    1,448       15,173  
                 
Investment net of impairment of $455,000 and $445,000, respectively
           
Deposit for purchase of fixed assets
    5,650,000        
TOTAL ASSETS
  $ 5,651,448     $ 15,173  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
               
                 
CURRENT LIABILITIES
               
Accounts payable and accrued expenses
  $ 453,589     $ 328,705  
Accounts payable to related party
    200,000       -  
Current portion of convertible notes payable, net of discount of $279,116 and $280,892, respectively
    344,518       193,824  
Current portion of accrued interest payable
    89,097       68,625  
Total current liabilities
    1,087,204       591,154  
                 
Convertible notes payable, net of discount of $358,018 and $355,753, respectively
    13,925       9,353  
Accrued interest payable
    12,218       8,214  
TOTAL LIABILITIES
    1,113,347       608,721  
                 
COMMITMENTS AND CONTINGENCIES
               
                 
SHAREHOLDERS’ EQUITY (DEFICIT)
               
Common stock, $0.0010 par value; 480,000,000 shares authorized; 6,938,875 shares and 616,908 shares issued; 6,938,858 and 616,858 shares outstanding at June 30, 2015 and December 31, 2014, respectively
    6,939       617  
Preferred stock, $0.0010 stated value; 20,000,000 shares authorized; 1,000,000 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively
    1,000       1,000  
Treasury shares, 17 and 50 shares as of June 30, 2015 and December 31, 2014, respectively
    (19 )     (55 )
Additional paid-in capital
    20,421,948       14,823,239  
Common stock payable
    5,000       5,000  
Accumulated deficit
    (15,896,767 )     (15,423,349 )
Total shareholders’ equity (deficit)
    4,538,101       (593,548 )
                 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
  $ 5,651,448     $ 15,173  
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
 
GREEN TECHNOLOGY SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 
   
Six months ended
June 30,
   
Three months ended
 June 30,
 
   
2015
   
2014
   
2015
   
2014
 
                         
REVENUE
  $     $     $     $  
                                 
OPERATING EXPENSES
                               
General and administrative expenses
    248,390       501,384       105,383       95,550  
                                 
LOSS FROM OPERATIONS
    (248,390 )     (501,384 )     (105,383 )     (95,550 )
                                 
OTHER INCOME (EXPENSE)
                               
Interest expense
    (215,028 )     (118,724 )     (124,560 )     (42,488 )
Impairment on investment
    (10,000 )           (5,000 )      
Total other income (expense)
    (225,028 )     (118,724 )     (129,560 )     (42,488 )
                                 
NET LOSS
  $ (473,418 )     (620,108 )     (234,943 )     (138,038 )
                                 
NET LOSS PER COMMON SHARE  –  Basic and diluted
  $ (0.14 )     (2.54 )   $ (0.04 )   $ (0.52 )
                                 
WEIGHT AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — Basic and diluted
    3,369,708       244,256       5,245,487       265,450  
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
 
GREEN TECHNOLOGY SOLUTIONS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
 (UNAUDITED)
 
   
Preferred stock
   
Common stock
   
Additional
paid in
   
Common
Stock
   
Treasury
Shares
   
Accumulated
       
   
Shares
   
Amount
   
Shares
   
Amount
   
capital
   
payable
   
Shares
   
Amount
   
deficit
   
Total
 
                                                             
BALANCE, December 31, 2014
    1,000,000     $ 1,000       616,908     $ 617     $ 14,823,239     $ 5,000       50     $ (55 )   $ (15,423,349 )   $ (593,548 )
                                                                                 
Common stock issued for:
                                                                               
Conversion of notes payable
                3,322,000       3,322       29,898                               33,220  
Purchase of fixed assets
                3,000,000       3,000       5,397,000                               5,400,000  
Beneficial conversion discount on convertible note
                            169,783                               169,783  
Imputed interest expense
                            2,064                               2,064  
Treasury shares retired
                (33 )           (36 )           33       36              
Net loss
                                                    (473,418 )     (473,418 )
                                                                                 
BALANCE, June 30, 2015
    1,000,000     $ 1,000       6,938,875     $ 6,939     $ 20,421,948     $ 5,000       17     $ (19 )   $ (15,896,767 )   $ 4,538,101  


 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
 
GREEN TECHNOLOGY SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 
   
Six months ended June 30,
 
   
2015
 
2014
 
                 
CASH FLOW FROM OPERATING ACTIVITIES:
               
