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EX-32 - 906 CERTIFICATION - GREEN PLANET GROUP, INC.p1108_ex32.htm
EX-31.1 - 302 CERTIFICATION OF CEO - GREEN PLANET GROUP, INC.p1108_ex31-1.htm
EX-31.2 - 302 CERTIFICATION OF CFO - GREEN PLANET GROUP, INC.p1108_ex31-2.htm

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 
þ     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009
 
OR
 
 
o     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 
For the transition period from ______________ to ______________
 
Commission File Number 333-136583
 
GREEN PLANET GROUP, INC.
(Exact name of registrant as specified in its charter)

Nevada
41-2145716
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
 
 
7430 E. Butherus, Suite D, Scottsdale, AZ
85260
(Address of principal executive offices)
(Zip Code)
 
 
Registrants telephone number, including area code:
(480) 222-6222
 
(Not applicable)
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    
 
Yes 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
 
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
 
The number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date, November 13, 2009:  $0.001 par value common stock 135,598,942 shares outstanding.

 
INDEX

 
 
Page
 
         
PART I – Financial Information
 
 
3
 
 
 
 
 
 
Item 1.  Financial Statements
 
 
3
 
 
 
 
 
 
Three and Six Months Ended September 30, 2009 and 2008
 
 
 
 
Consolidated Balance Sheets as of September 30, 2009 (Unaudited) and March 31, 2009
 
 
3
 
Consolidated Statements of Operations for the Three and Six Months Ended September 30, 2009 and 2008 (Unaudited)
 
 
4
 
Consolidated Statements of Stockholders’ Equity/(Deficit) for the Six Months Ended September 30, 2009 and 2008 (Unaudited)
 
 
5
 
Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2009 and 2008 (Unaudited)
 
 
6
 
Notes to Consolidated Financial Statements as of September 30, 2009 and 2008 (Unaudited)
 
 
7–33
 
 
 
 
 
 
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
 
34
 
Item 3.  Quantitative and Qualitative Disclosure About Market Risk
   
44
 
Item 4.  Controls and Procedures
 
 
44
 
 
 
 
 
 
PART II – Other Information
 
 
45
 
 
 
 
 
 
Item 1. Legal Proceedings
 
 
45
 
Item 1A.  Risk Factors 
   
45
 
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
   
45
 
Item 3.  Defaults Upon Senior Securities
   
45
 
Item 4.  Submission of Matters to a Vote of Security Holders
   
45
 
Item 5.  Other Information
   
45
 
Item 6.  Exhibits
   
45
 
 
       
Signatures
   
 46
 
         


2

 
PART I – FINANCIAL INFORMATION
 
Item 1.  Financial Statements
 
Green Planet Group, Inc. and Subsidiaries
Consolidated Balance Sheets

 
   
September 30,
   
March 31,
 
   
2009
   
2009
 
   
(Unaudited)
   
(Restated)
 
             
ASSETS
           
Current Assets:
           
Cash
  $ 1,184,843     $ 470,288  
Accounts receivable
    5,363,933       4,349,866  
Inventory
    388,564       369,403  
Prepaid expenses
    1,425,437       1,654,431  
Total Current Assets
    8,362,777       6,843,988  
Equipment and computers, net of accumulated depreciation
    1,815,544       1,900,834  
Other Assets:
               
Other assets
    306,495       295,372  
Intangible assets
    3,352,361       3,745,025  
Goodwill
    8,979,822       8,979,822  
Total Other Assets
    12,638,678       13,020,219  
Total Assets
  $ 22,816,999     $ 21,765,041  
                 
LIABILITIES AND STOCKHOLDERS EQUITY/(DEFICIT)
               
Current Liabilities:
               
Accounts payable
  $ 1,434,918     $ 1,210,127  
Accounts payable - Affiliates
    54,988       165,565  
Accrued liabilities
    3,858,703       2,318,097  
Accrued payroll, taxes and benefits
    7,350,736       2,446,929  
Cashless warrant liability
    47,578       57,876  
Notes payable and amounts due within one year
    6,915,549       6,536,202  
Convertible loans payable
    4,027,050       5,054,100  
Derivative warrant liability
    763,876       643,750  
Total Current Liabilities
    24,453,398       18,432,646  
                 
Notes payable due after one year
    7,840,204       9,061,650  
Total Liabilities
    32,293,602       27,494,296  
                 
Stockholders’ Equity/(Deficit)
               
Preferred Stock, $0.001 par value, 1,000,000 authorized; no shares issued and outstanding
           
Common Stock, $0.001 par value, 250,000,000 authorized, issued and outstanding 131,487,944 and 117,440,764 at September 30, 2009 and March 31, 2009, respectively
    131,488       117,441  
Additional paid-in capital
    15,628,128       14,714,148  
Accumulated deficit
    (25,236,219 )     (20,560,844 )
Total Stockholders’ Equity/(Deficit)
    (9,476,603 )     (5,729,255 )
Total Liabilities and Stockholders’ Equity/(Deficit)
  $ 22,816,999     $ 21,765,041  
 
See accompanying notes to these consolidated financial statements.
3

 
Green Planet Group, Inc. and Subsidiaries
Consolidated Statements of Operations

 
   
For the three months ended
   
For the six months ended
 
   
September 30,
   
September 30,
 
   
2009
   
2008
   
2009
   
2008
 
   
(Unaudited)
   
(Unaudited/Restated)
   
(Unaudited)
   
(Unaudited/Restated)
 
Revenue:
                       
Sales, net of returns and allowances
  $ 16,406,810     $ 529,650     $ 33,104,714     $ 2,366,071  
Cost of sales
    14,280,181       324,483       29,001,700       1,051,259  
Gross Profit
    2,126,629       205,167       4,103,014       1,314,812  
                                 
Operating Expenses:
                               
Selling, general and administrative
    3,900,241       1,250,717       7,480,876       1,932,420  
Depreciation and amortization
    239,455       61,967       479,173       123,933  
Allowance for bad debts
    56,500             470,570        
Research and development
    13,094       250       13,094       250  
Total Operating Expenses
    4,209,290       1,312,934       8,443,713       2,056,603  
                                 
Loss From Operations
    (2,082,661 )     (1,107,767 )     (4,340,699 )     (741,791 )
                                 
Other Income and (Expense):
                               
Other income
    (17 )     41       1,492       416  
Interest expense
    1,091,066       1,884,511       (336,168 )     615,128  
                                 
Income/(Loss) before provision for income taxes
    (991,612 )     776,785       (4,675,375 )     (126,247 )
Provision for/(Benefit of) income taxes
                       
                                 
Net Income/(Loss)
  $ (991,612 )   $ 776,785     $ (4,675,375 )   $ (126,247 )
                                 
Earning/(Loss) per share:
                               
Basic earnings per share
  $ (0.01 )   $ 0.01     $ (0.04 )   $ (0.00 )
Weighted average shares outstanding
    128,046,715       66,066,375       124,867,997       63,962,835  
 
See accompanying notes to these consolidated financial statements.
4

 
Green Planet Group, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity/(Deficit)
(Unaudited)

 
               
Additional
   
 
       
                Paid-in     
Accumulated
       
   
Shares
   
Common Stock
   
Capital
   
Deficit
   
Total
 
                               
Balance March 31, 2008
    54,885,103     $ 54,885     $ 9,779,844     $ (17,888,470 )   $ (8,053,741 )
                                         
Shares issued for cash
    6,431,000       6,431       1,090,499               1,096,930  
Shares issued services for consultants and others
    5,300,000       5,300       1,067,700               1,073,000  
Stock option valuation
                    170,370               170,370  
Net loss for the six months ended September 30, 2008
                            (126,247 )     (126,247 )
                                         
Balance September 30, 2008
    66,616,103     $ 66,616     $ 12,108,413     $ (18,014,717 )   $ (5,839,688 )
                                         
Balance March 31, 2009
    117,440,764     $ 117,441     $ 14,714,148     $ (20,560,844 )   $ (5,729,255 )
                                         
Shares issued for cash
    4,380,000       4,380       115,620               120,000  
Shares issued for acquisition and payables
    2,846,234       2,846       148,262               151,108  
Shares issued for services of consultants and others
    6,656,182       6,656       415,294               421,950  
Shares issued for interest expense
    164,764       165       15,835               16,000  
Stock option expense
                    218,969               218,969  
Net loss for the six months ended September 30, 2009
                            (4,675,375 )     (4,675,375 )
                                         
Balance September 30, 2009
    131,487,944     $ 131,488     $ 15,628,128     $ (25,236,219 )   $ (9,476,603 )
 
See accompanying notes to these consolidated financial statements.
5

 
Green Planet Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows

 
 
   
For the six months ended
September 30,
 
   
2009
   
2008
 
   
(Unaudited)
   
(Unaudited/Restated)
 
Cash Flows from Operating Activities:
           
Net Loss
  $ (4,675,375 )   $ (126,247 )
Adjustments to reconcile net loss to net cash
               
provided (used) by operating activities:
               
Depreciation and amortization
    479,173       123,933  
Bad debt provision
    470,570        
Amortization of debt discount
    99,175       206,916  
Shares issued for services and interest
    437,950       269,833  
Stock option costs
    218,969       170,370  
Change in derivative valuation
    (906,924 )     (840,993 )
Cashless warrant conversion
    (10,298 )     (166,351 )
Changes in assets and liabilities, excluding
               
effects of acquisitions:
               
Receivables
    (1,484,637 )     (948,004 )
Inventory
    (19,161 )     (59,957 )
Prepaid expenses
    129,819       18,518  
Other assets
    (11,123 )      
Accounts payable
    194,792       135,471  
Accounts payable - affiliates
    (110,577 )      
Accrued liabilities
    6,625,521       155,543  
Cash provided (used) by operating activities
    1,437,874       (1,060,968 )
Investing Activities:
               
Proceeds from note receivable
          85,000  
Capital expenditures
    (1,220 )     (7,383 )
Cash provided (used) by investing activities
    (1,220 )     77,617  
Financing Activities:
               
Net borrowings of debt
          157,000  
Repayment of debt
    (842,099 )     (282,825 )
Net proceeds from issuance of common shares
    120,000       1,096,930  
Net cash provided (used) by financing activities
    (722,099 )     971,105  
Net increase (decrease) in cash
    714,555       (12,246 )
Cash at beginning of period
    470,288       59,544  
Cash at end of period
  $ 1,184,843     $ 47,298  
                 
Supplemental disclosures of cash flow information:
               
Cash paid during the period for:
               
Interest
  $ 769,985     $ 231,719  
Income taxes
  $     $  
                 
Non Cash Activities:
               
Common stock issued for services, payables and interest
  $ (619,058 )   $  
Common stock issued for services, payables and interest
    9,667        
Additional paid-in capital from conversion of note payable
    609,391        
    $     $  
 
See accompanying notes to these consolidated financial statements.
6

 
Green Planet Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Six Months Ended September 30, 2009 and 2008 (Unaudited)

 
Note 1 – The Company

The Company – Green Planet Group, Inc.  (which is referred to herein together with its subsidiaries as “Green Planet,” “GPG,” “the Company,” “we”, “us” or “our”), formerly EMTA Holdings, Inc. and before that Omni Alliance Group, Inc., was organized and incorporated in the state of Nevada. On March 31, 2006, we changed our name from Omni Alliance Group, Inc. to EMTA Holdings, Inc., and on May 22, 2009 we changed the name through merger with a wholly owned subsidiary to Green Planet Group, Inc. Our common stock now trades on the OTC-Bulletin Board market under the trading symbol GNPG”.

