| UNITED STATES SECURITIES AND EXCHANGE COMMISSION | |
| Washington, D.C. 20549 | |
| FORM 10-K | |
| (Mark One) | |
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the year ended December 31, 2015 | |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from _________ to_________. | |
Commission file number 000-54018 | |
| GREEN ENDEAVORS, INC. | |
| (Exact name of registrant as specified in its charter) | |
| Utah | 27-3270121 |
| (State or Other Jurisdiction of | (I.R.S. Employer |
| Incorporation or Organization) | Identification No.) |
59 West 100 South, 2nd Floor, Salt Lake City, Utah 84101 | |
| (Address of Principal Executive Offices) (Zip Code) | |
| (801) 575-8073 | |
| (Registrant's Telephone Number, including Area Code) | |
| None | |
| Securities registered pursuant to Section 12(b) of the Act: | |
| None | |
| Securities registered pursuant to Section 12(g) of the Act: | |
| Title of Each Class | Names of Each Exchange on which Registered |
| $0.0001 Common Stock | None |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes ☐ No ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (check one):
Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☒
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
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, 2015 was $359,521.
On March 14, 2016, approximately 1,446,125,852 shares of the Registrant's Common Stock, $0.0001 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
1
GREEN ENDEAVORS, INC. AND SUBSIDIARIES
Annual Report on Form 10-K
For the Year Ended December 31, 2015
| PAGE | |||
| PART I. | |||
| PART II. | |||
| PART III. | |||
| PART IV. | |||
PART I.
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 City Creek Center, a high end shopping mall, located in 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
Additional information on Green can be found on its website at www.green-endeavors.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, nail polish removers, 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. Booth rental opportunities for stylists create competition in retaining stylists in our salons at competitive compensation levels. 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, 2015, Landis employed 74 individuals, with approximately 66 providing salon and support services and 8 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.
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 2016. 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 Sack Lunch Productions Inc. creates an anti-takeover or change of control limitation. Sack Lunch currently holds voting control of the Company through its ownership of super voting preferred stock.
As of March 1, 2016, the 10,000,000 shares of Super voting Preferred Stock (100 votes for each share) held by SAKL combined with the 678,786,286 shares of common stock provide SAKL 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 1,678,786,286 shares of common stock. This effectively gives SAKL 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 SAKL thus have a strong anti-takeover effect. The interests of SAKL 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 ensure 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:
| · | Significant dilution |
| · | 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.
None.
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 term of five years beginning on October 1, 2015.
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.
Our Landis Experience Center location is in the City Creek Center shopping mall 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 ending on July 31, 2019.
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.
At the current time there are no material pending legal proceedings to which Green or its subsidiaries are parties.
During the fourth quarter of 2015 no matters were brought to a vote of security holders.
Subsequent Event
None
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 March 14, 2016, 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, 2015:
| High | Low | |||||||
2014 | ||||||||
| First Quarter | $ | 0.0130 | $ | 0.0048 | ||||
| Second Quarter | $ | 0.0099 | $ | 0.0052 | ||||
| Third Quarter | $ | 0.0080 | $ | 0.0050 | ||||
| Fourth Quarter | $ | 0.0079 | $ | 0.0025 | ||||
2015 | ||||||||
| First Quarter | $ | 0.0079 | $ | 0.0025 | ||||
| Second Quarter | $ | 0.0048 | $ | 0.0015 | ||||
| Third Quarter | $ | 0.0031 | $ | 0.0005 | ||||
| Fourth Quarter | $ | 0.0010 | $ | 0.0001 | ||||
Unregistered Sales of Equity Securities
On January 21, 2015, the Board of Directors approved a stock-based compensation program entitled The 2015 Benefit Plan of Green Endeavors, Inc. (the "Plan") wherein common stock options are granted to employees. A total of 80,000,000 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, the Company has granted stock options to three employees during 2015 from January 27, 2015 to March 3, 2015 at option prices ranging from $0.0045 to $0.006 per share for an aggregate of 36,000,000 shares. Each of the three employees exercised the options on the same day they were granted by each issuing a promissory notes to the Company in the aggregate amount of $198,000. The promissory notes mature in 12 months from their issuance date and the Company is entitled to 4% interest per annum.
On January 23, 2015, the Board of Directors approved the conversion of 3,900 shares of Series B Preferred Stock held by an investor into 4,924,242 shares of Common Stock. The shares were converted at $0.00396 per share based on the conversion provisions for the Series B Preferred Stock designation.
On January 26, 2015, pursuant to a Securities Purchase Agreement, Green issued a $64,000 Convertible Promissory Note (the "Note") to KBM Worldwide, Inc. ("KBM") that matures October 28, 2015. The Note bears interest at a rate of 8% per annum and can be converted into Green's common shares, at the holder's option, at the conversion rate of 58% (a 42% discount) of the average of the three lowest trading price of Green's common shares during the ten-day period ending one trading day prior to the date of the conversion, subject to a limitation that KBM and its affiliates cannot at any time hold, as a result of conversion, more than 9.99% of the outstanding common stock of Green. On December 7, 2015, the company settled the remaining note and accrued interest for $20,486.
On February 3, 2015, Landis Salons II, Inc. entered into a loan agreement with American Express Bank, FSB in the amount of $74,000. The note is a merchant account financing arrangement wherein Landis repays the loan at the rate of 30% of the American Express credit card sales receipts that are collected each month. The loan requires a prepaid interest charge that is 12% ($8,880) of the $74,000 loan amount. These financing costs are being amortized monthly to interest expense during the two year term of the loan. The total amount due at the inception date is $82,880.
On March 24, 2015, Green Endeavors, Inc. and Landis Salons, Inc. (the "Company") issued a promissory note to Richard Surber, President, CEO and Director of Green, in the principal amount of $25,082 for funds loaned. The note bears interest at the rate of 18% per annum, has a maturity date of March 12, 2018, and requires monthly payments of $806. The Company shall be credited for satisfaction of the note for any payment that it makes of a loan that Mr. Surber is obligated to pay to Upstart Network, Inc., the reported source of the funds loan to the Company by Mr. Surber.
On March 25, 2015, pursuant to a Securities Purchase Agreement, Green issued a $34,000 Convertible Promissory Note (the "Note") to LG Capital Funding, LLC ("LGCF") that matures October 28, 2015. The Note bears interest at a rate of 8% per annum and can be converted into Green's common shares, at the holder's option, at the conversion rate of 58% (a 42% discount) of the average of the three lowest trading price of Green's common shares during the eighteen-day period ending on the trading day of the conversion notice date, subject to a limitation that LGCF and its affiliates cannot at any time hold, as a result of conversion, more than 9.99% of the outstanding common stock of Green.
On July 8, 2015, the Board of Directors approved the conversions of 5,076 shares of Series B Preferred shares into 13,500,000 shares of Common Stock. The shares were converted at prices per share of approximately $0.00188 based on the conversion provisions for the Convertible Series B Preferred Stock designation.
On July 8, 2015, the Board of Directors approved a settlement where $34,330 of the subscription receivable was forgiven and accepted $20,040 as payment in full.
On July 9, 2015, the Board of Directors approved an amendment to the stock-based compensation plan entitled The 2015 Benefit Plan of Green Endeavors Inc. (the "2015 Plan") wherein common stock options are granted to employees of the Company. A total of 100,000,000 additional shares of the Company's common stock (par value $0.0001) are authorized to be issued or granted to employees under the Amendment to the 2015 Plan.
On July 9, 2015 the Board of Directors approved a grant of 13,500,000 shares pursuant to the S-8 Registration Statement and 2015 Benefit Plan of Green Endeavors Inc. The shares were issued based on an option price of $0.0015 per share. The employee exercised the options on the same day they were granted by issuing a promissory note to the Company that will appear on the balance sheet as a subscription receivable. The promissory note matures 12 months from its issuance date and the Company is entitled to 4% interest per annum.
On July 29, 2015, the Board of Directors approved a settlement on $72,000 subscription receivable for payments of $24,200 as satisfaction in full.
On July 29, 2015, pursuant to a Securities Purchase Agreement, Green issued a $200,000 Convertible Promissory Note (the "Note") to JMJ Financial ("JMJ") that matures two years from the date of each funding. The Note bears interest at a rate of 0% per annum for the first 90 days and 12% per annum thereafter, and can be convertible into Green's common shares, at the holder's option, at the conversion rate of 60% of the market price (a 40% discount) of the lowest trading price of Green's common shares during the twenty-day period ending one trading day prior to the date of the conversion, or $0.002, whichever is lesser, subject to a limitation that JMJ and its affiliates cannot at any time hold, as a result of conversion, more than 9.99% of the outstanding common stock of Green.
On August 12, 2015, the Board of Directors approved a settlement on $72,000 subscription receivable for payments of $17,542 as satisfaction in full.
On October 13, 2015, LG Capital Funding LLC, subject to the terms of the convertible note, converted $2,000 of convertible debt principle into 6,351,937 shares of the Company's common stock.
On October 19, 2015, KBM Worldwide, Inc., subject to the terms of the convertible note, converted $8,025 of convertible debt principle into 29,722,222 shares of the Company's common stock.
On October 22, 2015, KBM Worldwide, Inc., subject to the terms of the convertible note, converted $7,430 of convertible debt principle into 29,720,000 shares of the Company's common stock.
On October 23, 2015, LG Capital Funding LLC, subject to the terms of the convertible note, converted $3,500 of convertible debt principle into 13,526,231 shares of the Company's common stock.
On October 27, 2015, subject to the terms of the convertible note, KBM converted $6,835 of note principle into 27,717,391 shares of the Company's common stock.
On October 29, 2015, subject to the terms of the convertible note, KBM converted $6,835 of note principle into 29,717,391 shares of the Company's common stock.
On November 4, 2015, LG Capital Funding LLC, subject to the terms of the convertible note, converted $2,762.06 of convertible debt principle and interest into 15,873,908 shares of the Company's common stock.
On November 5, 2015 subject to the terms of the convertible note, KBM converted $4,455 of note principle into 29,700,000 shares of the Company's common stock.
On November 17, 2015, LG Capital Funding LLC, subject to the terms of the convertible note, converted $2,986.28 of convertible debt principle and interest, into 22,066,108 shares of the Company's common stock.
On November 17, 2015, the Board of Directors approved a settlement where $16,000 of the subscription receivable was forgiven and accepted $4,250 as payment in full.
On November 21, 2015, KBM Worldwide, Inc., subject to the terms of the convertible note, converted $5,340 of convertible debt principle into 44,500,000 shares of the Company's common stock.
On December 7, 2015, LG Capital Funding LLC, subject to the terms of the convertible note, converted $2,894.81 of convertible debt principle and interest, into 24,955,258 shares of the Company's common stock.
On December 9, 2015, LG Capital Funding LLC, subject to the terms of the convertible note, converted $1,631.69 of convertible debt principle and interest, into 28,132,586 shares of the Company's common stock.
On December 21, 2015, LG Capital Funding LLC, subject to the terms of the convertible note, converted $17131.38 of convertible debt principle and interest, into 29,541,054 shares of the Company's common stock.
On December 23, 2015 the Board of Directors approved a partial settlement where $44,635.69 of interest and $66,000 of principle of the debenture held by SAKL was settled and paid through the issuance of 582,293,105 restricted shares of the Company's common stock.
On December 31 2015, LG Capital Funding LLC, subject to the terms of the convertible note, converted $2,261.44 of convertible debt principle and interest, into 29,242,758 shares of the Company's common stock.
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.
Subsequent Events
On January 12, 2016, LG Capital Funding LLC, subject to the terms of the convertible note, converted $1,711 of convertible debt, principle and interest, into 29,492,413 shares of the Company's common stock.
On February 11, 2016, LG Capital Funding LLC, subject to the terms of the convertible note, converted $1,712.22 of convertible debt, principle and interest, into 29,521,034 shares of the Company's common stock.
