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GNIN > SEC Filings for GNIN > Form 10-Q on 9-Aug-2013All Recent SEC Filings

Show all filings for GREEN INNOVATIONS LTD.

Form 10-Q for GREEN INNOVATIONS LTD.


9-Aug-2013

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We believe that it is important to communicate our future expectations to our security holders and to the public. This report, therefore, contains statements about future events and expectations which are "forward-looking statements" within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations." You can expect to identify these statements by forward-looking words such as "may," "might," "could," "would," "will," "anticipate," "believe," "plan," "estimate," "project," "expect," "intend," "seek" and other similar expressions. Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the "Risk Factors" section of and elsewhere in our Form 10-K dated December 31, 2011 for the fiscal year ended December 31, 2011 and in our subsequent filings with the Securities and Exchange Commission.

THESE FORWARD LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR ANTICIPATED RESULTS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AS FILED IN FORM 8-K DATED SEPTEMBER 26, 2012 AND ELSEWHERE IN THIS REPORT. THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH "SELECTED FINANCIAL DATA" AND THE COMPANY'S FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT.

Company Overview

The Company was a startup company that was incorporated in Nevada under the name Winecom, Inc. on July 1, 2008. The stockholders of the Company on August 15, 2012, approved a forward split of one share of common stock for twenty shares of common stock. On August 15, 2012, the Company filed with the State of Nevada for a name change to Green Innovations Ltd. ("Green Innovations"). On September 20, 2012, the Company filed with FINRA for its name change and a symbol change. On September 28, 2012, FINRA notified the Company of its symbol change from WNCM.OB to WNCMD.OB for thirty days, effective October 1, 2012, and then the subsequent change to GNIN.OB, to be traded on the NASDAQ OTC Bulletin Board. The Florida-based company is an importer and wholesaler of bamboo-based hygienic products through a licensing agreement for proprietary products. On September 26, 2012, the Company acquired Green Hygienics, Inc., a Florida corporation, as noted in Form 8-K dated September 26, 2012. The officer and director of the acquired company was the sole officer and a director of the Company at the time of the acquisition.

Results of Operations

Three months ended June 30, 2013 compared to the three months ended June 30, 2012

Revenue. For the three months ended June 30, 2013, our revenue was $437,940, compared to $0 for the same period in 2012. Revenue was comprised of $250,000 for a licensing fee with Tauriga Sciences, Inc. and $187,940 was related to the sale of products.

Gross Profit. For the three months ended June 30, 2013, our gross profit was $278,306, compared to $0 for the same period in 2012.


Selling, General and Administrative Expenses. For the three months ended June 30, 2013, selling, general and administrative expenses were $905,143 compared to $0 for the same period in 2012. This increase was primarily caused by the acquisition of Green Hygienics in August 2012. The Company recorded stock-based compensation of $573,446, or 63.4% of the selling, general and administrative expenses. Excluding the stock-based compensation, the selling, general and administrative expenses were $331,697.

Net Loss. We generated net losses of $869,464 for the three months ended June 30, 2013 compared to $0 for the same period in 2012. The net loss increase was attributable to the acquisition of Green Hygienics in August 2012. Additionally, $573,446 of the total net loss was attributable to stock-based compensation. Excluding the stock-based compensation, the net loss was $296,018.

Six months ended June 30, 2013 compared to the six months ended June 30, 2012

Revenue. For the six months ended June 30, 2013, our revenue was $599,645, compared to $0 for the same period in 2012. Revenue was comprised of $250,000 for a licensing fee with Tauriga Sciences, Inc. and $349,645 was related to the sale of products.

Gross Profit. For the six months ended June 30, 2013, our gross profit was $297,887, compared to $0 for the same period in 2012.

Selling, General and Administrative Expenses. For the six months ended June 30, 2013, selling, general and administrative expenses were $2,115,964 compared to $0 for the same period in 2012. This increase was primarily caused by the acquisition of Green Hygienics in August 2012. The Company recorded stock-based compensation of $1,587,238, or 75.0% of the selling, general and administrative expenses. Excluding the stock-based compensation, the selling, general and administrative expenses were $528,726.

Net Loss. We generated net losses of $2,066,361 for the six months ended June 30, 2013 compared to $0 for the same period in 2012. The net loss increase was attributable to the acquisition of Green Hygienics in August 2012. Additionally, $1,587,238 of the total net loss was attributable to stock-based compensation. Excluding the stock-based compensation, the net loss was $497,123.