Nature of the Business – We operate in two industry segments: 1) a specialty energy conservation chemical company that produces and supplies technologies to the global transportation, industrial and consumer markets and 2) an employee staffing business which primarily provides staffing to the light industrial market. The energy technologies include gasoline, oil and diesel additives for engines and other transportation-related fluids and industrial lubricants.
 
Presentation of Interim Statements – The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q for small business filers. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Form 10-K for the years ended March 31, 2009 and 2008. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included in the accompanying unaudited consolidated financial statements. The results of operations for the periods presented are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year.

Restatement of Prior Financial Statements – See Note 17 Restatement of Prior Financial Statements.

Going Concern Uncertainty

The Company’s continued existence is dependent upon its ability to generate sufficient cash flows from operations to support its daily operations as well as provide sufficient resources to retire existing liabilities and obligations on a timely basis.
 
The Company anticipates that future sales of equity and debt securities to fully implement its business objectives and to raise working capital to support and preserve the integrity of the corporate entity will be necessary. There is no assurance that the Company will be able to obtain additional funding through the sales of additional equity or debt securities or, that such funding, if available, will be obtained on terms favorable to or affordable by the Company.
 
7

 
In addition, the Company has $5,596,824 of outstanding payroll tax liabilities due the Internal Revenue Service and various states.  The Company anticipates negotiating a payment plan with these agencies, but there is no assurance that the Company will be successful.  In the event that the Company is unable to negotiate acceptable payment plans, the Company’s operations could be negatively impacted including ceasing operations in certain states and jurisdictions.
 
If no additional capital is received to successfully implement the Company’s business plan, the Company will be forced to rely on existing cash in the bank and upon additional funds which may or may not be loaned by management and/or significant stockholders to preserve the integrity of the corporate entity at this time. In the event, the Company is unable to acquire sufficient capital, the Company’s ongoing operations would be negatively impacted.
 
It is the intent of management and significant stockholders to provide sufficient working capital necessary to support and preserve the integrity of the corporate entity. However, no formal commitments or arrangements to advance or loan funds to the Company or repay any such advances or loans exist. There is no legal obligation for either management or significant stockholders to provide additional future funding.
 
While the Company is of the opinion that good faith estimates of the Company’s ability to secure additional capital in the future to reach our goals have been made, there is no guarantee that the Company will receive sufficient funding to sustain operations or implement its objectives.
 
Note 2 – Significant Accounting Policies
 
Over the years, the Financial Accounting Standards Board (“FASB”) and other designated GAAP-setting bodies, have issued standards in the form of FASB Statements, Interpretations, FASB Staff Positions, EITF consensuses, AICPA Statements of Position, etc. The FASB finalized the Codification for periods ending after September 15, 2009. Prior FASB standards are no longer being issued in the previous format and are included herein for the convenience of the reader. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification, sometimes referred to as the “Codification” or “ASC”.

Consolidation – The consolidated financial statements include the accounts of Green Planet Group, Inc. and its consolidated subsidiaries and wholly-owned limited liability company. All significant intercompany transactions and profits have been eliminated.

Use of Estimates – The preparation of financial statements in conformity with United States generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. The more significant estimates relate to revenue recognition, contractual allowances and uncollectible accounts, intangible assets, accrued liabilities, derivative liabilities, income taxes, litigation and contingencies. Estimates are based on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances, the results of which form the basis for judgments about results and the carrying values of assets and liabilities. Actual results and values may differ significantly from these estimates.
 
Cash Equivalents – The Company invests its excess cash in short-term investments with various banks and financial institutions. Short-term investments are cash equivalents, as they are part of the cash management activities of the Company and are comprised of investments having maturities of three months or less when purchased.
 
8


Allowance for Doubtful Accounts – The Company provides an allowance for doubtful accounts when management estimates collectibility to be uncertain. Accounts receivable are continually reviewed to determine which, if any, accounts are doubtful of collection. In making the determination of the appropriate allowance amount, the Company considers current economic and industry conditions, relationships with each significant customer, overall customer credit-worthiness and historical experience. The allowance for doubtful accounts was $1,267,123 and $806,846 at September 30, 2009 and March 31, 2009, respectively.
 
Inventories – Inventories are stated at the lower of cost or market value. Cost of inventories is determined by the first-in, first-out (FIFO) method. Obsolete or abandoned inventories are charged to operations in the period that it is determined that the items are not longer viable sales products.

Property, Plant and Equipment – Property, plant and equipment are carried at cost. Repair and maintenance costs are charged against operations while renewals and betterments are capitalized as additions to the related assets. The Company depreciates it assets on a straight line basis. Estimated useful lives for the equipment range from 3 to 10 years and the buildings are being depreciated over 31 years.

 
Impairment of Long-Lived Assets – In accordance with ASC 360-10 (formerly the Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,”) the Company reviews long-lived assets, including, but not limited to, property and equipment, patents and other assets, for impairment annually or whenever events or changes in circumstances indicate the carrying amounts of assets may not be recoverable. The carrying value of long-lived assets is assessed for impairment by evaluating operating performance and future undiscounted cash flows of the underlying assets. If the sum of the expected future cash flows of an asset is less than its carrying value, an impairment measurement is required. Impairment charges are recorded to the extent that an asset’s carrying value exceeds fair value. Accordingly, actual results could vary significantly from such estimates. There were no impairment charges during the periods presented.
 
Fair Value Disclosures – The carrying values of cash, accounts receivable, deposits, prepaid expenses, accounts payable and accrued expenses generally approximate the respective fair values of these instruments due to their current nature.
 
The fair values of debt instruments for disclosure purposes only are estimated based upon the present value of the estimated cash flows at interest rates applicable to similar instruments.
 
The Company generally does not use derivative financial instruments to hedge exposures to cash flow or market risks. However, certain other financial instruments, such as warrants and embedded conversion features that are indexed to the Company’s common stock, are classified as liabilities when either (a) the holder possesses rights to net-cash settlement or (b) physical or net-share settlement is not within the control of the Company. In such instances, net-cash settlement is assumed for financial accounting and reporting, even when the terms of the underlying contracts do not provide for net-cash settlement. Such financial instruments are initially recorded at fair value and subsequently adjusted to fair value at the close of each reporting period.

9

 
Revenue Recognition – Revenues are recognized at the time of shipment of products to customers, or at the time of transfer of title, if later, and when collection is reasonably assured. All amounts in a sales transaction billed to a customer related to shipping and handling are reported as revenues.  Staffing revenue is recognized at the completion of each billing cycle to the customer after completion of the work.  The billing cycle is generally weekly.
 
Provisions for sales discounts and rebates to customers are recorded, based upon the terms of sales contracts, in the same period the related sales are recorded, as a deduction to the sale. Sales discounts and rebates are offered to certain customers to promote customer loyalty and encourage greater product sales.  As a general rule, the Company does not charge interest on its accounts receivables.

 
The recording of a net deferred tax asset assumes the realization of such asset in the future; otherwise a valuation allowance must be recorded to reduce this asset to its net realizable value. The Company considers future pretax income and, if necessary, ongoing prudent and feasible tax planning strategies in assessing the need for such a valuation allowance. In the event that the Company determines that it may not be able to realize all or part of the net deferred tax asset in the future, a valuation allowance for the deferred tax asset is charged against income in the period such determination is made. The Company has recorded full valuation allowances as of September 30, 2009 and 2008.
 
Stock-Based Compensation
 
We account for stock-based awards to employees and non-employees using the accounting provisions of ASC 718-10 (formerly the Statement of Financial Accounting Standards (“SFAS”) No. 123 — Accounting for Stock-Based Compensation and SFAS No. 123(R which revised SFAS No. 123) which provides for the use of the fair value based method to determine compensation for all arrangements where shares of stock or equity instruments are issued for compensation. Shares of common issued in connection with acquisitions are also recorded at their estimated fair values based on the Hull-White “enhanced US ASC 718-10 standard. The standards for the accounting of transactions in which an entity exchanges its equity instruments for goods or services, particularly transactions in which an entity obtains employee services in share-based payment transactions. The statement also requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period during which the employee is required to provide service in exchange for the award.
 
Concentrations of Credit Risks – Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. Although the amount of credit exposure to any one institution may exceed federally insured amounts, the Company limits its cash investments to high-quality financial institutions in order to minimize its credit risk. The Company extends credit based on an evaluation of the customer’s financial condition, generally without requiring collateral. Exposure to losses on receivables is dependent on each customer’s financial condition. At September 30, 2009 and 2008 the Company had a receivable from one foreign customer in the amount of $1,363,756 and $1,391,171 and at September 30, 2009 the Company had a reserve for bad debts of $681,000 against this account.  The balance of the accounts receivable are primarily from clients, retailers and distributors located in the United States. For the six months ended September 30, 2009 three clients accounted for 12.0%, 13.6% and 13.7% of gross sales for the period.
 
10

 
Recent Accounting Pronouncements

Fair Value Measurement and Fair Value of a Financial Asset When the Market is Not Active
 
ASC 820-10 (formerly SFAS No. 157, Fair Value Measurements (“SFAS 157”), as amended by FSP FAS 157-2, Effective Date of FASB Statement No. 157, and further amended by FSP FAS 157-3, Fair Value of a Financial Asset When the Market for that Asset is Not Active. Portions of the provisions of ASC 820-10 became effective for the Company as of April 1, 2008 while other provisions deferred the effective date for all nonfinancial assets and liabilities, except those recognized or disclosed at fair value on an annual or more frequent basis, until April 1, 2009 and a further revision which clarifies the application in a market that is not active  became effective upon issuance. ASC 820-10 defines fair value, creates a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements and additional guidance is provided regarding how the reporting entity’s own assumptions should be considered when relevant observable inputs do not exist, how available observable inputs in a market that is not active should be considered when measuring fair value, and how the use of market quotes should be considered when assessing the relevance of inputs available to measure fair value. The adoption of these standards did not have a material impact on the Company’s consolidated financial statements for the current period.
 
Fair Value When the Volume and Level of Activity Significantly Decreased

ASC 820-10 was amended in April 2009 by what was formerly FSP No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, which clarifies the application of ASC 820-10 when there is no active market or where the price inputs being used represent distressed sales. Additional guidance is provided regarding estimating the fair value of an asset or liability (financial and nonfinancial) when the volume and level of activity for the asset or liability have significantly decreased and identifying transactions that are not orderly. The Company adopted the standard as of June 30, 2009, which was the required effective date. Its adoption did not have a material impact on the Company’s consolidated financial statements.
 
Determining Whether an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock (ASC 815-10)
 
 
Fair Value Option
 
In February 2007, ASC 825-10 was amended by the FASB in what was formerly SFAS No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115 which permits all entities to choose to measure eligible items at fair value on specified election dates. The associated unrealized gains and losses on the items for which the fair value option has been elected shall be reported in earnings. The ASC 825-10 became effective for the Company as of April 1, 2008; however, the Company has not elected to utilize the fair value option on any of its financial assets or liabilities under the scope of this ASC.
 
11

 
Interim Disclosures about Fair Value of Financial Instruments

In April 2009, the FASB further amended ASC 825-10 with the issued FSP FAS 107-1 and Accounting Principles Board (APB) 28-1, Interim Disclosures about Fair Value of Financial Instruments . The amendments ASC 825-10 to require an entity to provide disclosures about fair value of financial instruments in interim financial information. This FSP is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The adoption of this amendment did not have an impact on the Company’s financial statements.

