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EX-31.01 - EXHIBIT 31.01 - Green Endeavors, Inc.ex3101.htm
EX-32.01 - EXHIBIT 32.01 - Green Endeavors, Inc.ex3201.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-Q
(Mark One)
 
X  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES    EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2015
OR
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 000-54018
______________________
GREEN ENDEAVORS, INC.
(Exact Name of Registrant as Specified in Its Charter)
______________________
Utah
27-3270121
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
   
   
59 W 100 S, 2nd Floor, Salt Lake City, UT
84101
(Address of Principal Executive Offices)
(Zip Code)
   
(801) 575-8073
Registrant’s Telephone Number, including Area Code
______________________
   
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes X       No
   
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes X        No
   
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Smaller reporting company   X
Non-accelerated filer
(Do not check if a smaller reporting company)
   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes        No  X
On August 19, 2015, approximately 297,568,747 shares of the registrant’s common stock, $0.0001 par value, were outstanding.

 
 

 
 

GREEN ENDEAVORS, INC. AND SUBSIDIARIES
INDEX
 
PAGE
PART I FINANCIAL INFORMATION
 
   
Item 1. Financial Statements (Unaudited):
 
   
Condensed Consolidated Balance Sheets - June 30, 2015 (unaudited) and December 31, 2014
1
   
Condensed Consolidated Statements of Operations - Three and Six Months Ended
 
June 30, 2015 and 2014 (unaudited)
2
   
Condensed Consolidated Statements of Cash Flows - Six Months Ended
 
June 30, 2015 and 2014 (unaudited)
3
   
Notes to Condensed Consolidated Financial Statements
4
   
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
16
   
Item 3.Quantitative and Qualitative Disclosures About Market Risk
21
   
Item 4.Controls and Procedures
21
   
PART I OTHER INFORMATION
 
   
Item 1. Legal Proceedings
22
   
Item 1A. Risk Factors
22
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
22
   
Item 3. Defaults Upon Senior Securities
23
   
Item 4. [Reserved]
23
   
Item 5. Other Information
23
   
Item 6. Exhibits
24
   
Signatures
25
   

 
 

 

PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Green Endeavors, Inc. and Subsidiaries
 
Condensed Consolidated Balance Sheets
 
             
   
June 30,
2015
   
December 31,
2014
 
   
(Unaudited)
       
Assets
 
Current Assets:
           
Cash
  $ 83,915     $ 100,628  
Certificate of Deposit
    -       28,660  
Accounts receivable
    11,518       15,764  
Inventory
    133,393       152,758  
Prepaid expenses
    22,630       22,800  
Notes receivable - current
    1,037       -  
Total current assets
    252,493       320,610  
                 
Property, plant, and equipment, net of accumulated depreciation of $795,597 and $727,328, respectively
    342,450       402,152  
Other assets
    24,475       24,475  
Total Assets
  $ 619,418     $ 747,237  
                 
Liabilities and Stockholders’ Deficit
 
Current Liabilities:
               
Accounts payable and accrued expenses
  $ 394,314     $ 336,569  
Deferred revenue
    60,393       62,755  
Deferred rent
    98,716       103,174  
Due to related parties
    108,751       77,132  
Derivative liability
    213,370       31,424  
Current portion of notes payable
    208,110       181,762  
Current portion of notes payable, related party
    67,439       52,250  
Current portion of capital lease obligations
    20,499       21,701  
Current portion of convertible notes payable, net of debt discount of $51,192 and $0, respectively
    81,808       110,000  
Total current liabilities
    1,253,400       976,767  
                 
Long-Term Liabilities:
               
Notes payable
    72,702       114,147  
Notes payable, related party
    17,749       -  
Capital lease obligations
    3,765       12,945  
Convertible debentures, related party, net of debt discount of $35,479 and $41,741, respectively
    2,178,112       2,171,850  
Total long-term liabilities
    2,272,328       2,298,942  
Total Liabilities
    3,525,728       3,275,709  
                 
Stockholders’ Deficit:
               
Convertible supervoting preferred stock, $0.001 par value, 10,000,000 shares authorized; 10,000,000 shares issued and outstanding at June 30, 2015 and December 31, 2014; no liquidation value
    10,000       10,000  
Convertible preferred series B stock - $0.001 par value, 2,000,000 shares authorized, 742,383 and 760,488 shares issued and outstanding at June 30, 2015, and December 31, 2014, respectively
    743       760  
Preferred, undesignated stock - $0.001 par value 3,000,000 shares authorized, no shares issued and outstanding at June 30, 2015, and December 31, 2014
    -       -  
Common stock, $0.0001 par value, 10,000,000,000 shares authorized; 270,568,747 and 195,414,505 shares issued and outstanding at June 30, 2015, and December 31, 2014, respectively
    27,056       19,541  
Subscription receivable
    (109,300 )     -  
Additional paid-in capital
    1,000,035       643,547  
Accumulated deficit
    (3,834,844 )     (3,202,320 )
Total stockholders’ deficit
    (2,906,310 )     (2,528,472 )
Total Liabilities and Stockholders’ Deficit
  $ 619,418     $ 747,237  
                 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 

 
1

 


Green Endeavors, Inc. and Subsidiaries
 
Condensed Consolidated Statements of Operations
 
(Unaudited)
 
                         
   
Three Months Ended
   
Six Months Ended
 
   
June 30, 2015
   
June 30, 2014
   
June 30, 2015
   
June 30, 2014
 
Revenue:
                       
Services, net of discounts
  $ 551,140     $ 628,859     $ 1,055,657     $ 1,245,426  
Product, net of discounts
    207,252       217,550       404,491       438,448  
Total revenue
    758,392       846,409       1,460,148       1,683,874  
                                 
Costs and expenses:
                               
Cost of services
    326,869       342,817       624,312       713,301  
Cost of product
    118,516       136,704       228,801       265,507  
Depreciation
    35,622       33,105       68,270       66,031  
General and administrative
    422,605       313,426       887,098       668,688  
Total costs and expenses
    903,612       826,052       1,808,481       1,713,527  
Income (loss) from operations
    (145,220 )     20,357       (348,333 )     (29,653 )
                                 
Other income (expenses):
                               
Interest income
    2,458       210       3,567       417  
Interest expense
    (44,829 )     (11,011 )     (82,791 )     (42,105 )
Interest expense, related parties
    (47,212 )     (48,595 )     (92,951 )     (98,360 )
Gain (loss) on derivative fair value adjustment
    (51,500 )     24,254       (81,880 )     32,020  
Gain on settlement of debt
    71,025       205,200       110,220       212,194  
Loss on settlement of subscription receivable
    (139,304 )     -       (139,304 )     -  
Other expense
    (146 )     (1,141 )     (1,052 )     (2,397 )
Total other income (expenses)
    (209,508 )     168,917       (284,191 )     101,769  
Income (loss) before income taxes
    (354,728 )     189,274       (632,524 )     72,116  
Provision for income taxes
    -       -       -       -  
Net income (loss)
  $ (354,728 )   $ 189,274     $ (632,524 )   $ 72,116  
                                 
Net income (loss) per common share – basic and diluted
                               
Basic:
                               
Basic earnings per common share
  $ (0.00 )   $ 0.00     $ (0.00 )   $ 0.00  
Weighted-average common shares outstanding
    255,253,830       195,355,209       245,206,155       184,266,206  
Diluted:
                               
Diluted earnings per common share
    N/A     $ 0.00       N/A     $ 0.00  
Weighted-average common shares outstanding
    255,253,830       2,106,065,006       245,206,155       2,094,976,002  
                                 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 


 
2

 


Green Endeavors, Inc. and Subsidiaries
 
Condensed Consolidated Statements of Cash Flows
 
(Unaudited)
 
             
   
Six Months Ended
 
   
June 30, 2015
   
June 30, 2014
 
             
             
Cash Flows from Operating Activities:
           
Net income (loss)
  $ (632,524 )   $ 72,116  
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
               
Depreciation
    68,270       66,031  
Debt discount amortization
    49,118       25,791  
Stock-based compensation
    124,405       -  
Gain on settlement of debt
    (110,220 )     (212,194 )
Loss on settlement of subscription receivable
    139,304       -  
(Gain) loss on derivative liability fair value adjustment
    81,880       (32,020 )
Initial derivative expense
    6,018       -  
                 
Changes in operating assets and liabilities:
               
Accounts receivable
    4,246       4,805  
Notes receivable
    (1,037 )     -  
Certificate of deposit
    28,660       -  
Inventory
    19,365       6,887  
Prepaid expenses
    170       -  
Other assets
    -       (18,527 )
Accounts payable and accrued expenses
    57,746       80,437  
Due to related parties
    31,619       12,193  
Deferred rent
    (4,458 )     (2,617 )
Deferred revenue
    (2,362 )     (10,250 )
Net cash used in operating activities
    (139,800 )     (7,348 )
                 
Cash Flows from Investing Activities:
               
Purchases of property, plant, and equipment
    (8,567 )     (19,473 )
Net cash used in investing activities
    (8,567 )     (19,473 )
                 
Cash Flows from Financing Activities:
               
Payments made on notes payable
    (97,978 )     (26,899 )
Payments made on notes payable, related party
    (2,144 )     (38,395 )
Payments made on capital lease obligations
    (10,382 )     (8,799 )
Proceeds from issuance of notes payable
    82,880       12,021  
Proceeds from issuance of notes payable, related party
    35,082       -  
Proceeds from issuance of convertible notes payable
    98,000       -  
Proceeds from issuance of stock options
    26,196       -  
Proceeds from issuance of convertible series B preferred stock
    -       75,000  
Net cash provided by financing activities
    131,654       12,928  
                 
Capital decrease in cash
    (16,713 )     (13,893 )
                 
Cash at beginning of period
    100,628       105,984  
                 
Cash at end of period
  $ 83,915     $ 92,091  
                 
Supplemental cash flow information:
               
Cash paid during the period for:
               
Interest
  $ 89,192     $ 11,120  
Non-cash investing and financing activities:
               
Debt discount on derivative liability, convertible notes
  $ 94,048     $ -  
Conversion of Series B preferred shares to common stock
  $ 492     $ 2,850  
Return of Series B preferred stock
  $ 14     $ -  
Exercised options for stock subscription
  $ 274,800     $ -  
Conversion of debt
  $ 35,805     $ -  
                 
The accompanying notes are an integral part of these condensed consolidated financial Statements.
 


