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):
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second quarter ended June 30, 2013 was $351,474.
On April 15, 2014, approximately 195,414,205 shares of the Registrant’s Common Stock, $0.0001 par value, were outstanding.
PART I.
Item 1. Business
This Annual Report on Form 10-K and the documents incorporated by reference in this Annual Report on Form 10-K contain forward-looking statements. Certain of such statements, including, but not limited to, statements regarding the extent and timing of future revenues and expenses and customer demand, statements regarding our reliance on third parties and other statements using words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “should,” “will” and “would,” and words of similar import and the negatives thereof, constitute forward-looking statements. These statements are predictions based upon our current expectations about future events. Actual results could vary materially as a result of certain factors, including but not limited to, those expressed in these statements. We refer you to the “Competition,” “Risk Factors,” “Results of Operations,” and “Liquidity and Capital Resources” sections contained in this Annual Report on Form 10-K and the risks discussed in our other Securities Exchange Commission, or SEC, filings, which identify important risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements.
We urge you to consider these factors carefully in evaluating the forward-looking statements contained in this Annual Report on Form 10-K. All subsequent written or spoken forward-looking statements attributable to our company or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements included in this Annual Report on Form 10-K are made only as of the date of this Annual Report on Form 10-K. We do not intend, and undertake no obligation, to update these forward-looking statements.
Overview
Green Endeavors, Inc. (“Green”) is a Utah corporation originally formed on April 25, 2002. Our fiscal year ends on December 31. We have never filed bankruptcy nor been through any similar financial reorganization.
We run two high-quality hair care salons that feature Aveda™ products for retail sale. Landis Salons, Inc. (“Landis I”) operates its business within a 4,000 square foot space located in the Liberty Heights District of Salt Lake City, Utah as an Aveda Lifestyle Salon. Landis Salons II, Inc. (“Landis II”) operates within a 3,024 square foot space located in the Marmalade District of Salt Lake City, Utah under the Landis Lifestyle Salon brand as an Aveda Lifestyle Salon. Aveda Lifestyle Salons can be distinguished from Aveda Concept Salons in that Aveda Lifestyle Salons are required to carry all of Aveda’s products and must meet a higher threshold for product sales than Aveda Concept Salons. An Aveda Lifestyle Salon is the highest level within the Aveda hierarchy of salons which is classified by higher purchasing volume, location, array of products carried and size of retail space.
A third location opened in August of 2012, and operates as an Aveda™ Experience Center in the newly developed City Creek Center located the central business district of Salt lake City, Utah. Aveda Experience Centers operate as retail outlets of Aveda™ branded products, including the full lines of hair care products, makeup, and skin care. The Experience Center also serves as a resource where potential clients can be referred to and make appointments for services at the two Landis Lifestyle Salons.
Salon operations consist of three major components, an Aveda™ retail store, an advanced hair salon, and a training academy, which educates and prepares future staff about the culture, services, and products provided by the salon. The design of the salons is intended to look modern and feel comfortable, appealing to both genders, and all age groups.
Additional information on Landis can be found on its website at www.landissalon.com
Products and Services
The salons offer high quality hair care and other salon services such as makeup, skin care and nail care. The salons incorporate the use of the Aveda line of products in all the services performed and exclusively offer Aveda retail product for sale. The Aveda brand, owned by Estee Lauder Companies, Inc., manufactures professional plant-based hair care, skin care, makeup, Pure-Fume™, and other lifestyle products. The products used during services and which are available for purchase, include the following for both men and women:
| | · | Hair care - hair color and styling products, shampoos, conditioners and finishing sprays. |
| | · | Makeup - lipsticks, lip glosses, mascaras, foundations, eye shadows, nail polishes-remove nail polishes and powders. |
| | · | Skincare - moisturizers, creams, lotions, cleansers and sunscreens. |
| | · | Fragrance - oils, candles, and a variety of fragrance products used on hair, the body, and in the home. |
These products are sold directly to a broad consumer base for personal use. Therefore, we do not rely on any single customer for product sales.
Marketing and Sales
The target market for the salons are 70% female and 30% male, seeking customers with high expectations at a reasonable cost. The average customer in Salt Lake City is expected to visit the salon 6-8 times per year and spend an average of $66 on services and purchase about $16 of Aveda products per visit.
The Liberty Heights location was selected for its central location, high income demographics within easy driving distance, and the trendy nature of the area. The Marmalade location was chosen because of the high traffic count, high visibility, easy access from an I-15 freeway exit, trendy up and coming neighborhood, high income demographics within a 1 mile area east of the salon, ample parking, proximity to the new City Creek Shopping mall and the modern building that houses our facility. The primary marketing efforts of the salons continue to be word of mouth, supplemented by targeted advertising campaigns and referrals from existing customers. Our marketing campaigns are heavily focused on organically ranking under certain search terms online, and online sites such as Yelp and CitySearch, coupled with other social media sites. The Landis Aveda Experience Center opened in August of 2012 in City Creek Center, the newest shopping mall located in downtown Salt Lake City and is a first class mall covering most of two city blocks with numerous high quality and attractive tenants.
Another form of marketing is done through community and charitable involvement. Our salons pride themselves in giving back to the community by sponsoring as many charitable events as possible which align with our values revolving around women’s issues, high fashion, environmental conservation and other community based programs.
Competition
The Company’s primary competition comes from other high end salons offering above-and-beyond customer service in the Salt Lake City market. The closest competitors offering a similar level of service that are within our area include: Lunatic Fringe, Salon Zazou, and Salon Keiji. Low cost salons with large scale hair cutting operations, such as Great Clips, Supercuts, and Fantastic Sams also compete for clients, and may be competing directly with our stylists that are training to become senior stylists. The price point of our entry level hair and color services in most cases is only slightly higher than some of the above mentioned discount hair cutting operations. However, they do not offer comparable extra services and products which is our competitive point of difference.
Employees
As of December 31, 2013, Landis employed 85 individuals, with approximately 80 providing salon and support services and 5 in management, administration and finance. None of our employees are represented by labor unions and we have experienced no work stoppages. We believe that our employee relations are good.
Item 1A. Risk Factors
Our business faces many risks. Described below are what we believe to be the material risks that we face. If any of the events or circumstances described in the following risks actually occurs, our business, financial condition or results of operations could suffer.
Our ability to continue as a going concern is in doubt absent obtaining adequate new debt or equity financing and achieving sufficient sales levels.
We have limited capital. Because we do not have sufficient working capital for continued operations for at least the next 12 months, our continued existence is dependent upon us sustaining operating profitability or obtaining the necessary capital to meet our expenditures. Our operating capital requirements, in excess of what is generated from operations, for the next 12 months are approximately $500,000. This primarily consists of the costs associated with our financial statement reporting obligations and costs associated with future expansion plans in 2014. At this time, we are still in the process of identifying additional salon locations within the Salt Lake valley. The funding for our operations will primarily come from private investors purchasing our stock as well as obtaining traditional lines of credit and loans to finance equipment, furniture, leasehold improvements and operations. We cannot assure you that we will be able to generate sufficient sales or raise adequate capital to meet our future working capital needs.
The voting control held by Nexia Holdings Inc. creates an anti-takeover or change of control limitation. Nexia currently holds voting control of the Company through its ownership of Supervoting preferred stock.
As of April 15, 2014, the 10,000,000 shares of Supervoting Preferred Stock (100 votes for each share) held by Nexia combined with the 96,493,181 shares of common stock provide Nexia with voting control over any proposal requiring a vote of the shareholders. Through its ownership of the preferred voting shares and common stock it holds voting rights equal to 1,096,493,181 shares of common stock. This effectively gives Nexia a veto over any attempt to take over or change control of the Company. Such an event would include a vote by the board of directors to conduct a reverse or forward split of the common stock. The shares held by Nexia thus have a strong anti-takeover effect. The interests of Nexia may not always conform to the interests of the common stockholders, in general, and thus its voting rights may not always be exercised in the best interests of the common stockholders of the Company.
Our business and our industry are affected by cyclical factors in the State of Utah, including the risk of a prolonged recession.
Our financial results are substantially dependent upon overall economic conditions in the State of Utah. General economic factors that are beyond our control, such as interest rates, recession, inflation, deflation, tax rates and policy, energy costs, unemployment trends, and other matters that influence consumer confidence and spending, may impact our business. In particular, visitation patterns to our salons can be adversely impacted by increases in unemployment rates and decreases in discretionary income levels.