 
In December 2007, the FASB amended ASC 805-10 by issuing SFAS No. 141(R), Business Combinations. The objective of this ASC is to improve the information provided in financial reports about a business combination and its effects. ASC 805-10 states that all business combinations (whether full, partial or step acquisitions) must apply the “acquisition method.” In applying the acquisition method, the acquirer must determine the fair value of the acquired business as of the acquisition date and recognize the fair value of the acquired assets and liabilities assumed. As a result, it will require that certain forms of contingent consideration and certain acquired contingencies be recorded at fair value at the acquisition date. This ASC also states acquisition costs will generally be expensed as incurred and restructuring costs will be expensed in periods after the acquisition date. This amendment is effective for business combination transactions for which the acquisition date is on or after April 1, 2009, and earlier application is prohibited. The Company adopted this statement on April 1, 2009. The impact of the adoption of amendment on the Company’s financial statements will largely be dependent on the size and nature of the business combinations completed after the adoption of this ASC. While this amendment to ASC 805-10 generally applies only to transactions that close after its effective date, the amendment to ASC 740-10 are applied prospectively as of the adoption date and will apply to business combinations with acquisition dates before the effective date of this amendment.  Adoption of this amendment did not have a material effect on the results of operations or statement of position for the period ended September 30, 2009.

Contingencies in Business Combinations

In April 2009, the FASB further amended ASC 805-10 by the issuance of FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies. This amendment requires that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value if fair value can be reasonably estimated. If fair value cannot be reasonably estimated, the asset or liability would generally be recognized in accordance with ASC 450-10 and ASC 450-20. Further, the FASB removed the subsequent accounting guidance for assets and liabilities arising from contingencies from ASC 805-10. The requirements of this amendment carry forward without significant revision the other guidance on contingencies of ASC 805-10, which was superseded by SFAS No. 141(R) (see previous paragraph). The amendment also eliminates the requirement to disclose an estimate of the range of possible outcomes of recognized contingencies at the acquisition date. For unrecognized contingencies, the FASB requires that entities include only the disclosures required by ASC 450-10. This amendment was adopted effective April 1, 2009. There was no impact upon adoption, and its effects on future periods will depend on the nature and significance of business combinations subject to this statement.

12

 
Disclosures about Derivative Instruments and Hedging Activities

In March 2008, the FASB amended ASC 815-10 by issuing SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133. This amendment changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under ASC 815-10 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company adopted this amendment on April 1, 2009, the beginning of the Company’s first fiscal 2010 quarter and its adoption did not have a material effect on the results of operations or statement of position in the subsequent periods.
 
Codification and the Hierarchy of Generally Accepted Accounting Principles

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles,” which replaces SFAS No. 162 and establishes the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. On the effective date for financial statements issued for interim and annual periods ending after September 15, 2009, the Codification will supersede all then–existing non-SEC accounting and reporting standards and is codified as ASC 105-10. The Company has determined that the adoption of the Codification will not have a material impact on the financial statements.

Convertible Debt
 
In May 2008, ASC 470-20 was amended by the FASB issuance of  Financial Statement Position (FSP) Accounting Principles Board (APB) 14-1 “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).” This amendment requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. ASC 470-20 became effective for fiscal years beginning after December 15, 2008 on a retroactive basis and has been adopted by the Company in the first quarter of fiscal 2010.

Useful Life of Intangible Assets

In April 2008, the FASB amended ASC 350-30 by issuing FSP FAS 142-3, Determination of the Useful Life of Intangible Assets. The amendment states that in developing assumptions about renewal or extension options used to determine the useful life of an intangible asset, an entity needs to consider its own historical experience adjusted for entity-specific factors. In the absence of that experience, an entity shall consider the assumptions that market participants would use about renewal or extension options. This ASC is to be applied to intangible assets acquired after January 1, 2009. The adoption of this ASC did not have an impact on the Company’s financial statements.

13

 
Other Than Temporary Impairments

In April 2009, the FASB issued FASB Staff Position (FSP) No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments,” amending ASC 320-10 to determine whether the holder of an investment in a debt or equity security for which changes in fair value are not regularly recognized in earnings (such as securities classified as held-to-maturity or available-for-sale) should recognize a loss in earnings when the investment is impaired. ASC 320-10 improves the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. The effective date for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. Earlier adoption for periods ending before March 15, 2009, is not permitted.  The adoption of this amendment did not have an impact on the Company’s financial statements.
Subsequent Events

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events,” which amends ASC 855-10 and requires entities to disclose the date through which they have evaluated subsequent events and whether the date corresponds with the release of their financial statements. The statement establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. ASC 855-10 as amended is effective for interim or annual financial periods ending after June 15, 2009, and shall be applied prospectively. The adoption of this amendment did not have a material impact on the Company’s consolidated financial statements.
 
Transfers of Financial Assets

 In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets,” which has not be codified yet and which is an amendment of ASC 860-10 (formerly SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” and requires entities to provide more information about sales of securitized financial assets and similar transactions, particularly if the seller retains some risk to the assets. This amendment will improve the relevance, representation faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets. It will also take into account the effects of a transfer on its financial position, financial performance, and cash flows, and a transferor’s continuing involvement. SFAS No. 166 is effective for annual periods beginning after November 15, 2009.  This statement is effective for the Company beginning April 1, 2010 and is not expected to have a material impact on the financial statements.

Amendments to FASB interpretation No. 46(R)

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB interpretation No. 46(R),” which will amend ASC 810-10 and has not been codified yet. It establishes how a company determines when an entity that is insufficiently capitalized or not controlled through voting should be consolidated. This statement improves financial reporting by enterprises involved with variable interest entities, which addresses the effects on certain provisions of ASC 810-10 as a result of the elimination of the qualifying special-purpose entity concept in FASB No. 166, “Accounting for Transfers of Financial Assets,” which also has not be codified yet, and clarifies constituent concerns about the application of certain key provisions of ASC 810-10. SFAS No. 167 is effective after November 15, 2009. This statement is effective for the Company beginning January 1, 2010 and is expected to have no material impact on the financial statements.
 
14

 

Inventory consists of finished goods and raw material as follows:  
 
   
September 30,
2009
   
March 31, 
2009
 
    (Unaudited)        
             
Finished goods
  $ 327,378     $ 173,523  
Raw material
    61,186       195,880  
    $ 388,564     $ 369,403  


At September 30, 2009 and March 31, 2009 property, plant and equipment and computers consisted of the following:

   
September 30,
2009
   
March 31,
2009
 
    (Unaudited)          
                 
Property and plant
 
$
1,452,146
   
$
1,453,650
 
Equipment and computers
   
840,910
     
839,690
 
Less accumulated depreciation
   
(477,512
)
   
(392,506
)
Net property, plant and equipment
 
$
1,815,544
   
$
1,900,834
 
 
During the six months ended September 30, 2009 and 2008 depreciation expense was $86,510 and $60,572, respectively.
 
15


Note 5 – Intangible Assets and Goodwill

Intangible assets consist of technology of production and license rights under the Environmental Protection Agency to market one of the products acquired in the acquisition of White Sands, L.L.C. on March 31, 2006. The Company is amortizing this asset over its estimated useful life of seven years on a straight line basis. For the six months ended September 30, 2009 and 2008 amortization was $63,361 in each period. The customer relationships are the value of the purchased business relationships acquired as part of the purchase by Lumea of the staffing business on March 1, 2009.  The amortization period of this intangible is 5 years. For the period ended September 30, 2009 the amortization expense was $329,302.
 
Intangible assets subject to amortization:

 
Weighted
 
September 30, 2009
(Unaudited)
 
 
Average
 
Gross Carrying
   
Accumulated
   
Net Carrying
 
 
Useful Life
 
Amount
   
Amortization
   
Amount
 
                     
Intangible assets subject to amortization:
                   
    EPA licenses
7 years
 
$
887,055
   
$
443,528
   
$
443,527
 
    Customer relationships
5 years
   
3,293,020
     
384,186
     
2,908,834
 
     
$
4,180,075
   
$
827,714
   
$
3,352,361
 
                           
Goodwill not subject to amortization:
                         
Goodwill:
                         
    Goodwill
   
$
8,979,822
   
$
   
$
8,979,822
 
     
$
8,979,822
   
$
   
$
8,979,822
 
                           
                           
 
Weighted
 
March 31, 2009
 
 
Average
 
Gross Carrying
   
Accumulated
   
Net Carrying
 
 
Useful Life
 
Amount
   
Amortization
   
Amount
 
                     
Intangible assets subject to amortization:
                         
    EPA licenses
7 years
 
$
887,055
   
$
380,166
   
$
506,889
 
    Customer Relationships
5 years 
   
3,293,020
     
54,884
     
3,238,136
 
     
$
4,180,075
   
$
435,050
   
$
3,745,025
 
                           
Goodwill not subject to amortization:
                         
Goodwill:
                         
    Goodwill
   
$
8,979,822
   
$
   
$
8,979,822
 
     
$
8,979,822
   
$
 –
   
$
8,979,822
 
 
16

 
The scheduled amortization to be recognized over the next five years is as follows:
 
September 30, 2010
  $ 785,326  
September 30, 2011   
  $ 785,326  
September 30, 2012
  $ 785,326  
September 30, 2013
  $ 721,965  
September 30, 2014
  $ 274,418  
 
Note 6 – Accrued Liabilities

Accrued liabilities consist of the following as of September 30, 2009 and March 31, 2009:
   
September 30,
2009
   
March 31,
2009
 
    (Unaudited)          
                 
Accrued marketing and advertising
 
$
300,000
   
$
300,000
 
Accrued reimbursement to product testing partner
   
978,151
     
978,151
 
Accrued interest
   
1,851,018
     
804,717
 
Accrued workmen’s compensation
   
484,676
     
 
Other
   
244,858
     
235,229
 
   
$
3,858,703
   
$
2,318,097
 
 
Note 7 Accrued Payroll, Taxes and Benefits

Accrued payroll, taxes and benefits was $7,350,736 and $2,446,929 at September 30, 2009 and March 31, 2009, respectively.
 
Subsidiaries of the Company are delinquent in the payment of their payroll tax liabilities with the Internal Revenue Service and various states.  As of September 30, 2009, unpaid payroll taxes total $5,596,824.  The Company has estimated the related penalties and interest at approximately $646,639 through September 30, 2009, which are included in accrued liabilities at September 30, 2009.  The Company expects to pay these delinquent payroll tax liabilities in installments and as soon as possible subject to negotiations with the Internal Revenue Service.
 
17

 

As of September 30, 2009 and March 31, 2009 notes and contracts payable consist of the following:
 
   
September 30,
   
March 31,
 
   
2009
   
2009
 
    (Unaudited)          
                 
Revolving line of credit against factored Lumea receivables (2)
 
$
2,095,914
   
$
2,055,015
 
Bank loans, payable in installments
   
308,507
     
359,803
 
Mortgage loan payable, monthly payments of principal  and  interest at 3 month LIBOR plus 4.7% (1)
   
806,853
     
806,853
 
Payments due seller of XenTx Lubricants
   
254,240
     
254,240
 
Loan from Dyson
   
60,000
     
60,000
 
Notes payable
   
1,336,692
     
1,475,380
 
Loans from individuals, due within one year
   
277,407
     
255,000
 
Houtz Loan     212,000       306,000  
Purchase note payable
   
1,575,139
     
1,569,139
 
Purchase note 1
   
5,151,609
     
5,667,626
 
Purchase note 2
   
2,677,392
     
2,888,796
 
                 
Total
   
14,755,753
     
15,597,852
 
Less current portion
   
6,915,549
     
6,536,202
 
                 
Long-term debt
 
$
7,840,204
   
$
9,061,650
 
____________
(1)  
In conjunction with the acquisition of Dyson, the mortgage became payable as a result of the change of control of that company. The Company is in the process of refinancing the property.
(2)  
The Company maintains a $5 million line of credit relating to its factored accounts receivable.
 