Net loss
 
$
(473,418
)
 
$
(620,108
)
Adjustments to reconcile net loss to net cash used in operating activities:
               
Amortization of discount on convertible note payable
   
169,294
     
89,618
 
Imputed interest expense
   
2,064
     
5,255
 
Impairment of investment in Elevated Industries
   
10,000
     
 
Common stock issued for services
   
     
300,000
 
                 
Changes in operating assets and liabilities:
               
Accounts payable and accrued liabilities
   
124,884
     
56,304
 
Accrued interest payable
   
43,668
     
23,851
 
NET CASH USED IN OPERATING ACTIVITIES
   
(123,508
)
   
(145,080
)
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Deposit paid for purchase of fixed assets
   
(50,000
)
   
 
Investment in joint venture
   
(10,000
)
   
 
NET CASH USED IN INVESTING ACTIVITIES
   
(60,000
)
   
 
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Proceeds from issuance of common stock
   
     
30,000
 
Proceeds from advances
   
169,783
     
131,696
 
NET CASH PROVIDED BY FINANCING ACTIVITIES
   
169,783
     
161,696
 
                 
NET INCREASE (DECREASE) IN CASH
   
(13,725
)
   
16,616
 
                 
CASH, at the beginning of the period
   
15,173
     
4,198
 
                 
CASH, at the end of the period
 
$
1,448
   
$
20,814
 
                 
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
 
$
169,783
   
$
162,946
 
Beneficial conversion discount on convertible note payable
 
$
169,783
   
$
162,946
 
Conversion of convertible notes payable
 
$
33,220
   
$
60,000
 
Cancellation of treasury shares
  $
36
    $
 
Common stock issued for services
 
$
    $
300,000
 
Deposit on purchase of fixed assets included in accounts payable
 
$
5,400,000
   
$
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 

GREEN TECHNOLOGY SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2015
 
Note 1. General Organization and Business
 
Green Technology Solutions, Inc. (“GTSO”, “we”, “us”, “our” or the “Company”) was incorporated as XCL Sunrise, Inc. in Delaware on June 12, 2010. 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 July 28, 2014, the Company reincorporated from Delaware to Nevada. Our principal executive offices are at 2880 Zanker Road, Suite 203, San Jose, CA. Our year-end is December 31.
 
GTSO is in the business of 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. The corporate mission is to support the health and wellness sub-market of medical cannabis.
 
Note 2. Going Concern
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the six months ended June 30, 2015, the Company had a net loss of $473,418 and negative cash flow from operating activities of $123,508. As of June 30, 2015, the Company had negative working capital of $1,085,756. Management does not anticipate having positive cash flow from operations in the near future.
 
These factors raise a substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
 
The Company does not have the resources at this time to repay its credit and debt obligations, make any payments in the form of dividends to its shareholders or implement its business plan. Without additional capital, the Company will not be able to remain in business.
 
Management has plans to address the Company’s financial situation as follows:
 
In the near term, management plans to continue to focus on raising the funds necessary to implement the Company’s business plan. Management will continue to seek out debt financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that lenders will continue to advance capital to the Company or that the new business operations will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raise doubts about the Company’s ability to continue as a going concern.
 
In the long term, management believes that the Company’s projects and initiatives will be successful and will provide cash flow to the Company, which will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long-term viability depends on its ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation of its business operations, and the ability of the Company to achieve adequate profitability and cash flows from operations to sustain its operations.
 
Note 3. Summary of Significant Accounting Policies
 
Basis of presentations
 
The consolidated financial statements and related disclosures have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).
 
 
Interim Financial Statements
 
The accompanying these unaudited financial statements have been prepared in accordance with 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, 2014 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 six month period ended June 30, 2015 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2015.
 
Consolidated Financial Statements
 
The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries from the date of their formations. Significant intercompany transactions have been eliminated in consolidation.
 
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 $1,448 and $15,173 at June 30, 2015 and December 31, 2014, respectively.
 
Revenue Recognition
 
The Company follows ASC 605, Revenue Recognition recognizing 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.
 
Common Stock
 
The Company records common stock issuances when all of the legal requirements for the issuance of such common stock have been satisfied.
 
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 June 30, 2015 or December 31, 2014.
 
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.
 