 
3

 
Green Endeavors, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2015 (Unaudited)

Note 1 – Nature of Operations and Basis of Presentation

Business Description

Green Endeavors, Inc., (“Green”) owns and operates two hair salons carrying the Aveda™ product line through its wholly-owned subsidiaries Landis Salons, Inc. (“Landis”) and Landis Salons II, Inc. (“Landis II”) in Salt Lake City, Utah. Green also owns and operates Landis Experience Center LLC (“LEC”), an Aveda™ retail store in Salt Lake City, Utah.

Organization

Green Endeavors, Inc. was incorporated under the laws of the State of Delaware on April 25, 2002 as Jasper Holdings.com, Inc. During the year ended December 2004, Green changed its name to Net2Auction, Inc. In July of 2007, Green changed its name to Green Endeavors, Ltd. On August 23, 2010, Green changed its name to Green Endeavors, Inc. and moved the corporate domicile from Delaware to Utah. Green has four classes of stock as follows: common with 10,000,000,000 shares authorized; preferred with 3,000,000 shares authorized; convertible preferred with 2,000,000 shares authorized; and, convertible supervoting preferred with 10,000,000 shares authorized. Green is quoted on the “OTC Pink” marketplace segment under the symbol GRNE.

Green is a more than 50% controlled subsidiary of Sack Lunch Productions, Inc. (“SAKL”). Sack Lunch Productions, Inc. is listed at OTC Markets trading under the symbol SAKL and is not currently a reporting company. Previous to April 15, 2015, SAKL was known as Nexia Holdings, Inc. and was trading under its symbol NXHD.

Landis Salons, Inc., a Utah corporation, was organized on May 4, 2005 for the purpose of operating an Aveda™ Lifestyle Salon. Landis Salons, Inc. is a wholly-owned subsidiary of Green.

Landis Salons II, Inc., a Utah corporation was organized on March 17, 2010 as a wholly-owned subsidiary of Green for the purpose of opening a second Aveda™ Lifestyle Salon.

Landis Experience Center, LLC (“LEC”), a Utah limited liability company, was organized on January 23, 2012 as a wholly-owned subsidiary of Green for the purpose of operating an Aveda™ retail store in the City Creek Mall in Salt Lake City, Utah.

Basis of Presentation

The consolidated financial statements include the accounts of Green and its subsidiaries after elimination of intercompany accounts and transactions. All consolidated subsidiaries are wholly-owned by Green.

These statements should be read in conjunction with the Company’s annual financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. In particular, the Company’s significant accounting policies were presented as Note 2 to the consolidated financial statements in that Annual Report. In the opinion of management, all adjustments necessary for a fair presentation have been included in the accompanying condensed consolidated financial statements and consist of only normal recurring adjustments. The results of operations presented in the accompanying condensed consolidated financial statements for the six months ended June 30, 2015, are not necessarily indicative of the results that may be expected for the 12 months ending December 31, 2015.

Use of Estimates in the Preparation of the Financial Statements

The consolidated financial statements are prepared in conformity with U.S. GAAP, which requires the use of estimates, judgments and assumptions that affect the amounts of assets and liabilities at the reporting date and the amounts of revenue and expenses in the periods presented. We believe that the accounting estimates employed are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in making estimates actual results could differ from the original estimates, requiring adjustments to these balances in future periods.

 
4

 
Green Endeavors, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
June 30, 2015 (Unaudited)


Note 2 – Summary of Significant Accounting Policies

Cash and Cash Equivalents

Investments with original maturities of three months or less at the time of purchase are considered cash equivalents. As of June 30, 2015 and December 31, 2014, Green had no cash equivalents.

Inventory

Inventory consists of items held for resale and is carried at the lower of cost or market. Cost is determined using the first in, first out (“FIFO”) method.

Property, Plant, and Equipment

Property, plant, and equipment are stated at historical cost. Depreciation is generally provided over the estimated useful lives, using the straight-line method, as follows:

Leasehold improvements
Shorter of the lease term or the estimated useful life
Computer equipment and related software
3 years
Furniture and fixtures
3-10 years
Equipment
3-10 years
Vehicle
7 years
Signage
10 years

For the six month periods ended June 30, 2015 and 2014, Green recorded depreciation expense of $68,270 and $66,031, respectively.

Long-Lived Assets

We periodically review the carrying amount of our long-lived assets for impairment. An asset is considered impaired when estimated future cash flows are less than the carrying amount of the asset. In the event the carrying amount of such asset is not considered recoverable, the asset is adjusted to its fair value. Fair value is generally determined based on discounted future cash flow. There were no impairments of long-lived assets during the six month periods ended June 30, 2015 and 2014.

Fair Value Measurements

The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.

Revenue Recognition

There are two primary two types of revenue for the Company: 1) providing hair salon services, and 2) selling hair salon products. Revenue is recognized at the time the service is performed or the product is delivered. All revenue sources are domestic. In some cases, such as the sale of gift cards, revenue is deferred until the gift card is redeemed.

 
5

 
Green Endeavors, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
June 30, 2015 (Unaudited)

Deferred Revenue

Deferred revenue arises when customers pay for products and/or services in advance of revenue recognition. Green’s deferred revenue consists solely of unearned revenue associated with the purchase of gift certificates for which revenue is recognized only when the service is performed or the product is delivered. As of June 30, 2015 and December 31, 2014, deferred revenue was $60,393 and $62,755, respectively.

Advertising

The Company expenses advertising production costs as they are incurred and advertising communication costs the first time the advertising takes place. For the six month period ended June 30, 2015 and 2014, advertising costs amounted to $63,603 and $45,589, respectively.

Stock-Based Compensation

Green recognizes the cost of employee services received in exchange for awards of equity instruments as stock-based compensation expense. Stock-based compensation expense is measured at the grant date based on the fair value of the restricted stock award, option, or purchase right and is recognized as expense, less expected forfeitures, over the requisite service period, which typically equals the vesting period. Because the employee is expected to and has historically received shares of common stock on or about the date of the employee stock option grant date as part of the exercise process, the fair value of each stock issuance is determined using the fair value of Green’s common stock on the grant date.

Income Taxes

Deferred income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Also, Green's practice is to recognize interest and/or penalties related to income tax matters in income tax expense. Green is 100% consolidated into its parent company, SAKL, and therefore does not file an income tax return. Its financial amounts are consolidated into the SAKL income tax returns. As of June 30, 2015 and December 31, 2014, a 100% valuation allowance has been placed against the deferred tax asset and therefore is not reflected on the balance sheets.

Net Loss Per Share

Net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the specified period. Diluted earnings per common share is computed by dividing net income by the weighted average number of common shares and potential common shares during the specified period. For the six months ended June 30, 2015, potential common shares are not included in the diluted net loss per share calculation as their effect would be anti-dilutive. Such potentially dilutive shares are excluded when the effect would be to reduce net loss per share. There were approximately 5,142,722,303 such potentially dilutive shares excluded as of June 30, 2015.

Reclassification of Financial Statement Accounts

Certain amounts in the December 31, 2014 financial statements have been reclassified to conform to the presentation in the June 30, 2015 financial statements.

Recent Accounting Pronouncements

Management believes the impact of recently issued standards and updates, which are not yet effective, will not have a material impact on Green’s consolidated financial position, results of operations or cash flows upon adoption.

 
6

 
Green Endeavors, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
June 30, 2015 (Unaudited)


Note 3 – Inventory

Green’s inventory consists of items held for resale and product that is used in services by the Landis and Landis II salons, and all are considered finished goods. Inventory is carried at the lower of cost or market. As of June 30, 2015 and December 31, 2014, inventory amounted to $133,393 and $152,758, respectively.

