UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the year ended December 31, 2011
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________ to_________.
Commission file number 000-54018
GREEN ENDEAVORS, INC.
(Exact name of registrant as specified in its charter)
Utah (State or Other Jurisdiction of Incorporation or Organization) | 27-3270121 (I.R.S. Employer Identification No.) |
59 West 100 South, 2nd Floor, Salt Lake City, Utah 84101
(Address of Principal Executive Offices) (Zip Code)
(801) 575-8073
(Registrant's Telephone Number, including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
| Title of Each Class | Names of Each Exchange on which Registered |
| $0.001 Common Stock | None |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No x
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):
| Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company x | |
| | (Do not check if a smaller reporting company) | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
On December 3, 2012, approximately 4,463,589,292 shares of the Registrant’s Common Stock, $0.001 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Green Endeavors, Inc. (the “Company”) is filing this Amendment No. 1 to its Annual Report of Form 10-K for the year ended December 31, 2011, which was originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on, April 16, 2012 (the “Original Report”) to correct/restate the Financial Statements contained in the Original Report. The reporting of the Company’s convertible debt has not been recorded properly and there is a need to restate the classification of some of that debt.
The Financial Statements, the Financial Notes, and in Item 7, Management’s Discussion and Analysis of Financial Condition and Financial Disclose are the only portions of the Original Report being amended or revised/restated by this Amendment No. 1 to the Original Report. Except as described above, this Amendment No. 1 to the Original Report does not amend, update or change any items or disclosures contained in the Original Report and does not otherwise reflect events occurring after the original filing date of the Original Report. Accordingly, this Amendment No. 1 to the Original Report should be read in conjunction with the Company’s filings with the SEC subsequent to the filing of the Original Report.
Annual Report on Form 10-K/A
For the Year Ended December 31, 2011
Table of Contents
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This annual report, as well as information included in, or incorporated by reference from, future filings by the Company with the Securities and Exchange Commission and information contained in written material, press releases and oral statements issued by or on behalf of the Company contains or may contain "forward-looking statements" within the meaning of the federal securities laws, including statements concerning anticipated future events and expectations that are not historical facts. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements in this document reflect management's best judgment at the time they are made, but all such statements are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those expressed in or implied by the statements herein. Such forward-looking statements are often identified herein by use of words including, but not limited to, "may," "believe," "project," "forecast," "expect," "estimate," "anticipate," and "plan." In addition, the following factors could affect the Company's actual results and cause such results to differ materially from those expressed in forward-looking statements. These factors include but are not limited to competition within the personal hair care industry, price sensitivity; changes in economic conditions and in particular, continued weakness in the U.S. economies; changes in consumer tastes and fashion trends; the ability of the Company to maintain compliance with financial covenants in its credit agreements; labor and benefit costs; legal claims; the continued ability of the Company to obtain suitable locations and financing for new salon development and to maintain satisfactory relationships with landlords with respect to existing locations; governmental initiatives such as minimum wage rates, taxes; the ability of the Company to maintain satisfactory relationships with suppliers; or other factors not listed above. The ability of the Company to meet its expected revenue growth is dependent on salon acquisitions, new salon construction and same-store sales increases, all of which are affected by many of the aforementioned risks. Additional information concerning potential factors that could affect future financial results is set forth under Item 1A of this Form 10-K/A. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made in our subsequent annual and periodic reports filed or furnished with the SEC.
The forward-looking statements included in this Annual Report on Form 10-K/A are made only as of the date of this Annual Report on Form 10-K/A. We do not intend, and undertake no obligation, to update these forward-looking statements.
Results of Operations
Through our two wholly-owned subsidiaries, Landis Salons, Inc. and Landis Salons II, Inc., we operate two full-service hair and retail salons featuring the Aveda™ line of products. In August 2010, we determined that Newby Salons, LLC, which operated our Bountiful salon, did not meet our operational performance or real estate requirements and was closed. Revenue and expenses from the Bountiful salon are included in the following analysis of our operations until December 1, 2010 when Newby Salons, LLC was sold. The following discussion examines our results of operations and financial condition based on our consolidated financial statements for the years ended December 31, 2011 and 2010.
Revenue
We generate revenue through the sale of services and products in the hair salon industry. For the years ended December 31, 2011 and 2010, we had net sales of $2,814,026 and $2,250,998, respectively. Our net sales increased $563,028 or 25.0% for the year ended December 31, 2011 as compared to an increase of $206,647 or 10.1% for the year ended December 31, 2010. These increases in revenue were driven by the following factors:
| | | Percentage Increase (Decrease) in Revenues For the Years Ended | |
Factor | | December 31, 2011 | | | December 31, 2010 | |
Same-store | | | 25.0 | % | | | 6.2 | % |
New salon construction | | | 0.0 | % | | | 7.6 | % |
Closed salon | | | 0.0 | % | | | (3.7 | )% |
Total | | | 25.0 | % | | | 10.1 | % |
The following table shows the same-store change in service revenue for the years ended December 31, 2011 and 2010:
| | | Years Ended | | | Increase (Decrease) Over Prior Calendar Year | |
Salon | | December 31, 2011 | | | December 31, 2010 | | | Dollar | | | Percentage | |
Liberty Heights | | $ | 1,572,863 | | | $ | 1,496,401 | | | $ | 76,463 | | | | 5 | % |
Marmalade | | | 557,321 | | | | 110,451 | | | | 446,870 | | | | 405 | % |
Bountiful | | | - - - - | | | | 61,572 | | | | (61,572 | ) | | | (100 | )% |
Total Service revenue | | $ | 2,130,184 | | | $ | 1,668,424 | | | $ | 461,761 | | | | 28 | % |
The following table shows the same-store change in product revenue for the years ended December 31, 2011 and 2010:
| | | Years Ended | | | Increase (Decrease) Over Prior Fiscal Year | |
| | | December 31, 2011 | | | December 31, 2010 | | | Dollar | | | Percentage | |
Liberty Heights | | $ | 495,352 | | | $ | 510,910 | | | $ | (15,558 | ) | | | (3 | )% |
Marmalade | | | 188,490 | | | | 44,707 | | | | 143,783 | | | | 322 | % |
Bountiful | | | - - - - | | | | 26,957 | | | | (26,957 | ) | | | (100 | )% |
Total Product revenue | | $ | 683,842 | | | $ | 582,574 | | | $ | 101,066 | | | | 17 | % |
Cost of Revenue
The following table shows cost of revenue as a percentage of related revenue for the years ended December 31, 2011 and 2010:
| | | Years Ended | |
| | | December 31, 2011 | | | December 31, 2010 | |
Services | | | 55.7 | % | | | 59.6 | % |
Product | | | 62.6 | % | | | 53.3 | % |
Operating Expenses
We had a net loss of $276,264 for the year ended December 31, 2011 as compared to net income of $13,939 for the year ended December 31, 2010. The single largest item that accounts for this $290,203 change from net income in 2010 to net loss in 2011 was the $320,770 gain from the sale of Green’s Newby salon subsidiary in Bountiful during 2010. The amount is recorded in the other income and expense section of the consolidated statements of operations as it is not considered part of normal salon operations. The increased general and administrative expenses are explained below in more detail.
General and administrative
The following table shows General and administrative expense for the years ended December 31, 2011 and 2010:
| | | Years Ended | | | | |
| | | December 31, 2011 | | | December 31, 2010 | | | Change | |
Salaries and wages | | $ | 346,730 | | | $ | 300,919 | | | $ | 45,811 | |
Rent | | | 154,615 | | | | 115,214 | | | | 39,401 | |
Advertising | | | 102,176 | | | | 106,207 | | | | (4,031 | ) |
Credit card merchant fees | | | 39,170 | | | | 52,546 | | | | (13,376 | ) |
Insurance | | | 44,576 | | | | 44,369 | | | | 207 | |
Utilities and telephone | | | 43,676 | | | | 35,596 | | | | 8,080 | |
Professional services | | | 186,571 | | | | 143,448 | | | | 43,123 | |
Repairs and maintenance | | | 18,508 | | | | 22,593 | | | | (4,085 | ) |
Dues and subscriptions | | | 19,226 | | | | 18,330 | | | | 896 | |
Office expense | | | 58,121 | | | | 69,947 | | | | (11,826 | ) |
Travel | | | 16,474 | | | | 11,681 | | | | 4,793 | |
Other | | | 20,714 | | | | 39,101 | | | | (18,388 | ) |
Total General and administrative expenses | | $ | 1,050,556 | | | $ | 959,951 | | | $ | 90,605 | |
The increase in general and administrative expenses over the comparable annual period is primarily due to increases in salaries and wages, rent, professional services, and office expense. These 2011 increases over 2010 were primarily related to the opening and full year of operations for the Landis II salon.
Depreciation expense for the year ended December 31, 2011 increased to $93,983 from $77,042 for the year ended December 31, 2010. The increase is primarily due to having a full year of depreciation for new assets placed into service toward the end of 2010 due to the opening of the Landis II salon in 2010.
Other Income (Expense)
| | | Years Ended | |
| | | Restated December 31, 2011 | | | December 31, 2010 | |
Interest expense | | $ | (422,738 | ) | | $ | (253,514 | ) |
Interest income | | | 834 | | | | - - - - | |
Gain on sale of subsidiary | | | - - - - | | | | 320,770 | |
Gain on derivative liability fair value adjustment | | | 89,108 | | | | - - - - | |
Other income | | | 1,560 | | | | 38,083 | |
Total other income (expense) | | $ | (331,236 | ) | | $ | 105,339 | |
| | | | | | | | | |
Other income (expense) went from $105,339 for the year ended December 31, 2010 to $(331,236) for the year ended December 31, 2011 for a change of $(436,575) or (415)%. This change is primarily due to an increase in interest expense of $169,224, which is partially offset by the $89,108 gain on derivative liability fair value adjustment for 2011 that did not occur in 2010. Also there was a $320,770 gain on the sale of subsidiary in 2010 that did not occur in 2011.
Liquidity and Capital Resources
Cash and Investments in marketable securities
As of December 31, 2011, our principal source of liquidity consisted of $97,983 of cash, as compared to $67,593 as of December 31, 2010. Our primary sources of cash during the year ended December 31, 2011 were customer payments for salon services and products and cash proceeds from the sale of our Preferred Series B shares and from the issuance of convertible notes payable. Our primary uses of cash in the year ended December 31, 2011 were payments relating to salaries, benefits, rent, and other general operating expenses.
Working Capital as of December 31, 2011 and December 31, 2010
We had a working capital deficit of $1,399,631 as of December 31, 2011. Our current assets were $213,840, which consisted of $97,983 in cash, $109,470 in inventory, $6,244 in prepaid expenses and $143 in accounts receivable. Our total assets were $1,036,562, which included $420,089 in property and equipment (net), and $402,631 in other assets. Our current liabilities were $1,613,471, including $293,906 in accounts payable and accrued expenses, $845,997 due to related parties, and $200,629 in the current portion of notes payable, and a $116,409 derivative liability. Our long-term liabilities were $2,941,760. Our total stockholders’ deficit at December 31, 2011, was $3,518,669.
Working capital deficit increased by $112,758 as of December 31, 2011, as compared to December 31, 2010 primarily due to the addition of a derivative liability of $116,409 as of December 31, 2011. This addition is most of the overall change in working capital from 2010 to 2011.
Cash Flows from Operating Activities
Cash flows from operating activities include net income (loss), adjusted for certain non-cash charges, as well as changes in the balances of certain assets and liabilities. Our net cash used in operating activities decreased by $304,918 as of December 31, 2011, as compared to December 31, 2010 primarily due to the overall $290,203 change from having net income in 2010 to having a net loss in 2011. Most of the net loss, as discussed earlier, was due to the $320,770 gain on sale of a subsidiary and the $175,311 accretion of convertible debt discounts.
Cash Flows from Investing Activities
Net cash used in investing activities decreased by $284,299 during the year ended December 31, 2011, as compared to the year ended December 31, 2010 primarily due to decreased purchases of property, plant, and equipment by $259,214.
As resources are available, we expect to continue our investing activities, including purchasing property, plant and equipment and making short and long-term equity investments.
Cash Flows from Financing Activities
Net cash provided by financing activities decreased by $592,764 during the year ended December 31, 2011, as compared to the year ended December 31, 2010. This is primarily due to a decrease of proceeds from the sale of preferred stock by $546,000. Other less significant financing activities net to a decrease of $46,764 in cash provided.
