To the Board of Directors and Stockholders
B Green Innovations, Inc. (f/k/a iVoice Technology, Inc.)
Matawan, New Jersey
We have audited the accompanying balance sheet of B Green Innovations, Inc. as of December 31, 2009, and the related statement of operations, changes in stockholders' deficit, and cash flow for the year ended December 31, 2009. B Green Innovations, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of B Green Innovations, Inc as of December 31, 2008 and for the year then ended (before restated for the matter discussed in Note 18 to the financial statements) were audited by other auditors whose report dated March 14, 2009 expressed an unqualified opinion on those financial statements.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordi ngly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of B Green Innovations, Inc. as of December 31, 2009, and the results of its operations and its cash flow for the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.
As more fully described in Note 18, the 2009 financial statements have been restated.
As discussed above, the consolidated financial statements of B Green Innovations, Inc. as of December 31, 2008, and for the year then ended were audited by other auditors. As described in Note 18, these financial statements have been restated. We audited the adjustments described in Note 18 that were applied to restate the 2008 financial statements. In our opinion, such adjustments are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2008 financial statements of the Company other than with respect to such adjustments and, accordingly, we do not express or any other form of assurance on the 2008 financial statements taken as a whole.
The accompanying financial statements for December 31, 2009 have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company had a net loss, a negative cash flow from operations, as well as negative working capital. These issues lead to substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also discussed in Note 3. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Rosenberg, Rich, Baker, Berman and Company
Somerset, New Jersey
March 19, 2010, except for Note 18 as to which the date is November 16, 2010
Bagell, Josephs, Levine & Company, LLC
406 Lippincott Drive, Marlton, NJ 08053
Tel: 856-355-5900; Fax: 856-396-0022
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
B Green Innovations, Inc. (f/k/a iVoice Technology, Inc.)
Matawan, New Jersey
We have audited before the effects of the adjustments for the correction of the error described in Note 18, the consolidated balance sheet of B Green Innovations, Inc. (“Company”), as of December 31, 2008 and the related consolidated statements of operations, stockholders’ deficit and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, except for the error described in Note 18, the 2008 consolidated financial statements present fairly, in all material respects, the consolidated financial position of B Green Innovations, Inc., as of December 31, 2008, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
We were not engaged to audit, review, or apply any procedures to the adjustments for the correction of the error described in Note 18 and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by the Rosenberg, Rich, Baker, Berman & Company.
The accompanying consolidated financial statements for December 31, 2008 have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company had a net loss, a negative cash flow from operations, as well as negative working capital. These issues lead to substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also discussed in Note 3. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
/s/ BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C.
Bagell, Josephs, Levine & Company, L.L.C.
Marlton, NJ 08053
March 14, 2009
RESTATED BALANCE SHEETS
DECEMBER 31,
| | | 2009 | | | 2008 | |
| ASSETS | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 190,350 | | | $ | 460,869 | |
| Accounts receivable, net of allowance for doubtful accounts of $12,083 | | | 6,188 | | | | - | |
| Inventories | | | - | | | | 6,246 | |
| Note receivable, net of allowance of $25,017 at December 31, 2008 | | | - | | | | - | |
| Prepaid expenses and other current assets | | | 17,542 | | | | 6,615 | |
| Total current assets | | | 214,080 | | | | 473,730 | |
| | | | | | | | | |
| Property, plant and equipment, net | | | 33,554 | | | | 17,313 | |
| Intangible assets | | | 59,934 | | | | 54,540 | |
| Total assets | | $ | 307,568 | | | $ | 545,583 | |
| | | | | | | | | |
| LIABILITIES & STOCKHOLDERS’ DEFICIT | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 593,201 | | | $ | 455,632 | |
| Due to related parties | | | 420,708 | | | | 351,287 | |
| Deferred maintenance contracts | | | 2,210 | | | | 9,407 | |
| Notes payable to related parties | | | 3,003 | | | | 141,708 | |
Convertible promissory note, net of unamortized debt discount of $-0- and $91,869 at December 31, 2009 and 2008, respectively | | | 112,058 | | | | 15,953 | |
| Derivative liabilities | | | 1,254,567 | | | | 133,212 | |
| Total current liabilities | | | 2,385,747 | | | | 1,107,199 | |
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| Stockholders' deficit: | | | | | | | | |
Preferred stock, par value $1.00; authorized 1,000,000 shares; 10,000 shares designated as follows; 990,000 shares available for further designation | | | | | | | | |
Series A 10% Secured Preferred Stock; $1,000 stated value; Authorized 10,000 shares; 1,444.44 shares issued and outstanding | | | 1,444,444 | | | | 1,444,444 | |
| Common stock: | | | | | | | | |
Class A Common Stock– 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 December 31, 2009; 486,835,870 shares issued and 485,641,387 outstanding, and 1,194,483 in escrow at December 31, 2008; | | | 1,074,736 | | | | 915,166 | |
Class B Common Stock - $.01 par value; authorized 50,000,000 shares; 115,025 shares issued and outstanding at December 31, 2009; no shares issued and outstanding at December 31, 2008. | | | 1,150 | | | | - | |
Class C Common Stock - $.01 par value; authorized 20,000,000 Shares; no shares issued and outstanding | | | - | | | | - | |
| Additional paid-in capital | | | 7,443,646 | | | | 6,899,510 | |
| Additional paid-in capital – beneficial conversion | | | 1,444,444 | | | | 1,444,444 | |
| Accumulated deficit | | | (13,486,599 | ) | | | (11,265,180 | ) |
| Total stockholders' deficit | | | (2,078,179 | ) | | | (561,616 | ) |
| Total liabilities and stockholders' deficit | | $ | 307,568 | | | $ | 545,583 | |
See accompanying notes to the financial statements
RESTATED STATEMENTS OF OPERATIONS
| | | Years Ended | |
| | | December 31, 2009 | | | December 31, 2008 | |
| | | | | | | |
| Net sales | | $ | 108,120 | | | $ | 46,773 | |
| Cost of sales | | | 46,594 | | | | 746 | |
| | | | | | | | | |
| Gross profit | | | 61,526 | | | | 46,027 | |
| | | | | | | | | |
| Operating expenses: | | | | | | | | |
| Selling, general and administrative expenses | | | 596,002 | | | | 544,272 | |
| Total operating expenses | | | 596,002 | | | | 544,272 | |
| | | | | | | | | |
| Loss from operations | | | (534,476 | ) | | | (498,245 | ) |
| | | | | | | | | |
| Other income (expense): | | | | | | | | |
| Interest income | | | 2,901 | | | | 13,902 | |
| Interest expense | | | (573,312 | ) | | | (164,736 | ) |
| Amortization of debt discount | | | (94,670 | ) | | | (715,891 | ) |
| Redemption premium | | | - | | | | (85,922 | ) |
| Other income | | | 25,504 | | | | 82,017 | |
| Gain (loss) on valuation of derivative | | | (1,047,366 | ) | | | 1,253,863 | |
