UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | For the quarterly period ended March 31, 2010 |
| | |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | |
Commission File No. 333-120490
B GREEN INNOVATIONS, INC.
(Exact name of the Registrant as specified in Charter)
| New Jersey | 20-1862731 |
| (State of Incorporation) | (I.R.S. Employer ID Number) |
| | |
| 750 Highway 34, Matawan, New Jersey | 07747 |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s Telephone No. including Area Code: 732-441-7700
Securities registered under 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Act). Yeso No x
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 o No x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x
(Do not check if a smaller reporting company)
Indicate the number of shares outstanding of the issuer's common stock, as of the latest practical date: 600,415,387 shares of Class A Common stock, no par value as of May 6, 2010.
B GREEN INNOVATIONS, INC.
Item 1 . Condensed Financial Statements (Unaudited)
| ASSETS | | March 31, | | | December 31, | |
| | | 2010 | | | 2009 | |
| | | (Unaudited) | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 1,421,186 | | | $ | 190,350 | |
Accounts receivable, net of allowance for doubtful accounts of $0 at March 31, 2010 and December 31, 2009 | | | 10,246 | | | | 6,188 | |
| Prepaid expenses and other current assets | | | 33,364 | | | | 17,542 | |
| Total current assets | | | 1,464,796 | | | | 214,080 | |
| | | | | | | | | |
| Property, Plant and Equipment, net | | | 30,831 | | | | 33,554 | |
| Intangible assets | | | 59,934 | | | | 59,934 | |
| | | | | | | | | |
| Total assets | | $ | 1,555,561 | | | $ | 307,568 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | | | | | | | | |
| | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 608,981 | | | $ | 593,201 | |
| Accrued dividends | | | 286,925 | | | | 260,791 | |
| Due to related parties | | | 424,855 | | | | 420,708 | |
| Deferred maintenance contracts | | | 998 | | | | 2,210 | |
| Notes payable to related parties | | | 3,003 | | | | 3,003 | |
Convertible promissory note, net of unamortized debt discount of $-0- at December 31, 2009 | | | - | | | | 112,058 | |
| Derivative liabilities | | | - | | | | 1,254,567 | |
| Total current liabilities | | | 1,324,762 | | | | 2,646,538 | |
| | | | | | | | | |
| Stockholders' equity (deficit): | | | | | | | | |
Preferred stock, $1.00 par value; authorized 1,000,000 shares; 10,000 shares designated as follows; 990,000 available for further designation | | | | | | | | |
Series A 3% Secured Preferred Stock; $1,000 stated value, authorized authorized 10,000 shares; 2,663 shares issued and outstanding at at March 31, 2010 and 1,444 shares issued and outstanding at December 31, 2009 | | | 2,663,210 | | | | 1,444,444 | |
| Common stock: | | | | | | | | |
Class A – no par value; authorized 10,000,000,000 shares; 600,309,870 shares issued and 599,115,387 outstanding and 1,194,483 in escrow at March 31, 2010 and December 31, 2009 | | | 1,074,736 | | | | 1,074,736 | |
Class B - $.01 par value; authorized 50,000,000 shares; 115,025 shares issued and outstanding at March 31, 2010 and December 31, 2009 | | | 1,150 | | | | 1,150 | |
Class C - $.01 par value; authorized 20,000,000 shares; no shares issued and outstanding | | | - | | | | - | |
| Additional paid-in capital | | | 7,443,646 | | | | 7,443,646 | |
| Additional paid-in capital – beneficial conversion | | | 1,444,444 | | | | 1,444,444 | |
| Accumulated deficit | | | (12,396,387 | ) | | | (13,747,390 | ) |
| Total stockholders' equity (deficit) | | | 230,799 | | | | (2,338,970 | ) |
| Total liabilities and stockholders' equity (deficit) | | $ | 1,555,561 | | | $ | 307,568 | |
See accompanying notes to condensed financial statements.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| | | Three Months Ended | |
| | | March 31, 2010 | | | March 31, 2010 | |
| Net sales | | $ | 42,400 | | | $ | 15,030 | |
| | | | | | | | | |
| Cost of sales | | | 25,412 | | | | 9,221 | |
| | | | | | | | | |
| Gross profit | | | 16,988 | | | | 5,809 | |
| | | | | | | | | |
| Operating expenses: | | | | | | | | |
| General and administrative expenses | | | 139,777 | | | | 141,123 | |
| Total operating expenses | | | 139,777 | | | | 141,123 | |
| | | | | | | | | |
| Loss from operations | | | (122,789 | ) | | | (135,314 | ) |
| | | | | | | | | |
| Other income (expense): | | | | | | | | |
| Interest income | | | 821 | | | | 1,023 | |
| Interest expense | | | (2,953 | ) | | | (10,656 | ) |
| Other income | | | 247,491 | | | | - | |
| Amortization of debt discount | | | - | | | | (14,033 | ) |
| Gain from extinguishment of derivative | | | 1,636,695 | | | | - | |
| Loss on valuation of derivative | | | (382,128 | ) | | | (666,877 | ) |
| | | | | | | | | |
| Total other income (expense) | | | 1,499,926 | | | | (690,543 | ) |
| | | | | | | | | |
| Income (loss) from operations before income taxes | | | 1,377,137 | | | | (825,857 | ) |
| | | | | | | | | |
| Provision for income taxes | | | - | | | | - | |
| | | | | | | | | |
| Net income (loss) | | | 1,377,137 | | | | (825,857 | ) |
| | | | | | | | | |
| Preferred stock dividends | | | 26,134 | | | | 36,111 | |
| | | | | | | | | |
Net income (loss) attributable to common Shareholders | | $ | 1,351,003 | | | $ | (861,968 | ) |
| | | | | | | | | |
| Basic income (loss) per common share | | $ | 0.00 | | | $ | 0.00 | |
| Diluted income (loss) per common share | | $ | 0.00 | | | $ | 0.00 | |
| | | | | | | | | |
| Weighted average shares outstanding: | | | | | | | | |
| Basic | | | 599,115,387 | | | | 509,325,787 | |
| Diluted | | | 3,563,817,753 | | | | 509,325,787 | |
See accompanying notes to condensed financial statements.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | Three Months Ended | |
| | | March 31, 2010 | | | March 31, 2009 | |
| Cash flows from operating activities: | | | | | | |
| Net income (loss) | | $ | 1,370,137 | | | $ | (825,857 | ) |
| Adjustments to reconcile net gain (loss) to net cash provided by (used in) operating activities: | | | | | | | | |
| Depreciation | | | 2,723 | | | | 2,122 | |
| Loss on valuation of derivative | | | 328,128 | | | | 666,877 | |
| Amortization of discount on debt | | | - | | | | 14,033 | |
| Issuance of common stock for services | | | - | | | | 14,219 | |
| Gain on extinguishment of derivative liability | | | (1,636,695 | ) | | | - | |
| Beneficial conversion incurred in conversion of promissory note | | | - | | | | 5,100 | |
| | | | | | | | | |
| Changes in assets and liabilities: | | | | | | | | |
| Decrease (increase) in accounts receivable | | | (4,058 | ) | | | (1,151 | ) |
| Decrease in inventories | | | - | | | | 797 | |
| Decrease (increase) in prepaid expenses | | | (8,822 | ) | | | 323 | |
| Increase in other assets | | | - | | | | (1,285 | ) |
| Increase in accounts payable and accrued liabilities | | | 22,488 | | | | 51,574 | |
| Increase in amounts due to related parties | | | 4,147 | | | | 10,901 | |
| Increase in deferred maintenance contracts | | | (1,212 | ) | | | 3,564 | |
| Net cash provided by (used in) operating activities | | | 130,836 | | | | (58,783 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Net proceeds from sale of Series A Preferred Stock | | | 1,100,000 | | | | - | |
| Net cash provided by financing activities | | | 1,100,000 | | | | - | |
| | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | | 1,230,836 | | | | (58,783 | ) |
| Cash and cash equivalents at beginning of period | | | 190,350 | | | | 460,869 | |
| Cash and cash equivalents at end of period | | $ | 1,421,186 | | | $ | 402,086 | |
| | | | | | | | | |
| Supplemental Disclosure of Cash Flow Information: | | | | | | | | |
| During the period, cash was paid for the following: | | | | | | | | |
| Taxes paid | | $ | - | | | $ | - | |
| Interest paid | | $ | - | | | $ | - | |
| | | | | | | | | |
See accompanying notes to condensed financial statements.