 
In periods in which a net loss has been incurred, all potentially dilutive common shares are considered anti-dilutive and thus are excluded from the calculation. The Company’s convertible debt is considered anti-dilutive due to the Company’s net loss for the six months ended June 30, 2015 and 2014. As a result, the Company did not have any potentially dilutive common shares for those periods. At June 30, 2015, the Company had 125,240,095 potentially issuable shares upon the conversion of convertible notes payable and interest.
 
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.
 
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 June 30, 2015. 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.
 
Beneficial Conversion Feature
 
Beneficial conversion feature is a non-detachable conversion feature that is in the money at the commitment date. The Company follows the guidance of ASC Subtopic 470-20 Debt with Conversion and Other Options to evaluate as to whether beneficial conversion feature exists. Pursuant to Section 470-20-30 an embedded beneficial conversion feature recognized separately under paragraph 470-20-25-5 shall be measured initially at its intrinsic value at the commitment date (see paragraphs 470-20-30-9 through 30-12) as the difference between the conversion price (see paragraph 470-20-30-5) and the fair value of the common stock or other securities into which the security is convertible, multiplied by the number of shares into which the security is convertible. When the Company issues an debt or equity security that is convertible into common stock at a discount from the fair value of the common stock at the date the debt or equity security counterparty is legally committed to purchase such a security (Commitment Date), a beneficial conversion charge is measured and recorded on the Commitment Date for the difference between the fair value of the Company’s common stock and the effective conversion price of the debt or equity security. If the intrinsic value of the beneficial conversion feature is greater than the proceeds allocated to the debt or equity security, the amount of the discount assigned to the beneficial conversion feature is limited to the amount of the proceeds allocated to the debt or equity security.
 
 
Commitments and Contingencies
 
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. There are no known commitments or contingencies as of June 30, 2015 and December 31, 2014.
 
Subsequent events
 
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.
 
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. Investment in Elevated Industries
 
On December 15, 2014, we signed in a profit participation agreement with Elevated Industries Inc. (“Elevated”), a Canadian corporation. The agreement calls for the Company to contribute up to US$75,000, at its sole discretion. As of June 30, 2015, we have contributed $35,000 toward this joint venture. These contributions were recorded in impairment expense due to the lack of current revenue and no indications of future revenue.
 
Note 5. Advances
 
During the six months ended June 30, 2015, Vista View Ventures, Inc. advanced $169,783 to the Company for working capital. These advances are non-interest bearing and payable on demand. During the same period, the Company refinanced $169,783 of the advances into convertible notes payable with Vista View Ventures, Inc. As of June 30, 2015 and December 31, 2014, advances in the amount of $0 and $0, respectively, are included in current liabilities on the consolidated balance sheets.
 
During the six months ended June 30, 2015, we recognized imputed interest expense of $2,064 on these advances.
 
Note 6. Deposit for Clean Room
 
On March 4, 2015, the Company signed an asset purchase agreement with SRN Properties Corporation (“SRN Properties”) to acquire an approximately 1,300 square foot Class 5 clean room (the “Clean Room”). The Company expects to install the Clean Room in Colorado, where it will serve as a center for hygienic testing and quality control services to cannabis growers and retailers. The agreement calls for GTSO to pay a total of $2,500,000 for the clean room with $250,000 to be paid in cash installments and the remaining $2,250,000 payable by the issuance of 3,000,000 shares of common stock of the Company. As of June 30, 2015, we have made cash payments of $50,000 and issued 3,000,000 shares of our common stock in satisfaction of this requirement. As of June 30, 2015, the remaining cash owed to SRN Properties of $200,000 has been recorded as accounts payable to related party on the balance sheet. SRN Properties was not a related party prior to the acquisition; however, it is a significant shareholder after the acquisition. For accounting purposes, the shares issued for the purchase of the Clean Room were valued at $5,400,000 based on the fair market value of the stock on the date the agreement was signed. The Company does not have the right to install and begin using the clean room until the purchase price is paid in full. As a result, the purchase price has been recorded as a deposit for the purchase of fixed assets on the balance sheet.
 
The 3,000,000 shares of common stock issued for the purchase of the clean room will be exchanged in three tranches of 1,000,000 shares each for a number of shares with a total value based on the 20-day volume weighted average price (as defined in the agreement) of $750,000 for each tranche. The exchange dates are (1) the later of 60 days following the closing or the date the registration statements is declared effective, (2) the end of the sixth months following the closing date, and (3) the end of the eighth month following the closing date.
 
