ITEM 1. DESCRIPTION OF BUSINESS
BACKGROUND
OVERVIEW
B Green Innovations, Inc., a Matawan, New Jersey-based corporation, (OTC Bulletin Board: BGNN), f/k/a iVoice Technology, Inc., (“B Green Innovations” or the “Company”) was incorporated under the laws of New Jersey on November 10, 2004 as a wholly owned subsidiary of iVoice, Inc. (“iVoice”). The Company received by assignment all of the interests in and rights and title to, and assumed all of the obligations of, all of the agreements, contracts, understandings and other instruments of iVoice Technology, Inc., a Nevada corporation and affiliate of the Company. When we refer to or describe any agreement, contract or other written instrument of the Company in these notes, we are referring to an agreement, contract or other written instrument that had been entered into by iVoice Technology Nevada and assigned to the Company.
In May 2008, the Company formed B Green Innovations, Inc. (“B Green”), a wholly owned subsidiary, and agreed to invest up to $500,000 in B Green, to commercialize its “green” technology platforms.
On November 17, 2009, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), B Green Innovations, Inc., a wholly owned subsidiary of iVoice Technology, Inc. (the “Company”), merged into iVoice Technology, Inc.
B Green Innovations, Inc. (“B Green”), “Go Green” mission from its inception, is to create a “Green” company for the development of solutions to eliminate waste from the world’s environment. B Green offers consumers a realistic and necessary solution to the problem of waste around the world. We believe that to truly have an impact on the planet, one must be committed to the environment and seek out environmentally friendly products.
On July 28, 2009, the Board of Directors and shareholders through written consent representing a majority of the total voting Class A and Class B Common stock voted to change the name of the Company to B Green Innovations, Inc. On November 20, 2009, the Company filed an Amendment to the Certificate of Incorporation with the State of New Jersey to officially change the name of the Company.
Our principal office is located at 750 Highway 34, Matawan, New Jersey 07747. Our telephone number is (732) 696-9333. Our company website is located at www.bgreeninnovations.com.
OUR BUSINESS
B Green Innovations, Inc., is dedicated to becoming a “green” technology company, focused on acquiring and identifying promising technologies that address environmental issues.
The first technology will be used to create new products from recycled tire rubber. EcoPod® and VibeAway® address important environmental concerns and problems facing the planet today. EcoPod® and VibeAway® are 100% recycled rubber-based products that can be utilized as support pads under any units that vibrate and make noise, including washing machines, dryers, compressors, commercial condensers, and many other units that advantageously benefit from sound and vibration control. In addition, we announced that we had filed a new patent application for a process it described as “Recycled Tire Pod with Appliance Recess Guide.”
Recently, the Company released its new 100% Degradable / Biodegradable Compactor Bags. These bags include oxo-biodegradable additive using the latest technology that supports the 3 R’s of Packaging Reduce, Reuse, Recycle and provides a fourth R, Remove. Independent Scientific Testing show that plastics incorporated with an additive called Renatura™ will degrade and then fully biodegrade, without leaving behind harmful residues in the soil.
These oxo-biodegradable plastic products are scientifically proven to be non-toxic and are FDA compliant, meaning they are safe for food packaging applications and have been awarded approved food film contact ‘no migration’ status. Regular plastic bags can take up to 100 years to break down causing plastic pollution and harm to both domestic and wild life. Standard plastics are filling our landfills and greatly impacting our planet. Plastics incorporating this additive in the presence of oxygen disappear when exposed to UV light or thermal heat. Our product is designed to allow plastics to degrade like a leaf, slowly yielding CO2 (which through photosynthesis becomes oxygen), water, bio-waste, and mineral salts that condition the soil in the process.
The Company continues to evaluate additional products to its product line as well as expanding its distribution channels.
The Company will also continue to support the Interactive Voice Response ("IVR"), software that was developed by iVoice. The Company's Interactive Voice Response line was designed to read information from and write information to, databases, as well as to query databases and return information. We currently have no plans to engage in future research and development, to launch any additional versions of the IVR software or other products, or to continue to market this product.
IVR is an application generator that allows full connectivity to many databases, including Microsoft Access, Microsoft Excel, Microsoft Fox Pro, and Paradox, or to standard text files. The IVR software is sold as an application generator that gives the end user the ability to develop its own customized IVR applications or as a customized turnkey system. IVR performs over 40 different customizable commands. Examples of IVR range from simply selecting announcements from a list of options stored in the computer (also known as audio text) to more complex interactive exchanges such as querying a database for information.
The Company has received a going concern opinion from its auditors. Its continuation as a going concern is dependent upon obtaining the financing necessary to operate its business. If the Company cannot find sources of additional financing to fund its working capital needs, the Company will be unable to obtain sufficient capital resources to operate our business. We cannot assure you that we will be able to access any financing in sufficient amounts or at all when needed. Our inability to obtain sufficient working capital funding will have an immediate material adverse effect upon our financial condition and our business.
Management plans to increase the development, manufacture, and distribution of “green” products to generate a positive cash flow. However, these plans are dependent upon obtaining additional capital. There can be no assurance that the Company will be able to obtain the necessary capital, and achieve its growth objectives. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
The business of the Company is not seasonal. The Company maintains no special arrangements relating to working capital items, and as far as it is aware this is standard in the industry. None of the Company’s present business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the government.
PRODUCTS AND SERVICES
In 2006 the Environmental Protection Agency (“EPA”) became involved, publishing a guidebook called “Scrap Tire Cleanup” in which it noted that large scrap tire stockpiles present a risk to human health and the environment for several reasons. It noted that, “They provide an ideal breeding ground for mosquitoes, which carry and transmit life-threatening diseases, such as encephalitis, West Nile and Eastern equine virus, and dengue fever in some regions. Stockpiles can also catch on fire as a result of lightening strikes, equipment malfunctions or arson. The longer the stockpile continues unabated, the more likely it is to catch fire, some experts no longer consider it a question of if a stockpile will catch fire, but when it will burn.”
According to this report, “State, federal and local agencies have spent tens of millions of dollars over the past several decades in responding to tire fires and, as a general rule, it is five to ten times more expensive to remediate a fire site than it is to remove tires before they catch fire.” This is where B Green comes in. The Company recently completed its review and analysis relating to the manufacture of products from recycled tires and will be filing for several patents to address this problem. The Company’s products include its VibeAway® Pads and EcoPod® (see below).
The Company released its new 100% Degradable / Biodegradable Compactor Bags. These bags include oxo-biodegradable additive using the latest technology that supports the 3 R’s of Packaging Reduce, Reuse, Recycle and provides a fourth R, Remove. Independent Scientific Testing show that plastics incorporated with an additive called Renatura™ will degrade and then fully biodegrade, without leaving behind harmful residues in the soil.
These oxo-biodegradable plastic products are scientifically proven to be non-toxic and are FDA compliant, meaning they are safe for food packaging applications and have been awarded approved food film contact ‘no migration’ status. Regular plastic bags can take up to 100 years to break down causing plastic pollution and harm to both domestic and wild life. Standard plastics are filling our landfills and greatly impacting our planet. Plastics incorporating this additive in the presence of oxygen disappear when exposed to UV light or thermal heat. Our product is designed to allow plastics to degrade like a leaf, slowly yielding CO2 (which through photosynthesis becomes oxygen), water, bio-waste, and mineral salts that condition the soil in the process.
In today's times, balancing and maintaining a business to meet customer demand can be difficult. The public demands unique, cost effective and planet friendly products prompting business owners to creatively meet these requests. In the recent months, more retailers are switching to biodegradable plastic bags in their stores, and many manufacturers are packaging their products using degradable / biodegradable plastics. B Green is also responding to the demands of consumers by providing planet friendly alternatives to regular plastics by providing our customers with fully certified degradable / biodegradable options.
B Green Products offers an oxo-biodegradable additive using the latest technology that supports the 3 R's of Packaging Reduce, Reuse, Recycle and provides a fourth R, Remove. Independent Scientific Testing show that plastics incorporated with an additive called Renatura™ will degrade and then fully biodegrade, without leaving behind harmful residues in the soil. These oxo-biodegradable plastic products are scientifically proven to be non toxic and are FDA compliant, meaning they are safe for food packaging applications and have been awarded approved food film contact 'no migration' status. The additive meets ASTM D 6954 Standard Guide for Exposing and Testing Plastics that Degrade in the Environment by a Combination of Oxidation and Biodegradation, as well as D5338 Standard Test Method for Determining Aerobic Biodegradation of Plastic Materials under Controlled Composting Conditions.
Regular plastic bags can take up to 100 years to break down causing plastic pollution and harm to both domestic and wild life. Standard plastics are filling our landfills and greatly impacting our planet. Plastics incorporating this additive in the presence of oxygen disappear when exposed to UV light or thermal heat. The product is designed to allow plastics to degrade like a leaf, slowly yielding CO2 (which through photosynthesis becomes oxygen), water, bio-waste, and mineral salts that condition the soil in the process.
The cost of changing from regular plastic bags to B Green oxo-biodegradable plastic bags is negligible, and depending on the type of packaging application, can cost considerably less than non degradable / biodegradable plastics. Many large companies are incorporating degradable plastic packaging including the Body Shop, Coca-Cola, Quantis and Butchart Gardens. B Green is committed to meeting environmental needs by providing customers with environmentally safe, practical solutions for their businesses.
The Company continues to evaluate additional “green” products to add to its line as well as opportunities to increase its distribution channels.
The Company will also continue to support the Interactive Voice Response ("IVR"), software that was developed by iVoice. The Company's Interactive Voice Response line is designed to read information from and write information to, databases, as well as to query databases and return information. We currently have no plans to engage in future research and development, to launch any additional versions of the IVR software or other products, or to continue to market this product.
IVR is an application generator that allows full connectivity to many databases, including Microsoft Access, Microsoft Excel, Microsoft Fox Pro, and Paradox, or to standard text files. The IVR software is sold as an application generator that gives the end user the ability to develop its own customized IVR applications or as a customized turnkey system. IVR performs over 40 different customizable commands. Examples of IVR range from simply selecting announcements from a list of options stored in the computer (also known as audio text) to more complex interactive exchanges such as querying a database for information.
SEGMENT DATA
The Company has determined it has two reportable segments - “green” technology products, and support of Interactive Voice Response (“IVR”) software. There are no inter-segment revenues. Please see Note 14 to the Financial Statements filed herein.
STRATEGIC ALLIANCES
Strategic alliances are an important part of our product development and distribution strategies. We rely on strategic alliances to provide technology, complementary product offerings and increased and quicker access to markets. We seek to form relationships with those entities that can provide technology or complementary market advantages for establishing the company in new market segments
MARKETING AND DISTRIBUTION
The Company plans to market and sell its products through a distribution network and also through the use of telemarketing. B Green Innovations has distribution agreements with reputable distributors that have proven themselves within their territories and industry segments. The four main sales areas we will concentrate on will be direct selling to the appliance manufactures, large retail chains, regional distributors of appliances (suppliers) and the strong internet marketing presence. Distributors receive discounts for stocking and selling, and such discounts are determined by industry standards. The loss of any of one these distributors would not have a material adverse effect on the Company or its operations. No distributor represented more than 10% of sales. One distributor represented 16% of sales.
PRODUCTS
The following are our product offerings:
EcoPod® - The EcoPod® is made from recycled tire rubber. It is a shock absorption pad that is used to reduce sound, vibrations, and pulsating of heavy equipment. EcoPod® is a compact, solid crumb rubber isolation blocks engineered to reduce structure noise transmission. When installed between the noise source and a secondary surface, EcoPod® will minimize sound radiation through floors, walls, ceilings and other surfaces such as sheet metal, fiberglass, glass and plastic.
Applications:
EcoPod® is designed to separate noise-generating sources such as heating and air conditioning (HVAC) units, appliances, pumps, motors, and generators.
Typical applications include:
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Appliances: Can be mounted on the bottom of washing machines, dryers, dishwashers and refrigerators to reduce vibration and noise transmission
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HVAC: Mount under feet of slab or rooftop mounted air conditioners, heat pumps and other refrigeration equipment to reduce structure borne vibration noise
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Equipment: Used to isolate vibration from pool pumps, generators and other vibration generating equipment. Excellent for use in isolating sheet metal enclosures
VibeAway® - VibeAway® pads are specially designed washing machine anti-vibration pads for washing machines and dryers. The 100% crumb rubber pad, made from recycled tires, is designed to reduce the transfer of vibration that occurs in most typical washing and drying cycles. It is a shock absorption pad that is used to reduce sound, vibrations, and pulsating of washing machines, dryers, table saws, freezers and other large appliances. Our VibeAway® pads prevent washing machines from "walking," and help prolong the life of your washing machine, dryer or other appliance. They also reduce the need to reinforce upper level floors to reduce vibration and noise. The pads have a full refund guarantee and have the following advantages:
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Reduces the transfer of vibration
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Prevents washing machines from "walking"
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Protect floors
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Made from 100% recycled tire rubber, address important environmental concerns
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Recessed for easy guidance for foot of washing machine/dryer
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Full refund guarantee
Degradable/Biodegradable Plastic bags include an oxo-biodegradable additive using the latest technology that supports the 3 R’s of Packaging Reduce, Reuse, Recycle and provides a fourth R, Remove. Independent Scientific Testing show that plastics incorporated with an additive called Renatura™ will degrade and then fully biodegrade, without leaving behind harmful residues in the soil. These oxo-biodegradable plastic products are scientifically proven to be non toxic and are FDA compliant, meaning they are safe for food packaging applications and have been awarded approved food film contact ‘no migration’ status. The additive meets ASTM D 6954 Standard Guide for Exposing and Testing Plastics that Degrade in the Environment by a Combination of Oxidation and Biodegradation, as well as D5338 Standard Test Method for Determining Aerobic Biodegradation of Plastic Materials under Controlled Composting Conditions. These bags are available in two sizes:
Biodegradable compactor bag- 15.75 x 10.75 x 32.5 2.5 Mil. thick
Biodegradable trash tall kitchen bag- 13 Gallon-1.0 Mil. thick
CUSTOMERS
Our end user customers are consumers that want products that are help provide a solution to minimize waste around the world. For our EcoPod® and VibeAway® products, we primarily sell to wholesale distributors that are recognized in the HVAC, Appliance, Motors, Plumbing, Maintenance, Electrical, Tools and Refrigeration Industries. For our Biodegradable Plastic bags we sell to wholesales distributors, supermarket chain, and other retail sales outlets.
We do not rely on any one specific customer for any significant portion of our revenue base.
COMPETITION
The Company competes with a number of small and large companies. We may not be able to compete effectively against current and potential competitors, especially those with significantly greater resources and market leverage. As a result, these competitors may respond more quickly than we do to new or emerging technologies or changes in customer requirements. In addition, some of our larger competitors may be able to provide greater incentives to customers through rebates and marketing development funds and similar programs. Furthermore, some of our competitors with multiple product lines may integrate other products that we do not sell or bundle their products to offer a broader product portfolio, which may make it difficult for us to gain or maintain market share.
No assurance can be given that our competitors will not develop new technologies or enhancements to their existing products or introduce new products that will offer superior price or performance features. We expect our competitors to offer new and existing products at prices necessary to gain or retain market share. Certain of our competitors have substantial financial resources, which may enable them to withstand sustained price competition or a market downturn better than us. There can be no assurance that we will be able to compete successfully in the pricing of our products, or otherwise, in the future.
MANUFACTURING AND SUPPLIERS
The Company does not have the internal capability to manufacture products. We use third party manufacturing companies to produce the products. Our inability to coordinate the efforts of our third party manufacturing partners, or the lack of capacity available at our third party manufacturing partners, could impair our ability to supply product to our customers. Such an interruption could cause us to incur substantial costs and our ability to generate revenue may be adversely affected. We may not be able to enter into alternative supply arrangements at commercially acceptable rates, if at all. Moreover, while we may choose to manufacture products in the future, we have no experience in the manufacture of these products.
PATENTS AND TECHNOLOGY DEVELOPMENT
The Company will continue its research and development to generate new and improved product offerings while strengthening its intellectual property portfolio. The following patents have been filed, but there can be no assurance that these patents will be approved. The Company expects to make additional filings in the future:
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New Interlocking Paver and Patio Blocks
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Recycled Tire Trash Cans
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Vehicle Mud Flaps Made of Recycled Tires
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Recycled Tire Pod with Appliance Recess Guide
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Pad with Appliance Pod
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Method of Plastic sheet container
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Embedded Container Plastic Sheet
There can be no assurance that we will not become the subject of claims of infringement with respect to intellectual property rights associated with our products. In addition, we may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Any such claims could be time consuming and could result in costly litigation or lead us to enter into royalty or licensing agreements rather than disputing the merits of such claims.
GOVERNMENT REGULATION
We are subject to licensing and regulation by a number of authorities in their respective state or municipality. These may include health, safety, and fire regulations. Our operations are also subject to federal and state minimum wage laws governing such matters as working conditions and overtime.
We are not subject to any necessary government approval or license requirement in order to market, distribute or sell our principal or related products other than ordinary federal, state, and local laws, which governs the conduct of business in general. We are unaware of any pending or probable government regulations that would have any material impact on the conduct of business.
RESEARCH AND DEVELOPMENT
We currently have no plans to engage in future research and development or to launch any additional versions of the IVR software or other products. The Company has not incurred any research and development expenses related to its “green” products activities.
For the year ending December 31, 2010 and 2009, the Company has not incurred any research and development expenditures.
EMPLOYEES
At December 31, 2010, we had 3 full-time employees and 2 part-time employee as well as 3 part-time consultants. Our employees are not covered by labor union contracts or collective bargaining agreements. From time to time, the Company also employs independent contractors to support its operations. At December 31, 2010, the Company utilized one outside contractor in the accounting area.
We have entered into an employment agreement with our President, Chief Executive Officer and Secretary (Jerome Mahoney). Mr. Mahoney will not provide services to the Company on a full-time basis. The Company is evaluating its need to hire additional personnel, and such plans will be based upon available financial resources. Currently, we expect our current employees to continue to fulfill orders received by telephone. Within the industry, competition for key technical and management personnel is intense, and there can be no assurance that we can retain our future key technical and managerial employees or that, should we seek to add or replace key personnel, we can assimilate or retain other highly qualified technical and managerial personnel in the future.
In addition to other information in this Annual Report on Form 10-K, the following important factors should be carefully considered in evaluating the Company and its business because such factors currently have a significant impact on the Company's business, prospects, financial condition and results of operations
FORWARD LOOKING STATEMENTS - CAUTIONARY FACTORS
Certain statements in this report on Form 10-K contain "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995. These statements are typically identified by their inclusion of phrases such as "the Company anticipates", or "the Company believes", or other phrases of similar meaning. These forward-looking statements involve risks and uncertainties and other factors that may cause the actual results, performance or achievements to differ from any future results, performance or achievements expressed or implied by such forward-looking statements. Except for the historical information and statements contained in this Report, the matters and items set forth in this Report are forward looking statements that involve uncertainties and risks some of which are discussed at appropriate points in the Report and are also summarized as follows:
Additional risks and uncertainties not currently known or deemed to be immaterial also may materially adversely affect the business, financial condition and/or operating results.
WE HAVE A LIMITED OPERATING HISTORY WITH OUR CURRENT “GREEN PRODUCTS” AND WILL FACE MANY OF THE DIFFICULTIES THAT COMPANIES IN THE EARLY STAGE MAY FACE.
As a result of the Company’s limited operating history with “green” products, the current difficult economic conditions of the marketplace and the competition in the industry, it may be difficult for you to assess our growth and earnings potential. Therefore, we have faced many of the difficulties that companies in the early stages of their development in new and evolving markets often face, as they are described herein. We may continue to face these difficulties in the future, some of which may be beyond our control. If we are unable to successfully address these problems, our future growth and earnings will be negatively affected.
WE HAVE A LIMITED OPERATING HISTORY AS AN INDEPENDENT PUBLIC COMPANY AND MAY BE UNABLE TO OPERATE PROFITABLY AS A STAND-ALONE COMPANY.
