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 September 30, 2017

 

or

 

[  ]

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________________ to __________________________

 

Commission file number: 000-54395

 

GREEN ENVIROTECH HOLDINGS CORP.

(Exact name of registrant as specified in its charter)

 

DELAWARE		32-0218005
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

14699 Holman Mtn Rd., Jamestown, CA 95327		95361
(Address of principal executive offices)		(Zip Code)

 

(209) 848-3523

(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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [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.

 

Large accelerated filer [  ]		Accelerated filer [  ]
Non-accelerated filer [  ]		Smaller reporting company [X]
		Emerging growth company [  ]
(Do not check if smaller reporting company)

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date; 38,573,637 shares of common stock are issued and outstanding as of November 20, 2017.

 

 

 

TABLE OF CONTENTS

 

		Page No.
PART I. - FINANCIAL INFORMATION
Item 1.	Financial Statements.	4
	Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016 (Unaudited)	4
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2017 and 2016 (Unaudited)	5
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016 (Unaudited)	6
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	24
Item 4	Controls and Procedures.	24
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings.	25
Item 1A.	Risk Factors.	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	25
Item 3.	Defaults Upon Senior Securities.	25
Item 4.	Mine Safety Disclosures.	25
Item 5.	Other Information.	25
Item 6.	Exhibits.	26

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

Statements in this quarterly report on Form 10-Q may be “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this quarterly report on Form 10-Q, including the risks described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this quarterly report on Form 10-Q and in other documents which we file with the Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to our ability to raise any financing which we may require for our operations, competition, government regulations and requirements, pricing and development difficulties, our ability to make acquisitions and successfully integrate those acquisitions with our business, as well as general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and, except as may be required under applicable securities laws, we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this quarterly report on Form 10-Q.

 

 

PART I. - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

GREEN ENVIROTECH HOLDINGS CORP.

CONSOLIDATED BALANCE SHEETS

UNAUDITED

 

		September 30, 2017				December 31, 2016
ASSETS
CURRENT ASSETS
Cash		$	2,211			$	94,664
Deposits			32,500				38,012
Prepaid expenses			5,812				177,169
Other current assets			104,284				2,284
Total current assets			144,807				312,129
Property, plant, & equipment			1,063,481				722,915
TOTAL ASSETS		$	1,208,288			$	1,035,044
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable		$	964,473			$	630,719
Due to related party			31,480				-
Accrued expenses			393,160				382,715
Stock payable			60,000				-
Secured debentures payable			305,000				305,000
Loan payable-related party-convertible			1,661,921				1,433,937
Loan payable-other-convertible, current portion			232,961				149,295
Loan payable-other-non-convertible			170,000				170,000
Derivative liability			368,477				-
Total current liabilities			4,187,472				3,071,666
Loan payable-other-convertible, long term			76,393				-
TOTAL LIABILITIES			4,263,865				3,071,666
STOCKHOLDERS' DEFICIT
Preferred stock, $0.001 par value, 25,000,000 shares authorized, none issued and outstanding as of September 30, 2017 and December 31, 2016, respectively			-				-
Common stock, $0.001 par value, 250,000,000 shares authorized, 35,073,637 and 28,517,597 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively			35,074				28,518
Additional paid in capital			20,814,268				20,799,102
Accumulated deficit			(23,904,919	)			(22,818,208	)
Total Green Envirotech Holdings Corp. Stockholders' deficit			(3,055,577	)			(1,990,588	)
Noncontrolling interest			-				(46,034	)
Total stockholders' deficit			(3,055,577	)			(2,036,622	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	1,208,288			$	1,035,044

 

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

 

 

GREEN ENVIROTECH HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

(UNAUDITED)

 

		NINE MONTHS				NINE MONTHS				THREE MONTHS				THREE MONTHS
		SEPTEMBER 30, 2017				SEPTEMBER 30, 2016				SEPTEMBER 30, 2017				SEPTEMBER 30, 2016
OPERATING EXPENSES
Wages and professional fees		$	689,349			$	1,129,785			$	31,518			$	839,489
General and administrative			285,384				101,616				59,200				62,613
Total operating expenses			974,733				1,231,401				90,718				902,102
Loss from operating expenses			974,733				1,231,401				90,718				902,102
OTHER INCOME (EXPENSE)
Interest expense			(336,329	)			(83,376	)			(148,655	)			(37,067	)
Loss on debt conversion			-				(126,870	)			-				(126,870	)
Gain on fair value of derivatives			164,257				-				164,257				-
Total other income (expense)			(172,072	)			(210,246	)			15,602				(163,937	)
NET LOSS			(1,146,805	)			(1,441,647	)			(75,116	)			(1,066,039	)
Loss attributable to noncontrolling interest			(60,094	)			(1,370	)			-				(1,370	)
Loss attributable to controlling interest			(1,086,711	)			(1,440,277	)			(75,116	)			(1,064,669	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING			30,154,241				24,368,947				31,545,022				25,243,713
NET LOSS PER SHARE-BASIC AND DILUTED:		$	(0.04	)		$	(0.06	)		$	(0.00	)		$	(0.04	)

 

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

 

 

GREEN ENVIROTECH HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOW

UNAUDITED

 

		NINE MONTHS ENDED				NINE MONTHS ENDED
		SEPTEMBER 30, 2017				SEPTEMBER 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(1,146,805	)		$	(1,441,647	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount			153,691				-
Gain on change in fair value of derivatives			(164,257	)			-
Common stock issued for services			83,750				18,750
Loss on debt conversion			-				126,870
Debt increase as a result of a consulting agreement			-				45,000
Warrants issued for services			14,688				614,288
Warrants issued for services-related party			147,856				148,952
Change in assets and liabilities
Decrease in deposits, prepaid expenses, and other current assets			176,869				-
Increase (decrease) in accounts payable and accrued expenses			137,305				(135,211	)
Increase in accounts payable related party			-				(5,708	)
Net cash used in operating activities			(596,903	)			(628,706	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on loan payable-related party-convertible			(45,200	)			-
Proceeds received from loan payable-other-convertible			314,650				-
Proceeds from line of credit - related party			235,000				780,500
Payment on current notes			-				(53,500	)
Net cash provided by financing activities			504,450				727,000
NET INCREASE IN CASH AND CASH EQUIVALENTS			(92,453	)			98,294
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD			94,664				8,076
CASH AND CASH EQUIVALENTS - END OF PERIOD		$	2,211			$	106,370
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest		$	70,000			$	-
Income Taxes		$	-			$	-
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES
Debt assigned to a related party		$	-			$	134,000
Debt assigned to a third party		$	-			$	215,405
Warrants issued for Related party accrued salary		$	-			$	417,100
Warrants issued for Employees accrued salary		$	-			$	1,737,035
Net assets acquired in Smart Fuel solution after non-controlling interest		$	-			$	53,710
Accrued liability settled by note payable		$	-			$	74,295
Conversion of loans payable to common stock		$	130,000			$	152,905
Conversion of accrued interest to common stock		$	102,192			$	-
Acquisition of minority interest in Smart Fuel		$	360,000			$	-
Common shares issued for equity purchase agreement		$	27,000			$	-
Debenture issued for equity purchase agreement		$	75,000			$	-
Expenses paid for by related party on behalf of the Company		$	31,480			$	-
Debt discount from convertible loan payable - BCF & OID		$	50,650			$	-
Unpaid additions to property, plant and equipment		$	340,566			$	-
Derivative liability from tainted notes and warrants reclassified from additional paid in capital		$	380,518			$	-
Resolution of derivative liability due to conversion of note		$	27,582			$	-
Debt discount due to derivatives		$	179,798			$	-

  

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

 

 

GREEN ENVIROTECH HOLDINGS CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1

Basis of Presentation and Accounting Policies:

 

The unaudited interim consolidated financial statements include the accounts of our Company and our former subsidiary, Smart Fuel Solutions, Inc. which was merged into the Company on June 30, 2017. On September 28, 2016, the Company acquired a controlling interest in Smart Fuel Solutions, Inc., (Smart Fuel) a Florida Corporation, established and staffed as a service company. Smart Fuel undertook and assisted with the operational responsibilities of the Company. Smart Fuel was a private company, majority owned by us. Effective June 30, 2017, we acquired the remaining minority interest in Smart Fuel and integrated its operations into the Company. The former ownership interest in Smart Fuel, held by third parties, are presented in the consolidated balance sheet within the equity section as a line item identified as “non-controlling interest”, separate from the parent’s equity. All significant inter-company balances and transactions have been eliminated in the consolidation as of and for the nine months ended September 30, 2017. There was not a strategic shift nor were there any discontinued operations from the collapse.