Bank Loans consist of two loans that became due in the first quarter of 2009; these loans are secured by receivables, inventory and equipment in Durant, Oklahoma.  The Company is working to replace these loans and has arranged a payment schedule to retire these loans. The Mortgage Loan Payable has matured as a result of the change in control of the operations in Durant.  The Company continues to make principal and interest payments while the Company obtains a replacement loan on the property.  Interest is reset quarterly at Libor plus 4.7%.
 
The amounts due sellers bear interest at a rate of 8.0% and are due March 31, 2010.
 
18

 
Substantially all of the staffing receivables are pledged as collateral for the revolving line of credit.  At September 30, 2009 and March 31, 2009, the Company had pledged receivables of $3,721,302 and $2,532,926, respectively.
 
The balance of the notes payable consist of commercial loans of a vehicles and equipment in the normal course of business.
 
The Loans from individuals includes three loans which are all due within one year and bear interest from 9% to 12%.
Notes payable include amounts due after one year consists of the loan from Purchase Notes 1 and 2, all of which are secured by all of the business assets of Lumea, Notes Payable which is secured by all of the business assets of XenTx and the unsecured Houtz Loan.  Maturities for the remainder of the loans are as follows:
 
2011   
  $ 2,111,985
2012
  $ 1,150,198
2013
  $ 1,155,930
2014
  $ 3,422,091

Note 9 – Fair Value Measurements
 
The Company adopted the amendments to ASC 820-10 that apply to certain assets and liabilities that are being measured and reported on a fair value basis. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosure about fair value measurements.  This ASC enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. It also  requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
 
Level 1:  Quoted market prices in active markets for identical assets or liabilities.
 
Level 2:  Observable market based inputs or unobservable inputs that are corroborated by market data.
 
Level 3:  Unobservable inputs that are not corroborated by market data.
 
The Company records liabilities related to its warrants (See Note 11 – Derivative Financial Instruments) and the beneficial conversion feature of its convertible debentures (See Note 9 – Convertible Debt) at their fair market values as provided by ASC 820-10.
 
19

 
The following table provides fair market measurements of the warrant and beneficial conversion feature liabilities as of September 30, 2009:
 
   
Fair Value Measurements at Reporting Date Using Significant Unobservable Inputs (Level 3)
 
    (Unaudited)  
         
Warrant liabilities
 
$
763,876
 
Beneficial conversion feature liabilities
   
1,500,000
 
   
$
2,263,876
 
 
The change in fair market value of the warrant and beneficial conversion feature liabilities is included in interest expense in the Consolidated Statements of Operations.
 
The following table provides a reconciliation of the beginning and ending balances of the warrant and beneficial conversion feature liabilities as of September 30, 2009:
   
Warrant liability
   
Beneficial conversion
feature liability
   
Total
 
                         
Beginning balance April 1, 2009
 
$
643,750
   
$
2,527,050
   
$
3,170,800
 
    Change in fair market value of beneficial conversion liabilities due to partial maturity of note and conversion feature
   
– 
     
(1,027,050)
     
(1,027,050)
 
    Change in fair market value of warrant and beneficial conversion liabilities
   
120,126
     
  –
     
120,126
 
Ending balance September 30, 2009
 
$
763,876
   
$
1,500,000
   
$
2,263,876
 
 
Certain financial instruments are carried at cost on the consolidated balance sheets, which approximates fair value due to their short-term, highly liquid nature. These instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, other short-term liabilities, and capital lease obligations.
 
Note 10 – Convertible Debt
 
The Company entered into a Convertible Loan Agreement which also entitled the lenders to warrants and to convert the loans, at their option, to common stock of the Company. The debt is convertible at a rate of 50% of the then current market price at the time of conversion. At September 30, 2009, the value of the 6% Convertible Notes, with interest quarterly, was as follows:

20

 
Maturity
 
Face Amount
   
Conversion Derivative
   
Balance
 
                   
April 28, 2009 (Matured)
 
$
327,050
   
$
   
$
327,050
 
August 17, 2009 (Matured)
   
700,000
     
     
    700,000
 
October 28, 2009
   
300,000
     
300,000
     
600,000
 
November 10, 2009
   
1,200,000
     
1,200,000
     
2,400,000
 
Total
 
$
2,527,050
   
$
1,500,000
   
$
4,027,050
 
 
Interest expense for the quarter ended September 30, 2009 and 2008 was $91,516 and $76,940, respectively.
 
Note 11 – Income Taxes

Provision/benefit for income taxes for the periods ended September 30, 2009 and 2008 consisted of the follows:

 
For the six months ended
September 30,
 
 
2009
 
2008
 
 
(Unaudited)
 
(Unaudited)
 
                 
Federal income taxes/(benefit)
 
$
(1,021,116
)  
$
(304,675)
 
State income taxes
   
(224,943
)    
(61,171)
 
Total
   
(1,246,059
)
   
(371,792)
 
Valuation allowance
   
1,246,059
     
371,792
 
Net tax provision/benefit
 
$
   
$
 
Through September 30, 2009, we recorded a valuation allowance of $7,117,274 against deferred income tax assets primarily associated with tax loss carry forwards. Our significant operating losses experienced in prior years establishes a presumption that realization of these income tax benefits does not meet a “more likely than not” standard.  For the six months ended September 30, 2009 and 2008 we recognized $1,246,049 and $371,792 respective of the valuation allowance to offset the provision for income taxes for these periods.
 
We have net operating loss carry forwards of $17,013,433. Our net operating loss carry forwards will expire between 2025 and 2030.
  
21

 
Future realization of the net operating losses is dependent on generating sufficient taxable income prior to their expiration. Tax effects are based on a 34% Federal income tax rate. The Federal net operating losses expire as follows:
 
Expiration
 
Amount
 
         
2025
 
$
1,524,541
 
2026
   
5,132,298
 
2027
   
3,052,902
 
2028
   
2,251,029
 
2029  
   
      2,295,008
 
2030
   
2,757,655
 
     Total
 
 $
17,013,433
 
 
Note 12 – Derivative Financial Instruments

In connection with various financings through November 10, 2006, the Company has issued warrants to purchase shares of common stock in conjunction with the convertible notes to purchase 12,000,000 shares of common stock at an exercise price of $2.50 per share. The Company also issued warrants to a broker in the transaction for the exercise of 70,000 shares of common stock at an exercise price of $2.50. These warrants expire if not exercised at various dates in 2013 through November 10, 2013. At September 30, 2009, all of the 12,000,000 warrants have been issued entitling the lender to one share for each warrant at an exercise price of $2.50 per share.

The agreements include registration rights and certain other terms and conditions related to share settlement of the embedded conversion features and the warrants. In this instance, ASC 815-40 requires allocation of the proceeds between the various instruments and the derivative elements carried at fair values.

In additional, in conjunction with financings, purchases and consulting transactions between April 1, 2007 and March 31, 2009 the Company issued additional warrants, net of expirations, to purchase 8,725,000 shares of the Company’s common stock at exercise prices between $0.75 and $2.50 per share.  
At September 30, 2009 there were 18,225,000 shares subject to warrants at a weighted average exercise price of $1.95.

   
Number of Shares
 
Weighted Average
   
Subject to Outstanding
 
Remaining
Exercise
 
Warrants
 
Contractual Life
Price
 
and Exercisable
 
(years)
             
$
0.75
   
5,775,000
 
  2.50
             
$
2.50
   
12,450,000
 
  3.51
             
       
18,225,000
   

22

 
In addition to the spot price of the stock and remaining term of the warrant, other factors used in the binomial model included in the analysis at September 30, 2009 were the volatility of 229.95%, risk free rate of between 0.40% and 2.93% and a dividend rate of $0 per period.
 
 
Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash. The Company periodically evaluates the credit worthiness of financial institutions, and maintains cash accounts only in large high quality financial institutions, thereby minimizing exposure for deposits in excess of federally insured amounts.

Lease Commitments

The Company has lease agreements for office space in Scottsdale, Arizona and for 26 offices throughout the United States. The remaining lease commitment for the two Scottsdale offices are 3 and 5 years and the other offices are year to year or month-to-month. The following table sets forth the aggregate minimum future annual lease commitments at September 30, 2009 under all non-cancelable leases:
 
2010   
 
$
334,905
 
2011   
   
241,907
 
2012   
   
185,350
 
2013
   
67,618
 
2014
   
60,442
 
Thereafter
   
75,000
 
   
$
965,222
 
 
Lease expense for the six months ended September 30, 2009 and 2008 were $263,901 and $19,856, respectively.  The total of all scheduled lease payments, assuming all locations are continued at the same rates, is $498,475 per year.
 
Note 14 – Company Stock
 
Preferred Stock

At September 30, 2009, the Company had 1,000,000 shares of $0.001 par value authorized and no outstanding or issued shares.

23

 
Common Stock

At September 30, 2009, the Company had 250,000,000 shares authorized of $0.001 par value common stock, of which issued and outstanding shares were 131,487,944.

During the six months ended September 30, 2009, the Company issued 4,380,000 par value $0.001 common shares of stock for net proceeds of $120,000.  Also during the period, the Company issued an aggregate of 6,656,182 common shares for services to consultants recognizing an aggregate addition to stockholders’ equity of $421,950 based on the market price of the stock at the date of the agreements.  Some of these services will be recognized over the next one year and the related expense is being recognized over the service period.  Also during this period, the Company issued 2,846,324 shares of common stock for an acquisition and payment of accounts payable, 6,656,182 shares for services of consultants and directors and 164,764 shares for interest expense.  The Company recorded these accounts at $181,658, $421,950 and $16,000, respectively.
Warrants


At September 30, 2009 the status of the outstanding warrants is as follows:
 
Issue Date
 
Shares Exercisable
 
Weighted Average
Exercise Price
 
Expiration Date
               
September 27, 2005
 
450,000
 
$
2.50
 
September 26, 2010
April 29, 2006    
 
1,866,667
 
$
2.50
 
April 28, 2013
June 28, 2006  
 
5,000,000
 
$
2.50
 
August 10, 2013
August 17, 2006  
 
1,633,333
 
$
2.50
 
August 17, 2013
October 28, 2006
 
700,000
 
$
2.50
 
October 28, 2013
November 10, 2006
 
2,800,000
 
$
2.50
 
November 10, 2013
July 1, 2007
 
5,775,000
 
$
.75
 
June 30, 2012
Cashless April 20-November 10, 2006
 
700,000
 
$
2.50
 
April 29 - November 10, 2015
Cashless March 26, 2007
 
1,400,000
 
$
.75
 
March 26, 2010
Cashless July 1, 2007
 
519,750
 
$
.75
 
June 30, 2012
 
The warrants have no intrinsic value at September 30, 2009 or 2008.
 
24

 
Stock Options
 
At March 31, 2009, the Company had one stock option plan under which grants were outstanding. The stock options outstanding are for grants issued under the Company’s 2007 Stock Incentive Plan.
 
The 2007 Stock Incentive Plan
 
During the fiscal year ended March 31, 2008, the Company adopted a stock option plan, entitled the “2007 Incentive Plan” (the “2007 Plan”), under which the Company may grant options to purchase up to 20,000,000 shares of common stock.
 
The 2007 Plan is administered by the Board of Directors or a Committee of the Board of Directors which has the authority to determine the persons to whom the options may be granted, the number of shares of common stock to be covered by each option grant, and the terms and provisions of each option grant. Options granted under the 2007 Plan may be incentive stock options or non-qualified options, and may be issued to employees, consultants, advisors and directors of the Company and its subsidiaries. The exercise price of options granted under the 2007 Plan may not be less than the fair market value of the shares of common stock on the date of grant, and may not be granted more than ten years from the date of adoption of the plan or exercised more than ten years from the date of grant.
 
