UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

  

FORM 10-Q

 

 

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

 

For the quarterly period ended March 31, 2016

 

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

 

Commission File No. 333-120490

 

B GREEN INNOVATIONS, INC.

         (Exact name of the Registrant as specified in Charter)

 

New Jersey	20-1862731
(State of Incorporation)	(I.R.S. Employer ID Number)
750 Highway 34, Matawan, New Jersey	07747
(Address of Principal Executive Offices)	(Zip Code)
Registrant’s Telephone No. including Area Code: 732-696-9333

 

Securities registered under 12(b) of the Exchange Act:  None

 

Securities registered under Section 12(g) of the Exchange Act: None

 

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 ☐  No ☒

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Act).  Yes ☐  No ☒

 

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 ☐  No ☒

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

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

                                        

Indicate the number of shares outstanding of the issuer's common stock, as of the latest practical date: 336,354,321 shares of Class A Common stock, no par value per share, and 134,410 shares of Class B common, par value of $.01 per share, as of May 9, 2015.

 

B GREEN INNOVATIONS, INC

TABLE OF CONTENTS

 

		Page
Part I – Financial Information
Item 1.	Condensed Financial Statements (Unaudited):
	Condensed Balance Sheets – March 31, 2016 and December 31, 2015	3
	Condensed Statements of Operation –Three months ended March 31, 2016 and 2015	4
	Condensed Statements of Cash Flows – Three months ended March 31, 2016 and 2015	5
	Notes to Condensed Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Result of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	20
Part II – Other Information
Item 1.	Legal Proceedings	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	20
Item 4.	Mine Safety Disclosures	20
Item 6.	Exhibits	20
	Signatures	21

 

EXPLANATORY NOTE

These Financial Statements are part of the Quarterly Report on Form 10-Q for the three months ended March 31, 2016 and do not contain financial statements reviewed or audited by an independent registered public accounting firm for the three months ended March 31, 2016 or the fiscal year ended December 31, 2015.

PART I - FINANCIAL INFORMATION

 

Item 1.  Condensed Financial Statements

 

B GREEN INNOVATIONS, INC.

CONDENSED BALANCE SHEETS

(Unaudited)

 

ASSETS		March 31,				December 31,
		2016				2015
Current assets:
Cash and cash equivalents		$	101,819			$	134,727
Accounts receivable			1,427				2,538
Inventories			9,715				6,733
Prepaid expenses and other current assets			2,283				3,290
Total current assets			115,244				147,288
Property, plant and equipment, net			—				—
Intangible assets, net of accumulated amortization			28,002				28,543
Total assets		$	143,246			$	175,831
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses		$	372,471			$	356,115
Due to related party			840,536				785,314
Convertible notes payable, net of unamortized debt discount of $35,208 and $15,260			357,050				161,418
Derivative liabilities			356,288				330,176
Total current liabilities			1,926,345				1,633,023
Long term convertible notes payable, net of unamortized debt discount of $0 and $30,229			—				124,647
Long term derivative liabilities			—				21,771
Total liabilities			1,926,345				1,779,441
Stockholders' equity (deficit):
Series A 3% Preferred Stock			761,922				761,922
Common stock:
Class A Common Stock			2,319,669				2,298,695
Class B Common Stock			1,344				1,344
Class C Common Stock			—				—
Class A Common Stock Subscriptions			81,570				81,570
Additional paid-in capital			10,617,245				10,617,245
Accumulated deficit			(15,564,849	)			(15,364,386	)
Total stockholders' equity (deficit)			(1,783,099	)			(1,603,610	)
Total liabilities and stockholders' equity (deficit)		$	143,246			$	175,831

 

See accompanying notes to condensed financial statements.

 

 

B GREEN INNOVATIONS, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three months Ended
		March 31, 2016				March 31, 2015
Net sales		$	12,576			$	20,222
Cost of sales			6,336				10,972
Gross profit			6,240				9,250
Operating expenses:
General and administrative expenses			93,126				134,967
Impairment of assets			—				—
Total operating expenses			93,126				134,967
Loss from operations			(86,886	)			(125,717	)
Other income (expense):
Interest			12				16
Amortization of debt discount			(4,341	)			(21,831	)
Interest expense			(17,855	)			(8,777	)
Loss on valuation of derivatives			(79,925	)			(118,497	)
Settlement expense			(11,468	)			(7,020	)
Total other income (expense)			(113,577	)			(156,109	)
Loss from operations before provision for income taxes			(200,463	)			(281,826	)
Provision for income taxes			—				—
Net loss		$	(200,463	)		$	(281,826	)
Basic and diluted loss per common share		$	(0.00	)		$	(0.00	)
Weighted average shares outstanding
Basic and diluted			194,190,407				111,684,629

 

See accompanying notes to condensed financial statements

 

 

B GREEN INNOVATIONS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Three months Ended
		March 31, 2016				March 31, 2015
Cash flows from operating activities:
Net loss		$	(200,463	)		$	(281,826	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Amortization of intangibles			541				541
Amortization of debt discounts			4,341				21,831
Settlement expense			11,468				7,020
Loss on valuation of derivative liabilities			79,925				118,497
Changes in assets and liabilities:
Decrease in accounts receivable			1,111				2,425
(Increase) in inventories			(2,982	)			(8,260	)
Decrease in prepaid expenses			1,007				2,337
Increase in accounts payable and accrued liabilities			16,922				27,086
Increase in amounts due to related parties			55,222				52,389
Net cash (used in) operating activities			(32,908	)			(57,960	)
Cash flows from financing activities:
Proceeds from common stock subscriptions			—				38,391
Proceeds from new debt issued			—				133,750
Net cash (used in) financing activities			—				172,141
Net increase (decrease) in cash and cash equivalents			(32,908	)			114,181
Cash and cash equivalents at beginning of period			134,727				99,407
Cash and cash equivalents at end of period		$	101,819			$	213,588
During the period, cash was paid for the following:
Taxes paid		$	—			$	—
Interest paid		$	—			$	—

 

See accompanying notes to condensed financial statements.

 

 

B GREEN INNOVATIONS, INC.

CONDENSED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

 

Supplemental Schedule of Non-Cash Financing Activities:

 

For the Three months Ended March 31, 2016:

 

a)

The Company issued an aggregate of 55,337,318 shares of Class A Common Stock upon the conversion of $9,506 of debt owed to various debtors of the Company pursuant to various Assignment of Debt Agreements and Convertible Promissory Notes. The market value of the shares was $20,974. The difference between the market value and the debt reduction of $11,468 was charged to settlement expense.