On February 19, 2016, LG Capital Funding LLC, subject to the terms of the convertible note, converted $2,036.59 of convertible debt, principle and interest, into 35,113,620 shares of the Company's common stock.
On February 19, 2016, JMJ Financial, subject to the terms of the convertible note, converted $1,775 of convertible debt into 35,500,000 shares of the Company's common stock.
On February 25, 2016, JMJ Financial, subject to the terms of the convertible note, converted $1,995 of convertible debt into 39,100,000 shares of the Company's common stock.
On February 29, 2016, JMJ Financial, subject to the terms of the convertible note, converted $2,053 of convertible debt into 41,050,000 shares of the Company's common stock.
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.
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, 2015, 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 in August of 2012, and operates as an Aveda Experience Center ("LEC") in the City Creek Center shopping mall in downtown 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.
Accounting Assumptions, Judgments, and 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, 2015 and 2014.
For the year ended December 31, 2015 and 2014, 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, 2015 and 2014, we had net sales of $3,028,006 and $3,194,052, respectively. Our net sales decreased by $166,046 or 5.19% for the year ended December 31, 2015 compared to 2014.
The following table shows the change in service revenue by salon for the years ended December 31, 2015 and 2014:
| Increase (Decrease) | ||||||||||||||||
| Years Ended December 31 | Over Prior Period | |||||||||||||||
| Salon | 2015 | 2014 | Dollar | Percentage | ||||||||||||
| Liberty Heights | $ | 1,608,038 | $ | 1,651,212 | $ | (43,174 | ) | -2.6 | % | |||||||
| Marmalade | 590,276 | 650,734 | (60,458 | ) | -9.3 | % | ||||||||||
| City Creek | - | 1,325 | (1,325 | ) | -100.0 | % | ||||||||||
| Total Service Revenue | $ | 2,198,314 | $ | 2,303,271 | $ | (104,957 | ) | -4.6 | % | |||||||
As can be seen from the above table for year ended December 31, 2015 as compared to the year ended December 31, 2014, there was an over-all 4.6% decline in service revenues. This drop in service revenue is almost all due to companywide changes in staffing wherein several of the senior stylists who produce more revenue have been performing other non-revenue producing activities, such as training new artists. Revenue production from new artists tends to start out lower, but has ramped up over the course of the year.
The following table shows the change in product revenue by salon for the years ended December 31, 2015 and 2014:
| Increase (Decrease) | ||||||||||||||||
| Years Ended December 31 | Over Prior Period | |||||||||||||||
| Salon | 2015 | 2014 | Dollar | Percentage | ||||||||||||
| Liberty Heights | $ | 456,635 | $ | 486,873 | $ | (30,238 | ) | -6.2 | % | |||||||
| Marmalade | 173,464 | 192,951 | (19,487 | ) | -10.1 | % | ||||||||||
| City Creek | 199,593 | 210,957 | (11,364 | ) | -5.4 | % | ||||||||||
| Total Product Revenue | $ | 829,692 | $ | 890,781 | $ | (61,089 | ) | -6.9 | % | |||||||
As can be seen from the above table for the year ended December 31, 2015 as compared to the year ended December 31, 2014, there was an over-all 6.9% decline in product revenues. This decrease coincides with the decrease in service revenue identified above
Cost of Revenue
The following table shows cost of revenue as a percentage of related revenue for the years ended December 31, 2015 and 2014:
| Years Ended | ||||||||
| December 31, | December 31, | |||||||
| Revenue Type | 2015 | 2014 | ||||||
| Services | 54.0 | % | 58.0 | % | ||||
| Product | 56.4 | % | 57.6 | % | ||||
The above table shows the cost of services revenue being 4.0% less for the year ended December 31, 2015 as compared to the year ended December 31, 2014. This decrease in service cost is primarily due to the lower personnel costs associated with hiring new stylists at lower, introductory wage scales.
Operating Expenses
We had a net loss of $884,543 for the year ended December 31, 2015 as compared to net loss of $79,037 for the year ended December 31, 2014 a $805,506 change. The increased loss is attributable an increase in general and administrative expenses and an increase in other expense.
General and administrative
The following table shows General and Administrative expense for the years ended December 31, 2015 and 2014:
| Years Ended December 31 | ||||||||||||
| 2015 | 2014 | Change | ||||||||||
| Salaries and wages | $ | 641,434 | $ | 437,007 | $ | 204,427 | ||||||
| Rent | 187,214 | 203,480 | (16,266 | ) | ||||||||
| Advertising | 136,150 | 113,124 | 23,026 | |||||||||
| Credit card merchant fees | 54,451 | 37,936 | 16,515 | |||||||||
| Insurance | 47,782 | 56,136 | (8,354 | ) | ||||||||
| Utilities and telephone | 53,855 | 57,115 | (3,260 | ) | ||||||||
| Professional services | 176,746 | 187,549 | (10,803 | ) | ||||||||
| Repairs and maintenance | 24,605 | 35,290 | (10,685 | ) | ||||||||
| Dues and subscriptions | 30,040 | 26,336 | 3,704 | |||||||||
| Office expense | 61,046 | 48,621 | 12,425 | |||||||||
| Travel | 15,724 | 11,457 | 4,267 | |||||||||
| Investor relations and company promotion | 129,541 | 9,985 | 119,556 | |||||||||
| Other | 38,385 | 34,369 | 4,016 | |||||||||
| Total general and administrative expenses | $ | 1,596,973 | $ | 1,258,405 | $ | 338,568 | ||||||
The significant contributors to the $338,568 increase in general and administrative expenses over the comparable period is primarily a $204,427 increase to salaries and wages, and the $119,556 increase in investor relations and company promotion. The increase in salaries and wages is due primarily to approximately $140,000 paid in stock compensation with the remainder going to additional hires in the salons. The increase in investor relations and company promotion is strategic in nature, to increase revenue in the near future.
The following table shows Other income and (expense) for the years ended December 31, 2015 and 2014:
| Years Ended December 31 | ||||||||||||
| 2015 | 2014 | Change | ||||||||||
| Interest income | $ | 5,544 | $ | 852 | $ | 4,692 | ||||||
| Interest expense | (232,954 | ) | (71,104 | ) | (161,850 | ) | ||||||
| Interest expense related parties | (188,647 | ) | (198,413 | ) | 9,766 | |||||||
| Gain (loss) on derivative fair value adjustment | (86,992 | ) | 23,675 | (110,667 | ) | |||||||
| Loss on forgiveness of debt | (155,488 | ) | - | (155,488 | ) | |||||||
| Gain on settlement of debt | 110,220 | 212,194 | (101,974 | ) | ||||||||
| Other income (expense) | 17,869 | 1,278 | 16,591 | |||||||||
| Total Other income and (expenses) | $ | (530,448 | ) | $ | (31,518 | ) | $ | (498,930 | ) | |||
The increase in other expense of $498,930 is related to the increase in interest expense, related to additional debt, loss on forgiveness of debt, loss on derivative fair value adjustment and a reduction in gain on settlement of debt.
Liquidity and Capital Resources
Cash and Investments in marketable securities
As of December 31, 2015, our principal source of liquidity consisted of $150,458 of cash, as compared to $100,628 as of December 31, 2014. Our primary sources of cash during the year ended December 31, 2015 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, 2015 were payments relating to salaries, benefits, rent, and other general operating expenses as well as payments of notes payable.
Working Capital
| December 31, | ||||||||
| Current Assets | 2015 | 2014 | ||||||
| Cash | $ | 150,459 | $ | 100,628 | ||||
| Certificate of Deposit | - | 28,660 | ||||||
| Accounts receivable | 15,967 | 15,764 | ||||||
| Inventory | 138,928 | 152,758 | ||||||
| Due (to)/from related parties | - | - | ||||||
| Prepaid expenses | 31,513 | 22,800 | ||||||
| Notes receivable - current | 196,922 | - | ||||||
| Total current assets | 533,789 | 320,610 | ||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | 344,051 | 336,569 | ||||||
| Deferred revenue | 66,048 | 62,755 | ||||||
| Deferred rent | 86,818 | 103,174 | ||||||
| Due to related parties | 424,804 | 77,132 | ||||||
| Derivative liability | 209,610 | 31,424 | ||||||
| Current portion of notes payable | 44,094 | 181,762 | ||||||
| Current portion of notes payable, related party | 67,990 | 52,250 | ||||||
| Current portion of capital lease obligations | 10,038 | 21,701 | ||||||
| Current portion of convertible notes payable, net of debt discount of $18,514 and $0, respectively | 152,089 | 110,000 | ||||||
| Total current liabilities | 1,405,543 | 976,767 | ||||||
| Working Capital Deficit | $ | (871,754 | ) | $ | (656,157 | ) | ||
Working capital decreased by $215,597 for the period from December 31, 2014 to December 31, 2015 primarily due to an increase in due to related parties and derivative liability offset slightly by a 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 2015 to 2014.
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 (used in) operating activities for the year ended December 31, 2015 and 2014 was $118,840 and $(142,005), respectively.
Cash Flows from Investing Activities
Cash flow used in investing activities for the years ended December 31, 2015 and 2014 was $20,824 and $63,634, respectively. Investing activities are related to the purchase of equipment and leasehold improvements. These purchases are made based on the need for new technologies and replacements due to wear and tear and obsolescence.
We expect to continue our investing activities, including purchasing property and equipment.
Cash Flows from Financing Activities
Cash flow provided by (used in) financing activities for the years ended December 31, 2015 and 2014 was $(48,185) and $200,283, respectively. For the year ended December 31, 2015, the Company paid $604,672 on notes payable, $196,187 on related party notes receivable and $21,352 on capital leases. For the same period, the Company received $567,750 from the issuance of notes payable, $133,000 from convertible notes payable and $62,762 from stock subscriptions.
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 Sack Lunch Productions Inc. (fka Nexia Holdings Inc.) and Sack Lunch'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 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 Sack Lunch in exchange for the release of debt obligations owed to Sack Lunch by DHI and Sack Lunch is the current holder of the Debenture. On December 11, 2015, the Company amended the conversion terms of the note to include a floor to the conversion price. The note holder can convert all of any amount over $10,000 of the principal face amount of the debenture into shares of Common stock, $0.0001 par value per share, at a conversion price for each share of Common stock at the greater of $0.0001 or equal to 95% of the average closing bid price of the common stock three days prior to the date we receive notice. As of December 31, 2015, the total obligation on the Debenture is $2,118,372, net of debt discount of $29,218.
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, 2015 and 2014, 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
Management believes the impact of recently issued standards and updates, which are not yet effective, will not have a material impact on Green's consolidated financial position, results of operations or cash flows upon adoption.
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."
None
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, 2015.
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, 2015, 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.
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, 2015. Our management has concluded that, as of December 31, 2015, 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.
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.
None.
Executive Officers of the Registrant
The following table provides information regarding the executive officers of Green as of December 31, 2015:
| Name | Age | Positions and Offices |
| Richard D. Surber | 42 | President, CEO, CFO and Director |
| Logan C. Fast | 29 | Vice President 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 Sack Lunch Productions, 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" within the Aveda network and frequently instructs stylist around the world on Aveda cutting and color techniques. Mr. Fast does not hold any position as officer or director of any other publicly held company.
There are no family relationships among any officer or director of Green Endeavors, Inc.
The following table sets forth the compensation of the named executive officer for each of the two years ended December 31, 2015 and 2014:
| Stock | |||||||||||||||||
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Awards ($) | Total ($) | ||||||||||||
| Richard D. Surber - President, CEO, CFO, and Director (1) | 2015 | $ | 97,500 | $ | - | $ | - | $ | 97,500 | ||||||||
| 2014 | $ | 97,500 | $ | - | $ | - | $ | 97,500 | |||||||||
| Logan C. Fast - Vice President, Director (1)(2) | 2015 | $ | 82,064 | $ | - | $ | - | $ | 82,064 | ||||||||
| 2014 | $ | 84,326 | $ | - | $ | - | $ | 84,326 | |||||||||
(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.