| Total other income (expense) | | | (1,686,943 | ) | | | 383,233 | |
| | | | | | | | | |
| Loss from operations before income taxes | | | (2,221,419 | ) | | | (115,012 | ) |
| | | | | | | | | |
| Provision for income taxes | | | - | | | | - | |
| | | | | | | | | |
| Net loss | | | (2,221,419 | ) | | | (115,012 | ) |
| | | | | | | | | |
| Preferred stock accretion | | | - | | | | 1,444,444 | |
| | | | | | | | | |
| Net loss attributable to common shareholders | | $ | (2,221,419 | ) | | $ | (1,599,456 | ) |
| Basic and diluted loss to per common share | | $ | (0.00 | ) | | $ | (0.00 | ) |
| | | | | | | | | |
| Weighted average shares outstanding - Basic and diluted | | | 542,134,390 | | | | 440,330,597 | |
See accompanying notes to the financial statements
RESTATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2009 and 2008
| | | Series A Preferred Stock | | | Common Stock A | | | | | | Additional Paid-In Capital – Beneficial Conversion | | | Additional Paid-In Capital | | | Accumulated Deficit | | | Total Stockholders’ Deficit | |
| | | Shares | | | Amount | | | Shares | | | Amount | | | Shares | | | Amount | | | | | | | | | | | | | |
| Balance at January 1, 2008 | | | - | | | $ | - | | | | 168,847,878 | | | $ | 506,286 | | | | - | | | $ | - | | | $ | - | | | $ | 7,057,606 | | | $ | (9,705,724 | ) | | $ | (2,141,832 | ) |
| Issuance of common stock pursuant to terms of the Equity Line of Credit | | | - | | | | - | | | | 89,039,944 | | | | 102,835 | | | | | | | | | | | | - | | | | (13,652 | ) | | | - | | | | 89,183 | |
| Common stock issued for conversion of convertible debenture | | | - | | | | - | | | | 87,653,565 | | | | 118,283 | | | | | | | | | | | | - | | | | - | | | | - | | | | 118,283 | |
| Common stock issued for repayment of related party note payable | | | - | | | | - | | | | 46,500,000 | | | | 82,150 | | | | | | | | | | | | - | | | | - | | | | - | | | | 82,150 | |
| Common stock issued for conversion of convertible promissory note | | | - | | | | - | | | | 42,000,000 | | | | 45,720 | | | | | | | | | | | | - | | | | - | | | | - | | | | 45,720 | |
| Common stock issued for services received | | | - | | | | - | | | | 51,600,000 | | | | 59,892 | | | | | | | | | | | | - | | | | - | | | | - | | | | 59,892 | |
| Issuance of Series A Preferred Stock for cash | | | 1,444.44 | | | | 1,444,444 | | | | - | | | | - | | | | | | | | | | | | - | | | | (144,444 | ) | | | - | | | | 1,300,000 | |
| Beneficial conversion on preferred stock | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | 1,444,444 | | | | | | | | (1,444,444 | ) | | | - | |
Net loss for the year ended December, 31, 2008 | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | - | | | | - | | | | (115,012 | ) | | | (115,012 | ) |
| Balance at December 31, 2008 | | | 1,444.44 | | | $ | 1,444,444 | | | | 485,641,387 | | | $ | 915,166 | | | | - | | | $ | - | | | $ | 1,444,444 | | | $ | 6,899,510 | | | $ | (11,265,180 | ) | | $ | (561,616 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock issued for repayment of related party note payable | | | - | | | | - | | | | 74,000,000 | | | | 140,000 | | | | | | | | | | | | - | | | | - | | | | - | | | | 140,000 | |
| Common stock issued for conversion of convertible promissory note | | | - | | | | - | | | | 16,724,000 | | | | 5,351 | | | | | | | | | | | | - | | | | - | | | | - | | | | 5,351 | |
| Common stock – Class B issued for related party note payable | | | - | | | | - | | | | - | | | | - | | | | 115,025 | | | | 1,150 | | | | - | | | | 478,121 | | | | - | | | | 479,271 | |
| Common stock issued for services received | | | - | | | | - | | | | 22,750,000 | | | | 14,219 | | | | | | | | | | | | - | | | | - | | | | - | | | | 14,219 | |
| Extinguishment of debt– related party | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | - | | | | 66,015 | | | | - | | | | 66,015 | |
Net loss for the year ended December, 31, 2009 | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | - | | | | - | | | | (2,221,419 | ) | | | (2,221,419 | ) |
| Balance at December 31, 2009 | | | 1,444.44 | | | $ | 1,444,444 | | | | 599,115,387 | | | $ | 1,074,736 | | | | 115,025 | | | $ | 1,150 | | | $ | 1,444,444 | | | $ | 7,443,646 | | | $ | (13,486,599 | ) | | $ | (2,078,179 | ) |
See accompanying notes to the financial statements ;
RESTATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
| | | 2009 | | | 2008 | |
| Cash flows from operating activities: | | | | | | |
| Net loss | | $ | (2,221,419 | ) | | $ | (115,012 | ) |
| Adjustments to reconcile net loss to net cash | | | | | | | | |
| (used in) operating activities: | | | | | | | | |
| Depreciation | | | 9,262 | | | | 854 | |
| (Gain) loss on valuation of derivative | | | 1,047,366 | | | | (1,253,863 | ) |
| Amortization of discount on debt | | | 94,670 | | | | 715,891 | |
| Beneficial conversion incurred in debt reduction | | | 554,555 | | | | 62,470 | |
| Beneficial conversion incurred in conversion of debenture | | | - | | | | 54,063 | |
| Common stock issued for investor relations | | | 14,219 | | | | 24,192 | |
| Common stock issued for consulting fees | | | - | | | | 35,700 | |
| Changes in certain assets and liabilities: | | | | | | | | |
| (Increase) decrease in accounts receivable | | | (6,188 | ) | | | 9,905 | |
| Decrease (increase) in inventories | | | 6,246 | | | | (6,246 | ) |
| Increase in prepaid expenses and other assets | | | (10,927 | ) | | | (2,208 | ) |
| Increase in accounts payable and accrued expenses | | | 184,867 | | | | 156,250 | |
| Increase in due to related parties | | | 69,421 | | | | 43,085 | |
| Decrease in deferred maintenance contracts | | | (7,197 | ) | | | (4,690 | ) |
| Net cash (used in) operating activities | | | (265,125 | ) | | | (279,609 | ) |
| | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | |
| Purchase of intangible assets | | | (5,394 | ) | | | (54,540 | ) |
| Purchases of equipment | | | - | | | | (17,370 | ) |
Net cash (used in) investing activities | | | (5,394 | ) | | | (71,910 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Issuance of common stock through equity financing | | | - | | | | 89,183 | |
| Net proceeds from sale of Series A Preferred Stock | | | - | | | | 1,300,000 | |
| Payment of convertible debenture | | | - | | | | (759,372 | ) |
Net cash provided by financing activities | | | - | | | | 629,811 | |
| | | | | | | | | |
| Net (decrease) increase in cash and cash equivalents | | | (270,519 | ) | | | 278,292 | |
| Cash and cash equivalents, beginning of year | | | 460,869 | | | | 182,577 | |
| | | | | | | | | |
| Cash and cash equivalents, end of year | | $ | 190,350 | | | $ | 460,869 | |
| | | | | | | | | |
| Supplemental Schedule of Cash Flow Information:: | | | | | | | | |
| During the year, cash was paid for the following: | | | | | | | | |
| Income taxes | | $ | - | | | $ | - | |
| Interest | | $ | - | | | $ | 50,072 | |
| | | | | | | | | |
| Supplemental Disclosure of Non-Cash Investing and Financing Activities: | | | | | | | | |
| Accounts payable converted into convertible promissory notes | | $ | 37,613 | | | $ | 121,262 | |
| Accrued expenses converted into convertible debenture | | $ | 37,989 | | | $ | 186,557 | |
| Equipment received in lieu of payment of note receivable | | $ | 25,503 | | | $ | - | |
| Convertible promissory note converted into common stock | | $ | 5,352 | | | $ | 13,440 | |
| Convertible debenture converted into common stock | | $ | - | | | $ | 109,940 | |
| Promissory note converted into common stock | | $ | 138,705 | | | $ | 19,600 | |
| Forgiveness of convertible debt from related party | | $ | 66,015 | | | $ | - | |
See accompanying notes to the financial statements
B GREEN INNOVATIONS, INC.