B GREEN INNOVATIONS, INC.
CONDENSED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Supplemental Schedule of Non-Cash Investing and Financing Activities:
For the Three Months Ended March 31, 2010:
a) The Company accrued $26,134 of preferred stock dividends.
b) The Company issued 119 shares of Series A Preferred Stock in exchange $118,766 for Convertible Promissory Notes to iVoice, Inc.
For the Three Months Ended March 31, 2009:
a) During the three months ended March 31, 2009, the Company issued 16,724,000 shares of Class A common stock with a fair value of $10,452 to reduce the convertible promissory note in the amount of $5,352. The difference in the market value and the convertible promissory note reduction was charged to beneficial interest in the amount of $5,100.
b) During the three months ended March 31, 2009, the Company issued 22,750,000 shares of Class A common stock with a fair value of $14,219 for investor relations services.
c) During the three months ended March 31, 2009, the Company converted accounts payable to a convertible promissory note in the amount of $24,663.
d) The Company accrued $36,111 of preferred stock dividends.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1 Background
B Green Innovations, Inc., a Matawan, New Jersey-based corporation, (OTC Bulletin Board: BGNN), formerly iVoice Technology, Inc., (“B Green Innovations” or the “Company”) was incorporated under the laws of New Jersey on November 10, 2004 as a wholly owned subsidiary of iVoice, Inc. (“iVoice”). The Company received by assignment all of the interests in and rights and title to, and assumed all of the obligations of, all of the agreements, contracts, understandings and other instruments of iVoice Technology, Inc., a Nevada corporation and affiliate of the Company. When we refer to or describe any agreement, contract or other written instrument of the Company in these notes, we are referring to an agreement, contract or other written instrument that had been entered into by iVo ice Technology Nevada and assigned to the Company.
In May 2008, the Company formed B Green Innovations, Inc. (“B Green”), a wholly-owned subsidiary, and has agreed to invest up to $500,000 in B Green, to commercialize its “green” technology platforms.
On November 17, 2009, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), B Green Innovations, Inc., a wholly owned subsidiary of iVoice Technology, Inc. (the “Company”), merged into iVoice Technology, Inc.
On July 28, 2009, the Board of Directors and shareholders through written consent representing a majority of the total voting Class A and Class B Common stock voted to change the name of the Company to B Green Innovations, Inc. On November 20, 2009, the Company filed an Amendment to the Certificate of Incorporation with the State of New Jersey to officially change the name of the Company.
Note 2 Business Operations
The B Green Innovations, Inc. ("B Green"), "Go Green" mission from its inception, is to create a "Green" company for the development of solutions to eliminate waste from the world's environment. B Green offers consumers a realistic and necessary solution to the problem of waste around the world. We believe that to truly have an impact on the planet, one must be committed to the environment and seek out environmentally-friendly products.
The first technology will be used to create new products from recycled tire rubber. EcoPod® and VibeAway® address important environmental concerns and problems facing the planet today. EcoPod® and VibeAway® are 100% recycled rubber-based products that can be utilized as support pads under any units that vibrate and make noise, including washing machines, dryers, compressors, commercial condensers, and many other units that advantageously benefit from sound and vibration control. In addition, we announced that we had filed a new patent application for a process described as “Recycled Tire Pod with Appliance Recess Guide.”
Recently, the Company released its new 100% Degradable / Biodegradable Compactor Bags. These bags include Oxo-Biodegradable additive using the latest technology that supports the 3 R’s of Packaging Reduce, Reuse, Recycle and provides a fourth R, Remove. Independent Scientific Testing show that plastics incorporated with an additive called Renatura™ will degrade and then fully biodegrade, without leaving behind harmful residues in the soil. These Oxo-Biodegradable plastic
B GREEN INNOVATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 2 Business Operations (continued)
products are scientifically proven to be non toxic and are FDA compliant, meaning they are safe for food packaging applications and have been awarded approved food film contact ‘no migration’ status. Regular plastic bags can take up to 100 years to break down causing plastic pollution and harm to both domestic and wild life. Standard plastics are filling our landfills and greatly impacting our planet. Plastics incorporating this additive in the presence of oxygen disappear when exposed to UV light or thermal heat. Our product is designed to allow plastics to degrade like a leaf, slowly yielding CO2 (which through photosynthesis becomes oxygen), water, bio-waste, and mineral salts that condition the soil in the process.
The Company continues to evaluate additional products to its product line as well as expanding its distribution channels.
The Company will also continue to support the Interactive Voice Response ("IVR"), software that was developed by iVoice. The Company's Interactive Voice Response line is designed to read information from and write information to, databases, as well as to query databases and return information.
IVR is an application generator that allows full connectivity to many databases, including Microsoft Access, Microsoft Excel, Microsoft Fox Pro, and Paradox, or to standard text files. The IVR software is sold as an application generator that gives the end user the ability to develop its own customized IVR applications or as a customized turnkey system. IVR performs over 40 different customizable commands. Examples of IVR range from simply selecting announcements from a list of options stored in the computer (also known as audio text) to more complex interactive exchanges such as querying a database for information.
Note 3 Going Concern
The accompanying condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern.
As of March 31, 2010, the Company had a net operating loss, and a negative cash flow from operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Therefore, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn, is dependent upon the Company’s ability to raise capital and/or generate positive cash flow from operations.
Management plans to increase the development, manufacture, and distribution of “green” products to generate a positive cash flow. However, these plans are dependent upon obtaining additional capital. There can be no assurance that the Company will be able to obtain the necessary capital, and achieve its growth objectives. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
B GREEN INNOVATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 4 Summary of Significant Accounting Policies
a) Basis of Presentation
The accompanying condensed unaudited interim financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The condensed financial statements and notes are presented as permitted on Form 10-Q and do not contain information included in the Company's annual statements and notes. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the De cember 31, 2009 audited financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these condensed financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year. These results are not necessarily indicative of the results to be expected for the full year.