No director compensation was paid or accrued during the years ended December 31, 2015 and 2014.
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 March 14, 2016, there were 1,446,125,852 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) | Sack Lunch Productions, 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 | 4.88% | |
| Salt Lake City, Utah 84101 | ||||
| Voting Common Stock | Richard D. Surber | |||
| ($0.0001 par value)(2) | 59 West 100 South, 2nd Floor | 1,104,864 | 0.08% | |
| 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 | 0.26% | |
| Salt Lake City, Utah 84101 | ||||
| Voting Common Stock | Sack Lunch Productions, Inc. (1) | |||
| ($0.0001 par value)(2) | 59 West 100 South, 2nd Floor | 678,786,286 | 52.16% | |
| Salt Lake City, Utah 84101 | ||||
| Preferred Series "B" Stock | Directors and Executive Officers | |||
| ($0.001par value) | as a Group (including beneficial | 55,134 | 7.25% | |
| ownership) (1) | ||||
| Voting Common Stock | Directors and Executive Officers | |||
| ($0.0001 par value)(2) | as a Group (including beneficial | 679,891,150 | 52.24% | |
| 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 679,891,150 shares of the Company's common stock by virtue of his position as an officer and director of Sack Lunch Productions Inc. and of 10,000,000 shares of Super Voting Preferred by virtue of his positions with Sack Lunch Productions, Inc.
Change in Control
There are no agreements, pledges or arrangements of any kind that could affect a change in control of Green Endeavors, Inc.
Related Transactions
Green shares its corporate office space, certain personnel, and lines of credit with Sack Lunch Productions, Inc. or entities controlled by Sack Lunch under the direction of Richard Surber. A Consulting Agreement is expected to be formalized in 2016 to memorialize costs related to shared office space, utilization of certain staff members and lines of credit that are guaranteed by Richard Surber.
Richard 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 $97,443. Subsequent to December 31, 2015, 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.
During the year ended December 31, 2014, the Company paid an aggregate of $38,395 and $133,209 to Sack Lunch for payment of the debenture principal and accrued interest, respectively. During the year ended December 31, 2015, the Company converted $66,000 of debenture principle and $44,636 of related accrued interest into 582,293,105 shares of the Company's common stock.
As of December 31, 2015 and 2014, amounts due to related parties are $424,804 and $77,132, respectively. The $424,804 consists of $6,204 of accrued interest for the note payable to Richard Surber and $418,600 from various amounts owed to Sack Lunch's subsidiaries. The $77,132 consists of $3,704 of accrued interest for the note payable to Richard Surber and $73,428 from various amounts owed to Sack Lunch's subsidiaries.
During 2014, the Company recorded a $33,535 increase to additional paid-in capital as the result of related party forgiveness of debt, which is comprised of $21,874 that Green owed to Diversified Management Services for services and $11,661 that Landis II owed to Downtown Development Corporation for accrued interest.
Effective October 16, 2015, Sack Lunch Productions, Inc. (Green's parent corporation "SAKL") closed a Credit Agreement (the "Credit Agreement") with SAKL, as borrower, and the Company's subsidiaries as joint and several guarantors and TCA Global Credit Master Fund, LP, ("TCA"). Pursuant to the Credit Agreement, TCA loaned SAKL an initial amount of $1,800,000. The amounts borrowed pursuant to the Credit Agreement are evidenced by a Convertible Promissory Note (the "Note") and the repayment of the Note is secured by a first position security interest in substantially all of SAKL's assets in favor of TCA, as evidenced by a Security Agreement by and between SAKL and TCA (the "Company Security Agreement") and a first position security interest in substantially all of the Subsidiaries' assets, including Green Endeavors, in favor of TCA. The Note is due and payable, along with interest thereon, fifteen months following the effective date of the Note, and bears interest at the rate of 12% per annum.
On September 3, 2016 Landis Salons Inc. entered into a Memorandum of Intercompany Loan with Color Me Rad LLC, a related party, to advance $200,000. This sum is to be repaid in weekly payments of not less than $4,350, with interest at the rate of 20.1% per annum.
Director Independence
Our Board of Directors does not have any independent members. They 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. 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.
Sadler, Gibb & Associates, L.L.C. (SGA) served as our independent registered public accounting firm for the years ended December 31, 2015 and 2014. $44,529 and $42,150 was paid to SGA for services rendered during the fiscal years ending December 31, 2015 and 2014, 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, 2015 and 2014 were $44,529 and $42,150, respectively.
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, 2015 and 2014.
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, 2015 and 2014.
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, 2015 and 2014.
PART IV.
| Page | ||
(a) 1. Financial Statements | ||
| Report of Independent Registered Public Accounting Firm | 21 | |
| Consolidated Balance Sheets as of December 31, 2015 and 2014 | 22 | |
| Consolidated Statements of Operations for the years ended December 31, 2015 and 2014 | 23 | |
| Consolidated Statements of Stockholders' Deficit for the years ended December 31, 2015 and 2014 | 24 | |
| Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014 | 25 | |
| Notes to Consolidated Financial Statements | 26 | |
(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.
(a) 3. Exhibits | 44 |
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 and shareholders of
Green Endeavors, Inc.
We have audited the accompanying balance sheets of Green Endeavors, Inc. as of December 31, 2015 and 2014, and the related statements of operations, stockholders' deficit, and cash flows for each of the years in the two-year period ended December 31, 2015. 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Green Endeavors, Inc. as of December 31, 2015 and 2014, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 16 to the financial statements, the Company has negative working capital of $871,754 and an accumulated deficit of $4,086,863 as of December 31, 2015 which raises substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also described in Note 16. The 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
March 17, 2016
 |
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
| Green Endeavors, Inc. and Subsidiaries | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| December 31, 2015 | December 31, 2014 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 150,459 | $ | 100,628 | ||||
| Certificate of Deposit | - | 28,660 | ||||||
| Accounts receivable | 15,967 | 15,764 | ||||||
| Inventory | 138,928 | 152,758 | ||||||
| Prepaid expenses | 31,513 | 22,800 | ||||||
| Notes receivable related party - current | 196,922 | - | ||||||
| Total current assets | 533,789 | 320,610 | ||||||
| Property, plant, and equipment, net of accumulated depreciation of $857,236 and $727,328, respectively | 293,068 | 402,152 | ||||||
| Other assets | 24,475 | 24,475 | ||||||
| Total Assets | $ | 851,332 | $ | 747,237 | ||||
| Liabilities and Stockholders' Deficit | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 344,052 | $ | 336,569 | ||||
| Deferred revenue | 66,048 | 62,755 | ||||||
| Deferred rent | 86,818 | 103,174 | ||||||
| Due to related parties | 424,804 | 77,132 | ||||||
| Derivative liability | 209,610 | 31,424 | ||||||
| Current portion of convertible notes payable, net of debt discount of $5,889 and $0 | 44,094 | 110,000 | ||||||
| Current portion of notes payable, related party | 67,990 | 52,250 | ||||||
| Current portion of capital lease obligations | 10,038 | 21,701 | ||||||
| Current portion of notes payable | 152,089 | 181,762 | ||||||
| Total current liabilities | 1,405,543 | 976,767 | ||||||
| Long-Term Liabilities: | ||||||||
| Notes payable | 152,028 | 114,147 | ||||||
| Notes payable, related party | 14,389 | - | ||||||
| Convertible notes payable, net of debt discount of $30,390 and $0, respectively | 8,110 | - | ||||||
| Capital lease obligations | - | 12,945 | ||||||
| Convertible debentures, related party, net of debt discount of $29,218 and $41,741, respectively | 2,118,373 | 2,171,850 | ||||||
| Total long-term liabilities | 2,292,900 | 2,298,942 | ||||||
| Total Liabilities | 3,698,443 | 3,275,709 | ||||||
| Stockholders' Deficit: | ||||||||
| Convertible super voting preferred stock, $0.001 par value, 10,000,000 shares authorized; 10,000,000 shares issued and outstanding at December 31, 2015 and December 31, 2014; no liquidation value | 10,000 | 10,000 | ||||||
| Convertible preferred series B stock - $0.001 par value, 2,000,000 shares authorized, 734,607 and 760,488 shares issued and outstanding at December 31, 2015, and December 31, 2014, respectively | 735 | 760 | ||||||
| Preferred, undesignated stock - $0.001 par value 3,000,000 shares authorized, no shares issued and outstanding at December 31, 2015, and December 31, 2014 | - | - | ||||||
| Common stock, $0.0001 par value, 10,000,000,000 shares authorized; 1,236,348,785 and 195,414,505 shares issued and outstanding at December 31, 2015, and December 31, 2014, respectively | 123,634 | 19,541 | ||||||
| Subscription receivable | (76,800 | ) | - | |||||
| Additional paid-in capital | 1,182,183 | 643,547 | ||||||
| Accumulated deficit | (4,086,863 | ) | (3,202,320 | ) | ||||
| Total stockholders' deficit | (2,847,111 | ) | (2,528,472 | ) | ||||
| Total Liabilities and Stockholders' Deficit | $ | 851,332 | $ | 747,237 | ||||
| The accompanying notes are an integral part of these consolidated financial statements. | ||||||||
| Green Endeavors, Inc. and Subsidiaries | ||||||||
| Condensed Consolidated Statements of Operations | ||||||||
| Year Ended | ||||||||
| December 31, 2015 | December 31, 2014 | |||||||
| Revenue: | ||||||||
| Services, net of discounts | $ | 2,198,314 | $ | 2,303,271 | ||||
| Product, net of discounts | 829,692 | 890,781 | ||||||
| Total revenue | 3,028,006 | 3,194,052 | ||||||
| Costs and expenses: | ||||||||
| Cost of services | 1,187,437 | 1,337,039 | ||||||
| Cost of product | 467,782 | 513,083 | ||||||
| Depreciation | 129,909 | 133,044 | ||||||
| General and administrative | 1,596,973 | 1,258,405 | ||||||
| Total costs and expenses | 3,382,101 | 3,241,571 | ||||||
| Loss from operations | (354,095 | ) | (47,519 | ) | ||||
| Other income (expenses): | ||||||||
| Interest income | 5,544 | 852 | ||||||
| Interest expense | (232,954 | ) | (71,104 | ) | ||||
| Interest expense, related parties | (188,647 | ) | (198,413 | ) | ||||
| Gain (loss) on derivative fair value adjustment | (86,992 | ) | 23,675 | |||||
| Loss on settlement of debt | (45,268 | ) | 212,194 | |||||
| Other income (expense) | 17,869 | 1,278 | ||||||
| Total other income (expenses) | (530,448 | ) | (31,518 | ) | ||||
| Loss before income taxes | (884,543 | ) | (79,037 | ) | ||||
| Provision for income taxes | - | - | ||||||
| Net Loss | $ | (884,543 | ) | $ | (79,037 | ) | ||
| Net Loss per common share – basic and diluted | ||||||||
| Basic: | ||||||||
| Basic earnings per common share | $ | (0.00 | ) | $ | (0.00 | ) | ||
| Weighted-average common shares outstanding | 331,430,348 | 189,901,610 | ||||||
| Diluted: | ||||||||
| Diluted earnings per common share | $ | (0.00 | ) | $ | (0.00 | ) | ||
| Weighted-average common shares outstanding | 331,430,348 | 189,901,610 | ||||||
| The accompanying notes are an integral part of these consolidated financial statements. | ||||||||
| Green Endeavors, Inc. and Subsidiaries | ||||||||||||||||||||||||||||||||||||||||