 

The unaudited interim consolidated financial statements also include our new wholly owned subsidiary, GETH CFP, Inc. (CFP). CFP is a Delaware Corporation formed on February 9, 2017 for the purpose of handling and upgrading both third party carbon black and the carbon black produced by our GEN 1 End of Life Tire Processing Plants. We acquired a Carbon Black Finishing System last year for installation in our Centralized Carbon Black Finishing Plant located in Ohio. The equipment is being relocated and installed with the assistance of GETH’s strategic partners, under a master services agreement that covers all of the GETH plants. The Ohio site is being provided by the Lawrence County Economic Development Corporation as part of its mission to bring jobs back to that part of Ohio.

 

The unaudited interim consolidated financial Statements presented herein have been prepared by us in accordance with the accounting policies described in our December 31, 2016 and 2015 audited financial statements included in Form 10-K and should be read in conjunction with the notes to the financial statements which appear in that report.

 

The preparation of these unaudited interim consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including related intangible assets, income taxes, insurance obligations and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results may differ from these estimates under different assumptions or conditions.

 

In the opinion of management, the information furnished in these unaudited interim consolidated financial statements reflect all adjustments necessary for a fair statement of the financial position and results of operations and cash flows as of and for the nine months ended September 30, 2017 and 2016. All such adjustments are of a normal recurring nature. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the unaudited interim consolidated financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.

 

 

GREEN ENVIROTECH HOLDINGS CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Reclassifications

 

Certain prior year amounts have been reclassified to conform with the current year presentation.

 

Recent accounting pronouncements

 

In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-Controlling Interests with a Scope Exception”. The ASU was issued to address the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. The ASU, among other things, eliminates the need to consider the effects of down round features when analyzing convertible debt, warrants and other financing instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. The amendments are effective for fiscal years beginning after December 15, 2018, and should be applied retrospectively. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the implementation date and the impact of this amendment on its consolidated financial statements.

 

Note 2

Going Concern

 

These unaudited interim consolidated financial statements have been prepared on a going concern basis which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. For the nine months ended September 30, 2017, we had a net loss. We also have a working capital deficit and an accumulated deficit since inception. These factors raise substantial doubt about our ability to continue as a going concern.

 

These unaudited interim consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from a future uncertainty. The Company plans to continue funding itself through the generation of revenues and raising capital through loans and new equity.

 

Note 3

Acquisition of Minority Interest in Smart Fuel

 

Effective June 30, 2017, we merged Smart Fuel into the Company by acquiring the remaining 17.5% minority interest of 3,600,000 shares in exchange for a similar number of the Company’s common shares. The minority interest was valued at $360,000 based on the closing price of the Company’s stock at June 30, 2017 of $0.10 per share. We issued 3,000,000 shares valued at $300,000 to a minority shareholder of Smart Fuel as of September 30, 2017 and the remaining 600,000 shares to be issued, remain as a liability on our consolidated balance sheet. The difference in the fair value of the consideration and the carrying amount of the non-controlling interest of $466,128 was charged to additional paid in capital. As a result of the acquisition, Smart Fuel became a wholly-owned subsidiary of the Company. As of September 30, 2017, the Company has issued 3,000,000 of the 3,600,000 shares exchanged. The fair value of the remaining 600,000 shares is $60,000 and is carried on the consolidated balance sheet as stock payable. The Company also recognize Smart Fuel’s 3,143,000 outstanding warrants as if they had been issued by the Company.

 

 

GREEN ENVIROTECH HOLDINGS CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 4

Property, Plant, and Equipment

 

During the nine months ended September 30, 2017, we added $800,501 in construction in progress when we started development of our Ohio carbon finishing plant. Of the $800,501, there was $459,935 in carbon equipment that was moved to construction in progress due to the carbon equipment being refurbished for use in the plant. We have incurred to date $340,566 in engineering and design work in relation to our pyrolysis plant to be located in Texas. This brings the total construction in progress to $1,063,481 for the nine months ended September 30, 2017.

 

Note 5

Loan Payable – Related Party and Convertible

 

On March 3, 2017, we approved a new working capital line of credit loan with our CEO, Chris Bowers in the amount up to $150,000 at 8% due December 31, 2017. The note has conversion rights into our common shares at $0.10 per share. On March 8, 2017, we received $100,000 of this loan. To date the remaining balance of $50,000 has not been received. For the nine months ended September 30, 2017, this note had accrued interest in the amount of $4,537. The Company evaluated this convertible LOC for Beneficial Conversion Features (BCF) and concluded that the LOC incurred a BCF when it was issued on March 3, 2017. The BCF resulted in a debt discount in the amount of $35,300 of which $24,284 has been amortized for the nine months ended September 30, 2017 leaving a balance of $11,016 to be amortized going forward.

 

On August 15, 2016, we accepted a Line of Credit (LOC) in the amount of $500,000 from our CEO Chris Bowers. On November 14, 2016, we accepted a second Line of Credit (LOC) in the amount of $500,000 from our CEO. As of the September 30, 2017, these two LOCs had an outstanding balance in the amount of $1,000,000 with $20,000 in accrued interest on September 30, 2017. These LOCs accrue interest at the rate of 1% per month based upon $1,000,000 total balance. We have been paying $10,000 per month in interest on the two LOCs. The due date of the two loans is December 31, 2017. The funds were used for working capital in the Company. The first LOC has two Addendums attached to it. Addendum A clarifies debt conversion rights attached to the LOC at $0.20 per share of common stock. Addendum B clarifies other rights attached to the LOC. The Company received $100,000 on January 31, 2017 which represented the balance of the LOC2. There was no BCF on the balance of the LOC2. These other rights, referred to above, are numbered below. (The second LOC has the same rights as that of the first LOC). These certain other rights in Addendum B provide for the following:

 

	1.	LOC has Repayment rights: The LOC has priority principal and interest repayment rights from other sources of capital received by the Company.
	2.	LOC has Warrant rights: Bowers has the right to receive 500,000 (five hundred thousand) $0.10 warrants for providing the LOC and 250,000 (two hundred fifty thousand) $0.10 warrants per $100,000 drawn against the $500,000 LOC. This would be a total of 1,750,000 $0.10 warrants to be issued to Bowers and/or Assigns for providing the funding and the Company using all $500,000 LOC. These warrants will be accounted for once the term of the warrants is known.
	3.	LOC has Additional Stock Conversion rights: At any time while the LOC is outstanding, Bowers has the right to convert per $100,000 of the LOC for 500,000 shares of duly paid and non-assessable common stock of the Company at a conversion price of $0.20 per share (subject to adjustment in the event of stock splits or stock dividends) by providing a notice of conversion in a form reasonably acceptable to the Company. The full conversion of the LOC would be 2,500,000 shares of the Company common stock.

 

The Company evaluated these convertible LOCs for a BCF and concluded that the second LOC incurred a BCF when it was issued on November 14, 2016. The BCF resulted in a debt discount in the amount of $105,600 of which $8,800 was amortized for the year ended December 31, 2016. $79,200 has been amortized to interest expense for the nine months ended September 30, 2017 leaving a balance of $17,600 to be amortized going forward.

 

On February 1, 2016, we issued an 8%, $134,000 Note Payable to our CEO Chris Bowers for funds received. These funds were issued to Smart Fuel for a promissory note for the same amount at eight percent (8%). The funds were intended for the working capital needs of Smart Fuel Solutions. On September 28, 2016, we acquired controlling interest in SFS; we assumed the note. The note is convertible at $0.50 per share and matures December 31, 2017. As of September 30, 2017, the accrued interest on this note was $12,622.