RESTATED STATEMENTS OF CASH FLOWS
Supplemental Schedule of Non-Cash Investing and Financing Activities:
For the Year Ended December 31, 2009:
a) The Company issued 16,724,000 shares of Class A common stock with a fair value of $10,452 to reduce a convertible promissory note in the amount of $5,351.
b) The Company issued 74,000,000 shares of Class A common stock with a fair value of $140,000 to an individual to reduce a promissory note in the amount of $23,680. The difference in the market value and the promissory note reduction was charged to beneficial interest in the amount of $116,320.
c) The Company converted accounts payable to a convertible promissory note in the amount of $37,613.
d) The Company had a convertible note in the amount of $66,015 due to a related party that was forgiven during the year.
e) The Company received equipment valued at approximately $25,503 in lieu of payment of a note receivable which was previously written-off.
f) The Company issued 115,025 shares of Class B common stock to an individual to reduce a promissory note in the amount of $115,025. The difference in the market value and the promissory note reduction was charged to beneficial interest in the amount of $364,246.
See accompanying notes to the financial statements
B GREEN INNOVATIONS, INC.
RESTATED STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2008:
a) The Company issued 46,500,000 shares of Class A common stock with a fair value of $82,150 to an individual to reduce a promissory note in the amount of $19,680. The difference in the market value and the promissory note reduction was charged to beneficial interest in the amount of $62,470.
b) The Company issued 87,653,565 shares of Class A common stock with a fair value of $118,283 to reduce a convertible debenture in the amount of $96,500. The difference in the market value and the reduction in the convertible debenture was charged to beneficial interest in the amount of $21,783.
c) The Company issued 89,039,944 shares of Class A common stock pursuant to the Equity Line of Credit with YA Global Investments (f/k/a/ Cornell Capital Partners) valued at $102,835. Issuance costs of $13,652 were incurred and charged to additional paid-in capital for net proceeds of $89,183.
d) The Company issued 42,000,000 shares of Class A common stock with a fair value of $45,720 to reduce a convertible promissory note in the amount of $13,440. The difference in the market value and the convertible promissory note reduction was charged to beneficial interest in the amount of $32,280.
e) The Company converted accounts payable to a convertible promissory note in the amount of $96,199.
f) The Company converted accrued expenses related to accrued interest due to YA Global to a convertible debenture in the amount of $186,557. In March 2008, the Company and YA Global agreed that the Company would redeem all amounts outstanding under the Debenture, except for $186,557 of interest. The amount redeemed was $691,021, consisting of the remaining balance of the Debenture equal to $572,815, accrued interest of $32,284, and a redemption premium equal to $85,922.
g) The Company recognized $1,444,444 of preferred stock accretion in the statements of operations as a result of the conversion features of the preferred stock issued (See Note 11).
h) The Company issued 21,600,000 shares of Class A common stock with a fair value of $24,192 to an individual for repayment of investor relations expenses.
i) The Company issued 30,000,000 shares of Class A common stock with a fair value of $35,700 to two individuals for repayment of consulting fees.
See accompanying notes to the financial statements
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
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 iVoice T echnology 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
B Green Innovations, Inc., is dedicated to becoming a “green” technology company, focused on acquiring and identifying promising technologies that address environmental issues.
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.”
The Company continues to evaluate additional products to its product line as well as expanding its distribution channels.
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 2 - BUSINESS OPERATIONS (CONTINUED)
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.
In conjunction with the Spin-off from iVoice, Inc., B Green Innovations, Inc., f/k/a iVoice Technology entered into a temporary administrative service agreement with iVoice. iVoice presently continues to provide administrative services to the Company on a month-to-month basis until the Company is able to replace the services provided by iVoice. As of October 1, 2009, iVoice, Inc. suspended all charges for the Administrative Service Agreement with the Company.
NOTE 3 - GOING CONCERN
The accompanying 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. The Company relies on iVoice, Inc. for administrative, management, research and other services.
As of December 31, 2009, the Company had a net loss, a negative cash flow from operations, as well as negative working capital. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Therefore, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn, is dependent upon the Company’s ability to raise capital and/or generate positive cash flow from operations.
Management plans on developing and selling products as well as expanding its distribution channels to achieve profitability and 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.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation
The accompanying financial statements included herein have been prepared in conformity with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").
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 sales.
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 years ended December 31, 2009 and 2008.
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
f) Advertising Costs
Advertising costs are expensed as incurred and included in selling expenses. For the years ended December 31, 2009 and 2008, the Company incurred advertising expenses of $8,893 and $998, 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 December 31, 2009 and 2008.