The Company only has limited operating history as an independent public company. The business has operated at a loss for the last few years, and such losses may continue or increase. We may not be able to successfully put in place the financial, administrative and managerial structure necessary to operate as an independent public company, and the development of such structure will require a significant amount of management’s time and other resources.
WE HAVE A HISTORY OF LOSSES AND CASH FLOW SHORTFALLS
The Company has incurred recurring operating losses. The Company had losses from operations of approximately $513,237 and $534,476 for the years ended December 31, 2010 and 2009, respectively, and cash used in operating activities of approximately $135,794 and $265,125 during the years ended December 31, 2010 and 2009, respectively. The Company has been and may, in the future, be dependent upon outside and related party financing to develop and market their products, perform their business development activities, and provide for ongoing working capital requirements. Our inability to obtain sufficient financing would have an immediate material adverse effect on our financial condition, our business, and us.
WE HAVE RECEIVED A REPORT FROM OUR INDEPENDENT AUDITORS THAT DESCRIBES THE UNCERTAINITY REGARDING OUR ABILITY TO CONTINUE AS A GOING CONCERN.
The Company has received a report from its independent auditors for the fiscal years ended December 31, 2010 and December 31, 2009 containing an explanatory paragraph describing the issues leading to substantial doubt about the uncertainty regarding the Company’s ability to continue as a going concern due to its historical negative cash flow and because, as of the date of the auditors’ opinion, the Company did not have access to sufficient committed capital to meet its projected operating needs for at least the next 12 months.
Our financial statements have been prepared on the basis of a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have not made any adjustments to our financial statements as a result of the going concern modification to the report of our independent registered public accounting firm. If we become unable to continue as a going concern, we could have to liquidate our assets, which means that we are likely to receive significantly less for those assets than the values at which such assets are carried on our financial statements Any shortfall in the proceeds from the liquidation of our assets would directly reduce the amounts, if any, that holders of our common stock could receive in liquidation.
There can be no assurance that management’s plans will be successful, and other unforeseeable actions may become necessary. Any inability to raise capital may require us to reduce the level of our operations. Such actions would have a material adverse effect on us, our business, and operations and result in charges that would be material to our business and results of operations.
WE CANNOT ACCURATELY FORECAST OUR FUTURE REVENUES AND OPERATING RESULTS, WHICH MAY FLUCTUATE.
Our short operating history and the rapidly changing nature of the markets in which we compete make it difficult to accurately forecast our revenues and operating results. Our operating results are unpredictable, and we expect them to fluctuate in the future due to a number of factors, including the following:
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the timing of sales of our products and services, particularly in light of our minimal sales history;
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the introduction of competitive products by existing or new competitors;
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reduced demand for any given product;
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difficulty in obtaining a supply for its products;
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difficulty in keeping current with changing technologies;
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unexpected delays in introducing new products, new features and services;
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the timing of product implementation, particularly large design projects;
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increased or uneven expenses, whether related to sales and marketing, product development, or administration;
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deferral of recognition of our revenue in accordance with applicable accounting principles, due to the time required to complete projects;
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seasonality in the end-of-period buying patterns of foreign and domestic markets;
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the mix of product license and services revenue; and
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costs related to possible acquisitions of technology or businesses.
Due to these factors, forecasts may not be achieved, either because expected revenues do not occur or because they occur at lower prices or on terms that are less favorable to us. In addition, these factors increase the chances that our results could diverge from the expectations of investors and analysts. If this is the case, the market price of our stock would likely decline.
WE DEPEND ON THIRD PARTIES TO MANUFACTURE AND DISTRIBUTE OUR PRODUCTS FOR B GREEN INNOVATIONS, INC.
We do not have the internal capability to manufacture products. We use third party manufacturing companies to produce the products. Our inability to coordinate the efforts of our third party manufacturing partners, or the lack of capacity available at our third party manufacturing partners, could impair our ability to supply product to our customers. Such an interruption could cause us to incur substantial costs and our ability to generate revenue may be adversely affected. We may not be able to enter into alternative supply arrangements at commercially acceptable rates, if at all. Moreover, while we may choose to manufacture products in the future, we have no experience in the manufacture of these products.
WE HAVE IN THE PAST AND MAY IN THE FUTURE SELL ADDITIONAL UNREGISTERED CONVERTIBLE SECURITIES, POSSIBLY WITHOUT LIMITATIONS ON THE NUMBER OF SHARES OF COMMON STOCK THE SECURITIES ARE CONVERTIBLE INTO, WHICH COULD DILUTE THE VALUE OF THE HOLDINGS OF CURRENT STOCKHOLDERS AND HAVE OTHER DETRIMENTAL EFFECTS ON YOUR HOLDINGS.
We have relied on the private placement of equity securities, convertible debentures and promissory notes to obtain working capital and may continue to do so in the future. As of December 31, 2010, we have outstanding convertible obligations. The promissory note of $3,003 at December 31, 2010, deferred compensation of $312,750 (plus accrued interest of $113,394) owing to Mr. Mahoney provides that, at Mr. Mahoney’s option, principal and interest due on the note can be converted into shares of the Company’s Class B Common Stock, which is convertible into the number of shares of Class A Common Stock determined by dividing the number of shares of Class B Common Stock being converted by a 20% discount of the lowest price of at which the Company had ever issued its Class A Common Stock. However, the Board of Directors of the Company maintains control over the issuance of shares and may decline the request for conversion of the repayment into shares of the Company. There is no limit upon the number of shares that we may be required to issue upon conversion of any of these obligations.
In order to obtain working capital in the future, we intend to issue additional equity securities and convertible obligations.
In the event that the price of our Class A Common Stock decreases, and our convertible obligations (or any other convertible obligations we may issue) are converted into shares of our Class A Common Stock:
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the percentage of shares outstanding that will be held by these holders upon conversion will increase accordingly,
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increased share issuance, in addition to a stock overhang of an indeterminable amount, may depress the price of our Class A Common Stock,
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the sale of a substantial amount of convertible debentures to relatively few holders could effectuate a possible change in control of the Company, and
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in the event of our voluntary or involuntary liquidation while the secured convertible debentures are outstanding, the holders of those securities will be entitled to a preference in distribution of our property.
In addition, if the market price declines significantly, we could be required to issue a number of shares of Class A Common Stock sufficient to result in our current stockholders not having an effective vote in the election of directors and other corporate matters. In the event of a change in control of the Company, it is possible that the new majority stockholders may take actions that may not be consistent with the objectives or desires of our current stockholders.
We are required to convert our existing convertible obligations based upon a formula that varies with the market price of our common stock. As a result, if the market price of our Class A Common Stock increases after the issuance of our convertible obligations, it is possible, that, upon conversion of our convertible obligations, we will issue shares of Class A Common Stock at a price that is far less than the then-current market price of our Class A Common Stock.
If the market price of our Class A Common Stock decreases after our issuance of any convertible obligations, upon conversion, we will have to issue an increased number of shares to the holders of our convertible obligations. Any sale of convertible obligations may result in a very large conversion at one time. If we do not have a sufficient number of shares to cover the conversion, we may have a risk of a civil lawsuit.
LOSS OF THE SERVICES OF KEY PERSONNEL, INCLUDING OUR CHIEF EXECUTIVE OFFICE OR OUR DIRECTORS COULD MATERIALLY HARM OUR BUSINESS.
We are dependent on our key officers and directors, including Jerome R. Mahoney, our President, Chief Executive Officer, Chief Financial Officer and Secretary. The loss of any of our key personnel could materially harm our business because of the cost and time necessary to retain and train a replacement. Such a loss would also divert management attention away from operational issues. To minimize the effects of such loss, the Company has entered into an employment contract with Jerome Mahoney.
OUR FUTURE BUSINESS ACQUISITIONS MAY BE UNPREDICTABLE AND MAY CAUSE OUR BUSINESS TO SUFFER.
The Company may seek to expand its operations through the acquisition of additional businesses. These potential acquired additional businesses may be outside the current field of operations of the Company. The Company may not be able to identify, successfully integrate or profitably manage any such businesses or operations. The proposed expansion may involve a number of special risks, including possible adverse effects on the Company’s operating results, diversion of management attention, inability to retain key personnel, risks associated with unanticipated events and the financial statement effect of potential impairment of acquired intangible assets, any of which could have a materially adverse effect on the Company’s business, financial condition and results of operations. In addition, if competition for acquisition candidates or assumed operations were to increase, the cost of acquiring businesses or assuming customers’ operations could increase materially. The inability of the Company to implement and manage its expansion strategy successfully may have a material adverse effect on the business and future prospects of the Company. Furthermore, through the acquisition of additional businesses, the Company may effect a business acquisition with a target business which may be financially unstable, under-managed, or in its early stages of development or growth. While the Company may, under certain circumstances, seek to effect business acquisitions with more than one target business, as a result of its limited resources, the Company, in all likelihood, will have the ability to effect only a single business acquisition at one time. Currently, the Company has no plans, proposals or arrangements, either orally or in writing, regarding any proposed acquisitions and is not considering any potential acquisitions.
MEMBERS OF OUR BOARD OF DIRECTORS AND MANAGEMENT MAY HAVE CONFLICTS OF INTEREST; WE DO NOT HAVE ANY FORMAL PROCEDURES FOR RESOLVING CONFLICTS IN THE FUTURE.
Mr. Mahoney, a member of the board of directors, who also owns iVoice, Inc. shares (a related party), has the right to convert $277,753 of loans and deferred compensation and $113,394 of accrued and unpaid interest into 391,147 shares of the Company’s Class B Common Stock, as well as owning 115,025 shares of Class B common stock, both of which are convertible into the number of shares of Class A Common Stock determined by dividing the number of shares of Class B Common Stock being converted by a 20% discount of the lowest price at which the Company had ever issued its Class A Common Stock. There is no limitation on the number of shares of Class A Common Stock we may be required to issue to Mr. Mahoney upon the conversion of this indebtedness. However, the Board of Directors of the Company maintains control over the issuance of shares and may decline the request for conversion of the repayment into shares of the Company. In addition, Mr. Mahoney, President and CEO of the Company, serves as the Chairman of the Board and Chief Executive Officer of iVoice and we anticipate that he will continue to serve in such capacities. These relationships could create, or appear to create, potential conflicts of interest when the Company’s directors and management are faced with decisions that could have different implications for the Company and iVoice. For example, Mr. Mahoney may experience conflicts of interest with respect to the allocation of his time, services and functions among iVoice, the Company and any other projects. Other examples could include potential business acquisitions that would be suitable for either the Company or iVoice, activities undertaken by iVoice in the future that could be in direct competition with B Green Innovations, or the resolution of disputes arising out of the agreements governing the relationship between iVoice and B Green Innovations. Also, the appearance of conflicts, even if such conflicts do not materialize, might adversely affect the public’s perception of B Green Innovations. Furthermore, B Green Innovations does not have any formal procedure for resolving such conflicts of interest should they arise.
THE INDUSTRIES IN WHICH WE COMPETE ARE CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGE AND FAILURE TO ADAPT OUR PRODUCT DEVELOPMENT TO THESE CHANGES MAY CAUSE OUR PRODUCTS TO BECOME OBSOLETE.
We participate in a highly dynamic industries characterized by rapid change and uncertainty relating to new and emerging technologies and markets. Future technology or market changes may cause some of our products to become obsolete more quickly than expected.
OUR SHAREHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION IF FUTURE EQUITY OFFERINGS ARE USED TO FUND OPERATIONS OR ACQUIRE BUSINESSES.
If working capital or future acquisitions are financed through the issuance of equity securities, B Green Innovations stockholders would experience significant dilution. In addition, the conversion of outstanding debt obligations into equity securities would have a dilutive effect on the Company’s shareholders. Further, securities issued in connection with future financing activities or potential acquisitions may have rights and preferences senior to the rights and preferences of the B Green Innovations Class A Common Stock.
If B Green Innovations is unable to obtain funds from the equity financing, management believes that the Company can limit its operations, defer payments to management and maintain its business at nominal levels until it can identify alternative sources of capital. However, there is no assurance that management will be able to obtain additional funding.
WE FACE INTENSE PRICE-BASED COMPETITION FOR OUR “GREEN” PRODUCTS, WHICH COULD REDUCE PROFIT MARGINS.
Price competition is often intense in this market. Many of our competitors have significantly reduced the price of their products. Price competition may continue to increase and become even more significant in the future, resulting in reduced profit margins.
WE MAY DEPEND ON DISTRIBUTION BY RESELLERS AND DISTRIBUTORS FOR A SIGNIFICANT PORTION OF REVENUES.
We may distribute some of our products through resellers and distributors. To effectively do so, we must establish and maintain good working relationships with these resellers and distributors. If we are unsuccessful in establishing and maintaining relationships with resellers and distributors or with new resellers and distributors, or if these resellers and distributors are unsuccessful in reselling our products, our future net revenues and operating results may be adversely affected. The Company does not have any material relationship with any single distributor or reseller.
THE LIMITED SCOPE OF RESULTS OF OUR RESEARCH AND DEVELOPMENT MAY LIMIT OUR ABILITY TO EXPAND OR MAINTAIN ITS SALES AND PRODUCTS IN A COMPETITIVE MARKETPLACE.
The Company currently has no plans to engage in research and development of new products or improvements on existing technologies. Failure to engage in such research and to develop new technologies or products or upgrades, enhancements, applications or uses for existing technologies may place the Company at a competitive disadvantage in the marketplace for its products. As no current research and development program currently exists within the Company, any future research and development programs could cause us to incur substantial fixed costs, which may result in such programs being prohibitively expensive to initiate without substantial additional financing being obtained on favorable terms. Also, the lack of any current research and development program may result in an extended launch period for a research and development program at a point in our business when time is of the essence. These delays could have a material adverse effect on the amount and timing of future revenues.
Such limited research and development may also adversely affect the ability of B Green Innovations to test any new technologies, which may be established in the future in order to determine if they are successful. If they are not technologically successful, our resulting products may not achieve market acceptance and our products may not compete effectively with products of our competitors currently in the market or introduced in the future.
IF WE MUST RESTRUCTURE OUR OPERATIONS, VALUABLE RESOURCES WILL BE DIVERTED FROM OTHER BUSINESS OBJECTIVES.
We intend to continually evaluate our product and corporate strategy. We have in the past undertaken, and will in the future undertake, organizational changes and/or product and marketing strategy modifications. These organizational changes increase the risk that objectives will not be met due to the allocation of valuable limited resources to implement changes. Further, due to the uncertain nature of any of these undertakings, these efforts may not be successful and we may not realize any benefit from these efforts.
POTENTIAL SOFTWARE DEFECTS AND PRODUCT LIABILTY COULD RESULT IN DELAYS IN MARKET ACCEPTANCE, UNEXPECTED COSTS AND DIMINSIHED OPERATING RESULTS.
Software products frequently contain errors or defects, especially when first introduced or when new versions or enhancements are released. Defects and errors could be found in current versions of our products. Software defects could result in unexpected reprogramming costs, which could materially adversely affect our operating results. Most of our license agreements with customers contain provisions designed to limit our exposure to potential product liability claims. It is possible, however, that these provisions limiting our liability may not be valid as a result of federal, state, local or foreign laws or ordinances or unfavorable judicial decisions. A successful product liability claim may have a material adverse effect on our business, operating results and financial condition.
WE RELY ON THIRD PARTY TECHNOLOGIES, WHICH MAY NOT SUPPORT OUR PRODUCTS.
Our software products are designed to run on the Microsoft® Windows® operating system and with industry standard hardware. Although we believe that the operating systems and necessary hardware are and will be widely utilized by businesses in the corporate market, businesses may not actually adopt such technologies as anticipated or may in the future migrate to other computing technologies that we do not support. Moreover, if our products and technology are not compatible with new developments from industry leaders, such as Microsoft, our business, results of operations and financial condition could be materially and adversely affected.
WE FACE AGGRESSIVE COMPETITION IN MANY AREAS OF THE BUSINESS, AND THE BUSINESS WILL BE HARMED IF WE FAIL TO COMPETE EFFECTIVELY.
We encounter aggressive competition from numerous competitors in many areas of our business. Many of our current and potential competitors have longer operating histories, greater name recognition and substantially greater financial, technical and marketing resources than we have. We may not be able to compete effectively with these competitors. Our competition may engage in research and development to develop new products and periodically enhance existing products in a timely manner, while we have no established plan or intention to engage in any manner of research or development. We anticipate that we may have to adjust the prices of many of our products to stay competitive. In addition, new competitors may emerge, and entire product lines may be threatened by new technologies or market trends that reduce the value of these product lines.
WE MAY NOT BE ABLE TO ACCESS SUFFICIENT FUNDS WHEN NEEDED.
We are dependent on external financing to fund our operations. Our inability to obtain sufficient financing would have an immediate material adverse effect on our financial condition, our business and us.
JEROME MAHONEY THE PRESIDENT AND CEO OF B GREEN INNOVATIONS MAY HAVE CONTROL OVER OUR MANAGEMENT AND DIRECTION.
Mr. Mahoney owns 115,025 of the Company’s Class B common stock and will have the right to convert $277,753 of indebtedness and deferred compensation, together with accrued but unpaid interest of $113,394, into 391,147 shares of B Green Innovations Class B Common Stock, which Class B Common Stock is convertible into the number of shares of Class A Common Stock determined by dividing the number of shares of Class B Common Stock being converted by a 20% discount of the lowest price at which the Company had ever issued its Class A Common Stock. Interest accrues on the outstanding principal balance of the note at prime plus 2% per annum. There is no limitation on the number of shares of Class A Common Stock we may be required to issue to Mr. Mahoney upon the conversion of this indebtedness. Each share of Class B Common Stock has voting rights equal to 100 shares of Class A Common Stock. If Mr. Mahoney converts his indebtedness into 391,147 shares of Class B Common Stock, he will have voting rights equal to 1,249,461,041 shares of Class A Common Stock and will have control over the management and direction of B Green Innovations, including the election of directors, appointment of management and approval of actions requiring the approval of stockholders.
OUR MANAGEMENT TEAM IS NEW AND ITS WORKING RELATIONSHIPS UNTESTED.
We have only recently assembled our management team and have made changes in our operating structure. Some members of our management team have worked with each other in the past, although at this time we cannot assess the effectiveness of their working relationships. As a result, we may be unable to effectively develop and sell our products and the Company, as a business, may fail.
WE RELY ON INTELLECTUAL AND PROPRIETARY RIGHTS WHICH MAY NOT REMAIN UNIQUE TO US.
We regard our underlying technology as proprietary. We seek to protect our proprietary rights through a combination of confidentiality agreements and copyright, patent, trademark and trade secret laws.
We do not have any patents or statutory copyrights on any of our proprietary technology that we believe to be material to our future success. Our future patents, if any, may be successfully challenged and may not provide us with any competitive advantages. We may not develop proprietary products or technologies that are patentable and other parties may have prior claims.
Patent, trademark and trade secret protection is important to us because developing and marketing new technologies and products is time-consuming and expensive. We do not own any U.S. or foreign patents or registered intellectual property. We may not obtain issued patents or other protection from any future patent applications owned by or licensed to us.
Our competitive position is also dependent upon unpatented trade secrets. Trade secrets are difficult to protect. Our competitors may independently develop proprietary information and techniques that are substantially equivalent to ours or otherwise gain access to our trade secrets, such as through unauthorized or inadvertent disclosure of our trade secrets.
There can be no assurance that our means of protecting our proprietary rights will be adequate or that our competitors will not independently develop similar technology substantially equivalent or superseding proprietary technology. Furthermore, there can be no assurance that any confidentiality agreements between us and our employees will provide meaningful protection of our proprietary information, in the event of any unauthorized use or disclosure thereof. As a consequence, any legal action that we may bring to protect proprietary information could be expensive and may distract management from day-to-day operations.