Other Factors Affecting Liquidity and Capital Resources
8% Series A Senior Subordinated Convertible Redeemable Debentures
On April 30, 2008, we entered into a stock transfer agreement with our parent company Nexia and Nexia’s wholly-owned subsidiary DHI whereby they would each sell their holdings in Landis and Newby in exchange for an 8% Series A Senior Subordinated Convertible Debenture with a face amount of $3,000,000. Interest on the debenture commenced on December 30, 2008. DHI has the option, at any time, to convert all or any amount over $10,000 of principal face amount and accrued interest into shares of Common stock, $0.001 par value per share, at a conversion price equal to 95% of the average closing bid price of the common stock three days prior to the date we receive notice. In February of 2011, DHI transferred the Debenture to Nexia in exchange for the release of debt obligations owed to Nexia by DHI and Nexia is the current holder of the Debenture.
Impact of Inflation
We compensate some of our salon employees with percentage commissions based on sales they generate. Accordingly, this provides us certain protection against inflationary increases, as payroll expense is a variable cost of sales. In addition, we may increase pricing in our salons to offset any significant increases in wages and cost of services provided. Therefore, we do not believe inflation has had a significant impact on the results of our operations.
Off-Balance Sheet Arrangements
As of December 31, 2011 and December 31, 2010, we had no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
Critical Account Policies and Estimates
The preparation of our consolidated financial statements in accordance with U.S. generally accepted accounting principles, or “GAAP,” is based on the selection and application of accounting policies that require us to make significant estimates and assumptions about the effects of matters that are inherently uncertain. We consider the accounting policies discussed below to be critical to the understanding of our financial statements. Actual results could differ from our estimates and assumptions, and any such differences could be material to our consolidated financial statements.
New Accounting Standards
In June 2011, the FASB issued amendments to existing standards for reporting comprehensive income. Accounting Standards Update (ASU) 2011-05 rescinds the requirement to present a Consolidated Statement of Changes in Share Owners’ Equity and introduces a new statement, the Consolidated Statement of Comprehensive Income. The new statement begins with net income and adds or deducts other recognized changes in assets and liabilities that are not included in net earnings under GAAP. For example, unrealized changes in currency translation adjustments are included in the measure of comprehensive income but are excluded from net earnings. The amendments are effective for our first quarter 2012 financial statements. The amendments affect only the display of those components of equity categorized as other comprehensive income and do not change existing recognition and measurement requirements that determine net earnings.
In May 2011, the FASB issued amendments to existing standards for fair value measurement and disclosure, which are effective in the first quarter of 2012. The amendments clarify or change the application of existing fair value measurements, including: that the highest and best use and valuation premise in a fair value measurement are relevant only when measuring the fair value of nonfinancial assets; that a reporting entity should measure the fair value of its own equity instrument from the perspective of a market participant that holds that instrument as an asset; to permit an entity to measure the fair value of certain financial instruments on a net basis rather than based on its gross exposure when the reporting entity manages its financial instruments on the basis of such net exposure; that in the absence of a Level 1 input, a reporting entity should apply premiums and discounts when market participants would do so when pricing the asset or liability consistent with the unit of account; and that premiums and discounts related to size as a characteristic of the reporting entity’s holding are not permitted in a fair value measurement. The impact of adopting these amendments is expected to be immaterial to the financial statements.
Item 15. Exhibits and Financial Statement Schedules
Page
(a) 1. Financial Statements
(a) 2. Financial Statement Schedules
All other schedules are omitted because they are not required or the required information is shown in the Consolidated Financial Statements or Notes thereto.
The exhibits listed in the accompanying Exhibit Index (following the Signatures section of this Annual Report on Form 10-K/A) are filed or incorporated by reference as part of this Annual Report on Form 10-K/A.
The exhibits filed or incorporated by reference as part of this Annual Report on Form 10-K/A contain agreements to which Green Endeavors, Inc. is a party. These agreements are included to provide information regarding their terms and are not intended to provide any other factual or disclosure information about Green Endeavors, Inc. or the other parties to the agreements. Certain of the agreements contain representations and warranties by each of the parties to the applicable agreement, and any such representations and warranties have been made solely for the benefit of the other parties to the applicable agreement as of specified dates, may apply materiality standards that are different than those applied by investors, and may be subject to important qualifications and limitations that are not necessarily reflected in the agreement. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time, and should not be relied upon as statements of factual information.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Green Endeavors, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Green Endeavors, Inc. and Subsidiaries (the Company) as of December 31, 2011 and 2010, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2011. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
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. 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Green Endeavors, Inc. and Subsidiaries as of December 31, 2011 and 2010, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As disclosed in the notes to the consolidated financial statements, the Company will need additional working capital for its planned activity and to service its debt. This raises substantial doubt about the Company’s ability to continue as a going concern. Management's plans regarding these matters are described in the notes to the consolidated financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
As discussed in Note 14 to the financial statements, the Company discovered that it incorrectly applied accounting principles relating to the treatment of convertible debt resulting in material overstatements of previously reported derivative liabilities and additional paid-in capital, and also resulting in material understatements of interest expense and gain on derivative liability fair value adjustment as of and for the year ended December 31, 2011. Accordingly, the financial statements have been restated to correct the error.
/s/ Madsen & Associates CPA’s, Inc.
Madsen & Associates CPA’s, Inc.
Salt Lake City, Utah
April 12, 2012 and December 17, 2012 with respect to Note 14 to the financial statements
Consolidated Balance Sheets
| | | Restated | | | | |
| | | December 31, | | | December 31, | |
| | | 2011 | | | 2010 | |
| Assets | | | | | | |
| Current Assets: | | | | | | |
Cash | | $ | 97,983 | | | $ | 67,593 | |
Accounts receivable | | | 143 | | | | 941 | |
Inventory | | | 109,470 | | | | 107,365 | |
Prepaid expenses | | | 6,244 | | | | 3,317 | |
Note receivable | | | - - - - | | | | - - - - | |
Total current assets | | | 213,840 | | | | 179,216 | |
| | | | | | | | | |
| Property, plant and equipment, net of accumulated depreciation of $342,922 and $248,939 respectively | | | 420,093 | | | | 493,205 | |
Other assets | | | 402,629 | | | | 408,614 | |
Total Assets | | $ | 1,036,562 | | | $ | 1,081,035 | |
| | | | | | | | | |
| Liabilities and Stockholders’ Deficit | |
| Current Liabilities: | | | | | | | | |
Accounts payable and accrued expenses | | $ | 293,906 | | | $ | 200,327 | |
Deferred revenue | | | 57,823 | | | | 48,525 | |
Due to related parties | | | 845,997 | | | | 893,405 | |
Derivative liability | | | 116,409 | | | | - - - - | |
Current portion of notes payable related party | | | - - - - | | | | 125,584 | |
Current portion of notes payable | | | 200,629 | | | | 198,248 | |
| Convertible notes payable, net of debt discount of $41,793 and $0, respectively | | | 98,707 | | | | - - - - | |
| | | | | | | | | |
Total current liabilities | | | 1,613,471 | | | | 1,466,089 | |
| | | | | | | | | |
| Long-Term Liabilities: | | | | | | | | |
Notes payable related party | | | 105,000 | | | | 105,000 | |
Notes payable | | | 72,128 | | | | 102,056 | |
Convertible debentures, net of debt discount of $95,168 and $110,193, respectively | | | 2,764,632 | | | | 2,749,607 | |
Total long-term liabilities | | | 2,941,760 | | | | 2,956,663 | |
| | | | | | | | | |
| Stockholders’ Deficit: | | | | | | | | |
Convertible super voting preferred stock, $0.001 par value, 10,000,000 shares authorized; 5,850,000 and 5,850,000 shares issued and outstanding at December 31, 2011 and 2010; respectively, no liquidation value | | | 5,850 | | | | 5,850 | |
Convertible preferred series B stock - $0.001 par value 2,000,000 shares authorized, 630,732 and 610,332 shares issued and outstanding at December 31, 2011and 2010, respectively | | | 631 | | | | 610 | |
Preferred stock - $0.001 par value 3,000,000 shares authorized, no shares issued and outstanding at December 31, 2011 and 2010, respectively | | | - - - - | | | | - - - - | |
Common stock, $0.001 par value, 2,500,000,000 shares authorized; 570,886,764 and 430,149,464 shares issued and outstanding at December 31, 2011 and 2010, respectively | | | 570,887 | | | | 430,150 | |
Additional paid-in capital | | | (1,735,952 | ) | | | (1,694,506 | ) |
Accumulated deficit | | | (2,360,085 | ) | | | (2,083,821 | ) |
| | | | | | | | | |
Total stockholders’ deficit | | | (3,518,669 | ) | | | (3,341,717 | ) |
Total Liabilities and Stockholders’ Deficit | | $ | 1,036,562 | | | $ | 1,081,035 | |
| | | | | | | | | |
The accompanying notes are an integral part of these Consolidated Financial Statements.
Green Endeavors, Inc. and Subsidiaries
| | | Years Ended | |
| | | Restated | | | | |
| | | December 31, 2011 | | | December 31, 2010 | |
| Revenue: | | | | | | |
Services, net of discounts | | $ | 2,130,184 | | | $ | 1,668,424 | |
Product, net of discounts | | | 683,842 | | | | 582,574 | |
Total revenue | | | 2,814,026 | | | | 2,250,998 | |
| | | | | | | | | |
| Costs and Expenses: | | | | | | | | |
Cost of services | | | 1,186,726 | | | | 994,765 | |
Cost of product | | | 427,789 | | | | 310,640 | |
Depreciation | | | 93,983 | | | | 77,042 | |
General and administrative | | | 1,050,556 | | | | 959,951 | |
Total costs and expenses | | | 2,759,054 | | | | 2,342,398 | |
| | | | | | | | | |
Income (loss) from operations | | | 54,972 | | | | (91,400 | ) |
| | | | | | | | | |
| Other income (expense): | | | | | | | | |
Interest expense | | | (422,738 | ) | | | (253,514 | ) |
Interest income | | | 834 | | | | - - - - | |
Gain on sale of subsidiary | | | - - - - | | | | 320,770 | |
Gain on derivative liability fair value adjustment | | | 89,108 | | | | - - - - | |
Other income | | | 1,560 | | | | 38,083 | |
Total other income (expense) | | | (331,236 | ) | | | 105,339 | |
| | | | | | | | | |
Net income (loss) | | $ | (276,264 | ) | | $ | 13,939 | |
| | | | | | | | | |
Basic and diluted net income (loss) per share | | $ | (0.00 | ) | | $ | 0.00 | |
| | | | | | | | | |
Weighted average common shares outstanding – basic and diluted | | | 459,868,549 | | | | 381,748,573 | |
The accompanying notes are an integral part of these Consolidated Financial Statements.