The Company maintains cash and cash equivalent balances at a financial institution that is insured by the Federal Deposit Insurance Corporation up to $250,000. The uninsured cash balances at December 31, 2009 and 2008 were $-0- and $204,808, respectively.
h) Accounts Receivable
Accounts receivable are non-interest bearing obligations due under normal trade terms. Senior management reviews accounts receivable on a monthly basis to determine if any receivables will be potentially uncollectible. Historical bad debts and current economic trends are used in evaluating the allowance for doubtful accounts. The Company includes any accounts receivable balances that are determined to be uncollectible, along with a general reserve, in its overall allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on the information available, the Company believes its allowance for doubtful accounts as of December 31, 2009 and 2008 is adequate.
i) 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.
j) Intangible Assets
Registration and maintenance costs associated with the filing and registration of patents are prepaid and amortized over the remaining life of the patent, not to exceed 20 years. Costs associated with patents which are not approved or abandoned are expensed in the period in which such patents are not approved or abandoned.
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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) Concentrations 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 December 31, 2009 the Company believes it has no significant risk related to its concentration within its accounts receivable.
m) 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").
Basic net loss per share attributable to common stockholders is computed by dividing the net loss by the weighted-average number of common shares outstanding during the period. Diluted loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding during the period, including common stock equivalents, such as conversions, exercise or contingent exercise of securities. Diluted earnings per share gives effect to all dilutive potential common shares outstanding during the period. The computation of diluted loss per share attributable to common shareholders at December 31, 2009 and 2008 does not assume conversion, exercise or contingent exercise of securities in the amount of approximately 448,950,321 and 318,593,750 shares, respectively, as they would have an anti-dilutive effect on earnings resulting from the Company’s net loss position.
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
m) Loss per Share (continued)
The computation of EPS is as follows:
| | | December 31, 2009 | | | December 31, 2008 | |
Basic and diluted net loss per share attributable t o common shareholders computation: | | | | | | |
Net loss attributable to common stockholders | | $ | (2,221,419 | ) | | $ | (1,599,456 | ) |
Weighted-average common shares outstanding | | | 542,134,390 | | | | 440,330,597 | |
Basic and diluted net loss per share attributable to common stockholders | | $ | (0.00 | ) | | $ | (0.00 | ) |
n) 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, “Contracts in Entity’s Own Equity”. 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 f air value of the derivative liabilities is recognized as “Other expense” or “Other income”, respectively.
o) Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation. The reclassifications have had no effect on the financial position, operations or cash flows for the year ended December 31, 2008.
p) Fair Value of Instruments
On January 1, 2008, the Company adopted ASC Topic 820 Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC Topic 820 applies to reported balances that are required or permitted to be measured at fair value under existing GAAP; accordingly, ASC Topic 820 does not require any new fair value measurements of reported balances. On February 12, 2008, the FASB deferred the effective date of ASC Topic 820 for certain nonfinancial assets and liabilities to fiscal years beginning after November 15, 2008. All other provisions of ASC Topic 820 are effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years.
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
p) Fair Value of Instruments (continued)
Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) on the measurement date in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. The fair value framework specifies a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable. (see Note 12 to the Financial Statements).
q) Impairment of 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 years ended December 31, 2009 and 2008, respectively.
r) Recent Accounting Pronouncements
In April 2009, the FASB issued FASB ASC 320-10, “Recognition and Presentation of Other-Than-Temporary Impairments.” FASB ASC 320-10 amends the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments in the financial statements. The most significant change FASB ASC 320-10 brings is a revision to the amount of other-than-temporary loss of a debt security recorded in earnings. FASB ASC 320-10 is effective for interim and annual reporting periods ending after June 15, 2009. The Company’s adoption of FASB ASC 320-10 did not have a material impact on the Company’s financial statements.
In April 2009, the FASB issued FASB ASC 820-10, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.” FASB ASC 820-10 provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. FASB ASC 820-10 also includes guidance on identifying circumstances that indicate a transaction is not orderly. This FSP emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or paid to transfer a liabilit y in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. FASB ASC 820-10 is effective for interim and annual reporting periods ending after June 15, 2009, and is applied prospectively. The Company’s adoption of FASB ASC 820-10 did not have a material impact on the Company’s financial statements.
In April 2009, the FASB issued FASB ASC 825-10, “Interim Disclosures about Fair Value of Financial Instruments.” FASB ASC 825-10 amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. FASB ASC 825-10 also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods FASB ASC 825-10 is effective for interim and annual reporting periods ending after June 15, 2009. The Company’s adoption of issued FASB ASC 825-10 did not have a material impact on the Company’ s financial statements.
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
r) Recent Accounting Pronouncements (continued)
In June 2009, the FASB issued FASB ASC 105-10, The FASB Accounting Standards Codification and Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162. FASB ASC 105-10 establishes the FASB Standards Accounting Codification (“Codification”) as the source of authoritative GAAP recognized by the FASB to be applied to nongovernmental entities. The only other source of authoritative GAAP is the rules and interpretive releases of the SEC which only apply to SEC registrants. The Codification will supersede all the existing non-SEC accounting and reporting standards upon its effective date. Since the issuance of the Codification is not intended to change or alter existing GAAP, adoption of this statement did not have an impact on the Company’s financial position or results of operations, but will change the way in which GAAP is referenced in the Company’s financial statements. FASB ASC 105-10 is effective for interim and annual reporting periods ending after September 15, 2009.
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 regarding 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.
NOTE 5 – NOTE RECEIVABLE
On January 24, 2008, iVoice Technology, Inc. (the "Company") entered into a non-binding Letter of Intent with Atire Technologies, Inc. ("Atire") for the purpose of discussing and negotiating a merger of Atire into a wholly owned subsidiary of the Company. On February 1, 2008, the Company provided a secured loan to Atire for the sum of Thirty Thousand Dollars ($30,000) in the form of a Secured Promissory Note and Security Agreement (the “Note”). On April 22, 2008, the Company notified Atire that is was terminating discussions with Atire. Atire breached the terms of repayment under the Note and subsequently, the Company filed suit against Atire and Robert F. Williams, a guarantor of the Note (“Williams”). In 2008, the Company fully reserved the outstanding balance as it was deemed uncollectib le.
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 5 – NOTE RECEIVABLE (continued)
On May 21, 2009, the Company entered into a Stipulation of Settlement with Atire and Williams whereby Atire agreed to transfer to the Company all of its rights, title and interest in various assets of Atire (the “Assets”). These assets include various machinery and supplies used in the fabrication of products from recycled tire rubber. The Company has valued these assets at $25,503, the amount of the note receivable previously written-off.
NOTE 6 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
| | | December 31, 2009 | | | December 31, 2008 | |
| Machinery and equipment | | $ | 45,215 | | | $ | 19,712 | |
| Less: Accumulated depreciation | | | (11,661 | ) | | | (2,399 | ) |
| | | | | | | | | |
| | | $ | 33,554 | | | $ | 17,313 | |
Depreciation expense was $9,262 and $854 for the years ended December 31, 2009 and 2008, respectively.