WE MAY BECOME INVOLVED IN FUTURE LITIGATION, WHICH MAY RESULT IN SUBSTANTIAL EXPENSE AND MAY DIVERT OUR ATTENTION FROM THE IMPLEMENTATION OF OUR BUSINESS STRATEGY.
We believe that the success of our business depends, in part, on obtaining intellectual property protection for our products, defending our intellectual property once obtained and preserving our trade secrets. Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets and to determine the validity and scope of our proprietary rights. Any litigation could result in substantial expense and diversion of our attention from our business, and may not adequately protect our intellectual property rights.
In addition, third parties who claim that our products infringe the intellectual property rights of others may sue us. This risk is exacerbated by the fact that the validity and breadth of claims covered in technology patents involve complex legal and factual questions for which important legal principles are unresolved. Any litigation or claims against us, whether valid or not, could result in substantial costs, place a significant strain on our financial resources, divert management resources and harm our reputation. Such claims could result in awards of substantial damages, which could have a material adverse impact on our results of operations. In addition, intellectual property litigation or claims could force us to:
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cease licensing, incorporating or using any of our products that incorporate the challenged intellectual property, which would adversely effect our revenue;
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obtain a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms, if at all; and
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redesign our products, which would be costly and time-consuming.
IF OUR TECHNOLOGIES AND PRODUCTS CONTAIN DEFECTS OR OTHERWISE DO NOT WORK AS EXPECTED, WE MAY INCUR SIGNIFICANT EXPENSES IN ATTEMPTING TO CORRECT THESE DEFECTS OR IN DEFENDING LAWSUITS OVER ANY SUCH DEFECTS.
Voice-recognition products are not currently accurate in every instance, and may never be. Furthermore, we could inadvertently have sold products and technologies that contain defects. In addition, third-party technology that we include in our products could contain defects. We may incur significant expenses to correct such defects. Clients who are not satisfied with our products or services could bring claims against us for substantial damages. Such claims could cause us to incur significant legal expenses and, if successful, could result in the plaintiffs being awarded significant damages. Our payment of any such expenses or damages could prevent us from becoming profitable.
PROTECTING OUR INTELLECTUAL PROPERTY IN OUR TECHNOLOGY THROUGH PATENTS MAY BE COSTLY AND INEFFECTIVE AND IF WE ARE NOT ABLE TO PROTECT OUR INTELLECTUAL PROPERTY, WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY AND WE MAY NOT BE PROFITABLE.
Our future success depends in part on our ability to protect the intellectual property for our technology by obtaining patents. We will only be able to protect our products and methods from unauthorized use by third parties to the extent that our products and methods are covered by valid and enforceable patents or are effectively maintained as trade secrets.
The protection provided by our patents, and patent applications if issued, may not be broad enough to prevent competitors from introducing similar products into the market. The courts of any jurisdiction, if challenged or if we attempt to enforce them, may not uphold our patents. Numerous publications may have been disclosed by, and numerous patents may have been issued to, our competitors and others relating to methods which we are not aware and additional patents relating to methods that may be issued to our competitors and others in the future. If any of those publications or patents conflict with our patent rights, or cover our products, then any or all of our patent applications could be rejected and any or all of our granted patents could be invalidated, either of which could materially adversely affect our competitive position.
Litigation and other proceedings relating to patent matters, whether initiated by us or a third party, can be expensive and time consuming, regardless of whether the outcome is favorable to us, and may require the diversion of substantial financial, managerial and other resources. An adverse outcome could subject us to significant liabilities to third parties or require us to cease any related development product sales or commercialization activities. In addition, if patents that contain dominating or conflicting claims have been or are subsequently issued to others and the claims of these patents are ultimately determined to be valid, we may be required to obtain licenses under patents of others in order to develop, manufacture use, import and/or sell our products. We may not be able to obtain licenses under any of these patents on terms acceptable to us, if at all.
If we do not obtain these licenses, we could encounter delays in, or be prevented entirely from using, importing, developing, manufacturing, offering or selling any products or practicing any methods, or delivering any services requiring such licenses.
IF WE ARE NOT ABLE TO PROTECT OUR TRADE SECRETS THROUGH ENFORCEMENT OF OUR CONFIDENTIALITY AND NON-COMPETITION AGREEMENTS, THEN WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY AND WE MAY NOT BE PROFITABLE.
We attempt to protect our trade secrets, including the processes, concepts, ideas and documentation associated with our technologies, through the use of confidentiality agreements and non-competition agreements with our current employees and with other parties to whom we have divulged such trade secrets.
If the employees or other parties breach our confidentiality agreements and non-competition agreements or if these agreements are not sufficient to protect our technology or are found to be unenforceable, our competitors could acquire and use information that we consider to be our trade secrets and we may not be able to compete effectively. Most of our competitors have substantially greater financial, marketing, technical and manufacturing resources than we have and we may not be profitable if our competitors are also able to take advantage of our trade secrets.
OUR SECURITIES
WE DO NOT EXPECT TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE.
We intend to retain any future earnings to finance the growth and development of our business. Therefore, we do not expect to pay any cash dividends in the foreseeable future on our common stock. Any future dividends will depend on our earnings, if any, and our financial requirements. The Company has Series A Convertible Preferred Stock, which includes a mandatory 3% dividend prior to any distribution to common shareholders.
FUTURE SALES BY OUR STOCKHOLDERS MAY ADVERSELY AFFECT OUR STOCK PRICE AND OUR ABILITY TO RAISE FUNDS IN NEW STOCK OFFERINGS.
Sales of our common stock in the public market could lower the market price of our Class A Common Stock. Sales may also make it more difficult for us to sell equity securities or equity-related securities in the future at a time and price that our management deems acceptable or at all.
OUR COMMON STOCK IS DEEMED TO BE “PENNY STOCK” WHICH MAY MAKE IT MORE DIFFICULT FOR INVESTORS TO SELL THEIR SHARES DUE TO SUITABILITY REQUIREMENTS.
Our common stock is deemed to be “penny stock” as that term is defined in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934. Penny stocks are stock:
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with a price of less than $5.00 per share;
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that are not traded on a “recognized” national exchange;
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whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ listed stock must still have a price of not less than $5.00 per share); or
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in issuers with net tangible assets of less than $2.0 million (if the issuer has been in continuous operation for at least three years) or $5.0 million (if in continuous operation for less than three years), or with average revenues of less than $6.0 million for the last three years.
Broker/dealers dealing in penny stocks are required to provide potential investors with a document disclosing the risks of penny stocks. Moreover, broker/dealers are required to determine whether an investment in a penny stock is a suitable investor for a prospective investor. These requirements may reduce the potential market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of them. This could cause our stock price to decline.
THE PRICE OF OUR STOCK MAY BE AFFECTED BY A LIMITED TRADING VOLUME AND MAY FLUCTUATE SIGNIFICANTLY
There has been a limited public market for our Class A common stock and there can be no assurance that an active trading market for our stock will continue. An absence of an active trading market could adversely affect our stockholders' ability to sell our Class A common stock in short time periods, or possibly at all. Our Class A common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our Class A common stock to fluctuate substantially.
Risk Factor Related to Controls and Procedures
The Company has limited segregation of duties amongst its employees with respect to the Company's preparation and review of the Company's financial statements due to the limited number of employees, which is a material weakness in internal controls, and if the Company fails to maintain an effective system of internal controls, it may not be able to accurately report its financial results or prevent fraud. As a result, current and potential stockholders could lose confidence in the Company's financial reporting which could harm the trading price of the Company's stock.
Management has found it necessary to limit the Company's administrative staffing in order to conserve cash, until the Company's level of business activity increases. As a result, the Company and its independent public accounting firm have identified this as a material weakness in the Company's internal controls. The Company intends to remedy this material weakness by hiring additional employees and reallocating duties, including responsibilities for financial reporting, among the employees as soon as there are sufficient resources available. However, until such time, this material weakness will continue to exist. Despite the limited number of administrative employees and limited segregation of duties, management believes that the Company's administrative employees are capable of following its disclosure controls and procedures effectively.
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTY
We do not own any real property. Our corporate headquarters are located at 750 Highway 34, Matawan, New Jersey, which we currently co-occupy and sublease from iVoice. We intend to continue subleasing such space, and anticipate no relocation of our offices in the foreseeable future. We are unaware of any environmental problems in connection with this location, and, because of the nature of our activities, do not anticipate such problems.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
We are subject to litigation from time to time arising from our normal course of operations. Currently, there are no open litigation matters.
PART II
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
Our Class A common stock, no par value, is quoted on the OTC Bulletin Board under the symbol "BGNN." The following table shows the high and low closing prices for the periods indicated.
The quotations listed above reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions
HOLDERS OF COMMON EQUITY.
As of December 31, 2010, the number of record holders of our common shares was approximately 761.
DIVIDEND INFORMATION.
To date, the Company has never paid a dividend. We have no plans to pay any dividends on common stock in the near future. We intend to retain all earnings, if any, for the foreseeable future, for use in our business operations. The Company has Series A 3 % Preferred Stock, which includes a mandatory 3% dividend prior to any distribution to common shareholders.
SALE OF UNREGISTERED SECURITIES.
On February 10, 2010, the Company issued 1,100 shares of the Company’s Series A 3% Preferred Stock for $1,100,000 in cash, which includes a mandatory 3% dividend prior to any distribution to common shareholders. The previously issued Series A 10 % Preferred Stock has been changed to a 3% dividend rate.
On February 10, 2010, the Company issued 119 shares of the Company’s Series A 3% Preferred Stock in exchange for $119,000 of convertible debt to iVoice, inc.
DESCRIPTION OF SECURITIES
Pursuant to our certificate of incorporation, we are authorized to issue 1,000,000 shares of preferred stock, par value of $1.00 per share, 10,000,000,000 shares of Class A common stock, no par value per share, 50,000,000 shares of Class B common stock, par value $.01 per share, and 20,000,000 shares of Class C Common Stock, par value $.01 per share. Below is a description of the Company’s outstanding securities, including Preferred stock, Class A common stock, Class B common stock, Class C common stock, options, warrants and debt.
PREFERRED STOCK
The Board of Directors expressly is authorized, subject to limitations prescribed by the New Jersey Business Corporations Act and the provisions of this Certificate of Incorporation, to provide, by resolution and by filing an amendment to the Certificate of Incorporation pursuant to the New Jersey Business Corporations Act, for the issuance from time to time of the shares of Preferred Stock in one or more series, to establish from time to time the number of shares to be included in each series, and to fix the designation, powers, preferences and other rights of the shares of each such series and to fix the qualifications, limitations and restrictions thereon, including, but without limiting the generality of the foregoing, the following:
a) the number of shares constituting that series and the distinctive designation of that series;
b) the dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;
c) whether that series shall have voting rights, in addition to voting rights provided by law, and, if so, the terms of such voting rights;
d) whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provisions for adjustment of the conversion rate in such events as the Board of Directors shall determine;
e) whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;
f) whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund;
g) the rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; and
h) any other relative powers, preferences and rights of that series, and qualifications, limitations or restrictions on that series.
In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of Preferred Stock of each series shall be entitled to receive only such amount or amounts as shall have been fixed by the certificate of designations or by the resolution or resolutions of the Board of Directors providing for the issuance of such series.
The Company is authorized to issue 1,000,000 shares of Preferred Stock, par value $1.00 per share.
Of the 1,000,000 shares of Preferred Stock, 10,000 shares are designated Series A 3% Secured Preferred Stock, par value $1.00 per share, with a stated value of $1,000. The stated value is used for calculation of dividends and liquidation preferences. On March 12, 2008, the Company sold 1,444.44 shares of Series A 10% Convertible Preferred Stock to iVoice, Inc. for $1,444,444.
On March 6, 2009, the Company filed with the State of New Jersey an Amendment to the Certificate (the “Amendment”) that revised the rights of the holders of the Company’s Series A 10% Preferred Stock. The revisions included:
a.
This preferred stock will be referred to in the Company’s Certificate of Incorporation as: “Series A 10% Secured Preferred Stock”.
b.
The holders of the Series A 10% Secured Preferred Stock shall have no voting rights.
c.
The Series A 10% Secured preferred Stock shall no longer be convertible.
On February 10, 2010, iVoice, Inc. agreed to purchase 1,219 shares of the Company’s 3% Preferred Stock for $1,100,000 in cash and exchange of a convertible promissory note.
In February 2010, the Company filed with the State of New Jersey an Amendment to the Certificate that revised the rights of the holders of the Company’s Series A 3% Secured Convertible Preferred Stock. The revisions included:
a.
The preferred stock will be referred to in the Company’s Certificate of Incorporation as: “Series A 3% Preferred Stock”.
b.
The holders of the preferred stock will have a new dividend rate of 3%.
c.
The holders of the Series A 3% Preferred Stock shall have no voting rights.
d.
Series A 3% Preferred Stock is convertible, at the option of the holder with the consent of the Corporation, at any time after the date of issuance of such share into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series A Initial Value, as may be adjusted from time to time, by the Conversion Price applicable to such share. The "Conversion Price” per share shall be calculated as the closing bid price of the Class A Common stock on the last trading day immediately prior to the date that the Notice of Conversion is tendered to the Corporation, subject to certain adjustments.
e.
The holders of shares of Series A Preferred Stock shall be prohibited from converting shares of Series A Preferred Stock, and the Corporation shall not honor any attempted conversion of Series A Preferred Stock, if, and to the extent, the shares of Common Stock held by such converting holder of Series A Preferred Stock following any attempted conversion would exceed 9.99% of the outstanding shares of Common Stock of the Corporation after giving effect to such conversion.
CLASS A COMMON STOCK
Each holder of our Class A common stock is entitled to one vote for each share held of record. Holders of our Class A common stock have no preemptive, subscription, conversion, or redemption rights. Upon liquidation, dissolution or winding-up, the holders of Class A Common Stock are entitled to receive our net assets pro rata. Each holder of Class A common stock is entitled to receive ratably any dividends declared by our board of directors out of funds legally available for the payment of dividends. We have not paid any dividends on our common stock and do not contemplate doing so in the foreseeable future. We anticipate that any earnings generated from operations will be used to finance our growth.
As of December 31, 2010, there are 10,000,000,000 shares of Class A Common Stock authorized, no par value, and 605,609,870 shares were issued, 604,415,387 shares were outstanding, and 1,194,483 shares were in escrow.
As of December 31, 2009, there are 10,000,000,000 shares of Class A Common Stock authorized, no par value, and 600,309,870 shares were issued, 599,115,387 shares were outstanding, and 1,194, 483 shares were in escrow. The shares in escrow represent shares issued to YA Global, but not yet sold to the public market.
CLASS B COMMON STOCK
Each holder of Class B Common Stock shall have the right to convert each share of Class B Common Stock into the number of Class A Common Stock Shares calculated by dividing the number of Class B Common Stock Shares being converted by twenty percent (20%) discount of the lowest price that the Company had previously issued its Class A Common Stock since the Class B Common Stock Shares were issued. Every holder of the outstanding shares of the Class B Common Stock Shares shall be entitled on each matter to cast the number of votes equal to the number of Class A Common Stock Shares that would be issued upon the conversion of the Class B Common Stock Shares held by that holder, had all of the outstanding Class B Common Stock Shares held by that holder been converted on the record date used for purposes of determining which stockholders would vote in such an election. With respect to all matters upon which stockholders are entitled to vote or to which stockholders are entitled to give consent, the holders of the outstanding shares of Class B Common Stock Shares shall vote together with Class A Common Stock Shares without regard to class, except as to those matters on which separate class voting is required by applicable law.
There shall be no cumulative voting by stockholders. Each Class B Common Stock Share shall receive dividends or other distributions, as declared, equal to the number of Class A Common Stock Shares that would be issued upon the conversion of the Class B Common Stock Shares, had all of the outstanding Class B Common Stock Shares been converted on the record date established for the purposes distributing any dividend or other stockholder distribution.
During 2009 the Company issued 115,025 shares of Class B Common Stock as repayment of $115,205 of a promissory note.
As of December 31, 2010 and 2009 there are 115,025 shares issued or outstanding.
CLASS C COMMON STOCK
Each holder of Class C Common Stock is entitled to 1,000 votes for each share held of record. Shares of Class C Common Stock are not convertible into Class A Common Stock. Upon liquidation, dissolution or wind-up, the holders of Class C Common Stock are not entitled to receive our net assets pro rata.
As of December 31, 2010 and 2009, there are 20,000,000 shares of Class C Common Stock authorized; par value $.01 per share, and no shares were issued or outstanding.
OPTIONS AND WARRANTS
During the year 2005, the Company adopted the 2005 Stock Incentive Plan and the 2005 Directors’ and Officers’ Stock Incentive Plan (the “Plan”) in order to attract and retain qualified personnel. Under the Plan, the Board of Directors (the "Board"), in its discretion may grant stock options (either incentive or non-qualified stock options) to officers and employees to purchase the Company's common stock.
The Company did not issue any stock options for the years ended December 31, 2010 and 2009.
EQUITY COMPENSATION PLAN INFORMATION
(1) As of December 31, 2010, subject to approval by the Board of Directors, up to twenty percent (20%) of the total issued and outstanding Class A Common Stock are available for future issuance pursuant to the Company’s 2005 Stock Incentive Plan (the “Stock Incentive Plan”) and up to twenty percent (20%) of the total issued and outstanding Class A Common Stock are available for future issuance pursuant to the Company’s 2005 Directors' and Officers' Stock Incentive Plan (the “Directors’ and Officers’ Stock Incentive Plan”). As of December 31, 2009, the Board had previously approved for issuance a total of 5,495,000 Class A Common Stock shares for each the Stock Incentive Plan and the Directors’ and Officers’ Stock Incentive Plan. All authorized shares have been issued pursuant to each plan with no additional shares remaining. The Board of Directors must take further action to authorize additional shares of issuance under each plan.
The Company’s 2005 Stock Incentive Plan (the "Plan") was approved by the Board of Directors, and became effective, on December 12, 2005. The shares that may be delivered or purchased or used for reference purposes under the Plan shall not exceed an aggregate of twenty percent (20%) of the issued and outstanding shares of the Company's Class A Common Stock, no par value per share, as determined by the Board from time to time. The purpose of the Plan is to (i) provide long-term incentives and rewards to employees, directors, independent contractors or agents of B Green Innovations and its subsidiaries; (ii) assist the Company in attracting and retaining employees, directors, independent contractors or agents with experience and/or ability on a basis competitive with industry practices; and (iii) associate the interests of such employees, directors, independent contractors or agents with those of the Company’s stockholders. Awards under the Plan may include, but need not be limited to, stock options (including non-statutory stock options and incentive stock options, stock appreciation rights, warrants, dividend equivalents, stock awards, restricted stock, phantom stock, performance shares or other securities or rights that the Board of Directors determines to be consistent with the objectives and limitations of the Plan. Under the Plan, the Board may provide for the issuance of shares of the Company's Class A Common Stock as a stock award for no consideration other than services rendered or, to the extent permitted by applicable state law, to be rendered. The Board shall have all the powers vested in it by the terms of the Plan, such powers to include exclusive authority (within the limitations of the Plan) to select the Eligible Participants to be granted awards under the Plan, to determine the type, size and terms of the awards to be made to each Eligible Participant selected, to determine the time when the awards will be granted, when they will vest, when they may be exercised, and when they will be paid, to amend awards previously granted, and the establish objectives and conditions, if any, for earning awards and whether awards will be paid after the end of the award period.