 

 

For the Three months Ended March 31, 2015:

 

b)

The Company was notified that a portion of the principal and accrued interest on the May 15, 2013 Promissory Notes was assigned to another unrelated party and concurrent with the assignment, the Company consented to add conversion rights to the new owner.

 

c)

The Company issued 430,849 shares of Class A Common Stock upon the conversion of $5,000 of debt owed to a debtor of the Company pursuant to an Assignment of Debt Agreement. The market value of the shares was $12,020. The difference between the market value and the debt reduction of $7,020 was charged to settlement expense.

 

 

 

 

See accompanying notes to condensed financial statements.

 

 

B GREEN INNOVATIONS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

March 31, 2016 and 2015

 

Note 1 Background

 

B Green Innovations, Inc., a Matawan, New Jersey-based corporation, (OTC Pink® marketplace: BGNN), formerly iVoice Technology, Inc., (“B Green Innovations” or the “Company”) was incorporated under the laws of New Jersey on November 10, 2004 as a wholly owned subsidiary of iVoice, Inc. (“iVoice”).  In May 2008, the Company formed B Green Innovations, Inc. (“B Green”), a wholly-owned subsidiary to commercialize its “green” technology platforms.

 

On November 17, 2009, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), B Green Innovations, Inc., a wholly owned subsidiary of iVoice Technology, Inc., merged into iVoice Technology, Inc.

 

On July 28, 2009, the Board of Directors and shareholders through written consent representing a majority of the total voting Class A and Class B Common stock voted to change the name of the Company to B Green Innovations, Inc.  On November 20, 2009, the Company filed an Amendment to the Certificate of Incorporation with the State of New Jersey to officially change the name of the Company.

 

Note 2 Business Operations

 

The B Green Innovations, Inc. ("B Green"), "Go Green" mission from its inception, is to create a "Green" company for the development of solutions to eliminate waste from the world's environment. B Green offers consumers a realistic and necessary solution to the problem of waste around the world. We believe that to truly have an impact on the planet, one must be committed to the environment and seek out environmentally-friendly products. 

The first technology was to create new products from recycled tire rubber. EcoPod® and VibeAway® address important environmental concerns and problems facing the planet today. EcoPod® and VibeAway® are 100% recycled rubber-based products that can be utilized as support pads under any units that vibrate and make noise, including washing machines, dryers, compressors, commercial condensers, and many other units that advantageously benefit from sound and vibration control. In addition, we announced that we had filed a new patent application for a process described as “Recycled Tire Pod with Appliance Recess Guide.”

Additionally, the Company released its 100% Degradable / Biodegradable Compactor Bags. These bags include oxo-biodegradable additive using the latest technology that supports the 3 R’s of Packaging Reduce, Reuse, Recycle and provides a fourth R, Remove. Independent Scientific Testing show that plastics incorporated with an additive called Renatura™ will degrade and then fully biodegrade, without leaving behind harmful residues in the soil.

These oxo-biodegradable plastic products are scientifically proven to be non-toxic and are FDA compliant, meaning they are safe for food packaging applications and have been awarded approved food film contact ‘no migration’ status. Regular plastic bags can take up to 100 years to break down causing plastic pollution and harm to both domestic and wild life. Standard plastics are filling our landfills and greatly impacting our planet. Plastics incorporating this additive in the presence of oxygen disappear when exposed to UV light or thermal heat. Our product is designed to allow plastics to degrade like a leaf, slowly yielding CO2 (which through photosynthesis becomes oxygen), water, bio-waste, and mineral salts that condition the soil in the process.

In 2013, the Company started selling its Wrap-N-Save product through our website BGREENINNOVATIONS.COM. The Wrap-N-Save product is a plastic film used for sealing paint trays, paint brushes, rollers and sprayer in-feed. Its versatile size allows it to fit any size brush, roller or paint tray.

In 2014, the Company announced the addition of two new products available to our distributors and direct customers. The 1st product is the Ice Pack Sack which is specifically designed to provide a simple, comfortable, and effective method for applying Hot and Cold Therapy.  Hot and Cold Therapy is recognized medical treatment for everyday minor injuries.  It provides relief from sprains, strains and common muscle pain. The 2^nd product is the Sock Pocket Organizer which holds paired socks in place through the washing-machine and dryer cycles. The Sock Pocket Organizer is a mesh bag that has 9 individual pockets with zipper closures.

In May 2014, the Company was engaged by two developing companies (the “Consultee”) to provide consulting services related to management, organization, short and long term strategic planning, and advice and recommendations regarding corporate financing. According to the Consulting Agreements, a) for services related to raising funds in the form of debt and/or equity the Company will receive 5% of the gross proceeds plus 2% of the Consultee’s common stock; and b) for all other services provided the Company will receive 1% of the sales of the company for 7 years from the product release/launch date plus 1% of the Consultee’s common stock.

The Company continues to evaluate additional products to its product line as well as expanding its distribution channels.

Note 3 Going Concern

 

The accompanying condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern.

 

As of March 31, 2016, the Company had a net operating loss and negative working capital.  These matters raise substantial doubt about the Company’s ability to continue as a going concern. Therefore, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn, is dependent upon the Company’s ability to raise capital and/or generate positive cash flow from operations.

 

Management plans to increase the development, manufacture, and distribution of “green” products to generate a positive cash flow. However, these plans are dependent upon obtaining additional capital. There can be no assurance that the Company will be able to obtain the necessary capital, and achieve its growth objectives. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

 

Note 4 Summary of Significant Accounting Policies

 

a)    Basis of Presentation

 

The accompanying condensed unaudited interim financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The condensed financial statements and notes are presented as permitted on Form 10-Q and do not contain information included in the Company's annual statements and notes. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the December 31, 2015 financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these condensed financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year. These results are not necessarily indicative of the results to be expected for the full year.

 

These condensed unaudited financial statements reflect all adjustments, including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the operations and cash flows for the periods presented.

 

b)    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.

 

c)    Revenue Recognition

 

For the “green” products revenues are recognized at the time of shipment to, or acceptance by customer, provided title and risk of loss is transferred to the customer. Provisions, when appropriate, are made where the right to return exists.

 

Shipping and handling costs charged to customers are classified as revenue, and the shipping and handling costs incurred are included in cost of goods sold.