Note 4 – Property, Plant, and Equipment

The following is a summary of Green’s Property, plant, and equipment by major category as of June 30, 2015:

   
Cost
   
Accumulated Depreciation
   
Net
 
                   
Computer equipment and related software
  $ 39,247     $ 26,341     $ 12,906  
Construction in process
    1,512       -       1,512  
Leasehold improvements
    639,254       448,156       191,098  
Furniture and fixtures
    27,201       23,740       3,461  
Leased equipment
    76,298       46,433       29,865  
Equipment
    281,188       202,187       79,001  
Vehicle
    48,193       36,145       12,048  
Signage
    25,154       12,595       12,559  
Total
  $ 1,138,047     $ 795,597     $ 342,450  

The following is a summary of Green’s Property, plant, and equipment by major category as of December 31, 2014:

   
Cost
   
Accumulated Depreciation
   
Net
 
                   
 Computer equipment and related software
  $ 39,247     $ 22,189     $ 17,058  
 Construction in process
    24,905       -       24,905  
 Leasehold improvements
    625,004       410,010       214,994  
 Furniture and fixtures
    27,201       22,117       5,084  
 Leased equipment
    76,298       38,803       37,495  
 Equipment
    263,478       190,114       73,364  
 Vehicle
    48,193       32,703       15,490  
 Signage
    25,154       11,392       13,762  
 Total
  $ 1,129,480     $ 727,328     $ 402,152  


 
7

 
Green Endeavors, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
June 30, 2015 (Unaudited)



Note 5 – Fair Value Measurements

Our financial assets and (liabilities) carried at fair value measured on a recurring basis as of June 30, 2015 and December 31, 2014, consisted of the following:

   
Total fair
   
Quoted prices
   
Significant other
   
Significant
 
   
value at
   
in active
   
observable
   
unobservable
 
   
March 31,
   
markets
   
Inputs
   
inputs
 
Description
 
2015
   
(Level)
   
(Level 2)
   
(Level)
 
Derivative liability (1)
  $ 213,370     $ -     $ 213,370     $ -  
                                 
   
Total fair
   
Quoted prices
   
Significant other
   
Significant
 
   
value at
   
in active
   
Observable
   
unobservable
 
   
December 31,
   
markets
   
Inputs
   
inputs
 
Description
    2014    
(Level)
   
(Level 2)
   
(Level)
 
Derivative liability (1)
  $ 31,424     $ -     $ 31,424     $ -  

 
(1)
Derivative liability amounts are due to the embedded derivatives of certain convertible notes payable issued by the Company and are calculated using the Black Scholes pricing model (see Note 6 - Derivative liability)

Note 6 – Derivative Liability

As of June 30, 2015, the Company had a $213,370 derivative liability balance on the balance sheet, and for the six months ended June 30, 2015, the Company recorded an $81,880 loss from derivative liability fair value adjustment. The derivative liability activity comes from convertible notes payable as follows:

Eastshore Enterprises, Inc.
On August 17, 2012, Green issued a $35,000 Convertible Promissory Note to Eastshore Enterprises, Inc. (“Eastshore Note”) that matured August 17, 2014. The Eastshore Note bears interest at a rate of 8% per annum and can be convertible into Green’s common shares, at the holder’s option, at the conversion rate of 54% of the market price (a 46% discount) of the lowest trading price of Green’s common shares during the ten-day period ending one trading day prior to the date of the conversion. Green analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.

The embedded derivative for the Eastshore Note is carried on Green’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. Green fair values the embedded derivative using the Black-Scholes option pricing model. The fair value of the derivative at the inception date of the Eastshore Note was $63,636. Of the total, $35,000 was recorded as a debt discount, which is up to but not more than the net proceeds of the note. $28,636 was charged to operations as non-cash interest expense. The fair value of $63,636 was recorded as a derivative liability on the balance sheet.

The debt discount for the Eastshore Note is amortized over the life of the note (approximately two years). On June 30, 2015, Green marked-to-market the fair value of the derivative liabilities related to the Eastshore Note and determined an aggregate fair value of $61,470 and recorded a $30,046 loss from change in fair value of derivative for the six month period ended June 30, 2015. The fair value of the embedded derivative for the note was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 192.84%, (3) risk-free interest rate of 0.11%, (4) expected life of .50 years, and (5) estimated fair value of Green’s common stock of $0.0020 per share.
 
 
8

 
Green Endeavors, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
June 30, 2015 (Unaudited)

 
KBM Worldwide, Inc.
As discussed in Note 8 – “Debt”, on January 26, 2015, Green issued a $64,000 Convertible Promissory Note to KBM Worldwide, Inc. (“KBM Note”) that matures October 28, 2015. The KBM Note bears interest at a rate of 8% per annum and can be convertible into Green’s common shares, at the holder’s option, at the conversion rate of 58% of the market price (a 42% discount) of an average of the three lowest trading price of Green’s common shares during the ten-day period ending one day prior to the date of the conversion. Green analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.

The embedded derivative for the KBM Note is carried on Green’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. Green fair values the embedded derivative using the Black-Scholes option pricing model. The fair value of the derivative at the inception date of the KBM Note was $60,048. Of the total, $60,048 was recorded as a debt discount, which is up to but not more than the net proceeds of the note. $0 was charged to operations as non-cash interest expense. The fair value of $60,048 was recorded as a derivative liability on the balance sheet.

The debt discount for the KBM Note is amortized over the life of the note (approximately nine months). On June 30, 2015, Green marked-to-market the fair value of the derivative liabilities related to the KBM Note and determined an aggregate fair value of $93,544 and recorded a $33,496 loss from change in fair value of derivative for the six month period ended June 30, 2015. The fair value of the embedded derivative for the note was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 175.78%, (3) risk-free interest rate of 0.10%, (4) expected life of .33 years, and (5) estimated fair value of Green’s common stock of $0.0020 per share.

LG Capital Funding, LLC
As discussed in Note 8 – “Debt”, on March 25, 2015, Green issued a $34,000 Convertible Promissory Note to LG Capital Funding, LLC (“LGCF Note”) that matures March 25, 2016. The LGCF Note bears interest at a rate of 8% per annum and can be convertible into Green’s common shares, at the holder’s option, at the conversion rate of 58% of the market price (a 42% discount) of an average of the three lowest trading price of Green’s common shares during the eighteen-day period ending on the date of the conversion. Green analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.

The embedded derivative for the LGCF Note is carried on Green’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. Green fair values the embedded derivative using the Black-Scholes option pricing model. The fair value of the derivative at the inception date of the LGCF Note was $40,018. Of the total, $34,000 was recorded as a debt discount, which is up to but not more than the net proceeds of the note. $6,018 was charged to operations as non-cash interest expense. The fair value of $40,018 was recorded as a derivative liability on the balance sheet.

The debt discount for the LGCF Note is amortized over the life of the note (approximately twelve months). On June 30, 2015, Green marked-to-market the fair value of the derivative liabilities related to the LGCF Note and determined an aggregate fair value of $58,356 and recorded an $18,338 loss from change in fair value of derivative for the six month period ended June 30, 2015. The fair value of the embedded derivative for the note was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 192.93%, (3) risk-free interest rate of 0.195%, (4) expected life of 0.74 years, and (5) estimated fair value of Green’s common stock of $0.0020 per share.

 
9

 
Green Endeavors, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
June 30, 2015 (Unaudited)



Note 7 – Related Party Transactions

On April 30, 2008, Green entered into a stock transfer agreement with its parent company SAKL and SAKL’s wholly-owned subsidiary DHI whereby they would each sell their holdings in Landis and Newby in exchange for an 8% Series A Senior Subordinated Convertible Debenture with a face amount of $3,000,000. Interest on the debenture commenced on December 30, 2008. DHI has the option, at any time, to convert all or any amount over $10,000 of principal face amount and accrued interest into shares of Common stock, $0.0001 par value per share, at a conversion price equal to 95% of the average closing bid price of the Common stock three days prior to the date notice is received by Green. Green determined that there is a beneficial conversion feature for the debt and recorded a debt discount of $150,000 on April 30, 2008, which is being amortized for 10 years to the maturity date of the debenture. In December 2009, SAKL converted $125,000 of the debenture into common stock of Green and during 2010 Green paid $15,200 of principal on the debenture. During 2010, SAKL sold $500,000 of its holdings of the debenture to unrelated parties for cash thus leaving the related and unrelated party portions of the debenture at $2,359,800 and $500,000, respectively for a total amount of $2,859,800. As of June 30, 2015 and December 31, 2014, the entire amount is considered long-term. The following table shows the related party debenture and the amortized debt discount amounts:
 
   
June 30,
   
December 31,
 
   
2015
   
2014
 
Convertible Debenture - Related Party
           
Principal amount
  $ 2,213,591     $ 2,213,591  
Debt discount
    (35,479 )     (41,741 )
Convertible debenture, net of debt discount
  $ 2,178,112     $ 2,171,850  

As of June 30, 2015 and December 31, 2014, the principal balance of related party convertible debentures was $2,213,591. As of June 30, 2015 the balance of accrued interest was $22,281 which is included in amounts due to related parties.

As of June 30, 2015 and December 31, 2014, amounts due to related parties are $108,751 and $77,132, respectively. The $108,751 consists of $22,281 in accrued interest on the convertible debenture, $4,633 of accrued interest for the notes payable to Richard Surber, and $81,837 from various amounts owed to SAKL and its subsidiaries. The $77,132 consists of $3,704 of accrued interest for the note payable to Richard Surber and $73,428 from various amounts owed to SAKL's subsidiaries.