A prolonged or a deepening recession in the United States, specifically in Utah, could substantially decrease the demand for our products and services below current levels and adversely affect our business. Our industry has historically been vulnerable to significant declines in consumption and product and service pricing during prolonged periods of economic downturn such as at present.
Recessions and other periods of economic dislocation typically result in a lower level of discretionary income for consumers. To the extent discretionary income declines, consumers may be more likely to reduce discretionary spending. This could result in our salon customers foregoing salon treatments or using home treatments as a substitute.
If we cannot improve same-store sales our business and results of operations may be affected.
Our success depends, in part, upon our ability to improve sales, as well as both gross margins and operating margins. A variety of factors affect comparable sales, including fashion trends, competition, current economic conditions, changes in our product assortment, the success of marketing programs and weather conditions. These factors may cause our comparable store sales results to differ materially from prior periods and from our expectations. If we are unable to improve our comparable sales on a long-term basis or offset the impact with operational savings, our financial results may be affected.
Changes in our key relationships may adversely affect our operating results.
We maintain key relationships with certain companies, including Aveda™. Termination or modification of any of these relationships could significantly reduce our revenues and have a material and adverse impact on our business, our operating results and our ability to expand.
Changes in fashion trends may impact our revenue.
Changes in consumer tastes and fashion trends can have an impact on our financial performance. For example, trends in wearing longer hair may reduce the number of visits to, and therefore, sales at our salons.
We are dependent on key personnel, specifically Richard Surber, our President and CEO.
We are dependent on the services of Richard Surber, our President, CEO, and a director. The Company does not have an employment agreement with Mr. Surber, and losing his services would likely have an adverse effect on our ability to conduct business.
The salon operations are dependent on key personnel.
The operations of the two salons are dependent on the day to day management of current staff at those locations who work in the salons and train their personnel. Losing the services of these long term employees would likely have an adverse effect on the operations and business development of the salons.
Our success depends on our ability to attract and retain trained stylists in order to support our existing salon business and to staff future expansion.
The salons are actively recruiting qualified candidates to fill stylist positions. There is substantial competition for experienced personnel in this area, which we expect to continue. We will compete for experienced candidates with companies who have substantially greater financial resources than we do. If we fail to attract, motivate and retain qualified stylists, it could harm our business and limit our ability to be successful and hamper expansion plans. For example, we will depend upon the expertise and training abilities of our current staff and management at the salons. Since we do not maintain insurance policies on any of our employees, if we lose the services of any key officers or employees it could harm our business and results of operations.
Changes in regulatory and statutory laws may result in increased costs to our business.
Our financial results can be adversely impacted by regulatory or statutory changes in laws. Due to the number of people we employ, laws that increase costs to provide employee benefits may result in additional costs to our business. Compliance with new, complex and changing laws may cause our expenses to increase. In addition, any non-compliance with these laws could result in fines, product recalls and enforcement actions or otherwise restrict our ability to market certain products, which could adversely affect our business, financial condition and results of operations.
If we are not able to successfully compete in our business segments, our financial results may be affected.
Competition on a market by market basis remains strong. Therefore, our ability to raise prices in certain markets can be adversely impacted by this competition. If we are not able to raise prices, our ability to grow same-store sales and increase our revenue and earnings may be impaired.
We face significant competition in the salon business, which could harm our sales and profitability.
The primary competition to our operations comes from salons offering excellent customer service in the Salt Lake Area market. We have identified our main competitors as Lunatic Fringe, Salon Zazou and Salon Keiji. We are also in competition with large scale hair cutting operations such as Great Clips, Supercuts, and Fantastic Sams, though these operations do not compete in offering the high-end services and products of our salons.
The loss of the Aveda™ line of products would damage the operation of our salons and have a significant and negative impact on our ability to operate and generate revenues.
Our salons offer the Aveda™ line of products, which are used almost exclusively in the services provided to customers of the salon and offered for retail sale at the salon location. Loss of the Aveda™ product line would have a significant and negative impact on the operation of the salons and their ability to generate revenues from either retail sales of health and beauty products or from providing services to consumers at the salon. We believe that the high quality and reputation of this line of products is key to our current operations and future success.
Changes in manufacturers' choice of distribution channels may negatively affect our revenues.
The retail products that we sell are licensed to be carried exclusively by professional salons. The products we purchase for sale in our salons are purchased pursuant to purchase orders, as opposed to long-term contracts, and generally can be terminated by the producer without much advance notice. Should the various product manufacturers decide to utilize other distribution channels, such as large discount retailers, it could negatively impact the revenue earned from product sales.
If we fail to protect the security of personal information about our customers, we could be subject to costly government enforcement actions or private litigation and our reputation could suffer.
The nature of our business involves processing, transmission and storage of personal information about our customers. If we experience a data security breach, we could be exposed to government enforcement actions and private litigation. In addition, our customers could lose confidence in our ability to protect their personal information, which could cause them to stop visiting our salons altogether. Such events could lead to lost future sales and adversely affect our results of operations. Our internal reviews of our procedures help to insure that our efforts to protect this information are working and will protect this personal information from disclosure.
Our stock price may be volatile.
The market price of our common stock is highly volatile and fluctuates widely in price in response to various factors, many of which are beyond our control, including the following:
| | · | Our services or our competitors |
| | · | Additions or departures of key personnel |
| | · | Our ability to execute our business plan |
| | · | Operating results that fall below expectations |
| | · | Loss of any strategic relationship |
| | · | Economic and other external factors |
| | · | Period-to-period fluctuations in our financial results |
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
Investors bear a risk that a liquid market may never develop and as a result, you may not be able to buy or sell our securities at the times you may wish and market liquidity may be limited.
Even though our securities are quoted on the “Pink Sheets,” that may not permit our investors to sell securities when and in the manner that they wish. There is not currently a significant volume of shares trading in the Company’s common stock and there may never be sufficient volume to create a liquid market such as to allow all shareholders to sell or buy shares whenever they desire. A liquid market for the sale of shares of the Companies securities may never develop.
Our common stock is currently deemed to be “penny stock”, which makes it more difficult for investors to sell their shares.
Our common stock is and will be subject to the “penny stock” rules adopted under section 15(g) of the Exchange Act. The penny stock rules apply to companies whose common stock is not listed on the NASDAQ Stock Market or other national securities exchange and trades at less than $5.00 per share or that have tangible net worth of less than $5,000,000 ($2,000,000 if the company has been operating for nine or more years). These rules require, among other things, that brokers who trade penny stock to persons other than “established customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If we remain subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. If our securities are subject to the penny stock rules, investors will find it more difficult to dispose of our securities.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We lease three facilities for our salon and experience center operations in Salt Lake City Utah. We believe that these facilities are adequate for our current needs and that suitable additional or substitute space will be available as needed to accommodate any expansion of our operations.
Our Liberty Heights facility is located at 1298 South 900 East, Salt Lake City, Utah 84105. This lease is for a 4,000 square foot free standing commercial building with a preliminary term of ten years beginning on October 1, 2005 and the lease provides for one five year extended term.
Our Landis II facility is located at 600 North 300 West, Salt Lake City, Utah 84103. This lease is for a 3,000 square foot commercial building with a term of ten years beginning on September 15, 2010 and the lease provides for two, five year extended terms.
On March 10, 2012, we signed a lease through a newly formed subsidiary, Landis Experience Center, LLC to operate an Aveda™ experience center in the newly opened City Creek Center located in downtown Salt Lake City, Utah. This 430 square foot store will focus on the sale of products only, no salon services will be provided. The lease is for a period of seven years beginning when the store opened in August of 2012.
Item 3. Legal Proceedings
From time to time, we are involved in various disputes and litigation that arise in the ordinary course of business. If the potential loss from any claim or legal proceeding is considered probable and the amount or the range of loss can be estimated, we accrue a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based only on the best information available at the time. As additional information becomes available, we reassess the potential liability related to pending claims and litigation matters and may revise estimates.
While the outcome of disputes and litigation matters cannot be predicted with any certainty, management does not believe that the outcome of any current matters will have a material adverse effect on our consolidated financial position, liquidity or results of operations.