These condensed unaudited financial statements reflect all adjustments, including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the operations and cash flows for the periods presented.
b) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
c) Revenue Recognition
With respect to IVR customer support services, the Company offers customers an optional annual software maintenance and support agreement for subsequent periods. Sales of purchased maintenance and support agreements are recorded as deferred revenue and recognized over the respective terms of the agreements.
For the “green” products revenues are recognized at the time of shipment to, or acceptance by customer, provided title and risk of loss is transferred to the customer. Provisions, when appropriate, are made where the right to return exists.
Shipping and handling costs charged to customers are classified as revenue, and the shipping and handling costs incurred are included in cost of goods sold.
B GREEN INNOVATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 4 Summary of Significant Accounting Policies (continued)
d) Product Warranties
The Company estimates its warranty costs based on historical warranty claims experience in estimating potential warranty claims. Due to the limited sales of the Company's products, management has determined that warranty costs are immaterial and has not included an accrual for potential warranty claims. Presently, costs related to warranty coverage are expensed as incurred. Warranty claims are reviewed quarterly to verify that warranty liabilities properly reflect any remaining obligation based on the anticipated expenditures over the balance of the obligation period.
e) Research and Development Costs
Research and development costs are charged to expense as incurred. The Company has not incurred any research and development costs for the three months ended March 31, 2010 and 2009.
f) Advertising Costs
Advertising costs are expensed as incurred and are included in selling expenses. For the three months ended March 31, 2010 and 2009, the Company incurred $177 and $3,501, respectively.
g) Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. There were no cash equivalents at March 31, 2010 and December 31, 2009.
The Company maintains cash balances at a financial institution that is insured by the Federal Deposit Insurance Corporation. The Company maintains cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to federally insured limits. At times balances may exceed FDIC insured limits. The Company has not experienced any losses in such accounts.
h) Accounts Receivable
Accounts receivables consist primarily of uncollected invoices for product sales made to credit worthy customers.
i) Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable and cash. As of March 31, 2010 the Company believes it has no significant risk related to its concentration within its accounts receivable.
B GREEN INNOVATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 4 Summary of Significant Accounting Policies (continued)
j) Property and Equipment
Property and equipment is stated at cost. Depreciation is computed using the straight-line method based upon the estimated useful lives of the assets, generally five to seven years. Maintenance and repairs are charged to expense as incurred.
k) Income Taxes
The Company accounts for income taxes using the asset and liability method described in FASB ASC 740-10 (Prior authoritative literature: FASB Statement 109, “Accounting for Income Taxes,”). Under this pronouncement, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740-10, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
l) Derivative Liabilities
The Company accounts for its embedded conversion features in its convertible debentures in accordance FASB ASC 815-10 (Prior authoritative literature: SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which requires a periodic valuation of their fair value and a corresponding recognition of liabilities associated with such derivatives, and FASB ASC 815-40 Section 05, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. The recognition of derivative liabilities related to the issuance of convertible debt is applied first to the proceeds of such issuance as a debt discount, at the date of issuance, and the excess of derivative liabilities over the proceeds is recognized as “Loss on Valuation of Derivative” in other expense in the accompanying financial statements. Any subsequent increase or decrease in the fair value of the derivative liabilities is recognized as “Other expense” or “Other income”, respectively.
m) Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation. The reclassifications have had no effect on the results of operations or cash flows for the period ended March 31, 2010.
B GREEN INNOVATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
n) Fair Value of Instruments
The Company estimates that the fair value of all financial instruments at March 31, 2010 and December 31, 2009, as defined in FASB ASC 825-10, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying condensed consolidated balance sheets. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
Effective January 1, 2009, we implemented FASB ASC 825-10, Fair Value Measurements, or (Prior authoritative literature: SFAS 157), for our nonfinancial assets and liabilities that are re-measured at fair value on a non-recurring basis. In addition, we may have additional disclosure requirements in the event we complete an acquisition or incur impairment of our assets in future periods.
o) Long-Lived Assets
The Company assesses the recoverability of the carrying value of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future, undiscounted cash flows expected to be generated by an asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. No impairment losses have been recognized for the periods ended March 31, 2010 and 2009, respectively.
B GREEN INNOVATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 5 Earnings (Loss) Per Share
FASB Accounting Standards Codification (“ASC”) 260-10 (Prior authoritative literature: FASB Statement 128, “Earnings Per Share”) requires the presentation of basic earnings per share ("basic EPS") and diluted earnings per share ("diluted EPS").
The Company’s basic income (loss) per common share is based on net income (loss) for the relevant period, divided by the weighted average number of common shares outstanding during the period. Diluted income per common share is based on net income, divided by the weighted average number of common shares outstanding during the period, including common share equivalents, such as outstanding stock options and beneficial conversion of related party accounts. For the three months ended March 31, 2010 there were 2,825,623,084 share equivalents which are included in the calculation of diluted earnings per share. The computation of diluted loss p er share at March 31, 2009 does not assume conversion, exercise or contingent exercise of warrants, and securities in the amount of 347,483,974 shares as they would have an anti-dilutive effect on the earnings resulting from the Company’s net loss position in that period.
| | | Three Months Ended | | | Three Months Ended | |
| | | March 31, 2010 | | | March 31, 2009 | |
| Basic net income (loss) per share attributable to common shareholders computation: | | | | | | |
| Net income (loss) attributable to common stockholders | | $ | 1,351,003 | | | $ | (861,968 | ) |
| Weighted-average common shares outstanding | | | 599,115,387 | | | | 509,325,787 | |
| Basic net income (loss) per share attributable to common Stockholders | | $ | 0.00 | | | $ | 0.00 | |
| Diluted net income (loss) per share attributable to common shareholders computation | | | | | | | | |
| Net income (loss) attributable to common stockholders | | $ | 1,351,003 | | | $ | (861,968 | ) |
| Weighted-average common shares outstanding | | | 599,115,387 | | | | 509,325,787 | |
| Incremental shares attributable to the common stock equivalents | | | 2,964,702,366 | | | | - | |
| Total adjusted weighted-average shares | | | 3,563,817,753 | | | | 509,325,787 | |
| Diluted net income (loss) per share attributable to common Stockholders | | $ | 0.00 | | | $ | 0.00 | |
Note 6 Intangible Assets
Other consists of patents pending in the amount of $59,934 for the periods ended March 31, 2010 and December 31, 2009. There was no amortization expense for the three months ended March 31, 2010 and 2009, respectively.
B GREEN INNOVATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 7 Related Party Transactions
In conjunction with the spin-off from iVoice, Inc., the Company, and its former subsidiary, had entered into a temporary administrative services agreements with iVoice. The administrative services agreements were to continue on a month-to-month basis until the Company has found replacement services for those services being provided by iVoice or can provide these services for itself. As of October 1, 2009 iVoice has suspended all charges for the Administrative Service Agreement for the Company and with the Company. There were no administrative service charges for the three months ended March 31, 2010. Administrative services were $24,663 for the three months ended March 31, 2009.