The following table sets forth the status of the Company’s non-vested stock options under the 2007 Plan as of September 30, 2009:
 
   
Number of
Options
   
Weighted-Average
Grant-Date
Fair Value
 
             
Non-vested as of March 31, 2008
   
5,415,000
   
$
.11
 
Granted
               
Forfeited
   
(450,000
)
   
 
Vested
   
(3,310,000
)
   
 
                 
Non-vested as of March 31, 2009
   
1,655,000
   
$
.11
 
Granted
   
     
 
Forfeited
   
     
 
Vested
   
(1,655,000
   
.11
 
                 
Non-vested as of September 30, 2009
   
   
$
 
 
25

 
During the year ended March 31, 2008, the Company granted options to purchase an aggregate of 5,415,000 shares of common stock to employees, directors and consultants for services to be provided. These options are exercisable at $0.20 per share, and vest one third on October 1, 2008, April 1, 2009 and October 1, 2009 with an expiration of three years from the date of grant, March 26, 2011, for all options. The Company has valued these at their fair value on the date of grant using the Hull-White enhanced option-pricing model.
 
Unrecognized stock-based compensation expense related to the unvested options at the issue date was approximately $525,165 which is being recognized over the vesting periods of 18 months. This estimate is based on the number of unvested options currently outstanding and could change based on the number of options granted or forfeited in the future.  During the six months ended September 30, 2009 and 2008 the Company recognized expense of $201,299 and $170,370, respectively. These options had no intrinsic value at September 30, 2009.
 
The assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimates.
 
The risk-free interest rate used for each grant is equal to the U.S. Treasury yield in effect at the time of grant for instruments with a similar expected life.
 
The expected term of options granted was determined based on the historical exercise behavior of similar peer groups.
 
The Company has never declared or paid a cash dividend, and has no current plans to pay a cash dividend in the future.
 
ASC 718-10 also requires that the Company recognize compensation expense for only the portions that are expected to vest. Therefore, the Company has estimated expected forfeitures of stock options with the adoption of ASC 718-10. In developing a forfeiture rate estimate, the Company considered its historical experience. If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in future periods.
 
 
 
2008
   
Risk Free Interest Rate
1.79%
Expected Life
3.0 years
Expected Volatility
116%
Expected Dividend Yield
0%

The per share weighted average fair value of stock options granted for the fiscal year ended March 31, 2008 was $0.11.

26

 
Purchase stock options

In conjunction with the acquisition of the staffing business on March 1, 2009, the Company issued 2,500,000 options to acquire shares of the Company’s stock at a price of $0.04 per share.  The options vest at a rate of 150,000 shares per quarter beginning June 30, 2009 through March 1, 2017.  At September 30, 2009, 300,000 options were vested. For the six months ended September 30, 2009 the Company has recorded an expense of $17,670. At September 30, 2009, the 300,000 options vested had an intrinsic value of $3,000.

Note 15 – Earnings (Loss) Per Share

Basic income/(loss) per common share is computed by dividing the results of operations by the weighted average number of shares outstanding during the period. For purposes of the determining the number of shares outstanding the shares received by the acquirer in the reverse acquisition are treated as outstanding for all periods prior to the transaction.

Diluted income/(loss) earnings per common share adjusts basic income/(loss) per common share for the effects of convertible securities, stock options, warrants and other potentially dilutive financial instruments only in periods in which such effect is dilutive. At September 30, 2009, the potentially issuable shares of common stock reflect the potential dilution that could occur from common stock issuable through stock options, warrants, and convertible debt, which excludes 30,000,000 shares for convertible debt, 20,844,750 under warrants and 5,265,000 shares issuable under stock options.  No instruments were dilutive at September 30, 2009 or 2008.  These potential shares of common stock were not included as they were anti-dilutive.
 
Note 16 – Subsequent Events
 
In August 1, 2009, the Company received notice of default from Shelter Island Opportunity Fund, LLC that due to the failure to make timely payments under the note that it was accelerating the note and making demand for payment and has filed such documents with the New York Supreme Court seeking judgment. In November, 2009 the parties settled the default and the litigation will be dismissed.
 
Subsequent to September 30, 2009, the Company issued 3,000,000 shares of common stock in conjunction with a twelve month consulting contract valued at $150,000 and 1,110,998 shares in conjunction with the payment of accounts payable valued at $55,550.
 
Management performed an evaluation of Company activity through November 18, 2009, the date the unaudited consolidated financial statements were issued.  The Company concluded that there are no other significant subsequent events requiring disclosure.
 
Note 17 – Segment Reporting
 
Green Planet Group, Inc. has two reportable segments: the engine, fuel additives and green energy products and the industrial staffing segments.  The first segment is comprised of the XenTx Lubricants, EMTA Corp. and White Sands entities and the staffing segment is comprised of Lumea, Inc. and its operating subsidiaries. Prior to March 1, 2009 Green Planet Group, Inc. only had the first reporting segment of business.
 
The accounting policies of the segments are the same as those described in the summary of significant accounting policies.  Interest expense related to the individual entities is paid by or charged to those entities and the related debt is included as that entity’s liability. Green Planet management evaluates performance based on profit or loss before income taxes not including nonrecurring gains and losses.
 
27

 
There have been no significant intersegment sales or costs.
 
Green Planet’s business is conducted through separate legal entities that are wholly owned subsidiaries.  Each entity has a specific set of business objectives and line of business.
 
The Company analyzes the result of the operations of the individual entities and the segments. Green Planet does not allocate income taxes and unusual items to the segments. The segment information for the three and six months ended September 30, 2009 are presented below.

 For the three months ended September 30, 2009
 
Additives &
         
Corporate
       
   
Green Energy
   
Staffing
   
& Eliminations
   
Consolidated
 
                         
Income statement information:
                       
Sales
 
$
103,072
   
$
16,303,738
   
$
   
$
16,406,810
 
Depreciation and amortization
   
 61,650
     
172,405
     
5,400
     
239,455
 
Interest expense
   
174,735
     
287,197
     
(1,552,998)
     
(1,091,066
)
Income (Loss) before income taxes
   
55,944
     
(1,209,824
)
   
162,268
     
(991,612
)
Net income (loss)
   
55,944
     
(1,209,824
)
   
162,268
     
(991,612
)
 
 For the six months ended September 30, 2009
 
Additives &
         
Corporate
       
   
Green Energy
   
Staffing
   
& Eliminations
   
Consolidated
 
                         
Income statement information:
                       
Sales
 
$
687,305
   
$
32,417,409
   
$
   
$
33,104,714
 
Depreciation and amortization
   
 128,700
     
345,073
     
5400
     
479,173
 
Interest expense
   
349,470
     
721,288
     
(734,590)
     
336,168
 
Loss before income taxes
   
(297,316
)
   
(2,848,336
)
   
(1,529,723
)
   
(4,675,375
)
Net loss
   
(297,316
)
   
(2,848,336
)
   
(1,529,723
)
   
 (4,675,375
)
                                 
Balance sheet information:
                               
Total assets
   
3,603,760
     
16,047,429
     
3,165,810
     
22,816,999
 


28

 
Note 18 – Restatement of Prior Financial Statements

On July 31, 2009, the board of directors (the “Board”) of Green Planet Group, Inc. (the “Company”) concluded that the Company’s previously filed consolidated financial statements for the fiscal year ends March 31, 2007, 2008 and 2009 on Form 10-K and the quarterly statements from September 30, 2006 (the first required filing date) through December 31, 2008 on Form 10-Q should no longer be relied upon.  The Board with the recommendation of management came to this conclusion based on comments received the Accounting Staff of the Division of Corporate Finance of the Securities and Exchange Commission (the “SEC”) in its review of the Company’s financial statements for the year ended March 31, 2008 and interim filings through December 31, 2008.  After discussion, review and analysis of our accounting and disclosures, the Company identified the following issues:
 
 
1)
The Company treated the convertible debt and related warrants under ASC 470-20 under which such converted or exercised instruments are recognized as equity and under the ASC 815-40 and owing to the unlimited nature of the potential issuances, the instruments are to be treated as liabilities or assets and revalued each reporting period.
 
 
2)
Under ASC 480-10 and (ASC 815-10)  state in part that convertible instruments should be valued at their fair value at date of issuance and derivatives, such as warrants, should be valued at their fair value at issuance and each subsequent reporting date.
 
 
3)
Accordingly, the Company will restate the financial statements referred to above. In summary, in conjunction with the aggregate face amount of the convertible loans of $3,000,000 with net proceeds of $2,512,500, the Company estimates that at the closing of the various convertible loans in the year ended March 31, 2007 the Company will book an additional $3,000,000 of loan balance representing the 50% conversion feature of the instruments to common stock of the Company and a derivative liability of $39,207,874 for the then fair value of the warrants issued and outstanding. At the end of the reporting period credits of $13,960,334 to adjust for the “default warrants” issued and valued under ASC 470-20 in error and a valuation allowance of $38,685,527 to adjust to the year end valuation resulting in a net decrease of $10,437,986 in the net loss for March 31, 2007.  At March 31, 2008, the year end valuation resulted in additional interest expense of $1,272,447 and a increase in the net loss for the period of a like amount and at March 31, 2009 the Company has a reduction of interest expense by $1,151,045 and a decrease in the net loss for the period of the same amount. For the six months ended September 30, 2008 the Company is reporting a reduction in interest expense of $840,993 and a change in the net loss for the period from $(967,240) to a loss of $(126,247). The results of these changes are reflected in the following balance sheets and statements of operations for the year ended March 31, 2009 and the six months ended September 30, 2008:
29

 
 
   
March 31, 2009
 
   
As Originally
               
After
 
ASSETS
 
Reported
   
Adjustments
         
Restatement
 
                         
Current Assets:
                       
Cash
 
$
470,288
   
$
         
$
470,288
 
Accounts receivable
   
4,349,866
     
           
4,349,866
 
Inventory
   
369,403
     
           
369,403
 
Prepaid expenses
   
1,495,461
     
158,970
   
A
     
1,654,431
 
Total Current Assets
   
6,685,018
     
158,970
           
6,843,988
 
Plant and equipment, net of accumulated depreciation
   
1,900,834
     
           
1,900,834
 
Other Assets:
                             
Other assets
   
189,164
     
106,208
   
A
     
295,372
 
Intangible assets
   
3,745,025
     
           
3,745,025
 
Goodwill
   
8,979,822
     
           
8,979,822
 
Total Other Assets
   
12,914,011
     
106,208
           
13,020,219
 
Total Assets
 
$
21,499,863
   
$
265,178
         
$
21,765,041
 
                               
                             
                               
Current Liabilities:
                             
Accounts payable
 
$
1,210,127
   
$
         
$
1,210,127
 
Accounts payable - affiliates
   
165,565
     
           
165,565
 
Accrued liabilities
   
4,765,026
     
           
4,765,026
 
Cashless warrant liability
   
57,876
     
           
57,876
 
Notes payable and amounts due within one year
   
6,429,994
     
106,208
   
A
     
6,536,202
 
Derivative liability
   
     
643,750
   
B
     
643,750
 
Convertible notes payable
   
2,474,287
     
2,579,813
   
C
     
5,054,100
 
Total Current Liabilities
   
15,102,875
     
3,329,771
           
18,432,646
 
                               
Notes payable due after one year
   
8,955,442
     
106,208
   
A
     
9,061,650
 
Total Liabilities
   
24,058,317
     
3,435,979
           
27,494,296
 
                               
Stockholders’ Equity
                             
Preferred Stock, $0.001 par value, 1,000,000 Authorized; no shares issued and outstanding
   
     
           
 
Common Stock, $0.001 par value, 250,000,000 authorized, issued and outstanding 117,440,103 at March 31, 2009
   
117,441
     
           
117,441
 
Additional paid-in capital
   
28,201,532
     
(13,487,384
)
 