Richard Surber is also providing his personal guaranty for several lines of credit and credit cards that are being utilized by the Company and its operating subsidiaries. In addition to the above, Mr. Surber is a personal guarantor to notes payable by the Company with remaining principal balances of $108,603. Subsequent to June 30, 2015, Mr. Surber continues to provide his personal guaranty for several lines of credit, credit cards, and loans that are being utilized by the Company and its subsidiaries. The total amount of these credit obligations could exceed the amount of $300,000 from time to time.

On March 24, 2015, Green Endeavors, Inc. and Landis Salons, Inc. (the "Company") issued a promissory note to Richard Surber, President, CEO and Director of Green, in the principal amount of $25,082 for funds loaned. The note bears interest at the rate of 18% per annum, has a maturity date of March 12, 2018, and requires monthly payments of $806. The Company shall be credited for satisfaction of the note for any payment that it makes of a loan that Mr. Surber is obligated to pay to Upstart Network, Inc., the reported source of the funds loan to the Company by Mr. Surber.

On May 6, 2015, Green Endeavors, Inc. and Landis Salons, Inc. (the "Company") issued a promissory note to Diversified Holdings X, Inc., a corporation owned solely by Richard Surber, President, CEO and Director of Green, in the principal amount of $10,000 for funds loaned. The note bears interest at the rate of 18% per annum, has a maturity date of May 6, 2016, and requires a single payment of $10,000 plus accrued interest.


 
10

 
Green Endeavors, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
June 30, 2015 (Unaudited)



Note 8 –Debt

During the six month period ending June 30, 2015, the Company has entered into five new loan agreements in the total amount of $215,962.

A summary of the new note payable as of June 30, 2015 and December 31, 2014 is as follows:

   
Interest
 
Maturity
 
June 30,
   
December 31,
 
Creditor
 
Rate
 
Date
 
2015
   
2014
 
American Express Bank, FSB (1)
    11.13 %
2/3/2017
  $ 67,337     $ -  
Total
              67,337       -  
Less: Current portion
              (40,223 )     -  
Long-term portion
            $ 27,113     $ -  

A summary of the new convertible notes payable as of June 30, 2015 and December 31, 2014 is as follows:

   
Interest
 
Maturity
 
June 30,
   
December 31,
 
Creditor
 
Rate
 
Date
 
2015
   
2014
 
KBM Worldwide, Inc. (2)
    8.00 %
10/28/2015
  $ 64,000     $ -  
LG Capital Funding, LLC (3)
    8.00 %
3/25/2016
    34,000       -  
Debt discount - convertible notes, net
              (51,192 )     -  
Total, net
              46,808       -  
Less: Current portion
              (46,808 )     -  
Long-term portion
            $ -     $ -  

A summary of the new related party note payable as of June 30, 2015 and December 31, 2014 is as follows:

   
Interest
 
Maturity
 
June 30,
   
December 31,
 
Creditor
 
Rate
 
Date
 
2015
   
2014
 
Richard D. Surber (related party) (4)
    18.00 %
3/12/2018
  $ 23,629     $ -  
Diversified Holdings X, Inc. (5)
    18.00 %
5/06/2016
    9,309       -  
Total
              32,938       -  
Less: Current portion
              (15,189 )     -  
Long-term portion
            $ 17,749     $ -  

(1)
On February 3, 2015, the Landis Salons II, Inc. entered into a loan agreement with American Express Bank, FSB in the amount of $74,000. The note is a merchant account financing arrangement wherein Landis repays the loan at the rate of 30% of the American Express credit card sales receipts that are collected each month. The loan requires a prepaid interest charge that is 12% ($8,880) of the $74,000 loan amount. These financing costs are being amortized monthly to interest expense during the two year term of the loan. The total amount due at the inception date is $82,880. As of June 30, 2015, the loan balance was $67,337. Payments made during the six months ended June 30, 2015, amounted to $15,544.


 
11

 
Green Endeavors, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
June 30, 2015 (Unaudited)



(2)
On January 26, 2015, pursuant to a Securities Purchase Agreement, Green issued a $64,000 Convertible Promissory Note (the "Note") to KBM Worldwide, Inc. (“KBM”) that matures October 28, 2015. The Note bears interest at a rate of 8% per annum and can be convertible into Green’s common shares, at the holder’s option, at the conversion rate of 58%of the market price (a 42% discount) of the average of the three lowest trading price of Green’s common shares during the ten-day period ending one trading day prior to the date of the conversion, subject to a limitation that KBM and its affiliates cannot at any time hold, as a result of conversion, more than 9.99% of the outstanding common stock of Green. Green analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability. The embedded derivative for the KBM Note is carried on Green’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. Green fair values the embedded derivative using the Black-Scholes option pricing model. The fair value of the derivative at the inception date of the KBM note was $60,048, which was recorded on the balance sheet. $60,048 was recorded as a debt discount on the balance sheet and $0 was recorded as a credit to non-cash interest expense. As of June 30, 2015, the balance of the note was $64,000 and the balance of the debt discount was $26,203. No payments were made on the note during the six months ended June 30, 2015.

(3)
On March 25, 2015, pursuant to a Securities Purchase Agreement, Green issued a $34,000 Convertible Promissory Note (the "Note") to LG Capital Funding, LLC (“LGCF") that matures March 25, 2016. The Note bears interest at a rate of 8% per annum and can be convertible into Green’s common shares, at the holder’s option, at the conversion rate of 58% of the market price (a 42% discount) of an average of the three lowest trading price of Green’s common shares during the eighteen-day period ending on the date of the conversion, subject to a limitation that LGCF and its affiliates cannot at any time hold, as a result of conversion, more than 9.99% of the outstanding common stock of Green. Green analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability. The embedded derivative for the LGCF Note is carried on Green’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. Green fair values the embedded derivative using the Black-Scholes option pricing model. The fair value of the derivative at the inception date of the LGCF note was $40,018, which was recorded on the balance sheet. $34,000 was recorded as a debt discount on the balance sheet and $6,018 was recorded as non-cash interest expense. As of June 30, 2015, none of the note had been converted into shares of common stock. As of June 30, 2015, the balance of the note was $34,000 and the balance of the debt discount was $24,989. No payments have been made on the note as of June 30, 2015.
 
The exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. As a result, the Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability (see Note 6 - Derivative Liability).
 

 
12

 
Green Endeavors, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
June 30, 2015 (Unaudited)




(4)
On March 24, 2015, Green Endeavors, Inc. and Landis Salons, Inc. (the "Company") issued a promissory note to Richard Surber, President, CEO and Director of Green, in the principal amount of $25,082 for funds loaned. The note bears interest at the rate of 18% per annum, has a maturity date of March 12, 2018, and requires monthly payments of $806. The Company shall be credited for satisfaction of the note for any payment that it makes of a loan that Mr. Surber is obligated to pay to Upstart Network, Inc., the reported source of the funds loan to the Company by Mr. Surber. As of June 30, 2015, the balance of the note was $23,629. Payments made during the six months ended June 30, 2015, amounted to $1,453.

(5)
On May 6, 2015, Landis Salons, Inc. (the "Company") issued a promissory note to Diversified Holdings X, Inc. a corporation solely owned by Richard Surber, President, CEO and Director of Green, in the principal amount of $10,000 for funds loaned. The note bears interest at the rate of 18% per annum, has a maturity date of May 6, 2016, and requires a single payment of $10,000 plus accrued interest. As of June 30, 2015, the balance of the note was $9,309. Payments made during the six months ended June 30, 2015, amounted to $691. Mr. Surber is also providing his personal guaranty for several lines of credit and credit cards that are being utilized by the company and its operating subsidiaries.

As of June 30, 2015, Mr. Surber is a personal guarantor to various notes payable by the Company with remaining principal balances of $108,603. Subsequent to June 30, 2015, Mr. Surber continues to provide his personal guaranty for several lines of credit, credit cards, and loans that are being utilized by the Company and its subsidiaries. The total amount of these credit obligations could exceed the amount of $300,000 from time to time.

Note 9 – Settlement of Convertible Note Payable

On January 13, 2015, Green Endeavors entered into a Settlement Agreement and Release for the litigation between itself and Southridge Partners as described in Note 10 below (also see 10-K, filed April 7, 2015 for years ending December 31, 2014 and 2013, Note 14 – Litigation). The settlement required that Southridge deliver to Green 14,205 shares of Green's series B preferred convertible stock and deliver, release, and mark satisfied in full the August 15, 2013, $75,000 promissory note that Green had issued to Southridge for a value of $71,025. In return, on January 14, 2015 Green issued to Southridge 10,230,000 shares of its common stock at a price of $0.0035 for a value of $35,805, resulting in a non-cash gain on settlement of debt of $110,220. Certain portions were classified in the three months ended June 30, 2015 as a correction to properly value the gain on settlement.

Note 10 – Stockholders’ Deficit

Preferred Stock
Green is authorized to issue 15,000,000 shares of preferred stock (par value $.001 per share). Green’s preferred stock may be divided into such series as may be established by the Board of Directors. As of June 30, 2015, Green has designated 12,000,000 of the preferred stock into two series as follows: 2,000,000 shares of Convertible Series B Preferred and 10,000,000 shares of Convertible Supervoting Preferred.

The Preferred Stock is classified as equity as long as there are sufficient shares available to effect the conversion. In some instances certain contracts may pass the option to receive cash or common stock to the shareholder. In this case, it is assumed that a cash settlement will occur and balance sheet classification of the affected Preferred Stock and related preferred paid-in capital as a liability.