Effective November 17, 2009, the Company’s subsidiary at the time and iVoice mutually agreed to terminate and extinguish any all obligations between the parties pursuant to the following agreements:
a. The Administrative Services Agreement dated March 1, 2007 by and between B Green Innovations, Inc. (subsidiary) and iVoice, Inc.
b. The Convertible Promissory Note dated May 5, 2008 issued by B Green Innovations, Inc. payable to iVoice, Inc.
c. The Security Agreement dated May 5, 2008 by and between B Green Innovations, Inc. and iVoice, Inc.
As a result of the above the Company extinguished a total of $63,875 of a Convertible Promissory Note and accrued interest of $2,140. The total of $66,015 was recorded in the balance sheet as additional paid-in capital as since this is classified as a related party transaction as December 31, 2009.
As of February 10, 2010, the Administrative Services Agreement with iVoice, Inc. was terminated, and the Company entered into an Exchange Agreement to exchange the Convertible Promissory Note having a principal and accrued interest of approximately $119,000 for 119 shares of the Company’s 3% Preferred Stock. As a result the Company recorded a gain from the extinguishment of the derivative liability in the amount of $1,636,695 and is included as other income in the accompanying statement of operations for the three months ended March 31, 2010 (See Note 10 for terms of the 3% Preferred Stock)..
On March 1, 2010 the Company entered into an administrative services agreement with iVoice, Inc. The Company will provide iVoice, Inc. administrative and financial services as well as providing iVoice, Inc. with office space. This agreement will continue on a month-to-month basis unless terminated by either party by providing 30 days written notice. In consideration of the services, iVoice, Inc. will pay B Green $4,000 per month. For the three months ended March 31, 2010 the Company recorded income of $15,000, and such income is included in other income in the accompanying statement of operations for the period ended March 31, 2010 (See Subsequent Event Footnote).
B GREEN INNOVATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 7 Related Party Transactions (continued)
The Company has assumed an outstanding promissory demand note in the amount of $190,000 payable to Jerry Mahoney, President and Chief Executive Officer. This amount is related to funds loaned to iVoice and is unrelated to the operations of the Company. The note will bear interest at the rate of prime plus 2.0% per annum (5.25% at March 31, 2010) on the unpaid balance until paid. Interest payments are due and payable annually. Under the terms of the Promissory Note, at the option of the Note holder, principal and interest can be converted into either (i) one share of Class B Common Stock of the Company, par value $.01, for each dollar owed, (ii) the number of shares of Class A Common Stock of the Company calculated by dividing (x) the sum of the principal and interest that the Note holder has requested to have pr epaid by (y) eighty percent (80%) of the lowest issue price of Class A Common Stock since the first advance of funds under this Note ($.0.00032 at March 31, 2010), or (iii) payment of the principal of this Note, before any repayment of interest
The Board of Directors of the Company maintains control over the issuance of shares and may decline the request for conversion of the repayment into shares of the Company. As of March 31, 2010 and December 31, 2009, the outstanding balances wee $3,003, plus accrued interest of $103,646 and $100,692, respectively.
On May 8, 2007, the Company executed a Security Agreement providing Jerome Mahoney, President and Chief Executive Officer of the Company, with a security interest in all of the assets of the Company to secure the promissory note dated August 5, 2005 and all future advances including, but not limited to, additional cash advances: deferred compensation, deferred expense reimbursement, deferred commissions and income tax reimbursement for the recognition of income upon the sale of common stock for the purpose of the holder advancing additional funds to the Company.
The Company entered into a five-year employment agreement with Jerome Mahoney to serve as Non-Executive Chairman of the Board of Directors, effective August 1, 2004. On March 9, 2009, the term of the employment agreement between the Company and Mr. Mahoney, the Company’s CEO, was extended to July 31, 2016. The Company will compensate Mr. Mahoney with a base salary of $85,000 for the first year with annual increases based on the Consumer Price Index. Mr. Mahoney had a consulting agreement with the Company’s former subsidiary B Green Innovations for annual compensation of $24,000 and upon every annual anniversary thereafter, at the rate based on the increase in the Consumer Price Index for All Urban Consumers (New York-Northern N.J.-Long Island). Effective January 1, 2010, this amount was added to Mr. Mahoney’s base salary. At March 31, 2010, Mr. Mahoney’s salary was $121,604. As of December 31, 2009 and March 31, 2010, total deferred compensation due to Mr. Mahoney was $253,448 and 267,349, respectively.
The Board has the option to pay Mr. Mahoney’s compensation in the form of Class B Common Stock. Mr. Mahoney will also be entitled to certain bonuses based on mergers and acquisitions completed by the Company. Pursuant to the terms of the Class B Common Stock, a holder of Class B Common Stock has the right to convert each share of Class B Common Stock into the number of shares of Class A Common Stock determined by dividing the number of Class B Common Stock being converted by a 20% discount of the lowest price ($0.00032 at March 31, 2010) for which the Company had ever issued its Class A Common Stock.
B GREEN INNOVATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 7 Related Party Transactions (continued)
On August 29, 2005, the Company entered into an employment agreement with Mark Meller. Mr. Meller served as the Company’s President, Chief Executive Officer and Chief Financial Officer until August 29, 2006. As compensation, the Company paid Mr. Meller a base salary of $85,000 the first year with an annual increase based on the Consumer Price Index every year thereafter. Mr. Meller has agreed to defer all but $20,000 of his compensation until such time that the Board of Directors determines, in its sole discretion, that the Company has sufficient financial resources to pay his compensation. The Board of Directors may also elect to pay Mr. Meller the balance of his compensation in the form of Company Class A or Class B Common Stock. As of March 31, 2010, total deferred compensation due to Mr. Meller was $53,860.
Note 8 Convertible Promissory Note and Derivative Liability
The Company had has entered into a temporary administrative services agreement with iVoice. The administrative services agreement will continue on a month-to-month basis until the Company has found replacement services for those services being provided by iVoice or can provide these services for itself. In March 2008, the administrative services agreement was amended to provide that accrued and unpaid administrative services shall be aggregated and converted into a Convertible Promissory Note. The principal and interest shall be due and payable as follows: (a) interest shall accrue monthly on the unpaid balance and shall be paid annually, and (b) principal shall be payable on demand.
On March 5, 2008, the Company converted its outstanding accounts payable to iVoice, Inc. for unpaid administrative services in the amount of $50,652 into a convertible promissory note at the rate of prime plus 1 percent per annum. Additional amounts may be added to this note based on any unpaid administrative services, and will accrue interest at the above specified rate from date of advance until paid. The principal and interest shall be due and payable as follows: (a) interest shall accrue monthly on the unpaid balance and shall be paid annually, and (b) principal shall be payable on demand. There were no administrative service charges for the three months ended March 31, 2010. Administrative services were $12,663 for the three months ended March 31, 2009.
B GREEN INNOVATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 8 Convertible Promissory Note and Derivative Liability (continued)
As of October 1, 2009 iVoice, Inc. suspended all charges for the Administrative Service Agreement (see Note 7). At this time the balance of the convertible promissory note was $112,058.
iVoice, Inc. may elect payment of the principal and/or interest, at the its sole discretion, owed pursuant to the Note by requiring the Company to issue to iVoice, or his assigns either: (i) one Class B common stock share of the Company par value $.01 per share, for each dollar owed, (ii) the number of Class A common stock shares of the Company calculated by dividing (x) the sum of the principal and interest that the Note holder has decided to have paid by (y) eighty percent (80%) of the lowest issue price of Class A common stock since the first advance of funds under this Note, or (iii), payment of the principal of this Note, before any repayment of interest.