While not a matter of litigation, the following matter has resulted in significant or material effects upon the Company that is difficult to quantify. On August 24, 2012, the Company received a notice from The Depository Trust Company (“DTC”) that is imposing a deposit transaction restriction (“Deposit Chill”) on the common stock of the Company. The notice states that the DTC is imposing the Deposit Chill in order to prevent additional deposits of the Company’s common stock with the DTC. The DTC serves as the depository trust for shares held in the majority of brokerage accounts; therefore, this action has prevented many brokerages from accepting new deposits of the Company’s common stock. The notice sets forth the DTC’s position that the Deposit Chill was imposed as a result of various unusually large deposits of shares during the period from October 18, 2011 through June 19, 2012. The Company filed an objection to the Deposit Chill and retained legal counsel to work with the DTC to remove the Deposit Chill and any restrictions on the deposit of additional shares with the DTC. The Deposit Chill was removed June 6, 2013.
At the current time there are no material pending legal proceedings to which Green or its subsidiaries are parties.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of 2013 no matters were brought to a vote of security holders.
Subsequent Event
None
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Our common stock is traded on the Pink Sheets under the symbol GRNE. We have never declared or paid any cash dividends on our common stock in the past, and we do not plan to pay cash dividends in the foreseeable future. Currently, there are no securities authorized for issuance and no compensation plans in place. All share and per share information included in this Annual Report on Form 10-K has been adjusted to reflect our August 2010 five for one forward stock split and the April 2013 one for two hundred reverse stock split.
As of April 15, 2014, we had approximately 3,500 registered stockholders and approximately four beneficial owners of our common stock.
The following table sets forth the high and low sales prices of our common stock for each quarter in the two-year period ended December 31, 2013 and also for the first quarter of 2014:
| | | High | | | Low | |
| 2012 | | | | | | |
| First Quarter | | $ | 0.2400 | | | $ | 0.0200 | |
| Second Quarter | | $ | 0.1400 | | | $ | 0.0200 | |
| Third Quarter | | $ | 0.0800 | | | $ | 0.0200 | |
| Fourth Quarter | | $ | 0.0400 | | | $ | 0.0200 | |
| | | | | | | | | |
| 2013 | | | | | | | | |
| First Quarter | | $ | 0.0200 | | | $ | 0.0200 | |
| Second Quarter | | $ | 0.0650 | | | $ | 0.0050 | |
| Third Quarter | | $ | 0.0120 | | | $ | 0.0030 | |
| Fourth Quarter | | $ | 0.0100 | | | $ | 0.0026 | |
| | | | | | | | | |
| 2014 | | | | | | | | |
| First Quarter | | $ | 0.0130 | | | $ | 0.0050 | |
Unregistered Sales of Equity Securities
On May 22, 2013, the Board of Directors approved the conversion of 2,772 shares of Series B Preferred Stock held by an investor into 1,000,000 shares of Common Stock. The shares were converted at $0.014 per share based on the conversion provisions for the Series B Preferred Stock designation.
On May 22, 2013, the Board of Directors approved the conversion of $5,800 of the June 14, 2011 Convertible Note held by Asher Enterprises, Inc. into 773,333 shares of Common Stock. The shares were converted at $0.0075 per shares which was the conversion price provided for by the terms of the note. This conversion resulted in the final satisfaction of this note.
On May 28, 2013, the Board of Directors approved the conversion of 2,772 shares of Series B Preferred Stock held by an investor into 1,000,000 shares of Common Stock. The shares were converted at $0.014 per share based on the conversion provisions for the Series B Preferred Stock designation.
On May 28, 2013, the Board of Directors approved the conversion of 2,600 shares of Series B Preferred Stock held by an investor into 1,069,078 shares of Common Stock. The shares were converted at $0.012 per share based on the conversion provisions for the Series B Preferred Stock designation.
On May 29, 2013 Asher Enterprises, Inc. submitted a conversion request for $3,800 of the July 19, 2011 note into 1,085,714 shares of Common Stock. The shares were converted at $0.0035 per share which was the conversion price provided for by the terms of the note.
On May 31, 2013, the Board of Directors approved the conversion of 2,000 shares of Series B Preferred Stock held by an investor into 1,035,197 shares of Common Stock. The shares were converted at $0.01 per share based on the conversion provisions for the Series B Preferred Stock designation.
On June 11, 2013, the Board of Directors approved the conversion of 2,797 shares of Series B Preferred Stock held by an investor into 1,280,678 shares of Common Stock. The shares were converted at $0.011 per share based on the conversion provisions for the Series B Preferred Stock designation.
On June 27, 2013, the Board of Directors approved the conversion of $3,500 of the July 19, 2011 Convertible Note held by Asher Enterprises, Inc. into 1,093,750 shares of Common Stock. The Shares were converted at $0.0032 per share which was the conversion price provided for by the terms of the note.
On July 2, 2013, Asher Enterprises, Inc. and the Company amended each of the Asher convertible promissory notes to extend the beginning date of default interest from the maturity date of each note until after May 19, 2013. The amendment and also provides that the 50% default fees may not be converted to equity until after May 19, 2013.
On July 31, 2013, Nexia Holdings Inc., converted $169,434 of debt into 84,716,865 shares of common stock. The transaction was valued at $169,434 with a stated value per share of $0.002 for the common stock. The shares were issued with a restrictive legend to Nexia, the parent corporation of the Company. The transaction was handled as a private sale exempt from registration under Section 4 of the Securities Act of 1933.
On August 12, 2013, the Board of Directors approved the conversion of 4,600 shares of Series B Preferred Stock held by an investor into 5,502,392 shares of Common Stock. The shares were converted at $0.00418 per share based on the conversion provisions for the Series B Preferred Stock designation.
On August 13, 2013, the Board of Directors approved the conversion of 3,900 shares of Series B Preferred Stock held by an investor into 4,411,765 shares of Common Stock. The shares were converted at $0.00442 per share based on the conversion provisions for the Series B Preferred Stock designation.
On August 13, 2013, the Board of Directors approved the issuance of 10,000 shares of Convertible Preferred Series B Stock in exchange for $20,000 in cash.
On August 23, 2013, the Board of Directors approved the conversion of 4,850 shares of Series B Preferred Stock held by an investor into 5,639,535 shares of Common Stock. The shares were converted at $0.0043 per share based on the conversion provisions for the Series B Preferred Stock designation.
On August 23, 2013, the Board of Directors approved the issuance of 20,000 shares of Convertible Preferred Series B Stock in exchange for $30,000 in cash.
On August 28, 2013, the Board of Directors approved the conversion of $12,000 of the July 19, 2011 Convertible Note held by Asher Enterprises, Inc. into 5,217,391 shares of Common Stock. The Shares were converted at $0.0023 per share which was the conversion price provided for by the terms of the note.
On August 29, 2013, the Board of Directors approved the conversion of 2,000 shares of Series B Preferred Stock held by an investor into 2,183,406 shares of Common Stock. The shares were converted at $0.00458 per share based on the conversion provisions for the Series B Preferred Stock designation.
On September 19, 2013, the Board of Directors approved the conversion of 2,896 shares of Series B Preferred Stock held by an investor into 4,000,000 shares of Common Stock. The shares were converted at $0.00362 per share based on the conversion provisions for the Series B Preferred Stock designation.
On October 1, 2013, $13,200 of the July 19, 2011 Convertible Note held by Asher Enterprises, Inc. was converted into 6,947,368 shares of Common Stock of Green. The Shares were converted at $0.0023 per share which was the conversion price provided for by the terms of the note. $5,700 of the conversion was a reduction of principal on the note and $7,500 was a reduction of the default fee on the note.
On October 31, 2013, the Board of Directors approved the conversion of 2,353 shares of Series B Preferred Stock held by an investor into 3,231,143 shares of Common Stock. The shares were converted at $0.00364 per share based on the conversion provisions for the Series B Preferred Stock designation.
On November 12, 2013, the Board of Directors approved the conversion of 8,234 shares of Series B Preferred Stock held by an investor into 7,300,000 shares of Common Stock. The shares were converted at $0.00564 per share based on the conversion provisions for the Series B Preferred Stock designation.
On December 9, 2013, the Board of Directors approved the conversion of 6,000 shares of Series B Preferred Stock held by an investor into 6,818,182 shares of Common Stock. The shares were converted at $0.0044 per share based on the conversion provisions for the Series B Preferred Stock designation.
Subsequent Events
On February 12, 2014, the Board of Directors approved the issuance of 10,000 shares of Convertible Preferred Series B Stock in exchange for $20,000 in cash.