Convertible Supervoting Preferred Stock
Each share of the Convertible Supervoting Preferred Stock is convertible into 100 shares of Green’s Common stock and has the voting rights equal to 100 shares of common stock.

During the six month period ended June 30, 2015, there were no issuances or conversions of Convertible Supervoting Preferred shares.

As of both June 30, 2015 and December 31, 2014, Green had 10,000,000 shares of Convertible Supervoting Preferred stock issued and outstanding.

Convertible Series B Preferred Stock
Each share of Green’s Convertible Series B Preferred Stock has one vote per share and is convertible into $5.00 worth of common stock. The number of common shares received is based on the average closing bid market price of Green's common stock for the five days before conversion notice date by the shareholder. Convertible Series B Preferred Stock shareholders, at the option of Green, can receive cash or common stock upon conversion.

 
13

 
Green Endeavors, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
June 30, 2015 (Unaudited)

 
 
On January 13, 2015, Green Endeavors entered into a Settlement Agreement and Release for the litigation between itself and Southridge Partners as described in Note 9 above. The settlement required that Southridge deliver to Green 14,205 shares of Green's series B preferred convertible stock and deliver, release, and mark satisfied in full the August 15, 2013, $75,000 promissory note that Green had issued to Southridge. In return, on January 14, 2015 Green issued to Southridge 10,230,000 shares of its common stock at a price of $0.0035 as a partial non-cash payment of the promissory note, resulting in a non-cash gain on settlement of debt of $110,220.

On January 23, 2015, the Board of Directors approved the conversions of 3,900 shares of Series B Preferred shares into 4,924,242 shares of Common Stock. The shares were converted at prices per share of approximately $0.00396 based on the conversion provisions for the Convertible Series B Preferred Stock designation.

As of June 30, 2015 and December 31, 2014, Green had 742,383 and 760,488 shares of Convertible Series B Preferred stock issued and outstanding, respectively.

Common Stock
Green is authorized to issue 10,000,000,000 shares of common stock (par value $0.0001 per share).

As of June 30, 2015 and December 31, 2014, Green had 270,568,747 and 195,414,505 shares of common stock issued and outstanding, respectively. This 75,154,242 increase of common shares is due to the conversion of 3,900 shares of Convertible Series B Preferred stock into 4,924,242 shares of Common Stock mentioned above; the partial conversion of the $75,000 promissory note to 10,230,000 shares mentioned above; and the exercising of 60,000,000 options issued (see Note 11 – Stock Based Compensation).

Note 11 – Stock-Based Compensation

On December 2, 2011, the Board of Directors approved a stock-based compensation program entitled The 2011 Benefit Plan of Green Endeavors, Inc. (the “Plan”) wherein common stock options are granted to employees. A total of 1,500,000 shares of the Green’s common stock (par value $0.0001) are authorized to be issued or granted to employees (“Employees”) under the Plan. Employees include actual employees or certain non-employee, consultants and advisors of Green, its subsidiaries, and parent company. The Plan is designed to attract and retain employees.

On January 21, 2015, the Board of Directors approved a stock-based compensation plan entitled The 2015 Benefit Plan of Green Endeavors Inc. (the “2015 Plan”) wherein common stock options are granted to employees of the Company. A total of 80,000,000 shares of the Company’s common stock (par value $0.0001) are authorized to be issued or granted to employees under the 2015 Plan. Employees as designated by the 2015 Plan include actual employees and others, consultants and advisors to the Company, its subsidiaries and the parent company. The 2015 Plan is designed to attract and retain employees.

As of June 30, 2015, the Company has granted 60,000,000 stock options to four employees and one independent contractor for services provided to the Company. The stock based-compensation expense of $124,405 was accounted for under the fair value method of accounting using a Black-Scholes valuation model to measure stock option expense at the date of grant. The weighted average components used for the calculation of the fair value for the options granted were approximately between: $0.0032 - $0.0060 exercise price, one year term, 160.93% – 164.25% volatility, and 0.17% – 0.26% risk free rates.

Under the 2015 Plan, the Company has granted stock options to four employees and one independent contractor during the six months ended June 30, 2015 at option prices ranging from $0.0032 to $0.0060 per share for an aggregate of 60,000,000 shares. Each of the four employees and the consultant exercised the options on the same day they were granted by each issuing a promissory note to the Company in the aggregate amount of $274,800 appearing on the balance sheet as subscription receivable. The promissory notes mature 12 months from their issuance date and the Company is entitled to 4% interest per annum. The accrued interest receivable is included in notes receivable – current. For the six months ended June 30, 2015, there were no expired or cancelled grants. As of June 30, 2015, there were 20,000,000 and 470, 000 shares available for future stock-based compensation grants between the 2015 plan and the 2011 plan, respectively.

Subsequent to June 30, 2015, management determined that a portion of the subscription receivable would be uncollectible due to the difference between exercise and market prices of the options granted. The company executed forgiveness of the remainder on three subscriptions receivable in the aggregate amount of $139,304. This amount has been allowed for and is reflected on the income statement under Loss on settlement of subscription receivable. The settlements and release of claim were executed between July 8, 2015 and August 12, 2015. (See also Note 15 – Subsequent events.)

 
14

 
Green Endeavors, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
June 30, 2015 (Unaudited)



Note 12 – Litigation

Southridge Partners II, LP, v. Green Endeavors, Inc. This action was filed on or about August 13, 2014 in the State Courts of Connecticut and was subsequently removed to the United States District Court, District of Connecticut, Case No. 3:13-cv-01358 (SRU). Suit was filed based upon the breach in the payment of promissory note in the face amount of $75,000 and the refusal by Green Endeavors to allow Southridge Partners to convert shares of preferred stock. Green Endeavors filed a counterclaim and an answer denying the claims to damages alleged by Southridge and seeking to recover damages resulting from Southridge’s Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair Dealing and Negligent Misrepresentation-Fraud in the Inducement. On January 13, 2015, the parties entered into a Settlement Agreement and Release whereby they have settled the litigation (see Note 9 – “Settlement of Convertible Debt” for details of the agreement) As of June 30, 2015, the $75,000 amount owed to Southridge has been removed from the balance sheet per the settlement agreement.

Note 13 – Concentration of Risk

Supplier Concentrations
The Company purchases most of its salon inventory that is used for service and product sales from Aveda™. Aveda™ product purchases for the six months ended June 30, 2015 and for the year ended December 31, 2014 accounted for approximately 99% and 99%, respectively, of salon products purchased.

Market or Geographic Area Concentrations
100% of the Company's sales are in the salon services and products market and are concentrated in the Salt Lake City, Utah geographic area.

Note 14 – Going Concern

Generally accepted accounting principles in the United States of America contemplate the continuation of Green as a going concern. As of and for the six months ended June 30, 2015, Green had negative working capital of $1,000,907 and a net loss of $632,524, respectively, which raises substantial doubt about Green’s ability to continue as a going concern. Green’s ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and its ability to successfully fulfill its business plan. Management plans to attempt to raise additional funds to finance the operating and capital requirements of Green through a combination of equity and debt financings. While Green is making its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be sufficient for operations.

Note 15 – Subsequent Events

In accordance with ASC 855-10 Company management reviewed all material events through the date of this report and there are no additional material subsequent events to report.

On July 8, 2015, the Board of Directors approved the conversions of 5,076 shares of Series B Preferred shares into 13,500,000 shares of Common Stock. The shares were converted at prices per share of approximately $0.00188 based on the conversion provisions for the Convertible Series B Preferred Stock designation.

On July 8, 2015, the Board of Directors approved a settlement where $34,330 of the subscription receivable was forgiven and accepted $20,040 as payment in full.

On July 9, 2015, the Board of Directors approved an amendment to the stock-based compensation plan entitled The 2015 Benefit Plan of Green Endeavors Inc. (the “2015 Plan”) wherein common stock options are granted to employees of the Company. A total of 100,000,000 additional shares of the Company’s common stock (par value $0.0001) are authorized to be issued or granted to employees under the Amendment to the 2015 Plan.

On July 9, 2015 the Board of Directors approved a grant of 13,500,000 shares pursuant to the S-8 Registration Statement and 2015 Benefit Plan of Green Endeavors Inc. The shares were issued based on an option price of $0.0015 per share. The employee exercised the options on the same day they were granted by issuing a promissory note to the Company that will appear on the balance sheet as a subscription receivable. The promissory note matures 12 months from its issuance date and the Company is entitled to 4% interest per annum.
 
On July 29, 2015, the Board of Directors approved a settlement on $72,000 subscription receivable for payments of $24,200 as satisfaction in full.

On July 29, 2015, pursuant to a Securities Purchase Agreement, Green issued a $200,000 Convertible Promissory Note (the "Note") to JMJ Financial (“JMJ”) that matures two years from the date of each funding. The Note bears interest at a rate of 0% per annum for the first 90 days and 12% per annum thereafter, and can be convertible into Green’s common shares, at the holder’s option, at the conversion rate of 60% of the market price (a 40% discount) of the lowest trading price of Green’s common shares during the twenty-day period ending one trading day prior to the date of the conversion, or $0.002, whichever is lesser, subject to a limitation that JMJ and its affiliates cannot at any time hold, as a result of conversion, more than 9.99% of the outstanding common stock of Green.