 

d)    Product Warranties

 

The Company estimates its warranty costs based on historical warranty claims experience in estimating potential warranty claims. Management has determined that warranty costs are immaterial and has not included an accrual for potential warranty claims. Presently, costs related to warranty coverage are expensed as incurred. Warranty claims are reviewed quarterly to verify that warranty liabilities properly reflect any remaining obligation based on the anticipated expenditures over the balance of the obligation period.

 

e)    Research and Development Costs

 

Research and development costs are charged to expense when incurred. The Company has not incurred any research and development costs for the three months ended March 31, 2016 and 2015.

 

f)    Advertising Costs

 

Advertising costs are expensed as incurred and are included in selling expenses. The Company has not incurred any advertising costs for the three months ended March 31, 2016 and 2015.

 

g)    Cash and Cash Equivalents

 

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. There were no cash equivalents at March 31, 2016 and December 31, 2015. The Company maintains cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to federally insured limits. At times balances may exceed FDIC insured limits. The Company has not experienced any losses in such accounts.

 

h)   Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable and cash.  As of March 31, 2016 the Company believes it has no significant risk related to its concentration within its accounts receivable.

 

j)    Accounts Receivable

 

Accounts receivable are non-interest bearing obligations due under normal trade terms. Senior management reviews accounts receivable on a monthly basis to determine if any receivables will be potentially uncollectible. Historical bad debts and current economic trends are used in evaluating the allowance for doubtful accounts. The Company includes any accounts receivable balances that are determined to be uncollectible, along with a general reserve, in its overall allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on the information available, the Company believes its allowance for doubtful accounts as of March 31, 2016 and December 31, 2015 is adequate.

 

j)   Property and Equipment

 

Property and equipment is stated at cost. Depreciation is computed using the straight-line method based upon the estimated useful lives of the assets, generally five to seven years. Maintenance and repairs are charged to expense as incurred.

 

k)   Intangible Assets

 

Registration and maintenance costs associated with the filing and registration of patents are prepaid and amortized over the remaining life of the patent, not to exceed 20 years. Costs associated with such patents are not approved or abandoned.

 

l)   Income Taxes

 

The Company accounts for income taxes using the asset and liability method described in FASB ASC 740. Deferred tax assets arise from a variety of sources, the most significant being: a) tax losses that can be carried forward to be utilized against profits in future years; b) expenses recognized in the books but disallowed in the tax return until the associated cash flow occurs; and c) valuation changes of assets which need to be tax effected for book purposes but are deductible only when the valuation change is realized.

 

Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when such differences are expected to reverse.  The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefit, which is not more likely than not to be realized. In assessing the need for a valuation allowance, future taxable income is estimated, considering the realization of tax loss carryforwards. Valuation allowances related to deferred tax assets can also be affected by changes to tax laws, changes to statutory tax rates and future taxable income levels. In the event it was determined, that the Company would not be able to realize all or a portion of our deferred tax assets in the future, we would reduce such amounts through a charge to income in the period in which that determination is made. Conversely, if we were to determine that we would be able to realize our deferred tax assets in the future in excess of the net carrying amounts, we would decrease the recorded valuation allowance through an increase to income in the period in which that determination is made.  In its evaluation of a valuation allowance, the Company takes into account existing contracts and backlog, and the probability that options under these contract awards will be exercised as well as sales of existing products. The Company prepares profit projections based on the revenue and expenses forecast to determine that such revenues will produce sufficient taxable income to realize the deferred tax assets.

 

The Company adopted FASB ASC 740-10-50, Accounting for Uncertainty in Income Taxes. ASC 740-10-50 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740-10 requires that the Company determine whether the benefits of its tax positions are more-likely-than-not of being sustained upon audit based on the technical merits of the tax position. The Company recognizes the impact of an uncertain income tax position taken on its income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. 

 

Despite the Company’s belief that its tax return positions are consistent with applicable tax laws, one or more positions may be challenged by taxing authorities. Settlement of any challenge can result in no change, a complete disallowance, or some partial adjustment reached through negotiations or litigation.

 

Interest and penalties related to income tax matters, if applicable, will be recognized as income tax expense. During the three months ended March 31, 2016 and 2015, the Company did not incur any expense related to interest or penalties for income tax matters, and no such amounts were accrued as of March 31, 2016 and December 31, 2015.

 

m)     Fair Value of Financial Instruments

 

The carrying amounts reported in the balance sheets as of March 31, 2016 and December 31, 2015 for cash and cash equivalents, marketable securities, accounts receivable, inventories, prepaid expenses and other current assets, accounts payable and accrued expenses other current liabilities approximate the fair value because of the immediate or short-term maturity of these financial instruments.  The fair value of the debt approximates its carrying value at the stated discount rate of the debt to reflect recent market conditions.

 

n)     Long-Lived Assets

 

The Company assesses the recoverability of the carrying value of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future, undiscounted cash flows expected to be generated by an asset.  If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.  Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.  No impairment losses were recognized for the three months ended March 31, 2016 and 2015. 

 

o) Recent Accounting Pronouncements

There were various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's financial position, results of operations or cash flows.

Note 5 Earnings (Loss) Per Share

 

FASB ASC 260-10 requires the presentation of basic earnings per share ("basic EPS") and diluted earnings per share ("diluted EPS").

 

The Company’s basic income (loss) per common share is based on net income (loss) for the relevant period, divided by the weighted average number of common shares outstanding during the period.  Diluted income per common share is based on net income, divided by the weighted average number of common shares outstanding during the period, including common share equivalents, such as outstanding stock options and beneficial conversion of related party accounts. The computation of diluted loss per share for the three months ended March 31, 2016 and 2015 does not assume conversion, exercise or contingent exercise of warrants, and securities as they would have an anti-dilutive effect on the earnings resulting from the Company’s net loss position in that period.

 

		Three months Ended
		March 31, 2016				March 31, 2015
Basic net loss per share:
Net loss attributable to common stockholders		$	(200,463	)		$	(281,826	)
Weighted-average common shares outstanding			194,190,407				111,684,629
Basic net loss per share		$	(0.00	)		$	(0.00	)
Diluted net loss per share:
Net loss attributable to common stockholders		$	(200,463	)		$	(281,826	)
Weighted-average common shares outstanding			194,190,407				111,684,629
Incremental shares attributable to the common stock equivalents			—				—
Total adjusted weighted-average shares			194,190,407				111,684,629
Diluted net loss per share		$	(0.00	)		$	(0.00	)

 

Note 6 Intangible Assets

 

Intangible assets consist of patents pending in the amount of $28,002 and $28,543 for the periods ended March 31, 2016 and December 31, 2015. The Company recorded amortization expense of $541 for the three months ended March 31, 2016 and 2015. There was no additional impairment expense for the three months ended March 31, 2016.