Consolidated Statements of Stockholders' Deficit
December 31, 2009 through December 31, 2011
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Super Voting Preferred Stock | | | Series B Preferred Stock | | | Common Stock | | | | | | | | | | | | | |
| | | Shares | | | Amount | | | Shares | | | Amount | | | Shares | | | Amount | | | in Capital | | | (Deficit) | | | Interest | | | Deficit | |
| Balance, December 31, 2009 | | | 6,500,000 | | | $ | 6,500 | | | | 183,800 | | | $ | 183 | | | | 321,395,650 | | | $ | 321,396 | | | $ | (1,778,595 | ) | | $ | (2,100,450 | ) | | $ | 2,690 | | | $ | (3,548,277 | ) |
| Series B preferred shares issued in settlement agreement issued | | | - - - - | | | | - - - - | | | | 10,000 | | | | 10 | | | | - - - - | | | | - - - - | | | | (6,010 | ) | | | - - - - | | | | - - - - | | | | (6,000 | ) |
| Series B preferred shares issued to repurchase Super voting preferred stock issued | | | (650,000 | ) | | | (650 | ) | | | 52,000 | | | | 52 | | | | - - - - | | | | - - - - | | | | 598 | | | | - - - - | | | | - - - - | | | | - - - - | |
| Write-off of related party receivables | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | (702,572 | ) | | | - - - - | | | | - - - - | | | | (702,572 | ) |
| Acquisition of remaining 1% ownership of Landis Salons, Inc. | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | 2,690 | | | | (2,690 | ) | | | - - - - | |
| Conversion of series B preferred shares | | | - - - - | | | | - - - - | | | | (54,200 | ) | | | (54 | ) | | | 108,753,814 | | | | 108,754 | | | | (108,700 | ) | | | - - - - | | | | - - - - | | | | - - - - | |
| Series B preferred shares sold for cash between $1.50 and $2.50 per share | | | - - - - | | | | - - - - | | | | 337,732 | | | | 338 | | | | - - - - | | | | - - - - | | | | 510,662 | | | | - - - - | | | | - - - - | | | | 511,000 | |
| Series B preferred shares issued pursuant to employment agreement with related party issued | | | - - - - | | | | - - - - | | | | 25,000 | | | | 25 | | | | - - - - | | | | - - - - | | | | 124,975 | | | | - - - - | | | | - - - - | | | | 125,000 | |
| Series B preferred shares issued as collateral pursuant to the facility lease agreement for Landis II issued | | | - - - - | | | | - - - - | | | | 50,000 | | | | 50 | | | | - - - - | | | | - - - - | | | | 249,950 | | | | - - - - | | | | - - - - | | | | 250,000 | |
| Amortization of debt discount on convertible debenture | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | (14,808 | ) | | | - - - - | | | | - - - - | | | | (14,808 | ) |
| Series B preferred shares issued for key employees issued | | | - - - - | | | | - - - - | | | | 6,000 | | | | 6 | | | | - - - - | | | | - - - - | | | | 29,994 | | | | - - - - | | | | - - - - | | | | 30,000 | |
| Net income for year ended December 31, 2010 | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | 13,939 | | | | - - - - | | | | 13,939 | |
| Balance, December 31, 2010 | | | 5,850,000 | | | | 5,850 | | | | 610,332 | | | | 610 | | | | 430,149,464 | | | | 430,150 | | | | (1,694,506 | ) | | | (2,083,821 | ) | | | - - - - | | | | (3,341,717 | ) |
| Write-off of related party receivables | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | (1,588 | ) | | | - - - - | | | | - - - - | | | | (1,588 | ) |
| Conversion of series B preferred shares | | | - - - - | | | | - - - - | | | | (20,266 | ) | | | (20 | ) | | | 44,414,417 | | | | 44,414 | | | | (44,394 | ) | | | - - - - | | | | - - - - | | | | - - - - | |
| Common stock options granted for services | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | | | | | | | | | 25,364 | | | | - - - - | | | | - - - - | | | | 25,364 | |
| Exercise of common stock options granted | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | 60,000,000 | | | | 60,000 | | | | (60,000 | ) | | | - - - - | | | | - - - - | | | | - - - - | |
| Conversion of convertible note payable to common shares (restated) | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | 36,322,883 | | | | 36,323 | | | | (23,701 | ) | | | - - - - | | | | - - - - | | | | 12,622 | |
| Series B preferred shares sold for cash at $1.50 per share | | | - - - - | | | | - - - - | | | | 40,666 | | | | 41 | | | | - - - - | | | | - - - - | | | | 64,959 | | | | - - - - | | | | - - - - | | | | 65,000 | |
| Adjustment of additional paid-in capital due to restatement (restated) | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | (2,086 | ) | | | - - - - | | | | - - - - | | | | (2,086 | ) |
| Net income for year ended December 31, 2011 (restated) | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | - - - - | | | | (276,264 | ) | | | - - - - | | | | (276,264 | ) |
| Balance, December 31, 2011 (restated) | | | 5,850,000 | | | $ | 5,850 | | | | 630,732 | | | $ | 631 | | | | 570,886,764 | | | $ | 570,887 | | | $ | (1,735,952 | ) | | $ | (2,3600,085 | ) | | $ | - - - - | | | $ | (3,518,669 | ) |
The accompanying notes are an integral part of these Consolidated Financial Statements.
Consolidated Statements of Cash Flows
| | | Years Ended | |
| | | Restated December 31, 2011 | | | December 31, 2010 | |
| Cash Flows from Operating Activities: | | | | | | |
Net income (loss) | | $ | (276,264 | ) | | $ | 13,939 | |
Adjustments to reconcile net loss attributable to controlling interest to net cash provided by (used in) operating activities: | | | | | | | | |
Depreciation | | | 93,983 | | | | 77,042 | |
Gain on sale of subsidiary | | | - - - - | | | | (320,770 | ) |
Gain on derivative liability fair value adjustment | | | (89,108 | ) | | | - - - - | |
Debt discount amortization and initial recording | | | 175,311 | | | | - - - - | |
Write-down of related party receivables | | | (1,588 | ) | | | (40,349 | ) |
Stock based compensation | | | 25,364 | | | | 30,000 | |
Changes in operating assets and liabilities: | | | | | | | | |
Accounts receivable | | | 799 | | | | - - - - | |
Due from related parties | | | (47,408 | ) | | | (643,962 | ) |
Inventories | | | (2,105 | ) | | | (14,331 | ) |
Prepaid expenses | | | (2,927 | ) | | | (3,317 | ) |
Other assets | | | 5,983 | | | | (190,175 | ) |
Accounts payable and accrued expenses | | | 93,579 | | | | 661,431 | |
Deferred revenue | | | 9,298 | | | | 19,030 | |
Other long-term liabilities | | | (525 | ) | | | 90,936 | |
Net cash provided by (used in) operating activities | | | (15,608 | ) | | | (320,526 | ) |
| | | | | | | | | |
| Cash Flows from Investing Activities: | | | | | | | | |
Purchases of long-term investment | | | - - - - | | | | (25,085 | ) |
Purchases of property, plant, and equipment | | | (20,871 | ) | | | (280,085 | ) |
Net cash provided by (used in) investing activities | | | (20,871 | ) | | | (305,170 | ) |
| | | | | | | | | |
| Cash Flows from Financing Activities: | | | | | | | | |
Proceeds from bank loan | | | - - - - | | | | 100,000 | |
Payments made on bank loan | | | (8,569 | ) | | | (51,367 | ) |
Payments made on notes payable | | | (18,978 | ) | | | - - - - | |
Payments made on related party notes payable | | | (125,584 | ) | | | - - - - | |
Proceeds from issuance of convertible notes payable | | | 155,000 | | | | - - - - | |
Proceeds from issuance of preferred stock | | | 65,000 | | | | 611,000 | |
Net cash provided by (used in) financing activities | | | 66,869 | | | | 659,633 | |
| | | | | | | | | |
Increase in cash | | | 30,390 | | | | 33,937 | |
| | | | | | | | | |
Cash at Beginning of Year | | | 67,593 | | | | 33,656 | |
| | | | | | | | | |
Cash at end of year | | $ | 97,983 | | | $ | 67,593 | |
| Supplemental cash flow information: | | | | | | |
Cash paid during the year for: | | | | | | |
Interest | | $ | 5,699 | | | $ | 7,317 | |
Non-cash investing and financing activities: | | | | | | | | |
Issuance of series B preferred shares | | $ | 64,959 | | | $ | 369,000 | |
Issuance of common stock options | | $ | 25,364 | | | $ | - - - - | |
Derivative liability | | $ | 205,308 | | | $ | - - - - | |
Conversion of convertible note payable to common shares | | $ | 14,500 | | | $ | - - - - | |
Conversion of B preferred shares | | $ | 44,394 | | | $ | 108,700 | |
The accompanying notes are an integral part of these Consolidated Financial Statements.
Notes to Consolidated Financial Statements
Note 1 – Organization and Basis of Financial Statement Presentation
Business Description
Green Endeavors, Inc., (“Green”) owns and operates two hair salons carrying the Aveda™ product line through its wholly-owned subsidiaries Landis Salons, Inc. (“Landis”) and Landis Salons II, Inc. (“Landis II”) in Salt Lake City Utah.
Organization
Green Endeavors, Inc. was incorporated under the laws of the State of Delaware on April 25, 2002 as Jasper Holdings.com, Inc. During the year ended December 2004, Green changed its name to Net2Auction, Inc. In July of 2007, Green changed its name to Green Endeavors, Ltd. On August 23, 2010, Green changed its name to Green Endeavors, Inc. and moved the corporate domicile from Delaware to Utah. On August 26, 2010, Green effected a forward split of the issued and outstanding shares of its common stock on a 1 for five basis and by the same proportion the number of authorized shares were increased to 2.5 billion to maintain the same ratios of authorized shares to issued shares and amended the designations of its Preferred Stock. All share and per share information included in these financial statements has been adjusted to reflect this forward stock split. The change in the designation of the Supervoting Preferred Stock increased its voting rights from 10 votes per share to 100 votes per share, and the amendment to the designation of the Series B Preferred Shares will modify the language in the designation regarding changes in the Common stock and the time period allowed to the corporation to respond to request for conversion up to 90 days. All share and per share information included in these financial statements has been adjusted to reflect this forward stock split. Green is quoted on the Pinksheets as an OTCQB issuer under the symbol GRNE.
Green is a 90% controlled subsidiary of Nexia Holdings, Inc (“Nexia”). Green was acquired by Nexia in October 2007 in exchange for 150,000 shares of Nexia Series C Preferred Stock valued at $750,000. Nexia is not currently a reporting company and is quoted on the Pinksheets under the symbol NXHD.
Landis Salons, Inc., a Utah corporation, was organized on May 4, 2005 for the purpose of operating an Aveda Lifestyle Salon. As of December 31, 2009, Landis was 99% owned by Green and a noncontrolling interest of 1% was held by a former employee. During the three months ended March 31, 2010, Green issued 10,000 Series B Preferred shares for the remaining 1% noncontrolling interest in Landis.
Landis Salons II, Inc., a Utah corporation was organized on March 17, 2010 as a wholly-owned subsidiary of Green for the purpose of opening a second Aveda Lifestyle Salon. On September 20, 2010, Landis II opened its doors for operations.
Basis of Financial Statement Presentation
The consolidated financial statements include the accounts of Green and its subsidiaries after elimination of intercompany accounts and transactions. All consolidated subsidiaries are wholly-owned by Green as of December 31, 2011 and 2010.
Green consolidates entities under control and records a noncontrolling interest for the portions not owned by Green. Control is determined, where applicable, by the sufficiency of equity invested and the rights of the equity holders, and by the ownership of a majority of the voting interests, with consideration given to the existence of approval or veto rights granted to the minority shareholder. If the minority shareholder holds substantive participating rights, it overcomes the presumption of control by the majority voting interest holder. In contrast, if the minority shareholder simply holds protective rights (such as consent rights over certain actions), it does not overcome the presumption of control by the majority voting interest holder.
Note 2 – Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The carrying values of all financial instruments are deemed to approximate fair value due to the short maturity of these instruments and interest rates that approximate current market rates.
Cash and Cash Equivalents
Investments with original maturities of three months or less at the time of purchase are considered cash equivalents. As of December 31, 2011 and 2010, Green had no cash equivalents.
Inventory
Inventory consists of items held for resale and is carried at the lower of cost or market. Cost is determined using the first in, first out (“FIFO”) method.
Property, Plant and Equipment
Property, plant, and equipment is stated at historical cost. Depreciation is generally provided over the estimated useful lives, using the straight-line method, as follows:
Computer equipment and related software | 3 years |
| Leasehold improvement | Shorter of the lease term or the estimated useful life |
| Furniture and fixtures | 3-10 years |
| Equipment | 3-10 years |
| Vehicle | 7 years |
| Signage | 10 years |
During the years ending December 31, 2011 and 2010, Green recorded depreciation expense in the amount of $93,983 and $77,042, respectively.
The following is a summary of Green’s Property, plant, and equipment by major category as of December 31, 2011:
| | | Cost | | | Accumulated Depreciation | | | Net | |
| | | | | | | | | | |
Computer equipment and related software | | $ | 18,992 | | | $ | 11,733 | | | $ | 7,259 | |
Leasehold improvements | | | 443,579 | | | | 204,377 | | | | 239,202 | |
Furniture and fixtures | | | 21,504 | | | | 11,652 | | | | 9,852 | |
Equipment | | | 205,593 | | | | 107,431 | | | | 98,162 | |
Vehicle | | | 48,193 | | | | 4,590 | | | | 43,603 | |
Signage | | | 25,154 | | | | 3,139 | | | | 22,015 | |
Total | | $ | 763,015 | | | $ | 342,922 | | | $ | 420,093 | |
The following is a summary of Green’s Property, plant, and equipment by major category as of December 31, 2010:
| | | Cost | | | Accumulated Depreciation | | | Net | |
| | | | | | | | | | |
Computer equipment and related software | | $ | 15,859 | | | $ | 4,249 | | | $ | 11,610 | |
Leasehold improvements | | | 438,678 | | | | 155,993 | | | | 282,685 | |
Furniture and fixtures | | | 20,473 | | | | 9,239 | | | | 11,234 | |
Equipment | | | 194,838 | | | | 76,463 | | | | 118,375 | |
Vehicle | | | 48,193 | | | | 2,295 | | | | 45,898 | |
Signage | | | 24,103 | | | | 700 | | | | 23,403 | |
Total | | $ | 742,144 | | | $ | 248,939 | | | $ | 493,205 | |
Investments in Equity Securities
Marketable Securities
Green considers all of its investments in marketable securities as available-for-sale. Available-for-sale securities are stated at fair value, with the unrealized gains and losses presented net of tax and reported as a separate component of Stockholders' deficit. Realized gains and losses are determined using the specific identification method. Gains are recognized when realized and are recorded in the Consolidated Statements of Operations as Other income. Losses are recognized as realized or when Green has determined that an other-than-temporary decline in fair value has occurred.