 

We have an unsecured line of credit with H. E. Capital, S. A., a related party. The line of credit accrues interest at the rate of 8% per annum. The due date of the line of credit has been extended to December 31, 2017. Balance of the line of credit at September 30, 2017 was $456,537 with accrued interest in the amount of $52,620. We previously had an agreement with H.E. Capital wherein we paid $5,000 monthly for financial services. As of December 31, 2016, this agreement is no longer in effect. H. E. Capital’s activity for the nine months ended September 30, 2017, included advancing $35,000 to the Company and receipt of $45,200 in payment from the Company. H. E. Capital converted $30,000 of the line of credit and $100,000 in accrued interest into 1,300,000 shares of our common stock on April 3, 2017 at a $0.10 conversion rate. A schedule of the H. E. Capital loan activity, principal only, with us for the nine months ended September 30, 2017 and for the year ended December 31, 2016 is as follows:

 

 

GREEN ENVIROTECH HOLDINGS CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

H. E. Capital S.A. transactions for 2017		September 30, 2017				December 31, 2016
Beginning Balance		$	496,737			$	241,582
Proceeds			35,000				352,000
Reclassification from accounts payable & accruals			-				76,060
Consulting fees			-				60,000
Assignments			-				(190,000	)
Non-cash conversions to stock			(30,000	)			(42,905	)
Cash paid to H. E. Capital			(45,200	)			-
Ending Balance		$	456,537			$	496,737

 

Note 6

Secured Debentures

 

On January 24, 2011, we entered into a series of securities purchase agreements with accredited investors pursuant to which we sold an aggregate of $380,000 in 12% secured debentures. The Debentures are secured by the assets of the Company pursuant to security agreements entered into between us and the investors. As of September 30, 2017 these secured debentures have an outstanding balance of $305,000 and accrued interest in the amount of $264,975. These debentures are in default and the Company is in negotiations with the holders for extensions.

 

Note 7

Loan Payable – Other and Convertible

 

On May 16, 2016, we approved H.E. Capital S.A.’s (HEC) request to assign to a private company $200,000 of its Line of Credit Note. We approved the request and reduced HEC’s Line of Credit Note for that amount and record a new note. On July 19, 2016, the private company converted $100,000 of its note into 1,000,000 common shares of the Company’s stock. As of September 30, 2017, the note balance is $100,000 with accrued interest in the amount of $12,405.

 

On July 1, 2016, we issued a note to a private individual in the amount of $49,295. This new note has $0.50 conversion rights attached to it and accrues interest at 8%. As of September 30, 2017, this note had accrued interest in the amount of $4,938.

 

On April 12, 2017, we received working capital funds in the amount of $100,000 from a private company. The note has an interest rate of 8% and is due on April 11, 2018. The note has a variable conversion price feature per the agreement, in which, if the stock price is below $0.20 per share at conversion, the lender can convert at a 15% discount on the stock price. On July 21, 2017, the private company holding this $100,000 note with its accrued interest in the amount of $2,192 exercised their right to convert in exchange for 1,481,040 shares of our common stock. The conversion price was the price of the stock at the time with a 15% discount to the market price. On the date of conversion, it was determined this note had derivative discount in the amount of $28,130 which was amortized in full. See Note 10.

 

 

GREEN ENVIROTECH HOLDINGS CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

On May 5, 2017, we received working capital funds in the amount of $77,500 from Auctus Fund LLC (“Auctus”). The note has an interest rate of 10% and is due February 5, 2018. The note has prepayment conditions. The note can be prepaid any time during the period beginning on the issue date and ending on the date which is ninety (90) days following the issue date at 125% of the unpaid principal balance including interest. The note can be prepaid at any time during the period beginning the day which is ninety- one (91) days following the issue date and ending on the date which is one hundred eighty (180) days following the issue date at 135% of the unpaid principal balance plus interest. After the expiration of one hundred eighty (180) days following the date of the note, the Company shall have no right of prepayment. The note has a variable conversion price feature per the agreement. The conversion feature starts on August 5, 2017. The conversion price shall equal the lesser of (i) the average of the two (2) lowest trading prices during the previous twenty-five (25) trading day period ending on the latest complete trading day prior to the date of this note and (ii) the variable conversion price. The variable conversion price shall mean 55% multiplied by the market price, representing a discount rate of 45%. Market price means the average of the two (2) lowest trading prices for the common stock during the twenty-five (25) trading day period ending on the latest complete trading day prior to the conversion date. As of September 30, 2017, the note had accrued interest in the amount of $1,980. During the third quarter, it was determined this note had derivative discount in the amount of $40,538 of which $9,450 was amortized leaving a balance of $31,088. See Note 10. Subsequent to September 30, 2017, this note was paid in full.

 

On May 16, 2017, we received working capital funds in the amount of $74,650 from EMA Financial LLC (“EMA”). The note is in the amount of $77,500 with an original issue discount (OID) in the amount of $2,850 and has an interest rate of 10% and is due May 1, 2018, date of the note. The note has prepayment conditions. The note can be prepaid any time during the period beginning on the issue date and ending on the date which is six months following the issue date. If paid within 90 days from the issue date, the payment is at 125% of the unpaid principal balance including interest. If the note is prepaid at any time during the period beginning the day which is ninety- one (91) days following the issue date and ending on the date which is one hundred eighty (180) days following the issue date, the payment is at 135% of the unpaid principal balance plus interest. After the expiration of one hundred eighty (180) days following the date of the note, the Company shall have no right of prepayment. The note has a variable conversion price feature per the agreement. The conversion feature starts on July 15, 2017. The conversion price is equal to the lower of: (i) the closing sale price of the common stock on the principal market on the trading day immediately preceding the closing date, and (ii) 55% of either the lowest sale price for the common stock on the principal market during the twenty-five (25) consecutive trading days immediately preceding the conversion date or the closing bid price, whichever is lower. As of September 30, 2017, the note had accrued interest in the amount of $1,981. The note also had an OID balance in the amount of $1,663 after amortizing $1,187 to interest expense. During the third quarter, it was determined this note had derivative discount in the amount of $48,630 of which $10,047 was amortized leaving a balance of $38,583. See Note 10. Subsequent to September 30, 2017, this note was paid in full.

 

On July 20, 2017, we entered into an equity purchase agreement for up to $5,000,000 of our common stock with Peak One Opportunity Fund, LP (Peak One). In connection with that same agreement, we also entered into a related registration rights agreement. We issued a non-interest bearing convertible debenture maturing on July 20, 2020 in the amount of $75,000 to Peak One as a commitment fee in connection with the agreement, as well as agreed to issue 300,000 shares of our common stock as commitment shares. On July 25, 2017, we issued these shares valued at $27,000. Both the commitment debenture and commitment shares were charged to other current assets until such time the registration statement is filed after which the amount will be offset against the proceeds of the offering. The note is convertible after 180 days from issuance at a conversion price equal to 90% of the lowest closing bid price of the last 20 days prior to the conversion date.

 

 

GREEN ENVIROTECH HOLDINGS CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

On July 27, 2017, we received the first of three installments in connection with Peak One Opportunity LP (Peak One) purchase agreement for certain Company convertible debentures totaling $425,000. We issued to Peak One a three year $75,000 non-interest bearing debenture maturing on July 26, 2020. The debenture had an OID (original issue discount) in the amount of $12,500. As of September 30, 2017, there was a remaining OID in the amount of $12,083. The debentures when issued are convertible into common shares of the Company with certain terms and conditions as set forth in the agreement. The Holder is entitled to, at any time or from time to time, to convert the conversion amount into conversion shares, at a conversion price for each share of common stock equal to the lesser of (a) $0.15 or (b) sixty five percent (65%) of the lowest closing bid price (as reported by Bloomberg LP) of the common stock for the twenty (20) trading days immediately preceding the date of the date of conversion of the debentures subject in each case to equitable adjustments resulting from any stock splits, stock dividends, recapitalizations or similar events. During the third quarter, it was determined this note had derivative discount in the amount of $62,500 of which $976 was amortized leaving a balance of $61,524. See Note 10.

 

Note 8

Loan Payable – Other and Non-Convertible

 

On November 16, 2012, we issued a note to a private individual in the amount of $170,000 with interest accruing at 8% per annum. This note has been extended to December 31, 2017. As of September 30, 2017, the accrued interest was $17,102.

 

Note 9

Commitments and Contingencies

 

On March 29, 2017, we entered into a lease and working capital credit facility with Caliber Capital & Leasing LLC and its assignee, Real Estate Acquisition Development Sales, LLC (“READS”). Under the agreements, READS is providing an initial commitment of up to $2.5 million for the construction of our first processing line in our centralized Carbon Finishing Plant in Ohio. The loan is dated for April 4, 2017. We have received $450,000 from READS subsequent to September 30, 2017, please see subsequent events note 13.

 

On March 29, 2017, we also signed the Master Equipment and Building Related Lease Agreement for $100 Million. The lease covers land, buildings and equipment. The equipment will have an initial term of seven years; after which we will have the option to purchase the facility from READS or renew the lease under the same terms. The commencement date was scheduled for April 4, 2017. We have received $450,000 from READS subsequent to September 30, 2017; please see subsequent events note 13.