On February 14, 2014, the Board of Directors approved the conversion of 5,795 shares of Series B Preferred Stock held by an investor into 6,965,144 shares of Common Stock. The shares were converted at $0.00416 per share based on the conversion provisions for the Series B Preferred Stock designation.
On March 14, 2014, the Board of Directors approved the conversion of 11,245 shares of Series B Preferred Stock held by an investor into 8,650,000 shares of Common Stock. The shares were converted at $0.0065 per share based on the conversion provisions for the Series B Preferred Stock designation.
On March 18, 2014, the Board of Directors approved the conversion of 10,100 shares of Series B Preferred Stock held by an investor into 7,890,625 shares of Common Stock. The shares were converted at $0.0064 per share based on the conversion provisions for the Series B Preferred Stock designation.
On March 28 2014, the Board of Directors approved the issuance of a total of 189,123 shares of the Company's Convertible Preferred Series B Stock in exchange for cancellation of the principal and accrued interest of the five, $100,000 each, 8% Series A Senior Subordinated Convertible Redeemable Debentures (the "Debentures"). The Debentures were held by two unrelated parties and amounted to $500,000 in principal and $161,929 of accrued interest for a total of $661,929. The original issuance of each of the $100,000 Debentures provided for a 30% discount for the conversion of the debt into common stock. Therefore the Convertible Preferred Series B shares were issued at a 30% discount.
On April 2, 2014, the Board of Directors approved the conversion of 6,532 shares of Series B Preferred Stock held by an investor into 5,336,601 shares of Common Stock. The shares were converted at $0.00612 per share based on the conversion provisions for the Series B Preferred Stock designation.
In the above transactions, the Board of Directors relied upon Rule 506 of the Securities Act of 1933 in originally issuing the convertible notes or preferred stock and in the subsequent issuances resulting from conversions of the notes and preferred securities into common stock were done pursuant to Rule 4(2) of the Securities Act of 1933 and the resales by the holders were carried out in reliance on Rule 144.
Item 6. Selected Financial Data
Item 301(c) of Regulation S-K states that Smaller reporting companies, as defined by section 229.10(f)(1) of Regulation S-K, are not required to provide this information.
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. 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.
Overview
Green Endeavors, Inc. (“Green”) is a Utah corporation originally formed on April 25, 2002. Our fiscal year ends on December 31. We have never filed bankruptcy nor been through any similar financial reorganization.
As of December 31, 2012, we operate two high-quality hair care salons that feature Aveda™ products for retail sale. Landis Salons, Inc. (“Landis I”) operates its business within a 4,000 square foot space located in the Liberty Heights District of Salt Lake City, Utah as an Aveda Lifestyle Salon. Landis Salons II, Inc. (“Landis II”) operates within a 3,024 square foot space located in the Marmalade District of Salt Lake City, Utah under the Landis Lifestyle Salon brand as an Aveda Lifestyle Salon. A third location opened August 16, 2012, and operates as an Aveda Experience Center ("LEC") in the newly developed City Creek Mall in Salt lake City, Utah.
Aveda Lifestyle Salons can be distinguished from Aveda Concept Salons in that Aveda Lifestyle Salons are required to carry all of Aveda’s products and must meet a higher threshold for product sales than Aveda Concept Salons. An Aveda Lifestyle Salon is the highest level within the Aveda hierarchy of salons which is classified by higher purchasing volume, location, array of products carried and size of retail space.
Salon operations consist of three major components, an Aveda™ retail store, an advanced hair salon, and a training academy, which educates and prepares future staff about the culture, services, and products provided by the salon. The design of the salons is intended to look modern and feel comfortable, appealing to both genders, and all age groups.
Critical Accounting Estimates
In preparing our Consolidated Financial Statements, we make assumptions, judgments and estimates that can have a significant impact on our revenue, operating income and net income, as well as on the value of certain assets and liabilities on our Consolidated Balance Sheets. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. At least quarterly, we evaluate our assumptions, judgments and estimates and make changes accordingly. Historically, our assumptions, judgments and estimates relative to our critical accounting estimates have not differed materially from actual results.
Results of Operations
The following discussion examines our results of operations and financial condition based on our Consolidated Financial Statements for the years ended December 31, 2013 and 2012.
For the year ended December 31, 2013 and 2012, we operated three wholly owned subsidiaries. Two of the subsidiaries, Landis Salons, Inc. and Landis Salons II, Inc., operate as full-service hair and retail salons featuring the Aveda™ line of products. The third subsidiary, Landis Experience Center, LLC, is a retail Aveda experience center.
Revenue
We generate revenue through the sale of services and products in the hair salon industry. For the years ended December 31, 2013 and 2012, we had net sales of $3,566,027 and $3,148,516, respectively. Our net sales increased $417,511 or 13.3% for the year ended December 31, 2013.
The following table shows the change in service revenue by salon for the years ended December 31, 2013 and 2012:
| | | Years Ended | | | Increase (Decrease) | |
| | | December 31, | | | December 31, | | | Over Prior Fiscal Year | |
| Salon | | 2013 | | | 2012 | | | Dollar | | | Percentage | |
| Liberty Heights | | $ | 1,899,025 | | | $ | 1,661,385 | | | $ | 237,640 | | | | 14 | % |
| Marmalade | | | 725,231 | | | | 667,165 | | | | 58,066 | | | | 9 | % |
| City Creek | | | 3,864 | | | | 580 | | | | 3,284 | | | | n/a | |
| Total Service Revenue | | $ | 2,628,120 | | | $ | 2,329,130 | | | $ | 298,990 | | | | 13 | % |
As can be seen from the above table our Liberty Heights salon experienced a 14% growth of service revenues for the year ending December 31, 2013 as compared to 2012. This increase in service revenue growth is almost all due to an increased client base rather than the price charged for salon services. The 9% increase in salon service revenues for the same period for our Marmalade salon is also almost all due to an increased client base. The service revenues for the Marmalade salon are growing slower than the Liberty Heights salon because of decreases in the amounts charged for services due to newer employees at the Marmalade salon. Service revenue for the City Creek store is $3,864 and $580 for the years ending December 31, 2013 and 2012, respectively. The City Creek store is a product sales store that focuses predominantly on the sale of Aveda products. On occasion various services will be performed for product demonstration purposes. The City Creek store was open for only four months for the year ended December 31, 2012 as compared to a full 12 months for the year ended December 31, 2013, and therefore the comparison is not applicable.
The following table shows the change in product revenue by salon for the years ended December 31, 2013 and 2012:
| | | Years Ended | | | Increase (Decrease) | |
| | | December 31, | | | December 31, | | | Over Prior Fiscal Year | |
| Salon | | 2013 | | | 2012 | | | Dollar | | | Percentage | |
| Liberty Heights | | $ | 532,953 | | | $ | 531,655 | | | $ | 1,298 | | | | 0.24 | % |
| Marmalade | | | 206,076 | | | | 206,026 | | | | 50 | | | | 0.02 | % |
| City Creek | | | 198,878 | | | | 81,705 | | | | 117,173 | | | | n/a | |
| Total Product Revenue | | $ | 937,907 | | | $ | 819,386 | | | $ | 118,521 | | | | 14 | % |
As can be seen from the above table our Liberty Heights salon experienced .24% growth of product revenues for the year ending December 31, 2013 as compared to 2012. This relatively insignificant increase in product revenue growth is primarily due to less price increases from 2012 to 2013. The relatively nonexistent .02% increase in salon product revenues for the same period for our Marmalade salon is primarily due to less price increases from 2012 to 2013. Product revenue for the City Creek store is $198,878 and $81,705 for the years ending December 31, 2013 and 2012, respectively. The City Creek store is a new store that opened in August, 2012 and therefore was open for only four months for the year ended December 31, 2012 as compared to a full 12 months for the year ended December 31, 2013, and therefore the comparison is not applicable.
Cost of Revenue
The following table shows cost of revenue as a percentage of related revenue for the years ended December 31, 2013 and 2012:
| | | Years Ended | |
| | | December 31, | | | December 31, | |
| Revenue Type | | 2013 | | | 2012 | |
| Services | | | 56.4 | % | | | 59.1 | % |
| Product | | | 53.6 | % | | | 57.0 | % |
The above table shows the cost of services revenue being 2.7% less for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This decrease in service cost is primary due to a decreased cost of payroll and related costs. The 3.5% decrease in product costs for the same comparable period is primarily due to stabilization of product prices charged to customers for product during the year ended December 31, 2013 as compared to December 31, 2012.