Non-Marketable Securities
Green uses either the cost or equity method of accounting to account for its long-term, non-marketable investment securities. If Green determines that an other-than-temporary decline exists in a non-marketable equity security, Green writes down the investment to its fair value and records the related write-down as an impairment loss in the Consolidated Statements of Operations.
Series B Preferred Stock
The Series B preferred stock is voting, convertible preferred. Each share of Green’s Series B Preferred Stock is convertible into $5.00 worth of common stock. The number of common shares received is based on the market value of the common stock on the date of conversion. Series B Preferred Stock shareholders, at the option of Green, can receive cash or common stock upon conversion. The Preferred Stock is classified as equity as long as there are sufficient shares available to effect the conversion. In some instances certain contracts may pass the option to receive cash or Common Stock to the shareholder. In this case, it is assumed that a cash settlement will occur and balance sheet classification of the affected Preferred Stock and related preferred paid-in capital as a liability.
Derivative Liability (restated)
Green follows the guidance in ASC 815-15 “Derivatives and Hedging” to determine if an embedded conversion feature from the issuance of convertible instruments should be classified as a derivative. ASC 815-15 requires that the conversion feature is bifurcated and separately accounted for as an embedded derivative contained in Green’s convertible debt. The embedded derivative is carried on Green’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. Green fair values the embedded derivative using the Black-Scholes option pricing model.
Deferred Revenue
Deferred revenue arises when customers pay for products and/or services in advance of revenue recognition. Green’s deferred revenue consists solely of unearned revenue associated with the purchase of gift certificates for which revenue is recognized only when the service is performed or the product is delivered.
Revenue Recognition
Revenue is recognized at the time the service is performed or the product is delivered.
Stock Based Compensation
Green recognizes the cost of employee services received in exchange for awards of equity instruments as stock-based compensation expense. Stock-based compensation expense is measured at the grant date based on the value of the restricted stock award, option, or purchase right and is recognized as expense, less expected forfeitures, over the requisite service period, which typically equals the vesting period. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. The fair value of each restricted stock issuance is determined using the fair value of Green’s common stock on the grant date.
Determining the fair value of stock-based awards at the grant date requires judgment, including estimating the following:
| · | Expected volatility of Green’s stock; |
| · | Expected term of stock options; |
| · | Risk-free interest rate for the period; |
| · | Expected dividends (if any); and, |
The computation of the expected volatility assumption used in the Black-Scholes option pricing model for new grants is based on implied volatility when the remaining maturities of the underlying traded options are at least one year and, when the remaining maturities of the underlying traded options are less than one year, it is based on an equal weighting of historical and implied volatilities.
When establishing the expected life assumption, Green reviews annual historical employee exercise behavior with respect to option grants having similar vesting periods. The risk-free interest rate for the period within the expected term of the option is based on the yield of United States Treasury notes in effect at the time of grant. Green has not historically paid dividends, thus the expected dividends used in any calculations are zero. Judgment is required in estimating the amount of stock-based awards that Green expects to be forfeited. Green calculates an expected forfeiture rate for stock options issuances based on historical trends.
The valuation of all options, including the expected life and forfeiture rates of stock options, are calculated based on one employee pool because there is no significant difference in exercise behavior between classes of employees.
During the year ended December 31, 2011, Green issued 60,000,000 shares of common stock to three individuals for services calculated at $25,364 using the Black-Scholes option pricing model. See footnotes to the financial statements for additional disclosures regarding the Company’s stock-based compensation.
Income Taxes
Deferred income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Also, Green's practice is to recognize interest and/or penalties related to income tax matters in income tax expense.
The following is a table of Green’s net operating losses (NOL), related estimated deferred tax assets, and expiration dates of the NOLs:
| | | Net Operating Income (Loss) | | | Deferred Tax Asset (Liability) | | | Expiration Year of NOL | |
| | | | | | | | | | |
2008 | | $ | (1,682,884 | ) | | $ | 572,000 | | | | 2028 | |
2009 | | | (385,160 | ) | | | 131,000 | | | | 2029 | |
2010 | | | 13,939 | | | | (4,800 | ) | | | 2030 | |
2011(restated) | | | (276,264 | ) | | | 90,000 | | | | 2031 | |
Total (restated) | | $ | (2,330,369 | ) | | $ | 788,200 | | | | | |
The related deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The deferred tax asset above has been fully offset by a valuation allowance because the Company expects that it will not realize the benefits of the deferred tax asset in the near future.
Net Loss Per Share
Net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the specified period. Diluted earnings per common share is computed by dividing net income by the weighted average number of common shares and potential common shares during the specified period. For the year ended December 31, 2011, potential common shares are not included in the diluted net loss per share calculation as their effect would be anti-dilutive.
Noncontrolling Interest in Subsidiary
On January 1, 2009, Green adopted new accounting guidance which clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. The new guidance also requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest and requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. In addition, it establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that does not result in deconsolidation and requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated unless the deconsolidation is an in-substance sale of real estate.
The new guidance on noncontrolling interests was required to be applied prospectively after adoption, with the exception of the presentation and disclosure requirements, which were applied retrospectively for all periods presented. As a result, Green reclassified noncontrolling interests to permanent equity in the accompanying consolidated balance sheets.
Recent Accounting Pronouncements
In January 2010, the FASB issued ASU No. 2010-06, “Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”). ASU 2010-06 requires new disclosures for (i) transfers of assets and liabilities in and out of levels one and two fair value measurements, including a description of the reasons for such transfers and (ii) additional information in the reconciliation for fair value measurements using significant unobservable inputs (level three). This guidance also clarifies existing disclosure requirements including (i) the level of disaggregation used when providing fair value measurement disclosures for each class of assets and liabilities and (ii) the requirement to provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements for level two and three assets and liabilities. ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about activity in the roll forward for level three fair value measurements, which is effective for fiscal years beginning after December 15, 2010. The adoption of this guidance has not had a material impact on Green’s financial position and results of operations.
In February 2010, the FASB issued ASU No. 2010-09, “Amendments to Certain Recognition and Disclosure Requirements” (“ASU 2010-09”), which amends ASC Topic 855, “Subsequent Events.” The amendments to ASC Topic 855 do not change existing requirements to evaluate subsequent events, but: (i) defines a “SEC Filer,” which we are; (ii) removes the definition of a “Public Entity”; and (iii) for SEC Filers, reverses the requirement to disclose the date through which subsequent events have been evaluated. ASU 2010-09 was effective for us upon issuance. This guidance did not have a material impact on Green’s financial position and results of operations.
In April 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-13, “Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades” (“ASU 2010-13”). ASU 2010-13 addresses the classification of a share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security trades. FASB Accounting Standards Codification (“ASC”) Topic 718 was amended to clarify that a share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trade shall not be considered to contain a market, performance or service condition. Therefore, such an award is not to be classified as a liability if it otherwise qualifies for equity classification. The amendments in ASU 2010-13 are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010, with early application permitted. We do not anticipate that the adoption of this guidance will have a material impact on Green’s financial position and results of operations.
In May 2011, the FASB issued amendments to existing standards for fair value measurement and disclosure, which are effective in the first quarter of 2012. The amendments clarify or change the application of existing fair value measurements, including: that the highest and best use and valuation premise in a fair value measurement are relevant only when measuring the fair value of nonfinancial assets; that a reporting entity should measure the fair value of its own equity instrument from the perspective of a market participant that holds that instrument as an asset; to permit an entity to measure the fair value of certain financial instruments on a net basis rather than based on its gross exposure when the reporting entity manages its financial instruments on the basis of such net exposure; that in the absence of a Level 1 input, a reporting entity should apply premiums and discounts when market participants would do so when pricing the asset or liability consistent with the unit of account; and that premiums and discounts related to size as a characteristic of the reporting entity’s holding are not permitted in a fair value measurement. The impact of adopting these amendments is expected to be immaterial to the financial statements.
In June 2011, the FASB issued amendments to existing standards for reporting comprehensive income. Accounting Standards Update (ASU) 2011-05 rescinds the requirement to present a Consolidated Statement of Changes in Share Owners’ Equity and introduces a new statement, the Consolidated Statement of Comprehensive Income. The new statement begins with net income and adds or deducts other recognized changes in assets and liabilities that are not included in net earnings under GAAP. For example, unrealized changes in currency translation adjustments are included in the measure of comprehensive income but are excluded from net earnings. The amendments are effective for our first quarter 2012 financial statements. The amendments affect only the display of those components of equity categorized as other comprehensive income and do not change existing recognition and measurement requirements that determine net earnings.
Management believes the impact of other recently issued standards and updates, which are not yet effective, will not have a material impact on Green’s consolidated financial position, results of operations or cash flows upon adoption.
Note 3 – Inventory
Green’s inventory consists of items held for resale and product that is used in services by the Landis and Landis II Salons. Inventory is carried at the lower of cost or market. As of December 31, 2011 and 2010, inventory amounted to $109,470 and $107,365, respectively.
Note 4 – Other Assets
The following table shows other assets as of December 31, 2011 and 2010:
| | | December 31, 2011 | | | December 31, 2010 | |
| Green Series B Preferred shares pledged as collateral for the Landis II facility lease (1) | | $ | 250,000 | | | $ | 250,000 | |
Note receivable pledged as collateral for the Landis II facility lease (2) | | | 105,000 | | | | 105,000 | |
Lease and utility deposits | | | 21,403 | | | | 23,684 | |
Certificate of deposit | | | 26,226 | | | | 25,462 | |
Other | | | ---- | | | | 4,468 | |
Total other assets | | $ | 402,629 | | | $ | 408,614 | |
(1) On July 9, 2010, the Board of Directors approved the issuance of 50,000 shares of restricted Series B Preferred shares to Landis Salons II, Inc., a subsidiary of Green, to be used as collateral for a lease entered into by Landis Salons II to serve as the location for a new Landis Lifestyle Salon. These shares were then assigned to the landlord of Landis II as a security deposit with a related value of $250,000.
(2)On July 12, 2010, Landis Salons II, Inc. issued a promissory note in the principal amount of $105,000 payable to Wasatch Capital Corporation, which is a subsidiary of Nexia Holdings, Inc. Principal and interest, accruing at the rate of 5% per year, will be due on or before November 10, 2018. This promissory note was issued in exchange for a note receivable assigned to Landis Salons II, for $105,000 with the same terms. As of December 31, 2011 and 2010, there was $7,724 and $2,474 of accrued interest on the note, respectively.
Note 5 – Lease Commitments
Operating Leases
Facilities are leased under operating leases expiring at various dates through 2020. Certain of these leases contain renewal options. For the years ended December 31, 2011 and 2010, rent expense was $154,615 and $115,214, respectively.
As of December 31, 2011, future minimum lease payments under non-cancelable operating leases were as follows:
| | | Operating | |
For the fiscal years: | | Leases | |
2012 | | $ | 141,528 | |
2013 | | | 145,066 | |
2014 | | | 148,693 | |
2015 | | | 132,415 | |
2016 | | | 75,741 | |
Thereafter | | | 301,087 | |
Total lease payments | | $ | 944,530 | |
Capital Leases
The following is a summary of the gross amount of assets by class recorded under capital leases as of December 31, 2011 and 2010:
Classes of Property | | December 31, 2011 | | | December 31, 2010 | |
Salon equipment | | $ | - - - - | | | $ | 50,603 | |
During the year ended December 31, 2011, Green completed its capital lease through a bargain purchase option extended in the lease agreement. The bargain purchase amount was $4,916 which was the entire amount of the security deposit.