On August 12, 2015, the Board of Directors approved a settlement on $72,000 subscription receivable for payments of $17,542 as satisfaction in full.


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

The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto included in this Quarterly Report on Form 10-Q, or this Quarterly Report, and in conjunction with our Form 10-K for the fiscal year ended December 31, 2014 and Form 10-Q for the quarter ended June 30, 2015. Certain of these statements, including, without limitation, statements regarding the extent and timing of future revenues and expenses, customer demand and other statements using words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecast,” “intends,” “may,” “plans,” “projects,” “should,” “will” and “would,” and words of similar import and the negatives thereof, constitute forward-looking statements. These statements are predictions based upon management’s best judgment at the time they are made about future events that are not historical facts. Actual results could vary materially as a result of certain factors, including but not limited to, those expressed in these statements. We refer you to the “Risk Factors,” “Results of Operations,” and “Liquidity and Capital Resources” sections contained in this Quarterly Report, which identify important risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements.

We urge you to consider these factors carefully in evaluating the forward-looking statements contained in this Quarterly Report. All subsequent written or oral forward-looking statements attributable to our company or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements included in this Quarterly Report are made only as of the date of this Quarterly Report. We do not intend, and undertake no obligation, to update these forward-looking statements.

Overview

Green Endeavors, Inc. (“Green”) is a Utah corporation originally formed on April 25, 2002. Our fiscal year ends on December 31. We have never filed bankruptcy nor been through any similar financial reorganization.

As of June 30, 2015, we operate two high-quality hair care salons that feature Aveda™ products for retail sale. Landis Salons, Inc. (“Landis I”) operates its business within a 4,000 square foot space located in the Liberty Heights District of Salt Lake City, Utah as an Aveda™ Lifestyle Salon. Landis Salons II, Inc. (“Landis II”) operates within a 3,024 square foot space located in the Marmalade District of Salt Lake City, Utah under the Landis Lifestyle Salon brand as an Aveda™ Lifestyle Salon. A third location opened August 16, 2012, and operates as an Aveda™ Experience Center ("LEC") in the City Creek Mall in Salt lake City, Utah.

Aveda™ Lifestyle Salons can be distinguished from Aveda™ Concept Salons in that Aveda™ Lifestyle Salons are required to carry all of Aveda’s products and must meet a higher threshold for product sales than Aveda™ Concept Salons. An Aveda™ Lifestyle Salon is the highest level within the Aveda™ hierarchy of salons which is classified by higher purchasing volume, location, array of products carried and size of retail space.

Salon operations consist of three major components, an Aveda™ retail store, an advanced hair salon, and a training academy, which educates and prepares future staff about the culture, services, and products provided by the salon. The design of the salons is intended to look modern and feel comfortable, appealing to both genders, and all age groups.

Additional information on Landis can be found on its website at: www.landissalons.com.

Critical Accounting Estimates

In preparing our Condensed Consolidated Financial Statements, we make assumptions, judgments and estimates that can have a significant impact on our revenue, operating income and net income, as well as on the value of certain assets and liabilities on our Consolidated Balance Sheets. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. At least quarterly, we evaluate our assumptions, judgments and estimates and make changes accordingly. Historically, our assumptions, judgments and estimates relative to our critical accounting estimates have not differed materially from actual results.

Results of Operations

The following discussion examines our results of operations and financial condition based on our Condensed Consolidated Financial Statements for the six month periods ended June 30, 2015 and 2014.

For the six months ended June 30, 2015, we owned and operated three wholly owned subsidiaries. Two of the subsidiaries, Landis Salons, Inc. and Landis Salons II, Inc., operate as full-service hair and retail salons featuring the Aveda™ line of products. The third subsidiary, Landis Experience Center, LLC, is a retail Aveda™ Experience Center.
 
 
 
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Revenue

We generate revenue through the sale of services and products in the hair salon industry. For the three month periods ended June 30, 2015 and 2014, we had net sales of $758,392 and $846,409, respectively. For the six month periods ended June 30, 2015 and 2014, we had net sales of $1,460,148 and $1,683,874, respectively.

Three months ended June 30, 2015 and 2014

The following table shows the change in service revenue by salon for the three month periods ended June 30, 2015 and 2014:

   
Three Months Ended
   
Increase (Decrease)
 
   
June 30,
   
June 30,
   
Over Prior Period
 
Salon
 
2015
   
2014
   
Dollar
   
Percentage
 
Liberty Heights
  $ 402,743     $ 431,617     $ (28,874 )     -6.7 %
Marmalade
    148,047       197,062       (49,015 )     -24.9 %
City Creek
    350       180       170       94.4 %
Total Service Revenue
  $ 551,140     $ 628,859     $ (77,719 )     -12.4 %

As can be seen from the above table our three locations experienced a decline of 12.4% in service revenues for the three month period ending June 30, 2015 over the comparable period of service sales for 2014. This decrease is mostly due to reduced staffing resulting from several of the of the senior stylists, who produce above average revenue, performing other non-revenue producing activities such as training new artists in the Landis II salon as well as attrition and vacations.

The following table shows the change in product revenue by salon for the three month periods ended June 30, 2015 and 2014:

   
Three Months Ended
   
Increase (Decrease)
 
   
June 30,
   
June 30,
   
Over Prior Period
 
Salon
 
2015
   
2014
   
Dollar
   
Percentage
 
Liberty Heights
  $ 116,857     $ 118,758     $ (1,901 )     -1.6 %
Marmalade
    46,378       50,277       (3,899 )     -7.8 %
City Creek
    44,017       48,515       (4,498 )     -9.3 %
Total Product Revenue
  $ 207,252     $ 217,550     $ (10,298 )     -4.7 %

As can be seen from the above table our three locations experienced a decline of 4.7% in product revenues for the six month period ended June 30, 2015 over the comparable period of product sales for 2014. This decline in product revenue growth is primarily due to the Company's senior staff spending more time towards training programs for new artists. This, along with reduced service sales, reduces time available for sales of products.

Six months ended June 30, 2015 and 2014

The following table shows the change in service revenue by salon for the six month periods ended June 30, 2015 and 2014:

   
Six Months Ended
   
Increase (Decrease)
 
   
June 30,
   
June 30,
   
Over Prior Period
 
Salon
 
2015
   
2014
   
Dollar
   
Percentage
 
Liberty Heights
  $ 775,121     $ 869,208     $ (94,087 )     -10.8 %
Marmalade
    280,041       375,783       (95,742 )     -25.5 %
City Creek
    495       435       60       13.8 %
Total Service Revenue
  $ 1,055,657     $ 1,245,426     $ (189,769 )     -15.2 %

As can be seen from the above table our three locations experienced a decline of 15.2% in service revenues for the six month period ending June 30, 2015 over the comparable period of service sales for 2014. This decrease is mostly due to reduced staffing resulting from several of the of the senior stylists, who produce above average revenue, performing other non-revenue producing activities such as training new artists in the Landis II salon as well as attrition and vacations.
 
 
 
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The following table shows the change in product revenue by salon for the six month periods ended June 30, 2015 and 2014:

   
Six Months Ended
   
Increase (Decrease)
 
   
June 30,
   
June 30,
   
Over Prior Period
 
Salon
 
2015
   
2014
   
Dollar
   
Percentage
 
Liberty Heights
  $ 225,124     $ 241,933     $ (16,809 )     -6.9 %
Marmalade
    88,876       99,757       (10,881 )     -10.9 %
City Creek
    90,491       96,758       (6,267 )     -6.5 %
Total Product Revenue
  $ 404,491     $ 438,448     $ (33,957 )     -7.7 %

As can be seen from the above table our three locations experienced a decline of 7.7% in product revenues for the six month period ended June 30, 2015 over the comparable period of product sales for 2014. This decline in product revenue growth is primarily due the Company's senior staff spending more time towards training programs for new artists. This, along with reduced service sales, reduces time available for sales of products.

Costs of Revenue

Three months ended June 30, 2015 and 2014

The following table shows cost of revenue by type as a percentage of related revenue for the three month periods ended June 30, 2015 and 2014:

   
Three Months Ended
 
   
June 30,
   
June 30,
 
Revenue Type
 
2015
   
2014
 
Services
    59.3 %     54.5 %
Product
    57.2 %     62.8 %

The above table shows the cost of services revenue being 4.8% increase for the three month period ended June 30, 2015 over the comparable period of service sales for 2014. This increase in service cost is primary due to the Company having more staff employed, which generates more payroll expenses. The 5.6% decrease in product costs for the same comparable period is primarily due to less inventory shrinkage.

Six months ended June 30, 2015 and 2014

The following table shows cost of revenue by type as a percentage of related revenue for the six month periods ended June 30, 2015 and 2014:

   
Six Months Ended
 
   
June 30,
   
June 30,
 
Revenue Type
 
2015
   
2014
 
Services
    59.1 %     57.3 %
Product
    56.6 %     60.6 %

The above table shows the cost of services revenue being 1.8% more for the six month period ended June 30, 2015 over the comparable period of service sales for 2014. This increase in service cost is primary due to the Company having more staff employed, which generates more payroll expenses. The 4.0% decrease in product costs for the same comparable period is primarily due to less inventory shrinkage.