D
     
14,714,148
 
Accumulated deficit
   
(30,877,427
)
   
10,316,583
   
E
     
(20,560,844
)
Total Stockholders’ Equity/Deficit
   
(2,558,454
)
   
(3,170,801
)
         
(5,729,255
)
Total Liabilities and Stockholders’ Equity
 
$
21,499,863
   
$
265,178
         
$
21,765,041
 
 
(Continued)
 
30

 
Consolidated Statements of Operations
 
   
For the Year Ended March 31, 2009
 
   
As Originally
               
After
 
   
Reported
   
Adjustments
         
Restatement
 
Revenue:
                       
Sales, net of returns and allowances
 
$
9,170,794
   
$
         
$
9,170,794
 
Cost of sales
   
7,030,015
     
           
7,030,015
 
                               
Gross Profit
   
2,140,779
     
           
2,140,779
 
                               
Operating Expenses:
                             
Selling, general and administrative
   
3,798,290
     
           
3,798,290
 
Depreciation and amortization
   
308,833
     
           
308,833
 
Allowance for bad debts
   
970,542
     
           
970,542
 
Total Operating Expenses
   
5,077,665
     
           
5,077,665
 
Loss From Operations
   
(2,936,886
)
   
           
(2,936,886
)
                               
Other Income and (Expense):
                             
Other income
   
416
     
           
416
 
Interest expense
   
(886,945
)
   
1,151,045
   
B
     
264,100
 
Loss before provision for income taxes
   
(3,823,415
)
   
1,151,045
           
(2,672,370
)
                               
Provision for/(Benefit of) income taxes
   
     
           
 
                               
Net Loss
 
$
(3,823,415
)
 
$
1,151,045
         
$
(2,672,370
)
                               
Loss per share:
                             
Basic and diluted earnings per share
 
$
(0.05
)
 
$
0.01
         
$
(0.04
)
Weighted average shares outstanding
   
73,612,313
     
73,612,313
           
73,612,313
 
 
(Continued)
 
31


(Unaudited)
                       
   
September 30, 2008
 
   
As Originally
               
After
 
ASSETS
 
Reported
   
Adjustments
         
Restatement
 
Current Assets:
                       
Cash
  $ 47,298     $           $ 47,298  
Accounts receivable
    1,880,130                   1,880,130  
Notes receivable
    52,500                   52,500  
Inventory
    476,750                   476,750  
Prepaid expenses
    835,117       225,897     A       1,061,014  
Total Current Assets
    3,291,795       225,897             3,517,692  
Property, plant and equipment, net of accumulated depreciation
    1,749,639                   1,749,639  
Other Assets:
                             
Other assets
    2,351       161,176     A       163,527  
Intangible assets
    570,250                   570,250  
Total Other Assets
    572,601       161,176             733,777  
Total Assets
  $ 5,614,035     $ 387,073           $ 6,001,107  
                               
LIABILITIES AND STOCKHOLDERS EQUITY/(DEFICIT)
                             
Current Liabilities:
                             
Accounts payable
  $ 951,403     $           $ 951,403  
Accrued liabilities
    1,812,959                   1,812,959  
Cashless warrant liability
    91,028                   91,028  
Notes payable and amounts due within one year
    1,985,530       115,863     A       2,101,393  
Derivative liability
          953,801     B       953,801  
Convertible notes payable
    990,679       1,063,421     C       2,054,100  
Total Current Liabilities
    5,831,600       2,133,085             7,964,684  
                               
Notes payable due after one year
    706,779       169,332     A       876,111  
Convertible notes payable
    1,434,495       1,565,505     C       3,000,000  
Total Liabilities
    7,972,874       3,867,922             11,840,795  
                               
Stockholders’ Equity
                             
Preferred Stock, $0.001 par value, 1,000,000 authorized; no shares issued and outstanding
                       
Common Stock, $0.001 par value, 250,000,000 authorized, issued and outstanding 66,616,103 at September 30, 2008
    66,616                   66,616  
Additional paid-in capital
    25,595,797       (13,487,384 )   D       12,108,413  
Accumulated deficit
    (28,021,252 )     10,006,535     E       (18,014,717 )
Total Stockholders’ Equity/(Deficit)
    (2,358,839 )     (3,480,849 )           (5,839,688 )
Total Liabilities and Stockholders’ Equity/Deficit)
  $ 5,614,035     $ 387,073           $ 6,001,107  
 
(Continued)
 
32

Consolidated Statements of Operations
(Unaudited)
 
   
For the three months ended
September 30, 2008
   
For the six months ended
September 30, 2008
 
   
As Originally
           
After
   
As Originally
           
After
 
   
Reported
   
Adjustments
     
Restatement
   
Reported
   
Adjustments
     
Restatement
 
Revenue:
                                       
Sales, net of returns and allowances
  $ 529,650     $       $ 529,650     $ 2,366,071     $       $ 2,366,071  
Cost of sales
    324,483               324,483       1,051,259               1,051,259  
                                                     
Gross Profit
    205,167               205,167       1,314,812               1,314,812  
                                                     
Operating Expenses:
                                                   
Selling, general and administrative
    1,250,717               1,250,717       1,932,420               1,932,420  
Depreciation and amortization
    61,967               61,967       123,933               123,933  
Research and development
    250               250       250               250  
Total Operating Expenses
    1,312,934               1,312,934       2,056,603               2,056,603  
Loss From Operations
    (1,107,767 )             (1,107,767 )     (741,791 )             (741,791 )
                                                     
Other Income and (Expense):
                                                   
Other income
    41               41       416               416  
Interest expense
    (27,031 )     1,911,542   B     1,884,511       (225,865 )     840,993   B     615,128  
Loss before provision for income taxes
    (1,134,757 )     1,911,542         776,785       (967,240 )     840,993         (126,247 )
                                                     
Provision for/(Benefit of) income taxes
                                       
                                                     
Net Income/(Loss)
  $ (1,134,757 )   $ 1,911,542       $ 776,785     $ (967,240 )   $ 840,993       $ (126,247 )
                                                     
Earnings/(Loss) per share:
                                                   
Basic earnings/(loss) per share
  $ (0.02 )   $ 0.03       $ 0.01     $ (0.02 )   $ 0.02       $ (0.00 )      
Weighted average shares outstanding
    66,066,375       66,066,375         66,066,375       63,962,835       63,962,835         63,962,835  
A – Adjustment to reclassify unamortized loan fees and costs to prepaids and other assets
B – Adjustment to reflect change in derivative value for the period
C – Cumulative effect to reflect loan conversion feature net of conversions in prior periods
D – Cumulative effect of error in reporting cure cost of default and effect of conversions
E – Cumulative effect of prior period adjustments and current period adjustment to accumulated deficit
33

 
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Forward-Looking Statements 
 
The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are “forward-looking statements” under the Private Securities Litigation Reform Act of 1995 and within Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All forward-looking statements involve various risks and uncertainties. Forward-looking statements contained in this Report include statements regarding the plans of Green Planet Group, Inc. (“Green Planet, “GPG,” “we,” “our,” or “the Company”) to develop, test and deliver new products; market risks, opportunities and acceptance; industry growth; anticipated capital expenditures; the impact of option expensing; our ability to finance operations, refinance current maturities of long-term obligations; and our ability to meet our cash requirements while maintaining proper liquidity. These statements involve risks and uncertainties and are based on management’s current expectations and estimates; actual results may differ materially. Those risks and uncertainties that could impact these statements include the risks relating to implementation and success of our advertising and marketing plans and sensitivity to general economic conditions, including the current economic environment, consumer spending patterns; our ability to complete long-term financing, our leverage and debt risks; the effect of competition on GPG and our clients; management’s allocation of capital and the timing of capital purchases; and internal factors such as the ability to increase efficiencies, control expenses and successfully execute growth strategies. The effect of market risks could be impacted by future borrowing levels and economic factors such as interest rates. The expected impact of option/warrant expensing is based on certain assumptions regarding the number and fair value of options granted, resulting tax benefits and shares outstanding. The actual ultimate impact of option/warrant expensing could vary significantly to the extent actual results vary significantly from current assumptions and market conditions.
 
 Such forward-looking statements encompass our beliefs, expectations, hopes or intentions regarding future events. Words such as “expects,” “believes,” “anticipates,” “should,” and “likely” also identify forward-looking statements. All forward-looking statements included in this Report are made as of the date hereof, based on information available to us as of such date, and we assume no obligation to update any forward-looking statement. It is important to note that such statements may not prove to be accurate and that our actual results and future events could differ materially from those anticipated in such statements. Among the factors that could cause actual results to differ materially from our expectations are those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations---Risks Related to Existing and Proposed Operations.” All subsequent written and oral forward-looking statements attributable to GPG or persons acting on our behalf are expressly qualified in their entirety by this section and other factors included elsewhere in this Report. For a more detailed discussion of these and other factors that could cause actual results to differ from those contained in the forward-looking statements, see the company’s annual report on Form 10-K filed with the Securities and Exchange Commission which includes our financial statements for the year ended March 31, 2009. As previously reported, the Company will be restating its financial statements on Form 10-K for the year ended March 31, 2009 and prior years as soon as practicable.
 
Overview
 
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand Green Planet Group, Inc., our operations and our business environment. MD&A is provided as a supplement to (and should be read in conjunction with) our Financial Statements and accompanying notes.
 
34

 
 
 
   
For the three months ended
 
For the six months ended
   
September 30,
 
September 30,
   
2009
 
2008
 
2009
 
2008
                         
NET SALES
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
                         
COST OF SALES
 
87.0
%
 
61.3
%
 
87.6
%
 
44.4
%
                         
GROSS PROFIT
 
13.0
%
 
38.7
%
 
12.4
%
 
55.6
%
                         
OPERATING EXPENSES
                       
Selling, general and administrative
 
23.8
%
 
236.1
%
 
22.6
%
 
81.7
%
Depreciation and amortization
 
1.5
%
 
  11.7
%
 
1.4
%
 
5.2
%
Allowance for bad debts
 
0.3
%
 
0.0
%
 
1.4
%
 
0.0
%
Research and development
 
0.1
%
 
0.0
%
 
0.0
%
 
0.0
%
                         
TOTAL OPERATING EXPENSES
 
25.7
%
 
247.8
%
 
25.4
%
 
86.9
%
                         
INCOME/(LOSS) FROM OPERATIONS
 
(12.7)
%
 
(209.1)
%
 
(13.0)
%
 
(31.3)
%
                         
Other income (expense)
 
0.0
%
 
0.0
%
 
0.0
%
 
0.0
%
Interest expense
 
6.7
%
 
355.8
%
 
(1.0)
%
 
26.0
%
                         
LOSS BEFORE INCOME TAXES
 
(6.0)
%
 
146.7
%
 
(14.0)
%
 
(5.3)
%
Income tax benefit
 
0.0
%
 
0.0
%
 
0.0
%
 
0.0
%
                         
NET LOSS
 
(6.0)
%
 
146.7
%
 
(14.0)
%
 
(5.3)
%
 
Three months ended September 30, 2009 as compared to three months ended September 30, 2008
 
Net Sales: Net Sales increased from $529,650 in 2008 to $16,406,810 in 2009 or an increase of $15,877,160. This represents an increase of 2,998% over the same period a year earlier. This increase was due to the addition of the staffing business segment that added $16,303,738 and a decrease in the chemical additive volume of $168,401.
 
Gross Margin: Gross Margin decreased to 13.00% from 38.7% or a decrease of 66.4%. This was due to the lower gross margins from the staffing segment and decreased sales of the chemical additive products and an increase in petroleum based product costs used by our product mix.
 