Note 6 – Related Party Transactions
The following table summarizes the principal and accrued interest balance of the Convertible Debentures as of December 31, 2011and 2010:
| | | Related party | | | Related party | | | Total | | | Total | |
| | | December 31, 2011 | | | December 31, 2010 | | | December 31, 2011 | | | December 31, 2010 | |
Principal balance | | $ | 2,359,800 | | | $ | 2,359,800 | | | $ | 2,859,800 | | | $ | 2,859,800 | |
Accrued interest | | | 627,106 | | | | 438,322 | | | | 699,062 | | | | 470,278 | |
Total | | $ | 2,986,906 | | | $ | 2,798,122 | | | $ | 3,558,862 | | | $ | 3,330,078 | |
On June 24, 2010, the Board of Directors approved the purchase of 650,000 shares of Green’s Super voting Preferred stock from AmeriResource Technologies, Inc. in exchange for 52,000 shares of Green’s Series B Preferred stock. The number of Series B Preferred shares issued in this transaction was determined based on one share of Green’s Super voting Preferred stock being equivalent to 10 shares of Common stock and each Series B Preferred share is convertible into $5.00 of Common stock. The Series B Preferred shares were valued at $260,000.
On July 7, 2010, the Board of Directors authorized the issuance of 25,000 shares of restricted Series B Preferred shares to Richard G. Clegg, an officer and director of Green, pursuant to the terms of his employment agreement with a related party, Diversified Holdings I, Inc. The shares were issued pursuant to The 2008 Benefit Plan of Green to a natural person, providing bona fide services and not in conjunction with a capital raising transaction, exempt from registration under Rule 701 of the Securities Act of 1933. These shares are subject to redemption based upon Mr. Cleggs resignation under the terms of his employment agreement.
On July 9, 2010, the Board of Directors approved the issuance of 50,000 shares of restricted Series B Preferred shares to Landis Salons II, Inc., a subsidiary of Green, to be used as collateral for a lease entered into by Landis Salons II, Inc. to serve as the location for a new Landis Lifestyle Salon. The shares are held by the landlord of the Marmalade facility to be converted and liquidated in the event of default on the part of Landis II. The shares will be returned to Landis II at on the second anniversary of the lease commencement date provided that all obligations under the lease are current and the shares are reflected as an other non-current asset on Green’s Consolidated Balance Sheet.
On July 12, 2010, Landis Salons II, Inc. issued a promissory note in the principal amount of $105,000 payable to Wasatch Capital Corporation, which is a subsidiary of Nexia Holdings, Inc. Principal and interest, accruing at the rate of 5% per year, will be due on or before November 10, 2018. This promissory note was issued in exchange for a note receivable assigned to Landis Salons II, for $105,000 with the same terms.
On December 1, 2010, Green sold its ownership interest in Newby to Diversified Holdings X, Inc. whose president is also the president of Green Endeavors, Inc. See Note 9 for additional information on the sale of Newby.
On December 2, 2010, the Board of Directors approved the issuance of 2,000 Series B Preferred shares each to three employees of Landis Salons, Inc. for services rendered. The shares were valued at $5 per share or $30,000. One of the employees who received such shares was Logan Fast, an officer and director of Green.
On January 6, 2011, the Board of Directors approved the conversion of 12,866 Series B Preferred shares into 12,866,000 shares of Common stock for Richard D. Surber, President, CEO and Director of Green. The shares were converted at $0.005 per share which was the quoted closing price on the date the conversion letter was received from Mr. Surber.
Note 7 – Notes Payable (Restated as indicated)
A summary of notes payable as of December 31, 2011 and 2010 is as follows:
Creditor | | Interest Rate | | | Due Date | | | December 31, 2011 | | | December 31, 2010 | |
| Asher Enterprises, Inc. (3) | | | 8.00 | % | | | 01-09-2012 | | | $ | 60,500 | | | $ | - - - - | |
| Asher Enterprises, Inc. (4) | | | 8.00 | % | | | 03-16-2012 | | | | 32,500 | | | | - - - - | |
| Asher Enterprises, Inc. (5) | | | 8.00 | % | | | 04-25-2012 | | | | 25,000 | | | | - - - - | |
| Asher Enterprises, Inc. (6) | | | 8.00 | % | | | 09-12-2012 | | | | 22,500 | | | | - - - - | |
Xing Investment Corp (1) | | | 10.00 | % | | | 05-12-2008 | | | | 171,000 | | | | 171,000 | |
Chase Bank | | | 7.24 | % | | | 02-13-2015 | | | | 28,463 | | | | 37,032 | |
Nexia Holdings, Inc (related party). | | | - - - - | | | | 09-11-2011 | | | | - - - - | | | | 125,584 | |
Salt Lake City Corporation (2) | | | 3.25 | % | | | 06-18-2015 | | | | 73,294 | | | | 92,272 | |
Wasatch Capital Corp. (related party) | | | 5.00 | % | | | 11-10-2018 | | | | 105,000 | | | | 105,000 | |
Total | | | | | | | | | | | 518,257 | | | | 530,888 | |
Less: Current portion of notes payable | | | | | | | | | | | (341,129 | ) | | | (323,832 | ) |
Long-term portion of notes payable | | | | | | | | | | $ | 177,128 | | | $ | 207,056 | |
| | (1) On May 12, 2006, Green borrowed $171,000 from Xing Investment Corp with a convertible promissory note. The note is interest bearing at 10% per annum with no interest due until the note maturity date of May 12, 2008. Both principal and accrued interest, at the option of the note holder, may be converted into Common stock of Green at $0.01 per share. The note was not liquidated at the maturity date and is currently in default. No payments have been made on the obligation because Green is unable to locate Xing Investment Corp. or its representatives. As of December 31, 2011 and December 31, 2010, accrued interest reported in accounts payable and accrued expenses was $34,200, respectively. |
| | (2) On June 18, 2010, Landis Salons, Inc. received a loan in the amount of $100,000 from the Division of Economic Development of Salt Lake City Corporation. The loan includes a 1% origination fee and bears interest at the rate of 3.25% per annum. Principal and interest payments are made monthly over a five year term commencing June 2010. The loan is secured by a $25,000 certificate deposit held in the name of Landis Salons, Inc. and personally guaranteed by Richard D. Surber, CEO of Green. |
| | (3) (Restated) On April 5, 2011, Green issued an 8% Convertible Promissory Note in the principal face amount of $75,000 to Asher Enterprises Inc., in exchange for a cash payment of the same amount. The note has a due date of January 9, 2012. The note provides for potential conversion into Green’s common stock beginning in six months from issuance with the conversion price set at 61% of the average of the lowest three (3) trading prices for the Common Stock during the ten (10) Trading Day period prior to the date of conversion. The transaction was handled as a private sale exempt from registration under Rule 506 of the Securities Act of 1933. Green analyzed the conversion feature for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion feature should be classified as a liability due to their being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. ASC 815-15 requires that the conversion features are bifurcated and separately accounted for as an embedded derivative contained in Green’s convertible debt. The embedded derivative is carried on Green’s balance sheet at fair value. Any unrealized change in fair value, as determined at each measurement period, is recorded as a component of the income statement and the associated carrying amount on the balance sheet is adjusted by the change. The Company values the embedded derivative using the Black-Scholes pricing model. Upon issuance of the note, the fair value of $94,977 was recorded as a derivative liability. A discount to the convertible debt principal was recorded in the amount of $75,000 and the difference between the initial recording of the derivative liability and the debt discount in the amount of $19,977 was recorded as interest expense. The debt discount is amortized over the life of the note. For the year ended December 31, 2011, $73,048 of the debt discount was amortized and recorded as interest expense. As of December 31, 2011, the remaining, unamortized debt discount balance was $1,952 and the accrued interest balance on the note was $4,237. Also for the year ended December 31, 2011, $73,555 was recorded as a derivative liability adjustment gain on the mark-to-market, fair value measurement. The derivative liability balance for the note as of December 31, 2011 was $21,422. As of December 31, 2011, $14,500 of the note had been converted to 36,322,884 shares Common Stock (see Note 8). |
| | (4) (Restated) On September 14, 2011, Green issued an 8% Convertible Promissory Note in the principal face amount of $32,500 to Asher Enterprises Inc., in exchange for a cash payment of the same amount. The note has a due date of March 16, 2012. The note provides for potential conversion into Green’s common stock beginning in six months from issuance with the conversion price set at 61% of the average of the lowest three (3) trading prices for the Common Stock during the ten (10) Trading Day period prior to the date of conversion. The transaction was handled as a private sale exempt from registration under Rule 506 of the Securities Act of 1933. Green analyzed the conversion feature for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion feature should be classified as a liability due to their being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. ASC 815-15 requires that the conversion features are bifurcated and separately accounted for as an embedded derivative contained in Green’s convertible debt. The embedded derivative is carried on Green’s balance sheet at fair value. Any unrealized change in fair value, as determined at each measurement period, is recorded as a component of the income statement and the associated carrying amount on the balance sheet is adjusted by the change. The Company values the embedded derivative using the Black-Scholes pricing model. Upon issuance of the note, the fair value of $41,588 was recorded as a derivative liability. A discount to the convertible debt principal was recorded in the amount of $32,500 and the difference between the initial recording of the derivative liability and the debt discount in the amount of $9,088 was recorded as interest expense. The debt discount is amortized over the life of the note. For the year ended December 31, 2011, $23,551 of the debt discount had been amortized and recorded as interest expense. As of December 31, 2011, the remaining, unamortized debt discount balance was $8,949 and the accrued interest balance on the note was $1,425. Also for the year ended December 31, 2011, $10,214 was recorded as a derivative liability adjustment gain on the mark-to-market, fair value measurement. The derivative liability balance for the note at December 31, 2011 was $31,374. As of December 31, 2011, none of the convertible note had been converted. |
| | (5) (Restated) On July 19, 2011, Green issued an 8% Convertible Promissory Note in the principal face amount of $25,000 to Asher Enterprises Inc., in exchange for a cash payment of the same amount. The note has a due date of April 25, 2012. The note provides for potential conversion into Green’s common stock beginning in six months from issuance with the conversion price set at 61% of the average of the lowest three (3) trading prices for the Common Stock during the ten (10) Trading Day period prior to the date of conversion. The transaction was handled as a private sale exempt from registration under Rule 506 of the Securities Act of 1933. Green analyzed the conversion feature for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion feature should be classified as a liability due to their being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. ASC 815-15 requires that the conversion features are bifurcated and separately accounted for as an embedded derivative contained in Green’s convertible debt. The embedded derivative is carried on Green’s balance sheet at fair value. Any unrealized change in fair value, as determined at each measurement period, is recorded as a component of the income statement and the associated carrying amount on the balance sheet is adjusted by the change. The Company values the embedded derivative using the Black-Scholes pricing model. Upon issuance of the note, the fair value of $33,930 was recorded as a derivative liability. A discount to the convertible debt principal was recorded in the amount of $25,000 and the difference between the initial recording of the derivative liability and the debt discount in the amount of $8,930 was recorded as interest expense. The debt discount is amortized over the life of the note. For the year ended December 31, 2011, $14,680 of the debt discount had been amortized and recorded as interest expense. As of December 31, 2011, the remaining, unamortized debt discount balance was $10,320 and the accrued interest balance on the note was $904. Also for the year ended December 31, 2011, $4,010 was recorded as a derivative liability adjustment gain on the mark-to-market, fair value measurement. The derivative liability balance for the note at December 31, 2011 was $29,920. As of December 31, 2011, none of the convertible note had been converted. |
| | (6) (Restated) On December 7, 2011, Green issued an 8% Convertible Promissory Note in the principal face amount of $22,500 to Asher Enterprises Inc., in exchange for a cash payment of the same amount. The note has a due date of September 12, 2012. The note provides for potential conversion into Green’s common stock beginning in six months from issuance with the conversion price set at 56% of the average of the lowest three (3) trading prices for the Common Stock during the ten (10) Trading Day period prior to the date of conversion. The transaction was handled as a private sale exempt from registration under Rule 506 of the Securities Act of 1933. Green analyzed the conversion feature for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion feature should be classified as a liability due to their being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. ASC 815-15 requires that the conversion features are bifurcated and separately accounted for as an embedded derivative contained in Green’s convertible debt. The embedded derivative is carried on Green’s balance sheet at fair value. Any unrealized change in fair value, as determined at each measurement period, is recorded as a component of the income statement and the associated carrying amount on the balance sheet is adjusted by the change. The Company values the embedded derivative using the Black-Scholes pricing model. Upon issuance of the note, the fair value of $34,813 was recorded as a derivative liability. A discount to the convertible debt principal was recorded in the amount of $22,500 and the difference between the initial recording of the derivative liability and the debt discount in the amount of $12,313 was recorded as interest expense. The debt discount is amortized over the life of the note. For the year ended December 31, 2011, $1,929 of the debt discount had been amortized and recorded as interest expense. As of December 31, 2011, the remaining, unamortized debt discount balance was $20,571 and the accrued interest balance on the note was $118. Also for the year ended December 31, 2011, $1,328 was recorded as a derivative liability adjustment gain on the mark-to-market, fair value measurement. The derivative liability balance for the note at December 31, 2011 was $33,485. As of December 31, 2011, none of the convertible note had been converted. |
Note 8 – Stockholders’ Deficit
Preferred Stock
On August 4, 2010 by Written Consent of the majority of the voting rights of the shareholders of Green, consent was given to authorize the Board of Directors to amend the designations of the Preferred Stock. The change in the designation of the Supervoting Preferred Stock increased its voting rights from 10 votes per share to 100 votes per share.