 

On April 11, 2017, our wholly owned subsidiary GETH CFP, Inc. signed a 10-year lease with the Lawrence Economic Development Corporation of Lawrence County, Ohio for the lease of 11,200 sq. ft. of manufacturing space for our carbon finishing plant in Ohio. The lease had a start date of June 1, 2017, which has been extended to the opening of the Carbon Plant and runs to June 1, 2027. The lease has three, five year extensions. The lease is $4.00 per sq. ft. with initial payments in the amount of $3,733 per month. The first extension is at $4.50 per sq. ft. with payments in the amount of $4,200 per month.

 

On July 20, 2017, we entered into an equity purchase agreement for up to $5,000,000 of our common stock with Peak One Opportunity Fund, LP (“Peak One”). In connection with that same agreement, we also entered into a related registration rights agreement. We issued a convertible debenture in the amount of $75,000 to Peak One as a commitment fee in connection with the agreement, as well as agreed to issue 300,000 shares of our common stock as commitment shares. On July 25, 2017, we issued these shares valued at $27,000. Both the commitment debenture and commitment shares were charged to other current assets until such time the registration statement is filed after which the amount will be offset against the proceeds of the offering.

 

 

GREEN ENVIROTECH HOLDINGS CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 10

Fair value of Financial Instruments and Derivative Liabilities

 

The carrying value of cash, accounts payable and accrued expenses, and debt approximate their fair values because of the short-term nature of these instruments and approximate market interest rates of these instruments. Management believes the Company is not exposed to significant interest or credit risks arising from these financial instruments. The notes totaled $150,000 with net discounts in the amount of $73,607.

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable.

 

	●	Level 1 -	Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.
	●	Level 2 -	Quoted prices for similar assets and liabilities in active markets; quoted prices included for identical or similar assets and liabilities that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. These are typically obtained from readily-available pricing sources for comparable instruments.
	●	Level 3 -	Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own beliefs about the assumptions that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

 

The following table presents the derivative financial instruments, the Company’s only financial liabilities measured and recorded at fair value on the Company’s balance sheets on a recurring basis, and their level within the fair value hierarchy as of September 30, 2017:

 

The following table presents the derivative financial instruments, the Company’s only financial liabilities measured and recorded at fair value on the Company’s consolidated balance sheet on a recurring basis, and their level within the fair value hierarchy as of September 30, 2017:

 

		Amount				Level 1				Level 2				Level 3
Embedded conversion derivative liability		$	297,160			$	-			$	-			$	297,160
Warrant derivative liabilities		$	71,317			$	-			$	-			$	71,317
Total		$	368,477			$	-			$	-			$	368,477

 

The embedded conversion feature in the convertible debt instruments that the Company issued (See Note 7), that became convertible during the third quarter ended September 30, 2017, qualified them as derivative instruments since the number of shares issuable under the notes are indeterminate based on guidance in FASB ASC 815, Derivatives and Hedging. These convertible notes tainted all other equity linked instruments including outstanding warrants and fixed rate convertible debt on the date that the instrument became convertible.

 

The valuation of the derivative liability of the warrants was determined through the use of a Multinomial Lattice model that values the liability of the warrants based on a risk-neutral valuation where the price of the option is its discounted expected value. The technique applied generates a large number of possible (but random) price paths for the underlying common stock via simulation, and then calculates the associated exercise value (i.e. “payoff”) of the option for each path. These payoffs are then averaged and discounted to a current valuation date resulting in the fair value of the option.

 

 

GREEN ENVIROTECH HOLDINGS CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

The valuation of the derivative liability attached to the convertible debt was arrived at through the use of a Multinomial Lattice model that values the derivative liability within the notes. The technique applied generates a large number of possible (but random) price paths for the underlying (or underlyings) via simulation, and then calculates the associated payment value (cash, stock, or warrants) of the derivative features. The price of the underlying common stock is modeled such that it follows a geometric Brownian motion with constant drift, and elastic volatility (increasing as stock price decreases). The stock price is determined by a random sampling from a normal distribution. Since the underlying random process is the same, for enough price paths, the value of the derivative is derived from path dependent scenarios and outcomes. The features in the notes that were analyzed and incorporated into the model included the conversion features with the reset provisions, the call/redemption/prepayment options, and the default provisions. Based on these features, there are six primary events that can occur; payments are made in cash; payments are made with stock; the note holder converts upon receiving a redemption notice; the note holder converts the note; the issuer redeems the note; or the Company defaults on the note. The model simulates the underlying economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms that would be in effect at the time (i.e. stock price, conversion price, etc.). Probabilities were assigned to each variable such as redemption likelihood, default likelihood, and timing and pricing of reset events over the remaining term of the notes based on management projections. This led to a cash flow simulation over the life of the note. A discounted cash flow for each simulation was completed, and it was compared to the discounted cash flow of the note without the embedded features, thus determining a value for the derivative liability.

 

Key inputs and assumptions used to value the convertible notes and warrants upon issuance or tainting and also as of September 30, 2017.

 

	●	The stock price of 0.100 to $0.0721 in these periods (variable conversion price; reset provisions; and upon redemption or default penalties) would fluctuate with the Company projected volatility;
	●	An event of default adjusting the interest rate would occur 0% of the time for all notes except the Peak 1 Note which increases 0.50% per month to a maximum of 5% with the corresponding penalty;
	●	The projected volatility curve from an annualized analysis for each valuation period was based on the historical volatility of comparable companies and the term remaining for each note was from 204% through 313% at issuance, conversion, and quarters ends;
	●	The Company would redeem the notes (with the corresponding penalty) projected initially at 0% of the time for all notes except the EMA and Auctus notes which increase monthly by 1.0% to a maximum of 5.0% (from alternative financing being available for a redemption event to occur); and
	●	For the variable rate (some notes include conversion rate ceilings – the lessor of variable rates and a fixed rate) and fixed rate notes, the holder would convert (after 0 days) at maturity based on ownership and trading volume limits; and
	●	The holder would automatically convert the note or exercise early at a multiple of the conversion/exercise or the stock price if the registration was effective (after 0 days) and the Company was not in default.

 

 

GREEN ENVIROTECH HOLDINGS CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Using the results from the model, the Company recorded a derivative liability of $127,660 for newly granted warrants (see note 11) and a derivative liability of $441,120 for the fair value of the convertible feature included in the Company’s convertible debt instruments with a corresponding charge to debt discount of $179,798, a “day 1” derivative of $8,464 and additional paid in capital of $380,518 for the tainted equity linked convertible notes and warrants. The debt discount on the convertible notes of $179,798 is being amortized over the remaining term of the notes using the effective interest rate method. Interest expense related to the amortization of this debt discount for the nine months ended September 30, 2017, was $48,603. The remaining unamortized debt discount related to the derivative liability was $131,195 as of September 30, 2017. The Company also recorded a reclassification from derivative liability to equity of $27,582 for the conversion of a portion of the Company’s convertible notes.

 

The following table provides a summary of the changes in fair value, including net transfers in and/or out, of the derivative financial instruments, measured at fair value on a recurring basis using significant unobservable inputs:

 

Balance at December 31, 2016		$	-
Fair value of derivative liability at issuance charged to debt discount			179,798
Fair value of derivative liability at issuance charged to derivative loss			8,464
Fair value of derivative liability at issuance reclassified from additional paid in capital			380,518
Settlement of derivative liability due to conversion			(27,582	)
Unrealized derivative gain included in other expense			(172,721	)
Balance at September 30, 2017		$	368,477

 

Note 11

Equity

 

Common Stock

 

We have 250,000,000 common shares of $0.001 par value stock authorized. On December 31, 2016, we had 28,517,597 common shares outstanding. As of September 30, 2017, we had 35,073,637 common shares outstanding.

 

On January 15, 2017, we issued 100,000 common shares for consulting services valued at $20,000.

 

On April 3, 2017, H. E. Capital converted $30,000 of its line of credit and $100,000 of its accrued interest into 1,300,000 shares of our common stock at a $0.10 conversion rate.

 

On May 15, 2017, we issued 125,000 common shares for consulting services valued at $26,250.

 

On May 25, 2017, we issued 250,000 common shares for consulting services valued at $37,500

 

On July 21, 2017, a private company holding a note in the amount of $100,000 with its accrued interest in the amount of $2,192 exercised their right to convert in exchange for 1,481,040 shares of our common stock. The conversion price was the price of the stock at the time with a 15% discount to the market price. On the date of conversion, it was determined this note had derivative liability in the amount of $27,582 which was credited to additional paid in capital. See Note 10.