 
We are required to prepare and file a registration statement with the Securities and Exchange Commission to register the shares underlying this agreement within 30 days after the signing of the agreement and to use our best efforts to cause that registration statement to be declared effective within 270 days.
 
Note 7. Related Party
 
As of June 30, 2015, the Company owes $200,000 to SRN Properties for the purchase of the Clean Room. SRN Properties is a significant shareholder of the Company as a result of the transaction discussed in Note 6.
 
Note 8. Convertible Notes Payable
 
Convertible notes payable consisted of the following at June 30, 2015 and December 31, 2014:
 
   
June 30,
2015
   
December 31,
2014
 
Convertible note 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.
  $ 13,45     $ 12,808  
Convertible note 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.
    6,896       6,567  
Convertible note 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 per share. This note is in default.
    64       62  
Convertible note 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 per share. This note is in default.
    1,147       5,999  
Convertible note 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 per share.
    126,820       136,969  
Convertible note 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 per share.
    312,310       312,310  
Convertible note dated June 30, 2014, bearing interest at 10% per annum, matures on June 30, 2016 and convertible into shares of common stock at $0.01 per share.
    162,946       162,947  
Convertible note dated December 31, 2014, bearing interest at 10% per annum, matures on December 31, 2016 and convertible into shares of common stock at $2.00 per share.
    202,160       202,160  
Convertible note dated March 31, 2015, bearing interest at 10% per annum, maturing on March 31, 2017, and convertible into shares of common stock at $1.10 per share.
    87,970        
Convertible note dated June 30, 2015, bearing interest at 10% per annum, maturing on June 30, 2017, and convertible into shares of common stock at $0.15 per share.
    81,813        
Total convertible notes payable
  $ 995,577     $ 839,822  
                 
Less: current portion of convertible notes payable
    (623,634 )     (474,716 )
Less: discount on noncurrent convertible notes payable
    (358,018 )     (355,753 )
Convertible notes payable, net of discount
  $ 13,925     $ 9,353  
 
All principal along with accrued interest is payable on the maturity date. The notes are convertible into common stock at the option of the holder. The holder of the notes cannot convert the notes into shares of common stock if that conversion would result in the holder owning more than 4.9% of the outstanding stock of the Company.
 
 
Advances Refinanced into Convertible Promissory Notes
 
During the three months ended June 30, 2015, the Company has signed Convertible Promissory Notes that refinance non-interest bearing advances into convertible notes payable. The Convertible Promissory Notes bear interest at 10% per annum and are payable along with accrued interest. The Convertible Promissory Note and unpaid accrued interest are convertible into common stock at the option of the holder.
 
Date Issued
 
Maturity Date
 
Interest Rate
 
Conversion Rate
   
Amount of Note
   
Beneficial Conversion Feature
 
March 31, 2015
 
March 31, 2017
    10 %   $ 1.10     $ 87,970     $ 87,970  
June 30, 2015
 
June 30, 2017
    10 %     0.15       81,813       81,813  
                        $ 169,783     $ 169,783  
 
Conversions to Common Stock
 
During six months ended June 30, 2015, the holders of the Convertible Note Payable dated April 1, 2013 elected to convert principal and accrued interest in the amounts show below into share of common stock at a rate of $0.01 per share. On the conversion date, the unamortized discount related to the principal amount converted was immediately amortized to interest expense. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement that provided for conversion.
 
Date
 
Amount Converted
   
Number of Shares Issued
   
Discount
Amortized
 
January 12, 2015
  $ 300       30,000     $  
January 14, 2015
    300       30,000        
January 27, 2015
    320       32,000        
February 6, 2015
    350       35,000        
February 16, 2015
    350       35,000        
February 16, 2015
    350       35,000        
February 16, 2015
    350       35,000        
February 26, 2015
    400       40,000        
February 26, 2015
    400       40,000        
March 11, 2015
    1,900       190,000        
April 1, 2015
    2,000       200,000        
April 13, 2015
    2,000       200,000        
April 28, 2015
    2,300       230,000        
May 5, 2015
    2,300       230,000        
May 22, 2015
    2,500       250,000        
June 2, 2015
    2,500       250,000        
June 16, 2015
    2,800       280,000        
June 23, 2015
    2,900       290,000        
June 25, 2015
    1,800       180,000        
June 26, 2015
    1,400       140,000        
June 29, 2015
    1,000       100,000        
June 30, 2015
    2,800       280,000        
Total
  $ 31,320       3,132,000     $  
 
During six months ended June 30, 2015, the holders of the Convertible Note Payable dated June 30, 2013 elected to convert principal and accrued interest in the amounts show below into share of common stock at a rate of $0.01 per share. On the conversion date, the unamortized discount related to the principal amount converted was immediately amortized to interest expense. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement that provided for conversion.
 