| Consolidated Statements of Stockholders' Deficit | ||||||||||||||||||||||||||||||||||||||||
| Super Voting Preferred Stock | Series B Preferred Stock | Common Stock | Additional Paid in Capital | Retained Earnings (Deficit) | Subscription Receivable | Total Stockholders' Deficit | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2013 | 10,000,000 | 10,000 | 561,704 | 562 | 166,572,135 | 16,657 | (116,841 | ) | (3,123,283 | ) | (3,212,905 | ) | ||||||||||||||||||||||||||||
| Series B preferred shares issued for settlement of principal and accrued interest on convertible debentures | 189,123 | 189 | 654,746 | 654,935 | ||||||||||||||||||||||||||||||||||||
| Conversion of series B preferred shares into common shares | (33,672 | ) | (34 | ) | 28,842,370 | 2,884 | (2,850 | ) | - | |||||||||||||||||||||||||||||||
| Series B preferred shares issued for cash | 43,333 | 43 | 74,957 | 75,000 | ||||||||||||||||||||||||||||||||||||
| Forgiveness of debt by related party | 33,535 | 33,535 | ||||||||||||||||||||||||||||||||||||||
| Net loss for the year ended December 31, 2014 | (79,037 | ) | (79,037 | ) | ||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2014 | 10,000,000 | 10,000 | 760,488 | 760 | 195,414,505 | 19,541 | 643,547 | (3,202,320 | ) | (2,528,472 | ) | |||||||||||||||||||||||||||||
| Conversion of series B preferred shares into common shares | (8,976 | ) | (8 | ) | 18,424,242 | 1,842 | (1,834 | ) | - | |||||||||||||||||||||||||||||||
| Series B preferred shares redeemed for cash | (2,700 | ) | (3 | ) | (2,697 | ) | (2,700 | ) | ||||||||||||||||||||||||||||||||
| Conversion of debt and Class B preferred shares to common shares | (14,205 | ) | (14 | ) | 10,230,000 | 1,023 | (36,229 | ) | (35,220 | ) | ||||||||||||||||||||||||||||||
| - | ||||||||||||||||||||||||||||||||||||||||
| Common shares issued for subscription receivable | 73,500,000 | 7,350 | 428,004 | (295,050 | ) | 140,304 | ||||||||||||||||||||||||||||||||||
| Payments on subscription receivable | 62,762 | 62,762 | ||||||||||||||||||||||||||||||||||||||
| Loss on settlement of subscription receivable | 155,488 | 155,488 | ||||||||||||||||||||||||||||||||||||||
| Common stock issued for convertible debt | 356,486,933 | 35,649 | 30,453 | 66,102 | ||||||||||||||||||||||||||||||||||||
| Change in derivative due to conversion | 68,532 | 68,532 | ||||||||||||||||||||||||||||||||||||||
| Conversion of debt and accrued interest to common stock | 582,293,105 | 58,229 | 52,407 | 110,636 | ||||||||||||||||||||||||||||||||||||
| - | ||||||||||||||||||||||||||||||||||||||||
| Net loss for the year ended December 31, 2015 | (884,543 | ) | (884,543 | ) | ||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2015 | 10,000,000 | 10,000 | 734,607 | 735 | 1,236,348,785 | 123,634 | 1,182,183 | (4,086,863 | ) | (76,800 | ) | (2,847,111 | ) | |||||||||||||||||||||||||||
| The accompanying notes are an integral part of these consolidated financial statements. | ||||||||||||||||||||||||||||||||||||||||
| Green Endeavors, Inc. and Subsidiaries | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| Years Ended December 31, | ||||||||
| 2015 | 2014 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | (884,543 | ) | $ | (79,037 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation | 129,909 | 133,044 | ||||||
| Amortization of debt issuance costs | 39,916 | |||||||
| Amortization of debt discount costs | 108,792 | 34,353 | ||||||
| Stock-based compensation | 140,304 | - | ||||||
| Gain on forgiveness of capital lease | (3,256 | ) | - | |||||
| Gain on settlement of debt | 45,268 | (212,194 | ) | |||||
| (Gain) loss on derivative liability fair value adjustment | 86,992 | (23,675 | ) | |||||
| Initial derivative expense | 27,178 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (203 | ) | 770 | |||||
| Certificate of deposit | 28,660 | (28,660 | ) | |||||
| Inventory | 13,830 | (8,441 | ) | |||||
| Prepaid expenses | (22,800 | ) | ||||||
| Other assets | - | 27,826 | ||||||
| Accounts payable and accrued expenses | 7,483 | 46,916 | ||||||
| Due to (from) related parties | 392,308 | 1,294 | ||||||
| Deferred rent | (16,356 | ) | (10,326 | ) | ||||
| Deferred revenue | 3,293 | (1,075 | ) | |||||
| Note receivable | (735 | ) | ||||||
| Net cash provided by (used in) operating activities | 118,840 | (142,005 | ) | |||||
| Cash Flows from Investing Activities: | ||||||||
| Payment to related party for note receivable | (196,187 | ) | - | |||||
| Purchases of property, plant, and equipment | (20,824 | ) | (63,634 | ) | ||||
| Net cash used in investing activities | (217,011 | ) | (63,634 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Payments made on notes payable | (604,672 | ) | (98,772 | ) | ||||
| Payments made on convertible debt | (16,915 | ) | ||||||
| Payments made on related party notes payable | (4,953 | ) | - | |||||
| Payments made on related party convertible notes payable | (38,395 | ) | ||||||
| Payments made on capital lease obligations | (21,352 | ) | (18,371 | ) | ||||
| Proceeds from issuance of notes payable | 567,750 | 280,821 | ||||||
| Proceeds from issuance of related party notes payable | 35,082 | - | ||||||
| Proceeds from issuance of convertible notes payable | 133,000 | - | ||||||
| Proceeds from stock subscriptions | 62,762 | - | ||||||
| Proceeds from Class B shares redeemed | (2,700 | ) | ||||||
| Proceeds from issuance of convertible series B preferred stock | - | 75,000 | ||||||
| Net cash provided by (used in) financing activities | 148,002 | 200,283 | ||||||
| Increase (decrease) in cash | 49,831 | (5,356 | ) | |||||
| Cash at beginning of period | 100,628 | 105,984 | ||||||
| Cash at end of period | $ | 150,459 | $ | 100,628 | ||||
| Supplemental cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | 100,103 | $ | 36,169 | ||||
| Non-cash investing and financing activities: | ||||||||
| Debt discount on derivative liability, convertible notes | $ | 132,548 | $ | - | ||||
| Conversion of Series B preferred shares to common stock | $ | 1,842 | $ | 2,850 | ||||
| Forgiveness of related party debt | $ | 33,535 | ||||||
| Issuance of Series B preferred stock for settlement of debt | $ | 654,746 | ||||||
| Return of Series B preferred stock | $ | 14 | $ | - | ||||
| Exercised options for subscription receivable | $ | 295,050 | $ | - | ||||
| Settlement of debt | $ | 35,805 | $ | - | ||||
| Conversion of debt to common stock | $ | 134,634 | $ | - | ||||
| Stock issued for related party debt | $ | 110,636 | $ | - | ||||
| Deferred finance costs | $ | 45,130 | $ | - | ||||
| Original issue discount | $ | 3,500 | $ | - | ||||
| The accompanying notes are an integral part of these consolidated financial Statements. | ||||||||
Note 1 – Organization and Basis of Financial Statement Presentation
Business Description
Green Endeavors, Inc., ("Green") owns and operates two hair salons carrying the Aveda™ product line through its wholly-owned subsidiaries Landis Salons, Inc. ("Landis") and Landis Salons II, Inc. ("Landis II") in Salt Lake City, Utah. Green also owns and operates Landis Experience Center LLC ("LEC"), an Aveda retail store in Salt Lake City, Utah.
Organization
Green Endeavors, Inc. was incorporated under the laws of the State of Delaware on April 25, 2002 as Jasper Holdings.com, Inc. During the year ended December 2004, Green changed its name to Net2Auction, Inc. In July of 2007, Green changed its name to Green Endeavors, Ltd. On August 23, 2010, Green changed its name to Green Endeavors, Inc. and moved the corporate domicile from Delaware to Utah. Green has four classes of stock as follows: common with 10,000,000,000 shares authorized; preferred with 3,000,000 shares authorized; convertible preferred with 2,000,000 shares authorized; and, convertible super voting preferred with 10,000,000 shares authorized. Green is quoted on the Pink Sheets as an OTCQB issuer under the symbol GRNE.
Green is a more than 50% controlled subsidiary of Sack Lunch Productions, Inc. ("SAKL"). Sack Lunch Productions, Inc. is listed at OTC Markets trading under the symbol SAKL and is not currently a reporting company. Previous to April 15, 2015, SAKL was known as Nexia Holdings, Inc. and was trading under its symbol NXHD.
Landis Salons, Inc., a Utah corporation, was organized on May 4, 2005 for the purpose of operating an Aveda Lifestyle Salon. Landis Salons, Inc. is a wholly-owned subsidiary of Green.
Landis Salons II, Inc., a Utah corporation was organized on March 17, 2010 as a wholly-owned subsidiary of Green for the purpose of opening a second Aveda Lifestyle Salon.
Landis Experience Center, LLC ("LEC"), a Utah limited liability company, was organized on January 23, 2012 as a wholly-owned subsidiary of Green for the purpose of operating an Aveda retail store in the City Creek Mall in Salt Lake City, Utah. LEC opened its doors August 16, 2012.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation / Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Green and its subsidiaries after elimination of intercompany accounts and transactions. All consolidated subsidiaries are wholly-owned by Green. These financial statements have been prepared in accordance with Article 10 of Regulation S-X promulgated by the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to such rules and regulations.
Use of Estimates in the Preparation of the Financial Statements
The consolidated financial statements are prepared in conformity with U.S. GAAP, which requires the use of estimates, judgments and assumptions that affect the amounts of assets and liabilities at the reporting date and the amounts of revenue and expenses in the periods presented. We believe that the accounting estimates employed are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in making estimates actual results could differ from the original estimates, requiring adjustments to these balances in future periods.
Cash and Cash Equivalents
Investments with original maturities of three months or less at the time of purchase are considered cash equivalents. As of December 31, 2015 and 2014, Green had no cash equivalents.
Concentration of Credit Risk and Accounts Receivable
Our cash balances are maintained in accounts held by major banks and financial institutions located in the United States. The Company occasionally maintains amounts on deposit with a financial institution that are in excess of the federally insured limit of $250,000. The risk is managed by maintaining all deposits in high quality financial institutions. The company had no deposits in excess of federally insured limits at December, 2015 and 2014. Accounts receivable represents the balance owed to LEC by Aveda as a rebate owed to LEC for inventory purchases. The Company has experienced no credit write-offs to this account and no allowance has been provided.
Inventory
Inventories are stated at the lower of cost or market. Cost is principally determined using the first-in, first-out method (FIFO).
Property, Plant, and Equipment
Property, plant, and equipment is stated at historical cost. Depreciation is generally provided over the estimated useful lives, using the straight-line method, as follows:
| Leasehold improvements | Shorter of the lease term or the estimated useful life |
| Computer equipment and related software | 3 years |
| Furniture and fixtures | 3-10 years |
| Equipment | 3-10 years |
| Vehicle | 7 years |
| Signage | 10 years |
For the years ended December 31, 2015 and 2014, Green recorded depreciation expense of $129,909 and $133,044, respectively. Maintenance and repair costs are expensed as incurred.
Long-Lived Assets
We periodically review the carrying amount of our long-lived assets for impairment. An asset is considered impaired when estimated future cash flows are less than the carrying amount of the asset. In the event the carrying amount of such asset is not considered recoverable, the asset is adjusted to its fair value. Fair value is generally determined based on discounted future cash flows. There were no impairments of long-lived assets during the years ended December 31, 2015 and 2014.