Unless otherwise provided, this Note may be prepaid in full or in part at any time without penalty or premium. Partial prepayments shall be applied to installments due in reverse order of their maturity.
During the three months ended March 31, 2010, there were no payments in stock or cash.
In the event of (a) default in payment of any installment of principal or interest hereof as the same becomes due and such default is not cured within ten (10) days from the due date, or (b) default under the terms of any instrument securing this Note, and such default is not cured within fifteen (15) days after written notice to maker, then in either such event the holder may, without further notice, declare the remainder of the principal sum, together with all interest accrued thereon, and the prepayment premium, if any, at once due and payable. Failure to exercise this option shall not constitute a waiver of the right to exercise the same at any other time. The unpaid principal of this Note and any part thereof, accrued interest and all other sums due under this Note shall bear interest at the rate of prime plus 2 percent per a nnum after default until paid.
The promissory note holders have a security interest in substantially all of the assets of the Company.
In accordance with FASB ASC 815-10 (Prior authoritative literature: SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", the Company determined that the conversion feature of the Debenture met the criteria of an embedded derivative, and therefore the conversion feature of this Debenture needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 2.25%; expected dividend yield: 0%: expected life: 5 years; and volatility: 321.58%. The accounting guidance instructs that the conversion options are a derivative liability. As such, on March 5, 2008 the Company recorded the conversion options as a liability, recorded a debt discount of $50,652, and c harged Other Expense - Loss on Valuation of Derivative for $16,366, resulting primarily from calculation of the conversion price.
B GREEN INNOVATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 8 Convertible Promissory Note and Derivative Liability (continued)
As of February 10, 2010, the Administrative Services Agreement with iVoice, Inc. was terminated, and the Company entered into an Exchange Agreement (see Note 14) to exchange the Convertible Promissory Note having a principal and accrued interest of approximately $119,000 for 119 shares of the Company’s 3% Preferred Stock. As a result the Company recorded a gain from the extinguishment of the derivative liability in the amount of $1,636,695 and is included as other income in the accompanying statement of operations for the three months ended March 31, 2010.
For the three months ended March 31, 2010, the Company recorded a loss on Valuation of Derivative in the amount of $382,128 as compared to a Loss on Valuation of Derivative of $451,890 for the three months ended March 31, 2009. The fair value of the embedded conversion was estimated at the February 10, 2010 using the Black-Scholes model with the following assumptions: risk free interest rate: 2.69%; expected dividend yield: 0%: expected life: 5 years; and volatility: 234.66%.
The derivative liability was $-0- and $1,257,567 at March 31, 2010 and December 31, 2009, respectively.
B Green, previously a subsidiary of the Company, had entered into a temporary administrative services agreement with iVoice. The administrative services agreement continues on a month-to-month basis until B Green Innovations, Inc. has found replacement services for those services being provided by iVoice or can provide these services for itself. The administrative services agreement provides that accrued and unpaid administrative services shall be aggregated and converted into a Convertible Promissory Note. The principal and interest shall be due and payable as follows: (a) interest shall accrue monthly on the unpaid balance and shall be paid annually, and (b) principal shall be payable on demand. The terms of this agreement are to similar to the terms of the agreement between the Company and iVoice, Inc. as described above in this f ootnote.
On June 30, 2008, the Company converted its outstanding B Green accounts payable to iVoice, Inc., for unpaid administrative services, in the amount of $8,000 into a convertible promissory note at the rate of prime plus 1 percent per annum. Additional amounts may be added to this note based on any unpaid administrative services, and will accrue interest at the above specified rate from date of advance until paid.
Effective November 17, 2009, the Company’s subsidiary at the time and iVoice mutually agreed to terminate and extinguish any all obligations between the parties pursuant to the following agreements:
a. The Administrative Services Agreement dated March 1, 2007 by and between B Green Innovations, Inc. (subsidiary) and iVoice, Inc.
b. The Convertible Promissory Note dated May 5, 2008 issued by B Green Innovations, Inc. payable to iVoice, Inc.
c. The Security Agreement dated May 5, 2008 by and between B Green Innovations, Inc. and iVoice, Inc.
As a result of the above the Company extinguished a total of $63,875 of a Convertible Promissory Note and accrued interest of $2,140. The total of $66,015 was recorded in the balance sheet as additional paid-in capital as since this is classified as a related party transaction at December 31, 2009.
For the three months ended March 31, 2009 the Company recorded a Loss on Valuation of Derivative in the amount of $214,987.
B GREEN INNOVATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 9 Income taxes
The tax effect of temporary differences, primarily net operating loss carry-forwards, asset reserves and accrued liabilities, gave rise to the Company's deferred tax asset in the accompanying March 31, 2010 and December 31, 2009 consolidated balance sheets. Deferred income taxes are recognized for the tax consequence of such temporary differences at the enacted tax rate expected to be in effect when the differences reverse. Because of the current uncertainty of realizing the benefit of the tax carry forward, a valuation allowance equal to the tax benefit for deferred taxes has been established. The full realization of the tax benefit associated with the carry forward depends predominantly upon the Company's ability to generate taxable income during the carry forward period.
On January 7, 2010, the Company received $232,491 from the sale of New Jersey state net operating losses totaling $2,935,491.
Note 10 Capital Stock
Pursuant to the Company’s certificate of incorporation, as amended, the Company is authorized to issue 1,000,000 shares of Preferred Stock, par value of $1.00 per share, 10,000,000,000 shares of Class A Common Stock, no par value per share, 50,000,000 shares of Class B Common Stock, par value $0.01 per share, and 20,000,000 shares of Class C Common Stock, par value $0.01 per share. Below is a description of the Company’s outstanding securities, including Preferred Stock, Class A Common Stock, Class B Common Stock and Class C Common Stock.
The Company is authorized to issue 1,000,000 shares of Preferred Stock, par value $1.00 per share.