 

Note 7 Promissory Notes Payable

On January 7, 2013, the Company executed a demand promissory note, with a value of $110,000, with an unrelated party to convert unpaid legal fees to a promissory note. The note will bear interest at the rate of prime plus 1.0% per annum, with a default interest rate of prime plus 2%, shall accrue interest monthly on the unpaid balance and shall be paid annually. Additional amounts may be advanced by the holder and added to the principal of the note and accrue interest from the date of the advance. At various time during 2013 and 2014, the Company was notified that the unpaid principal and accrued interest on this note was assigned to other unrelated parties and concurrent with the assignments, the Company consented to add conversion rights to the new owner. Under the terms of the Securities and Settlement Agreements, the new owners can convert amounts due into shares of Class A Common Stock at a conversion price of $.00005 (subsequently changed to $.50 per the reverse stock split) per shares and the ownership cannot exceed 9.99% at any time. As of December 31, 2015, the holder of the note has fully liquidated the principal balance and accrued interest on this note through the assignments of the note to other unrelated parties.

 

On May 15, 2013 the Company executed a demand convertible promissory note, with a value of $110,788, with an unrelated party to convert unpaid legal fees into various promissory notes. The notes will bear interest at the rate of prime plus 1.0% per annum, with a default interest rate of prime plus 2%, shall accrue interest monthly on the unpaid balance and shall be paid annually. Additional amounts may be advanced by the holder and added to the principal of the note and accrue interest from the date of the advance. Under the terms of these promissory notes, at the option of the note holder, prepayment of principal and interest can be converted into either (i) one share of Class B Common Stock of B Green Innovations, Inc., par value $.01, for each dollar owed, (ii) the number of shares of Class A Common Stock of B Green Innovations, Inc. calculated by dividing (x) the sum of the principal and interest that the note holder has requested to have prepaid by (y) eighty percent (80%) of the lowest issue price of Class A Common Stock since the first advance of funds under this Note, or (iii) payment of the principal of this Note, before any repayment of interest. The note holder is limited from beneficially owning more than 4.99% of the issued and outstanding shares of the Company’s Class A Common Stock. The Board of Directors of the Company maintains control over the issuance of shares and may decline the request for conversion of the repayment into shares of the Company. As of March 31, 2016, the holder has assigned an aggregate of $64,941 of this note to other unrelated parties. As of March 31, 2016, the principal balance on this note was $45,846 and accrued interest is $12,064.

 

On August 14, 2013, the Company executed a demand convertible promissory note, with a value of $6,000, with unrelated party to secure additional funding for the Company’s financing. The note will bear interest at the rate of prime plus 1.0% per annum, with a default interest rate of prime plus 2%, shall accrue interest monthly on the unpaid balance and shall be paid annually. Additional amounts, with an aggregate of $50,509 was advanced by the holder and added to the principal of the note and shall accrue interest from the date of the advance. Under the terms of the promissory note, at the option of the note holder, prepayment of principal and interest can be converted into either (i) one share of Class B Common Stock of B Green Innovations, Inc., par value $.01, for each dollar owed, (ii) the number of shares of Class A Common Stock of B Green Innovations, Inc. calculated by dividing (x) the sum of the principal and interest that the note holder has requested to have prepaid by (y) eighty percent (80%) of the lowest issue price of Class A Common Stock since the first advance of funds under this Note, or (iii) payment of the principal of this Note, before any repayment of interest. The note holder is limited from beneficially owning more than 4.99% of the issued and outstanding shares of the Company’s Class A Common Stock. The Board of Directors of the Company maintains control over the issuance of shares and may decline the request for conversion of the repayment into shares of the Company. As of March 31, 2016, the principal balance on the note was $56,509 and accrued interest is $5,882.

 

On October 1, 2013 the Company executed a demand convertible promissory note, with a value of $90,000, with an unrelated party to convert unpaid legal fees into various promissory notes. The notes will bear interest at the rate of prime plus 1.0% per annum, with a default interest rate of prime plus 2%, shall accrue interest monthly on the unpaid balance and shall be paid annually. Additional amounts may be advanced by the holder and added to the principal of the note and accrue interest from the date of the advance. Under the terms of these promissory notes, at the option of the note holder, prepayment of principal and interest can be converted into either (i) one share of Class B Common Stock of B Green Innovations, Inc., par value $.01, for each dollar owed, (ii) the number of shares of Class A Common Stock of B Green Innovations, Inc. calculated by dividing (x) the sum of the principal and interest that the note holder has requested to have prepaid by (y) eighty percent (80%) of the lowest issue price of Class A Common Stock since the first advance of funds under this Note, or (iii) payment of the principal of this Note, before any repayment of interest. The note holder is limited from beneficially owning more than 4.99% of the issued and outstanding shares of the Company’s Class A Common Stock. The Board of Directors of the Company maintains control over the issuance of shares and may decline the request for conversion of the repayment into shares of the Company. As of March 31, 2016, the principal balance on this note was $90,000 and accrued interest is $10,535.

 

At various times in 2013 and 2014, the Company consented to the assignments of the January 7, 2013 and the May 15, 2013 demand promissory notes, with an aggregate value of $118,000, to other unrelated parties. Pursuant to the terms of the various agreements, the new owners can convert amounts due into shares of Class A Common Stock at a conversion price of $.00005 (subsequently changed to $.50 per the reverse stock split) per shares and the ownership cannot exceed 9.99% at any time. During 2013 and 2014, the new owners converted $108,584 of this debt into approximately 10,136,371 (1,363,708,226 pre-reverse split plus 10,000,000 post split) shares of Class A Common Stock. As of March 31, 2016, the new owners still have an unpaid balance of $27,360, representing principal and accrued interest, of these notes.

 

On April 1, 2014, the Company executed an Original Issue Discount Convertible Promissory Note with an unrelated party to secure additional funding for the Company’s financing. The face amount of the note is $37,500 and the purchase price was $25,000. The debt discount of $12,500 was amortized monthly over the original term of the note. The note was due on March 28, 2015 and shall accrue late fees of 22% per annum on all overdue unpaid principal. After the maturity date, the holder of the note can convert amounts due for unpaid principal and accrued interest into shares of Class A Common Stock at a conversion price of $.00005 (subsequently changed to $.50 per the reverse stock split) per share and their ownership cannot exceed 4.99% at any time. As of March 31, 2016, the principal balance on the note was $37,500 and accrued interest was $8,340.