Fair Value Measurements
The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:
| Level 1: Quoted market prices in active markets for identical assets or liabilities. | |
| Level 2: Observable market-based inputs or inputs that are corroborated by market data. | |
| Level 3: Unobservable inputs that are not corroborated by market data. | |
Revenue Recognition
There are primary two types of revenue for the Company: 1) providing hair salon services, and 2) selling hair salon products. Revenue is recognized at the time the service is performed or the product is delivered. All revenue sources are domestic. In some cases, such as the sale of gift cards, revenue is deferred until the gift card is redeemed.
Deferred Revenue
Deferred revenue arises when customers pay for products and/or services in advance of revenue recognition. Green's deferred revenue consists solely of unearned revenue associated with the purchase of gift certificates for which revenue is recognized only when the service is performed or the product is delivered.
Advertising
The Company expenses advertising production costs as they are incurred and advertising communication costs the first time the advertising takes place. For the years ended December 31, 2015 and 2014, advertising costs amounted to $165,302 and $113,124, respectively.
Stock-Based Compensation
Green recognizes the cost of employee services received in exchange for awards of equity instruments as stock-based compensation expense. Stock-based compensation expense is measured at the grant date based on the fair value of the restricted stock award, option, or purchase right and is recognized as expense, less expected forfeitures, over the requisite service period, which typically equals the vesting period. Because the employee is expected to and has historically received shares of common stock on or about the date of the employee stock option grant date as part of the exercise process, the fair value of each stock issuance is determined using the fair value of Green's common stock on the grant date.
Income Taxes
The Company has adopted the ASC 740 "Income Taxes" as of its inception. The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.
Net Income (Loss) Per Share
Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the specified period. Diluted earnings per common share is computed by dividing net income by the weighted average number of common shares and potential common shares during the specified period. For the year ended December 31, 2015, diluted earnings per common share amounted to ($.00003).
The following table shows the calculation of diluted common shares as of December 31, 2015: | ||||
| 2015 | ||||
| Diluted Shares | ||||
| Potential shares issued due to conversion of Series B Preferred Stock | 15,691,217,262 | |||
| Potential shares issued due to conversion of convertible debt | 9,365,464,772 | |||
| Potential shares issued due to conversion of Super voting shares | 1,000,000,000 | |||
| Total potentially dilutive shares | 26,056,682,034 | |||
| Common shares outstanding | 331,430,348 | |||
| Total diluted shares | 26,388,112,382 | |||
| 2014 | ||||
| Potential shares issued due to conversion of Series B Preferred Stock | 651,387,482 | |||
| Potential shares issued due to conversion of convertible debt | 423,817,880 | |||
| Potential shares issued due to conversion of Super voting shares | 1,000,000,000 | |||
| Total potentially dilutive shares | 2,075,205,362 | |||
| Weighted average common shares outstanding | 189,901,610 | |||
| Total diluted shares | 2,265,106,972 | |||
Reclassification of Financial Statement Accounts
Certain amounts in the December 31, 2014 financial statements have been reclassified to conform to the presentation in the December 31, 2015 financial statements.
Recent Accounting Pronouncements
Management believes the impact of recently issued standards and updates, which are not yet effective, will not have a material impact on Green's consolidated financial position, results of operations or cash flows upon adoption.
Note 3 – Inventory
Green's inventory consists of finished good products that are held for resale at all locations or that are used for the services provided by the two salons. Inventory is carried at the lower of cost or market. As of December 31, 2015 and 2014, inventory amounted to $138,928 and $152,758, respectively.
Note 4 – Property, Plant, and Equipment
The following is a summary of Green's Property, plant, and equipment by major category as of December 31, 2015:
| Cost | Accumulated Depreciation | Net | ||||||||||
| Computer equipment and related software | $ | 39,247 | $ | 29,401 | $ | 9,846 | ||||||
| Construction in process | 12,000 | - | 12,000 | |||||||||
| Leasehold improvements | 639,253 | 476,652 | 162,601 | |||||||||
| Furniture and fixtures | 27,201 | 24,661 | 2,540 | |||||||||
| Leased equipment | 76,298 | 54,061 | 22,237 | |||||||||
| Equipment | 282,957 | 219,071 | 63,886 | |||||||||
| Vehicle | 48,193 | 39,587 | 8,606 | |||||||||
| Signage | 25,155 | 13,803 | 11,352 | |||||||||
| $ | 1,150,304 | $ | 857,236 | $ | 293,068 | |||||||
The following is a summary of Green's Property, plant, and equipment by major category as of December 31, 2014:
| Cost | Accumulated Depreciation | Net | ||||||||||
| Computer equipment and related software | $ | 39,247 | $ | 22,189 | $ | 17,058 | ||||||
| Construction in process | 24,905 | - | 24,905 | |||||||||
| Leasehold improvements | 625,004 | 410,010 | 214,994 | |||||||||
| Furniture and fixtures | 27,201 | 22,117 | 5,084 | |||||||||
| Leased equipment | 76,298 | 38,803 | 37,495 | |||||||||
| Equipment | 263,478 | 190,114 | 73,364 | |||||||||
| Vehicle | 48,193 | 32,703 | 15,490 | |||||||||
| Signage | 25,154 | 11,392 | 13,762 | |||||||||
| Total | $ | 1,129,480 | $ | 727,328 | $ | 402,152 | ||||||
Note 5 – Other Assets
The following table shows other assets as of December 31, 2015 and 2014:
| December 31, | ||||||||
| 2015 | 2014 | |||||||
| Lease and utility deposits | $ | 24,475 | $ | 24,475 | ||||
| Other | - | - | ||||||
| Total other assets | $ | 24,475 | $ | 24,475 | ||||
Note 6 – Fair Value Measurements
Our financial assets and (liabilities) carried at fair value measured on a recurring basis as of December 31, 2015 and 2014, consisted of the following:
| Level 1 | Level 2 | Level 3 | ||||||||||||||
| Total fair | Quoted prices | Significant other | Significant | |||||||||||||
| value at | in active | observable | unobservable | |||||||||||||
| December 31, | markets | inputs | inputs | |||||||||||||
| Description | 2015 | (Level) | (Level 2) | (Level) | ||||||||||||
| Derivative liability (1) | $ | 209,610 | $ | - | $ | 209,610 | $ | - | ||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||||||
| Total fair | Quoted prices | Significant other | Significant | |||||||||||||
| value at | in active | observable | unobservable | |||||||||||||
| December 31, | markets | inputs | inputs | |||||||||||||
| Description | 2014 | (Level) | (Level 2) | (Level) | ||||||||||||
| Derivative liability (1) | $ | 31,424 | $ | - | $ | 31,424 | $ | - | ||||||||
| (1) | Derivative liability amounts are due to the embedded derivatives of certain convertible notes payable issued by the Company and are calculated using the Black Scholes pricing model (see Derivative Liability footnote for information on measurement of the derivative liability). |
Note 7 – Derivative Liability
As of December 31, 2015, the Company has a $209,610 derivative liability balance on the balance sheet, and for the same year the Company recorded a ($86,992) loss from derivative liability fair value adjustment. The derivative liability activity comes from the convertible note payable as follows:
Eastshore Enterprises, Inc.
On August 17, 2012, Green issued a $35,000 Convertible Promissory Note to Eastshore Enterprises, Inc. ("Eastshore Note") that matured August 17, 2014. The Eastshore Note bears interest at a rate of 8% per annum and can be convertible into Green's common shares, at the holder's option, at the conversion rate of 54% of the market price (a 46% discount) of the lowest trading price of Green's common shares during the ten-day period ending one trading day prior to the date of the conversion. Green analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 "Derivatives and Hedging" and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to "reset" provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company's own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
The embedded derivative for the Eastshore convertible note payable is carried on Green's balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. Green fair values the embedded derivative using the Black-Scholes option pricing model. The fair value of the derivative at the inception date of the Eastshore note was $63,636. Of the total, $35,000 was recorded as a debt discount, which is up to but not more than the net proceeds of the note. $28,636 was charged to operations as non-cash interest expense. The fair value of $63,636 was recorded as a derivative liability on the balance sheet.
The debt discount for the Eastshore note is amortized over the life of the note (approximately two years), which became fully amortized during the third quarter ended September 30, 2014. On December 31, 2015, Green marked-to-market the fair value of the derivative liabilities related to the Eastshore Note and determined an aggregate fair value of $87,091 and recorded a $55,677 loss from change in fair value of derivative for the year ended December 31, 2015. The fair value of the embedded derivative for the note was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 287%, (3) risk-free interest rate of 0.65%, (4) expected life of 1.0027 years, and (5) estimated fair value of Green's common stock of $0.0012 per share.
KBM Worldwide, Inc.
On January 26, 2015, Green issued a $64,000 Convertible Promissory Note to KBM Worldwide, Inc. ("KBM Note") that matures October 28, 2015. The KBM Note bears interest at a rate of 8% per annum and can be convertible into Green's common shares, at the holder's option, at the conversion rate of 58% of the market price (a 42% discount) of an average of the three lowest trading price of Green's common shares during the ten-day period ending one day prior to the date of the conversion. Green analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 "Derivatives and Hedging" and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to "reset" provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company's own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
The embedded derivative for the KBM Note is carried on Green's balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. Green fair values the embedded derivative using the Black-Scholes option pricing model. The fair value of the derivative at the inception date of the KBM Note was $60,048. Of the total, $60,048 was recorded as a debt discount, which is up to but not more than the net proceeds of the note. $0 was charged to operations as non-cash interest expense. The fair value of $60,048 was recorded as a derivative liability on the balance sheet.
The embedded derivative for the KBM Note is carried on Green's balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. Green fair values the embedded derivative using the Black-Scholes option pricing model. The fair value of the derivative at the inception date of the KBM Note was $60,048. Of the total, $60,048 was recorded as a debt discount, which is up to but not more than the net proceeds of the note. $0 was charged to operations as non-cash interest expense. The fair value of $60,048 was recorded as a derivative liability on the balance sheet.
The debt discount for the KBM Note is amortized over the life of the note (approximately nine months). As of December 31, 2015, subject to the terms of the convertible note, the KBM Note has been fully converted to common stock.
On August 10, 2015, subject to the terms of the convertible note, KBM converted $15,000 of note principle into 23,437,500 shares of the Company's common stock. On October 19, 2015, subject to the terms of the convertible note, KBM converted $8,025 of note principle into 29,722,222 shares of the Company's common stock. On October 22, 2015, subject to the terms of the convertible note, KBM converted $7,430 of note principle into 29,720,000 shares of the Company's common stock. On October 27, 2015, subject to the terms of the convertible note, KBM converted $6,835 of note principle into 29,717,391 shares of the Company's common stock. On November 5, 2015, subject to the terms of the convertible note, KBM converted $4,455 of note principle into 29,700,000 shares of the Company's common stock. On November 19, 2015, subject to the terms of the convertible note, KBM converted $5,340 of note principle into 44,500,000 shares of the Company's common stock. On December 7, 2015, the company settled the remaining note and accrued interest for $20,486.
LG Capital Funding, LLC
On March 25, 2015, Green issued a $34,000 Convertible Promissory Note to LG Capital Funding, LLC ("LGCF Note") that matures March 26, 2016. The LGCF Note bears interest at a rate of 8% per annum and can be convertible into Green's common shares, at the holder's option, at the conversion rate of 58% of the market price (a 42% discount) of an average of the three lowest trading price of Green's common shares during the eighteen-day period ending on the date of the conversion. Green analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 "Derivatives and Hedging" and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to "reset" provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company's own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
The embedded derivative for the LGCF Note is carried on Green's balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. Green fair values the embedded derivative using the Black-Scholes option pricing model. The fair value of the derivative at the inception date of the LGCF Note was $40,018. Of the total, $34,000 was recorded as a debt discount, which is up to but not more than the net proceeds of the note. $6,018 was charged to operations as non-cash interest expense. The fair value of $40,018 was recorded as a derivative liability on the balance sheet.