Green is authorized to issue 15,000,000 shares of preferred stock. Green’s preferred stock may be divided into such series as may be established by the Board of Directors. Each share of the Supervoting preferred stock is convertible into 100 shares of Green’s Common stock and has the voting rights equal to 100 shares of Common stock.
The Series B preferred stock is non-voting, convertible preferred. Each share of Green’s Series B Preferred Stock is convertible into $5.00 worth of Common stock. The number of common shares received is based on the market value of the Common stock on the date of conversion. Series B Preferred Stock shareholders, at the option of Green, can receive cash.
On January 21, 2010, the Board of Directors approved the conversion of 6,400 shares of Series B Preferred shares into 32,000,000 shares of Common stock. The shares were converted at $0.001 per share based on the closing price of the stock prior to the date of conversion.
On February 17, 2010, Green issued 10,000 Series B Preferred shares to a former employee for the remaining 1% noncontrolling interest in Landis.
On February 26, 2010, Green issued 4,400 Series B Preferred shares to an investor for $11,000. The shares were valued at $2.50 per share which was mutually agreed upon by the Board of Directors and the individual investor.
On March 12, 2010, the Board of Directors approved the conversion of 400 Series B Preferred shares into 1,000,000 shares of Common stock for an employee. The shares were converted at $0.002 per share based on the closing price of the stock prior to the date of issuance.
On April 13, 2010, the Board of Directors approved the conversion of 2,000 Series B Preferred shares into 10,000,000 shares of Common stock for an investor. The shares were converted at $0.001 per share which was mutually agreed upon by the Board of Directors and the individual investor.
On April 16, 2010, Green issued 33,334 Series B Preferred shares to an investor for $50,000. The shares were valued at $1.50 per share which was mutually agreed upon by the Board of Directors and the individual investor.
On June 24, 2010, the Board of Directors approved the exchange of 650,000 shares of Green’s Supervoting Preferred stock from AmeriResource Technologies, Inc. for 52,000 shares of Green’s Series B Preferred stock. The number of Series B Preferred shares issued in this transaction were determined based on one share of Green’s Supervoting Preferred stock being equivalent to 10 shares of Common stock and each Series B Preferred shared is convertible into $5.00 of Common stock. The Series B Preferred shares were valued at $260,000.
On June 28, 2010, Green issued 33,334 Series B Preferred shares to two separate investors for $50,000 each. The shares were valued at $1.50 per share which was mutually agreed upon by the Board of Directors and the individual investor.
On July 7, 2010, the Board of Directors authorized the issuance of 25,000 shares of restricted Series B Preferred shares to Richard G. Clegg, an officer and director of Green, pursuant to the terms of his employment agreement with a related party, Diversified Holdings I, Inc.
On July 9, 2010, the Board of Directors approved the issuance of 50,000 shares of restricted Series B Preferred shares to Landis Salons II, Inc., a subsidiary of Green, to be used as collateral for a lease entered into by Landis Salons II to serve as the location for a new Landis Lifestyle Salon. These shares were then assigned to the landlord of Landis II as a security deposit with a related value of $250,000. This amount is recorded as an other asset on the Balance Sheet.
On August 4, 2010, the Board of Directors approved for two different investors the conversions of 3,000 Series B Preferred shares into 15,000,000 shares of common stock for each of the investors. The shares were converted at $0.001 per share which was mutually agreed upon by the Board of Directors and each of the investors.
On August 5, 2010, the Board of Directors approved the conversion of 3,000 Series B Preferred shares into 15,000,000 shares of common stock. The shares were converted at $0.001 per share which was mutually agreed upon by the Board of Directors and each of the investors.
On August 19, 2010, Green issued 33,334 Series B Preferred shares to an investor for $50,000. The shares were valued at $1.50 per share which was mutually agreed upon by the Board of Directors and the individual investor.
On August 26, 2010, Green issued 33,334 Series B Preferred shares to an investor for $50,000. The shares were valued at $1.50 per share which was mutually agreed upon by the Board of Directors and the individual investor.
On September 21, 2010, the Board of Directors approved the conversion of 2,200 Series B Preferred shares into 2,000,000 shares of Common stock. The shares were converted at $0.0055 per share, which was mutually agreed upon by the Board of Directors and the investor.
On September 21, 2010, Green issued 16,666 Series B Preferred shares to an investor for $25,000. The shares were valued at $1.50 per share which was mutually agreed upon by the Board of Directors and the individual investor.
On September 27, 2010, the Board of Directors approved the conversion of 5,000 Series B Preferred shares into 4,901,960 shares of Common stock. The shares were converted at $0.0051 per share, which was the closing price on the last trading day prior to the conversion.
On September 28, 2010, Green issued 16,666 Series B Preferred shares to an investor for $25,000. The shares were valued at $1.50 per share which was mutually agreed upon by the Board of Directors and the individual investor.
On October 12, 2010, Green issued 16,666 Series B Preferred shares to an investor for $25,000. The shares were valued at $1.50 per share which was mutually agreed upon by the Board of Directors and the individual investor.
On October 26, 2010, Green issued 16,666 Series B Preferred shares to an investor for $25,000. The shares were valued at $1.50 per share which was mutually agreed upon by the Board of Directors and the individual investor.
On October 28, 2010, the Board of Directors approved the conversion of 5,800 Series B Preferred shares into 3,411,765 shares of Common stock for an investor. The shares were converted at $0.0085 per share which was the quoted closing price on the date the conversion letter was received from the shareholder.
In November and December of 2010, Green issued 99,998 Series B Preferred shares to various investors for $150,000. The shares were valued at $1.50 per share which was mutually agreed upon by the Board of Directors and the individual investors.
On November 12, 2010, the Board of Directors approved the conversion of 16,600 Series B Preferred shares into 7,155,172 shares of Common stock for an investor. The shares were converted at $0.0116 per share which was the quoted closing price on the date the conversion letter was received from the shareholder.
On November 16, 2010, the Board of Directors approved the conversion of 4,600 Series B Preferred shares into 1,284,916 shares of Common stock for an investor. The shares were converted at $0.0179 per share which was the quoted closing price on the date the conversion letter was received from the shareholder.
On November 22, 2010, the Board of Directors approved the conversion of 2,200 Series B Preferred shares into 2,000,000 shares of Common stock for an investor. The shares were converted at $0.0055 per share which was the quoted closing price on the date the conversion letter was received from the shareholder.
On December 2, 2010, the Board of Directors approved the issuance of 2,000 Series B Preferred shares each to three employees of Landis Salons, Inc. for services rendered. The shares were valued at $5 per share or $30,000.
On January 6, 2011, the Board of Directors approved the conversion of 12,866 Series B Preferred shares into 12,866,000 shares of Common stock for Richard D. Surber, President, CEO and Director of Green. The shares were converted at $0.005 per share which was the quoted closing price on the date the conversion letter was received from Mr. Surber.
On March 10, 2011, Green issued 14,333 Series B Preferred shares to an investor for $25,000. The shares were valued at $1.74 per share which was mutually agreed upon by the Board of Directors and the individual investor.
On March 16, 2011, Green issued 16,333 Series B Preferred shares to an investor for $25,000. The shares were valued at $1.50 per share which was mutually agreed upon by the Board of Directors and the individual investor.
On April 1, 2011, the Board of Directors approved the conversion of 4,600 Series B Preferred shares into 3,833,333 shares of Common stock for an investor. The shares were converted at $0.006 per share which was the quoted closing price on the date the conversion letter was received from the shareholder. As of December 31, 2011, the Board of Directors had rescinded the approval as no shared had been issued by that date.
On April 26, 2011, Green issued 10,000 Series B Preferred shares to an investor for $15,000. The shares were valued at $1.50 per share which was mutually agreed upon by the Board of Directors and the individual investor.
On April 28, 2011, the Board of Directors approved the conversion of 5,000 Series B Preferred shares into 5,000,000 shares of Common stock for an investor. The shares were converted at $0.005 per share which was the quoted closing price on the date the conversion letter was received from the shareholder.
On June 13, 2011, the Board of Directors approved the conversion of 2,000 Series B Preferred shares into 2,500,000 shares of Common stock for an investor. The shares were converted at $0.004 per share which was the quoted closing price on the date the conversion letter was received from the shareholder. As of December 31, 2011, the Board of Directors had rescinded the approval as no shared had been issued by that date.
On November 22, 2011 the Board of Directors approved the conversion of 2,400 Series B Preferred shares into 24,000,000 shares of Common Stock for an investor. The shares were converted at $0.0005 per share which was the quoted closing price on the date the conversion request was received from the shareholder.
As of December 31, 2011 and 2010, Green had 5,850,000 and 5,850,000 shares of Supervoting Preferred stock issued and outstanding and 630,732 and 610,332 shares of convertible Series B Preferred stock issued and outstanding, respectively.
Common Stock
Green is authorized to issue 2,500,000,000 shares of Common stock with a par value of $0.001 per share. As of December 31, 2011 and 2010, Green had 570,886,794 and 430,149,464 shares of Common stock outstanding, respectively.
On August 4, 2010, by Written Consent of the majority of the voting rights of the shareholders of Green consent was given to authorize the Board of Directors to carry out a forward split of the issued and outstanding shares of the common stock on a 1 for five basis and by the same proportion, the number of authorized shares was increased to 2.5 billion to maintain the same ratios of authorized shares to issued shares. All share and per share information included in these financial statements has been adjusted to reflect this forward stock split.
On October 1, 2011, the Board of Directors approved the conversion of $10,000 of the April 5, 2011 Convertible Note held by Asher Enterprises, Inc. into 16,666,667 shares of Common Stock. The shares were converted at $0.0006 per share which was the conversion price provided for by the terms of the note.
On December 6 2011, the Board of Directors approved the conversion of 4,500 of the April 5, 2011 Convertible Note held by Asher Enterprises, Inc. into 19,656,217 shares of Common Stock. The shares were converted at $0.00023 per share which was the conversion price provided for by the terms of the note.
On December 16 2011, the Board of Directors approved the two issuances of 20,000,000 common shares each to two individuals who are employees of an affiliate of Green. The affiliate provides accounting and legal services to Green. The shares were issued pursuant to a stock option agreement and were valued at $19,510.
On December 27 2011, the Board of Directors approved the issuances of 20,000,000 common shares to an individual who provides accounting and tax consulting services to Green. The shares were issued pursuant to a stock option agreement and were valued at $5,854.
Note 9 – Gain on Sale of Subsidiary
On December 1, 2010, Green affected the sale of its ownership interest in Newby Salons, LLC to Diversified Holdings X, Inc., whose president is also the president of Green. Newby Salons, LLC operated the Bountiful salon location which was closed on August 15, 2010. Green transferred its stock ownership to DHX in exchange for $100. The Stock Purchase Agreement indemnifies and protects Green from any and all obligations, indebtedness and liabilities arising from the course of business.
The following table summarizes the gain on sale of Newby Salons, LLC on December 1, 2010:
Cash consideration received | | $ | 100 | |
Net current and long-term liabilities sold | | | 320,670 | |
Gain on sale of subsidiary | | $ | 320,770 | |
Note 10 – Stock-Based Compensation
On December 2, 2011, the Board of Directors approved a stock-based compensation program entitled The 2011 Benefit Plan of Green Endeavors, Inc. (the “Plan”) wherein common stock options are granted to employees. A total of 300,000,000 shares of the Green’s common stock (par $.001) are authorized to be issued or granted to employees (“Employees”) under the Plan. Employees include actual employees or certain non-employee, consultants and advisors of Green, its subsidiaries, and parent company. The Plan is designed to attract and retain Employees.