Operating Expenses
We had a net income $51,136 for the year ended December 31, 2013 as compared to a net loss of $814,334 for the year ended December 31, 2012, which is a $865,470 change. Significant accounts that contributed to this difference are: a $105,193 reduction in general and administrative expense; a $135,056 decrease in interest expense; a $250,764 decrease in derivative fair value adjustment; and, a $65,600 gain from forgiveness of debt.
General and administrative
The following table shows General and administrative expense for the years ended December 31, 2013 and 2012:
| | | Years Ended | | | | |
| | | December 31, | | | December 31, | | | | |
| | | 2013 | | | 2012 | | | Change | |
| Salaries and wages | | $ | 443,062 | | | $ | 494,214 | | | $ | (51,152 | ) |
| Rent | | | 216,789 | | | | 232,247 | | | | (15,458 | ) |
| Advertising | | | 92,628 | | | | 93,459 | | | | (831 | ) |
| Credit card merchant fees | | | 50,317 | | | | 47,416 | | | | 2,901 | |
| Insurance | | | 63,916 | | | | 54,361 | | | | 9,555 | |
| Utilities and telephone | | | 57,821 | | | | 49,072 | | | | 8,749 | |
| Professional services | | | 218,741 | | | | 235,275 | | | | (16,534 | ) |
| Repairs and maintenance | | | 26,302 | | | | 23,204 | | | | 3,098 | |
| Dues and subscriptions | | | 24,253 | | | | 24,706 | | | | (453 | ) |
| Office expense | | | 43,036 | | | | 46,135 | | | | (3,099 | ) |
| Travel | | | 21,455 | | | | 26,359 | | | | (4,904 | ) |
| Investor relations and company promotion | | | 13,954 | | | | 63,042 | | | | (49,088 | ) |
| Other | | | 37,757 | | | | 25,734 | | | | 12,023 | |
| Total General and administrative expenses | | $ | 1,310,031 | | | $ | 1,415,224 | | | $ | (105,193 | ) |
The $105,193 decrease in general and administrative expenses over the comparable period is primarily due to decreases in salaries and wages and investor relations and company promotion. Salaries and wages had an overall decrease of $51,152 primarily due to $71,775 of employee stock option compensation expense that was not present in the 2013 comparative period. Investor relations and company promotion decreased by $49,088 due to the reduction of promotional activities in 2013 as compared to 2012.
Depreciation expense for the year ended December 31, 2013 increased to $129,458 from $123,902 for the year ended December 31, 2012. The minor $5,556 increase is from normal increases of equipment in 2013.
| | | Years Ended | | | | |
| | | December 31, | | | December 31, | | | | |
| Other Income (Expenses), net | | 2013 | | | 2012 | | | Change | |
| Interest income | | $ | 824 | | | $ | 812 | | | $ | 12 | |
| Interest expense | | | (103,035 | ) | | | (238,091 | ) | | | 135,056 | |
| Interest expense, related parties | | | (206,692 | ) | | | (206,590 | ) | | | (102 | ) |
| Gain (loss) on derivative fair value adjustment | | | 155,914 | | | | (94,850 | ) | | | 250,764 | |
| Gain on forgiveness of debt | | | 65,000 | | | | - | | | | 65,000 | |
| Other income (expense) | | | (6,542 | ) | | | (42,171 | ) | | | 38,629 | |
| Total Other income (expenses), net | | $ | (90,931 | ) | | $ | (580,890 | ) | | $ | 489,959 | |
Other income (expenses), net, went from $(580,890) for the year ended December 31, 2012 to $(90,931) for the year ended December 31, 2013 for a change of $489,959 or 84.3%. This change is primarily due to a $250,764 change in the derivative fair value adjustment and a $65,600 gain on forgiveness of debt from the pay-off of the Asher notes, as can be seen in the table above . There was also a $135,056 change in interest expense, which was primarily due to the reduction of interest bearing debt and debt discount accretion.
Liquidity and Capital Resources
Cash and Investments in marketable securities
As of December 31, 2013, our principal source of liquidity consisted of $105,984 of cash, as compared to $86,586 as of December 31, 2012. Our primary sources of cash during the year ended December 31, 2013 were customer payments for salon services and products and cash proceeds from the issuance of convertible notes payable and notes payable. Our primary uses of cash in the year ended December 31, 2012 were payments relating to salaries, benefits, rent, and other general operating expenses as well as payments of notes payable.
Working Capital
We had a working capital deficit of $948,814 as of December 31, 2013. Our current assets were $266,835, which consisted of $105,984 in cash, $16,534 in accounts receivable, and $144,317 in inventory. Our total assets were $790,697, which included $460,503 in property and equipment (net), and $63,359 in other assets. Our current liabilities were $1,215,649 consisting of $485,780 in accounts payable and accrued expenses, $63,830 in deferred revenue, $113,500 in deferred rent, $109,373 due to related parties, a derivative liability of $55,099, and $388,067 in the current portion of notes payable. Our long-term liabilities were $2,787,953. Our total stockholders’ deficit at December 31, 2013, was $3,212,905.
Working capital improved by $366,778 as of December 31, 2013, compared to December 31, 2012 primarily due to the reduction of current portions of debt and other various changes in current assets and current liabilities that net to the overall change in working capital from 2012 to 2013.
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. Net cash provided by operating activities for the year ended December 31, 2013 and 2012 was $188,435 and $178,060, respectively. As mentioned above, cash flows from operating activities include net income or net loss for the period, as the case may be. While there were several accounts that make up the small change of $10,377 in cash provided by operating activities, the most significant contributor the change was the $865,470 change from $814,334 of net loss for the year ended December 31, 2012 to $51,136 of net income for the year ended December 31, 2013. This difference is offset by several items including an $86,204 reduction in debt discount amortization, a $50,127 reduction in interest expense on value of derivatives, a $71,775 reduction in stock-based conpensation, a $46,500 reduction in loss contingency, a $75,000 reduction of non-cash professional fees from issuance of a convertible note, a $65,600 gain from forgiveness of debt, a $250,764 change in derivative fair value adjustment, and a $223,961 change in accounts payable and accrued expenses. Many of these reductions are attributable to the pay-off of convertible debt.
Cash Flows from Investing Activities
Cash flow used in investing activities for the year ended December 31, 2013 and 2012 was $22,644 and $198,100, respectively. The decrease in cash flow used in investing activities is primarily due to the 2012 to 2013 reduction of the purchase of salon equipment and increased leasehold improvements due to the opening of the new LEC store in 2012.
We expect to continue our investing activities, including purchasing both property and equipment and making both short and long-term equity investments.
Cash Flows from Financing Activities
Cash flow used by financing activities for the year ended December 31, 2013 and 2012 was $146,393 and $8,645, respectively. For the year ended December 31, 2013, the Company paid $88,463 of notes payable, $50,000 of convertible notes payable, $117,964 of related party debt, and $15,526 of capital lease obligations. For the same period, the Company received $38,160 from the issuance of notes payable, $37,400 from the issuance of related party notes payable, and $50,000 from the issuance of series B convertible preferred stock. For the year ended December 31, 2012, the Company paid $60,551 of notes payable, $157,693 of related party debt, and $7,554 of capital lease obligations. For the same period, the Company received $122,958 from the issuance of notes payable, $25,000 from the issuance of related party notes payable, $62,500 from the issuance of convertible notes payable, and received $23,985 from the exercising of stock options.
We expect to continue to use cash flow from financing activities in the near term as necessary to expand operations.
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. The debenture holder has the option, at any time, to convert all or any amount over $10,000 of principal face amount and accrued interest into shares of Common stock, $0.0001 par value per share, at a conversion price equal to 95% of the average closing bid price of the common stock three days prior to the date we receive notice. In February of 2011, DHI transferred the Debenture to 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, 2013 and 2012, 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 8. Financial Statements and Supplementary Data
The financial statements required by Item 8 are submitted as a separate section of this Annual Report on Form 10-K. See Item 15, “Exhibits and Financial Statement Schedules.”
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation required by Rule 13a-15 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, under the supervision and with the participation of our management, including our Chief Executive Officer, or CEO, and our Chief Financial Officer, or CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2013.