 

On July 25, 2017, we issued 300,000 common shares as a commitment fee in relation with the Peak One Opportunity Fund, LP equity stock purchase agreement signed on July 20, 2017. The stock was valued at $27,000 and charged to other current assets after which the amount will be amortized over the proceeds of the offering.

 

 

GREEN ENVIROTECH HOLDINGS CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

On September 26, 2017, we issued 3,000,000 common shares to Black Lion Oil Ltd in connection with the acquisition of the minority interest in Smart Fuel. See Note 3.

 

On March 3, 2017, the Company evaluated a convertible LOC to its CEO for BCF and concluded that the LOC incurred a BCF when it was issued on March 3, 2017. The BCF resulted in a debt discount in the amount of $35,300 credited to additional paid in capital of which $24,284 has been amortized for the nine months ended September 30, 2017 leaving a balance of $11,016 to be amortized going forward.

 

Warrants

 

As of September 30, 2017, we had 19,708,341 common stock warrants outstanding

 

On January 9, 2017 our subsidiary, Smart Fuel, issued 150,000 warrants to each of its four directors. These warrants were valued at $142,857 using the Black-Sholes model. The grant date fair value calculation included the three year US Treasury note interest rate of 1.48%, dividend yield of 0, expected volatility of 289% and the expected term of three years. These warrants were fully vested and have an exercise price of $0.10 per share, and expire on December 31, 2019.

 

On February 8, 2017, we had 1,000 common stock warrants expire. These were five year warrants issued on February 9, 2012. These warrants had a conversion rate of $10 per warrant

 

On May 25, 2017, we issued 100,000 common stock warrants for services rendered valued at $14,688 by the Black Scholes method. The grant date fair value calculation included the three year US Treasury note interest rate of 1.04%, dividend yield of 0, expected volatility of 290% and the expected term of three years. These warrants were fully vested when issued and have a conversion price of $0.50 per share. These warrants expire on May 25, 2020.

 

On June 8, 2017 we issued 50,000 warrants to our president, CEO and board member, Chris Bowers. These warrants were valued at $4,999 using the Black-Scholes model. The grant date fair value calculation included the three year US Treasury note interest rate of 1.04%, dividend yield of 0, expected volatility of 289% and the expected term of three years. These warrants were fully vested and have an exercise price of $0.10 per share, and expire on December 31, 2019.

 

During the nine months ended September 30, 2017, the Company recorded a derivative liability for its outstanding warrants in the amount of $127,660 due to the variable convertible notes becoming convertible during the third quarter. There was no derivative liability for the nine months ended September 30, 2016. The Company recognized a fair market change in the recorded derivative in the amount of $56,343 which was recorded on the consolidated statement of operations in the category listed as other income and expenses. The balance of the derivative liability-warrants on September 30, 2017 was $71,317.

 

Note 12

Related Party Transactions

 

On January 9, 2017 our subsidiary, Smart Fuel, issued 150,000 warrants to each of its four directors. These warrants were valued at $142,857 by the Black-Sholes method. The grant date fair value calculation included the three year US Treasury note interest rate of 1.48%, dividend yield of 0, expected volatility of 289% and the expected term of three years. These warrants were fully vested and have an exercise price of $0.10 per share of the Company’s common stock, and expire on December 31, 2019.

 

 

GREEN ENVIROTECH HOLDINGS CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

On June 8, 2017 we issued 50,000 warrants to our president, CEO and board member, Chris Bowers. These warrants were valued at $4,999 using the Black-Scholes model. The grant date fair value calculation included the three year US Treasury note interest rate of 1.04%, dividend yield of 0, expected volatility of 289% and the expected term of three years. These warrants were fully vested and have an exercise price of $0.10 per share, and expire on December 31, 2019.

 

On September 26, 2017, we issued 3,000,000 common shares to Black Lion Oil Ltd, one of the minority interest shareholder, in connection with the acquisition of the minority interest in Smart Fuel. A member of our board of directors, Chris Smith, is also a director of Black Lion Oil.

 

At September 30, 2017, we owed our CEO, Chris Bowers, for expenses paid on behalf of the Company in the amount of $31,480. This amount is classified as Due to Related Party in the consolidated balance sheet, is unsecured, non-interest bearing and due on demand.

 

Note 13

Subsequent Events

 

Subsequent to September 30, 2017, we received a total of $450,000 from READS in connection with their initial commitment to fund up to $2.5 million of the construction of the Company’s first processing line in our centralized Carbon Finishing Plant in Ohio. See Note 9

 

On November 1, 2017, the Company issued an eight percent (8%) convertible note in the amount of $75,000. The note is convertible to the Company’s common stock at $0.05 per share. On November 7, 2017, the noteholder converted the note and the Company issued 1,500,000 shares as full settlement of the loan.

 

On November 2, 2017, H. E. Capital converted $200,000 of its line of credit into 2,000,000 shares of our common stock at a $0.10 conversion price.

 

In November 2017, we paid in full the EMA and Auctus notes.

 

 

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

 

The following is management’s discussion and analysis of financial condition and results of operations and is provided as a supplement to the accompanying unaudited financial statements and notes to help provide an understanding of our financial condition, results of operations and cash flows during the periods included in the accompanying unaudited financial statements.

 

In this Quarterly Report on Form 10-Q, “Company,” “the Company,” “we,” “us,” and “our” refer to Green EnviroTech Holdings Corp., a Delaware corporation, unless the context requires otherwise.

 

We intend the following discussion to assist in the understanding of our financial position and our results of operations for the three and nine months ended September 30, 2017 and September 30, 2016. You should refer to the Consolidated Financial Statements and related Notes in conjunction with this discussion.

 

Corporate History

 

On November 20, 2009, the Company, formerly known as Wolfe Creek Mining, Inc., entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Green EnviroTech Acquisition Corp., a Nevada corporation, and Green EnviroTech Corp. On July 20, 2010, the Company changed its name to Green EnviroTech Holdings Corp.

 

Overview of Our Business

 

Green EnviroTech Holding Corp. (OTC: GETH) is first and foremost a technology company. Our mission is to find, develop and implement practical, economical solutions to address environmental issues associated with the production of waste, energy, water and food; and to create jobs and stimulate economic growth in the local communities where we operate as we strive to achieve this mission.

 

Our first market will be to process end of life tires, starting in the USA. Our GEN 1 End of Life Tire Processing Solution is ready for deployment and we have secured a $100 Million project finance facility that will be used to build a Carbon Finishing Plant (CFP) in Ohio, and build two, GEN 1 End of Life Tire Processing Plants. When fully operational in early 2019, we expect these plants to process 100,000 tons per year of end of life tires and generate more than $40 Million of annual revenue.

 

Our goal over the next five years (by 2022) is to be processing 25% of the end of life tire feedstock in the USA, which would generate more than $200 Million in annual revenues, making GETH the market leader in the USA. In order to keep up with our five year building program, we expect to be commissioning numerous tire processing plants in a number of strategic locations throughout the country. With our expansion program, we intend to construct additional finishing lines at our central Carbon Finishing Plant in Ohio. Achieving our goal would mean that over 800,000 tons of end-of-life tires will be diverted from landfills. We see our expansion program creating hundreds of jobs, often in areas of low employment opportunity.

 

Recent Developments

 

Over the first nine months of 2017, we have been building on the progress we made in 2016 so as to build a firm foundation from which to launch growth. The last four months have been dedicated to consolidating our position and securing our first draw from READS LLC (Real Estate Assets/Real Estate Acquisition Development & Sales) who provided our lease finance facility. It was subsequent to September 30, 2017 that we received our first draw from READS. Due to the delay in receiving our first, as a result, the execution of our business plan has slipped by several months, and we now forecast the Carbon Finishing Plant, which is currently under construction, to be operating in Q2 of 2018. For the remainder of 2017, we will continue to be in an investment mode for which we anticipate these investments to generate revenues starting in the first quarter of 2018, a forecast revenue of $3 Million in 2018, and an estimated $30 Million in recurring revenues from 2019 onwards.

 

Management intends to finance operating costs over the next twelve months with revenues generated in 2018, credit lines, loans and/or private placement of common stock.