Liquidity and Capital Resources

General. At June 30, 2013, we had cash and cash equivalents of $72,261. We have historically met our cash needs through a combination of proceeds from financing from third parties. Our cash requirements are generally for selling, general and administrative activities. We believe that our cash balance is not sufficient to finance our cash requirements for expected operational activities, capital improvements, and partial repayment of debt through the next 12 months.

Our operating activities used cash in operations of $1,039,242 for the six months ended June 30, 2013, and we used cash in operations of $0 during the same period in 2012. The principal elements of cash flow from operations for the six months ended June 30, 2013 included a net loss of $2,066,361, primarily by increases in stock-based compensation, $1,587,238, inventory, $1,195,345, accounts payable, $282,653, accrued expenses, $161,507.

Cash provided by our financing activities was $1,065,760 for the six months ended June 30, 2013, compared to $0 during the comparable period in 2012. This increase was primarily attributed to proceeds from notes payable and the sale of common stock.

As of June 30, 2013, current assets exceeded current liabilities by 1.8 times. Current assets increased from $313,921 at December 31, 2012 to $2,189,857 at June 30, 2013 whereas current liabilities increased from $292,393 at December 31, 2012 to $1,188,373 at June 30, 2013.

GOING CONCERN

The accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company had sales of $599,645 and net losses of $2,066,361 for the six months ended June 30, 2013 compared to sales of $0 and net loss of $0 for the six months ended June 30, 2012. The Company had working capital, stockholders' equity, and accumulated deficit of $1,001,484, $1,654,205 and $3,255,846, respectively, at June 30, 2013, and used cash in operations of $1,065,760 in the six months ended June 30, 2013. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company is highly dependent on its ability to continue to obtain investment capital from future funding opportunities to fund the current and planned operating levels. The unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company's continuation as a going concern is dependent upon its ability to bring in income generating activities and its ability to continue receiving investment capital from future funding opportunities. No assurance can be given that the Company will be successful in these efforts.

CRITICAL ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Green Innovations and its wholly-owned subsidiaries (as of June 30, 2013), Green Hygienics and Sensational Brands. All significant inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying unaudited consolidated financial statements include the valuation and purchase price allocation of assets acquired and liabilities assumed in business combination, amortization period for intangible assets, valuation and impairment valuation of intangible assets, depreciable lives of the web site and property and equipment, valuation of warrants and beneficial conversion features, valuation of derivatives, valuation of share-based payments and the valuation allowance on deferred tax assets.

Changes in Accounting Principles

No significant changes in accounting principles were adopted during the six months ended June 30, 2013.


Derivatives

The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date.

Impairment of Long-Lived Assets

The Company accounts for long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards ASC 360-10, "Accounting for the Impairment or Disposal of Long-Lived Assets". This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment 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 net cash flows expected to be generated by the 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.

Fair Value of Financial Instruments

The Company measures their financial assets and liabilities in accordance with generally accepted accounting principles. For certain of our financial instruments, including cash, accounts payable, accrued expenses escrow liability and short-term loans the carrying amounts approximate fair value due to their short maturities.

Effective January 1, 2008, we adopted accounting guidance for financial and non-financial assets and liabilities. The adoption did not have a material impact on our results of operations, financial position or liquidity. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

Revenue Recognition

Revenues are recognized on our products in accordance with ASC 605-10, "Revenue Recognition in Financial Statement." Under these guidelines, revenue is recognized on sales transactions when all of the following exist: persuasive evidence of an arrangement did exist, delivery of service has occurred, the sales price to the buyer is fixed or determinable and collectability is reasonably assured. The Company has several revenue streams as follows:

Delivery of product to a merchant.

Seasonal Revenue

In the retail industry, there are typically seasonal periods of sales which cause fluctuations in revenue. The Company, due to the type of products it sells, does not have seasonal revenues.

Stock-Based Compensation

The Company accounts for stock-based instruments issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees. The Company accounts for non-employee share-based awards in accordance with ASC Topic 505-50. The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model.


Net Earnings (Loss) Per Share

In accordance with ASC 260-10, "Earnings Per Share," basic net earnings (loss) per common share is computed by dividing the net earnings (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share are computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. Dilutive common stock equivalent shares which may dilute future earnings per share as of June 30, 2013 consist of convertible notes convertible into 189,430 common shares. Equivalent shares are not utilized when the effect is anti-dilutive.

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