The evaluation of our disclosure controls and procedures included a review of our processes and the effect on the information generated for use in this Annual Report on Form 10-K. In the course of this evaluation, we sought to identify any material weaknesses in our disclosure controls and procedures, to determine whether we had identified any acts of fraud involving personnel who have a significant role in our disclosure controls and procedures, and to confirm that any necessary corrective action, including process improvements, was taken. This type of evaluation is performed every fiscal quarter so that our conclusions concerning the effectiveness of these controls can be reported in our periodic reports filed with the SEC. We intend to maintain these disclosure controls and procedures and to modifying them as circumstances warrant.
Based on evaluation as of December 31, 2013, the CEO and CFO have concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that the information required to be disclosed by us in our reports filed or submitted under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
Based on management's most recent evaluation of our company's internal control over financial reporting, management determined that there were no changes in our company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting that occurred during the most recent fiscal quarter.
Inherent Limitations on Effectiveness of Internal Control over Financial Reporting and Disclosure Controls and Procedures
Our management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. An internal control framework, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of internal control are met. Further, the design of internal control must reflect the fact that there are resource constraints, and the benefits of the controls must be considered relative to their costs. While our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of their effectiveness, because of the inherent limitations in internal control, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Green have been detected.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2013. Our management has concluded that, as of December 31, 2013, our internal control over financial reporting is not effective. We base this analysis on the simple fact that due to the size of the Company there may not be, from time to time, sufficient attention given to the five components of effective internal control over financial reporting as issued by The Committee of Sponsoring Organizations of the Treadway Commission (COSO). The five components are: the control environment, risk assessment, control activities, information and communication, and monitoring activities. We are a small entity that does not have sufficient segregation of duties and we also may not have from time to time sufficient personnel to ensure timely and accurate financial reporting. This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Our management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.
Item 9B. Other Information
None.
PART III.
Item 10. Directors, Executive Officers and Corporate Governance
Executive Officers of the Registrant
The following table provides information regarding the executive officers of Green as of December 31, 2012:
| Name | Age | Positions and Offices |
| Richard D. Surber | 41 | President, CEO and Director |
| Logan C. Fast | 27 | Vice President and Director |
| Scott C. Coffman | 52 | CFO and Director |
Our executive officers are appointed by the Board of Directors and serve at the discretion of the Board of Directors.
Richard D. Surber - Mr. Surber graduated from the University of Utah with a Bachelor of Science degree in Finance and then with a Juris Doctorate with an emphasis in corporate law, including securities, taxation and bankruptcy. He has served as President and Director of Nexia Holdings, Inc. since May of 1999. He has been an officer and director of several public companies. He was appointed as president and to the board of directors of Green Endeavors, Inc. in September of 2007
Logan C. Fast - Mr. Fast was appointed to these offices as of August 28, 2008. He is currently working as a grand salon stylist and as an instructor at the Landis Salon locations. Mr. Fast is an Aveda color and cutting "purefessional" with in the Aveda network and frequently instructs stylist around the world on Aveda cutting and color techiniques. Mr. Fast does not hold any position as officer or director of any other publicly held company.
Scott C. Coffman - Mr. Coffman graduated from the University of Utah with a Bachelor of Science degree in Finance and then with a Masters of Business Administration and later returned to the University of Utah for additional masters level accounting coursework. He was appointed as CFO on July 2, 2013 and to the Board of Directors of Green Endeavors, Inc. on June 27, 2013.
There are no family relationships among any officer or director of Green Endeavors, Inc.
Item 11. Executive Compensation
The following table sets forth the compensation of the named executive officer for each of the two years ended December 31, 2013 and 2012:
| | | | | | | | | | Stock | | | | |
| Name and Principal Position | Year | | Salary ($) | | | Bonus ($) | | | Awards ($) | | | Total ($) | |
| Richard D. Surber - President, CEO, CFO, and Director (1) | 2013 | | $ | 93,750 | | | $ | - | | | $ | - | | | $ | 93,750 | |
| | 2012 | | $ | 77,000 | | | $ | - | | | $ | - | | | $ | 77,000 | |
| | | | | | | | | | | | | | | | | | |
| Logan C. Fast - Vice President, Director (1)(2) | 2013 | | $ | 71,879 | | | $ | - | | | $ | - | | | $ | 71,879 | |
| | 2012 | | $ | 66,972 | | | $ | - | | | $ | - | | | $ | 66,972 | |
| | | | | | | | | | | | | | | | | | |
| Scott C. Coffman - CFO and Director (1)(3) | 2013 | | $ | - | | | $ | - | | | $ | 80,000 | | | $ | 80,000 | |
| | 2012 | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
(1) Compensation for services not related to positions as director.
(2) Wages received for services performed as a stylist and an educator at the salons.
| (3) | Mr. Coffman was appointed as CFO and Director in June, 2013 and does not receive a salary from Green or its subsidiaries at this time. Mr. Coffman is compensated through the company's parent payroll company. |
No director compensation was paid or accrued during the years ended December 31, 2012 and 2011.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth certain information concerning the ownership of the Company's stock with respect to: (i) each person known to the Company to be the beneficial owner of more than five percent of the Company's stock; (ii) all directors; and (iii) directors and executive officers of the Company as a group. The notes accompanying the information in the table below are necessary for a complete understanding of the figures provided below. As of April 15, 2014, there were 195,414,205 shares of common stock issued and outstanding. (2)
| Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class |
| Super voting Preferred ($0.001 par value) | Nexia Holdings, Inc. (1) | | |
| | 59 West 100 South, 2nd Floor | 10,000,000 | 100% |
| | Salt Lake City, Utah 84101 | | |
| Preferred Series "B" Stock | Richard D. Surber | | | |
| ($0.001 par value)(2) | 59 West 100 South, 2nd Floor | 37,134 | 5.11% |
| | Salt Lake City, Utah 84101 | | |
| Voting Common Stock | Richard D. Surber | | | |
| ($0.0001 par value)(2) | 59 West 100 South, 2nd Floor | 64,864 | 0.03% |
| | Salt Lake City, Utah 84101 | | |
| Preferred Series "B" Stock | Logan C. Fast | | | |
| ($0.001 par value)(2) | 59 West 100 South, 2nd Floor | 2,000 | 0.28% |
| | Salt Lake City, Utah 84101 | | |
| Preferred Series "B" Stock | Scott C. Coffman | | | |
| ($0.001 par value)(2) | 59 West 100 South, 2nd Floor | 16,000 | 2.20% |
| | Salt Lake City, Utah 84101 | | |
| Voting Common Stock | Nexia Holdings, Inc. (1) | | |
| ($0.0001 par value)(2) | 59 West 100 South, 2nd Floor | 96,493,181 | 49.38% |
| | Salt Lake City, Utah 84101 | | |
| Preferred Series "B" Stock | Directors and Executive Officers | | |
| ($0.001par value) | as a Group (including beneficial | 55,134 | 7.58% |
| | ownership) (1) | | | |
| Voting Common Stock | Directors and Executive Officers | | |
| ($0.0001 par value)(2) | as a Group (including beneficial | 11,841,179 | 6.06% |
| | ownership) (1) | | | |
| Super voting Preferred ($0.001 par value) | Directors and Executive Officers | | |
| | as a Group (including beneficial | 10,000,000 | 100% |
| | ownership) (1) | | | |
(1) Richard Surber may be deemed a beneficial owner of 96,493,181 shares of the Company's common stock by virtue of his position as an officer and director of Nexia Holdings Inc. and of 10,000,000 shares of Super Voting Preferred by virtue of his positions with Nexia Holdings, Inc.
(2) All shares of common stock reflect the 1 for 200 reverse stock split that was effective as of April 10, 2013.
Change in Control
There are no agreements, pledges or arrangements of any kind that could affect a change in control of Green Endeavors, Inc.
Item 13. Certain Relationships and Related Transactions and Director Independence
Related Transactions
Green shares its corporate office space, certain personnel, and lines of credit with Nexia Holdings, Inc. or entities controlled by Nexia Holdings under the direction of Richard Surber. A Consulting Agreement is expected to be formalized in 2014 to memorialize costs related to shared office space, utilization of certain staff members and lines of credit that are guaranteed by Richard Surber.
On April 27, 2012, the Company authorized the issuance of 4,150,000 shares of Supervoting Preferred Stock to Nexia Holdings Inc. in exchange for $144,558 in accrued interest settlement of related party obligations owed to Nexia by the Company that will be removed from the Company’s liabilities. The shares were issued with a restrictive legend to Nexia, the parent corporation of the Company. The issuance of the shares took place on May 4, 2012. The issuance results in Nexia holding 100% of the 10 million shares of Supervoting Preferred Stock authorized for the Company, resulting in Nexia holding 1 billion votes in any shareholder action.