The Company’s 2005 Directors' and Officers' Stock Incentive Plan (the "D&O Plan") was approved by the Board of Directors, and become effective, on December 12, 2005. The shares that may be delivered or purchased or used for reference purposes under the D&O Plan shall not exceed an aggregate of twenty percent (20%) of the issued and outstanding shares of the Company's Class A Common Stock, no par value per share, as determined by the Board from time to time. The purpose of the D&O Plan is to (i) provide long-term incentives and rewards to officers and directors of the Company and its subsidiaries; (ii) assist the Company in attracting and retaining officers and directors, with experience and/or ability on a basis competitive with industry practices; and (iii) associate the interests of such officers and directors with those of the Company's stockholders. Awards under the D&O Plan may include, but need not be limited to, stock options (including non-statutory stock options and incentive stock options), stock appreciation rights, warrants, dividend equivalents, stock awards, restricted stock, phantom stock, performance shares or other securities or rights that the Board of Directors determines to be consistent with the objectives and limitations of the D&O Plan. Under the D&O Plan, the Board may provide for the issuance of shares of the Company's Class A Common Stock as a stock award for no consideration other than services rendered or, to the extent permitted by applicable state law, to be rendered. The Board shall have all the powers vested in it by the terms of the Plan, such powers to include exclusive authority (within the limitations of the Plan) to select the Eligible Participants to be granted awards under the Plan, to determine the type, size and terms of the awards to be made to each Eligible Participant selected, to determine the time when the awards will be granted, when they will vest, when they may be exercised, and when they will be paid, to amend awards previously granted, and the establish objectives and conditions, if any, for earning awards and whether awards will be paid after the end of the award period.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION
Forward Looking Statements
A number of the statements made by the Company in this report may be regarded as “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include, among others, statements concerning the Company’s outlook, pricing trends and forces within the industry, the completion dates of capital projects, expected sales growth, cost reduction strategies and their results, long-term goals of the Company and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts.
All predictions as to future results contain a measure of uncertainty and accordingly, actual results could differ materially. Among the factors that could cause a difference are: changes in the general economy; changes in demand for the Company’s products or in the cost and availability of its raw materials; the actions of its competitors; the success of our customers; technological change; changes in employee relations; government regulations; litigation, including its inherent uncertainty; difficulties in plant operations and materials; transportation, environmental matters; and other unforeseen circumstances.
This discussion and analysis of financial condition and results of operations should be read in conjunction with our Financial Statements and Risk Factors included in this filing.
Overview and Plan of Operation
The Company business was formed from the contribution by iVoice of certain assets and related liabilities on August 5, 2005, and sought to leverage the value of underutilized developed technology and believed that the transition to an independent company will provide the Company with greater access to capital. In connection with this Spin-off by iVoice, iVoice assigned and conveyed to the Company its IVR software business and related liabilities, including all intellectual property of iVoice relating to the IVR software business. The board and management of iVoice elected not to transfer any part of its working cash balance to the Company. Based upon the current intention of the Company not to conduct any research and development or hire additional employees and instead focus on the sale of the existing products, the board has determined that, on balance, the Company has the ability to satisfy its working capital needs as a whole. The board and management has also determined that B Green Innovations has the ability to obtain financing to satisfy any addition working capital needs as a stand-alone company.
The emerging nature of the interactive voice response industry, and the Company’s lack of resources to develop and market new products made it difficult to compete in this industry. The Company is now dedicated to the development, manufacture, and distribution of “green” products. The Company will also continue to support the Interactive Voice Response ("IVR"), software that was developed by iVoice. We currently have no plans to engage in future research and development, to launch any additional versions of the IVR software or other products, or to continue to market this product.
The B Green Innovations, Inc. ("B Green"), "Go Green" mission from its inception, is to create a "Green" company for the development of solutions to eliminate waste from the world's environment. B Green offers consumers a realistic and necessary solution to the problem of waste around the world. We believe that to truly have an impact on the planet, one must be committed to the environment and seek out environmentally-friendly products.
The first technology will be used to create new products from recycled tire rubber. EcoPod® and VibeAway® address important environmental concerns and problems facing the planet today. EcoPod® and VibeAway® are 100% recycled rubber-based products that can be utilized as support pads under any units that vibrate and make noise, including washing machines, dryers, compressors, commercial condensers, and many other units that advantageously benefit from sound and vibration control. In addition, we announced that we had filed a new patent application for a process it described as “Recycled Tire Pod with Appliance Recess Guide.”
Recently, the Company released its new 100% Degradable / Biodegradable Compactor Bags. These bags include oxo-biodegradable additive using the latest technology that supports the 3 R’s of Packaging Reduce, Reuse, Recycle and provides a fourth R, Remove. Independent Scientific Testing show that plastics incorporated with an additive called Renatura™ will degrade and then fully biodegrade, without leaving behind harmful residues in the soil.
These oxo-biodegradable plastic products are scientifically proven to be non-toxic and are FDA compliant, meaning they are safe for food packaging applications and have been awarded approved food film contact ‘no migration’ status. Regular plastic bags can take up to 100 years to break down causing plastic pollution and harm to both domestic and wild life. Standard plastics are filling our landfills and greatly impacting our planet. Plastics incorporating this additive in the presence of oxygen disappear when exposed to UV light or thermal heat. Our product is designed to allow plastics to degrade like a leaf, slowly yielding CO2 (which through photosynthesis becomes oxygen), water, bio-waste, and mineral salts that condition the soil in the process.
The Company continues to evaluate additional products to its product line as well as expanding its distribution channels.
The Company will also continue to support the Interactive Voice Response ("IVR"), software that was developed by iVoice. The Company's Interactive Voice Response line is designed to read information from and write information to, databases, as well as to query databases and return information.
The Company has operated at a loss in the past for iVoice, and as an independent company such losses continue. Additionally, the Company’s business had relied on iVoice for financial, administrative and managerial expertise in conducting its operations. Currently, the Company has developed and maintained its own credit and banking relationships and performs its own financial and investor relations functions. However, the Company may not be able to successfully maintain the financial, administrative and managerial structure necessary to operate as an independent public company, and the development of such structure will require a significant amount of management’s time and other resources.
The Company has received a going concern opinion from its auditors. Its continuation as a going concern is dependent upon obtaining the financing necessary to operate its business. If the Company cannot find sources of additional financing to fund its working capital needs, the Company will be unable to obtain sufficient capital resources to operate our business. On March 12, 2008, the Company sold 1,444.44 shares of Series A 10% Convertible Preferred Stock to iVoice, Inc. for net proceeds of $1,300,000. These funds were used to repay the YA Global Convertible Debenture and to continue to fund operations and the new venture in B Green discussed above. On February 10, 2010, iVoice, Inc. agreed to purchase 1,219 shares of the Company’s 3% Preferred Stock for $1,100,000 in cash and exchange of convertible debt.
We cannot assure you that we will be able to access any financing in sufficient amounts or at all when needed. Our inability to obtain sufficient working capital funding will have an immediate material adverse effect upon our financial condition and our business. See “Liquidity and Capital Resources.”
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States, and reflect the historical financial position, results of operations, and cash flows of the business transferred to the Company by iVoice as part of the Spin-off from iVoice, Inc.. The financial information included in this report is not necessarily indicative of its future performance as an independent company.
Results of Operations 2010 Compared to 2009
Total revenues increased $69,078 (63.9%) for the year ended December 31, 2010 to $177,198 as compared to $108,120 for the year ended December 31, 2009. This increase is mainly attributed to the sale of the Company’s “green” products. The Company continues its efforts to market and sell its products through a distribution network. B Green has entered into distribution agreements with reputable distributors that have proven themselves within their territories and industry segments. The Company continues to evaluate additional products to its product line as well as expanding its distribution channels. Recently, the Company released its new 100% Degradable / Biodegradable Compactor Bags. The Company continues its efforts to market and sell its products through a distribution network. B Green has entered into distribution agreements with reputable distributors that have proven themselves within their territories and industry segments.
Maintenance services on IVR products continue to decline as the Company continues to phase out of this market and focusing its efforts on the sale of “green” products. There can be no assurance that sales of “green” products will increase or that the Company will be able to achieve profitable operations.
Gross profit increased $31,533 (51.3%) to $93,079 for the year ended December 31, 2010 as compared to $61,526 the same period in the prior year as a result of the increased volume for “Green” products. The gross profit percentage was 52.5% for the year ended December 31, 2010 as compared to 56.9% for the year ended December 31, 2008 as maintenance services were a higher percentage of sales in 2009. Maintenance services on IVR products yield a very high gross profit as a result of the limited costs needed to support these products as compared to the manufactured “Green” products.
Total operating expenses increased to $646,316 for the year ended December 31, 2010 from $596,002 for the previous year, an increase of $10,314 (1.7). This increase is mainly attributed to increased selling expenses for the Company’s “green” products partially offset by lower administrative service expenses.
Loss from operations for the year ended December 31, 2010 increased $18,761 (3.5%) to $553,237 as compared to a loss from operations of $534,476 for the year ended December 31, 2009. The increase in loss from operations was the result of the factors discussed above.
Total other income was $1,540,868 for the year ended December 31, 2010 as compared to an expense of $1,686,943 for the year ended December 31, 2009. This increase in other income is primarily attributed to the gain on the extinguishment of the derivative liability as a result on the conversion to preferred stock and lower loss on revaluation of derivative.
Net income for the year ended December 31, 2010 was $987,631 as compared to a loss of $2,221,419 for the year ended December 31, 2009. The increase in net income was the result of the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has incurred substantial losses, and will require financing for working capital to meet its operating obligations. We anticipate that we will require financing on an ongoing basis for the foreseeable future.
The Company has assumed an outstanding promissory demand note in the amount of $190,000 payable to Jerry Mahoney, President and Chief Executive Officer of iVoice and Non-Executive Chairman of the Board of the Company. This amount is related to funds loaned to iVoice and is unrelated to the operations of the Company. The note will bear interest at the rate of prime plus 2.0% per annum (5.25% and 5.25% at December 31, 2010 and 2009, respectively) on the unpaid balance until paid. Interest payments are due and payable annually. Under the terms of the Promissory Note, at the option of the Note holder, principal and interest can be converted into either (i) one share of Class B Common Stock of the Company, par value $.01, for each dollar owed, (ii) the number of shares of Class A Common Stock of the Company calculated by dividing (x) the sum of the principal and interest that the Note holder has requested to have prepaid by (y) eighty percent (80%) of the lowest issue price of Class A Common Stock since the first advance of funds under this Note, or (iii) payment of the principal of this Note, before any repayment of interest. The Board of Directors of the Company maintains control over the issuance of shares and may decline the request for conversion of the repayment into shares of the Company.
On February 10, 2010, iVoice, Inc. agreed to purchase 1,219 shares of the Company’s 3% Preferred Stock for $1,100,000 in cash and exchange of the convertible promissory note to iVoice, Inc.
If the Company cannot find sources of additional financing to fund its working capital needs, the Company will be unable to obtain sufficient capital resources to operate our business. We cannot assure you that we will be able to access any financing in sufficient amounts or at all when needed. Our inability to obtain sufficient working capital funding will have an immediate material adverse effect upon our financial condition and our business.
The Company currently has no other significant sources of working capital or cash commitments. However, no assurance can be given that the Company will raise sufficient funds from such financing arrangements, or that Company will ever produce sufficient revenues to sustain its operations, or that a market will develop for its common stock for which a significant amount of the Company’s financing is dependent upon.
During the year ended December 31, 2010, the Company had a net increase in cash of $951,594. The Company’s principal sources and uses of funds were as follows:
Cash used in operating activities. The Company used $135,794 in cash for operating activities for the year ended December 31, 2010 as compared to $265,125 in the prior year. The decrease in cash used in operating activities is primarily the result of cash received from the sale of New Jersey state net operating losses in the amount of $232,491.
Cash used in investing activities. The Company used $12,612 in investing activities for the purchase of property, plant and equipment for the year ended December 31, 2010.
Cash provided by financing activities. The Company generated $1,100,000 from financing activities for the year ended December 31, 2010 as a result of net proceeds from the sales of Series A Convertible Preferred Stock.
There was no significant impact on the Company’s operations as a result of inflation for the year ended December 31, 2010.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate these estimates, including those related to bad debts, inventory obsolescence, intangible assets, payroll tax obligations, and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.
We have identified below the accounting policies, revenue recognition and software costs, related to what we believe are most critical to our business operations and are discussed throughout Management’s Discussion and Analysis of Financial Condition or Plan of Operation where such policies affect our reported and expected financial results.
Revenue Recognition
For “green” products, revenues are recognized at the time of shipment to, or acceptance by customer, provided title and risk of loss is transferred to the customer. Provisions, when appropriate, are made where the right to return exists.
With respect to customer support services for IVR, upon the completion of one year from the date of sale, the Company offers customers an optional annual software maintenance and support agreement for subsequent one-year periods. Sales of purchased maintenance and support agreements are recorded as deferred revenues and recognized over the respective terms of the agreements.
Due to the nature of the business and one-time contracts, it is unlikely that one customer will impact revenues in future periods. All revenues for 2009 and 2008 related to the Company’s IVR operations were derived from annual maintenance and support agreements.
Derivative Liabilities
The Company accounts for its embedded conversion features in its convertible debentures in accordance with FASB ASC 815-10, "Accounting for Derivative Instruments and Hedging Activities", which requires a periodic valuation of their fair value and a corresponding recognition of liabilities associated with such derivatives, and FASB ASC 815-40, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. The recognition of derivative liabilities related to the issuance of convertible debt is applied first to the proceeds of such issuance as a debt discount, at the date of issuance, and the excess of derivative liabilities over the proceeds is recognized as “Loss on Valuation of Derivative” in other expense in the accompanying financial statements. Any subsequent increase or decrease in the fair value of the derivative liabilities is recognized as other expense or other income, respectively. The financial statements for the period include the recognition of the derivative liability on the underlying securities issuable upon conversion of the Convertible Debentures with YA Global Investments (f/k/a/Cornell Capital Partners)
Impact of Recent Accounting Pronouncements
In October 2009, the FASB issued Accounting Standards Update 2009-13, “Revenue Recognition (Topic 605)”. This Update provides amendments to the criteria in Subtopic 605-24 for separating consideration in multiple-deliverable revenue arrangements. It establishes a hierarchy of selling prices to determine the selling price of each specific deliverable which includes vendor-specific objective evidence (if available), third-party evidence (if vendor-specific evidence is not available), or estimated selling price if neither of the first two are available. This Update also eliminates the residual method for allocating revenue between the elements of an arrangement and requires that arrangement consideration be allocated at the inception of the arrangement. Finally, this Update expands the disclosure requirements regarding a vendor’s multiple-deliverable revenue arrangements. This Update is effective for fiscal years beginning on or after June 15, 2010. We do not anticipate any material impact from this Update.
In April, 2010, the FASB issued ASU 2010-17, “Revenue Recognition - Milestone Method.” ASU 2010-17 amends ASC 605 “Revenue Recognition” to provide guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. A vendor can recognize consideration that is contingent upon achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. The amendments in this Update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. The Company does not expect the adoption of ASU 2010-17 to have an effect on the Company’s financial statements.
Management does not believe there would have been a material effect on the accompanying financial statements had any other recently issued, but not yet effective, accounting standards been adopted in the current period.
OFF BALANCE SHEET ARRANGEMENTS
During fiscal 2010 we did not engage in any material off-balance sheet activities nor have any relationships or arrangements with unconsolidated entities established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide additional funding to any such entities.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS.
The financial statements and notes of this Form 10-K appear after the signature page to this Form 10-K.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
The evaluation of our disclosure controls and procedures included a review of their objectives and design, our implementation of them and their effect on the information generated for use in this Form 10-K. In the course of the controls evaluation, we reviewed any data errors or control problems that we had identified and sought to confirm that appropriate corrective actions, including process improvements, were being undertaken. This type of evaluation is performed on a quarterly basis so that the conclusions of management, including our Chief Executive Officer and Chief Financial Officer, concerning the effectiveness of the disclosure controls can be reported in our periodic reports on Form 10-K and Form 10-Q. Many of the components of our disclosure controls and procedures are also evaluated on an ongoing basis. The overall goals of these various evaluation activities are to monitor our disclosure controls and procedures and to modify them as necessary. The Company's Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Sec. 240.13a-15(e) or 240.15d-15(e)) as of December 31, 2010, and based on the evaluation of these controls and procedures required by paragraph (b) of Sec. 240.13a-15 or 240.15d-15 the disclosure controls and procedures have been found to be ineffective.
The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in our reports filed under the securities Exchange Act, is recorded, processed, summarized, and reported within the time periods specified by the SEC's rules and forms. Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
EVALUATION OF 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) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
We have identified the following material weaknesses in our internal control over financial reporting as of December 31, 2010:
A material weakness in the Company's internal control over financial reporting exists in that there is limited segregation of duties amongst the Company's employees with respect to the Company's preparation and review of the Company's financial statements. This material weakness is a result of the Company's limited number of employees. This material weakness may affect management's ability to effectively review and analyze elements of the financial statement closing process and prepare financial statements in accordance with U.S. GAAP.
Management conducted an evaluation of the effectiveness of the Company's internal control over financial reporting as of December 31, 2010. In making this assessment, management used the framework set forth in the report entitled "Internal Control-Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a Company's internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of the Company have concluded, as of the end of the fiscal year covered by this Annual Report on Form 10-K, due to a lack of segregation of duties that our internal control over financial reporting has not been effective. However, at this time, our resources and size prevent us from being able to employ sufficient resources to enable us to have adequate segregation of duties within our internal control system. The Company intends to remedy the material weakness by hiring additional employees and reallocating duties, including responsibilities for financial reporting, among the Company's employees as soon as the Company has the financial resources to do so. Management is required to apply judgment in evaluating the cost-benefit relationship of possible changes in our disclosure controls and procedures.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.
CHANGES IN INTERNAL CONTROLS.
Management of the Company has evaluated, with the participation of the Chief Executive Officer of the Company, any change in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal year covered by this Annual Report on Form 10-K. There was no change in the Company's internal control over financial reporting identified in that evaluation that occurred during the fiscal year covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting, other than what has been reported above.
RISK FACTOR RELATED TO CONTROLS AND PROCEDURES
The Company has limited segregation of duties amongst its employees with respect to the Company's preparation and review of the Company's financial statements due to the limited number of employees, which is a material weakness in internal controls, and if the Company fails to maintain an effective system of internal controls, it may not be able to accurately report its financial results or prevent fraud. As a result, current and potential stockholders could lose confidence in the Company's financial reporting which could harm the trading price of the Company's stock.
Management has found it necessary to limit the Company's administrative staffing in order to conserve cash, until the Company's level of business activity increases. As a result, there is very limited segregation of duties amongst the administrative employees, and the Company and its independent public accounting firm have identified this as a material weakness in the Company's internal controls. The Company intends to remedy this material weakness by hiring additional employees and reallocating duties, including responsibilities for financial reporting, among the employees as soon as there are sufficient resources available. However, until such time, this material weakness will continue to exist. Despite the limited number of administrative employees and limited segregation of duties, management believes that the Company's administrative employees are capable of following its disclosure controls and procedures effectively.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
B Green Innovations’ board of directors consists of two directors. Listed below is certain information concerning individuals who currently serve as directors and executive officers of B Green Innovations. Mr. Mahoney is currently a director of iVoice and we anticipate that Mr. Mahoney will remain a director of both iVoice and B Green Innovations.
Jerome R. Mahoney. Mr. Mahoney has served as the Company’s President, Chief Executive Officer and Secretary since August 30, 2006. Mr. Mahoney formerly served as the Company’s Non-Executive Chairman of the Board. He has been a director of iVoice since May 21, 1999. Mr. Mahoney was also the Chairman of the Board of Trey Resources, Inc. and had been a director of Trey Resources from January 1, 2002 until May 2009. He was also the Non-Executive Chairman of the Board of SpeechSwitch, Inc. and had been a director of SpeechSwitch from August 2004 until January 2008. He was also the Non-Executive Chairman of the Board of Deep Field Technologies, Inc. through February 13, 2007 and had been a director of Deep Field Technologies from August 2004 through February 2007. Mr. Mahoney started at Executone Information Systems, a telephone systems manufacturer, and was Director of National Accounts from 1988 to 1989. In 1989, Mr. Mahoney founded Voice Express, Inc., a New York company that sold voicemail systems and telephone system service contracts and installed these systems. Mr. Mahoney sold Voice Express Systems in 1993. From 1993 to 1997, Mr. Mahoney was President of IVS Corp., and on December 17, 1997, he established International Voice Technologies, with which iVoice merged on May 21, 1999. Mr. Mahoney received a B.A. in finance and marketing from Fairleigh Dickinson University, Rutherford, NJ in 1983.