Date
 
Amount Converted
   
Number of Shares Issued
   
Discount
Amortized
 
March 12, 2015
  $ 1,900       190,000     $  
Total
  $ 1,900       190,000     $  
 
 
Note 9. Stockholders’ Equity
 
Conversion of shares
 
During the six months ended June 30, 2015, we issued 3,322,000 shares as a result of the conversion of convertible promissory notes of $33,220. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement that provided for conversion.
 
Discount on Beneficial Conversion Feature of Convertible Notes Payable
 
During the year the company ended June 30, 2015 the Company issued convertible notes payable. At the time of the conversion, we recorded a discount to convertible notes payable to reflect the beneficial conversion feature of the note.
 
Date Issued
 
Maturity Date
 
Interest Rate
 
Conversion Rate
   
Amount of Note
   
Beneficial Conversion Feature
 
March 31, 2015
 
March 31, 2017
    10 %   $ 1.10     $ 87,970     $ 87,970  
June 30, 2015
 
June 30, 2017
    10 %     0.15       81,813       81,813  
                        $ 169,783     $ 169,783  
 
The Company evaluated the application of ASC 470-50-40/55, Debtor’s Accounting for a Modification or Exchange of Debt Instrument as it applies to the note listed above and concluded that the revised terms constituted a debt modification rather than a debt extinguishment because the present value of the cash flow under the terms of the new instrument was less than 10% from the present value of the remaining cash flows under the terms of the original note. No gain or loss on the modifications was required to be recognized.
 
The Company evaluated the terms of the new note in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock and determined that the underlying common stock is indexed to the Company’s common stock. The Company determined that the conversion features did not meet the definition of a liability and therefore did not bifurcate the conversion feature and account for it as a separate derivative liability. The Company evaluated the conversion feature for a beneficial conversion feature. The effective conversion price was compared to the market price on the date of the note and was deemed to be less than the market value of underlying common stock at the inception of the note. Therefore, the Company recognized beneficial conversion features as show in the table above. The beneficial conversion features were recorded as an increase in additional paid-in capital and a discount to the Convertible Notes Payable. Discounts to the Convertible Notes Payable are amortized to interest expense over the life of the note.
 
Imputed Interest
 
During six months ended June 30, 2015 and 2014, we recognized imputed interest of $2,064 and $5,255 as an increase to shareholders’ equity.
 
Shares Issued to Purchase Fixed Assets
 
On March 13, 2015, we issued 3,000,000 shares of common stock, pursuant to the terms to acquire a class 5 clean room (See footnote 6). These shares are valued at $5,400,000. We are required to prepare and file a registration statement with the Securities and Exchange Commission to register the shares underlying this agreement within 30 days after the Closing Date and to use its best efforts to cause that registration statement to be declared effective within 270 days.
 
 
Note 10. Subsequent Events
 
On July 8, 2015, the holder of the convertible promissory note dated June 30, 2013, converted $2,270 of principal and accrued interest into 227,000 shares of common stock, at a conversion rate of $0.01 per share.
 
On July 15, 2015, the holder of the convertible promissory note dated June 30, 2013, converted $2,250 of principal and accrued interest into 225,000 shares of common stock, at a conversion rate of $0.01 per share.
 
On July 16, 2015, the holder of the convertible promissory note dated June 30, 2013, converted $1,750 of principal and accrued interest into 175,000 shares of common stock, at a conversion rate of $0.01 per share.
 
On July 17, 2015, the holders of the convertible promissory note dated June 30, 2013, converted $7,500 of principal and accrued interest into 750,000 shares of common stock, at a conversion rate of $0.01 per share.
 
On July 21, 2015, the holders of the convertible promissory note dated June 30, 2013, converted $3,350 of principal and accrued interest into 335,000 shares of common stock, at a conversion rate of $0.01 per share.
 
On July 31, 2015, the holders of the convertible promissory note dated June 30, 2013, converted $3,100 of principal and accrued interest into 310,000 shares of common stock, at a conversion rate of $0.01 per share.
 