 

On January 15, 2015, the Company issued a 8% Convertible Redeemable Note to LG Capital Funding. Amounts due under this note are due on or before January 13, 2016. LG Capital Funding has the right to convert a portion or the entire outstanding principal into the Company's Class A Common Stock at a Conversion Price equal to sixty percent (60%) of the lowest closing bid price of the Common Stock during the twenty (20) trading days immediately preceding the Conversion Date. LG Capital Funding may not convert the note into shares of Class A Common Stock if such conversion would result in LG Capital Funding beneficially owning in excess of 9.9% of the then issued and outstanding shares of Class A Common Stock. During the three months ended March 31, 2016, the note holder converted $7,116 of debt and accrued interest into 35,420,651 shares of Class A Common Stock. As of March 31, 2016, the outstanding balance on this note was $72,200 and accrued interest was $9,587.

 

In accordance with ASC 815, "Derivatives and Hedging", the Company determined that the conversion feature of the LG Capital Funding note met the criteria of an embedded derivative, and therefore the conversion feature of this debenture needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 5.00%; expected dividend yield: 0%: expected life: 1 years; and volatility: 332.49%. The accounting guidance instructs that the conversion options are a derivative liability. As such, on the issue date, the Company recorded the conversion options as a liability of $128,588, recorded a debt discount of $78,750, and charged Other Expense - Loss on Valuation of Derivative for $49,838. For the three months ended March 31, 2016, the Company recorded a cumulative Loss on Valuation of Derivative in the amount of $43,544 on the fluctuation in the current market prices.

 

On March 16, 2015, the Company consented to the assignments of a portion of the May 15, 2013 demand promissory notes (see above), with an aggregate value of $55,394, to Tangiers Investment Group. Pursuant to the terms of the agreement, the new owners can convert amounts due into shares of Class A Common Stock at a Conversion Price equal to sixty percent (60%) of the lowest trading price of the Common Stock during the twenty (20) trading days immediately preceding the Conversion Date and the ownership cannot exceed 9.99% at any time. During 2015, the new owners converted an aggregate of $55,394 of this debt into 55,582,636 shares of Class A Common Stock. As of December 31, 2015, the new owners have fully liquidated the principal balance of this agreement.

 

On March 19, 2015, the Company issued a 10% Convertible Promissory Note to Tangiers Investment Group. Amounts due under this note are due on or before March 18, 2017. Tangiers Investment Group has the right to convert a portion or the entire outstanding principal into the Company's Class A Common Stock at a Conversion Price equal to sixty percent (60%) of the lowest trading price of the Common Stock during the twenty (20) trading days immediately preceding the Conversion Date. Tangiers Investment Group may not convert the note into shares of Class A Common Stock if such conversion would result in the owners beneficially owning in excess of 9.99% of the then issued and outstanding shares of Class A Common Stock. During the three months ended March 31, 2016, the note holder converted $2,390 of debt into 19,916,667 shares of Class A Common Stock. As of March 31, 2016, the outstanding balance on this note was $52,610 and accrued interest was $5,696.

 

In accordance with ASC 815, "Derivatives and Hedging", the Company determined that the conversion feature of the Tangiers Investment Group notes met the criteria of an embedded derivative, and therefore the conversion feature of these debentures needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 5.00%; expected dividend yield: 0%: expected life: 2 years; and volatility: 308.61%. The accounting guidance instructs that the conversion options are a derivative liability. As such, on the issue date, the Company recorded the aggregate conversion options as a liability of $234,143, recorded a debt discount of $110,394, and charged Other Expense - Loss on Valuation of Derivative for $123,749. For the three months ended March 31, 2016, the Company recorded a Loss on Valuation of Derivative in the amount of $28,507 on the fluctuation in the current market prices.

 

On December 15, 2015, the Company issued a 10% Convertible Note to JSJ Investments Inc. Amounts due under this note are due on or before December 15, 2016. JSJ Investments Inc. has the right to convert a portion or the entire outstanding principal into the Company's Class A Common Stock at a Conversion Price equal to 46% discount to the lowest trading price during the twenty (20) trading days to the date of Conversion. JSJ Investments Inc. may not convert the note into shares of Class A Common Stock if such conversion would result in the owners beneficially owning in excess of 4.99% of the then issued and outstanding shares of Class A Common Stock. As of March 31, 2016, the outstanding balance on this note was $12,500 and accrued interest was $366.

 

In accordance with ASC 815, "Derivatives and Hedging", the Company determined that the conversion feature of the JSJ Investments Inc. note met the criteria of an embedded derivative, and therefore the conversion feature of this debenture needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 5.00%; expected dividend yield: 0%: expected life: 1 years; and volatility: 197.44%. The accounting guidance instructs that the conversion options are a derivative liability. As such, on the issue date, the Company recorded the conversion options as a liability of $26,464, recorded a debt discount of $12,500, and charged Other Expense - Loss on Valuation of Derivative for $13,964. For the three months ended March 31, 2015, the Company recorded an additional Loss on Valuation of Derivative in the amount of $7,874 on the fluctuation in the current market prices.

 

Note 8 Related Party Transactions

 

On May 8, 2007, the Company executed a Security Agreement providing Jerome Mahoney, President and Chief Executive Officer of the Company, with a security interest in all of the assets of the Company to secure the promissory note dated August 5, 2005 and all future advances including, but not limited to, additional cash advances: deferred compensation, deferred expense reimbursement, deferred commissions and income tax reimbursement for the recognition of income upon the sale of common stock for the purpose of the holder advancing additional funds to the Company. This security interest expired in 2012, as the UCC Financing Amendment was never filed to continue the security interest of the creditor for the additional period provided by applicable law.