Frank V. Esser. Mr. Esser has served as a director of the Company since June 2005. He has also been a director of iVoice since February 2004. Mr. Esser functioned as Transfer Agent and Head Bookkeeper in the Treasury Department of Texaco Inc from 1959 to 1968. As a certified public accountant with Ernst & Young from 1968 to 1981, he participated in the audits of major publicly traded companies such as J.P. Stevens & Co., Dynamics Corporation of America, and Phillips - Van Heusen Corporation, along with law firms, banks, manufacturing companies and other organizations, and also participated in the public offerings of equity and debt and the preparation of SEC filings. In 1981, Mr. Esser accepted the position of Corporate Controller with Grow Group, Inc., a Fortune 500 manufacturer of paints, solvents, and household products and became its Chief Financial Officer in 1987. During 1997 and 1998, Mr. Esser was Chief Financial Officer of a privately-held plastics injection molding company. In 1998, Mr. Esser accepted the position of Senior Associate at Beacon Consulting Associates, adding the title of Vice President in 1999, and has been working in such capacities ever since. Mr. Esser holds a BA degree from Baruch College of the City University of New York and is a Certified Public Accountant in New York State.
AUDIT COMMITTEE
The Audit Committee currently consists of Messrs. Esser and Mahoney, with Mr. Esser serving as the Chairman of the Committee. Mr. Esser is an independent member of the Board of Directors and may be deemed a financial expert as defined in §228.401(e) of the regulations promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended. Management is responsible for the Company's internal controls and the financial reporting process. The independent auditors are responsible for performing an independent audit of the Company's consolidated financial statements in accordance with generally accepted accounting principles and to issue a report thereon and as to management's assessment of the effectiveness of internal controls over financial reporting. The Audit Committee's responsibility is to monitor and oversee these processes, although the members of the Audit Committee are not engaged in the practice of auditing or accounting. The Audit Committee had no meetings in 2010. The Board of Directors approved an Audit Committee Charter on March 30, 2006. As of this date, the Audit Committee operates pursuant to this Audit Committee Charter.
AUDIT COMMITTEE REPORT
The following is the Audit Committee's report submitted to the Board of Directors for the fiscal year ended December 31, 2010. The Audit Committee has:
·
reviewed and discussed the Company's audited financial statements with management and Rosenberg, Rich, Berman, Baker & Company, the Company's independent accountants;
·
discussed with Rich, Berman, Baker & Company the matters required to be discussed by Statement on Auditing Standards No. 61, as may be modified or supplemented; and
·
received from Rich, Berman, Baker & Company the written disclosures and the letter regarding their independence as required by Independence Standards Board Standard No. 1, as may be modified or supplemented, and discussed the auditors' independence with them.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010, for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
Frank Esser, CHAIRMAN
Jerome Mahoney
The Audit Committee report shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed filed under these acts.
CORPORATE GOVERNANCE
Director Independence
B Green Innovations’ board of directors consists of Jerome R. Mahoney and Frank V. Esser. Mr. Esser is an “independent director” as such term is defined in Section 4200(a)(15) of the NASDAQ Marketplace Rules.
Audit Committee
The Company’s audit committee currently consists of Messrs. Esser and Mahoney. Mr. Esser is an independent member of the audit committee under the independence standards set forth in Section 4350(d)(2) of the NASDAQ Marketplace Rules. Mr. Mahoney is not an independent member of the audit committee.
Nominating Committee
The Company does not have a standing nominating committee or a committee performing similar functions, as the Board of Directors consists of only two members. Due to the Company’s size, it finds it difficult to attract individuals who would be willing to accept membership on the Company’s Board of Directors. Therefore, with only two members of the Board of Directors, the full Board of Directors would participate in nominating candidates to the Board of Directors. The Company did not have an annual meeting of shareholders in the past fiscal year.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
As the Company has no class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) Forms 3,4 or 5, as required by Section 16(a) of the Exchange Act are not required to be filed.
Code of Ethics
The Board of Directors adopted a Code of Ethics for its chief executive officer and chief financial officer and was filed as Exhibit 14 to the Company’s Report on Form-10-KSB for the year ended December 31, 2005, filed on April 4, 2006. The Code of Ethics will be provided to any person without charge, upon request. Requests should be directed to the Investor Relations Department at the Company's corporate headquarters.
Compensation of Directors
The following table sets forth compensation information for services rendered by our directors during the last completed fiscal year. The following information includes the dollar value of fees earned or paid in cash and certain other compensation, if any, whether paid or deferred. Our directors did not receive any bonus, stock awards, option awards, non-equity incentive plan compensation, or nonqualified deferred compensation earnings during the last completed fiscal year.
Director Compensation
(1)
Mr. Esser has been serving as our outside director since June 2005 at a fee of $12,000 per year.
(2)
Mr. Esser has received no cash compensation during this period.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth compensation information for services rendered by certain of our executive officers in all capacities during the last three completed fiscal years. The following information includes the dollar value of base salaries, bonus awards, the number of stock options granted, and certain other compensation, if any, whether paid or deferred.
(1)
Mr. Mahoney has been serving as our President, Chief Executive Officer and Director since August 31, 2006. Prior to that time, Mr. Mahoney served as our Non-Executive Chairman of the Board since August 1, 2004. Mr. Mahoney’s employment contract is for a term of five-years at a base salary of $85,000 in the first year with annual increases based on the Consumer Price Index every year thereafter. On March 9, 2009, the term of the employment agreement between the Company and Mr. Mahoney, the Company’s CEO, was extended to July 31, 2016. The Company will compensate Mr. Mahoney with a base salary of $85,000 for the first year with annual increases based on the Consumer Price Index. Mr. Mahoney had a consulting agreement with the Company’s former subsidiary B Green Innovations for annual compensation of $24,000 and upon every annual anniversary thereafter, at the rate based on the increase in the Consumer Price Index for All Urban Consumers (New York-Northern N.J.-Long Island). Effective January 1, 2010, this amount was added to Mr. Mahoney’s base salary. On June 15, 2010, Mr. Mahoney’s employment agreement was amended to increase the base salary to $195,000 effective July 1, 2010.
(2)
$91,302, $27,085 and $27,085 was accrued and unpaid for the years ended December 31, 2010, 2009 and 2008, respectively.
(3)
Compensation for efforts related to the Company’s former subsidiary B Green Innovations. For the year ended December 31, 2009 and 2008, $22,000 and $16,000 was accrued and unpaid, respectively.
Stock Option Grants
The Company did not issue any stock options for the years ended December 31, 2010 and 2009.
EMPLOYMENT CONTRACTS
Jerome R. Mahoney
The Company entered into a five-year employment agreement with Mr. Mahoney as of August 1, 2004. Mr. Mahoney will serve as the Company’s Non-Executive Chairman of the Board for a term of five years. On March 9, 2009, the term of the employment agreement between the Company and Mr. Mahoney, the Company’s CEO, was extended to July 31, 2016. As consideration, the Company agreed to pay Mr. Mahoney the sum of $85,000 the first year with an annual increase based on the Consumer Price Index every year thereafter. The Company also agreed to pay Mr. Mahoney a bonus for each merger or acquisition completed by the Company equal to six percent (6%) of the gross consideration paid or received by iVoice Technology in a merger or acquisition completed by the Company during the term of the agreement. This bonus would be payable in the form of cash, debt or shares of our Class B Common Stock at the option of Mr. Mahoney. Mr. Mahoney had a consulting agreement with the Company’s former subsidiary B Green Innovations for annual compensation of $24,000 and upon every annual anniversary thereafter, at the rate based on the increase in the Consumer Price Index for All Urban Consumers (New York-Northern N.J.-Long Island). Effective January 1, 2010, this amount was added to Mr. Mahoney’s base salary. On June 15, 2010, Mr. Mahoney’s employment agreement was amended to increase the base salary to $195,000 effective July 1, 2010. All other terms of the Employment Agreement shall remain in full force and effect. A portion of Mr. Mahoney’s compensation shall be deferred until such time that the Board of Directors determines that the Company has sufficient financial resources to pay his compensation in cash.
In the event Mr. Mahoney's employment agreement is terminated by the Company for cause or due to Mr. Mahoney's disability or retirement, the Company will pay him his full base salary for five years from the date of termination at the highest salary level under the agreement. Under his agreement, "cause" means (1) the willful and continued failure of Mr. Mahoney to substantially perform his duties to the Company after written demand for such performance is delivered to Mr. Mahoney by the Company's Board of Directors, (2) the willful engaging by Mr. Mahoney in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, (3) the conviction of Mr. Mahoney of a felony, which is limited solely to a crime that relates to the business operations of the Company or that results in his being unable to substantially carry out his duties as set forth in the agreement, or (4) the commission of any act by Mr. Mahoney against the Company that may be construed as embezzlement, larceny, and/or grand larceny. However, Mr. Mahoney will not be deemed to have been terminated for cause unless the Board of Directors determines, by a vote of at least 75% of the members of the board of directors, that Mr. Mahoney was guilty of conduct described in items (1), (2) or (4) above.
As the board of directors consists solely of Mr. Mahoney and Mr. Esser, Mr. Mahoney, pursuant to his employment agreement, would be required to recuse himself from any discussions or vote regarding any potential termination, Mr. Esser would be required to determine, in accordance with his fiduciary duties as a board member, if Mr. Mahoney should be terminated for cause.
In the event Mr. Mahoney's employment agreement is terminated due to Mr. Mahoney's death, iVoice Technology will pay to his estate his full base salary for eight years from the date of termination at the highest salary level under the agreement. In the event Mr. Mahoney's employment agreement is terminated by iVoice Technology within three years following a change in control, as defined in the employment agreement, or by Mr. Mahoney for good reason within three years following a change in control, Mr. Mahoney will be entitled to receive a severance payment equal to three hundred percent (300%), less $100, of the average amount of his gross income for services rendered to iVoice Technology in each of the five prior calendar years (or shorter period during which Mr. Mahoney shall have been employed by iVoice Technology). Under his employment agreement, "good reason" means, among other things, (1) any limitation on Mr. Mahoney's powers as Chairman of the Board, (2) a reduction in compensation, (3) a relocation of the Company outside New Jersey or (4) the failure of the Company to make any required payments under the agreement. The employment agreement restricts Mr. Mahoney from competing with the Company during the term of the agreement and for one year after he is no longer employed by the Company; provided that Mr. Mahoney is receiving severance or other compensation from the Company pursuant to the employment agreement for at least one year (see Note 5 to the Financial Statements).
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the beneficial ownership of our voting securities as of February 24, 2011 of (i) each person known to us to beneficially own more than 5% of the applicable class of voting securities, (ii) our directors, (iii) and each named executive officer and (iv) all directors and executive officers as a group. As of February 24, 2011 a total of 605,609,870 shares of Class A common stock were outstanding. Each share of Class A common stock and Class B common stock is entitled to one vote on matters on which holders of common stock are eligible to vote. The column entitled "Percentage of Total Voting Stock" shows the percentage of total voting stock beneficially owned by each listed party.
The number of shares beneficially owned is determined under rules promulgated by the Securities and Exchange Commission, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under those rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days of February 24, 2011 through the exercise or conversion of any stock option, convertible security, warrant or other right. Unless otherwise indicated, each person or entity named in the table has sole voting power and investment power (or shares that power with that person's spouse) with respect to all shares of capital stock listed as owned by that person or entity.
Ownership of Common Stock
(1) Percentage ownership for the Company’s Class A Common Stock is based on 605,609,870 shares of Class A Common Stock outstanding as of February 24, 2011.
(2) Includes 17,049,410 shares of Class A common stock, 115,025 shares of Class B common stock held and gives effect to the right of Mr. Mahoney pursuant to the promissory note to be executed by the Company in favor of Mr. Mahoney in the amount of $391,146 ($277,753 of indebtedness and deferred compensation and unpaid interest of $113,394) to convert amounts owing under such promissory note to 325,143 shares of Class B Common Stock together with the Class B common stock held, which are convertible into the number of shares of our Class A Common Stock, determined by dividing the number of shares of our Class B Common Stock being converted by a 20% discount of the lowest price at which the Company had ever issued its Class A Common Stock (1,375,424,438 shares). There is no limitation on the number of shares of our Class A Common Stock we may be required to issue to Mr. Mahoney upon the conversion of this indebtedness.
(3) Includes 115,025 shares held and gives effect to the right of Mr. Mahoney to, at his option, convert the $391,146 promissory note plus accrued interest held by him into Class B Common Stock of the Company at a rate of one dollar per share into 391,146 shares of the Company’s Class B Common Stock. Such Class B Common Stock is convertible at any time into shares of our Class A Common Stock at a rate equal to 80% of the lowest price that the Company issues shares of Class A Common Stock subsequent to the date of the note. Thus by virtue of Mr. Mahoney's right to convert $391,146 owing under such promissory note into 391,146 shares of the Company’s Class B Common Stock, Mr. Mahoney is deemed to beneficially own such shares for the purpose of computing the percentage of ownership by him, but such shares are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company has assumed an outstanding promissory demand note in the amount of $190,000 payable to Jerry Mahoney, President and Chief Executive Officer of iVoice and Non-Executive Chairman of the Board of the Company. This amount is related to funds loaned to iVoice and is unrelated to the operations of the Company. The note will bear interest at the rate of prime plus 2.0% per annum (5.25% and 5.25% at December 31, 2010 and 2009, respectively) on the unpaid balance until paid. Interest payments are due and payable annually. Under the terms of the Promissory Note, at the option of the Note holder, principal and interest can be converted into either (i) one share of Class B Common Stock of the Company, par value $.01, for each dollar owed, (ii) the number of shares of Class A Common Stock of the Company calculated by dividing (x) the sum of the principal and interest that the Note holder has requested to have prepaid by (y) eighty percent (80%) of the lowest issue price of Class A Common Stock since the first advance of funds under this Note, or (iii) payment of the principal of this Note, before any repayment of interest.
The Board of Directors of the Company maintains control over the issuance of shares and may decline the request for conversion of the repayment into shares of the Company. During 2010 Mr. Mahoney did not convert any of his loan into Class A Common Stock. During 2009 Mr. Mahoney received 74,000,000 shares of Class A Common Stock, with a market value of $140,000 as repayment of $23,680 of the loan. The difference in the market value and the promissory note reduction was charged to beneficial interest in the amount of $116,320. During 2009 Mr. Mahoney also received 115,025 shares of Class B Common Stock as repayment of $115,205 of the loan. As of December 31, 2010 and 2009, the outstanding balances were $3,003 and $3,003, plus accrued interest of $113,394 and $100,692, respectively.
On May 8, 2007, the Company executed a Security Agreement providing Jerome Mahoney, President and Chief Executive Officer of the Company, with a security interest in all of the assets of the Company to secure the promissory note dated August 5, 2005 and all future advances including, but not limited to, additional cash advances: deferred compensation, deferred expense reimbursement, deferred commissions and income tax reimbursement for the recognition of income upon the sale of common stock for the purpose of the holder advancing additional funds to the Company.
The Company entered into a five-year employment agreement with Jerome Mahoney to serve as Non-Executive Chairman of the Board of Directors, effective August 1, 2004. On March 9, 2009, the term of the employment agreement between the Company and Mr. Mahoney, the Company’s CEO, was extended to July 31, 2016. The Company will compensate Mr. Mahoney with a base salary of $85,000 for the first year with annual increases based on the Consumer Price Index. Mr. Mahoney had a consulting agreement with the Company’s former subsidiary B Green Innovations for annual compensation of $24,000 and upon every annual anniversary thereafter, at the rate based on the increase in the Consumer Price Index for All Urban Consumers (New York-Northern N.J.-Long Island). Effective January 1, 2010, this amount was added to Mr. Mahoney’s base salary. On June 15, 2010, Mr. Mahoney’s employment agreement was amended to increase the base salary to $195,000 effective July 1, 2010. All other terms of the Employment Agreement shall remain in full force and effect. A portion of Mr. Mahoney’s compensation shall be deferred until such time that the Board of Directors determines that the Company has sufficient financial resources to pay his compensation in cash.
The Board has the option to pay Mr. Mahoney’s compensation in the form of Class B Common Stock. Mr. Mahoney will also be entitled to certain bonuses based on mergers and acquisitions completed by the Company. Pursuant to the terms of the Class B Common Stock, a holder of Class B Common Stock has the right to convert each share of Class B Common Stock into the number of shares of Class A Common Stock determined by dividing the number of Class B Common Stock being converted by a 20% discount of the lowest price for which the Company had ever issued its Class A Common Stock. Mr. Mahoney deferred $53,302 and $27,604 of his compensation for the years ended December 31, 2010 and 2009, respectively. As of December 31, 2010 and 2009, total deferred compensation due to Mr. Mahoney was $312,750 and $253,448, respectively.
In conjunction with the spin-off from iVoice, Inc., the Company, and its former subsidiary, had entered into a temporary administrative services agreements with iVoice. The administrative services agreements were to continue on a month-to-month basis until the Company has found replacement services for those services being provided by iVoice or can provide these services for itself. As of October 1, 2009 iVoice has suspended all charges for the Administrative Service Agreement for the Company and with the Company. There were no administrative service charges for the year ended December 31, 2010. Administrative services were $37,989 for the year ended December 31, 2009 (see Note 9).
Effective November 17, 2009, the Company’s subsidiary at the time and iVoice mutually agreed to terminate and extinguish any all obligations between the parties pursuant to the following agreements:
a. The Administrative Services Agreement dated March 1, 2007 by and between B Green Innovations, Inc.(subsidiary) and iVoice, Inc.
b. The Convertible Promissory Note dated May 5, 2008 issued by B Green Innovations, Inc. payable to iVoice, Inc.
c. The Security Agreement dated May 5, 2008 by and between B Green Innovations, Inc. and iVoice, Inc.
As a result of the above the Company extinguished a total of $63,875 of a Convertible Promissory Note and accrued interest of $2,140. The total of $66,015 was recorded in the balance sheet as of December 31, 2009 as additional paid-in capital as it is a related party transaction.
As of February 10, 2010, the Administrative Services Agreement with iVoice, Inc. and the Company was terminated, and the Company entered into an Exchange Agreement to exchange the Convertible Promissory Note having a principal and accrued interest of approximately $119,000 and $1,100,000 in cash for 1,219 shares of the Company’s 3% Preferred Stock. As a result the Company recorded a gain from the extinguishment of the derivative liability in the amount of $1,636,695 and is included in other income in the accompanying statement of operations for the year ended December 31, 2010 (See Note 11 for terms of the 3% Preferred Stock).
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth fees billed to the Company by the Company's independent auditors for the year ended December 31, 2010 and December 31, 2009 for (i) services rendered for the audit of the Company's annual financial statements and the review of the Company's quarterly financial statements, (ii) services rendered that are reasonably related to the performance of the audit or review of the Company's financial statements that are not reported as Audit Fees, and (iii) services rendered in connection with tax preparation, compliance, advice and assistance.
Prior to engaging our accountants to perform a particular service, our Audit Committee obtains an estimate for the service to be performed. The Audit Committee in accordance with its procedures approved all of the services described above.
On January 27, 2010, B Green Innovations, Inc. (the “Company”) learned that its independent accountant, Bagell, Josephs, Levine & Company, L.C.C. (“Bagell Josephs”) would decline to stand for re-election or appointment by the Company’s Board of Directors. The principal accountant's report on the financial statements for neither of the past two years contained an adverse opinion or a disclaimer of opinion, nor was qualified or modified as to uncertainty, audit scope, or accounting principles, with the exception of a going concern qualification. During the Company’s two most recent fiscal years and any subsequent interim period preceding such resignation, declination or dismissal there were no disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. Upon the Board of Directors learning that Bagell Josephs would not stand for re-election, the decision to retain the new independent accountant was decided by the Company’s Audit Committee. On January 27, 2010, the Company engaged the firm of Rosenberg, Rich, Berman, Baker & Company (“Rosenberg Rich”) as its new independent accountants.