NOTE 7 – INTANGIBLE ASSETS
Intangible consists of patents pending in the amounts of $59,934 and $54,540 for the years ended December 31, 2009 and 2008, respectively. There was no amortization expense for the years ended December 31, 2009 and 2008. We assess the carrying value of intangible assets for impairment annually. As of December 31, 2009 and 2008, there was no impairment of these assets.
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 8 - RELATED PARTY TRANSACTIONS
In conjunction with the spin-off from iVoice, Inc., the Company 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. Administrative services were $37,989 and $50,652, respectively, for the years ended December 31, 2009 and 2008, respectively. As of October 1, 2009 iVoice has suspended all charges for the Administrative Service Agreement with the Company (see Note 8).
B Green, originally 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 has found replacement services for those services being provided by iVoice or can provide these services for itself. Administrative services were $36,000 and $32,000, respectively, for the years ended December 31, 2009 and 2008. As of October 1, 2009 iVoice has suspended all charges for the Administrative Service Agreement with the Company (see Note 9).
Effective November 17, 2009, the Company 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.
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% and 5.25% at December 31, 2009 and 2008, respectively) 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.
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 8 - RELATED PARTY TRANSACTIONS (Continued)
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. During 2009 Mr. Mahoney received 74,000,000 shares of Class A Common Stock, with a market value of $140,000 as repayment of $23,680 of the loan. The difference in the market value and the promissory note reduction was charged to beneficial interest in the amount of $116,320. During 2009 Mr. Mahoney also received 115,025 shares of Class B Common Stock as repayment of $115,205 of the loan. The difference in the market value and the promissory note reduction was charged to beneficial interest in the amount of $364,246. During 2008 Mr. Mahoney received 46,500,000 shares of Class A Common Stock, with a market value of $82,150 as repayment of $19,680 of the loan. The diffe rence in the market value and the promissory note reduction was charged to beneficial interest in the amount of $62,470. As of December 31, 2009 and 2008, the outstanding balances were $3,003 and $141,708, plus accrued interest of $100,692 and $84,936, 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. At December 31, 2009, Mr. Mahoney’s annual salary was $97,604. A portion of Mr. Mahoney’s compensation shall be deferred until such time that the Board of Directors determines that the Company has sufficient financial resources to pay his compensation in cash.
The Board has the option to pay Mr. Mahoney’s compensation in the form of Class B Common Stock. Mr. Mahoney will also be entitled to certain bonuses based on mergers and acquisitions completed by the Company. Pursuant to the terms of the Class B Common Stock, a holder of Class B Common Stock has the right to convert each share of Class B Common Stock into the number of shares of Class A Common Stock determined by dividing the number of Class B Common Stock being converted by a 20% discount of the lowest price for which the Company had ever issued its Class A Common Stock. Mr. Mahoney deferred $27,604 and $27,085 of his compensation for the years ended December 31, 2009 and 2008, respectively. As of December 31, 2009 and 2008, total deferred compensation due to Mr. Mahoney was $221,448 and $193,844, respectively.
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 8 - 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. During 2009 and 2008, Mr. Meller received no payments f or deferred compensation. As of December 31, 2009 and 2008, total deferred compensation due to Mr. Meller was $53,860.
Mr. Mahoney has a consulting agreement with B Green 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). Mr. Mahoney agreed to accept compensation pursuant to this Consulting Agreement in the form of Class B Common Stock, par value $.01 per share, in lieu of cash, for as long as the Board of Directors decides in its sole discretion that the Company does not have the financial resources to pay the Consultant in cash. The number of Class B Common Stock shares to be issued to the Consultant pursuant to this Paragraph 2 shall be equal to one share of Class B common stock for every dollar of compensation due and owing the Consultant. As of December 31, 2009 and 2008, total deferre d compensation due to Mr. Mahoney was $38,000 and $16,000 respectively. No shares were issued to Mr. Mahoney for the years ended December 31, 2009 and 2008. Cash payments to Mr. Mahoney were $2,000 and $-0- for the years ended December 31, 2009 and 2008, respectively.
NOTE 9 – CONVERTIBLE PROMISSORY NOTE AND CONVERTIBLE DEBENTURE
The Company had entered into a temporary administrative services agreement with iVoice. The administrative services agreement will continue on a month-to-month basis until he 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. For the years ended December 31, 2009 and 2008, unpaid administrative services were $37,989 and $42,210, respectively. These amounts were added to the original convertible promissory note of $50,652.
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 9 – CONVERTIBLE PROMISSORY NOTE AND CONVERTIBLE DEBENTURE (continued)
During the year ended December 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. During the year ended December 31, 2008, the Company issued 42,000,000 shares of Class A common stock with a fair value of $45,720 to reduce the convertible promissory note in the amount of $13,440.
As of December 31, 2009 and 2008, the outstanding balances on the Convertible Promissory Note were $112,058 and $79,422, respectively.
iVoice, Inc. may elect payment of the principal and/or interest, at its sole discretion, owed pursuant to this Note by requiring the Company to issue to iVoice, or its 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.
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 until paid.
The promissory note holders have a security interest in substantially all of the assets of the Company.
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 9 – CONVERTIBLE PROMISSORY NOTE AND CONVERTIBLE DEBENTURE (continued)
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: 5.6%; expected dividend yield: 0%: expected life: 5 years; and volatility: 250.92%. The accounting guidance instructs that the conversion options are a derivative liability. At March 5, 2008 the Company recorded the conversion options as a liability, recorded a debt discount of $50,652, and charged Other Ex pense - Loss on Valuation of Derivative for $16,366, resulting primarily from calculation of the conversion price. For the year ended December 31, 2009, the Company recorded a Loss on Valuation of Derivative in the amount of $1,118,504. The fair value of the embedded conversion was estimated at the December 31, 2009 using the Black-Scholes model with the following assumptions: risk free interest rate: 2.69%; expected dividend yield: 0%: expected life: 3.17 years; and volatility: 257.85%. For the year ended December 31, 2008, the Company recorded a Loss on Valuation of Derivative in the amount of $31,030. The fair value of the embedded conversion was estimated at the December 31, 2008 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: 236.79%.
The derivative liability was $1,257,567 and $98,074 at December 31, 2009 and December 31, 2008, respectively.
As of October 1, 2009 iVoice has suspended all charges for the Administrative Service Agreement with the Company (see Note 6).
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 foo tnote.