 

The Company entered into a five-year employment agreement with Jerome Mahoney to serve as Non-Executive Chairman of the Board of Directors, effective August 1, 2004. On March 9, 2009, the term of the employment agreement between the Company and Mr. Mahoney, the Company’s CEO, was extended to July 31, 2016.  The Company will compensate Mr. Mahoney with a base salary of $85,000 for the first year with annual increases based on the Consumer Price Index. Mr. Mahoney had a consulting agreement with the Company’s former subsidiary B Green Innovations for annual compensation of $24,000 and upon every annual anniversary thereafter, at the rate based on the increase in the Consumer Price Index for All Urban Consumers (New York-Northern N.J.-Long Island). Effective January 1, 2010, this amount was added to Mr. Mahoney’s base salary. On June 15, 2010, Mr. Mahoney’s employment agreement was amended to increase the base salary to $195,000 effective July 1, 2010. All other terms of the Employment Agreement shall remain in full force and effect. A portion of Mr. Mahoney’s compensation shall be deferred until such time that the Board of Directors determines that the Company has sufficient financial resources to pay his compensation in cash. For the three months ended March 31, 2016, Mr. Mahoney drew $3,000 of his salary and the remainder was accrued to deferred compensation.

 

The Board has the option to pay Mr. Mahoney’s compensation in the form of Class B Common Stock. Mr. Mahoney will also be entitled to certain bonuses based on mergers and acquisitions completed by the Company. Pursuant to the terms of the Class B Common Stock, a holder of Class B Common Stock has the right to convert each share of Class B Common Stock into the number of shares of Class A Common Stock determined by dividing the number of Class B Common Stock being converted by a 20% discount of the lowest price for which the Company had ever issued its Class A Common Stock. On August 28, 2014, the Company converted $148,396 of deferred compensation into 148,396 shares of Class B Common Stock. On September 15, 2014, the Company received a forgiveness of debt in the amount of $500,000 from Mr. Mahoney. As of March 31, 2016 and December 31, 2015, total deferred compensation and accrued interest due to Mr. Mahoney was $840,536 and $785,314 respectively.

 

Note 9 Income taxes

 

The tax effect of temporary differences, primarily net operating loss carryforwards, asset reserves and accrued liabilities give rise to a deferred tax asset. Deferred income taxes are recognized for the tax consequence of such temporary differences at the enacted tax rate expected to be in effect when the differences reverse. Because of the current uncertainty of realizing the benefit of the tax carry forward, a valuation allowance equal to the tax benefit for deferred taxes has been established. The full realization of the tax benefit associated with the carry forward depends predominantly upon the Company's ability to generate taxable income during the carry forward period.

 

Note 10 Capital Stock

 

Pursuant to the Company’s certificate of incorporation, as amended, the Company is authorized to issue 1,000,000 shares of Preferred Stock, par value of $1.00 per share, 10,000,000,000 shares of Class A Common Stock, no par value per share, 50,000,000 shares of Class B Common Stock, par value $0.01 per share, and 20,000,000 shares of Class C Common Stock, par value $0.01 per share. Below is a description of the Company’s outstanding securities, including Preferred Stock, Class A Common Stock, Class B Common Stock and Class C Common Stock.

 

a)        Preferred Stock

 

The Company is authorized to issue 1,000,000 shares of Preferred Stock, par value $1.00 per share.

 

Of the 1,000,000 shares of Preferred Stock, 10,000 shares are designated Series A 10% Preferred Stock, par value $1.00 per share, with a stated value of $1,000 (the “Series A Preferred Stock”). The stated value is used for calculation of dividends and liquidation preferences. On March 12, 2008, the Company sold 1,444.44 shares of Series A 10% Preferred Stock to iVoice, Inc. for $1,444,444.  With consent of the holders of the Series A Preferred Stock, on March 6, 2009, the Company amended its Certificate of Incorporation and amended the rights of the Series A Preferred by: (i) eliminating all voting rights for the Series A Preferred Stock and (ii) eliminating the conversion feature of the Series A Preferred Stock.

 

In February 2010, the Company filed with the State of New Jersey an Amendment to the Certificate that revised the rights of the holders of the Company’s Series A 10% Convertible Preferred Stock. The revisions included:

 

a.   The preferred stock will be referred to in the Company’s Certificate of Incorporation as: “Series A 3% Preferred Stock”.

b.   The holders of the preferred stock will have a new dividend rate of 3%.

c.   The holders of the Series A 3% Preferred Stock shall have no voting rights.

d.   Series A 3% Preferred Stock is convertible, at the option of the holder with the consent of the Corporation, at any tim after the date of issuance of such share into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series A Initial Value, as may be adjusted from time to time, by the Conversion Price applicable to such share. The "Conversion Price” per share shall be calculated as the closing bid price of the Class A Common stock on the last trading day immediately prior to the date that the Notice of Conversion is tendered to the Corporation, subject to certain adjustments.

e.   The holders of shares of Series A Preferred Stock shall be prohibited from converting shares of Series A Preferred Stock, and the Corporation shall not honor any attempted conversion of Series A Preferred Stock, if, and to the extent, the shares of Common Stock held by such converting holder of Series A Preferred Stock following any attempted conversion would exceed 9.99% of the outstanding shares of Common Stock of the Corporation after giving effect to such conversion.

 

On January 5, 2011, the Company converted $66,104 of the principal amount and accrued interest of the iVoice Note Receivable, dated April 30, 2010 for redemption of 1,057.664 shares of B Green Innovations Series A 3% Preferred Stock in accordance with the terms of the Promissory Note. 

 

In February 2011 the Board of Directors authorized the Company to sell up 350 shares of the Series A 3% Preferred Stock.

 

On January 9, 2012, Jerome Mahoney exchanged a note issued by iVoice, Inc. for the sum of $972,203 for a new note issued by American Security Resources Corporation (“ASRC”), an unrelated party to the Company (the “ASRC Note”).  Thereafter, pursuant to a Preferred Stock Exchange Agreement by and among, Jerome Mahoney, ASRC and the Company, Mr. Mahoney returned the ASRC Note to ASRC in exchange for the Company cancelling an equal value of the Company’s Series A 3% Preferred Stock (“Preferred Stock”), or 972.2 shares, held by iVoice, Inc. and the issuance of an equal number of Preferred Stock shares to Mr. Mahoney.

 

On November 13, 2012 the Company filed with the State of New Jersey an Amendment to the Certificate of Incorporation that revised the rights of the holders of the Company’s Series A 3% Preferred Stock which provided additional conversions rights. The holder may convert, with the consent of the Corporation their stock into (b) such amount of marketable securities held by the Corporation equal in value to the Series A Initial Value, as may be adjusted from time to time, or (c) cash equal in value to the Series A Initial Value, as may be adjusted from time to time. During the year ended December 31, 2012, the holder converted 843.624 shares of Series A 3% Preferred Stock for marketable securities at the Initial Value of $843,624.