ITEM 15.
ITEM 15. EXHIBITS
Exhibits
No.
Description
3.1
Amended and Restated Certificate of Incorporation of iVoice Technology, Inc. (filed as Exhibit 3.1 to iVoice Technology, Inc.’s Amendment No. 1 to Form SB-2 Registration Statement, File No. 333-120490, filed on January 11, 2005, and incorporated herein by reference)
3.2
Amendment to the Certificate of Incorporation of iVoice Technology, Inc. filed with the State of New Jersey on January 11, 2008 (filed with the Commission as Exhibit 3.1 on a Current Report on Form 8-K dated January 11, 2008 and incorporated herein by reference.)
3.3
Amendment to the Certificate of Incorporation of iVoice Technology, Inc. filed with the State of New Jersey on March 10, 2008 (filed with the Commission as Exhibit 3.1 on a Current Report on Form 8-K dated March 5, 2008 and incorporated herein by reference.)
3.4
Amendment to the Certificate of Incorporation of iVoice Technology, Inc. filed with the State of New Jersey on August 11, 2008 (filed with the Commission as Exhibit 3.1 on a Current Report on Form 8-K dated August 11, 2008 and incorporated herein by reference.)
3.5
Amendment to the Certificate of Incorporation of iVoice Technology, Inc. filed with the State of New Jersey on March 6, 2009 (filed with the Commission as Exhibit 3.1 on a Current Report on Form 8-K dated March 6, 2009 and incorporated herein by reference.)
3.6
Amendment to the Certificate of Incorporation filed with the State of New Jersey on July 27, 2009 (filed with the Commission as Exhibit 3.1 on a Current Report on Form 8-K dated July 27, and incorporated herein by reference.)
3.7
Amendment to the Certificate of Incorporation filed with the State of New Jersey on November 20, 2009 (filed with the Commission as Exhibit 3.1 on a Current Report on Form 8-K dated November 17, 2009 and incorporated herein by reference.)
3.8
Amendment to the Certificate of Incorporation filed with the State of New Jersey on February 16, 2010 (filed with the Commission as Exhibit 3.1 on the Form 10-Q for the period ended March 31, 2010 and incorporated herein by reference.)
3.6
By-laws of iVoice Technology, Inc. (filed as Exhibit 3.2 to iVoice Technology, Inc.’s Amendment No. 1 to Form SB-2 Registration Statement, File No. 333-120490, filed on January 11, 2005, and incorporated herein by reference)
10.1
Employment Agreement, dated as of August 1, 2004, between iVoice Technology, Inc. and Jerome Mahoney (initially filed as Exhibit 10.9 to iVoice Technology, Inc.’s Amendment No. 2 to Form SB-2 Registration Statement, File No. 333-120490, filed on April 7, 2005, incorporated herein by reference) and amendment dated September 26, 2006 (filed as Exhibit 10.1 to iVoice Technology, Inc.’s Form 8-K, filed on September 28, 2006, incorporated by reference herein).
10.2
Administrative Services Agreement, dated August 1, 2004, between iVoice, Inc. and iVoice Technology, Inc. (filed as Exhibit 10.11 to iVoice Technology, Inc.’s Amendment No. 2 to Form SB-2 Registration Statement, File No. 333-120490, filed on April 7, 2005, and incorporated herein by reference)
10.3
Amendment No. 1 to Employment Agreement, dated April 1, 2005, between iVoice Technology, Inc. and Jerome Mahoney (filed as Exhibit 10.23 to iVoice Technology, Inc.’s Amendment No. 2 to Form SB-2 Registration Statement, File No. 333-120490, filed on April 7, 2005, and incorporated herein by reference)
10.4
Amendment No. 2 to Employment Agreement, dated June 15, 2005, between iVoice Technology, Inc. and Jerome Mahoney (filed as Exhibit 10.24 to iVoice Technology, Inc.’s Amendment No. 3 to Form SB-2 Registration Statement, File No. 333-120490, filed on June 24, 2005, and incorporated herein by reference)
10.5
Amendment No. 3 to Employment Agreement, dated July 18, 2005, between iVoice Technology, Inc. and Jerome Mahoney (filed as Exhibit 10.26 to iVoice Technology, Inc.’s Amendment No. 4 to Form SB-2 Registration Statement, File No. 333-120490, filed on July 28, 2005, and incorporated herein by reference
10.6
Promissory Note from iVoice Technology, Inc. to Jerome Mahoney, dated August 5, 2005 (filed as Exhibit 10.13 to iVoice Technology, Inc.’s Form SB-2 Registration Statement, filed on October 3, 2005, and incorporated herein by reference)
10.7
Amendment No. 4 to Employment Agreement, dated September 29, 2005, between iVoice Technology, Inc. and Jerome Mahoney (filed as Exhibit 10.33 to iVoice Technology, Inc.’s Form SB-2 Registration Statement, filed on October 3, 2005, and incorporated herein by reference)
10.9
Amended Administrative Services Agreement, dated March 5, 2005, between iVoice, Inc. and iVoice Technology, Inc. (filed as Exhibit 10.1 to iVoice Technology, Inc.’s Form 8-K, filed on March 14, 2008, and incorporated herein by reference)
10.10
Amendment No. 5 to Employment Agreement, dated September 26, 2006, between iVoice Technology, Inc. and Jerome Mahoney (filed as Exhibit 10.1 on the Current Report on Form 8-K dated August 31, 2006, and incorporated herein by reference)
10.11
Amendment No. 6 to Employment Agreement, dated November 22, 2006, between iVoice Technology, Inc. and Jerome Mahoney filed herein.
10.12
Convertible Promissory Note, dated March 5, 2008, payable to iVoice Technology, Inc. (filed as Exhibit 10.2 to iVoice Technology, Inc.’s Form 8-K, filed on March 14, 2008, and incorporated herein by reference)
10.13
Security Agreement by and between iVoice Technology, Inc. and iVoice, Inc. dated March 5, 2008 (filed as Exhibit 10.3 to iVoice Technology, Inc.’s Form 8-K, filed on March 14, 2008, and incorporated herein by reference)
10.14
Amendment No. 7 to Employment Agreement, dated March 9, 2009, between iVoice Technology, Inc. and Jerome Mahoney (filed as Exhibit 10.1 on the Current Report on Form 8-K dated March 6, 2009 and incorporated herein by reference)
10.15
Agreement and Plan of Merger by and between iVoice Technology, Inc. and B Green Innovations, Inc. dated November 17, 2009 (filed with the Commission as Exhibit 3.1 on a Current Report on Form 8-K dated November 17, 2000 and incorporated herein by reference.)
10.16
Termination of Administrative Services Agreement dated February 10, 2010 by and between B Green Innovations, Inc. and iVoice, Inc. (filed with the Commission as Exhibit 10.1 on the Form 10-Q for the period ended March 31, 2010 and incorporated herein by reference.)
10.17
Administrative Services Agreement dated March 1, 2010 by and between B Green Innovations, Inc. and iVoice, Inc., (filed with the Commission as Exhibit 10.2 on the Form 10-Q for the period ended March 31, 2010 and incorporated herein by reference.).
Code of Ethics (filed as Exhibit 14 to iVoice Technology, Inc.’s Form 10-KSB for the year ended December 31, 2005, filed on April 4, 2006, and incorporated herein by reference)
31.1* Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herein.
32.1* Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herein.
* Filed herein
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
INDEX OF EXHIBITS
No.
Description
3.1
Amended and Restated Certificate of Incorporation of iVoice Technology, Inc. (filed as Exhibit 3.1 to iVoice Technology, Inc.’s Amendment No. 1 to Form SB-2 Registration Statement, File No. 333-120490, filed on January 11, 2005, and incorporated herein by reference)
3.2
Amendment to the Certificate of Incorporation of iVoice Technology, Inc. filed with the State of New Jersey on January 11, 2008 (filed with the Commission as Exhibit 3.1 on a Current Report on Form 8-K dated January 11, 2008 and incorporated herein by reference.)
3.3
Amendment to the Certificate of Incorporation of iVoice Technology, Inc. filed with the State of New Jersey on March 10, 2008 (filed with the Commission as Exhibit 3.1 on a Current Report on Form 8-K dated March 5, 2008 and incorporated herein by reference.)
3.4
Amendment to the Certificate of Incorporation of iVoice Technology, Inc. filed with the State of New Jersey on August 11, 2008 (filed with the Commission as Exhibit 3.1 on a Current Report on Form 8-K dated August 11, 2008 and incorporated herein by reference.)
3.5
Amendment to the Certificate of Incorporation of iVoice Technology, Inc. filed with the State of New Jersey on March 6, 2009 (filed with the Commission as Exhibit 3.1 on a Current Report on Form 8-K dated March 6, 2009 and incorporated herein by reference.)
3.6
Amendment to the Certificate of Incorporation filed with the State of New Jersey on July 27, 2009 (filed with the Commission as Exhibit 3.1 on a Current Report on Form 8-K dated July 27, and incorporated herein by reference.)
3.7
Amendment to the Certificate of Incorporation filed with the State of New Jersey on November 20, 2009 (filed with the Commission as Exhibit 3.1 on a Current Report on Form 8-K dated November 17, 2009 and incorporated herein by reference.)
3.8
Amendment to the Certificate of Incorporation filed with the State of New Jersey on February 16, 2010 (filed with the Commission as Exhibit 3.1 on the Form 10-Q for the period ended March 31, 2010 and incorporated herein by reference.)
3.6
By-laws of iVoice Technology, Inc. (filed as Exhibit 3.2 to iVoice Technology, Inc.’s Amendment No. 1 to Form SB-2 Registration Statement, File No. 333-120490, filed on January 11, 2005, and incorporated herein by reference)
10.1
Employment Agreement, dated as of August 1, 2004, between iVoice Technology, Inc. and Jerome Mahoney (initially filed as Exhibit 10.9 to iVoice Technology, Inc.’s Amendment No. 2 to Form SB-2 Registration Statement, File No. 333-120490, filed on April 7, 2005, incorporated herein by reference) and amendment dated September 26, 2006 (filed as Exhibit 10.1 to iVoice Technology, Inc.’s Form 8-K, filed on September 28, 2006, incorporated by reference herein).
10.2
Administrative Services Agreement, dated August 1, 2004, between iVoice, Inc. and iVoice Technology, Inc. (filed as Exhibit 10.11 to iVoice Technology, Inc.’s Amendment No. 2 to Form SB-2 Registration Statement, File No. 333-120490, filed on April 7, 2005, and incorporated herein by reference)
10.3
Amendment No. 1 to Employment Agreement, dated April 1, 2005, between iVoice Technology, Inc. and Jerome Mahoney (filed as Exhibit 10.23 to iVoice Technology, Inc.’s Amendment No. 2 to Form SB-2 Registration Statement, File No. 333-120490, filed on April 7, 2005, and incorporated herein by reference)
10.4
Amendment No. 2 to Employment Agreement, dated June 15, 2005, between iVoice Technology, Inc. and Jerome Mahoney (filed as Exhibit 10.24 to iVoice Technology, Inc.’s Amendment No. 3 to Form SB-2 Registration Statement, File No. 333-120490, filed on June 24, 2005, and incorporated herein by reference)
10.5
Amendment No. 3 to Employment Agreement, dated July 18, 2005, between iVoice Technology, Inc. and Jerome Mahoney (filed as Exhibit 10.26 to iVoice Technology, Inc.’s Amendment No. 4 to Form SB-2 Registration Statement, File No. 333-120490, filed on July 28, 2005, and incorporated herein by reference
10.6
Promissory Note from iVoice Technology, Inc. to Jerome Mahoney, dated August 5, 2005 (filed as Exhibit 10.13 to iVoice Technology, Inc.’s Form SB-2 Registration Statement, filed on October 3, 2005, and incorporated herein by reference)
10.7
Amendment No. 4 to Employment Agreement, dated September 29, 2005, between iVoice Technology, Inc. and Jerome Mahoney (filed as Exhibit 10.33 to iVoice Technology, Inc.’s Form SB-2 Registration Statement, filed on October 3, 2005, and incorporated herein by reference)
10.9
Amended Administrative Services Agreement, dated March 5, 2005, between iVoice, Inc. and iVoice Technology, Inc. (filed as Exhibit 10.1 to iVoice Technology, Inc.’s Form 8-K, filed on March 14, 2008, and incorporated herein by reference)
10.10
Amendment No. 5 to Employment Agreement, dated September 26, 2006, between iVoice Technology, Inc. and Jerome Mahoney (filed as Exhibit 10.1 on the Current Report on Form 8-K dated August 31, 2006, and incorporated herein by reference)
10.11
Amendment No. 6 to Employment Agreement, dated November 22, 2006, between iVoice Technology, Inc. and Jerome Mahoney filed herein.
10.12
Convertible Promissory Note, dated March 5, 2008, payable to iVoice Technology, Inc. (filed as Exhibit 10.2 to iVoice Technology, Inc.’s Form 8-K, filed on March 14, 2008, and incorporated herein by reference)
10.13
Security Agreement by and between iVoice Technology, Inc. and iVoice, Inc. dated March 5, 2008 (filed as Exhibit 10.3 to iVoice Technology, Inc.’s Form 8-K, filed on March 14, 2008, and incorporated herein by reference)
10.14
Amendment No. 7 to Employment Agreement, dated March 9, 2009, between iVoice Technology, Inc. and Jerome Mahoney (filed as Exhibit 10.1 on the Current Report on Form 8-K dated March 6, 2009 and incorporated herein by reference)
10.15
Agreement and Plan of Merger by and between iVoice Technology, Inc. and B Green Innovations, Inc. dated November 17, 2009 (filed with the Commission as Exhibit 3.1 on a Current Report on Form 8-K dated November 17, 2000 and incorporated herein by reference.)
10.16
Termination of Administrative Services Agreement dated February 10, 2010 by and between B Green Innovations, Inc. and iVoice, Inc. (filed with the Commission as Exhibit 10.1 on the Form 10-Q for the period ended March 31, 2010 and incorporated herein by reference.)
10.17
Administrative Services Agreement dated March 1, 2010 by and between B Green Innovations, Inc. and iVoice, Inc., (filed with the Commission as Exhibit 10.2 on the Form 10-Q for the period ended March 31, 2010 and incorporated herein by reference.).
Code of Ethics (filed as Exhibit 14 to iVoice Technology, Inc.’s Form 10-KSB for the year ended December 31, 2005, filed on April 4, 2006, and incorporated herein by reference)
31.1* Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herein.
32.1* Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herein.
* Filed herein
B GREEN INNOVATIONS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
B GREEN INNOVATIONS, INC.
FINANCIAL STATEMENTS
CONTENTS
Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM-
Rosenberg, Rich, Baker, Berman & Company
FINANCIAL STATEMENTS
Balance Sheets
Statements of Operations
Statements of Changes in Stockholders' Deficit
Statements of Cash Flows
6-7
Notes to Financial Statements
8-30
Rosenberg, Rich, Baker, Berman & Company
265 Davidson Avenue, Somerset, NJ 08873
Tel: 908-231-1000 Fax: 908-231-6894
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
B Green Innovations, Inc.
Matawan, New Jersey
We have audited the accompanying balance sheets of B Green Innovations, Inc. as of December 31, 2010 and 2009, and the related statements of operations, changes in stockholders' deficit, and cash flow for each of the two years in the period ended December 31, 2010. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of B Green Innovations, Inc. as of December 31, 2010 and 2009, and the results of its operations and its cash flow for each of the two years in the period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements for the year ended December 31, 2010 have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company had negative cash flow from operations from date of inception, and recurring net losses. These issues lead to substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also discussed in Note 3. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Rosenberg, Rich, Baker, Berman and Company
Somerset, New Jersey
February 28, 2011
B GREEN INNOVATONS, INC.
BALANCE SHEETS
DECEMBER 31,
See accompanying notes to the financial statements
B GREEN INNOVATIONS, INC. STATEMENTS OF OPERATIONS
See accompanying notes to the financial statements
B GREEN INNOVATIONS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2010 and 2009
See accompanying notes to the financial statements
B GREEN INNOVATIONS, INC.
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
See accompanying notes to the financial statements
B GREEN INNOVATIONS, INC.
STATEMENTS OF CASH FLOWS
Supplemental Schedule of Non-Cash Investing and Financing Activities:
For the Year Ended December 31, 2010:
a) The Company converted $4,000 of accounts payable into 1,300,000 shares of Class A common stock.
b) The Company issued 4,000,000 shares of Class A common stock with a fair value $11,570 for services.
c) The Company issued 119 shares of Series A Preferred Stock in exchange for $112,058 Convertible Promissory Note and accrued interest of $6,708 to iVoice, Inc.
d) The Company converted $60,000 receivable to convertible note receivable.
For the Year Ended December 31, 2009:
a) The Company issued 16,724,000 shares of Class A common stock with a fair value of $10,452 to reduce a convertible promissory note in the amount of $5,351.
b) The Company issued 74,000,000 shares of Class A common stock with a fair value of $140,000 to an individual to reduce a promissory note in the amount of $23,680. The difference in the market value and the convertible promissory note reduction was charged to beneficial interest in the amount of $116,320.
c) The Company converted accounts payable to a convertible promissory note in the amount of $37,613.
d) The Company had a convertible note in the amount of $66,015 due to a related party that was forgiven during the year.
e) The Company received equipment valued at approximately $25,503 in lieu of payment of a note receivable which was previously written-off.
f) The Company issued 115,025 shares of Class B common stock to an individual to reduce a promissory note in the amount of $115,025. The difference in the market value and the promissory note reduction was charged to beneficial interest in the amount of $364,246.
See accompanying notes to the financial statements
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
NOTE 1 - BACKGROUND
B Green Innovations, Inc., a Matawan, New Jersey-based corporation, (OTC Bulletin Board: BGNN), formerly iVoice Technology, Inc., (“B Green Innovations” or the “Company”) was incorporated under the laws of New Jersey on November 10, 2004 as a wholly owned subsidiary of iVoice, Inc. (“iVoice”). The Company received by assignment all of the interests in and rights and title to, and assumed all of the obligations of, all of the agreements, contracts, understandings and other instruments of iVoice Technology, Inc., a Nevada corporation and affiliate of the Company. When we refer to or describe any agreement, contract or other written instrument of the Company in these notes, we are referring to an agreement, contract or other written instrument that had been entered into by iVoice Technology Nevada and assigned to the Company.
In May 2008, the Company formed B Green Innovations, Inc. (“B Green”), a wholly-owned subsidiary, and has agreed to invest up to $500,000 in B Green, to commercialize its “green” technology platforms.
On November 17, 2009, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), B Green Innovations, Inc., a wholly owned subsidiary of iVoice Technology, Inc. (the “Company”), merged into iVoice Technology, Inc.
On July 28, 2009, the Board of Directors and shareholders through written consent representing a majority of the total voting Class A and Class B Common stock voted to change the name of the Company to B Green Innovations, Inc. On November 20, 2009, the Company filed an Amendment to the Certificate of Incorporation with the State of New Jersey to officially change the name of the Company.
NOTE 2 - BUSINESS OPERATIONS
The B Green Innovations, Inc. ("B Green"), "Go Green" mission from its inception, is to create a "Green" company for the development of solutions to eliminate waste from the world's environment. B Green offers consumers a realistic and necessary solution to the problem of waste around the world. We believe that to truly have an impact on the planet, one must be committed to the environment and seek out environmentally-friendly products.
The first technology was to create new products from recycled tire rubber. EcoPod and VibeAway™ address important environmental concerns and problems facing the planet today. EcoPod and VibeAway™ are 100% recycled rubber-based products that can be utilized as support pads under any units that vibrate and make noise, including washing machines, dryers, compressors, commercial condensers, and many other units that advantageously benefit from sound and vibration control. In addition, we announced that we had filed a new patent application for a process described as “Recycled Tire Pod with Appliance Recess Guide.”