On November 5, 2012, Landis Salons II, Inc. entered into a promissory note with Richard Surber, President, CEO and Director of Green, for the sum of $25,000 for funds loaned. The note bears interest at the rate of 20% per annum, with a term of five years and monthly payments of $662.35 and a demand feature by which the note can be called upon the demand of Mr. Surber. Landis Salons II as security for the note pledged all of its assets, stock in trade, inventory, furniture, fixtures, supplies, any intangible property and all tangible personal property of Landis Salons II and all and any other assets to which Landis Salons II holds title or claims ownership or that is hereafter acquired by Landis Salons II, subject only to purchase money liens held by sellers or grantors. As of December 31, 2013, the balance of the note was $25,000. No payments were made on the note during the year ended December 31, 2013. Mr. Surber is also providing his personal guaranty for several lines of credit and credit cards that are being utilized by the company and its operating subsidiaries. In addition to the above, Mr. Surber is a personal guarantor to notes payable by the Company with remaining principal balances of $138,861. Subsequent to December 31, 2013, Mr. Surber continues to provide his personal guaranty for several lines of credit, credit cards, and loans that are being utilized by the Company and its subsidiaries. The total amount of these credit obligations could exceed the amount of $300,000 from time to time.
On February 13, 2013, the Board of Directors approved a partial settlement of accrued interest represented by the $3,000,000 Debenture. Green agreed to issue 4,150,000 Convertible Supervoting shares to Nexia. The shares were valued based on the value of the conversion shares based upon the closing price of the common stock prior to the date of issuance.
On April 15, 2013, Green issued a Promissory Note in the amount of $37,400 payable to Nexia for cash advanced to Green. Interest on the note is 10% per annum, monthly payments are $1,725.82 and the note is due 24 months from signing. During the year ended December 31, 2013, the Company paid an aggregate of $10,150 to Nexia for payment of the note's principal.
On May 16, 2013 the Board of Directors approved the issuance of 32,000 Convertible Series B Preferred Stock to two employees (16,000 shares each) for services performed on behalf of the Company pursuant to the 2008 Benefit Plan of the Company. The transaction was recorded at $160,000, which is the 32,000 shares multiplied by the conversion price of $5 multiplied per share. This $160,000 amount was offset against balances Green owed to a subsidiary of Nexia. The shares were issued with a restrictive legend.
On July 31, 2013, Nexia Holdings Inc., converted $169,434 of debt into 84,716,865 shares of common stock. The transaction was valued at $169,434 with a stated value per share of $0.002 for the common stock. There was a 50% discount provided and no loss was recorded because it was considered a capital transaction. The shares were issued with a restrictive legend to Nexia, the parent corporation of the Company.
Subsequent Events
As of April 15, 2014, there are no related party subsequent events.
Director Independence
Our Board of Directors does not have any independent members. Both are employed in some capacity by the Company or its affiliates. There are no committees made up of less than all members of the board for audit, nominating, compensation or hiring purposes. Based upon the size of the Company and its limited resources there are currently not sufficient resources to expand the size of the board and operate committees for these purposes. Richard D. Surber has the education and experience to be the financial expert on the board. The Board of Directors has always operated as a whole and has not proceeded without the other member(s) of the board consenting to any action.
Item 14. Principal Accountant Fees and Services
Sadler, Gibb & Associates, L.L.C. (SGA) served as our independent registered public accounting firm for the years ended December 31, 2013 and 2012. $53,000 and $3,090 was paid to SGA for services rendered during the fiscal years ending December 31, 2013 and 2012, respectively.
Audit Fees
The aggregate fees billed for professional services rendered by our principal accountants for the audit of our annual financial statements, review of financial statements included in the quarterly reports and other fees that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years ended December 31, 2013 and 2012 were $58,755 and $69,995, respectively. The $11,240 difference in these fees for 2012 over 2013 is primarily due to the timing of payment for restatement of financial statements and the associated amended reviews and audit on SEC Forms 10-Q/A and 10-K/A for 2012.
Audit Related Fees
There were no fees billed for assurance and related services by our principal accountant that are reasonably related to the performance of the audit or review of the financial statements, other than those previously reported above, for the years ended December 31, 2013 and 2012.
Tax Fees
There were no fees billed for professional services rendered by our principal accountant for tax compliance, tax advice and tax planning for the years ended December 31, 2013 and 2012, respectively.
All Other Fees
There were no other fees billed for products or services provided by our principal accountant, other than those previously reported above, for the years ended December 31, 2013 and 2012.
PART IV.
Item 15. Exhibits and Financial Statement Schedules
| | | Page |
(a) 1. Financial Statements | |
| | | |
| | Report of Independent Registered Public Accounting Firm | 23 |
| | | |
| | Consolidated Balance Sheets as of December 31, 2013 and 2012 | 24 |
| | | |
| | Consolidated Statements of Operations for the years ended December 31, 2013 and 2012 | 25 |
| | | |
| | Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2013 and 2012 | 26 |
| | | |
| | Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012 | 27 |
| | | |
| | Notes to Consolidated Financial Statements | 28 |
| | | |
(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) are filed or incorporated by reference as part of this Annual Report on Form 10-K.
The exhibits filed or incorporated by reference as part of this Annual Report on Form 10-K 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
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, 2013 and 2012 and the related consolidated statements of operations, stockholders’ deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. 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 audits to obtain reasonable assurance about whether the consolidated 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 audits 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 financial position of Green Endeavors, Inc. as of December 31, 2013 and 2012, and the results of their operations and cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 17 of the consolidated financial statements, the Company has negative working capital of $948,814 and accumulated deficit of $3,123,283. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with respect to these matters are also discussed in Note 17. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Sadler, Gibb & Associates, LLC
Salt Lake City, UT
April 15, 2014
Note 12 – Stockholders’ Deficit
Preferred Stock
Green is authorized to issue 15,000,000 shares of preferred stock (par value $.001 per share). Green’s preferred stock may be divided into such series as may be established by the Board of Directors. As of December 31, 2013, Green has designated 12,000,000 of the preferred stock into two series as follows: 2,000,000 shares of Convertible Series B Preferred and 10,000,000 shares of Convertible Supervoting Preferred.
Green Endeavors, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 2013 and 2012
The Preferred Stock is classified as equity as long as there are sufficient shares available to effect the conversion. In some instances certain contracts may pass the option to receive cash or common stock to the shareholder. In this case, it is assumed that a cash settlement will occur and balance sheet classification of the affected Preferred Stock and related preferred paid-in capital as a liability.
Convertible Supervoting Preferred Stock
Each share of the Convertible Supervoting Preferred Stock is convertible into 100 shares of Green’s Common stock and has the voting rights equal to 100 shares of Common stock.
During the year ended December 31, 2013, there were no issuances or conversions of Convertible Supervoting Preferred shares.
As of December 31, 2013 and 2012, Green had 10,000,000 and 10,000,000 shares of Convertible Supervoting Preferred stock issued and outstanding, respectively.
Convertible Series B Preferred Stock
Each share of Green’s Convertible Series B Preferred Stock has one vote per share and is convertible into $5.00 worth of common stock. The number of common shares received is based on the average closing bid market price of Green's common stock for the five days before conversion notice date by the shareholder. Convertible Series B Preferred Stock shareholders, at the option of Green, can receive cash or common stock upon conversion.
During the year ended December 31, 2013, the Board of Directors approved the conversions of 47,774 shares of Series B Preferred shares into 44,472,376 shares of Common Stock. The shares were converted at prices per share of approximately $0.00340 to $0.01386 based on the conversion provisions for the Convertible Series B Preferred Stock designation.
On May 16, 2013 the Board of Directors approved the issuance of 32,000 Convertible Series B Preferred Stock to two employees (16,000 shares each) for services performed on behalf of the Company pursuant to the 2008 Benefit Plan of the Company. The transaction was recorded at $160,000, which is the 32,000 shares multiplied by the conversion price of $5 multiplied per share. This $160,000 amount was offset against balances Green owed to a subsidiary of Nexia. The shares were issued with a restrictive legend.
During the year ended December 31, 2013, the Board of Directors approved the issuances of an aggregate of 30,000 shares of Convertible Preferred Series B Stock in exchange for a total of $50,000 in cash.