The debt discount for the LGCF Note is amortized over the life of the note (approximately twelve months). On December 31, 2015, Green marked-to-market the fair value of the derivative liabilities related to the LGCF Note and determined an aggregate fair value of $33,692 and recorded a $20,622 loss from change in fair value of derivative and a fair value gain on conversion of $26,958 for the year ended December 31, 2015. The fair value of the embedded derivative for the note was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 476.51%, (3) risk-free interest rate of 0.16%, (4) expected life of 0.23 years, and (5) estimated fair value of Green's common stock of $0.00012 per share.
On October 13, 2015, subject to the terms of the convertible note, LGCF converted $2,000 of note principle into 6,351,937 shares of the Company's common stock. On October 23, 2015, subject to the terms of the convertible note, LGCF converted $3,500 of note principle into 13,526,231 shares of the Company's common stock. On November 2, 2015, subject to the terms of the convertible note, JMJ converted $2,635 of note principle into 15,873,908 shares of the Company's common stock. On November 17, 2015, subject to the terms of the convertible note, LGCF converted $2,840 of note principle into 22,066,108 shares of the Company's common stock. On December 1, 2015, subject to the terms of the convertible note, LGCF converted $2,745 of note principle into 24,955,258 shares of the Company's common stock. On December 9, 2015, subject to the terms of the convertible note, LGCF converted $1,545 of note principle into 28,132,586 shares of the Company's common stock. On December 15, 2015, subject to the terms of the convertible note, LGCF converted $1,620 of note principle into 29,541,034 shares of the Company's common stock. On December 29, 2015, subject to the terms of the convertible note, LGCF converted $2,132 of note principle into 29,242,758 shares of the Company's common stock.
JMJ Financial
On July 30, 2015, Green issued a $38,500 Convertible Promissory Note to JMJ Financial ("JMJ Note") that matures July 30, 2017. The JMJ Note bears interest at a rate of 10% per annum and can be convertible into Green's common shares, at the holder's option, at the conversion rate of 60% of the market price (a 40% discount) of an average of the three lowest trading price of Green's common shares during the eighteen-day period ending on the date of the conversion. Green analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 "Derivatives and Hedging" and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to "reset" provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company's own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
The embedded derivative for the JMJ Note is carried on Green's balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. Green fair values the embedded derivative using the Black-Scholes option pricing model. The fair value of the derivative at the inception date of the JMJ Note was $59,660. Of the total, $38,500 was recorded as a debt discount, which is up to but not more than the net proceeds of the note. $21,160 was charged to operations as non-cash interest expense. The fair value of $59,660 was recorded as a derivative liability on the balance sheet.
The debt discount for the JMJ Note is amortized over the life of the note (approximately twenty-four months). On December 31, 2015, Green marked-to-market the fair value of the derivative liabilities related to the JMJ Note and determined an aggregate fair value of $88,827 and recorded a $29,167 loss from change in fair value of derivative for the year ended December 31, 2015. The fair value of the embedded derivative for the note was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 242.85%, (3) risk-free interest rate of 1.06%, (4) expected life of 1.58 years, and (5) estimated fair value of Green's common stock of $0.0012 per share.
Note 8 – Income Taxes
The Company is a subsidiary of Sack lunch Productions, Inc. that files a consolidated income tax return. The Company follows ASC 740, under which deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry-forwards. No net provision for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry-forward has been recognized, as it is not deemed likely to be realized. The cumulative net operating loss and the cumulative tax effect at the expected composite rate of 39 percent of significant items comprising our net deferred tax amount is as follows:
The cumulative net operating loss and the cumulative tax effect at the expected composite rate of 39 percent of significant items comprising our net deferred tax amount is as follows:
| December 31, | ||||||||
| 2015 | 2014 | |||||||
| Cumulative net operating loss | (3,831,190 | ) | (3,190,679 | ) | ||||
| December 31, | ||||||||
| 2015 | 2014 | |||||||
Deferred Tax assets: | ||||||||
| Net operating loss carry forwards | (1,593,877 | ) | (1,248,905 | ) | ||||
| Meals and Entertainment | 27,516 | 24,226 | ||||||
| Donations | 16,600 | 13,363 | ||||||
| Change in derivative liability | 880 | (33,047 | ) | |||||
| Stock options for services | 54,718 | |||||||
| Valuation allowance | 1,494,163 | 1,244,363 | ||||||
| - | - | |||||||
| December 31, | ||||||||
| 2015 | 2014 | |||||||
| Book income (loss) from operations | (344,972 | ) | (30,824 | ) | ||||
| Meals and Entertainment | 3,290 | 3,584 | ||||||
| Donations | 3,237 | 3,959 | ||||||
| Change in derivative liability | 33,927 | (9,233 | ) | |||||
| Stock options issued for services | 54,718 | |||||||
| Change in valuation allowance | 249,800 | 32,514 | ||||||
| - | - | |||||||
Note 9 – Related Party Transactions
On April 30, 2008, Green entered into a stock transfer agreement with its parent company Sack Lunch Productions Inc. and Sack Lunch's wholly-owned subsidiary DHI whereby they would each sell their holdings in Landis and Newby in exchange for an 8% Series A Senior Subordinated Convertible Debenture with a face amount of $3,000,000. Interest on the debenture commenced on December 30, 2008. DHI has the option, at any time, to convert all or any amount over $10,000 of principal face amount and accrued interest into shares of Common stock, $0.0001 par value per share, at a conversion price of 95% of the average closing bid price of the Common stock three days prior to the date notice is received by Green. Green determined that there is a beneficial conversion feature for the debt and recorded a debt discount of $150,000 on April 30, 2008, which is being amortized for 10 years to the maturity date of the debenture. In December 2009, Sack Lunch converted $125,000 of the debenture into common stock of Green and during 2010 Green paid $15,200 of principal on the debenture. During 2010, Sack Lunch sold $500,000 of its holdings of the debenture to unrelated parties for cash thus leaving the related and unrelated party portions of the debenture at $2,359,800 and $500,000, respectively for a total amount of $2,859,800. During 2014, the Company exchanged the total unrelated party principal and accrued interest for 189,123 of its Convertible Series B Preferred Stock. On December 11, 2015, the Company amended the conversion terms of the note to include a floor to the conversion price. The note holder can convert all or any amount over $10,000 of the principal face amount of the debenture into shares of Common stock, $0.0001 par value per share, at a conversion price for each share of Common stock at the greater of $0.0001 or equal to 95% of the average closing bid price of the common stock three days prior to the date we receive notice. As of December 31, 2015 and 2014, the entire amount is considered long-term. The following table shows the related and unrelated party amounts of the debenture and their respective amortized debt discount amounts:
| December 31, | ||||||||
| 2015 | 2014 | |||||||
Convertible Debenture - Related Party | ||||||||
| Principal amount | $ | 2,147,591 | $ | 2,213,591 | ||||
| Debt discount | (29,218 | ) | (41,741 | ) | ||||
| Convertible debenture, net of debt discount | $ | 2,118,373 | $ | 2,171,850 | ||||
Convertible Debenture - Totals | ||||||||
| Principal amount | $ | 2,147,591 | $ | 2,213,591 | ||||
| Debt discount | (29,218 | ) | (41,741 | ) | ||||
| Convertible debenture, net of debt discount | $ | 2,118,373 | $ | 2,171,850 | ||||
| The following table summarizes the related party amounts of principal and accrued interest on the Convertible Debentures as of December 31, 2015 and December 31, 2014: | ||||||||
| December 31, | ||||||||
| 2015 | 2014 | |||||||
| Principal balance | $ | 2,147,591 | $ | 2,213,591 | ||||
| Accrued interest | - | |||||||
| Total | $ | 2,147,591 | $ | 2,213,591 | ||||
During the year ended December 31, 2015, the Company converted $110,636 of debenture principle and interest and made cash payments of principle and interest of $132,452 to Sack Lunch. During the year ended December 31, 2014, the Company paid an aggregate of $38,395 and $177,845 to Sack Lunch for payment of the debenture principal and accrued interest, respectively.
As of December 31, 2015 and 2014, amounts due to related parties are $424,804 and $77,132, respectively. The $404,804 consists of $6,852 of accrued interest for the note payable to Richard Surber and $417,952 from various amounts owed to Sack Lunch's subsidiaries. The $77,132 consists of $3,704 of accrued interest for the note payable to Richard Surber and $73,428 from various amounts owed to Sack Lunch's subsidiaries.
On April 15, 2013, Green issued a Promissory Note in the amount of $37,400 payable to Sack Lunch for cash advanced to Green. Interest on the note is 10% per annum, monthly payments are $1,726 and the note is due April 15, 2015. As of December 31, 2015 and 2014, accrued interest on the note was $5,810 and $3,085 respectively. As of December 31, 2015 and 2014, the principal balance on the note was $27,250 and the note is currently in default.
During 2014, the Company recorded a $33,535 increase to additional paid-in capital as the result of related party forgiveness of debt, which is comprised of $21,874 that Green owed to Diversified Management Services for services and $11,661 that Landis II owed to Downtown Development Corporation for accrued interest.
Effective October 16, 2015, Sack Lunch Productions, Inc. (Green's parent corporation "SAKL") closed a Credit Agreement (the "Credit Agreement") with SAKL, as borrower, and the Company's subsidiaries as joint and several guarantors and TCA Global Credit Master Fund, LP, ("TCA"). Pursuant to the Credit Agreement, TCA loaned SAKL an initial amount of $1,800,000. The amounts borrowed pursuant to the Credit Agreement are evidenced by a Convertible Promissory Note (the "Note") and the repayment of the Note is secured by a first position security interest in substantially all of SAKL's assets in favor of TCA, as evidenced by a Security Agreement by and between SAKL and TCA (the "Company Security Agreement") and a first position security interest in substantially all of the Subsidiaries' assets, including Green Endeavors, in favor of TCA. The Note is due and payable, along with interest thereon, fifteen months following the effective date of the Note, and bears interest at the rate of 12% per annum.
On September 3, 2016 Landis Salons Inc. entered into a Memorandum of Intercompany Loan with Color Me Rad LLC, a related party, to advance $200,000. This sum is to be repaid in weekly payments of not less than $4,350, with interest at the rate of 20.1% per annum.
As of December 31, 2015, Mr. Surber is a personal guarantor to various notes payable by the Company. Subsequent to December 31, 2015, 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.