 
 
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Operating Expenses

Three months ended June 30, 2015 and 2014

The following table shows general and administrative expenses for the three months ended June 30, 2015 and 2014:
 
   
Three Months Ended
 
   
June 30,
   
June 30,
       
   
2015
   
2014
   
Change
 
Salaries and wages
  $ 151,687     $ 106,944     $ 44,743  
Rent
    52,927       52,905       22  
Advertising
    38,495       26,117       12,378  
Credit card merchant fees
    13,077       5,988       7,089  
Insurance
    12,690       15,794       (3,104 )
Utilities and telephone
    12,420       14,585       (2,165 )
Professional services
    40,513       51,057       (10,544 )
Repairs and maintenance
    7,565       7,892       (327 )
Dues and subscriptions
    9,457       6,106       3,351  
Office expense
    14,636       13,598       1,038  
Travel
    1,827       884       943  
Investor relations and company promotion
    54,899       975       53,924  
Other
    12,412       10,581       1,831  
Total general and administrative expenses
  $ 422,605     $ 313,426     $ 109,179  

The above table shows an increase of $109,179 in general and administrative expenses. As can be seen above there are several increases and decreases in the various categories the most notable of which are those of salaries and wages and investor relations and company promotion for an aggregate increase of $98,667 in the three month period ended June 30, 2015 compared to the three month period ended June 30, 2014.

Depreciation expense for the three months ended June 30, 2015, was $35,622 compared to $33,105 for the comparable three months ended June 30, 2014. The increase of $2,517 is primarily due to an increase in new equipment.

Six months ended June 30, 2015 and 2014

The following table shows general and administrative expenses for the six months ended June 30, 2015 and 2014:

   
Six Months Ended
 
   
June 30,
   
June 30,
   
Change
 
   
2015
   
2014
       
Salaries and wages
  $ 333,594     $ 219,324     $ 114,270  
Rent
    102,134       105,643       (3,509 )
Advertising
    63,603       45,589       18,014  
Credit card merchant fees
    25,285       21,025       4,260  
Insurance
    25,449       31,023       (5,574 )
Utilities and telephone
    27,699       29,734       (2,035 )
Professional services
    137,474       129,666       7,808  
Repairs and maintenance
    10,714       17,802       (7,088 )
Dues and subscriptions
    17,971       12,740       5,231  
Office expense
    29,340       22,808       6,532  
Travel
    3,216       4,798       (1,582 )
Investor relations and company promotion
    92,463       9,240       83,223  
Other
    18,156       19,296       (1,140 )
Total General and administrative expenses
  $ 887,098     $ 668,688     $ 218,410  

The above table shows an increase of $218,410 in general and administrative expenses. As can be seen above there are several increases and decreases in the various categories the most notable of which are those of salaries and wages and investor relations and company promotion for an aggregate increase of $197,493 in the six month period ended June 30, 2015 compared to the six month period ended June 30, 2014.

Depreciation expense for the six months ended June 30, 2015, was $68,270 compared to $66,031 for the comparable six months ended June 30, 2014. The increase of $2,239 is primarily due to an increase in new equipment purchased.
 
 
 
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Other Expense

Three months ended June 30, 2015 and 2014

Other expense for the three months ended June 30, 2015, increased to $209,508 from income of $168,917 for the comparable three months ended June 30, 2014, a change of $378,425. The increase is primarily attributable to the derivative fair value adjustment change which created a $75,754 increased loss, an increase in interest expense from non-related parties of $33,818 due to the new convertible notes payable, a change of $134,175 in gain on the settlement of debt, and a change in loss on settlement of subscription receivable of $139,304 during the three month period ending June 30, 2014 compared to the comparable period of 2015.

Six months ended June 30, 2015 and 2014

Other expense for the six months ended June 30, 2015, increased to $284,191 from income of $101,769 for the comparable six months ended June 30, 2014, an increase of $385,960 in expenses. The increase is primarily attributable to the derivative fair value adjustment change which created a $113,900 increased loss, an increase in interest expense from non-related parties of $40,686 due to the new convertible notes payable, a change of $101,974 in gain on the settlement of debt, and a change in loss on settlement of subscription receivable of $139,304 during the six month period ending June 30, 2014 compared to the comparable period of 2015.

Liquidity and Capital Resources

Cash and Investments in marketable securities
As of June 30, 2015, our principal source of liquidity consisted of $83,915 of cash, compared to $100,628 as of December 31, 2014. Our primary sources of cash during the six month period ended June 30, 2015 were customer payments for salon services and products and proceeds from issuance of convertible promissory notes. Our primary uses of cash during the six month period ended June 30, 2015 were payments relating to salaries, rent, and other general operating expenses as well as payments of notes payable.

Working Capital
We had a working capital deficit of $1,000,907 as of June 30, 2015. Our current assets were $252,493, which consisted of $83,915 in cash, $11,518 in accounts receivable, $133,393 in inventory, $22,630 in prepaid expenses and $1,037 in notes receivable. Our total assets were $619,418, which included $342,450 in property and equipment (net), and $24,475 in other assets. Our current liabilities were $1,253,400, including $394,314 in accounts payable and accrued expenses; $108,751 in amounts due to related parties; $310,417 in the current portion of convertible notes, notes payable, and capital leases payable; $60,393 in deferred revenue, and a $213,370 derivative liability. Our long-term liabilities were $2,272,328. Our total stockholders’ deficit at June 30, 2015 was $2,906,310.

Working capital decreased by $344,750 as of June 30, 2015, compared to December 31, 2014 primarily due to the various changes in current assets and current liabilities that net to the overall change in working capital for the six month period.

Cash Flows from Operating Activities
Cash flows from operating activities include net loss, adjusted for certain non-cash charges, as well as changes in the balances of certain assets and liabilities. Net cash used in operating activities for the six month period ended June 30, 2015 was $139,800 compared to $7,348 used in operating activities for the six months ended June 30, 2014. This $132,452 change in cash is made up of several changes in the operating activities of the Company the most significant of which $22,691 more cash used for accounts payable and accrued expenses. The remainder was a result of the net loss adjusted after removing non-cash items.

Cash Flows from Investing Activities
Cash flow used in investing activities for the six months ended June 30, 2015 was $8,567 compared to $19,473 for the six months ended June 30, 2014, a $10,906 difference. The change was due to fewer purchases of property and equipment.

Cash Flows from Financing Activities
Cash flow provided by financing activities for the six months ended June 30, 2015 was $131,654 compared to $12,928 provided by financing activities for the six months ended June 30, 2014, a change of $118,726. For the six months ended June 30, 2015 compared to the six months ended June 30, 2014, there was $203,941 more in the proceeds of new debt issuances offset by $36,411 more in payments made for debt obligations and 48,824 less in proceeds from stock issuances.

Other Factors Affecting Liquidity and Capital Resources

We have insufficient current assets to meet our current liabilities due to negative working capital of $1,000,907 as of June 30, 2015. Historically, we have funded our cash needs from a combination of revenues, carried payables, sales of equity, and debt transactions. Since we are not currently realizing net cash flows from our business, we may need to seek financing to continue our operations. Prospective sources of funding could include shareholder loans, equity sales or loans from other sources though no assurance can be given that such sources would be available or that any commitment of support is forthcoming to date.
 
 
 
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8% Series A Senior Subordinated Convertible Redeemable Debentures
On April 30, 2008, we entered into a stock transfer agreement with our parent company SAKL and SAKL’s wholly-owned subsidiary DHI whereby they would each sell their holdings in Landis and Newby in exchange for an 8% Series A Senior Subordinated Convertible Debenture with a face amount of $3,000,000. Interest on the debenture commenced on December 30, 2008. The debenture holder has the option, at any time, to convert all or any amount over $10,000 of principal face amount and accrued interest into shares of Common stock, $0.0001 par value per share, at a conversion price equal to 95% of the average closing bid price of the common stock three days prior to the date we receive notice. In February of 2011, DHI transferred the Debenture to SAKL in exchange for the release of debt obligations owed to SAKL by DHI and SAKL is the current holder of the Debenture.

We do not intend to pay cash dividends in the foreseeable future.

We expect to purchase property or equipment as part of our normal ongoing operations.

Going Concern

Our audit opinion for the year ended December 31, 2014 expressed substantial doubt as to our ability to continue as a going concern as a result of recurring losses and negative working capital. These conditions raise substantial doubt about our ability to continue as a going concern. Management’s plans to address our ability to continue as a going concern include raising additional funds to finance the operating and capital requirements through a combination of equity and debt financings. While we are making our best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations.

Impact of Inflation

We compensate some of our salon employees with percentage commissions based on sales they generate. Accordingly, this provides us certain protection against inflationary increases, as payroll expense is a variable cost of sales. In addition, we may increase pricing in our salons to offset any significant increases in wages and cost of services provided. Therefore, we do not believe inflation has had a significant impact on the results of our operations.

Off-Balance Sheet Arrangements

As of June 30, 2015 and December 31, 2014, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies pursuant to Item 305 of Regulation S-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation required by Rule 13a-15 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, under the supervision and with the participation of our management, including the Chief Executive Officer, or CEO, and the Chief Financial Officer, or CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2015.