As of December 31, 2013 and 2012, Green had 561,704 and 547,478 shares of Convertible Series B Preferred stock issued and outstanding, respectively.
Common Stock
Green is authorized to issue 10,000,000,000 shares of common stock (par value $0.0001 per share).
Green Endeavors, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 2013 and 2012
On or about March 22, 2013, the Company received the consent of a majority of the voting rights of the shareholders of the Company to carry out a reverse stock split of the common stock of the Company on the basis of one share for each two hundred shares of outstanding common stock and to change the par value of the common stock to $0.0001. The action as proposed was approved by the Board of Directors and notice was provided through the filing of a Form 14C Information Statement with the SEC and the reverse stock split was effective as of April 10, 2013. All common stock share quantities, prices, and par values contained in these financial statements and accompanying footnotes that occurred before April 10, 2013, have been retroactively restated to reflect the occurrence of the split and par value change.
During the year ended December 31, 2013, the Board of Directors approved the conversions of $40,263 of the Convertible Notes held by Asher Enterprises, Inc. ($28,000 in principal, 9,000 in default fee, and $3,263 in interest) into 15,117,556 shares of Common Stock. The shares were converted at prices per share of approximately $0.0019 to $0.0075 based on the conversion provisions of the convertible notes.
During the year ended December 31, 2013, the Board of Directors approved the conversions of 47,774 shares of Series B Preferred shares into 44,472,376 shares of Common Stock. The shares were converted at prices per share of approximately $0.00340 to $0.01386 based on the conversion provisions for the Convertible Series B Preferred Stock designation.
On July 31, 2013, Nexia Holdings Inc., converted $169,434 of debt into 84,716,865 shares of common stock. The transaction was valued at $169,434 with a stated value per share of $0.002 for the common stock. There was a 50% discount provided and no loss was recorded because it was considered a capital transaction. The shares were issued with a restrictive legend to Nexia, the parent corporation of the Company. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.
As of December 31, 2013 and 2012, Green had 166,572,135 and 22,265,197 shares of common stock issued and outstanding, respectively.
Note 13 – Stock-Based Compensation
On December 2, 2011, the Board of Directors approved a stock-based compensation program entitled The 2011 Benefit Plan of Green Endeavors, Inc. (the “Plan”) wherein common stock options are granted to employees. A total of 1,500,000 shares of the Green’s common stock (par value $0.0001) are authorized to be issued or granted to employees (“Employees”) under the Plan. Employees include actual employees or certain non-employee, consultants and advisors of Green, its subsidiaries, and parent company. The Plan is designed to attract and retain employees.
Under the Plan and during the year ended December 31, 2012, the company granted 730,000 stock options to five employees for services. For the year ended December 31, 2012, stock-based compensation expense of $71,775 was accounted for under the fair value method of accounting using a Black-Scholes valuation model to measure stock option expense at the date of grant. The weighted average components used for the calculation of the fair value for the options granted were approximately: $0.08 – exercise price, one year term, 502% volatility, and a .18% risk free rate.
Green Endeavors, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 2013 and 2012
Under the Plan and during the year ended December 31, 2013, the Company did not grant any stock options. At December 31, 2013, the aggregate intrinsic value of all options outstanding and exercisable was $0. As of December 31, 2013, 1,030,000 shares under the grants had been exercised and there were no unexercised grants. For the year ended December 31, 2013, there were no expired or cancelled grants. As of December 31, 2013, there were 470,000 shares available for future stock-based compensation grants.
Note 14 – Equity Purchase Agreement
On August 15, 2012, Green Endeavors Inc. (the “Company”) entered into an Equity Purchase Agreement (“Agreement”) with Southridge Partners II, LP (“Southridge”) wherein Southridge has committed to purchase up to $10,000,000 of the Company’s common stock over 36 months. The Company may draw on the facility from time to time in the form of puts, as and when it determines appropriate up to a maximum of less than 4.99% of the issued and outstanding shares of common stock of the Company per put notice. Southridge’s purchase price for each put is set at 91% of the lowest closing bid price of the common stock of the Company during the pricing period as defined in the Agreement as the period beginning on the Put Notice Date and ending on and including the date that is five Trading Days after such Put Notice Date. The option to draw down on the equity line is at the sole direction of the company. The Company is obligated to file one or more registration statements with the SEC to register the sale to Southridge of shares of common stock issued or issuable under the Agreement. The Company has agreed to file with the SEC an initial registration statement of From S-1 in order to carry out the terms of the Agreement. Upon the execution of the Agreement the Company issued to Southridge a $75,000 convertible promissory note as a condition to Southridge entering into the Agreement, which included preparation of the Agreement (see Note 10 - Notes Payable). As of December 31, 2013, there were no draws taken.
Note 15 – Depository Trust Company
On August 24, 2012, the Company received a notice from The Depository Trust Company (“DTC”) that is imposing a deposit transaction restriction (“Deposit Chill”) on the common stock of the Company. The notice states that the DTC is imposing the Deposit Chill in order to prevent additional deposits of the Company’s common stock with the DTC. The DTC serves as the depository trust for shares held in the majority of brokerage accounts; therefore, this action has prevented many brokerages from accepting new deposits of the Company’s common stock. The notice sets forth the DTC’s position that the Deposit Chill was imposed as a result of various unusually large deposits of shares during the period from October 18, 2011 through June 19, 2012. The Company filed an objection to the Deposit Chill and has retained legal counsel that is working with the DTC to remove the Deposit Chill and any restrictions on the deposit of additional shares with the DTC. The Deposit Chill was lifted on June 6, 2013.
Note 16 – Concentration of Risk
Supplier Concentrations
The Company purchases most of its salon inventory that is used for service and product sales from Aveda. Aveda product purchases for the years ended December 31, 2013 and 2012 accounted for approximately 99.5% and 99.5%, respectively, of salon products purchased.
Note 17 – Going Concern
Generally accepted accounting principles in the United States of America contemplate the continuation of Green as a going concern. As of and for the year ended December 31, 2013, Green had negative working capital of $948,814. Although Green had net income of $51,136 for the year ended December 31, 2013, it has experienced net loses in its recent years, which raises substantial doubt about Green’s ability to continue as a going concern. Green’s ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and its ability to successfully fulfill its business plan. Management plans to attempt to raise additional funds to finance the operating and capital requirements of Green through a combination of equity and debt financings. While Green is making its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be sufficient for operations.
Green Endeavors, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 2013 and 2012
Note 18 – Subsequent Events
On February 12, 2014, the Board of Directors approved the issuance of 10,000 shares of Convertible Preferred Series B Stock in exchange for $20,000 in cash.
On February 14, 2014, the Board of Directors approved the conversion of 5,795 shares of Series B Preferred Stock held by an investor into 6,965,144 shares of Common Stock. The shares were converted at $0.00416 per share based on the conversion provisions for the Series B Preferred Stock designation.
On March 14, 2014, the Board of Directors approved the conversion of 11,245 shares of Series B Preferred Stock held by an investor into 8,650,000 shares of Common Stock. The shares were converted at $0.00646 per share based on the conversion provisions for the Series B Preferred Stock designation.
On March 18, 2014, the Board of Directors approved the conversion of 10,100 shares of Series B Preferred Stock held by an investor into 7,890,625 shares of Common Stock. The shares were converted at $0.0064 per share based on the conversion provisions for the Series B Preferred Stock designation.
On March 28 2014, the Board of Directors approved the issuance of a total of 189,123 shares of the Company's Convertible Preferred Series B Stock in exchange for cancellation of the principal and accrued interest of the five, $100,000 each, 8% Series A Senior Subordinated Convertible Redeemable Debentures (the "Debentures"). The Debentures were held by two unrelated parties and amounted to $500,000 in principal and $161,929 of accrued interest for a total of $661,929. The original issuance of each of the $100,000 Debentures provided for a 30% discount for the conversion of the debt into common stock. Therefore the Convertible Preferred Series B shares were issued at a 30% discount.
On April 2, 2014, the Board of Directors approved the conversion of 6,532 shares of Series B Preferred Stock held by an investor into 5,336,601 shares of Common Stock. The shares were converted at $0.00612 per share based on the conversion provisions for the Series B Preferred Stock designation.
In accordance with ASC 855-10 Company management reviewed all material events through the date of this report and there are no additional material subsequent events to report.