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 2 - BUSINESS OPERATIONS (continued)
Recently, the Company released its new 100% Degradable / Biodegradable Compactor Bags. These bags include Oxo-Biodegradable additive using the latest technology that supports the 3 R’s of Packaging Reduce, Reuse, Recycle and provides a fourth R, Remove. Independent Scientific Testing show that plastics incorporated with an additive called Renatura™ will degrade and then fully biodegrade, without leaving behind harmful residues in the soil.
These Oxo-Biodegradable plastic products are scientifically proven to be non-toxic and are FDA compliant, meaning they are safe for food packaging applications and have been awarded approved food film contact ‘no migration’ status. Regular plastic bags can take up to 100 years to break down causing plastic pollution and harm to both domestic and wild life. Standard plastics are filling our landfills and greatly impacting our planet. Plastics incorporating this additive in the presence of oxygen disappear when exposed to UV light or thermal heat. Our product is designed to allow plastics to degrade like a leaf, slowly yielding CO2 (which through photosynthesis becomes oxygen), water, bio-waste, and mineral salts that condition the soil in the process.
The Company continues to evaluate additional products to its product line as well as expanding its distribution channels.
The Company will also continue to support the Interactive Voice Response ("IVR"), software that was developed by iVoice. The Company's Interactive Voice Response line is designed to read information from and write information to, databases, as well as to query databases and return information.
IVR is an application generator that allows full connectivity to many databases, including Microsoft Access, Microsoft Excel, Microsoft Fox Pro, and Paradox, or to standard text files. The IVR software is sold as an application generator that gives the end user the ability to develop its own customized IVR applications or as a customized turnkey system. IVR performs over 40 different customizable commands. Examples of IVR range from simply selecting announcements from a list of options stored in the computer (also known as audio text) to more complex interactive exchanges such as querying a database for information.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern.
As of December 31, 2010, the Company had negative cash flow from operations since inception and recurring net losses. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Therefore, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn, is dependent upon the Company’s ability to raise capital and/or generate positive cash flow from operations.
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 3 - GOING CONCERN (continued)
Management plans to increase the development, manufacture, and distribution of “green” products to generate a positive cash flow. However, these plans are dependent upon obtaining additional capital. There can be no assurance that the Company will be able to obtain the necessary capital, and achieve its growth objectives. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation
The accompanying financial statements included herein have been prepared in conformity with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").
b) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
c) Revenue Recognition
With respect to IVR customer support services, the Company offers customers an optional annual software maintenance and support agreement for subsequent periods. Sales of purchased maintenance and support agreements are recorded as deferred revenue and recognized over the respective terms of the agreements.
For the “green” products revenues are recognized at the time of shipment to, or acceptance by customer, provided title and risk of loss is transferred to the customer. Provisions, when appropriate, are made where the right to return exists.
Shipping and handling costs charged to customers are classified as revenue, and the shipping and handling costs incurred are included in cost of sales.
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
d) Product Warranties
The Company estimates its warranty costs based on historical warranty claims experience. Due to the limited sales of the Company’s products, management has determined that warranty costs are immaterial and has not included an accrual for potential warranty claims. Presently, costs related to warranty coverage are expensed as incurred. Warranty claims are reviewed quarterly to verify that warranty liabilities properly reflect any remaining obligation based on the anticipated expenditures over the balance of the obligation period.
e) Research and Development Costs
Research and development costs are charged to expense as incurred. The Company has not incurred any research and development costs for the years ended December 31, 2010 and 2009.
f) Advertising Costs
Advertising costs are expensed as incurred and included in selling expenses. For the years ended December 31, 2010 and 2009, the Company incurred advertising expenses of $2,663 and $8,893, respectively.
g) Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. There were no cash equivalents at December 31, 2010 and 2009.
The Company maintains cash balances at a financial institution that is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to federally insured limits. At times balances may exceed FDIC insured limits. The Company has not experienced any losses in such accounts.
h) Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable and cash. As of December 31, 2010 the Company believes it has no significant risk related to its concentration within its accounts receivable.
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
i) Accounts Receivable
Accounts receivable are non-interest bearing obligations due under normal trade terms. Senior management reviews accounts receivable on a monthly basis to determine if any receivables will be potentially uncollectible. Historical bad debts and current economic trends are used in evaluating the allowance for doubtful accounts. The Company includes any accounts receivable balances that are determined to be uncollectible, along with a general reserve, in its overall allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on the information available, the Company believes its allowance for doubtful accounts as of December 31, 2010 and 2009 is adequate.
j) Property and Equipment
Property and equipment is stated at cost. Depreciation is computed using the straight-line method based upon the estimated useful lives of the assets, generally five to seven years. Maintenance and repairs are charged to expense as incurred.
k) Intangible Assets
Registration and maintenance costs associated with the filing and registration of patents are prepaid and amortized over the remaining life of the patent, not to exceed 20 years. Costs associated with such patents are not approved or abandoned.
l) Income Taxes
The Company accounts for income taxes using the asset and liability method described in FASB ASC 740. Deferred tax assets arise from a variety of sources, the most significant being: a) tax losses that can be carried forward to be utilized against profits in future years; b) expenses recognized in the books but disallowed in the tax return until the associated cash flow occurs; and c) valuation changes of assets which need to be tax effected for book purposes but are taxable only when the valuation change is realized.
Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when such differences are expected to reverse. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefit which is not more likely than not to be realized. In assessing the need for a valuation allowance, future taxable income is estimated, considering the realization of tax loss carryforwards. Valuation allowances related to deferred tax assets can also be affected by changes to tax laws, changes to statutory tax rates and future taxable income levels. In the event it was determined that the Company would not be able to realize all or a portion of our deferred tax assets in the future, we would reduce such amounts through a charge to income in the period in which that determination is made. Conversely, if we were to determine that we would be able to realize our deferred tax assets in the future in excess of the net carrying amounts, we would decrease the recorded valuation allowance through an increase to income in the period in which that determination is made.
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
l) Income Taxes (continued)
The Company has adopted FASB ASC 740-10, Accounting for Uncertainty in Income Taxes. ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740-10 requires that the Company determine whether the benefits of its tax positions are more-likely-than-not of being sustained upon audit based on the technical merits of the tax position. The Company recognizes the impact of an uncertain income tax position taken on its income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position is not recognized if it has less than a 50% likelihood of being sustained. The Company has no uncertain tax positions.
Despite the Company’s belief that its tax return positions are consistent with applicable tax laws, one or more positions may be challenged by taxing authorities. Settlement of any challenge can result in no change, a complete disallowance, or some partial adjustment reached through negotiations or litigation.
Interest and penalties related to income tax matters, if applicable, will be recognized as income tax expense. During the years ended December 31, 2010 and 2009 the Company did not incur any expense related to interest or penalties for income tax matters, and no such amounts were accrued as of December 31, 2010 and 2009.
m) Earnings (loss) per Share
FASB Accounting Standards Codification (“ASC”) 260-10 (Prior authoritative literature: FASB Statement 128, “Earnings per Share”) requires the presentation of basic earnings per share ("basic EPS") and diluted earnings per share ("diluted EPS").
The Company’s basic income (loss) per common share is based on net income (loss) for the relevant period, divided by the weighted average number of common shares outstanding during the period. Diluted income per common share is based on net income, divided by the weighted average number of common shares outstanding during the period, including common share equivalents, such as outstanding stock options and beneficial conversion of related party accounts. The computation of diluted loss per share for the year ended December 31, 2009 does not assume conversion, exercise or contingent exercise of warrants, and securities as they would have an anti-dilutive effect on the earnings resulting from the Company’s net loss position in that period.
For the year ended December 31, 2010 there were 1,310,683,125 average share equivalents which are included in the calculation of diluted earnings per share. The computation of diluted loss per share for the year ended December 31, 2009 does not assume conversion, exercise or contingent exercise of warrants, and securities in the amount of 448,950,321 shares as they would have an anti-dilutive effect on the earnings resulting from the Company’s net loss position in that period.
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The computation of EPS is as follows:
n) Derivative Liabilities
The Company accounts for its embedded conversion features in its convertible debentures in accordance FASB ASC 815-10 (Prior authoritative literature: SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which requires a periodic valuation of their fair value and a corresponding recognition of liabilities associated with such derivatives, and FASB ASC 815-40, “Contracts in Entity’s Own Equity”. The recognition of derivative liabilities related to the issuance of convertible debt is applied first to the proceeds of such issuance as a debt discount, at the date of issuance, and the excess of derivative liabilities over the proceeds is recognized as “Loss on Valuation of Derivative” in other expense in the accompanying financial statements. Any subsequent increase or decrease in the fair value of the derivative liabilities is recognized as “Other expense” or “Other income”, respectively.
o) Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation. The reclassifications have had no effect on the financial position, operations or cash flows for the year ended December 31, 2009.
p) Fair Value of Instruments
The carrying amounts reported in the balance sheets as of December 31, 2010 and December 31, 2009 for cash and cash equivalents, accounts receivable, inventories, prepaid expenses and other current assets, accounts payable and accrued expenses other current liabilities approximate this fair value because of the immediate or short-term maturity of these financial instruments.
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
q) Impairment of Long-Lived Assets
The Company assesses the recoverability of the carrying value of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future, undiscounted cash flows expected to be generated by an asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. No impairment losses have been recognized for the years ended December 31, 2010 and 2009, respectively.
r) Recent Accounting Pronouncements
In October 2009, the FASB issued Accounting Standards Update 2009-13, “Revenue Recognition (Topic 605)”. This Update provides amendments to the criteria in Subtopic 605-24 for separating consideration in multiple-deliverable revenue arrangements. It establishes a hierarchy of selling prices to determine the selling price of each specific deliverable which includes vendor-specific objective evidence (if available), third-party evidence (if vendor-specific evidence is not available), or estimated selling price if neither of the first two are available. This Update also eliminates the residual method for allocating revenue between the elements of an arrangement and requires that arrangement consideration be allocated at the inception of the arrangement. Finally, this Update expands the disclosure requirements regarding a vendor’s multiple-deliverable revenue arrangements. This Update is effective for fiscal years beginning on or after June 15, 2010. We do not anticipate any material impact from this Update.
In April, 2010, the FASB issued ASU 2010-17, “Revenue Recognition - Milestone Method.” ASU 2010-17 amends ASC 605 “Revenue Recognition” to provide guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. A vendor can recognize consideration that is contingent upon achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. The amendments in this Update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. The Company does not expect the adoption of ASU 2010-17 to have an effect on the Company’s financial statements.
In December 2010, the FASB issued Accounting Standards Update ("ASU") No. 2010-29, Business Combinations (Topic 805)-Disclosure of Supplementary Pro Forma Information for Business Combinations-a consensus of the FASB Emerging Issues Task Force ("ASU 2010-29"). ASU 2010-29 requires a public entity to disclose pro forma revenue and earnings for a business combination occurring in the current year as though the business combination occurred as of the beginning of the year or, if comparative statements are presented, pro forma amounts are required to be presented as though the business combination took place as of the beginning of the comparative year. ASU 2010-29 also expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. We will apply ASU 2010-29 prospectively to business combinations consummated subsequent to January 1, 2011.
In December 2010, the FASB issued ASU No. 2010-28, Intangibles-Goodwill and Other (Topic 350)-When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying amounts-a consensus of the FASB Emerging Issues Task Force ("ASU 2010-28"). ASU 2010-28 provides guidance on (i) the circumstances under which step 2 of the goodwill impairment test must be performed for reporting units with zero or negative carrying amounts and (ii) the qualitative factors to be taken into account when performing step 2 in determining whether it is more likely than not that an impairment exists. For public entities, the provisions of ASU 2010-28 will be effective for fiscal years and interim periods within those years beginning after December 15, 2010. We are currently evaluating the impact this update will have on our financial statements.
Management does not believe there would have been a material effect on the accompanying financial statements had any other recently issued, but not yet effective, accounting standards been adopted in the current period.
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 5 - NOTE RECEIVABLE - RELATED PARTY
Effective January 1, 2010, the Company entered into an administrative services agreement with iVoice, Inc., a related party. The Company will provide iVoice, Inc. administrative and financial services as well as providing iVoice, Inc. with office space. This agreement will continue on a month-to-month basis unless terminated by either party by providing 30 days written notice. In consideration of the services, iVoice, Inc. will pay B Green $5,000 per month. For the year ended December 31, 2010 the Company recorded income of $60,000, and such income is included in other income in the accompanying statement of operations for the period ended December 31, 2010
On April 30, 2010, the Administrative Services Agreement between the Company and iVoice, Inc. was amended to state that the Administrative Service Fees will be evidenced by a Convertible Promissory Note, the terms of which are as follows:
i.
Interest will accrue in the unpaid balance at the rate of prime plus 1 percent per annum.
ii.
Additional advances to include administrative service fees accrued pursuant to the Administrative Services Agreement will be added to the principal of this note and will accrue interest at the above specified rate.
iii.
The interest shall accrue monthly and be paid annually.
iv.
The principal is payable on demand.
v.
The Company may elect payment of the principal and/or interest at our sole discretion, owed pursuant to the note by requiring the iVoice to issue to the Company, or its assigners either: (i) one Class B common stock share of the maker, no par value per share, for each dollar owed, (ii) the number of Class A common stock shares of the maker calculated by dividing (x) the sum of the principal and interest that the holder has decided to have paid by (y) fifty percent (50%) of the lowest issue price of Class A common stock, or (iii), payment of the principal, before any repayment of interest.
vi.
This note may be prepaid in full or in part at any time without penalty.
vii.
In the event of (a) default in payment of any installment of principal or interest hereof as the same becomes due and such default is not cured within ten (10) days from the due date, or (b) default under the terms of any instrument securing this Note, and such default is not cured within fifteen (15) days after written notice, then in either such event the holder may, without further notice, declare the remainder of the principal sum, together with all interest accrued thereon, and the prepayment premium, if any, at once due and payable. Failure to exercise this option shall not constitute a waiver of the right to exercise the same at any other time. The unpaid principal of the note and any part thereof, accrued interest and all other sums due shall bear interest at the rate of prime plus 2 percent per annum after default until paid.
As of December 31, 2010 and December 31, 2009, the note receivable balance was $60,000 and $-0-, respectively. Additionally, the Company recorded interest income of $1,070 and $-0- for the years ended December 31, 2010 and 2009, respectively. Interest receivable was $1,070 as of December 31, 2010.
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
Depreciation expense was $10,890 and $9,262 for the years ended December 31, 2010 and 2009, respectively.
On January 24, 2008, B Green Innovations, Inc. (the "Company") entered into a non-binding Letter of Intent with Atire Technologies, Inc. ("Atire") for the purpose of discussing and negotiating a merger of Atire into a wholly owned subsidiary of the Company. On February 1, 2008, the Company provided a secured loan to Atire for the sum of Thirty Thousand Dollars ($30,000) in the form of a Secured Promissory Note and Security Agreement (the “Note”). On April 22, 2008, the Company notified Atire that is was terminating discussions with Atire. Atire breached the terms of repayment under the Note and subsequently, the Company filed suit against Atire and Robert F. Williams, a guarantor of the Note (“Williams”). In 2008, the Company fully reserved the outstanding balance as it was deemed uncollectible.
On May 21, 2009, the Company entered into a Stipulation of Settlement with Atire and Williams whereby Atire agreed to transfer to the Company all of its rights, title and interest in various assets of Atire (the “Assets”). These assets include various machinery and supplies used in the fabrication of products from recycled tire rubber. The Company has valued these assets at $25,503, the amount of the note receivable previously wrtten-off, and such amount is included in the accompanying balance sheets under Property, Plant, and Equipment.
NOTE 7 - INTANGIBLE ASSETS
Intangible consists of patents pending in the amount of $59,934 for the years ended December 31, 2010 and 2009, respectively. There was no amortization expense for the years ended December 31, 2010 and 2009. We assess the carrying value of intangible assets for impairment annually. As of December 31, 2010 and 2009, there was no impairment of these assets.
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 8 - RELATED PARTY TRANSACTIONS
In conjunction with the spin-off from iVoice, Inc., the Company, and its former subsidiary, had entered into a temporary administrative services agreements with iVoice. The administrative services agreements were to continue on a month-to-month basis until the Company has found replacement services for those services being provided by iVoice or can provide these services for itself. As of October 1, 2009 iVoice has suspended all charges for the Administrative Service Agreement for the Company and with the Company. There were no administrative service charges for the year ended December 31, 2010. Administrative services were $37,989 for the year ended December 31, 2009 (see Note 9).
Effective November 17, 2009, the Company’s subsidiary at the time and iVoice mutually agreed to terminate and extinguish any all obligations between the parties pursuant to the following agreements:
a. The Administrative Services Agreement dated March 1, 2007 by and between B Green Innovations, Inc. (subsidiary) and iVoice, Inc.
b. The Convertible Promissory Note dated May 5, 2008 issued by B Green Innovations, Inc. payable to iVoice, Inc.
c. The Security Agreement dated May 5, 2008 by and between B Green Innovations, Inc. and iVoice, Inc.
As a result of the above the Company extinguished a total of $63,875 of a Convertible Promissory Note and accrued interest of $2,140. The total of $66,015 was recorded in the balance sheet as of December 31, 2009 as additional paid-in capital as it is a related party transaction.
As of February 10, 2010, the Administrative Services Agreement with iVoice, Inc. and the Company was terminated, and the Company entered into an Exchange Agreement to exchange the Convertible Promissory Note having a principal and accrued interest of approximately $119,000 and $1,100,000 in cash for 1,219 shares of the Company’s 3% Series A Preferred Stock. As a result, the Company recorded a gain from the extinguishment of the derivative liability in the amount of $1,636,695 which is included in other income in the accompanying statement of operations for the year ended December 31, 2010 (See Note 11 for terms of the 3% Preferred Stock).
The Company has assumed an outstanding promissory demand note in the amount of $190,000 payable to Jerry Mahoney, President and Chief Executive Officer of iVoice and Non-Executive Chairman of the Board of the Company. This amount is related to funds loaned to iVoice and is unrelated to the operations of the Company. The note will bear interest at the rate of prime plus 2.0% per annum (5.25% and 5.25% at December 31, 2010 and 2009, respectively) on the unpaid balance until paid. Interest payments are due and payable annually. Under the terms of the promissory note, at the option of the note holder, principal and interest can be converted into either (i) one share of Class B Common Stock of the Company, par value $.01, for each dollar owed, (ii) the number of shares of Class A Common Stock of the Company calculated by dividing (x) the sum of the principal and interest that the Note holder has requested to have prepaid by (y) eighty percent (80%) of the lowest issue price of Class A Common Stock since the first advance of funds under this Note, or (iii) payment of the principal of this Note, before any repayment of interest.
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 8 - RELATED PARTY TRANSACTIONS (continued)
The Board of Directors of the Company maintains control over the issuance of shares and may decline the request for conversion of the repayment into shares of the Company. For the year ended December 31, 2010, Mr. Mahoney did not convert any of the outstanding loan into shares. During 2009 Mr. Mahoney received 74,000,000 shares of Class A Common Stock, with a market value of $140,000 as repayment of $23,680 of the loan. The difference in the market value and the promissory note reduction was charged to beneficial interest in the amount of $116,320. During 2009 Mr. Mahoney also received 115,025 shares of Class B Common Stock as repayment of $115,205 of the loan. The difference in the market value and the promissory note reduction was charged to beneficial interest in the amount of $364,246. As of December 31, 2010 and 2009, the outstanding balance was $3,003, plus accrued interest of $113,394 and $100,692, respectively.
On May 8, 2007, the Company executed a Security Agreement providing Jerome Mahoney, President and Chief Executive Officer of the Company, with a security interest in all of the assets of the Company to secure the promissory note dated August 5, 2005 and all future advances including, but not limited to, additional cash advances, deferred compensation, deferred expense reimbursement, deferred commissions and income tax reimbursement for the recognition of income upon the sale of common stock for the purpose of the holder advancing additional funds to the Company.