35

 
Selling, General and Administrative Expenses: The Company increased its SG&A from $1,250,717 to $3,900,241 or an increase of $2,649,524, reflecting a decrease in the percentage of SG&A relative to sales from 236.1% of sales to 23.8% of sales, a decrease of 89.9%. The increased dollar amount  was due to the increase in operating costs of the staffing segment, including interest and penalties of $296,424 related to underpayment of various state and federal payroll taxes, that was not present in the prior period and an increase in consulting costs and sales and promotional expenses.
 
Depreciation and Amortization: The increase in the depreciation and amortization was due to the addition of the staffing segment which accounted for all of the increase. The amortization of the customer relations for the three months ended September 30, 2009 was $164,651 that was not present in the comparable period a year earlier.
 
Allowance for Bad Debts:   The allowance for bad debts was attributable to the staffing segment and the filing of bankruptcy by two of its clients, the collection of their outstanding amounts is uncertain.

Six months ended September 30, 2009 as compared to six months ended September 30, 2008
 
Net Sales: Net Sales increased from $2,366,071 in 2008 to $33,104,714 in 2009 or an increase of $30,738,643. This represents an increase of 1,299% over the same period a year earlier. This increase was due to the addition of the staffing business segment that added $32,417,409 and a decrease in the chemical additive volume of $1,678,766.
 
Gross Margin: Gross Margin decreased to 12.4% from 55.6% or a decrease of 77.7%. This was due to the lower gross margins from the staffing segment and decreased sales of the chemical additive products and an increase in petroleum based product costs used by our product mix.
 
Selling, General and Administrative Expenses: The Company increased its SG&A from $1,932,420 to $7,480,876 or an increase of $5,548,456, reflecting a decrease in the percentage of SG&A relative to sales from 81.7% of sales to 22.6% of sales, a decrease of 72.3%. The increased dollar amount  was due to the increased operating costs of the staffing segment, including interest and penalties of $646,639 related to underpayment of various state and federal payroll taxes, that was not present in the prior period and an increase in consulting costs and sales and promotional expenses.
 
Depreciation and Amortization: The increase in the depreciation and amortization was due to the addition of the staffing segment which accounted for all of the increase. The amortization of the customer relations for the 6 months ended September 30, 2009 was $329,302 that was not present in the comparable period a year earlier.
 
Allowance for Bad Debts:   The allowance for bad debts was attributable to the staffing segment and the filing of bankruptcy by two of its clients the collection of their outstanding amounts is uncertain.

DERIVATIVE FLUCTUATIONS

We experience significant fluctuations in the aggregate interest expense for each period as a result of the revaluation of the derivatives and changes in the conversion options.  These fluctuations are based on our stock price at the end of each period, volatility, risk free interest rates, the number of warrants outstanding and the conversion options outstanding.
 
36

 
IMPACT OF INFLATION
 
Inflation has not had a material effect on our results of operations.  We expect the cost of petroleum base products to track the increase and decrease in the worldwide oil prices.
 
SEASONALITY
 
The seasons of the year have no material impact on the Company’s fuel efficiency/emission reducing products or services but it does have an impact on both revenues and margin of our staffing companies. Revenues are lowest in the first calendar quarter and largest in the third calendar quarter.
 
 
We have experienced net losses for the three months ended September 30, 2009 and six months ended September 30, 2008 and 2009 and net income of for the three months ended September 30, 2008. The aggregate net losses for the last two fiscal years aggregated $2,672,370 (restated) and $3,722,531 (restated), respectively. For the three months ended September 30, 2009 the net loss was $991,612 with net aggregate contributing non-cash factors of depreciation, amortization, bad debts, share based payment expense and derivation valuation factors of $976,021 which has been offset by $1,661,046 of derivative benefits which reduce interest expense for the quarter compared to the prior year quarter which had a net benefit of $2,177,675 which includes derivative benefits of $2,115,708. The aggregate loss for the six months ended September 30, 2009 was $4,675,375 with net aggregate contributing non-cash factors of depreciation, amortization, bad debts, share based payment expense and derivation valuation factors of $1,705,837 which has been offset by $917,222 of derivative benefits which created an interest expense of $336,168 for the six months compared to the prior year period which had a net interest benefit of $615,128. We have funded our operations to date by borrowings from third parties and investors, a substantial portion of which are convertible into our common stock and underpayment of various state and federal payroll taxes. In the September 30, 2009 quarter we issued 7,081,000 common shares and recorded a value of $540,177 of common stock for services, interest, payables, acquisitions and stock option expense. The inability of the Company to raise capital through the private sale of common stock or through the issuance of debt instruments at acceptable prices and in a timely manner will have a negative impact on the results of operations and viability of the Company.
 
At September 30, 2009, the Company aggregate of accounts payable, accrued liabilities and notes due within one year has increased by $19,614,894 from $4,865,755 a year earlier.  These obligations together with operation costs will have to be funded from operations and additional funding from debt and equity offerings.
 
 
OFF BALANCE SHEET ARRANGEMENTS
 
Not applicable.
 
37

 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Over the years, the Financial Accounting Standards Board (“FASB”) and other designated GAAP-setting bodies, have issued standards in the form of FASB Statements, Interpretations, FASB Staff Positions, EITF consensuses, AICPA Statements of Position, etc. The FASB finalized the Codification for periods ending after September 15, 2009. Prior FASB standards are no longer being issued in the previous format and are included herein for the convenience of the reader. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification, sometimes referred to as the “Codification” or “ASC”.

Consolidation – The consolidated financial statements include the accounts of Green Planet Group, Inc. and its consolidated subsidiaries and wholly-owned limited liability company. All significant intercompany transactions and profits have been eliminated.

Use of Estimates – The preparation of financial statements in conformity with United States generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. The more significant estimates relate to revenue recognition, contractual allowances and uncollectible accounts, intangible assets, accrued liabilities, derivative liabilities, income taxes, litigation and contingencies. Estimates are based on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances, the results of which form the basis for judgments about results and the carrying values of assets and liabilities. Actual results and values may differ significantly from these estimates.
 
Cash Equivalents – The Company invests its excess cash in short-term investments with various banks and financial institutions. Short-term investments are cash equivalents, as they are part of the cash management activities of the Company and are comprised of investments having maturities of three months or less when purchased.
 
Allowance for Doubtful Accounts – The Company provides an allowance for doubtful accounts when management estimates collectibility to be uncertain. Accounts receivable are continually reviewed to determine which, if any, accounts are doubtful of collection. In making the determination of the appropriate allowance amount, the Company considers current economic and industry conditions, relationships with each significant customer, overall customer credit-worthiness and historical experience. The allowance for doubtful accounts was $1,267,123 and $806,846 at September 30, 2009 and March 31, 2009, respectively.
  
Inventories – Inventories are stated at the lower of cost or market value. Cost of inventories is determined by the first-in, first-out (FIFO) method. Obsolete or abandoned inventories are charged to operations in the period that it is determined that the items are not longer viable sales products.

Property, Plant and Equipment – Property, plant and equipment are carried at cost. Repair and maintenance costs are charged against operations while renewals and betterments are capitalized as additions to the related assets. The Company depreciates it assets on a straight line basis. Estimated useful lives for the equipment range from 3 to 10 years and the buildings are being depreciated over 31 years.
 
Intangible Assets – Intangible assets consist of patents, trademarks, intellectual property and government approval. For financial statement purposes, identifiable intangible assets with a defined life are being amortized using the straight-line method over the estimated useful lives of the assets. Costs incurred in connection with patent, trademark applications and approvals from governmental agencies such as the Environmental Protection Agency, including legal fees, patent and trademark fees and specific testing costs, are capitalized and amortized over an estimated economic life of the asset, generally seven years, commencing upon the grant or approval date. Costs subsequent to grant date are expensed as incurred.
 
38

 
Impairment of Long-Lived Assets – In accordance with ASC 360-10 (formerly the Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,”) the Company reviews long-lived assets, including, but not limited to, property and equipment, patents and other assets, for impairment annually or whenever events or changes in circumstances indicate the carrying amounts of assets may not be recoverable. The carrying value of long-lived assets is assessed for impairment by evaluating operating performance and future undiscounted cash flows of the underlying assets. If the sum of the expected future cash flows of an asset is less than its carrying value, an impairment measurement is required. Impairment charges are recorded to the extent that an asset’s carrying value exceeds fair value. Accordingly, actual results could vary significantly from such estimates. There were no impairment charges during the periods presented.
 
Fair Value Disclosures – The carrying values of cash, accounts receivable, deposits, prepaid expenses, accounts payable and accrued expenses generally approximate the respective fair values of these instruments due to their current nature.
 
The fair values of debt instruments for disclosure purposes only are estimated based upon the present value of the estimated cash flows at interest rates applicable to similar instruments.
 
The Company generally does not use derivative financial instruments to hedge exposures to cash flow or market risks. However, certain other financial instruments, such as warrants and embedded conversion features that are indexed to the Company’s common stock, are classified as liabilities when either (a) the holder possesses rights to net-cash settlement or (b) physical or net-share settlement is not within the control of the Company. In such instances, net-cash settlement is assumed for financial accounting and reporting, even when the terms of the underlying contracts do not provide for net-cash settlement. Such financial instruments are initially recorded at fair value and subsequently adjusted to fair value at the close of each reporting period.
 
Revenue Recognition – Revenues are recognized at the time of shipment of products to customers, or at the time of transfer of title, if later, and when collection is reasonably assured. All amounts in a sales transaction billed to a customer related to shipping and handling are reported as revenues.  Staffing revenue is recognized at the completion of each billing cycle to the customer after completion of the work.  The billing cycle is generally weekly.

Provisions for sales discounts and rebates to customers are recorded, based upon the terms of sales contracts, in the same period the related sales are recorded, as a deduction to the sale. Sales discounts and rebates are offered to certain customers to promote customer loyalty and encourage greater product sales.  As a general rule, the Company does not charge interest on its accounts receivables.

Income Taxes – We provide for income taxes in accordance with ASC 740-10 (formerly SFAS No. 109, “Accounting for Income Taxes.”) that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of the assets and liabilities.
 
The recording of a net deferred tax asset assumes the realization of such asset in the future; otherwise a valuation allowance must be recorded to reduce this asset to its net realizable value. The Company considers future pretax income and, if necessary, ongoing prudent and feasible tax planning strategies in assessing the need for such a valuation allowance. In the event that the Company determines that it may not be able to realize all or part of the net deferred tax asset in the future, a valuation allowance for the deferred tax asset is charged against income in the period such determination is made. The Company has recorded full valuation allowances as of September 30, 2009 and 2008.
 
39

 
Stock-Based Compensation
 
We account for stock-based awards to employees and non-employees using the accounting provisions of ASC 718-10 (formerly the Statement of Financial Accounting Standards (“SFAS”) No. 123 — Accounting for Stock-Based Compensation and SFAS No. 123(R which revised SFAS No. 123) which provides for the use of the fair value based method to determine compensation for all arrangements where shares of stock or equity instruments are issued for compensation. Shares of common issued in connection with acquisitions are also recorded at their estimated fair values based on the Hull-White “enhanced US ASC 718-10 standard. The standards for the accounting of transactions in which an entity exchanges its equity instruments for goods or services, particularly transactions in which an entity obtains employee services in share-based payment transactions. The statement also requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period during which the employee is required to provide service in exchange for the award.
 
Concentrations of Credit Risks – Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. Although the amount of credit exposure to any one institution may exceed federally insured amounts, the Company limits its cash investments to high-quality financial institutions in order to minimize its credit risk. The Company extends credit based on an evaluation of the customer’s financial condition, generally without requiring collateral. Exposure to losses on receivables is dependent on each customer’s financial condition. At September 30, 2009 and 2008 the Company had a receivable from one foreign customer in the amount of $1,290,394 and $1,317,809 and at September 30, 2009 the Company had a reserve for bad debts of $681,000 against this account.  The balance of the accounts receivable are primarily from clients, retailers and distributors located in the United States. For the six months ended September 30, 2009 three clients accounted for 12.0%, 13.6% and 13.7% of gross sales for the period.
 