Of the 1,000,000 shares of Preferred Stock, 10,000 shares are designated Series A 3% Preferred Stock, par value $1.00 per share, with a stated value of $1,000 (the “Series A Preferred Stock”). The stated value is used for calculation of dividends and liquidation preferences. On March 12, 2008, the Company sold 1,444 shares of Series A 3% Preferred Stock to iVoice, Inc. for $1,444,444. With consent of the holders of the Series A Preferred Stock, on March 6, 2009, the Company amended its Certificate of Incorporation and amended the rights of the Series A Preferred by: (i) eliminating all voting rights for the Series A Preferred Stock and (ii) eliminating the conversion feature of the Series A Preferred Stock
In February 2010, the Company filed with the State of New Jersey an Amendment to the Certificate that revised the rights of the holders of the Company’s Series A 3% Secured Convertible Preferred Stock. The revisions included:
| a. | The preferred stock will be referred to in the Company’s Certificate of Incorporation as: “Series A 3% Preferred Stock”. |
| b. | The holders of the preferred stock will have a new dividend rate of 3%. |
| c. | The holders of the Series A 3% Preferred Stock shall have no voting rights. |
B GREEN INNOVATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 10 Capital Stock (continued)
| a) | Preferred Stock (continued) |
| d. | Series A 3% Preferred Stock is convertible, at the option of the holder with the consent of the Corporation, at any time after the date of issuance of such share into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series A Initial Value, as may be adjusted from time to time, by the Conversion Price applicable to such share. The "Conversion Price” per share shall be calculated as the closing bid price of the Class A Common stock on the last trading day immediately prior to the date that the Notice of Conversion is tendered to the Corporation, subject to certain adjustments. |
| e. | The holders of shares of Series A Preferred Stock shall be prohibited from converting shares of Series A Preferred Stock, and the Corporation shall not honor any attempted conversion of Series A Preferred Stock, if, and to the extent, the shares of Common Stock held by such converting holder of Series A Preferred Stock following any attempted conversion would exceed 9.99% of the outstanding shares of Common Stock of the Corporation after giving effect to such conversion. |
On February 10, 2010, iVoice, Inc. agreed to purchase 1,219 shares of the Company’s 3% Preferred Stock for $1,100,000 in cash and a convertible note, including accrued interest, in the amount of $119,000.
As of March 31, 2010, 2,663 shares of Series A 3% Preferred Stock are issued and outstanding.
The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 5.47%; expected dividend yield: 0%: expected life: 5 years; and volatility: 265.44%. Prior to amendment, the stock had a feature that grants holders the right to convert the stock into common shares based upon 80% of the lowest price the Company has ever issued its Class A Common Stock. Due to this conversion feature the entire investment was deemed a dividend. For the year ended December 31, 2008, $1,444,444 of preferred stock accretion was recognized in the consolidated statements of operations. As noted above, an amendment was made which eliminated the conversion feature.
As of March 31, 2010, there are 10,000,000,000 shares of Class A Common Stock authorized, no par value, and 600,309,870 shares were issued, and 599,115,387 shares were outstanding, and 1,194,483 shares were issued pending conversion by YA Global Investments.
Each holder of Class A Common Stock is entitled to receive ratably dividends, if any, as may be declared by the Board of Directors out of funds legally available for payment of dividends. The Company has never paid any dividends on its common stock and does not contemplate doing so in the foreseeable future.
The Company anticipates that any earnings generated from operations will be used to finance its growth objectives.
B GREEN INNOVATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 10 Capital Stock (continued)
As of March 31, 2010, there are 50,000,000 shares of Class B Common Stock authorized, par value $.01 per share. Each holder of Class B Common Stock has voting rights equal to 100 shares of Class A Common Stock. A holder of Class B Common Stock has the right to convert each share of Class B Common Stock into the number of shares of Class A Common Stock determined by dividing the number of Class B Common Stock being converted by a 20% discount of the lowest price that the Company had ever issued its Class A Common Stock. Upon our liquidation, dissolution, or winding-up, holders of Class B Common Stock will be entitled to receive distributions. On July 27, 2009, the Company amended its Certificate of Incorporation as follows: a holder of Class B Common Stock has the right to convert each share of Class B Common Stock into the number of shares of Class A Common Stock determined by dividing the number of Class B Common Stock being converted by a 20% discount of the lowest price that the Company had ever issued its Class A Common Stock. Each holder of Class B common stock has voting rights equal to the number of Class A shares that would be issued upon the conversion of the Class B shares, had all of the outstanding Class B shares been converted on the record date used for purposes of determining which shareholders would vote. Previously, each holder of Class B Common Stock has voting rights equal to 100 shares of Class A Common Stock. As of March 31, 2010 there are 115,025 shares issued and outstanding.
As of March 31, 2010, there are 20,000,000 shares of Class C Common Stock authorized, par value $.01 per share. Each holder of Class C Common Stock is entitled to 1,000 votes for each share held of record. Shares of Class C Common Stock are not convertible into Class A Common Stock. Upon liquidation, dissolution or wind-up, the holders of Class C Common Stock are not entitled to receive our net assets pro rata. As of March 31, 2010, no shares were issued or outstanding.
Note 11 Stock Options
During 2005, the Company adopted the 2005 Stock Incentive Plan and the 2005 Directors’ and Officers’ Stock Incentive Plan (“Plan”) in order to attract and retain qualified personnel. Under the Plan, the Board of Directors, in its discretion may grant stock options (either incentive or non-qualified stock options) to officers, directors and employees. The Company has not issued any stock options as of March 31, 2010.
B GREEN INNOVATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 12 Fair Value Measurements
FASB Codification Topic 820-10, Fair Value Measurements and Disclosures defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and expands disclosures about fair value measurements; however, it does not require any new fair value measurements, rather, its application is made pursuant to other accounting pronouncements that require or permit fair value measurements.
As defined in FASB ASC 820-10, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique.
Fair value measurements are generally based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market assumptions in the absence of observable market information. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. FASB Codification Topic 820-10, Fair Value Measurements and Disclosures includes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy consists of the following three levels:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 – Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this catego ry generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.
Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
B GREEN INNOVATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 12 Fair Value Measurements (continued)
The valuation techniques that may be used to measure fair value are as follows:
Market approach — Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities
Income approach — Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts, including present value techniques, option-pricing models and excess earnings method
Cost approach — Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost)
As of January 1, 2010, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2010-06, Improving Disclosures about Fair Value Measurements (“ASU 2010-06”) which requires additional disclosures about the various classes of assets and liabilities measured at fair value, the valuation techniques and inputs used, the activity in Level 3 fair value measurements and the transfers between Levels 1, 2, & 3. The requirement for disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements are effective for interim and annual reporting periods beginning after December 15, 2010 and will be adopted by the Company on January 1, 2011.
The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as of March 31, 2010 and December 31, 2009. As required by FASB ASC 820-10, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.
B GREEN INNOVATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 12 Fair Value Measurements (continued)
| March 31, 2010 | | Level I | | | Level II | | | Level III | | | Total | |
| Total Assets | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | | | | | |
| Derivative liabilities | | | - | | | | - | | | | - | | | | - | |
| Total Liabilities | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| December 31, 2009 | | Level I | | | Level II | | | Level III | | | Total | |
| Total Assets | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | | | | | |
| Derivative liabilities | | | - | | | | 1,254,567 | | | | - | | | | 1,254,567 | |
| Total Liabilities | | $ | - | | | $ | 1,254,567 | | | $ | - | | | $ | 1,254,567 | |
Effective this January 1, 2009, we implemented FASB ASC 820-10, formerly Statement of Financial Accounting Standards No. 157, Fair Value Measurements, or SFAS 157, for our nonfinancial assets and liabilities that are re-measured at fair value on a non-recurring basis. The adoption of FASB ASC 820-10 for our nonfinancial assets and liabilities that are re-measured at fair value on a non-recurring basis did not impact our financial position or results of operations; however, could have an impact in future periods. In addition, we may have additional disclosure requirements in the event we complete an acquisition or incur impairment of our assets in future periods.