As of March 31, 2016 and December 31, 2015, 2663.444 shares were issued and 762.156 shares of Series A 3% Preferred Stock are outstanding.

As of March 31, 2016 and December 31, 2015 dividends in arrears amounted to $507,867 and $490,406, respectively.

 

b)        Class A Common Stock

 

As of March 31, 2016, there are 10,000,000,000 shares of Class A Common Stock authorized, no par value, and 239,342,349 shares were issued and outstanding.

 

Each holder of Class A Common Stock is entitled to receive ratably dividends, if any, as may be declared by the Board of Directors out of funds legally available for payment of dividends.  The Company has never paid any dividends on its common stock and does not contemplate doing so in the foreseeable future. The Company anticipates that any earnings generated from operations will be used to finance its growth objectives.

 

On September 9, 2014, pursuant to approval by a majority of voting shares as of August 28, 2014, an Amendment to the Certificate of Incorporation, dated September 4, 2014 was accepted by the State of New Jersey to consolidate all of the Class A Common Stock Shares pursuant to a reverse split in the ratio of One (1) new share for every Ten Thousand (10,000) shares currently held by a stockholder.. The reverse split took effect on September 26, 2014 and the trading symbol of our Class A Common Stock was temporarily changed to “BGNND”. The Amendment provided for the issuance of no fractional shares, but instead, all fractional shares created by the reverse split were rounded up to one whole share. Prior to the reverse split, there were 4,110,242,408 Class A Common Stock shares issued and 3,984,172,925 Class A Common Stock shares outstanding. Additional shares may be issued upon finalization of the roundup of the fractional shares. Following the reverse split, there were 422,395 Class A Common Stock shares outstanding. Additionally, the number of authorized Class A Common Stock was deduced from ten billion (10,000,000,000) no par value shares to five hundred million (500,000,000) no par value shares.

 

On October 7, 2015, pursuant to approval by a majority of voting shares as of October 6, 2015, an Amendment to the Certificate of Incorporation, dated October 6, 2015 was accepted by the State of New Jersey to authorize an increase in the number of authorized Class A Common Stock from five hundred million (500,000,000) shares, no par value per share, to ten billion (10,000,000,000) shares, no par value per share.

During the three months ended March 31, 2016, the Company issued the following shares of Class A Common stock:

 

a)   The Company issued an aggregate of 55,337,318 shares of Class A Common Stock upon the conversion of $9,506 of debt owed to various debtors of the Company pursuant to various Assignment of Debt Agreements and Convertible Promissory Notes. The market value of the shares was $20,974. The difference between the market value and the debt reduction of $11,468 was charged to settlement expense.

 

During the three months ended March 31, 2015, the Company issued the following shares of Class A Common stock:

 

a)   The Company issued an aggregate of 430,849 shares of Class A Common Stock upon the conversion of $5,000 of debt owed to a debtor of the Company pursuant to an Assignment of Debt Agreements. The market value of the shares was $12,020. The difference between the market value and the debt reduction of $7,020 was charged to settlement expense.

 

On October 7, 2015, pursuant to the approval, representing the holders of a majority of the aggregate votes of the Class A and Class B Common Stock of B Green Innovations as of October 6, 2015, an Amendment to the Certificate of Incorporation, dated October 6, 2015 was accepted by the State of New Jersey to increase the number of Authorized Class A Common Stock Shares, from 500,000,000 shares, no par value per share, to 10,000,000,000 shares, no par value per share.

 

c)        Class B Common Stock

 

As of March 31, 2016, there are 50,000,000 shares of Class B Common Stock authorized, par value of $.01 per share, 263,421 shares issued and 134,410 shares outstanding.  Each holder of Class B Common Stock has voting rights equal to 100 shares of Class A Common Stock. A holder of Class B Common Stock has the right to convert each share of Class B Common Stock into the number of shares of Class A Common Stock determined by dividing the number of Class B Common Stock being converted by a 20% discount of the lowest price that B Green Innovations, Inc. had ever issued its Class A Common Stock. Upon our liquidation, dissolution, or winding-up, holders of Class B Common Stock will be entitled to receive distributions. On July 27, 2009, the Company amended its Certificate of Incorporation as follows: a holder of Class B Common Stock has the right to convert each share of Class B Common Stock into the number of shares of Class A Common Stock determined by dividing the number of Class B Common Stock being converted by a 20% discount of the lowest price that B Green Innovations, Inc. had ever issued its Class A Common Stock. Each holder of Class B common stock has voting rights equal to the number of Class A shares that would be issued upon the conversion of the Class B shares, had all of the outstanding Class B shares been converted on the record date used for purposes of determining which shareholders would vote. Previously, each holder of Class B Common Stock has voting rights equal to 100 shares of Class A Common Stock. In February 2011, the Board of Directors authorized the Company to buyback up to 115,025 shares of Class B common stock at $1.00 per share. During the year ended December 31, 2012, the Company repurchased 39,237 shares of its Class B Common Stock at $1.00 per share which is the same price that it was purchased by the related party. During the year ended December 31, 2015, the Company converted $148,396 of deferred compensation into 148,396 shares of Class B Common Stock and converted 60,000 shares of Class B common stock into 1,200,000 shares of Class A common stock.

d)        Class C Common Stock

 

As of March 31, 2016, there are 20,000,000 shares of Class C Common Stock authorized, par value $.01 per share.  Each holder of Class C Common Stock is entitled to 1,000 votes for each share held of record. Shares of Class C Common Stock are not convertible into Class A Common Stock. Upon liquidation, dissolution or wind-up, the holders of Class C Common Stock are not entitled to receive our net assets pro rata. As of March 31, 2016, no shares were issued or outstanding.

 

Note 11 Equity Subscriptions

Equity Subscription Agreements

During the years ended December 31, 2014 and 2015, the Company executed several Equity Subscription Agreements with unrelated parties to provide addition funding for the Company. Pursuant to the terms of the agreements, the Company is required to issue one share of Class A common stock for each dollar invested by the purchasers and the shares will contain a restrictive legend until the shares can be sold pursuant to Rule 144 without any restrictions. As of March 31, 2016, the Company has received subscriptions for 81,570 shares of Class A common stock.

Note 12 Stock Options

 

During 2005, the Company adopted the 2005 Stock Incentive Plan and the 2005 Directors’ and Officers’ Stock Incentive Plan (“Plan”) in order to attract and retain qualified personnel.  Under the Plan, the Board of Directors, in its discretion may grant stock options (either incentive or non-qualified stock options) to officers, directors and employees.  The Company has not issued any stock options as of March 31, 2016.