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 9 – CONVERTIBLE PROMISSORY NOTE AND CONVERTIBLE DEBENTURE (continued)
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. For the year ended December 31, 2009 total unpaid administrative services in the amount of $36,000 was added to the convertible promissory note. For the year ended December 31, 2008 total unpaid administrative services in the amount of $20,400 was added to the convertible promissory note of $8,000.
As of October 1, 2009 iVoice has suspended all charges for the Administrative Service Agreement with the Company (see Note 7).
Effective November 17, 2009, the Company 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. (subsidiary) payable to iVoice, Inc.
c. The Security Agreement dated May 5, 2008 by and between B Green Innovations, Inc. (subsidiary) 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 of December 31, 2009 and 2008, the outstanding balances on the Convertible Promissory Note were $-0- and $28,400, respectively.
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: 226.33%. The accounting guidance instructs that the conversion options are a derivative liability. At June 30, 2008 the Company recorded the conversion options as a liability, recorded a debt discount of $8,000, and charged Other Ex pense - Loss on Valuation of Derivative for $16,366, resulting primarily from calculation of the conversion price.
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 9 – CONVERTIBLE PROMISSORY NOTE AND CONVERTIBLE DEBENTURE (continued)
As a result of the above, the Company reversed its derivative liability. For the year ended December 31, 2009, the Company recorded a Gain on Valuation of Derivative in the amount of $71,138 as compared to a Loss on Valuation of Derivative in the amount of $6,738 for the year ended December 31, 2008. The fair value of the embedded conversion was estimated at the December 31, 2008 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: 236.79%.
The derivative liability was $-0- and $35,138 at December 31, 2009 and December 31, 2008, respectively.
NOTE 10 - CONVERTIBLE DEBENTURE AND DERIVATIVE LIABILITY
On April 16, 2007, the Company issued a Secured Convertible Debenture dated March 30, 2007 (the "Debenture") to YA Global Investments (f/k/a/ Cornell Capital Partners, LP) for the sum of $700,000 in exchange for a previously issued note payable for the same amount. The Debenture has a term of three years, and pays interest at the rate of 5% per annum. Cornell has the right to convert a portion or the entire outstanding principal into the Company's Class A Common Stock at a Conversion Price equal to eighty percent (80%) of the lowest closing Bid Price of the Common Stock during the five (5) trading days immediately preceding the Conversion Date. Cornell may not convert the Debenture into shares of Class A Common Stock if such conversion would result in Cornell beneficially owning in excess of 4.9% of the then issued and outstanding shar es of Class A Common Stock. The Conversion Price and number of shares of Class A Common Stock issuable upon conversion of the Debenture are subject to certain exceptions and adjustment for stock splits and combinations and other dilutive events. Subject to the terms and conditions of the Debenture, the Company has the right at any time provided that as of the date of the Holder's receipt of a Redemption Notice (i) the Closing Bid Price of the of the Common Stock, as reported by Bloomberg, LP, is less than the Conversion Price and (ii) no Event of Default has occurred. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium ("Redemption Premium") equal to twenty percent (15%) of the principal amount being redeemed, and accrued interest, (collectively referred to as the "Redemption Amount"). During the time that any portion of this Debenture is outstanding, if any Event of Default has occurred, the full principal amount of this Debenture, together with interest an d other amounts owing in respect thereof, to the date of acceleration shall become at the Holder's election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common Stock of the Company. Furthermore, in addition to any other remedies, the Holder shall have the right (but not the obligation) to convert this Debenture at any time after (x) an Event of Default or (y) the Maturity Date at the Conversion Price then in-effect.
On March 14, 2008, the Company and YA Global Investments agreed that the Company would redeem all amounts outstanding under the Debenture, except for the $186,557 of the outstanding interest remaining on the original notes payable that were originally exchanged for the Debenture. The amount redeemed was $691,021, consisting of the remaining balance of the
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 10 - CONVERTIBLE DEBENTURE AND DERIVATIVE LIABILITY (continued)
Debenture of $572,815, accrued interest of $32,284, and a redemption premium of $85,922. The Debenture was amended to change amount to $186,557 with a due date of March 14, 2009. The Debenture shall accrue interest at the rate of 15% per annum, and shall be convertible at a conversion price equal to 70% of the lowest closing bid price of the Company’s common stock during the 30 trading days immediately preceding the conversion date. No conversions can be made prior to November 1, 2008.
On November 21, 2008, the Company entered into an Amendment Agreement (the "Agreement") between the Company and YA Global Investments LP, f/k/a Cornell Capital Partners, LP. ("YA Global") which paid off in full the Secured Convertible Debenture dated March 30, 2007 (the "Debenture"). Under the terms of the Agreement, the Company paid the sum of One Hundred and Thirty-five Thousand Dollars ($135,000) in full payment of the Debenture with a remaining principal balance of $186,557, with accrued interest of $17,788. The difference of $69,355 was included in other income in the financial statements for the year ended December 31, 2008. The security interest that YA Global held in the assets of the Company was also terminated.
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: 5.6%; expected dividend yield: 0%: expected life: 3 years; and volatility: 383.29%. The conversion feature of the debenture was recorded as a derivative liability. As such, in March 2007 the Company recorded the conversion options as a liability, recorded a debt discount of $700,000, and charged Other Expen se - Loss on Valuation of Derivative for $492,403, resulting primarily from calculation of the conversion price.
For the year ended December 31, 2008, the Company recorded a Gain on Valuation of Derivative in the amount of $1,291,631. There was no derivative liability at December 31, 2008 as the convertible debenture has been paid in full. For the year ended December 31, 2009, the Company did not record any Gain or Loss on Valuation of Derivative or amortization of debt discount as the convertible debenture has been paid in full. There was no derivative liability at December 31, 2009 and 2008 as the convertible debenture has been paid in full.
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 11 - INCOME TAXES
Deferred income taxes will be determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes will be measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. At December 31, 2009 and 2008 deferred tax assets consist of the following:
| | | 2009 | | | 2008 | |
| Net operating loss carry forwards | | $ | 853,000 | | | $ | 663,000 | |
| Deferred compensation | | | 125,000 | | | | 105,000 | |
| Deferred tax asset | | | 978,000 | | | | 763,000 | |
| Less: valuation allowance | | | (978,000 | ) | | | (768,000 | ) |
| Deferred tax asset, net | | $ | -0- | | | $ | -0- | |
At December 31, 2009 and 2008, the Company had a federal net operating loss carry forward in the approximate amounts of $2,136,000 and $1,658,000, respectively, available to offset future taxable income. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.
On January 1, 2008, the Company adopted authoritative guidance relating to the accounting for uncertainty in income taxes. The guidance clarified the recognition threshold and measurement attributes for financial statement disclosure of tax positions taken, or expected to the taken, on a tax return. The impact of an uncertain income tax provision on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain tax position will not be recognized if it has a less than 50% likelihood of being sustained. On the date of adoption, there were no unrecognized tax benefits. Further, there are no unrecognized tax benefits included in the Company’s balance sheet at December 31, 2009 and 2008, respectively.