Note 10 – Notes Payable
A summary of notes payable as of December 31, 2015 and 2014 is as follows:
| Interest | Maturity | Balance | Balance | ||||||||||
| Creditor | Rate | Date | 12/31/2015 | 12/31/14 | |||||||||
| Salt Lake City Corp (1) | 3.25 | % | 7/1/2015 | $ | - | $ | 12,520 | ||||||
| Alliance Laundry Services LLC (2) | 7.99 | % | 3/3/2019 | 8,532 | 10,681 | ||||||||
| American Express Merchant Funding (3) | 12.00 | % | 8/2/2016 | - | 225,558 | ||||||||
| American Express Merchant Funding (4) | 12.00 | % | 11/19/2017 | 261,806 | - | ||||||||
| William and Nina Wolfson (5) | 11.00 | % | 2/27/2016 | 14,844 | 18,115 | ||||||||
| Salt Lake City Corp (6) | 5.00 | % | 9/1/2017 | 18,935 | 29,035 | ||||||||
| Total | $ | 304,117 | $ | 295,909 | |||||||||
| Less: Current Portion | 152,089 | 181,762 | |||||||||||
| Long-Term Portion | $ | 152,028 | $ | 114,147 | |||||||||
A summary of capital leases payable as of December 31, 2015 and 2014 is as follows:
| Interest | Maturity | Balance | Balance | ||||||||||
| Creditor | Rate | Date | 12/31/2015 | 12/31/14 | |||||||||
| Castleton Equipment Lease (7) | 16.96 | % | 4/23/2016 | $ | 5,929 | $ | 21,843 | ||||||
| Imaging Concepts Copier Lease (8) | 10.90 | % | 2/25/2018 | - | 4,105 | ||||||||
| Time Payment Corp - equip lease (9) | 17.75 | % | 9/5/2016 | 4,110 | 8,698 | ||||||||
| Total | $ | 10,038 | $ | 34,646 | |||||||||
| Less: Current Portion | 10,038 | 21,701 | |||||||||||
| Long-Term Portion | $ | - | $ | 12,945 | |||||||||
A summary of convertible notes payable as of December 31, 2015 and 2014 is as follows:
| Interest | Maturity | Balance | Balance | ||||||||||
| Creditor | Rate | Date | 12/31/2015 | 12/31/14 | |||||||||
| Southridge Partners (10) | 2/28/2013 | $ | - | $ | 75,000 | ||||||||
| Eastshore Enterprises (11) | 8.00 | % | 8/17/2014 | 35,000 | 35,000 | ||||||||
| LG Capital Funding, LLC (12) | 8.00 | % | 3/25/2016 | 14,983 | - | ||||||||
| JMJ Financial (13) | 12.00 | % | 7/30/2017 | 38,500 | - | ||||||||
| Total | $ | 88,483 | $ | 110,000 | |||||||||
| Less: Current Portion | 49,983 | 110,000 | |||||||||||
| Less: Current Portion of Debt Discount | 5,889 | ||||||||||||
| Total Current Portion, net of discount | 44,094 | ||||||||||||
| Long-Term Portion | $ | 38,500 | $ | - | |||||||||
| Less: Long-Term Portion of Debt Discount | 30,390 | ||||||||||||
| Total Long-Term Portion net of discount | $ | 8,110 | |||||||||||
A summary of the related party note payable as of December 31, 2015 and 2014 is as follows:
| Interest | Maturity | Balance | Balance | ||||||||||
| Creditor | Rate | Date | 12/31/2015 | 12/31/14 | |||||||||
| Sack Lunch - note payable (14) | 10.00 | % | 4/15/2015 | $ | 27,250 | $ | 27,250 | ||||||
| Richard Surber $25k note payable (15) | 18.00 | % | 3/12/2018 | 20,820 | - | ||||||||
| Diversified Holdings X, Inc $10k note (16) | 18.00 | % | 5/6/2016 | 9,309 | - | ||||||||
| Richard Surber $25k note payable (17) | 20.00 | % | 11/6/2017 | 25,000 | 25,000 | ||||||||
| Total | $ | 82,379 | $ | 52,250 | |||||||||
| Less: Current Portion | 67,990 | 52,250 | |||||||||||
| Long-Term Portion | $ | 14,389 | $ | - | |||||||||
| (1) | On June 18, 2010, Landis Salons, Inc. received a loan in the amount of $100,000 from the Division of Economic Development of Salt Lake City Corporation. The loan includes a 1% origination fee. Principal and interest payments are made monthly over a five year term commencing June 2010. The loan is secured by a $25,000 certificate deposit held in the name of Landis Salons, Inc. and is personally guaranteed by Richard Surber, CEO of Green. The certificate of deposit is collateral for the loan. As of December 31, 2015 the note has been paid in full. |
| (2) | On March 3, 2014, Landis Salons, Inc. entered into a loan agreement with Alliance Laundry Services LLC in the amount of $12,021 for the financing of professional laundry equipment. The note calls for 60 monthly payments of $244 commencing when the equipment is delivered for installment. In addition to corporate guarantees, Richard Surber, President, CEO, and Director of Landis is a personal guarantor and the note is secured by the equipment. |
| (3) | On July 31, 2014, the Company entered into a loan agreement with American Express Bank, FSB in the amount of $240,000. The note is a merchant account financing arrangement wherein Landis repays the loan at the rate of 23% of the American Express credit card sales receipts that are collected each month. In addition to the merchant account receivables, collateral for the loan includes all receivables, financial instruments, equipment assets, inventories, intangibles, deposits, and other assets as applicable. The loan requires a prepaid interest charge that is 12% ($28,800) of the $240,000 loan amount. These financing costs are being amortized monthly to interest expense during the two year term of the loan. The total amount due at the inception date is $268,800. As of December 31, 2015, the note has been paid in full. |
| (4) | On February 3, 2015, the Landis Salons II, Inc. entered into a loan agreement with American Express Bank, FSB in the amount of $74,000. The note is a merchant account financing arrangement wherein Landis repays the loan at the rate of 30% of the American Express credit card sales receipts that are collected each month. The loan requires a prepaid interest charge that is 12% ($8,880) of the $74,000 loan amount. These financing costs are being amortized monthly to interest expense during the two year term of the loan. The total amount due at the inception date is $82,880. As of December 31, 2015 the note has been paid in full. |
| (5) | On February 27, 2012, Green and Landis Experience Center, LLC issued an 11% note payable in the principal face amount of $50,000 to William and Nina Wolfson in exchange for a cash payment of the same amount. The note provides for monthly payments in the amount of $1,292 of principal and interest. In addition to the Company's guarantee to the note, Richard Surber has personally guaranteed the note. |
| (6) | On August 20, 2012, the Board of Directors of LEC approved that LEC enter into a loan agreement with Salt Lake City Corporation in the amount of $50,000. Pursuant to the board approval, a note in the amount of $50,000 was issued on August 21, 2012. The note bears interest at 5% per annum and requires 60 monthly installments of $944 commencing October 1, 2012. In addition to corporate guarantees and the personal guarantee by Richard Surber, President, CEO, and Director of LEC, a certificate of deposit is being held as collateral for the loan. |
| (7) | On April 23, 2012, Landis Salons, Inc. entered into a capital lease financing agreement in the principal amount of $53,230 with Castleton Capital Corporation. The lease agreement requires 48 monthly payments of principal and interest in the amount of $1,535. Interest is at the rate of 16.96% per year and the maturity date is April 23, 2016. Landis has the option to purchase the leased salon equipment at maturity for a $1 bargain purchase amount. The Company applied the guidance of ASC 840 in its determination of the lease being a capital lease. In addition to the Company's guarantee for the debt, Richard Surber is personal guarantor to the lease. |
| (8) | On February 25, 2013, Landis Salons, Inc. entered into a capital lease financing agreement in the principal amount of $5,911 with Imaging Concepts. The lease agreement requires 60 monthly payments of principal and interest in the amount of $128. Interest is at the rate of 10.9% per year and the maturity date is February 25, 2018. Landis has the option to purchase the leased salon equipment at maturity for a $1 bargain purchase amount. The Company applied the guidance of ASC 840 in its determination of the lease being a capital lease. In addition to the Company's guarantee for the debt, Richard Surber is a personal guarantor to the lease. As of December 31, 2015 the note has been paid in full. |
| (9) | On July 26, 2012, Landis Salons, Inc. entered into a capital lease financing agreement in the principal amount of $16,826 with Time Payment Corporation. The lease agreement requires 48 monthly payments of principal and interest in the amount of $485. Landis has the option to purchase the leased salon equipment at maturity for $2,178 or less. The Company applied the guidance of ASC 840 in its determination of the lease being a capital lease. In addition to the Company's guarantee for the debt, Richard Surber is personal guarantor to the lease. |
| (10) | On August 15, 2012, Green issued a $75,000 promissory convertible promissory note to Southridge Partners II, LP as a condition of Southridge entering into an Equity Purchase Agreement with the Company (see Note 11). The transaction has been handled as a private sale exempt from registration under Rule 506 of the Securities Act of 1933. The note bears no interest and matures on February 28, 2014 at which time a balloon payment of the entire principal amount is due. The holder of the note is entitled any time after the maturity date to convert the note into common stock of the Company at 70% of the average of the two lowest closing bid prices for the five day prior to the date of the conversion. The Company determined the note contained a beneficial conversion feature and therefore recorded a $32,143 debt discount. As of December 31, 2015 the note has been paid in full. |
| (11) | On August 17, 2012, Green issued a $35,000 convertible promissory note to Eastshore Enterprises, Inc. Green converted $15,000 of accounts payable to Eastshore to the note and also received $20,000 in cash for the loan. The transaction has been handled as a private sale exempt from registration under Rule 506 of the Securities Act of 1933. The note matures on August 17, 2014 and bear interest at a rate of 8% per annum. After one year from issuance, the holder can be convertible into Green's common shares at the conversion rate of 54% of the market price of the lowest price of Green's common shares during the ten-day period ending one trading day prior to the date of the conversion. As of December 31, 2015, none of the note had been converted into shares of common stock. |
| (12) | On March 25, 2015, Green issued a $34,000 Convertible Promissory Note to LG Capital Funding, LLC ("LGCF Note") that matures March 26, 2016. The LGCF Note bears interest at a rate of 8% per annum and can be convertible into Green's common shares, at the holder's option, at the conversion rate of 58% of the market price (a 42% discount) of an average of the three lowest trading price of Green's common shares during the eighteen-day period ending on the date of the conversion. Green analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 "Derivatives and Hedging" and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to "reset" provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company's own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability. |
| (13) | On July 30, 2015, Green issued a $38,500 Convertible Promissory Note to JMJ. The JMJ Note can be convertible into Green's common shares, at the holder's option, at the conversion rate of 60% of the market price (a 40% discount) of an average of the three lowest trading price of Green's common shares during the eighteen-day period ending on the date of the conversion. Green analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 "Derivatives and Hedging" and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to "reset" provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company's own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability. |
| (14) | On April 15, 2013, Green entered into a promissory note with its parent company, Sack Lunch Productions Inc., in the amount of $37,400 for cash advanced to Green. Interest on the note is 10% per annum, monthly payments are $1,726 and the note is due 24 months from signing. |
| (15) | On March 24, 2015, Landis Salons, 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 18% per annum, with a term of five years and monthly payments of $806 and a demand feature by which the note can be called upon the demand of Mr. Surber. As security for the note, Landis Salons pledged all of its assets, stock in trade, inventory, furniture, fixtures, supplies, any intangible property and all tangible personal property of Landis Salons and all and any other assets to which Landis Salons holds title or claims ownership or that is hereafter acquired by Landis Salons, subject only to purchase money liens held by sellers or grantors. |
| (16) | On May 6, 2015 Landis salons Inc. entered into a promissory note with Diversified Holdings X Inc. for the sum of $$10,000. The interest rate on this loan is 18% per annum. There will be a lump sum payment made 12 months after the origination date. |
| (17) | 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 and a demand feature by which the note can be called upon the demand of Mr. Surber. As security for the note, Landis Salons II 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. |
Note 11 – Lease Commitments
Operating Leases
Facilities are leased under operating leases expiring at various dates through 2020. Certain of these leases contain renewal options. For the years ended December 31, 2015 and 2014, rent expense was $187,213 and $203,480, respectively.
As of December 31, 2015, future minimum lease payments under non-cancelable operating leases were as follows:
| Operating Leases | ||||
| For the fiscal years ending December 31: | ||||
| 2016 | 95,740 | |||
| 2017 | 137,800 | |||
| 2018 | 145,575 | |||
| 2019 | 120,065 | |||
| Thereafter | 62,313 | |||
| Total operating lease payments | $ | 561,493 | ||
Capital Leases
During 2012, the Company entered into two salon equipment lease agreements for its two salons. During 2013, the Company entered into a lease agreement for office equipment. The Company evaluated the leases at the time of purchase and determined that the agreement contained a beneficial by-out option wherein the Company has the option to buy the equipment for $1 at the end of the lease term. Under the guidance in ASC 840, the Company has classified the leases as capital leases for equipment in the gross amount of $76,298. This amount has been capitalized and included with the Company's equipment and is amortized as such. The Company used the discounted value of future payments as the fair value of this asset and has recorded the discounted value of the remaining payments as a liability. As of December 31, 2015 and 2014, the gross carrying amount of the leased assets was $76,298. As of December 31, 2015 and 2014, accumulated amortization on the leases was $54,016 and $38,803, respectively.