Under the Plan and during the year ended December 31, 2011, the company granted 60,000,000 shares to two employees and one consultant (20,000,000 shares each) for services of which all were exercised by the year ending December 31, 2011. For the year ended December 31, 2011, stock-based compensation expense was $25,364 and was accounted for under the fair value method of accounting using a Black-Scholes valuation model to measure stock option expense at the date of grant. The weighted average components used for the calculation of these options granted are $.0003 – exercise price, 1 year maturity, 422 volatility, and .12% risk free rate. Income tax benefits related to the 2011 stock-based compensation expense and recognized in earnings was $0. As of December 31, 2011, grants unexercised and shares available for future stock-based compensation grants were -0- and 240,000,000 shares, respectively.
The Plan is administered by or under the direction of the Board of Directors (Administrators”). It is intended to aid the Company in maintaining and developing a management team, attracting qualified officers and Employees capable of assuring the future success of the Company, and rewarding those individuals who have contributed to the success of the Company. The Plan is also designed to aid the Company in retaining the services of executives and employees and in attracting new personnel when needed for future operations and growth and to provide such personnel with an incentive to remain employees of the Company, to use their best efforts to promote the success of the Company's business, and to provide them with an opportunity to obtain or increase a proprietary interest in the Company. The Plan also allows for the Company to issue grants by rewarding those individuals who are not actual employees of the Company, but who management perceives to have contributed to the success of the Company or who are important to the continued business and operations of the Company.
The Company may reserve either authorized, but unissued shares or issued shares reacquired by the Company for Benefits under the Plan. The term of each Option issued under the Plan is established by the Administrators at the time the Option is granted. The term of the Option, once it is granted, may be reduced only as provided for in the Plan and under the express written provisions of the Option. The Stock is considered issued when the participant exercises his or her right to acquire all or a portion of the Stock subject to the Option and delivers the required consideration to the Company. The Options vest and become exercisable at such time or times and on such terms as the Plan Administrators may determine at the time of the grant of the Option. The options may contain restrictions on the vesting and exercise of the Options as the Plan Administrators may deem advisable. An Option may not be exercised after the expiration of its term and are non-transferable, except by the laws of descent and distribution.
The Plan Administrators establish and may amend the exercise price payable to the Company for shares to be obtained pursuant to the Option. The exercise of any Option is contingent on receipt by the Company of the exercise price paid in either cash or check payable to the Company. If the grant of a Benefit, or exercise of an Option given as a Benefit is subject to withholding or other trust fund payment requirements of the Internal Revenue Code of 1986, as amended (the “Code”), or applicable state or local laws, the Company will initially pay the Optionee’s liability and will be reimbursed by Optionee no later than six months after such liability arises and Optionee hereby agrees to such reimbursement terms.
For further information regarding the Plan, see the Company’s December 12, 2011, Form S-8 filing with the SEC entitled “Securities to be offered to employees in employee benefit plans”.
Note 11 – Subsequent Events
On January 11, 2012, the Board of Directors approved the conversion of $4,000 of the April 5, 2011 Convertible Note held by Asher Enterprises, Inc. into 21,052,632 shares of Common Stock. The shares were converted at $0.00019 per share which was the conversion price provided for by the terms of the note.
On January 13, 2012, the Board of Directors approved the conversion of $5,000 of the April 5, 2011 Convertible Note held by Asher Enterprises, Inc. into 26,315,789 shares of Common Stock. The shares were converted at $0.00019 per share which was the conversion price provided for by the terms of the note.
On January 24, 2012, the Board of Directors approved the conversion of $5,000 of the April 5, 2011 Convertible Note held by Asher Enterprises, Inc. into 27,272,727 shares of Common Stock. The shares were converted at $0.00019 per share which was the conversion price provided for by the terms of the note.
On February 2, 2012, Green issued an 8% Convertible Promissory Note in the principal face amount of $42,500 to Asher Enterprises Inc. in exchange for a cash payment of the same amount. The note has a due date of November 6, 2012. The note provides for potential conversion of Green’s common stock beginning in six months with the conversion price set at 58% of the average of the lowest three (3) trading prices for the Common Stock during the ten (10) trading day period prior to the date of conversion. The transaction was handled as a private sale exempt from registration under Rule 506 of the Securities Act of 1933.
On February 17, 2012, the Board of Directors approved the conversion of $3,500 of the April 5, 2011 Convertible Note held by Asher Enterprises, Inc. into 29,666,667 shares of Common Stock. The shares were converted at $0.00012 per share which was the conversion price provided for by the terms of the note.
On February 23, 2012, the Board of Directors approved the conversion of $3,500 of the April 5, 2011 Convertible Note held by Asher Enterprises, Inc. into 28,666,667 shares of Common Stock. The shares were converted at $0.00012 per share which was the conversion price provided for by the terms of the note.
On February 27, 2012, Green and Landis Experience Center LLC issued an 11% Convertible Note in the principal face amount of $50,000 to William and Nina Wolfson in exchange for a cash payment of the same amount. The note has a due date of February 27, 2016. The note provides for monthly payments in the amount of $1,292.28 of principal and interest. The note provides for potential conversion of Green’s common stock with the conversion price set at 50% of the bid price on the date of conversion. The transaction was handled as a private sale exempt from registration under Rule 506 of the Securities Act of 1933.
On March 2, 2012, the Board of Directors approved the conversion of $6,000 of the April 5, 2011 Convertible Note held by Asher Enterprises, Inc. into 31,578,947 shares of Common Stock. The shares were converted at $0.00019 per share which was the conversion price provided for by the terms of the note.
On March 14, 2012, the Board of Directors approved the conversion of $7,000 of the April 5, 2011 Convertible Note held by Asher Enterprises, Inc. into 30,434,783 shares of Common Stock. The shares were converted at $0.00023 per share which was the conversion price provided for by the terms of the note.
On March 16, 2012, the Board of Directors approved the conversion of 3,888 Series B Preferred shares into 38,880,000 shares of Common Stock for an investor. The shares were converted at $0.0005 per share which was the quoted closing price on the date the conversion request was received from the shareholder.
On March 29, 2012 the Company filed with the State of Utah an Amendment to its Articles of Incorporation that increased the number of authorized shares of common stock to ten billion shares. This action was taken after notice to the shareholders and having consent from a majority of the voting rights.
Note 12 – Going Concern
Generally accepted accounting principles in the United States of America contemplate the continuation of Green as a going concern. However, Green had a net loss $276,264 for the year ended December 31, 2011 and negative working capital of $1,399,631, which raises substantial doubt about the Green’s ability to continue as a going concern. Green’s ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and its ability to successfully fulfill its business plan. Management plans to attempt to raise additional funds to finance the operating and capital requirements of Green through a combination of equity and debt financings. While Green is making its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be sufficient for operations.
Note 13 – Derivative Liability (Added as part of these restated financial statements)
As discussed in Note 7 – “Notes Payable”, during 2011, Green issued an aggregate of $155,000 Convertible Promissory Notes to Asher Enterprises, Inc. (“Asher Notes”) that mature from January 9, 2012 to September 12, 2012. The Asher Notes bear interest at a rate of 8% per annum and can be convertible into Green’s common shares, at the holder’s option, at the conversion rates of 56% to 61% discount to the market price of the lowest three trading prices of Green’s common shares during the ten-day period ending one trading day prior to the date of the conversion. Green analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative due to their being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options and also because Asher is not entitled to convert any portion of the convertible notes to the extent that the shares to be issued would cause Asher’s beneficial ownership of the Company’s common stock to exceed 4.99% of the outstanding shares of the Company’s common stock. ASC 815-15 requires that the conversion feature is bifurcated and separately accounted for as an embedded derivative contained in Green’s convertible debt. The embedded derivative is carried on Green’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. Green fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the inception dates of the Asher Notes was $205,308. $155,000 was recorded as a debt discount, which is up to but not more than the net proceeds of the notes. $50,308 was charged to operations as non-cash interest expense. The fair value of $205,308 was recorded as a derivative liability on the balance sheet. The debt discount is amortized over the life of the notes (approximately nine months each). On December 31, 2011, Green marked-to-market the fair value of the debt derivatives and determined an aggregate fair value of $116,408 and recorded an $89,108 gain from change in fair value of debt derivatives for the year ended December 31, 2011. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 335%, (3) risk-free interest rate of 0.02%, (4) expected life of 0.25 to 0.7 of a year, and (5) estimated fair value of Green’s common stock of $0.00006 to $.00025 per share.
Note 14 – Restatement of Form 10-K (Added as part of these restated financial statements)
Subsequent to the filing of Green’s Form 10-K for the year ended December 31, 2011, management discovered an error from the application of an accounting principle that is not allowed by GAAP resulting in a material accounting error thus requiring the restatement of prior filings with the SEC. As noted above in Note 13 – “Derivative Liability”, Green issued various convertible promissory notes to Asher Enterprises, Inc. (“Asher”) during the year ended December 31, 2011. According to the guidance provided by ASC 815-15-25, Green failed to bifurcate the convertible debt issued to Asher for these convertible notes issued. Green incorrectly applied an accounting method not allowed by GAAP, which under the guidance of ASC 250, is to be treated as a correction of an error thus requiring the restatement of the prior affected accounting periods as of the first period presented.