 

Effective June 30, 2017, we merged Smart Fuel Solutions, Inc. (Smart Fuel) into the Company. Smart Fuel was a service company whose President and Chief Executive Officer was Chris Bowers. Chris Bowers became our new President and Chief Executive Officer effective December 2016. Smart Fuel has always promoted our Company and was assisting us with our operational responsibilities in all areas of management, including engineering and proposed plant development sites. It was decided that merging the two companies was the best alternative going forward. We already owned 17,000,000 of SFS’s 20,600,000 outstanding shares. The Company negotiated with Smart Fuel’s minority shareholders to take one-for-one conversion of the Company’s shares for Smart Fuel’s shares. The 3,600,000 minority shares were valued at $360,000 based on the Company’s closing price on June 30, 2017 of $0.10 as a result of the merger. We issued to the largest minority Smart Fuel shareholder 3,000,000 common shares on September 26, 2017 valued at $300,000. The remaining amount of $60,000 is carried on the consolidated balance sheet as Stock Payable at September 30, 2017. The balance of the shares to be issued will be in the last quarter of 2017.

 

 

The Company’s acquisition of the minority interest of Smart Fuel was accounted as an equity transaction in accordance with ASC 810-10-45 and consequently, no gain or loss was recognized in the consolidated statements of operations. The difference in the fair value of the consideration and the carrying amount of the non-controlling interest of $466,128 was charged to additional paid in capital.

 

On April 11, 2017, our wholly owned subsidiary GETH CFP, Inc. signed a ten- year lease with the Lawrence Economic Development Corporation of Lawrence County, Ohio for the lease of 11,200 sq. ft. of manufacturing space for our carbon finishing plant in Ohio. The lease had a start date of June 1, 2017, but this date has been extended until the opening of the carbon plant and runs to June 1, 2027. The lease has three five year extensions. The lease is $4.00 per sq. ft. with initial payments in the amount of $3,733 per month. The second extension is at $4.50 a sq. ft. with payments in the amount of $4,200 per month.

 

On March 29, 2017, Green EnviroTech Holdings Corp. entered into a lease and working capital credit facility with Caliber Capital & Leasing LLC and its assignee, Real Estate Acquisition Development Sales, LLC (“READS”). Under this agreement, READS is providing an initial commitment of up to $2.5 million for the construction of the Company’s first processing line in its centralized Carbon Finishing Plant in Ohio. Work commenced on April 4, 2017. Subsequent to September 30, 2017, we have received $450,000 from the facility for working capital.

 

On March 29, 2017, we also signed the Master Equipment and Building Related Lease Agreement. The agreement provides for up to $97.5 million in financing, subject to successful due diligence and underwriting, to be used for construction of additional facilities in the USA. The lease will have an initial term of seven years after which we will have the option to purchase the facility from READS or renew the lease under the same terms. The purchase option requires an appraisal with the final purchase price being at Fair Market Value based upon the appraisal. The commencement date was April 4, 2017. Subsequent to September 30, 2017, we have received $450,000 from the facility for working capital.

 

On February 9, 2017, we established GETH CFP, Inc., a wholly owned subsidiary, formed in Delaware. This subsidiary will be our new carbon finishing plant located in Ohio.

 

On January 12, 2017, we appointed Mr. Chris Smith, 47, to serve as a member of our Board of Directors. Mr. Smith was a principal of HE Capital S.A. upon its founding in 2000 until he resigned in 2014, but remains as a consultant. He is a licensed financial consultant to an international clientele and is on the Board of Black Lion Oil Ltd.

 

In 2016, we turned a corner as we perfected our first generation End of Life Tire Processing Solution that is financially viable and ready for deployment. The last 12 months have been focused on completing all of the complementary steps that are required to make a project fundable, securing partners who can help to deploy our solutions, and engaging with funding institutions financing projects in the USA and around the world.

 

We received $1,280,500 in working capital in 2016. This working capital afforded us the ability to:

 

	●	Secure a process certification for our Generation One (Gen 1) End of Life Tire Processing Solution
	●	Build a pipeline of End of Life Tire Processing projects
	●	Acquire carbon equipment at an extremely discounted price. This equipment will be used in our first Carbon Black Finishing Plant to be built in Ohio.
	●	Build a bench scale Processing Module and open our own testing lab in order to further test the end products generated by our Gen 1 End of Life Tire Processing Technology, particularly the oil and carbon black.

 

On December 12, 2016, we appointed Chris Bowers to the Board and appointed him as our new President and Chief Executive Officer. Gary DeLaurentiis became our Secretary Treasurer and Executive Vice President of Business Development. Mr. DeLaurentiis also remained our Chairman and Chief Financial Officer.

 

On November 11, 2016, we filed a press release and 8-K announcing we had entered into an agreement with BHP Engineering and Construction LP (BHP), a full-service design engineering and construction firm working with oil and gas, chemical, municipal and military clients. BHP will serve as a strategic partner and EPC for the building of the GEN 1 End of Life Tire Processing Plants.

 

 

On October 10, 2016, we filed a press release and 8-K announcing we had entered into an agreement with Schneider Electric, a global specialist in energy management and automation. Under the terms of the agreement, Schneider Electric will serve as a strategic partner to us, providing complete electrical and automation services and solutions, including design and installation services, Square D electrical gear and Modicon M580 programmable automation controller (ePAC) platform. Schneider Electric develops connected technologies and solutions to manage energy and process in ways that are safe, reliable, efficient and sustainable

 

In September 2016, the Company received a process performance certification for their Generation 1 (Gen 1) end of life Tire Processing Solution from BHP Engineering & Construction LP. This is a momentous achievement as the Company can now secure financing for projects that will recycle end of life tires anywhere in the world. Not only is the Gen 1 end of life Tire Processing Solution fundable, it also produces excellent financial returns to funding partners. We look forward to being able to announce in the near future we have installed and been commissioned to operate a Gen1 end of life tire processing plant.

 

On September 28, 2016 we established controlling interest in Smart Fuel when we received 17,000,000 shares of their common stock. Smart Fuel is a Florida Corporation formed on November 20, 2015. We received the shares in exchange for providing the technology and $53,710 for operating capital. Smart Fuel is a staffed service corporation working with the Company to undertake operational responsibilities, research and development, engineering, and development of operational facilities. Smart Fuel will provide the staffing, maintenance and management of the facilities. Smart Fuel will also provide the outlet for these facilities’ feed stock as well as the advertising and marketing programs for the facilities multitude of products. Effective June 30, 2017, we integrated Smart Fuel into the Company. Smart Fuel was a service company who had for its President and Chief Executive Officer, Chris Bowers, who is our new President and Chief Executive Officer effective December 2016. Smart Fuel has always promoted our Company and was assisting us with our operational responsibilities in all areas of management, including engineering and proposed plant development sites. It was decided, merging the two companies was the best alternative going forward. We already owned 17,000,000 of Smart Fuel’s 20,600,000 out-standing shares. The Company negotiated with Smart Fuel’s two minority shareholders to take one-for-one conversion of the Company’s shares for Smart Fuel’s shares.

 

Critical Accounting Policy and Estimates

 

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources.

 

The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements for the years ended December 31, 2016 and 2015, together with notes thereto as previously filed with our Annual Report on Form 10-K. In addition, these accounting policies are described at relevant sections in this discussion and analysis and in the notes to the financial statements included in our Quarterly Reports on Form 10-Q for prior quarter filings.

 

Results of Operations

 

Nine Months Ended September 30, 2017 compared to Nine Months Ended September 30, 2016.

 

Revenues and Cost of Revenues

 

The Company is a pre revenue-stage technology company that has developed a GEN 1 End of Life Tire Processing Solution that produces two valuable end products – Brent crude standard blend stock oil and carbon black. The Company had no operating revenues or cost of revenues for the nine months ended September 30, 2017 and 2016.

 

 

Operating Expenses

 

The salaries and professional fees for the nine months ended September 30, 2017 were $689,349 as compared to $1,129,785 for the nine months ended September 30, 2016, a decrease of $440,436, representing a 39% decrease. The salaries and professional fees for the nine months ended September 30, 2017 included $90,000 in salaries, $57,500 in stock issued for services, $162,544 in warrants issued for services, and $379,305 in professional fees. Compared to the nine months ended September 30, 2016, there were $763,240 in warrants issued for services, $212,281 in professional fees and $151,533 in salaries.

 

The general and administrative expenses for the nine months ended September 30, 2017 were $285,384 as compared to $101,616 for the nine months ended September 30, 2016, an increase of $183,768 representing 181% increase. The major increase was the result of an increase in the product samples, lab rent and lab expenses of $79,323, marketing expenses of $12,761, insurance of $62,824 and travel expenses in the amount of $73,045 for the nine months ended September 30, 2017 compared to minimal expenses in these accounts for the nine months ended September 30, 2016 except for travel which amounted to $45,910.