B GREEN INNOVATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 13 New Accounting Pronouncements
In October 2009, the FASB issued Accounting Standards Update 2009-13, “Revenue Recognition (Topic 605)”. This Update provides amendments to the criteria in Subtopic 605-24 for separating consideration in multiple-deliverable revenue arrangements. It establishes a hierarchy of selling prices to determine the selling price of each specific deliverable which includes vendor-specific objective evidence (if available), third-party evidence (if vendor-specific evidence is not available), or estimated selling price if neither of the first two are available. This Update also eliminates the residual method for allocating revenue between the elements of an arrangement and requires that arrangement consideration be allocated at the inception of the arrangement. Finally, this Update expands the disclosure requirements regardi ng a vendor’s multiple-deliverable revenue arrangements. This Update is effective for fiscal years beginning on or after June 15, 2010. We do not anticipate any material impact from this Update.
In January 2010, the FASB issued Accounting Standards Update No. 2010-06, Fair Value Measurements and Disclosures (the “Update”), which provides amendments to Accounting Standards Codification 820-10 (Fair Value Measurements and Disclosures – Overall Subtopic) of the Codification. The Update requires improved disclosures about fair value measurements. Separate disclosures need to be made of the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements along with a description of the reasons for the transfers. Also, disclosure of activity in Level 3 fair value measurements needs to be made on a gross basis rather than as one net number. The Update also requires: (1) fair value measurement disclosures for each class of assets and liabiliti es, and (2) disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements, which are required for fair value measurements that fall in either Level 2 or Level 3. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the Level 3 activity disclosures, which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The enhanced disclosure requirements have not had a material impact on the Company’s financial reporting.
Note 14 Subsequent Events
On April 30, 2010, the Administrative Services Agreement between the Company and iVoice, Inc. was amended as follows:
| a. | The agreement will commence effective January 1, 2010. |
| b. | The monthly fee will increase to $5,000 per month and will be evidenced by a Convertible Promissory Note, the terms of which are as follows: |
| i. | Interest will accrue in the unpaid balance at the rate of prime plus 1 percent per annum. |
| ii. | Additional advances to include Fees accrued pursuant to the Administrative Services Agreement will be added to the principal of this note and will accrue interest at the above specified rate. |
| iii. | The interest shall accrue monthly and be paid annually. |
| iv. | The principal is payable on demand. |
B GREEN INNOVATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 14 Subsequent Events (continued)
| v. | The holder may elect payment of the principal and/or interest at the Holder’s sole discretion, owed pursuant to this Note by requiring the Maker to issue to the Holder, or his assigns either: (i) one Class B common stock share of the Maker, no par value per share, for each dollar owed, (ii) the number of Class A common stock shares of the Maker calculated by dividing (x) the sum of the principal and interest that the Holder has decided to have paid by (y) fifty percent (50%) of the lowest issue price of Class A common stock, or (iii) exchange the iVoice Market Value of the number of Class A Common Stock shares calculated, but not issued, in subsection (ii) above, equal to the number of B Green Series A 3% Preferred Stock shares calculated by dividing the iVoice Market value by the Series A Initial Value, as defined in the Company’s Certifi cate of Incorporation. The Holder may elect payment of the principal of this Note, before any repayment of interest. |
| vi. | This note may be prepaid in full or in part at any time without penalty. |
| vii. | In the event of (a) default in payment of any installment of principal or interest hereof as the same becomes due and such default is not cured within ten (10) days from the due date, or (b) default under the terms of any instrument securing this Note, and such default is not cured within fifteen (15) days after written notice to maker, then in either such event the Holder may, without further notice, declare the remainder of the principal sum, together with all interest accrued thereon, and the prepayment premium, if any, at once due and payable. Failure to exercise this option shall not constitute a waiver of the right to exercise the same at any other time. The unpaid principal of this Note and any part thereof, accrued interest and all other sums due under this Note shall bear interest at the rate of prime plus 2 percent per annum after default un til paid. |
Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations Forward Looking Statements
A number of the statements made by the Company in this report may be regarded as “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include, among others, statements concerning the Company’s outlook, pricing trends and forces within the industry, the completion dates of capital projects, expected sales growth, cost reduction strategies and their results, long-term goals of the Company and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts.
All predictions as to future results contain a measure of uncertainty and accordingly, actual results could differ materially. Among the factors that could cause a difference are: changes in the general economy; changes in demand for the Company’s products or in the cost and availability of its raw materials; the actions of its competitors; the success of our customers; technological change; changes in employee relations; government regulations; litigation, including its inherent uncertainty; difficulties in plant operations and materials; transportation, environmental matters; and other unforeseen circumstances. For a discussion of material risks and uncertainties that the Company faces, see the discussion in the Form 10−K for the fiscal year ended December 31, 2009 entitled “Ris k Factors”.
Results of Operations
Total revenues increased $27,370 (182%) for the three months ended March 31, 2010 to $42,400 as compared to $15,030 for the same period in the prior year. This increase is primarily attributed to the growth in sales of our “green” products. The Company continues to evaluate additional products to its product line as well as expanding its distribution channels. Recently, the Company released its new 100% Degradable / Biodegradable Compactor Bags.
Gross profit increased $11,179 (292%) to $16,988 for the three months ended March 31, 2010 as compared to the same period in the prior year as a result of the increased volume for “Green” products.
Total operating expenses decreased $1,346 (1%) to $139,777 for the three months ended March 31, 2010 as compared to the three months ended March 31, 2009. Lower administrative service expenses were mostly offset by increased selling expenses for the Company’s “green” products.
For the three months ended March 31, 2010, the Company had a loss from operations of $122,789 as compared to a loss from operations of$135,314 for the three months ended March 31, 2009 as a result of the factors discussed above.
Total other income was $1,499,926 for the three months ended March 31, 2010 as compared to an expense of $690,543 for the three months ended March 31, 2009. This increase in other income is primarily attributed to the gain on the extinguishment of the derivative liability as a result on the conversion to preferred stock.
Net income for the quarter ended March 31, 2010 was $1,377,137 as compared to a loss of $825,857 for the quarter ended March 31, 2009. The changes were the result of the factors discussed above.
Liquidity and Capital Resources
To date, the Company has incurred substantial losses, and will require financing for working capital to meet its operating obligations. We anticipate that we will require financing on an ongoing basis for the foreseeable future.
The Company has assumed an outstanding promissory demand note in the amount of $190,000 payable to Jerry Mahoney, President and Chief Executive Officer of iVoice and Non-Executive Chairman of the Board of the Company. This amount is related to funds loaned to iVoice and is unrelated to the operations of the Company. The note will bear interest at the rate of prime plus 2.0% per annum (5.25% at March 31, 2010) on the unpaid balance until paid. Interest payments are due and payable annually. Under the terms of the Promissory Note, at the option of the Note holder, principal and interest can be converted into either (i) one share of Class B Common Stock of the Company, par value $.01, for each dollar owed, (ii) the number of shares of Class A Common Stock of the Company calculated by dividing (x) the sum of the principal and interest that the Note holder has requested to have prepaid by (y) eighty percent (80%) of the lowest issue price of Class A Common Stock since the first advance of funds under this Note, or (iii) payment of the principal of this Note, before any repayment of interest. The Board of Directors of the Company maintains control over the issuance of shares and may decline the request for conversion of the repayment into shares of the Company.