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 12 - STANDBY EQUITY DISTRIBUTION AGREEMENT
On September 22, 2005, the Company entered into a Standby Equity Distribution Agreement (the “SEDA”) with YA Global Investments (f/k/a/ Partners) (which was amended and restated on December 12, 2005) whereby YA Global agrees to purchase up to $10 million of the Company’s Class A Common Stock over a two-year period. The shares issued under the SEDA must be first registered under the Securities Act of 1933, as amended. The purchase price of the Common Stock shall be at ninety-five percent (95%) of the lowest trading price of the Company’s Common Stock during the five consecutive trading day period following the notification by the Company of its request for an advance from Cornell under the SEDA. In connection with the SEDA, the Company entered into an Escrow Agreement, Registratio n Rights Agreement and Placement Agent Agreement. For the year ended December 31, 2008, the Company had sold 89,039,944 shares of Class A common stock to YA Global for $89,183, which is net of fees of $13,652. The Standby Equity Distribution Agreement expired on February 5, 2008.
NOTE 13 - CAPITAL STOCK
Pursuant to the Company’s certificate of incorporation, as amended, the Company is authorized to issue 1,000,000 shares of Preferred Stock, par value of $1.00 per share, 10,000,000,000 shares of Class A Common Stock, no par value per share, 50,000,000 shares of Class B Common Stock, par value $0.01 per share, and 20,000,000 shares of Class C Common Stock, par value $0.01 per share. Below is a description of the Company’s outstanding securities, including Preferred Stock, Class A Common Stock, Class B Common Stock and Class C Common Stock.
a) Preferred Stock
The Company is authorized to issue 1,000,000 shares of Preferred Stock, par value $1.00 per share.
Of the 1,000,000 shares of Preferred Stock, 10,000 shares are designated Series A 10% Secured Preferred Stock, par value $1.00 per share, with a stated value of $1,000. Holders of our shares of Series A preferred stock are entitled to receive cumulative dividends payable in preference and before any declaration or payment of any dividend on common stock as may from time to time be declared by the board of directors out of funds legally available for that purpose at the rate of 10% of the original purchase price of such shares of preferred stock. As of December 31, 2009 and 2008, dividends in arrears on Series A Secured Preferred Stock amounted to $260,791 and $117,562, respectively. No dividends may be made with respect to our common stock until all declared dividends on the preferred stock have been paid or set a side for payment to the preferred stock holders. The stated value is used for calculation of dividends and liquidation preferences. On March 12, 2008, the Company sold 1,444.44 shares of Series A 10% Secured Preferred Stock to iVoice, Inc. for $1,444,444. With consent of the holders of the Series A Preferred Stock, on March 5, 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.
As of December 31, 2009 and 2008, 1,444.44 shares of Series A 10% Secured Preferred Stock are issued and outstanding.
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 13 - CAPITAL STOCK (continued)
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 statements of operations. As noted above, an amendment was made which eliminated the conversion feature.
b) Class A Common Stock
As of December 31, 2009, there are 10,000,000,000 shares of Class A Common Stock authorized, no par value, and 600,309,870 shares were issued, 599,115,387 shares were outstanding, and 1,194, 483 shares were in escrow.
As of December 31, 2008, there are 10,000,000,000 shares of Class A Common Stock authorized, no par value, and 486,835,870 shares were issued, 485,641,387 shares were outstanding, and 1,194, 483 shares were in escrow.
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.
c) Class B Common Stock
As of December 31, 2009, 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 th e 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
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 13 - CAPITAL STOCK (continued)
c) Class B Common Stock (continued)
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. During 2009 the Company issued 115,025 shares of Class B Common Stock as repayment of $115,205 of a promissory note. As of December 31, 2009 there are 115,025 shares issued or outstanding. As of December 31, 2008, no shares were issued or outstanding.
d) Class C Common Stock
As of December 31, 2009, 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 December 31, 2009 and 2008, no shares were issued or outstanding.
NOTE 14 - STOCK OPTIONS
Stock Option Plans
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 did not issue any stock options for the years ended December 31, 2009 and 2008.
NOTE 15 – FAIR VALUE MEASUREMENTS
In September 2006, the FASB issued FASB ASC 820-10, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of FASB ASC 820-10 were effective January 1, 2008.
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.
These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. FASB ASC 820-10 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value.
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 15 – FAIR VALUE MEASUREMENTS (continued)
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).
The three levels of the fair value hierarchy defined by FASB ASC 820-10 are as follows:
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 category ge nerally 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.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 15 – FAIR VALUE MEASUREMENTS (continued)
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 December 31, 2009 and December 31, 2008. 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.
December 31, 2009
| | | Level I | | | Level II | | | Level III | | | Total | |
| Total Assets | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | | | | | |
| Convertible promissory notes | | $ | - | | | $ | 112,058 | | | $ | - | | | $ | 112,058 | |
| Note payable to related parties | | | - | | | | 3,003 | | | | - | | | | 3,003 | |
| Derivative liabilities | | | - | | | | 1,254,567 | | | | - | | | | 1,254,567 | |
| Total Liabilities | | $ | - | | | $ | 1,369,628 | | | $ | - | | | $ | 1,369,628 | |
December 31, 2008
| | | Level I | | | Level II | | | Level III | | | Total | |
| Total Assets | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | | | | | |
| Convertible promissory notes | | $ | - | | | $ | 15,943 | | | $ | - | | | $ | 15,943 | |
| Note payable to related parties | | | - | | | | 141,708 | | | | - | | | | 141,708 | |
| Derivative liabilities | | | - | | | | 133,212 | | | | - | | | | 133,212 | |
| Total Liabilities | | $ | - | | | $ | 290,863 | | | $ | - | | | $ | 290,863 | |
The Company’s derivatives are classified within Level 2 of the valuation hierarchy. The Company’s derivatives are valued using internal models that use as their basis readily observable market inputs, such as time value, forward interest rates, and volatility factors. Refer to Notes 6 and 8 for more discussion on derivatives. The Company did not hold financial assets and liabilities, which were recorded at fair value in the Level 3 category as of December 31, 2009 and December 31, 2008.
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 16 – SEGMENT DATA
FASB ASC 280, “Disclosures about Segments of an Enterprise and related information”, establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information of those segments to be presented in interim financial statements. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Company’s President and Chief Executive Officer) in making decisions on how to allocate resources and assess performance. In accordance with FASB ASC 280 the Company has determined it has two reportable segments – “green” technology products, and support of Interactive Voice Response (“IVR”) software. There are no inter-segment revenues.