On August 5, 2015, the holders of the convertible promissory note dated June 30, 2013, converted $1,370 of principal and accrued interest into 137,000 shares of common stock, at a conversion rate of $0.01 per share.
 
On August 13, 2015, the holders of the convertible promissory note dated June 30, 2013, converted $3,280 of principal and accrued interest into 328,000 shares of common stock, at a conversion rate of $0.01 per share.
 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Overview
 
Green Technology Solutions, Inc. (“GTSO”, “we”, “us”, “our” or the “Company”) was incorporated as XCL Sunrise, Inc. in Delaware on June 12, 2010. 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 July 28, 2014, the Company reincorporated from Delaware to Nevada. Our principal executive offices are at 2880 Zanker Road, Suite 203, San Jose, CA. Our year-end is December 31.
 
GTSO is in the business of 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. The corporate mission is to support the health and wellness sub-market of medical cannabis.
 
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, 2014 on Form 10-K.
 
Results of Operations
 
Six months ended June 30, 2015 compared to the six months ended June 30, 2014.
 
General and Administrative Expenses
We incurred general and administrative expenses of $248,390 and $501,384 for the six months ended June 30, 2015 and 2014, respectively. During the three months ended March 31, 2014, we had incurred stock compensation expense of $300,000, whereas we had no stock compensation expense during the three months ended March 31, 2015. This was offset by a $67,825 increase in professional fees and a $9,802 increase in expenses related to investor relations.
 
Interest Expense
Interest expense increased from $118,724 for the six months ended June 30, 2014 to $215,028 for the six months ended  June 30, 2015. Interest expense for the six months ended June 30, 2015 included $169,294 for amortization of the discount on convertible notes, compared to $89,618 for the comparable period of 2014. The interest expense on our convertible notes increased by $19,817, due to higher average balances on these notes. This was offset by a small decrease in imputed interest on advances that the company received.
 
Investment Impairment
We recorded $10,000 impairment on our Elevated Industries investment during the six months ended June 30, 2015, versus $0 during the comparable period of 2014.
 
Net Loss
We incurred a net loss of $473,418 for the six months ended June 30, 2015 as compared to $620,108 for the comparable period of 2014. The decrease in the net loss was primarily due to the lack of stock compensation expense during the current year, offset by an increase in interest expense.
 
 
Three months ended June 30, 2015 compared to the three months ended June 30, 2014.
 
General and Administrative Expenses
We recognized general and administrative expenses in the amount of $105,383 and $95,550 for the three months ended June 30, 2015 and ended 2014, respectively. The $9,833 increase was driven by an increase in professional fees.
 
Interest Expense
Interest expense increased from $42,488 for the three months ended June 30, 2014 to $124,560 for the three months ended June 30, 2015. This was primarily due to amortization of the discount on our convertible notes, which increased from $26,973 last year to $100,210 this year. Interest expense on our convertible notes increased from $11,836 to $23,010, as we had higher average note balances during the current year. This is offset to by a small reduction in imputed interest on advances that we received.
 
Investment Impairment
We recorded $5,000 impairment on our Elevated Industries investment during the three months ended June 30, 2015, versus $0 during the comparable period of 2014.
 
Net Loss
We incurred a net loss of $234,943 for the three months ended  June 30, 2015 as compared to $138,038 for the comparable period of 2014. The increase in the net loss was primarily driven by increases to professional fees and interest expense.
 
Liquidity and Capital Resources
 
At June 30, 2015, we had cash on hand of $1,448. The company has negative working capital of $1,085,756. Net cash used in operating activities for the six months ended June 30, 2015 was $123,508. Cash on hand is adequate to fund our operations for less than one month. 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 June 30, 2015.
 
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
 
This item is not applicable to smaller reporting companies.
 
 
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 June 30, 2015. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2015, 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.
 
1.  
As of June 30, 2015, 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.
 
2.  
As of June 30, 2015, 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.
 
 

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
 
This item is not applicable to smaller reporting companies.
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
There were no sales of unregistered equity securities during the six months ended June 30, 2015.
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
The Company has not defaulted upon senior securities.
 
ITEM 4. MINE SAFETY DISCLOSURES
 
This item is not applicable.
 
ITEM 5. OTHER INFORMATION
 
None.
 
ITEM 6. EXHIBITS
 
 
(1)
Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission 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
 
 
 
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: August 19, 2015
BY: /s/ Wallace Browne
 
Wallace Browne
 
President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer and Director
 
 
 

 
 
20