 

Note 13 Subsequent Events

 

During the months of April 2016 and May 2016, the Company issued an aggregate of 97,011,972 shares of Class A common stock with a fair value of $26,812 for conversion of debt valued of $5,790.

 

 

Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF  OPERATIONS

 

Forward Looking Statements

 

A number of the statements made by the Company in this report may be regarded as “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

 

Forward-looking statements include, among others, statements concerning the Company’s outlook, pricing trends and forces within the industry, the completion dates of capital projects, expected sales growth, cost reduction strategies and their results, long-term goals of the Company and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts.

 

All predictions as to future results contain a measure of uncertainty and accordingly, actual results could differ materially.  Among the factors that could cause a difference are:  changes in the general economy; changes in demand for the Company’s products or in the cost and availability of its raw materials; the actions of its competitors; the success of our customers; technological change; changes in employee relations; government regulations; litigation, including its inherent uncertainty; difficulties in plant operations and materials; transportation, environmental matters; and other unforeseen circumstances. For a discussion of material risks and uncertainties that the Company faces, see the discussion in the Form 10−K for the fiscal year ended December 31, 2015 entitled “Risk Factors”.

 

Results of Operations

 

Total sales decreased $7,646 (37.8%) for the three months ended March 31, 2016, as compared to the same period in the prior year. This decrease is primarily attributed to the lower demand for our core product ”vibe-away” as we fulfill the market demand. We are unable to sustain any consistent demand for our new products such as the sock pocket product. The Company continues to evaluate additional products to add to its product line as well as expanding its distribution channels.

 

Gross profit decreased $3,010 (32.5%) for the three months ended March 31, 2016, as compared to the same period in the prior year. This decrease was primarily the result the decreased volume of the “green” products.  

 

Total selling, general and administrative expenses decreased $41,841 (31%) for the three months ended March 31, 2016, as compared to the same period in the prior year. This decrease was primarily the result of decreases in consulting and legal fees as compared to the prior year when the company was closing on the new debt instruments. The company continues to curtail spending to conserve cash during this period of declining revenues.

 

For the three months ended March 31, 2016 and 2015, the Company had losses from operations of $86,886 and $125,717, respectively.

 

Total other expense decreased $42,532 for the three months ended March 31, 2016 primarily from decreases in amortization of debt discount and losses on changes in valuation of derivatives and higher settlement expenses on debt to stock conversions.

 

The net losses for the three months ended March 31, 2016 decreased $81,363 primarily from the lower non-cash costs associated with the accounting for the derivative liabilities and decreases in operating expenses offset by lower gross margins.
 

Liquidity and Capital Resources

 

To date, the Company has incurred substantial operating losses, and will require financing for working capital to meet its operating obligations.  We anticipate that we will require financing on an ongoing basis for the foreseeable future.

 

If the Company cannot find sources of additional financing to fund its working capital needs, the Company will be unable to obtain sufficient capital resources to operate our business. We cannot assure you that we will be able to access any financing in sufficient amounts or at all when needed. Our inability to obtain sufficient working capital funding will have an immediate material adverse effect upon our financial condition and our business. The Company currently has no other significant sources of working capital or cash commitments. However, no assurance can be given that the Company will raise sufficient funds from such financing arrangements, or that Company will ever produce sufficient revenues to sustain its operations, or that a market will develop for its common stock for which a significant amount of the Company’s financing is dependent upon.

 

During the three months ended March 31, 2016, the Company had a net decrease in cash of $32,908.  The Company’s principal sources and uses of funds were as follows:

 

Cash (used in) operating activities. The Company used $32,908 in cash from operating activities for the three months ended March 31, 2016. Management carefully manages the cash account while facing lower billable sales.

 

Cash provided financing activities. The Company had no new debt financing activities for the three months ended March 31, 2016.

 

There was no significant impact on the Company’s operations as a result of inflation for the three months ended March 31, 2016.

 

Critical Accounting Policies

 

The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate these estimates, including those related to bad debts, inventory obsolescence, intangible assets, payroll tax obligations, and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

 

We have identified below the accounting policy on revenue recognition, related to what we believe is the most critical to our business operations and is discussed throughout Management’s Discussion and Analysis of Financial Condition or Plan of Operation where such policy affects our reported and expected financial results.

 

Revenue Recognition

 

For “green” products, revenues are recognized at the time of shipment to, or acceptance by customer, provided title and risk of loss is transferred to the customer. Provisions, when appropriate, are made where the right to return exists.

 

Off Balance Sheet Arrangements

 

During the three months ended March 31, 2016, the Company did not engage in any material off-balance sheet activities nor have any relationships or arrangements with unconsolidated entities established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, the Company has not guaranteed any obligations of unconsolidated entities nor do they have any commitment or intent to provide additional funding to any such entities.

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

 

We do not hold any derivative instruments and do not engage in any hedging activities.

 

Item 4.  Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Management of the Company has evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of the Company had concluded that the Company's disclosure controls and procedures as of the period covered by this Quarterly Report on Form 10-Q were not effective for the following reasons:

 

a)           The Company has limited segregation of duties amongst its employees with respect to the Company's control activities. This deficiency is the result of the Company's limited number of employees. This deficiency may affect management's ability to determine if errors or inappropriate actions have taken place. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible changes in our disclosure controls and procedures.

 

b)           The Company's has a limited number of external board members. This deficiency may give the impression to the investors that the board is not independent from management. Management and the Board of Directors are required to apply their judgment in evaluating the cost-benefit relationship of possible changes in the organization of the Board of Directors.

 

Changes in internal control over financial reporting.

 

Management of the Company has also evaluated, with the participation of the Chief Executive Officer of the Company, any change in the Company’s internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q and determined that there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1.  Legal Proceedings

 

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations.  There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company, threatened against or affecting our company, our common stock.

 

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

 

There were no unregistered sales of the Company’s equity securities during the three months ended March 31, 2016.

 

Item 3.  Defaults Upon Senior Securities.

 

Not applicable.

 

Item 4.  Mine Safety Disclosures.

 

Not applicable.

 

Item 6.  Exhibits

 

31.1	Certification required under Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification required under Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the Registrant caused this report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	B GREEN INNOVATIONS, INC.
Date: May 16, 2016	By:	/s/ Jerome Mahoney
		Jerome Mahoney
		President, Chief Executive Officer and
		Chief Financial Officer