The Company is organized primarily on the basis of its “green” technology products. The “green” technology segment is dedicated to the development, manufacture, and distribution of “green” products, focusing on acquiring and identifying promising technologies that address environmental issues. The Company also continues to support its IVR business. The Company currently has no plans to engage in future research and development, to launch any additional versions of the IVR software or other products, or to continue to market this product.
Management evaluates the performance of its segments by allocating resources to them based on gross margin. The Company’s general and administrative costs are not segment specific. As a result, all operating expenses are not managed on a segment basis. Most costs are related to the “green” technology segment. Costs associated with its IVR business are specifically allocated at the gross profit level. Segment assets include accounts receivable and inventory.
The table below presents information about reportable segments for the years ended December 31, 2009 and 2008.
2009
| | | “Green” Products | | | IVR | | | Corporate/ Reconciling Items | | | Total | |
| Net sales | | $ | 73,377 | | | $ | 34,743 | | | $ | - | | | $ | 108,120 | |
| Cost of sales | | | 46,594 | | | | - | | | | - | | | | 46,594 | |
| Gross profit | | | 26,783 | | | | 34,743 | | | | - | | | | 61,526 | |
| | | | | | | | | | | | | | | | | |
| General and administrative | | | - | | | | - | | | | 596,002 | | | | 596,002 | |
| Interest, net | | | - | | | | - | | | | 570,411 | | | | 570,411 | |
| Amortization of debt discount | | | - | | | | - | | | | 94,670 | | | | 94,670 | |
| Loss on valuation of derivative | | | - | | | | - | | | | 1,047,366 | | | | 1,047,366 | |
| Other income | | | - | | | | - | | | | (25,504 | ) | | | (25,504 | ) |
| | | | - | | | | - | | | | 2,282,945 | | | | 2,282,945 | |
| | | | | | | | | | | | | | | | | |
| Income (loss) before taxes | | $ | 26,783 | | | $ | 34,743 | | | $ | (2,282,945 | ) | | $ | (2,221,419 | ) |
| | | | | | | | | | | | | | | | | |
| Segment assets | | $ | 6,188 | | | | - | | | $ | 301,380 | | | $ | 307,568 | |
2008
| | | “Green” Products | | | IVR | | | Corporate/ Reconciling Items | | | Total | |
| Net sales | | $ | 1,073 | | | $ | 45,700 | | | $ | - | | | $ | 46,773 | |
| Cost of sales | | | 746 | | | | - | | | | - | | | | 746 | |
| Gross profit | | | 327 | | | | 45,700 | | | | - | | | | 46,027 | |
| | | | | | | | | | | | | | | | | |
| General and administrative | | | - | | | | - | | | | 544,272 | | | | 544,272 | |
| Interest, net | | | - | | | | - | | | | 150,834 | | | | 150,834 | |
| Amortization of debt discount | | | - | | | | - | | | | 715,891 | | | | 715,891 | |
| Gain on valuation of derivative | | | - | | | | - | | | | (1,253,863 | ) | | | (1,253,863 | ) |
| Redemption premium | | | - | | | | - | | | | 85,922 | | | | 85,922 | |
| Other income | | | - | | | | - | | | | (82,017 | ) | | | (82,017 | ) |
| | | | - | | | | - | | | | 161,039 | | | | 161,039 | |
| | | | | | | | | | | | | | | | | |
| Income (loss) before taxes | | $ | 327 | | | $ | 45,700 | | | $ | (161,039 | ) | | $ | (115,012 | ) |
| | | | | | | | | | | | | | | | | |
| Segment assets | | $ | 6,246 | | | | - | | | $ | 539,337 | | | $ | 545,583 | |
B GREEN INNOVATIONS, INC.
RESTATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
NOTE 17 – SUBSEQUENT EVENTS
On January 7, 2010, the Company received $232,491 from the sale of New Jersey state net operating losses.
In February 2010, the Administrative Services Agreement with iVoice, Inc. was terminated and the Company entered into an Exchange Agreement to exchange the Convertible Promissory Note outstanding having a principal and accrued interest of approximately $119,000 for 119 shares of the Company’s Series A 3% Preferred Stock.
In February 2010, the Company received the proceeds of $1.1 million from the sale of 1,100 shares of the Company’s Series A 3% Preferred Stock from a related party.
In February 2010, the Company filed with the State of New Jersey an Amendment to the Certificate of Incorporation that revised the rights of the holders of the Company’s Series A 3% 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. |
| 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. |
NOTE 18 – RESTATEMENTS
This amendment is being filed in order to: (i) modify the audit report of Bagell, Josephs, Levine & Company, LLC contained herein, (ii) correct the proper name order for our independent registered public accounting firm, (iii) incorporate the Segment Data footnote and amend the description of our business to reflect the modification of the Segment Data footnote and (iv) to reverse accrued dividends which have not been declared. No other change has been made, and the information contained in this Report has not been updated. For more current information regarding the Company, readers should refer to the more recent reports filed by the Company with the Securities and Exchange Commission.
The following table summarizes the changes:
Balance Sheets as December 31,
| | | 2009 As Reported | | | 2009 As Restated | | | 2008 As Reported | | | 2008 As Restated | |
| | | | | | | | | | | | | |
| Total Assets | | $ | 307,568 | | | $ | 307,568 | | | $ | 545,583 | | | $ | 545,583 | |
| | | | | | | | | | | | | | | | | |
| Total Liabilities | | | 2,646,538 | | | | 2,385,747 | | | | 1,224,761 | | | | 1,107,199 | |
| Stockholders’ Deficit | | | (2,338,970 | ) | | | (2,078,179 | ) | | | (679,178 | ) | | | (561,616 | ) |
| Total Liabilities & Stockholders’ Deficit | | $ | 307,568 | | | $ | 307,568 | | | $ | 545,583 | | | $ | 545,583 | |
| | | | | | | | | | | | | | | | | |
Statements of Operations for the Years Ended December 31,
| | | 2009 As Reported | | | 2009 As Restated | | | 2008 As Reported | | | 2008 As Restated | |
| | | | | | | | | | | | | |
| Net Loss | | $ | (2,221,419 | ) | | $ | (2,221,419 | ) | | $ | (115,012 | ) | | $ | (115,012 | ) |
| | | | | | | | | | | | | | | | | |
| Net Loss Attributable to Common Shareholders | | $ | (2,364,648 | ) | | $ | (2,221,419 | ) | | $ | (1,677,018 | ) | | $ | (1,599,456 | ) |
| | | | | | | | | | | | | | | | | |
| Basic and diluted loss per common share | | $ | (0.00 | ) | | $ | (0.00 | ) | | $ | (0.00 | ) | | $ | (0.00 | ) |
EXHIBIT INDEX
* Attached herein