 

Other Income and Expenses

 

Other income and expenses for the nine months ended September 30, 2017 were $172,072 in expenses as compared to $210,246 in expenses for the nine months ended September 30, 2016, a decrease of $38,174 in expenses representing a decrease of 18%. We recorded for the nine months ended September 30, 2017, interest expense on our outstanding notes in the amount of $336,329 as compared to $83,376 in interest expense for the nine months ended September 30, 2016. The increase was due to the increase in new debt and recognition of $153,691 in amortization of debt discount charged to interest expense. A detail of the new debt can be found in the notes to the financial statements dealing with debt. We also recognized $164,257 in gain due to the fair value adjustment concerning our derivative liability.

 

Net Loss

 

As a result of the above, the Company had a net loss of $1,146,805 for nine months ended September 30, 2017 as compared to a loss of $1,441,647 for the nine months ended September 30, 2016.

 

Three Months Ended September 30, 2017 compared to Three Months Ended September 30, 2016.

 

The Company is a pre revenue-stage technology company that has developed a GEN 1 End of Life Tire Processing Solution that produces two valuable end products – Brent crude standard blend stock oil and carbon black. The Company had no operating revenues or cost of revenues for the three months ended September 30, 2017 and 2016.

 

Operating Expenses

 

The wages and professional fees for the three months ended September 30, 2017 were $31,518 as compared to $839,489 for the three months ended September 30, 2016, a decrease of $807,971 and approximately 96% decrease. The wages and professional fees for the three months ended September 30, 2017 included $31,518 in professional fees. For the three months ended September 30, 2016, the wages and professional fees had $123,141 in professional fees, $714,815 in warrants issued for services and $1,533 in wages.

 

The general and administrative expenses for the three months ended September 30, 2017 were $59,200 as compared to $62,613 for the three months ended September 30, 2016, a decrease of approximately 5%. This decrease of $3,413 was the result of a decrease in product sample expenses, travel, entertainment, advertising and marketing concerning the promotion of the company.

 

Other Income and Expenses

 

Other income and expenses for the three months ended September 30, 2017 were $15,602 in income as compared to $163,937 in expenses for the three months ended September 30, 2016, an increase of 110%. This increase of $179,539 was the result of an increase in interest expense on the working capital notes in the amount of $148,655 as compared to $37,067 in interest expense for the three months ended September 30, 2016. $86,912 of the interest expense was the result of amortization of debt discount charged to interest expense for the three months ended September 30, 2017 as compared to $0 for the three months ended September 30, 2016. We also recognized $164,257 in gain due to the fair value adjustment concerning our derivatives liability. There was no loss on debt conversion for the three months ended September 30, 2017 compared to a $126,870 loss on debt conversion for the three months ended September 30, 2016.

 

Net Loss

 

As a result of the above, the Company had a net loss of $75,116 for the three months ended September 30, 2017 as compared to a loss of $1,066,039 for the three months ended September 30, 2016.

 

 

Liquidity and Capital Resources

 

On September 30, 2017, we had a balance of cash in the bank in the amount of $2,211. We had other current assets in the amount of $142,596. Included in other current assets is $5,812 in prepaid expenses, $32,500 in deposits and $104,284 in other assets. Our PP&E account totaled $1,063,481 which included $459,935 in carbon equipment acquired in SFS asset acquisition in the prior year. We had $964,473 in accounts payable to vendors, we had $31,480 in accounts payable to officers, we had $393,160 in accrued interest on our note obligations. We also had $60,000 in stock payable for the issue of our stock to acquire the minority interest in Smart Fuel on June 30, 2017. 3,000,000 of these shares were issued in the third quarter and the balance will be issued in the fourth quarter. We had secured debentures payable in the amount of $305,000 explained in detail below. We had loan payable –related party-convertible in the amount of $1,661,921 explained in detail below. We had loan payable-other-convertible in the amount of $309,354 explained in detail below with $232,961 in current portion and $76,393 in long term portion. We had loan payable-other-non-convertible in the amount of $170,000 explained in detail below. Our loans with conversion features became impacted with derivative measurements as a result of two of our loans becoming qualified for conversion rights during this third quarter. These two loans’ conversion features are considered variable in direct relation with the market price of our stock. This feature tainted all of our convertible loans, which triggered a direct discount to these loans and a new balance sheet account recording listed as Derivative Liability. Please refer to Note 10 dealing with Derivatives in our notes to the financials for further information.

 

We had negative cash flows from operations for the nine months ended September 30, 2017 in the amount of ($596,903) as compared to the same period ended September 30, 2016 in the amount of ($628,706). The main reason for the increase in the negative cash flows had to do with the amortization of debt and derivative discounts in the amount of $153,691. We also had common stock issued for services in the amount of $83,750 and warrants issued for service in the amount of $162,544. We had cash provided of $504,450 in financing activities for the nine months ended September 30, 2017 as compared to $727,000 for the same period ended September 30, 2016. This decrease was due to a decrease in proceeds from loan payable-related party from $780,500 in 2016 to only $235,000 net of $45,200 paid in principal to related party in 2017. The decrease was offset by proceeds from loans payable others in the amount of $314,650.

 

On July 27, 2017, we received the first of three installments in connection with Peak One Opportunity LP (Peak One) purchase agreement for certain Company Convertible Debentures totaling $425,000. We issued to Peak One a three year $75,000 non-interest bearing debenture maturing on July 26, 2020. The debenture had an OID (original issue discount) in the amount of $7,500. As of September 30, 2017, there was a remaining OID in the amount of $7,084. The debentures when issued are convertible into common shares of the Company with certain terms and conditions as set forth in the agreement. The Holder is entitled to, at any time or from time to time, to convert the Conversion Amount into Conversion Shares, at a conversion price for each share of Common Stock equal to the lesser of (a) $0.15 or (b) Sixty Five percent (65%) of the lowest closing bid price (as reported by Bloomberg LP) of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date of conversion of the Debentures subject in each case to equitable adjustments resulting from any stock splits, stock dividends, recapitalizations or similar events.

 

On May 16, 2017, we received working capital funds in the amount of $74,650 from EMA Financial LLC. The note is in the amount of $77,500 with an original issue discount (OID) in the amount of $2,850 has an interest rate of 10% and is due May 1, 2018. The note has prepayment conditions. The note can be prepaid any time during the period beginning on the Issue Date and ending on the date which is six months following the Issue Date. If paid within 90 days from the Issue Date, the payment is at 125% of the unpaid principal balance including interest. If the note is prepaid at any time during the period beginning the day which is ninety- one (91) days following the Issue Date and ending on the date which is one hundred eighty (180) days following the Issue Date, the payment is at 135% of the unpaid principal balance plus interest. After the expiration of one hundred eighty (180) days following the date of the Note, the Company shall have no right of prepayment. The note has a variable conversion price feature per the agreement. The conversion feature starts on July 15, 2017. The conversion price hereunder shall equal the lower of: (i) the closing sale price of the Common Stock on the Principal Market on the Trading Day immediately preceding the Closing Date, and (ii) 55% of either the lowest sale price for the Common Stock on the Principal Market during the twenty-five (25) consecutive Trading Days immediately preceding the Conversion Date or the closing bid price, whichever is lower. As of September 30, 2017, the note had accrued interest in the amount of $1,981. The note also had an OID balance in the amount of $1,663 after amortizing $1,187 to interest expense.

 

On May 5, 2017, we received working capital funds in the amount of $77,500 from Auctus Fund LLC. The note has an interest rate of 10% and is due February 5, 2018. The note has prepayment conditions. The note can be prepaid any time during the period beginning on the Issue Date and ending on the date which is ninety (90) days following the Issue Date at 125% of the unpaid principal balance including interest. The note can be prepaid at any time during the period beginning the day which is ninety- one (91) days following the Issue Date and ending on the date which is one hundred eighty (180) days following the Issue Date at 135% of the unpaid principal balance plus interest. After the expiration of one hundred eighty (180) days following the date of the Note, the Borrower shall have no right of prepayment. The note has a variable conversion price feature per the agreement. The conversion feature starts on August 5, 2017. The conversion price shall equal the lesser of (i) the average of the two (2) lowest Trading Prices during the previous twenty-five (25) Trading Day period ending on the latest complete Trading Day prior to the date of this Note and (ii) the Variable Conversion Price. The Variable Conversion Price shall mean 55% multiplied by the Market Price, representing a discount rate of 45%. Market Price means the average of the two (2) lowest Trading Prices for the Common Stock during the twenty-five (25) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. As of September 30, 2017, the note had accrued interest in the amount of $1,981.