The Company entered into a five-year employment agreement with Jerome Mahoney to serve as Non-Executive Chairman of the Board of Directors, effective August 1, 2004. On March 9, 2009, the term of the employment agreement between the Company and Mr. Mahoney, the Company’s CEO, was extended to July 31, 2016. The Company will compensate Mr. Mahoney with a base salary of $85,000 for the first year with annual increases based on the Consumer Price Index. Mr. Mahoney had a consulting agreement with the Company’s former subsidiary B Green
Innovations for annual compensation of $24,000 and upon every annual anniversary thereafter, at the rate based on the increase in the Consumer Price Index for All Urban Consumers (New York-Northern N.J.-Long Island). Effective January 1, 2010, this amount was added to Mr. Mahoney’s base salary. On June 15, 2010, Mr. Mahoney’s employment agreement was amended to increase the base salary to $195,000 effective July 1, 2010. All other terms of the Employment Agreement shall remain in full force and effect. A portion of Mr. Mahoney’s compensation shall be deferred until such time that the Board of Directors determines that the Company has sufficient financial resources to pay his compensation in cash.
The Board has the option to pay Mr. Mahoney’s compensation in the form of Class B Common Stock. Mr. Mahoney will also be entitled to certain bonuses based on mergers and acquisitions completed by the Company. Pursuant to the terms of the Class B Common Stock, a holder of Class B Common Stock has the right to convert each share of Class B Common Stock into the number of shares of Class A Common Stock determined by dividing the number of Class B Common Stock being converted by a 20% discount of the lowest price for which the Company had ever issued its Class A Common Stock. Mr. Mahoney deferred $53,302 and $27,604 of his compensation for the years ended December 31, 2010 and 2009, respectively. As of December 31, 2010 and 2009, total deferred compensation due to Mr. Mahoney was $312,750 and $253,448, respectively.
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 8 - RELATED PARTY TRANSACTIONS (continued)
On August 29, 2005, the Company entered into an employment agreement with Mark Meller. Mr. Meller served as the Company’s President, Chief Executive Officer and Chief Financial Officer until August 29, 2006. As compensation, the Company paid Mr. Meller a base salary of $85,000 the first year with an annual increase based on the Consumer Price Index every year thereafter. Mr. Meller has agreed to defer all but $20,000 of his compensation until such time that the Board of Directors determines, in its sole discretion, that the Company has sufficient financial resources to pay his compensation. The Board of Directors may also elect to pay Mr. Meller the balance of his compensation in the form of Company Class A or Class B Common Stock. During 2010 and 2009, Mr. Meller received no payments for deferred compensation. As of December 31, 2010 and 2009, total deferred compensation due to Mr. Meller was $53,860.
NOTE 9 - CONVERTIBLE PROMISSORY NOTE AND DERTIVATIVE LIABILITY
The Company had entered into a temporary administrative services agreement with iVoice. The administrative services agreement continued on a month-to-month basis until the Company found replacement services for those services being provided by iVoice or could provide these services for itself. In March 2008, the administrative services agreement was amended to provide that accrued and unpaid administrative services be aggregated and converted into a Convertible Promissory Note. The principal and interest shall be due and payable as follows: (a) interest shall accrue monthly on the unpaid balance and shall be paid annually, and (b) principal shall be payable on demand.
On March 5, 2008, the Company converted its outstanding accounts payable to iVoice, Inc. for unpaid administrative services in the amount of $50,652 into a convertible promissory note at the rate of prime plus 1 percent per annum. Additional amounts may be added to this note based on any unpaid administrative services, and will accrue interest at the above specified rate from date of advance until paid. The principal and interest shall be due and payable as follows: (a) interest shall accrue monthly on the unpaid balance and shall be paid annually, and (b) principal shall be payable on demand. There were no administrative service charges for the year ended December 31, 2010. For the year ended December 31, 2009, unpaid administrative services were $37,989, and were added to the original convertible promissory note of $50,652 and the unpaid administrative charges of $42,209 for the year ended December 31, 2008 for a total of $130,850
iVoice, Inc. may elect payment of the principal and/or interest, at its sole discretion, owed pursuant to this Note by requiring the Company to issue to iVoice, or its assigns either: (i) one Class B common stock share of the Company par value $.01 per share, for each dollar owed, (ii) the number of Class A common stock shares of the Company calculated by dividing (x) the sum of the principal and interest that the Note holder has decided to have paid by (y) eighty percent (80%) of the lowest issue price of Class A common stock since the first advance of funds under this Note, or (iii), payment of the principal of this Note, before any repayment of interest.
During the year ended December 31, 2009, the Company issued 16,724,000 shares of Class A common stock with a fair value of $10,452 to reduce the convertible promissory note in the amount of $5,352. During the year ended December 31, 2008, the Company issued 42,000,000 shares of Class A common stock with a fair value of $45,720 to reduce the convertible promissory note in the amount of $13,440.
As of December 31, 2010 and 2009, the outstanding balances on the Convertible Promissory Note were $-0- and $112,058, respectively.
As of October 1, 2009 iVoice, Inc. suspended all charges for the Administrative Service Agreement (see Note 8).
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 9 - CONVERTIBLE PROMISSORY NOTE AND DERIVATIVE LIABILITY (continued)
In accordance with FASB ASC 815-10 (Prior authoritative literature: SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", the Company determined that the conversion feature of the Debenture met the criteria of an embedded derivative, and therefore the conversion feature of this Debenture needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 5.6%; expected dividend yield: 0%: expected life: 5 years; and volatility: 250.92%. The accounting guidance instructs that the conversion options are a derivative liability. At March 5, 2008 the Company recorded the conversion options as a liability, recorded a debt discount of $50,652, and charged Other Expense - Loss on Valuation of Derivative for $16,366, resulting primarily from calculation of the conversion price.
As of February 10, 2010, the Administrative Services Agreement with iVoice, Inc. was terminated, and the Company entered into an Exchange Agreement to exchange the Convertible Promissory Note having a principal and accrued interest of approximately $119,000 for 119 shares of the Company’s 3% Preferred Stock. As a result the Company recorded a gain from the extinguishment of the derivative liability in the amount of $1,636,695 and is included as other income in the accompanying statement of operations for the year ended December 31, 2010. The fair value of the embedded conversion was estimated at the February 10, 2010 using the Black-Scholes model with the following assumptions: risk free interest rate: 1.44%; expected dividend yield: 0%: expected life: 5 years; and volatility: 219.73%.
For the year ended December 31, 2010, the Company recorded a loss on Valuation of Derivative in the amount of $382,128 as compared to a Loss on Valuation of Derivative in the amount of $1,118,504 for the year ended December 31, 2009. The fair value of the embedded conversion was estimated at the December 31, 2009 using the Black-Scholes model with the following assumptions: risk free interest rate: 2.69%; expected dividend yield: 0%: expected life: 3.17 years; and volatility: 257.85%.
The derivative liability was $-0- and $1,254,567 at December 31, 2010 and December 31, 2009, respectively.
B Green Innovations, previously a subsidiary of the Company, had entered into a temporary administrative services agreement with iVoice. The administrative services agreement continues on a month-to-month basis until B Green Innovations, Inc. has found replacement services for those services being provided by iVoice or can provide these services for itself. The administrative services agreement provides that accrued and unpaid administrative services shall be aggregated and converted into a Convertible Promissory Note. The principal and interest shall be due and payable as follows: (a) interest shall accrue monthly on the unpaid balance and shall be paid annually, and (b) principal shall be payable on demand. The terms of this agreement are to similar to the terms of the agreement between iVoice Technology, Inc. and iVoice, Inc. as described above in this footnote.
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 9 - CONVERTIBLE PROMISSORY NOTE AND DERIVATIVE LIABILITY (continued)
Effective November 17, 2009, the Company and iVoice mutually agreed to terminate and extinguish any all obligations between the parties pursuant to the following agreements:
a. The Administrative Services Agreement dated March 1, 2007 by and between B Green Innovations, Inc. (subsidiary) and iVoice, Inc.
b. The Convertible Promissory Note dated May 5, 2008 issued by B Green Innovations, Inc. (subsidiary) payable to iVoice, Inc.
c. The Security Agreement dated May 5, 2008 by and between B Green Innovations, Inc. (subsidiary) and iVoice, Inc.
As a result of the above the Company extinguished a total of $63,875 of a Convertible Promissory Note and accrued interest of $2,140. The total of $66,015 was recorded in the balance sheet as additional paid-in capital as since this is classified as a related party transaction as of December 31, 2009. The fair value of the embedded conversion was estimated at November 17, 2009 using the Black-Scholes model with the following assumptions: risk free interest rate: 2.69%; expected dividend yield: 0%: expected life: 5 years; and volatility: 296.01%.
In accordance with FASB ASC 815-10 (Prior authoritative literature: SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", the Company determined that the conversion feature of the Debenture met the criteria of an embedded derivative, and therefore the conversion feature of this Debenture needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 2.25%; expected dividend yield: 0%: expected life: 5 years; and volatility: 226.33%. The accounting guidance instructs that the conversion options are a derivative liability. At June 30, 2008 the Company recorded the conversion options as a liability, recorded a debt discount of $8,000, and charged Other Expense - Loss on Valuation of Derivative for $1,904, resulting primarily from calculation of the conversion price.
For the year ended December 31, 2009, the Company recorded a Gain on Valuation of Derivative in the amount of $71,138.
For the year ended December 31, 2009 total unpaid administrative services in the amount of $36,000 was added to the convertible promissory note. There were no administrative charges for the year ended December 31, 2010.
The derivative liability was $-0- at December 31, 2010 and December 31, 2009, respectively.
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 10 - INCOME TAXES
Deferred income taxes will be determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes will be measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. At December 31, 2010 and 2009 deferred tax assets consist of the following:
At December 31, 2010 and 2009, the Company had a federal net operating loss carry forward in the approximate amounts of $2,350,000 and $2,136,000, respectively, available to offset future taxable income. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.
The Company has adopted FASB ASC 740-10, Accounting for Uncertainty in Income Taxes. The guidance clarified the recognition threshold and measurement attributes for financial statement disclosure of tax positions taken, or expected to the taken, on a tax return. The impact of an uncertain income tax provision on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain tax position will not be recognized if it has a less than 50% likelihood of being sustained. On the date of adoption, there were no unrecognized tax benefits. Further, there are no unrecognized tax benefits included in the Company’s balance sheet at December 31, 2010 and 2009, respectively.
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 11 - CAPITAL STOCK
Pursuant to the Company’s certificate of incorporation, as amended, the Company is authorized to issue 1,000,000 shares of Preferred Stock, par value of $1.00 per share, 10,000,000,000 shares of Class A Common Stock, no par value per share, 50,000,000 shares of Class B Common Stock, par value $0.01 per share, and 20,000,000 shares of Class C Common Stock, par value $0.01 per share. Below is a description of the Company’s outstanding securities, including Preferred Stock, Class A Common Stock, Class B Common Stock and Class C Common Stock.
a) Preferred Stock
The Company is authorized to issue 1,000,000 shares of Preferred Stock, par value $1.00 per share.
Of the 1,000,000 shares of Preferred Stock, 10,000 shares are designated Series A 10% Preferred Stock, par value $1.00 per share, with a stated value of $1,000 (the “Series A Preferred Stock”). The stated value is used for calculation of dividends and liquidation preferences. On March 12, 2008, the Company sold 1,444.44 shares of Series A 10% Preferred Stock to iVoice, Inc. for $1,444,444. With consent of the holders of the Series A Preferred Stock, on March 6, 2009, the Company amended its Certificate of Incorporation and amended the rights of the Series A Preferred by: (i) eliminating all voting rights for the Series A Preferred Stock and (ii) eliminating the conversion feature of the Series A Preferred Stock.
In February 2010, the Company filed with the State of New Jersey an Amendment to the Certificate that revised the rights of the holders of the Company’s Series A 10% Secured Convertible Preferred Stock. The revisions included:
a.
The preferred stock will be referred to in the Company’s Certificate of Incorporation as: “Series A 3% Preferred Stock”.
b.
The holders of the preferred stock will have a new dividend rate of 3%.
c.
The holders of the Series A 3% Preferred Stock shall have no voting rights.
d.
Series A 3% Preferred Stock is convertible, at the option of the holder with the consent of the Corporation, at any time after the date of issuance of such share into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series A Initial Value, as may be adjusted from time to time, by the Conversion Price applicable to such share. The "Conversion Price” per share shall be calculated as the closing bid price of the Class A Common stock on the last trading day immediately prior to the date that the Notice of Conversion is tendered to the Corporation, subject to certain adjustments.
e.
The holders of shares of Series A Preferred Stock shall be prohibited from converting shares of Series A Preferred Stock, and the Corporation shall not honor any attempted conversion of Series A Preferred Stock, if, and to the extent, the shares of Common Stock held by such converting holder of Series A Preferred Stock following any attempted conversion would exceed 9.99% of the outstanding shares of Common Stock of the Corporation after giving effect to such conversion.
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 11 - CAPITAL STOCK (continued)
a) Preferred Stock (continued)
On February 10, 2010, iVoice, Inc. agreed to purchase 1,100 shares of the Company’s 3% Preferred Stock for $1,100,000 in cash.
On February 10, 2010, the Company issued 119 shares of Series A Preferred Stock in exchange for $112,058 Convertible Promissory Note and accrued interest of $6,708 to iVoice, Inc.
As of December 31, 2010, 2,663 shares of Series A 3% Preferred Stock are issued and outstanding.
b) Class A Common Stock
As of December 31, 2009, there are 10,000,000,000 shares of Class A Common Stock authorized, no par value, and 605,609,870 shares were issued, 604,415,387 shares were outstanding, and 1,194, 483 shares were issued pending conversion by YA Global Investments
As of December 31, 2009, there are 10,000,000,000 shares of Class A Common Stock authorized, no par value, and 600,309,870 shares were issued, 599,115,387 shares were outstanding, and 1,194, 483 shares were issued pending conversion by YA Global Investments.
Each holder of Class A Common Stock is entitled to receive ratably dividends, if any, as may be declared by the Board of Directors out of funds legally available for payment of dividends. The Company has never paid any dividends on its common stock and does not contemplate doing so in the foreseeable future.
The Company anticipates that any earnings generated from operations will be used to finance its growth objectives.
During the year ended December 31, 2010 the Company converted $4,000 of accounts payable into 1,300,000 shares of Class A common stock.
During the year ended December 31, 2010 the Company issued 4,000,000 shares of Class A common stock with a fair value $11,570 for services.
c) Class B Common Stock
As of December 31, 2010, there are 50,000,000 shares of Class B Common Stock authorized, par value of $.01 per share and 115,025 shares issued and outstanding. Each holder of Class B Common Stock has voting rights equal to 100 shares of Class A Common Stock. A holder of Class B Common Stock has the right to convert each share of Class B Common Stock into the number of shares of Class A Common Stock determined by dividing the number of Class B Common Stock being converted by a 20% discount of the lowest price that B Green Innovations, Inc. had ever issued its Class A Common Stock. Upon our liquidation, dissolution, or winding-up, holders of Class B Common Stock will be entitled to receive distributions. On July 27, 2009,
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 11 - CAPITAL STOCK (continued)
c) Class B Common Stock (continued)
the Company amended its Certificate of Incorporation as follows: a holder of Class B Common Stock has the right to convert each share of Class B Common Stock into the number of shares of Class A Common Stock determined by dividing the number of Class B Common Stock being converted by a 20% discount of the lowest price that B Green Innovations, Inc. had ever issued its Class A Common Stock. Each holder of Class B common stock has voting rights equal to the number of Class A shares that would be issued upon the conversion of the Class B shares, had all of the outstanding Class B shares been converted on the record date used for purposes of determining which shareholders would vote. Previously, each holder of Class B Common Stock has voting rights equal to 100 shares of Class A Common Stock. No shares were issued during the year ended December 31, 2010.
As of December 31, 2010, there are 20,000,000 shares of Class C Common Stock authorized, par value $.01 per share. Each holder of Class C Common Stock is entitled to 1,000 votes for each share held of record. Shares of Class C Common Stock are not convertible into Class A Common Stock. Upon liquidation, dissolution or wind-up, the holders of Class C Common Stock are not entitled to receive our net assets pro rata. As of December 31, 2010 and 2009, no shares were issued or outstanding.
NOTE 12 - STOCK OPTIONS
Stock Option Plans
During 2005, the Company adopted the 2005 Stock Incentive Plan and the 2005 Directors’ and Officers’ Stock Incentive Plan (“Plan”) in order to attract and retain qualified personnel. Under the Plan, the Board of Directors, in its discretion may grant stock options (either incentive or non-qualified stock options) to officers, directors and employees.
The Company did not issue any stock options as of December 31, 2010.
NOTE 13 - FAIR VALUE MEASUREMENTS
FASB Codification Topic 820-10, Fair Value Measurements and Disclosures defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and expands disclosures about fair value measurements; however, it does not require any new fair value measurements, rather, its application is made pursuant to other accounting pronouncements that require or permit fair value measurements.
As defined in FASB ASC 820-10, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique.
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 13 - FAIR VALUE MEASUREMENTS (continued)
Fair value measurements are generally based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market assumptions in the absence of observable market information. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. FASB Codification Topic 820-10, Fair Value Measurements and Disclosures includes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy consists of the following three levels:
Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.
Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
The valuation techniques that may be used to measure fair value are as follows:
Market approach - Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities
Income approach - Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts, including present value techniques, option-pricing models and excess earnings method
Cost approach - Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost)
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 13 - FAIR VALUE MEASUREMENTS (continued)
As of January 1, 2010, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2010-06, Improving Disclosures about Fair Value Measurements (“ASU 2010-06”) which requires additional disclosures about the various classes of assets and liabilities measured at fair value, the valuation techniques and inputs used, the activity in Level 3 fair value measurements and the transfers between Levels 1, 2, & 3. The requirement for disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements are effective for interim and annual reporting periods beginning after December 15, 2010 and will be adopted by the Company on January 1, 2011.
The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as of September 30, 2010 and December 31, 2009. As required by FASB ASC 820-10, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.
The Company’s derivatives are classified within Level 2 of the valuation hierarchy. The Company’s derivatives are valued using internal models that use as their basis readily observable market inputs, such as time value, forward interest rates, and volatility factors. The Company did not hold financial assets and liabilities, which were recorded at fair value in the Level 3 category as of December 31, 2010 and December 31, 2009.
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 14 - SEGMENT DATA
FASB ASC 280, “Disclosures about Segments of an Enterprise and related information”, establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information of those segments to be presented in interim financial statements. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Company’s President and Chief Executive Officer) in making decisions on how to allocate resources and assess performance. In accordance with FASB ASC 280 the Company has determined it has two reportable segments - “green” technology products, and support of Interactive Voice Response (“IVR”) software. There are no inter-segment revenues.
The Company is organized primarily on the basis of its “green” technology products. The “green” technology segment is dedicated to the development, manufacture, and distribution of “green” products, focusing on acquiring and identifying promising technologies that address environmental issues. The Company also continues to support its IVR business. The Company currently has no plans to engage in future research and development, to launch any additional versions of the IVR software or other products, or to continue to market this product.
Management evaluates the performance of its segments by allocating resources to them based on gross margin. The Company’s general and administrative costs are not segment specific. As a result, all operating expenses are not managed on a segment basis. Most costs are related to the “green” technology segment. Costs associated with its IVR business are specifically allocated at the gross profit level. Segment assets include accounts receivable and inventory.
The tables below present information about reportable segments for the years ended December 31, 2010 and 2009.
B GREEN INNOVATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010 AND 2009
NOTE 14 - SEGMENT DATA (continued)
NOTE 16 - SUBSEQUENT EVENT
On January 5, 2011, the Company converted $66,104 of the principal amount and accrued interest of the iVoice Note Receivable, dated April 30, 2010 for redemption of 1,057,664 shares of B Green Innovations Series A 3% Preferred Stock in accordance with the terms of the Promissory Note.