The effect on the Company’s previously issued December 31, 2011 financial statements are summarized as follows:
Balance Sheet as of December 31, 2011
| | | | | | As previously Reported | | | Adjustment | | | As Restated | |
| Assets | | | | | | | | | | | | |
| Current Assets: | | | | | | | | | | | | |
Cash | | | | | $ | 97,983 | | | $ | 0 | | | $ | 97,983 | |
Accounts receivable | | | | | | 143 | | | | 0 | | | | 143 | |
Inventory | | | | | | 109,470 | | | | 0 | | | | 109,470 | |
Prepaid expenses | | | | | | 6,244 | | | | 0 | | | | 6,244 | |
Total current assets | | | | | | 213,840 | | | | 0 | | | | 213,840 | |
| | | | | | | | | | | | | | | | |
Property, plant and equipment, net of accumulated depreciation | | | | | | 420,093 | | | | 0 | | | | 420,093 | |
Other assets | | | | | | 402,629 | | | | 0 | | | | 402,629 | |
Total Assets | | | | | $ | 1,036,562 | | | $ | 0 | | | $ | 1,036,562 | |
| | | | | | | | | | | | | | | | |
| Liabilities and Stockholders’ Deficit | | | | | | | | | | | | | | | |
| Current Liabilities: | | | | | | | | | | | | | | | |
Accounts payable and accrued expenses | | | (1 | ) | | $ | 293,794 | | | $ | 112 | | | $ | 293,906 | |
Deferred revenue | | | | | | | 57,823 | | | | 0 | | | | 57,823 | |
Due to related parties | | | (2 | ) | | | 838,274 | | | | 7,723 | | | | 845,997 | |
| Derivative liability | | | (3 | ) | | | 2,943,160 | | | | (2,826,751 | ) | | | 116,409 | |
Current portion of notes payable | | | | | | | 200,629 | | | | 0 | | | | 200,629 | |
| Convertible notes payable, net of debt discount | | | (4 | ) | | | 109,894 | | | | (11,187 | ) | | | 98,707 | |
Total Current LiabilitiesCurrent portion of notes payable | | | (5 | ) | | | 4,443,574 | | | | (2,830,103 | ) | | | 1,613,471 | |
Long-Term Liabilities: | | | | | | | | | | | | | | | | |
Notes payable related party | | | (2 | ) | | | 112,723 | | | | (7,723 | ) | | | 105,000 | |
Notes payable | | | | | | | 72,128 | | | | 0 | | | | 72,128 | |
Convertible debentures, net of debt discount | | | | | | | 2,764,632 | | | | 0 | | | | 2,764,632 | |
Total long-term liabilities | | | (2 | ) | | | 2,949,483 | | | | (7,723 | ) | | | 2,941,760 | |
| | | | | | | | | | | | | | | | | |
| Stockholders’ Deficit: | | | | | | | | | | | | | | | | |
| Convertible Supervoting preferred stock, $0.001 par value, 10,000,000 shares authorized; 5,850,000 and 5,850,000 shares issued and outstanding at December 31, 2011; no liquidation value | | | | | | | 5,850 | | | | 0 | | | | 5,850 | |
| Convertible preferred series B stock - $0.001 par value, 2,000,000 shares authorized, 630,732 shares issued and outstanding at December 31, 2011 | | | | | | | 631 | | | | 0 | | | | 631 | |
| Preferred stock - $0.001 par value 3,000,000 shares authorized, no shares issued and outstanding at December 31, 2011 | | | | | | | - - - - | | | | 0 | | | | - - - - | |
| Common stock, $0.001 par value, 2,500,000,000 shares authorized; 570,886,764 shares issued and outstanding at December 31, 2011 | | | | | | | 570,887 | | | | 0 | | | | 570,887 | |
Additional paid-in capital | | | (6 | ) | | | (4,585,663 | ) | | | 2,849,711 | | | | (1,735,952 | ) |
Accumulated deficit | | | (7 | ) | | | (2,348,200 | ) | | | (11,885 | ) | | | (2,360,085 | ) |
Total stockholders’ deficit | | | (8 | ) | | | (6,356,495 | ) | | | 2,837,826 | | | | (3,518,669 | ) |
Total Liabilities and Stockholders’ Deficit | | | | | | $ | 1,036,562 | | | $ | 0 | | | $ | 1,036,562 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | (1) This reflects a minor difference in accrued expenses. |
| | (2) This is a reclass of a related party accrued interest from long-term to current in order to be consistent with the prior year presentation. |
| | (3) This difference removes the derivative liability that was originally recorded and records the derivative liability that is calculated as required under the guidance of ASC 815-15 for the Asher convertible notes as further discussed in Notes 7 and 13. |
| | (4) This is the balance of the Asher convertible notes that is net of the debt discount as discussed in Notes 7 and 13. |
| | (5) This is the change in current liabilities due to the restatement adjustments. |
| | (6) This adjustment is from the correction adjustments referenced in numbers three and four above. |
| | (7) This reflects the effect of recording the adjustments relating to the derivative liability correction and other related adjustments to the income statement. |
| | (8) This is the change in total stockholders’ deficit due to the restatement adjustments. |
| | | | | | | | | | | | | |
| | | | | | As Previously Reported | | | Adjustments | | | As Restated | |
| Revenue: | | | | | | | | | | | | |
Services, net of discounts | | | | | $ | 2,130,184 | | | $ | 0 | | | $ | 2,130,184 | |
Product, net of discounts | | | | | | 683,842 | | | | 0 | | | | 683,842 | |
Total revenue | | | | | | 2,814,026 | | | | 0 | | | | 2,814,026 | |
| | | | | | | | | | | | | | | | |
| Costs and expenses: | | | | | | | | | | | | | | | |
Cost of services | | | | | | 1,186,726 | | | | 0 | | | | 1,186,726 | |
Cost of product | | | | | | 427,789 | | | | 0 | | | | 427,789 | |
Depreciation | | | | | | 93,983 | | | | 0 | | | | 93,983 | |
General and administrative | | | | | | 1,050,556 | | | | 0 | | | | 1,050,556 | |
Total costs and expenses | | | | | | 2,759,054 | | | | 0 | | | | 2,759,054 | |
| | | | | | | | | | | | | | | | |
Income (loss) from operations | | | | | | 54,972 | | | | 0 | | | | 54,972 | |
| | | | | | | | | | | | | | | | |
| Other income (expense): | | | | | | | | | | | | | | | |
Interest expense | | | (1 | ) | | | (321,745 | ) | | | (100,993 | ) | | | (422,738 | ) |
Interest income | | | | | | | 834 | | | | 0 | | | | 834 | |
Gain (loss) on derivative liability fair value adjustment | | | (2 | ) | | | - - - - | | | | 89,108 | | | | 89,108 | |
Other income (expense) | | | | | | | 1,560 | | | | 0 | | | | 1,560 | |
Total other income (expense) | | | (3 | ) | | | (319,351 | ) | | | (11,885 | ) | | | (331,236 | ) |
| | | | | | | | | | | | | | | | | |
Net loss | | | (4 | ) | | $ | (264,379 | ) | | $ | (11,885 | ) | | $ | (276,264 | ) |
| | | | | | | | | | | | | | | | | |
Net loss per common share – basic and diluted | | | | | | $ | (0.00 | ) | | $ | (0.00 | ) | | $ | (0.00 | ) |
| | | | | | | | | | | | | | | | | |
Weighted average common shares outstanding – basic and diluted | | | | | | | 459,868,549 | | | | | | | | 459,868,549 | |
| | (1) This adjustment is a result of the correction of the initial recording of the Asher convertible notes. As per the application of ASC 815-15, Green did not bifurcate the issuance of these convertible instruments. Upon doing so, the correction of the debt discounts recorded at inception of the issuance of the convertible instruments went from $104,512 to $155,000. Accordingly, it follows that the accretion of the higher debt discount amounts would result in an increased amount, which is charged to interest expense. The debt discount accretion is being recorded as interest expense. The other primary contributor to this change is the $50,308 of the initial recording of the difference of the debt discount and the derivative liability that is also initially recorded as interest expense. |
| | (2) This adjustment is a result of the derivative liability mark-to-market that is made each measurement period as required under the guidance of ASC 815-15 for the Asher and Nexia convertible debt as discussed in Note 13. The unrealized change in fair value is recorded as a component of the income statement as indicated. |
| | (3) This amount is simply the summation of the changes in other income (expense) for the period due to the restatements. |
| | (4) This amount is simply the summation of the change in the net loss for the period due to the restatements. |
Statement of Cash Flows for the Year Ended December 31, 2011:
| | | | | | As Previously Reported | | | Adjustments | | | As Restated |
| | | | | | | | | | | | |
| Cash Flows from Operating Activities: | | | | | | | | | | | |
Net loss | | | (1 | ) | | $ | (264,379 | ) | | $ | (11,885 | ) | | $ | (276,264 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Depreciation | | | | | | | 93,983 | | | | 0 | | | | 93,983 | |
Accretion of convertible debt discounts | | | (2 | ) | | | 73,905 | | | | 101,406 | | | | 175,311 | |
Write-down of related party receivables | | | | | | | (1,588 | ) | | | 0 | | | | (1,588 | ) |
Gain on derivative liability fair value adjustment | | | (3 | ) | | | - - - - | | | | (89,108 | ) | | | (89,108 | ) |
Stock based compensation | | | | | | | 25,364 | | | | 0 | | | | 25,364 | |
Changes in operating assets and liabilities: | | | | | | | | | | | | | | | | |
Accounts receivable | | | | | | | 799 | | | | | | | | 799 | |
Due from related parties | | | (4 | ) | | | (55,131 | ) | | | 7,723 | | | | (47,408 | ) |
Inventories | | | | | | | (2,105 | ) | | | 0 | | | | (2,105 | ) |
Prepaid expenses | | | | | | | (2,927 | ) | | | 0 | | | | (2,927 | ) |
Other assets | | | | | | | 5,983 | | | | 0 | | | | 5,983 | |
Accounts payable and accrued expenses | | | (4 | ) | | | 93,467 | | | | 112 | | | | 93,579 | |
Deferred revenue | | | | | | | 9,298 | | | | 0 | | | | 9,298 | |
Other long-term liabilities | | | (4 | ) | | | 7,723 | | | | (8,248 | ) | | | (525 | ) |
Net cash provided by (used in) operating activities | | | | | | | (15,608 | ) | | | 0 | | | | (15,608 | ) |
| | | | | | | | | | | | | | | | | |
| Cash Flows from Investing Activities: | | | | | | | | | | | | | | | | |
Purchases of property, plant, and equipment | | | | | | | (20,871 | ) | | | 0 | | | | (20,871 | ) |
Net cash provided by (used in) investing activities | | | | | | | (20,871 | ) | | | 0 | | | | (20,871 | ) |
| | | | | | | | | | | | | | | | | |
| Cash Flows from Financing Activities: | | | | | | | | | | | | | | | | |
Payments made on bank loan | | | | | | | (8,569 | ) | | | 0 | | | | (8,569 | ) |
Payments made on notes payable | | | | | | | (18,978 | ) | | | 0 | | | | (18,978 | ) |
Payments made on related party notes payable | | | | | | | (125,584 | ) | | | 0 | | | | (125,584 | ) |
Proceeds from issuance of convertible notes payable | | | | | | | 155,000 | | | | 0 | | | | 155,000 | |
Proceeds from issuance of preferred stock | | | | | | | 65,000 | | | | 0 | | | | 65,000 | |
Net cash provided by (used in) financing activities | | | | | | | 66,869 | | | | 0 | | | | 66,869 | |
| | | | | | | | | | | | | | | | | |
Increase in cash | | | | | | | 30,390 | | | | 0 | | | | 30,390 | |
| | | | | | | | | | | | | | | | | |
Cash at Beginning of Year | | | | | | | 67,593 | | | | 0 | | | | 67,593 | |
| | | | | | | | | | | | | | | | | |
Cash at end of year | | | | | | $ | 97,983 | | | $ | 0 | | | $ | 97,983 | |
| Supplemental cash flow information: | | | | | | | | | | | | | | | | |
Cash paid during the period for: | | | | | | | | | | | | | | | | |
Interest | | | | | | $ | 5,955 | | | $ | 0 | | | $ | 5,955 | |
Non-cash investing and financing activities: | | | | | | | | | | | | | | | | |
Issuance of series B preferred shares | | | (5 | ) | | $ | 5,955 | | | $ | 59,004 | | | $ | 64,959 | |
Issuance of common stock options | | | | | | $ | 25,364 | | | $ | 0 | | | $ | 25,364 | |
Derivative liability | | | (6 | ) | | $ | 2,943,160 | | | $ | (2,737,852 | ) | | $ | 205,308 | |
Conversion of convertible note payable to common shares | | | | | | $ | (14,500 | ) | | $ | 0 | | | $ | (14,500 | ) |
Conversion of series B preferred shares | | | | | | $ | 44,394 | | | $ | 0 | | | $ | 44,394 | |
(1) This amount is simply the summation of the change in the net loss for the period due to the restatements.
| | (2) This adjustment is a result of the correction of the initial recording of the Asher convertible notes. As per the application of ASC 815-15, Green did not bifurcate the issuance of these convertible instruments. Upon doing so, the correction of the debt discounts recorded at inception of the issuance of the convertible instruments went from $104,512 to $155,000. Accordingly, it follows that the accretion of the higher debt discount amounts would result in an increased amount, which is charged to interest expense. The debt discount accretion is being recorded as interest expense. The other primary contributor to this change is the $50,308 of the initial recording of the difference of the debt discount and the derivative liability that is also initially recorded as interest expense. These are non-cash reconciling entries. |
| | (3) This adjustment is a result of the derivative liability mark-to-market that is made each measurement period as required under the guidance of ASC 815-15 for the Asher and Nexia convertible debt as discussed in Note 13. The unrealized change in fair value is recorded as a component of the income statement as indicated. These are non-cash reconciling entries. |
| | (4) This is a reclass of a related party accrued interest from long-term to current in order to be consistent with the prior year presentation as well as a minor adjustment in accrued interest expense. |
(5) This is simply a correction of a typographical error.
| | (6) This difference removes the derivative liability that was originally recorded and records the derivative liability that is calculated as required under the guidance of ASC 815-15 for the Asher convertible notes as further discussed in Notes 7 and 13. |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Green Endeavors, Inc.
/s/ Richard D. Surber
Richard D. Surber
President, Chief Executive Officer, and Director
Dated: December 18, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| /s/ Richard D. Surber | December 18, 2012 |
| President, Chief Executive Officer, Chief Financial Officer, and Director |
| (Principal Executive Officer and Principal Accounting and Financial Officer) |
| | | Incorporated by Reference | |
| Exhibit Number | Description | Form | File Number | Exhibit Number | Filing Date | Provided Herewith |
| | | | | | | |
| 31.01 | Certification of the Registrant’s Chief Executive Officer, Richard D. Surber, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934. | | | | | X |
| 31.02 | Certification of the Registrant’s Chief Financial Officer, Richard D. Surber, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934. | | | | | X |
| 32.01 | Certification of the Registrant’s Chief Executive Officer, Richard D. Surber, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | | | X |
| 32.02 | Certification of the Registrant’s Chief Financial Officer, Richard D. Surber, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | | | X |