 

On April 12, 2017, we received working capital funds in the amount of $100,000 from a private company. The note is convertible to common stock three months after the issuance date of the note. The note has an interest rate of 8% and is due on April 11, 2018. The note has a variable conversion price feature per the agreement, in which, if the stock price is below $0.20 per share at conversion, the lender can convert at a 15% discount on stock price. As of June 30, 2017, the note had accrued interest in the amount of $1,753. On July 21, 2017, the private company holding this note with its accrued interest in the amount of $2,192 exercised their right to convert in exchange for 1,481,040 shares of our common stock. The conversion price was the price of the stock at the time with a 15% discount to the market price.

 

On March 3, 2017, we approved a new working capital line of credit loan (LOC) with our CEO, Chris Bowers in the amount up to $150,000 at 8% due December 31, 2017. The note has conversion rights into our common shares at $0.10 per share. On March 8, 2017, we received $100,000 of this loan. To date the remaining balance of $50,000 has not been received. For the nine months ended September 30, 2017, this note had accrued interest in the amount of $4,537. The Company evaluated this convertible LOC for a Beneficial Conversion Features (BCF) and concluded that the LOC incurred a BCF when it was issued on March 3, 2017. The BCF resulted in a debt discount in the amount of $35,300 of which $24,284 was amortized to interest expense for the nine months ended September 30, 2017 leaving a balance of $11,016 to be amortized over the remaining term of the LOC.

 

 

On August 15, 2016, we accepted a LOC in the amount of $500,000 from our new CEO Chris Bowers. On November 14, 2016, we accepted a second LOC in the amount of $500,000 from our CEO. At September 30, 2017, these two LOCs had an outstanding balance in the amount of $1,000,000 with $20,000 in accrued interest. These LOCs accrue interest at the rate of 1% per month and are due on December 31, 2017. The funds were used for working capital of the Company. The first LOC has two Addendums attached to it. Addendum A clarifies debt conversion rights attached to the LOC at $0.20 per share of common stock. Addendum B clarifies other rights attached to the LOC. These other rights are numbered below. (The second LOC has the same rights as that of the first LOC). These certain other rights in Addendum B provide for the following:

 

	1.	LOC has Repayment rights: The LOC has priority principal and interest repayment rights from other sources of capital received by the Company.
	2.	LOC has Warrant rights: Bowers has the right to receive 500,000 (five hundred thousand) $0.10 warrants for providing the LOC and 250,000 (two hundred fifty thousand) $0.10 warrants per $100,000 drawn against the $500,000 LOC. This would be a total of 1,750,000 $0.10 warrants to be issued to Bowers and/or Assigns for providing the funding and the Company using all $500,000 LOC. These warrants will be accounted for once the term of the warrants is known.
	3.	LOC has Additional Stock Conversion rights: At any time while the LOC is outstanding, Bowers has the right to convert per $100,000 of the LOC for 500,000 shares of duly paid and non-assessable common stock of the Company at a conversion price of $0.20 per share (subject to adjustment in the event of stock splits or stock dividends) by providing a notice of conversion in a form reasonably acceptable to the Company. The full conversion of the LOC would be 2,500,000 shares of the Company common stock.

 

The Company evaluated these convertible LOCs for BCF and concluded that the second LOC incurred a BCF when it was issued on November 14, 2016. The BCF resulted in a debt discount in the amount of $105,600 of which $8,800 was amortized for the year ended December 31, 2016. $79,200 has been amortized to interest expense for the nine months ended September 30, 2017 leaving a balance of $17,600 to be amortized over the remaining term of the LOC.

 

On February 1, 2016, we issued an 8%, $134,000 Note Payable to our CEO Chris Bowers for funds received. These funds were issued to Smart Fuel for a promissory note for the same amount at eight percent (8%). The funds were intended for the working capital needs of Smart Fuel. On September 28, 2016, we acquired a controlling interest in SFS and consequently assumed the note. The note is convertible at $0.50 per share and matures on December 31, 2017. As of September 30, 2017, the accrued interest on this note was $12,622.

 

We have an unsecured line of credit with H. E. Capital, S. A., a related party. The line of credit accrues interest at the rate of 8% per annum. The due date of the line of credit has been extended to December 31, 2017. Balance of the line of credit at September 30, 2017 was $456,537 with accrued interest in the amount of $52,620. We previously had an agreement with H.E. Capital wherein we paid $5,000 monthly for financial services. As of December 31, 2016, this agreement is no longer in effect. H. E. Capital’s activity for the nine months ended September 30, 2017, included advances of $35,000 to the Company and payments of $45,200. H. E. Capital also converted $30,000 of the line of credit and $100,000 in accrued interest into 1,300,000 shares of our common stock on April 3, 2017 at a $0.10 conversion rate. A schedule of the H. E. Capital loan activity with us for the nine months ended September 30, 2017 and for the year ended December 31, 2016 is as follows:

 

 

H. E. Capital S.A. transactions for 2017		September 30, 2017				December 31, 2016
Beginning Balance		$	496,737			$	241,582
Proceeds			35,000				352,000
Reclassification from accounts payable & accruals			-				76,060
Consulting fees			-				60,000
Assignments			-				(190,000	)
Non-cash conversion to stock			(30,000	)			(42,905	)
Cash paid to H. E. Capital			(45,200	)			-
Ending Balance		$	456,537			$	496,737

 

We will seek to raise additional funds to meet our working capital needs principally through the generation of revenues, and through the additional sales of our securities. However, we cannot guaranty that we will be able to obtain sufficient additional funds when needed, or that such funds, if available, will be obtainable on terms satisfactory to us.

 

We intend to pursue capital through public or private financing as well as borrowings and other sources, such as our officers, directors and principal shareholders. We cannot guarantee that additional funding will be available on favorable terms, if at all. If adequate funds are not available, then our ability to expand our operations may be significantly hindered. If adequate funds are not available, we believe that our officers, directors and principal shareholders will contribute funds to pay for our expenses to achieve our objectives over the next twelve months. However, our officers, directors and principal shareholders are not committed to contribute funds to pay for our expenses.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable for a smaller reporting company.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosures and Procedures

 

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the reports we file pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our Chief Executive Officer (“CEO”) (principal executive and financial officer), to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide a reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management designed the disclosure controls and procedures to provide reasonable assurance of achieving the desired control objectives.

 

 

We carried out an evaluation, under the supervision and with the participation of our management, including our CEO, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based upon that evaluation, the Chief Executive Officer concluded that the Company’s disclosure controls and procedures are ineffective. Once the first plant is funded and the Company has operations, it will have sufficient resources to address the inefficiencies.

 

Changes in Internal Controls Over Financial Reporting

 

There have been no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None

 

Item 1A. Risk Factors.

 

Not required for a smaller reporting company.

 

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

 

On September 26, 2017, we issued 3,000,000 shares of common stock to Black Lion Oil Ltd. in connection with the merger of Smart Fuel Solutions, Inc., into the Company. These shares were valued at $0.10 per share and no general solicitation was used. These securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933 and the rules and regulations promulgated thereunder as not involving any public offering.

 

Item 3. Defaults Upon Senior Securities.

 

We remain in default under promissory notes issued on January 21, 2011 for failure to make required payments of interest and principal by September 24, 2012. We are currently in negotiations regarding extensions on these notes.

 

Aggregate principal and interest owed as of the date of this filing are $569,975.

 

Item 4. Mine Safety Disclosures.

 

Not Applicable

 

Item 5. Other Information.

 

None

 

 

Item 6. Exhibits.

 

No.		Description
31.1		Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer
31.2		Rule 13a-14(a)/ 15d-14(a) Certification of Chief Financial Officer
32.1		Section 1350 Certification of Chief Executive Officer
32.2		Section 1350 Certification of Chief Financial Officer
EX-101.INS		XBRL INSTANCE DOCUMENT
EX-101.SCH		XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
EX-101.CAL		XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
EX-101.LAB		XBRL TAXONOMY EXTENSION LABELS LINKBASE
EX-101.PRE		XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

 

 

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 EnviroTech Holdings Corp.
Date: November 20, 2017	By:	/s/ Chris Bowers
		Chris Bowers
		Principal Executive Officer

 

	Green EnviroTech Holdings Corp.
Date: November 20, 2017	By:	/s/ Gary M. DeLaurentiis
		Gary M. DeLaurentiis
		Principal Financial Officer