On February 10, 2010, iVoice, Inc. agreed to purchase 1,219 shares of the Company’s 3% Preferred Stock for $1,100,000 in cash and exchange of the convertible promissory note to iVoice, Inc.
If the Company cannot find sources of additional financing to fund its working capital needs, the Company will be unable to obtain sufficient capital resources to operate our business. We cannot assure you that we will be able to access any financing in sufficient amounts or at all when needed. Our inability to obtain sufficient working capital funding will have an immediate material adverse effect upon our financial condition and our business.
The Company currently has no other significant sources of working capital or cash commitments. However, no assurance can be given that the Company will raise sufficient funds from such financing arrangements, or that Company will ever produce sufficient revenues to sustain its operations, or that a market will develop for its common stock for which a significant amount of the Company’s financing is dependent upon.
During the three ended March 31, 2010, the Company had a net increase in cash of $1,230,836. The Company’s principal sources and uses of funds were as follows:
Cash provided by (used in) operating activities. The Company provided $130,836 from operating activities for the three months ended March 31, 2010 as compared using $58,783 in the prior year. The increase in cash from operating activities is primarily the result of cash received from the sale of New Jersey state net operating losses in the amount of $232,491.
Cash provided by financing activities. The Company generated $1,100,00 from financing activities for the three months ended March 31, 2010 as a result of net proceeds from the sales of Series A Convertible Preferred Stock.
There was no significant impact on the Company’s operations as a result of inflation for the three months ended March 31, 2010.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate these estimates, including those related to bad debts, inventory obsolescence, intangible assets, payroll tax obligations, and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgme nts about the carrying values of certain assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.
We have identified below the accounting policies, revenue recognition and software costs, related to what we believe are most critical to our business operations and are discussed throughout Management’s Discussion and Analysis of Financial Condition or Plan of Operation where such policies affect our reported and expected financial results.
Revenue Recognition
For “green” products, revenues are recognized at the time of shipment to, or acceptance by customer, provided title and risk of loss is transferred to the customer. Provisions, when appropriate, are made where the right to return exists.
With respect to customer support services for IVR, upon the completion of one year from the date of sale, the Company offers customers an optional annual software maintenance and support agreement for subsequent one-year periods. Sales of purchased maintenance and support agreements are recorded as deferred revenues and recognized over the respective terms of the agreements.
Due to the nature of the business and one-time contracts, it is unlikely that one customer will impact revenues in future periods. All revenues for 2009 and 2008 related to the Company’s IVR operations were derived from annual maintenance and support agreements.
Derivative Liabilities
The Company accounts for its embedded conversion features in its convertible debentures in accordance with FASB ASC 815-10, "Accounting for Derivative Instruments and Hedging Activities", which requires a periodic valuation of their fair value and a corresponding recognition of liabilities associated with such derivatives, and FASB ASC 815-40, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. The recognition of derivative liabilities related to the issuance of convertible debt is applied first to the proceeds of such issuance as a debt discount, at the date of issuance, and the excess of derivative liabilities over the proceeds is recognized as “Loss on Valuation of Derivative” in other expense in the accompanying financial statements. Any subseq uent increase or decrease in the fair value of the derivative liabilities is recognized as other expense or other income, respectively. The financial statements for the period include the recognition of the derivative liability on the underlying securities issuable upon conversion of the Convertible Debentures with YA Global Investments (f/k/a/Cornell Capital Partners)
Item 4T. Controls and Procedures.
Management's report on internal control over financial reporting.
Management of the Company has evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of the Company had concluded that the Company's disclosure controls and procedures as of the period covered by this Quarterly Report on Form 10-Q were not effective for the following reasons:
a) The deficiency was identified as the Company's limited segregation of duties amongst the Company's employees with respect to the Company's control activities. This deficiency is the result of the Company's limited number of employees. This deficiency may affect management's ability to determine if errors or inappropriate actions have taken place. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible changes in our disclosure controls and procedures.
b) The deficiency was identified in respect to the Company's Board of Directors. This deficiency is the result of the Company's limited number of external board members. This deficiency may give the impression to the investors that the board is not independent from management. Management and the Board of Directors are required to apply their judgment in evaluating the cost-benefit relationship of possible changes in the organization of the Board of Directors.
Changes in internal control over financial reporting.
Management of the Company has also evaluated, with the participation of the Chief Executive Officer of the Company, any change in the Company’s internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q and determined that there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Part II. Other Information
Item 5. Other Information.
(a)
Section 1 - Registrant's Business and Operations
Item 1.01 Entry into a Material Definitive Agreement.
On March 1, 2010, the Company entered into an Administrative Services Agreement (the “Agreement”) with iVoice, Inc. (“iVoice”) for the Company to provide, effective February 1, 2010, certain administrative services as set forth in the Agreement for a fee of Four Thousand Dollars ($4,000) per month. This Agreement shall continue until either party terminates with thirty (30) advance written notice. This Agreement is filed as Exhibit 10.2 herein.
Item 1.02 Termination of a Material Definitive Agreement.
On February 10, 2010, the Company and iVoice, Inc. entered into the Termination of Administrative Services Agreement effective November 17, 2009 that terminated and extinguished any all obligations between the parties pursuant to the following agreements:
a. The Administrative Services Agreement dated March 1, 2007 by and between B Green Innovations, Inc. and iVoice, Inc.
b. The Convertible Promissory Note dated May 5, 2008 issued by B Green Innovations, Inc. payable to iVoice, Inc.
c. The Security Agreement dated May 5, 2008 by and between B Green Innovations, Inc. and iVoice, Inc.
At the time that the parties entered into this Administrative Services Agreement dated March 1, 2007, B Green Innovations, Inc. was a wholly subsidiary of iVoice Technology, Inc. On November 17, 2009, B Green Innovations, Inc. merged into iVoice Technology, Inc. and thereafter, on November 20, 2009, iVoice Technology, Inc. changed its name to B Green Innovations, Inc.
Section 5 - Corporate Governance and Management
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
On February 16, 2010, the Company filed with the State of New Jersey an Amendment to the Certificate of Incorporation which amended the rights of the Series A Preferred Stock
The revisions included:
| a. | The preferred stock will be referred to in the Company’s Certificate of Incorporation as: “Series A 3% Preferred Stock”. |
| b. | The holders of the preferred stock will have a new dividend rate of 3%. |
| c. | The holders of the Series A 3% Preferred Stock shall have no voting rights. |
| d. | The conversion rights of the Preferred Stock were amended. The Amendment is filed as Exhibit 3.1 herein. |
(b) The Company does not have a standing nominating committee or a committee performing similar functions as the Company’s Board of Directors consists of only two members and therefore there would be no benefit in having a separate nominating committee that would consist of the same number of members as the full board of directors. Both members of the Board of Directors participate in the consideration of director nominees.
In accordance with the requirements of the Exchange Act, the Registrant caused this report on Form10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
B GREEN INNOVATIONS, INC.
| | Company Name | |
| | | | |
| Date: May 17, 2010 | By: | /s/ Jerome Mahoney | |
| | | Jerome Mahoney | |
| | | President, Chief Executive Officer and | |
| | | Chief Financial Officer | |