Recent Accounting Pronouncements

Fair Value Measurement and Fair Value of a Financial Asset When the Market is Not Active
 
ASC 820-10 (formerly SFAS No. 157, Fair Value Measurements (“SFAS 157”), as amended by FSP FAS 157-2, Effective Date of FASB Statement No. 157, and further amended by FSP FAS 157-3, Fair Value of a Financial Asset When the Market for that Asset is Not Active. Portions of the provisions of ASC 820-10 became effective for the Company as of April 1, 2008 while other provisions deferred the effective date for all nonfinancial assets and liabilities, except those recognized or disclosed at fair value on an annual or more frequent basis, until April 1, 2009 and a further revision which clarifies the application in a market that is not active  became effective upon issuance. ASC 820-10 defines fair value, creates a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements and additional guidance is provided regarding how the reporting entity’s own assumptions should be considered when relevant observable inputs do not exist, how available observable inputs in a market that is not active should be considered when measuring fair value, and how the use of market quotes should be considered when assessing the relevance of inputs available to measure fair value. The adoption of these standards did not have a material impact on the Company’s consolidated financial statements for the current period.

40

 
Fair Value When the Volume and Level of Activity Significantly Decreased

 ASC 820-10 was amended in April 2009 by what was formerly FSP No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, which clarifies the application of ASC 820-10 when there is no active market or where the price inputs being used represent distressed sales. Additional guidance is provided regarding estimating the fair value of an asset or liability (financial and nonfinancial) when the volume and level of activity for the asset or liability have significantly decreased and identifying transactions that are not orderly. The Company adopted the standard as of June 30, 2009, which was the required effective date. Its adoption did not have a material impact on the Company’s consolidated financial statements.
 
Determining Whether an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock (ASC 815-10)
 
In June 2008, the FASB amended ASC 815-10 by what was formerly EITF 07-5, Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock.  ASC 815-10 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. The adoption of this pronouncement effective April 1, 2009, required the Company to perform additional analyses on both its freestanding equity derivatives and embedded equity derivative features. The adoption of these amendments to ASC 815-10 did not have a material effect on the Company’s consolidated financial statements at September 30, 2009.
 
Fair Value Option
 
In February 2007, ASC 825-10 was amended by the FASB in what was formerly SFAS No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115 which permits all entities to choose to measure eligible items at fair value on specified election dates. The associated unrealized gains and losses on the items for which the fair value option has been elected shall be reported in earnings. The ASC 825-10 became effective for the Company as of April 1, 2008; however, the Company has not elected to utilize the fair value option on any of its financial assets or liabilities under the scope of this ASC.
 
 Interim Disclosures about Fair Value of Financial Instruments

In April 2009, the FASB further amended ASC 825-10 with the issued FSP FAS 107-1 and Accounting Principles Board (APB) 28-1, Interim Disclosures about Fair Value of Financial Instruments . The amendments ASC 825-10 to require an entity to provide disclosures about fair value of financial instruments in interim financial information. This FSP is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The adoption of this amendment did not have an impact on the Company’s financial statements.
 
41

 
Business Combinations
 
In December 2007, the FASB amended ASC 805-10 by issuing SFAS No. 141(R), Business Combinations. The objective of this ASC is to improve the information provided in financial reports about a business combination and its effects. ASC 805-10 states that all business combinations (whether full, partial or step acquisitions) must apply the “acquisition method.” In applying the acquisition method, the acquirer must determine the fair value of the acquired business as of the acquisition date and recognize the fair value of the acquired assets and liabilities assumed. As a result, it will require that certain forms of contingent consideration and certain acquired contingencies be recorded at fair value at the acquisition date. This ASC also states acquisition costs will generally be expensed as incurred and restructuring costs will be expensed in periods after the acquisition date. This amendment is effective for business combination transactions for which the acquisition date is on or after April 1, 2009, and earlier application is prohibited. The Company adopted this statement on April 1, 2009. The impact of the adoption of amendment on the Company’s financial statements will largely be dependent on the size and nature of the business combinations completed after the adoption of this ASC. While this amendment to ASC 805-10 generally applies only to transactions that close after its effective date, the amendment to ASC 740-10 are applied prospectively as of the adoption date and will apply to business combinations with acquisition dates before the effective date of this amendment.  Adoption of this amendment did not have a material effect on the results of operations or statement of position for the period ended September 30, 2009.

Contingencies in Business Combinations

In April 2009, the FASB further amended ASC 805-10 by the issuance of FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies. This amendment requires that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value if fair value can be reasonably estimated. If fair value cannot be reasonably estimated, the asset or liability would generally be recognized in accordance with ASC 450-10 and ASC 450-20. Further, the FASB removed the subsequent accounting guidance for assets and liabilities arising from contingencies from ASC 805-10. The requirements of this amendment carry forward without significant revision the other guidance on contingencies of ASC 805-10, which was superseded by SFAS No. 141(R) (see previous paragraph). The amendment also eliminates the requirement to disclose an estimate of the range of possible outcomes of recognized contingencies at the acquisition date. For unrecognized contingencies, the FASB requires that entities include only the disclosures required by ASC 450-10. This amendment was adopted effective April 1, 2009. There was no impact upon adoption, and its effects on future periods will depend on the nature and significance of business combinations subject to this statement.
 
Disclosures about Derivative Instruments and Hedging Activities
 
In March 2008, the FASB amended ASC 815-10 by issuing SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133. This amendment changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under ASC 815-10 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company adopted this amendment on April 1, 2009, the beginning of the Company’s first fiscal 2010 quarter and its adoption did not have a material effect on the results of operations or statement of position in the subsequent periods.
 
42

 
Codification and the Hierarchy of Generally Accepted Accounting Principles

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles,” which replaces SFAS No. 162 and establishes the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. On the effective date for financial statements issued for interim and annual periods ending after September 15, 2009, the Codification will supersede all then–existing non-SEC accounting and reporting standards and is codified as ASC 105-10. The Company has determined that the adoption of the Codification will not have a material impact on the financial statements.
 
Convertible Debt
 
In May 2008, ASC 470-20 was amended by the FASB issuance of  Financial Statement Position (FSP) Accounting Principles Board (APB) 14-1 “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).” This amendment requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. ASC 470-20 became effective for fiscal years beginning after December 15, 2008 on a retroactive basis and has been adopted by the Company in the first quarter of fiscal 2010.

Useful Life of Intangible Assets

In April 2008, the FASB amended ASC 350-30 by issuing FSP FAS 142-3, Determination of the Useful Life of Intangible Assets. The amendment states that in developing assumptions about renewal or extension options used to determine the useful life of an intangible asset, an entity needs to consider its own historical experience adjusted for entity-specific factors. In the absence of that experience, an entity shall consider the assumptions that market participants would use about renewal or extension options. This ASC is to be applied to intangible assets acquired after January 1, 2009. The adoption of this ASC did not have an impact on the Company’s financial statements.
 
Other Than Temporary Impairments

In April 2009, the FASB issued FASB Staff Position (FSP) No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments,” amending ASC 320-10 to determine whether the holder of an investment in a debt or equity security for which changes in fair value are not regularly recognized in earnings (such as securities classified as held-to-maturity or available-for-sale) should recognize a loss in earnings when the investment is impaired. ASC 320-10 improves the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. The effective date for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. Earlier adoption for periods ending before March 15, 2009, is not permitted.  The adoption of this amendment did not have an impact on the Company’s financial statements.

Subsequent Events

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events,” which amends ASC 855-10 and requires entities to disclose the date through which they have evaluated subsequent events and whether the date corresponds with the release of their financial statements. The statement establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. ASC 855-10 as amended is effective for interim or annual financial periods ending after June 15, 2009, and shall be applied prospectively. The adoption of this amendment did not have a material impact on the Company’s consolidated financial statements.
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Transfers of Financial Assets

 In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets,” which has not be codified yet and which is an amendment of ASC 860-10 (formerly SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” and requires entities to provide more information about sales of securitized financial assets and similar transactions, particularly if the seller retains some risk to the assets. This amendment will improve the relevance, representation faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets. It will also take into account the effects of a transfer on its financial position, financial performance, and cash flows, and a transferor’s continuing involvement. SFAS No. 166 is effective for annual periods beginning after November 15, 2009.  This statement is effective for the Company beginning April 1, 2010 and is not expected to have a material impact on the financial statements.
 
Amendments to FASB interpretation No. 46(R)

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB interpretation No. 46(R),” which will amend ASC 810-10 and has not been codified yet. It establishes how a company determines when an entity that is insufficiently capitalized or not controlled through voting should be consolidated. This statement improves financial reporting by enterprises involved with variable interest entities, which addresses the effects on certain provisions of ASC 810-10 as a result of the elimination of the qualifying special-purpose entity concept in FASB No. 166, “Accounting for Transfers of Financial Assets,” which also has not be codified yet, and clarifies constituent concerns about the application of certain key provisions of ASC 810-10. SFAS No. 167 is effective after November 15, 2009. This statement is effective for the Company beginning January 1, 2010 and is expected to have no material impact on the financial statements.
 
Item 3.   Quantitative and Qualitative Disclosures About Market Risk

Not applicable.
 

(a)  Evaluation of Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Our chief executive officer and our chief financial officer have concluded, based on the evaluation of the effectiveness of our disclosure controls and procedures by our management, with the participation of our chief executive officer and our chief financial officer, as of the end of the period covered by this report, that our disclosure controls and procedures were effective for this purpose.
 
(b)  Changes in Internal Control Over Financial Reporting
  
There was no change in our internal control over financial reporting for the three months ended September 30, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. However, during second quarter, we implemented a new accounting system which allows us to develop better internal controls around issuing purchase orders, processing accounts payable, accounts receivable, inventory, manufacturing and reporting.
 
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PART II – OTHER INFORMATION
Item 1.   Legal Proceedings
 
None.
 
 
Not applicable.
 
 
During the period from April 1, 2009 through June 30, 2009, the Registrant sold and issued an aggregate of 4,380,000 shares of common stock, with par value of $0.001, for a net purchase price of $120,000.  The sales were exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder, in as much as the securities were issued only to accredited investors without any form of general solicitation or general advertising.

Except as otherwise disclosed herein, there were no underwriting discounts or other commissions paid in conjunction with the sales.
 
Item 3.   Defaults Upon Senior Securities
 
On August 6, 2009, the Company received a lawsuit filed in the Supreme Court of the State of New York, County of New York, Index No. 602313/09 by Shelter Island Opportunity Fund, LLP claiming default for non-payment under the Note and payment of $1,746,961 principal and interest or assignment of collateral pledged under the various loan documents.  In November 2009, the parties settled the default and the litigation will be dismissed.
 
Item 4.   Submission of Matters to a Vote of Security Holders
 
None.   
Item 5.   Other Information
 
None.
 
 
Exhibit No.
 
Description
     
31.1
 
Certification of  Chief Executive Officer pursuant to Rule 13a-14(a)
     
31.2
 
Certification of  Chief Financial Officer pursuant to Rule 13a-14(a)
     
32
 
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
GREEN PLANET GROUP,  INC.
(Registrant)
 
 
 
 
Date: November 23, 2009
 
 
/s/ Edmond L. Lonergan
 
 
 
Edmond L. Lonergan
President and Chief Executive Officer
 
 
 
 
 
Date: November 23, 2009
 
 
/s/ James C. Marshall
 
 
 
James C. Marshall
Chief Financial Officer

 
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