The evaluation of our disclosure controls and procedures included a review of our processes and the effect on the information generated for use in this Quarterly Report on Form 10-Q. In the course of this evaluation, we sought to identify any material weaknesses in our disclosure controls and procedures, to determine whether we had identified any acts of fraud involving personnel who have a significant role in our disclosure controls and procedures, and to confirm that any necessary corrective action, including process improvements, was taken. This type of evaluation is performed every fiscal quarter so that our conclusions concerning the effectiveness of these controls can be reported in our periodic reports filed with the SEC. We intend to maintain these disclosure controls and procedures and to modifying them as circumstances warrant.

Based on evaluation as of June 30, 2015, the CEO and CFO have concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that the information required to be disclosed by us in our reports filed or submitted under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
 
 
 
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Changes in Internal Control Over Financial Reporting

Based on management's most recent evaluation of our company's internal control over financial reporting, management determined that there were no changes in our company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting that occurred during the most recent fiscal quarter.

Inherent Limitations on Effectiveness of Controls
 
Our management, including our CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. Internal control over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of internal control are met. Further, the design of internal control must reflect the fact that there are resource constraints, and the benefits of the control must be considered relative to their costs. While our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of their effectiveness, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Green Endeavors, Inc. have been detected.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

No material change in any legal matter, as reported in the Annual Report on Form 10-K for the years ended December 31, 2014 and 2013, occurred during the six months ended June 30, 2015.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the years ended December 31, 2014 and 2013, which could materially affect our business, financial condition or future results. The risks described in this report and in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

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

On January 21, 2015, the Board of Directors approved a stock-based compensation program entitled The 2015 Benefit Plan of Green Endeavors, Inc. (the “Plan”) wherein common stock options are granted to employees. A total of 80,000,000 shares of the Green’s common stock (par value $0.0001) are authorized to be issued or granted to employees (“Employees”) under the Plan. Employees include actual employees or certain non-employee, consultants and advisors of Green, its subsidiaries, and parent company. The Plan is designed to attract and retain employees. Under the Plan, the Company has granted stock options to three employees during 2015 from January 27, 2015 to April 27, 2015 at option prices ranging from $0.0032 to $0.0060 per share for an aggregate of 60,000,000 shares. Each of the three employees exercised the options on the same day they were granted by each issuing a promissory notes to the Company in the aggregate amount of $274,800 included in subscription receivable. The promissory notes mature in 12 months from their issuance date and the Company is entitled to 4% interest per annum.

On January 23, 2015, the Board of Directors approved the conversion of 3,900 shares of Series B Preferred Stock held by an investor into 4,924,242 shares of Common Stock. The shares were converted at $0.00396 per share based on the conversion provisions for the Series B Preferred Stock designation.

On January 26, 2015, pursuant to a Securities Purchase Agreement, Green issued a $64,000 Convertible Promissory Note (the "Note") to KBM Worldwide, Inc. (“KBM”) that matures October 28, 2015. The Note bears interest at a rate of 8% per annum and can be converted into Green’s common shares, at the holder’s option, at the conversion rate of 58% of a market price (a 42% discount) of the average of the three lowest trading price of Green’s common shares during the ten-day period ending one trading day prior to the date of the conversion, subject to a limitation that KBM and its affiliates cannot at any time hold, as a result of conversion, more than 9.99% of the outstanding common stock of Green.

On March 25, 2015, pursuant to a Securities Purchase Agreement, Green issued a $34,000 Convertible Promissory Note (the "Note") to LG Capital Funding, LLC (“LGCF") that matures March 25, 2016. The Note bears interest at a rate of 8% per annum and can be converted into Green’s common shares, at the holder’s option, at the conversion rate of 58% of a market price (a 42% discount) of the average of the three lowest trading price of Green’s common shares during the eighteen-day period ending on the trading day of the conversion notice date, subject to a limitation that LGCF and its affiliates cannot at any time hold, as a result of conversion, more than 9.99% of the outstanding common stock of Green.
 
 
 
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In the above transactions, the Board of Directors relied upon Rule 506 of the Securities Act of 1933 in originally issuing the convertible notes or preferred stock and in the subsequent issuances resulting from conversions of the notes and preferred securities into common stock were done pursuant to Rule 4(2) of the Securities Act of 1933 and the resales by the holders were carried out in reliance on Rule 144.

Subsequent Events

In accordance with ASC 855-10 Company management reviewed all material events through the date of this report and there are no additional material subsequent events to report.

On July 8, 2015, the Board of Directors approved the conversions of 5,076 shares of Series B Preferred shares into 13,500,000 shares of Common Stock. The shares were converted at prices per share of approximately $0.00188 based on the conversion provisions for the Convertible Series B Preferred Stock designation.

On July 8, 2015, the Board of Directors approved a settlement where $34,330 of the subscription receivable was forgiven and accepted $20,040 as payment in full.

On July 9, 2015, the Board of Directors approved an amendment to the stock-based compensation plan entitled The 2015 Benefit Plan of Green Endeavors Inc. (the “2015 Plan”) wherein common stock options are granted to employees of the Company. A total of 100,000,000 additional shares of the Company’s common stock (par value $0.0001) are authorized to be issued or granted to employees under the Amendment to the 2015 Plan.

On July 9, 2015 the Board of Directors approved a grant of 13,500,000 shares pursuant to the S-8 Registration Statement and 2015 Benefit Plan of Green Endeavors Inc. The shares were issued based on an option price of $0.0015 per share. The employee exercised the options on the same day they were granted by issuing a promissory note to the Company that will appear on the balance sheet as a subscription receivable. The promissory note matures 12 months from its issuance date and the Company is entitled to 4% interest per annum.

On July 29, 2015, the Board of Directors approved a settlement on $72,000 subscription receivable for payments of $24,200 as satisfaction in full.

On July 29, 2015, pursuant to a Securities Purchase Agreement, Green issued a $200,000 Convertible Promissory Note (the "Note") to JMJ Financial (“JMJ”) that matures two years from the date of each funding. The Note bears interest at a rate of 0% per annum for the first 90 days and 12% per annum thereafter, and can be convertible into Green’s common shares, at the holder’s option, at the conversion rate of 60% of the market price (a 40% discount) of the lowest trading price of Green’s common shares during the twenty-day period ending one trading day prior to the date of the conversion, or $0.002, whichever is lesser, subject to a limitation that JMJ and its affiliates cannot at any time hold, as a result of conversion, more than 9.99% of the outstanding common stock of Green.

On August 12, 2015, the Board of Directors approved a settlement on $72,000 subscription receivable for payments of $17,542 as satisfaction in full.

Item 3. Defaults Upon Senior Securities

None.

Item 4. [Reserved]

Item 5. Other Information

None.


 
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Item 6. Exhibits

(a)
The following exhibits are filed herewith or incorporated by reference as indicated in the table below:

   
Incorporated by Reference
 
Exhibit Number
Description
Form
File Number
Exhibit Number
Filing Date
Provided Herewith
             
3(i)
Amended and Restated Certificate of Incorporation
10-12G/A
000-54018
3(i)
8/23/2010
 
3(ii)
Bylaws
10-12G/A
000-54018
3(ii)
8/23/2010
 
3(iii)
Plan of Merger
8-K
000-54018
3(iii)
8/26/2010
 
3(iv)
Plan of Merger and Share Exchange
8-K
000-54018
3(iv)
8/31/2010
 
3(v)
Utah Articles of Incorporation
8-K
000-54018
3(v)
8/31/2010
 
4(i)
Certificate of Designation for Series B Preferred Stock.
10-12G/A
000-54018
4(i)
8/23/2010
 
4(ii)
8% Series A Senior Subordinated Convertible Redeemable Debenture issued to DHI dated April 30, 2008.
10-12G/A
000-54018
4(ii)
8/23/2010
 
4(iii)
8% Series A Senior Subordinated Convertible Redeemable Debenture issued to Akron Associates, Inc. dated January 15, 2010.
10-12G/A
000-54018
4(iii)
8/23/2010
 
4(iv)
8% Series A Senior Subordinated Convertible Redeemable Debenture issued to Desert Vista Capital, LLC. dated January 15, 2010.
10-12G/A
000-54018
4(iv)
8/23/2010
 
4(v)
8% Series A Senior Subordinated Convertible Redeemable Debenture issued to Akron Associates, Inc. dated March 16, 2010.
10-12G/A
000-54018
4(v)
8/23/2010
 
4(vi)
8% Series A Senior Subordinated Convertible Redeemable Debenture issued to Akron Associates dated May 11, 2010.
10-12G/A
000-54018
4(vi)
8/23/2010
 
4(vii)
8% Series A Senior Subordinated Convertible Redeemable Debenture issued to Desert Vista Capital, LLC dated May 11, 2010.
10-12G/A
000-54018
4(vii)
8/23/2010
 
4(viii)
Amended Certificate of Designation for Series B Preferred Stock.
10-12G/A
000-54018
4(viii)
9/22/2010
 
10(i)
None
         
             
31.01
Certification of the Registrant’s Chief Executive Officer, Richard D. Surber, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.
       
X
32.01
Certification of the Registrant’s Chief Executive Officer, Richard D. Surber, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
       
X


 
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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 ENDEAVORS, INC.
(Registrant)
   
   
DATE: August 19, 2015
By: /s/ Richard D. Surber
 
Richard D. Surber
 
President, Chief Executive Officer, Chief Financial Officer, and Director

 
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