Capital leases payable outstanding were as follows:
| December 31, | December 31, | |||||||
| 2015 | 2014 | |||||||
| Total, net | $ | 10,038 | $ | 34,646 | ||||
| Less current portion | (10,038 | ) | (21,701 | ) | ||||
| Long-term portion | $ | - | $ | 12,945 | ||||
As of December 31, 2015, future minimum lease payments under non-cancelable capital leases were as follows:
| Capital Leases | ||||
| For the fiscal years ending December 31: | ||||
| 2016 | 10,503 | |||
| Thereafter | - | |||
| Total operating lease payments | 10,503 | |||
| Less interest for the terms | (465 | ) | ||
| Total, net | $ | 10,038 | ||
Contingent Deferred Rents
The Landis Experience Center, (LEC), retail outlet has entered into various lease modification agreements with its landlord. The landlord has agreed to monthly lease payment reductions through December 31, 2015 which total $58,500. Under the terms of the modification agreements, these deferred payments will be cancelled if LEC fulfills its lease term commitment.
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, 2015 and 2014, 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 Super voting Preferred.
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 Super voting Preferred Stock
Each share of the Convertible Super voting 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 years ended December 31, 2015 and 2014, there were no issuances or conversions of Convertible Super voting Preferred shares.
As of December 31, 2015 and 2014, Green had 10,000,000 shares of Convertible Super voting Preferred stock issued and outstanding, respectively.
Convertible Series B Preferred Stock
Each share of Green's Convertible Series B Preferred Stock, (Series B) 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.
2015
On January 15, 2015 the Board of Directors approved the return and cancellation of 14,205 shares of Series B shares in conjunction with an issuance of common stock for the cancellation of debt. (See Common Stock below)
On January 23, 2015, the Board of Directors approved the conversion of 3,900 shares of Series B held by an investor into 4,924,242 shares of Common Stock. The shares were converted at $0.00396 per share based on the conversion provisions for the Series B Preferred Stock designation.
On July 8, 2015, the Board of Directors approved the conversions of 5,076 shares of Series B into 13,500,000 shares of Common Stock. The shares were converted at prices per share of approximately $0.00188 based on the conversion provisions for the Convertible Series B Preferred Stock designation.
On November 16, 2015 The Board of Directors approved the payment of $2,500 to an investor for the return of 2,700 shares of Series B.
2014
During the year ended December 31, 2014, the Board of Directors approved the conversions of 33,672 shares of Series B into 28,842,370 shares of Common Stock. The shares were converted at prices per share of approximately $0.00416 to $0.00646 based on the conversion provisions for the Series B designation.
During the year ended December 31, 2014, the Board of Directors approved the issuance of 43,333 shares of Series B in exchange for a total of $75,000 in cash.
On March 28 2014, the Board of Directors approved the issuance of a total of 189,123 shares of the Company's Series B 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 Company recognized a gain of $6,994 on the transaction.
As of December 31, 2015 and 2014, Green had 734,607 and 760,488 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).
2015
On January 23, 2015, the Board of Directors approved the conversion of 3,900 shares of Series B held by an investor into 4,924,242 shares of Common Stock. The shares were converted at $0.00396 per share based on the conversion provisions for the Series B Preferred Stock designation.
On July 8, 2015, the Board of Directors approved the conversions of 5,076 shares of Series B into 13,500,000 shares of Common Stock. The shares were converted at prices per share of approximately $0.00188 based on the conversion provisions for the Convertible Series B Preferred Stock designation.
On December 23, 2015 the Board of Directors approved a partial settlement where $44,635.69 of interest and $66,000 of principle of the debenture held by Sack Lunch Productions Inc. was settled and paid through the issuance of 582,293,105 restricted shares of the Company's common stock.
During the year ended December 31, 2015 the Board of Directors approved grants totaling 73,500,000 shares of common stock pursuant to the S-8 Registration Statement and 2015 Benefit Plan of Green Endeavors, Inc. to certain employees and consultants to the Company.
During the year ended December 31, 2015, subject to the terms of certain Convertible Promissory Notes, $66,102 of convertible debt principle was converted into 356,486,933 share of common stock. (See detailed description of these transactions under Note 7, Derivative Liability, in the footnotes to the financial statements.)
2014
During the year ended December 31, 2014, the Board of Directors approved the conversions of 33,672 shares of Series B into 28,842,370 shares of Common Stock. The shares were converted at prices per share of approximately $0.00416 to $0.00646 based on the conversion provisions for the Series B designation.
On July 31, 2013, Sack Lunch Productions Inc., the parent corporation of the Company, 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 Sack Lunch. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.
During the year ended December 31, 2013, the Board of Directors approved the conversions of 47,774 shares of Series B 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 Series B designation.
As of December 31, 2015 and 20143, Green had 1,236,348,785 and 195,414,505 shares of common stock issued and outstanding, respectively.
Note 13 – Stock-Based Compensation
On January 21, 2015, the Board of Directors approved a stock-based compensation program entitled The 2015 Benefit Plan of Green Endeavors, Inc. (the "Plan") wherein common stock options are granted to employees. A total of 80,000,000 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, the Company has granted stock options to three employees during 2015 from January 27, 2015 to March 3, 2015 at option prices ranging from $0.0045 to $0.006 per share for an aggregate of 36,000,000 shares. Each of the three employees exercised the options on the same day they were granted by each issuing a promissory notes to the Company in the aggregate amount of $198,000. The promissory notes mature in 12 months from their issuance date and the Company is entitled to 4% interest per annum.
On July 9, 2015, the Board of Directors approved an amendment to the stock-based compensation plan entitled The 2015 Benefit Plan of Green Endeavors Inc. (the "2015 Plan") wherein common stock options are granted to employees of the Company. A total of 100,000,000 additional shares of the Company's common stock (par value $0.0001) are authorized to be issued or granted to employees under the Amendment to the 2015 Plan.
On July 9, 2015 the Board of Directors approved a grant of 13,500,000 shares pursuant to the S-8 Registration Statement and 2015 Benefit Plan of Green Endeavors Inc. The shares were issued based on an option price of $0.0015 per share. The employee exercised the options on the same day they were granted by issuing a promissory note to the Company that will appear on the balance sheet as a subscription receivable. The promissory note matures 12 months from its issuance date and the Company is entitled to 4% interest per annum.
Note 14 – Options and Warrants
The Company issued 73,500,000 options to certain employees and consultants to the Company during the year ended December 31, 2015. The options allow the individuals to purchase the company's common stock at exercise prices of between.0015 and .006. The options contained no vesting period and expire 1 year from grant date. At December 31, 2015, all options had been exercised and no options were outstanding.
| Number of Options | ||||
| Outstanding December 31, 2014 | - | |||
| Granted | 49,500,000 | |||
| Exercised | 49,500,000 | |||
| Outstanding December 31, 2015 | - | |||
Note 15 – Litigation
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.
At the current time there are no material pending legal proceedings to which Green or its subsidiaries are parties.
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, 2015 and 2014 accounted for approximately 99% of salon products purchased.
Market or Geographic Area Concentrations
100% of the Company's sales are in the salon services and products market and are concentrated in the Salt Lake City, Utah geographic area.
Note 17 – Going Concern
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, which contemplate the continuation of Green as a going concern. However, as of and for the year ended December 31, 2015, Green had negative working capital of $871,754 and an accumulated deficit of $4,086,863, 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.
Note 18 – Subsequent Events
On January 12, 2016, LG Capital Funding LLC, subject to the terms of the convertible note, converted $1,711 of convertible debt, principle and interest, into 29,492,413 shares of the Company's common stock.
On February 11, 2016, LG Capital Funding LLC, subject to the terms of the convertible note, converted $1,712.22 of convertible debt, principle and interest, into 29,521,034 shares of the Company's common stock.
On February 19, 2016, LG Capital Funding LLC, subject to the terms of the convertible note, converted $2,036.59 of convertible debt, principle and interest, into 35,113,620 shares of the Company's common stock.
On February 19, 2016, JMJ Financial, subject to the terms of the convertible note, converted $1,775 of convertible debt into 35,500,000 shares of the Company's common stock.
On February 25, 2016, JMJ Financial, subject to the terms of the convertible note, converted $1,995 of convertible debt into 39,100,000 shares of the Company's common stock.
On February 29, 2016, JMJ Financial, subject to the terms of the convertible note, converted $2,053 of convertible debt into 41,050,000 shares of the Company's common stock.
(a) The following exhibits are filed herewith or incorporated by reference as indicated in the table below:
| Incorporated by Reference | ||||||
| Exhibit Number | Description | Form | File Number | Exhibit Number | Filing Date | Provided Herewith |
| 3(i) | Amended and Restated Certificate of Incorporation | 10-12G/A | 000-54018 | 3(i) | 8/23/2010 | |
| 3(ii) | Bylaws | 10-12G/A | 000-54018 | 3(ii) | 8/23/2010 | |
| 3(iii) | Plan of Merger | 8-K | 000-54018 | 3(iii) | 8/26/2010 | |
| 3(iv) | Plan of Merger and Share Exchange | 8-K | 000-54018 | 3(iv) | 8/31/2010 | |
| 3(v) | Utah Articles of Incorporation | 8-K | 000-54018 | 3(v) | 8/31/2010 | |
| 4(i) | Certificate of Designation for Series B Preferred Stock. | 10-12G/A | 000-54018 | 4(i) | 8/23/2010 | |
| 4(ii) | 8% Series A Senior Subordinated Convertible Redeemable Debenture issued to DHI dated April 30, 2008. | 10-12G/A | 000-54018 | 4(ii) | 8/23/2010 | |
| 4(iii) | 8% Series A Senior Subordinated Convertible Redeemable Debenture issued to Akron Associates, Inc. dated January 15, 2010. | 10-12G/A | 000-54018 | 4(iii) | 8/23/2010 | |
| 4(iv) | 8% Series A Senior Subordinated Convertible Redeemable Debenture issued to Desert Vista Capital, LLC. dated January 15, 2010. | 10-12G/A | 000-54018 | 4(iv) | 8/23/2010 | |
| 4(v) | 8% Series A Senior Subordinated Convertible Redeemable Debenture issued to Akron Associates, Inc. dated March 16, 2010. | 10-12G/A | 000-54018 | 4(v) | 8/23/2010 | |
| 4(vi) | 8% Series A Senior Subordinated Convertible Redeemable Debenture issued to Akron Associates dated May 11, 2010. | 10-12G/A | 000-54018 | 4(vi) | 8/23/2010 | |
| 4(vii) | 8% Series A Senior Subordinated Convertible Redeemable Debenture issued to Desert Vista Capital, LLC dated May 11, 2010. | 10-12G/A | 000-54018 | 4(vii) | 8/23/2010 | |
| 4(viii) | Amended Certificate of Designation for Series B Preferred Stock. | 10-12G/A | 000-54018 | 4(viii) | 9/22/2010 | |
| 10(i) | Securities to be offered to employee benefit plans pursuant to The 2015 Benefit Plan of the Company, January 21, 2015. | S-8 | 1/26/2015 | |||
| Subsequent Events for 2015-Material Contracts | ||||||
| 10(i) | None | |||||
| 31.010 | Certification of the Registrant's Chief Executive Officer, Richard D. Surber, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934. | X | ||||
| 31.020 | Certification of the Registrant's Chief Financial Officer, Richard D. Surber, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934. | X | ||||
| 32.010 | Certification of the Registrant's Chief Executive Officer, Richard D. Surber, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||
| 32.020 | Certification of the Registrant's Chief Financial Officer, Richard D. Surber, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| GREEN ENDEAVORS, INC. (Registrant) | |
DATE: March 17, 2016 | By: /s/ Richard D. Surber |
| Richard D. Surber | |
| President, Chief Executive Officer and Director | |
DATE: March 17, 2016 | By: /s/ Richard D. Surber |
| Richard D. Surber | |
| Chief Financial Officer |
45