Quarterly Report (10-q) Date : 05/25/2017

Quarterly Report (10-q)

Date : 05/25/2017 @ 4:40PM
Source : Edgar (US Regulatory)
Stock : Code Green Apparel Corp. (PN) (CGAC)
Quote : 0.0078 0.0027 (52.94%) @ 4:00PM






Quarterly Report (10-q)






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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-Q



QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934



For the quarterly period ended March 31, 2017



Commission file number: 000-53434



(CODEGREEN APPAREL LOGO)



Code Green Apparel Corp.
(Exact name of Registrant as specified in its charter)





Nevada 80-0250289
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)



31642 Pacific Coast Highway, Ste 102, Laguna
Beach, California 92651
(Address of principal executive offices) (Zip Code)



(888) 884-6277
(Registrant’s telephone number, including area code)



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☒



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “ large accelerated filer, ” “ accelerated filer, ” “ smaller reporting company, ” and “ emerging growth company ” in Rule 12b-2 of the Exchange Act.



Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company ☐
Emerging growth company ☒



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒



As of May 10, 2017, there were 488,376,582 shares of the registrant’s common stock outstanding.


















TABLE OF CONTENTS



PART I – FINANCIAL INFORMATION

Item 1. Financial Statements 1
Condensed Balance Sheets 1
Condensed Statements of Operations 2
Statement of Stockholders’ Deficit 3
Condensed Statement of Cash Flows 4
Notes to Condensed Financial Statements 5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
Item 4. Controls and Procedures 22

PART II – OTHER INFORMATION

Item 1. Legal Proceedings 24
Item 1a. Risk Factors 24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24
Item 3. Defaults Upon Senior Securities 25
Item 4. Mine Safety Disclosures 25
Item 5. Other Information 25
Item 6. Exhibits 25
Signatures 26
Exhibit Index 27













PART I – FINANCIAL INFORMATION



Item 1. Financial Statements



CODE GREEN APPAREL CORP.

CONDENSED BALANCE SHEETS

(UNAUDITED)




March 31, 2017

December 31, 2016
ASSETS

CURRENT ASSETS

Cash $ — $ 47
Accounts receivable, net — 7,834
Prepaid expenses 64,000 —
Inventory — 22,831

TOTAL CURRENT ASSETS 64,000 30,712

Fixed assets, net 12,122 12,962

TOTAL ASSETS $ 76,122 $ 43,674

LIABILITIES

CURRENT LIABILITIES

Accounts payable and accrued expenses $ 328,120 $ 341,615
Accrued interest 153,066 120,232
Notes payable, current 82,500 82,595
Convertible debts payable, net of discount of $10,995 and $19,811, respectively 546,999 556,388
Derivative liability 1,251,179 1,525,135

TOTAL CURRENT LIABILITIES 2,361,864 2,625,965

Notes payable, net of current portion 200,000 200,000

TOTAL LIABILITIES 2,561,864 2,825,965

STOCKHOLDERS’ DEFICIT

Series A Preferred Stock, par value $0.001 per share, Authorized – 1,000 shares, Issued and outstanding – 1,000 shares 1 1
Series B Preferred Stock, par value $0.001 per share, Authorized – 200,000 shares, Issued and outstanding – 65,000 shares 65 65
Common stock, par value $0.001 per share, Authorized – 1,990,000,000 shares, Issued and outstanding – 466,985,101 and 404,985,101 shares, respectively 466,985 404,985
Additional paid-in capital 11,476,697 11,352,697
Accumulated deficit (14,429,490 ) (14,540,039 )

TOTAL STOCKHOLDERS’ DEFICIT (2,485,742 ) (2,782,291 )

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT $ 76,122 $ 43,674



See notes to unaudited condensed financial statements.







1






CODE GREEN APPAREL CORP.

CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016

UNAUDITED



2017 2016

REVENUE $ 33,479 $ 18,237
COST OF GOODS SOLD (24,628 ) (15,198 )

GROSS PROFIT 8,851 3,039

OPERATING EXPENSES
Selling, general and administrative 89,074 375,296

TOTAL OPERATING EXPENSES 89,074 375,296

LOSS FROM OPERATIONS (80,233 ) (372,257 )

OTHER INCOME (EXPENSE)
Gain on conversion 22,757 —
Change in fair value of derivative (344,249 ) 154,014
Derivative liability gain (expense) – insufficient shares 561,447 (254,303 )
Interest expense (49,183 ) (11,967 )

TOTAL OTHER INCOME (EXPENSE) 190,772 (112,256 )

INCOME (LOSS) BEFORE INCOME TAXES 110,549 (484,513 )

Income tax expense — —

NET INCOME (LOSS) 110,549 (484,513 )

Discount attributable to beneficial conversion privilege of preferred stock — —

Income (Loss) applicable to common stock 110,549 (484,513 )

NET INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per common share $ 0.00 $ (0.00 )
Diluted net income (loss) per common share $ (0.00 ) $ (0.00 )
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic 434,117,323 368,602,393
Diluted 968,517,143 368,602,393





See notes to unaudited condensed financial statements.




2






CODE GREEN APPAREL CORP.

CONDENSED STATEMENT OF STOCKHOLDERS’ DEFICIT

FOR THE THREE MONTHS ENDED MARCH 31, 2017

UNAUDITED



Series A Preferred Stock Series B Preferred Stock Common Stock Additional Paid-in Accumulated Total Stockholders’
Shares Amount Shares Amount Shares Amount Capital Deficit Equity (Deficit)
Balance, December 31, 2016 1,000 $ 1 65,000 $ 65 404,985,101 $ 404,985 $ 11,352,697 $ (14,540,039 ) $ (2,782,291 )

Issuance of shares for services — — — — 42,000,000 42,000, 84,000 — 126,000

Issuance of shares for convertible debt — — — — 20,000,000 20,000 40,000 — 60,000

Net income — — — — — — — 110,549 110,549

Balance, March 31, 2017 1,000 $ 1 65,000 $ 65 466,985,101 $ 466,985 $ 11,476,697 $ (14,429,490 ) $ (2,485,742 )





See notes to unaudited condensed financial statements.




3






CODE GREEN APPAREL CORP.

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016

UNAUDITED



2017 2016

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 110,549 $ (484,513 )
Adjustments to reconcile net income (loss) to net cash (used) provided by operating activities:
(Gain) loss on derivative revaluation 344,248 (154,014 )
Derivative liability (income) expense - insufficient shares (561,447 ) 254,303
Gain on conversion of debt (22,757 ) —
Depreciation 840 658
Common stock issued for services 62,000 75,000
Amortization of debt discount 8,816 6,233
Changes in operating assets and liabilities:
Accounts receivable 7,834 —
Inventory 22,831 15,197
Prepaid expenses — 33,387
Accounts payable and accrued expenses (13,495 ) 7,501
Accrued interest 32,834 5,734

NET CASH USED IN OPERATING ACTIVITIES (7,747 ) (240,514 )

CASH FLOWS USED BY INVESTING ACTIVITIES:
Purchase of fixed assets — (13,928 )

NET CASH USED IN INVESTING ACTIVITIES — (13,928 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of Series B Preferred Stock — 250,000
Proceeds from notes payable, net of repayments 7,700 —

NET CASH PROVIDED BY FINANCING ACTIVITIES 7,700 250,000

NET DECREASE IN CASH (47 ) (4,442 )

CASH AT THE BEGINNING OF THE YEAR 47 32,205

CASH AT THE END OF THE YEAR $ — $ 27,763

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Interest paid $ 7,534 $ —
Taxes paid $ — $ —

Issuance of shares upon debt conversion 60,000 —



See notes to unaudited condensed financial statements.




4






CODE GREEN APPAREL CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

UNAUDITED



NOTE 1 ORGANIZATION AND BASIS OF PRESENTATION



Organization and Nature of Business



Code Green Apparel Corp. (the “ Company ”) was incorporated in Nevada on December 11, 2007. On April 26, 2014, and with the appointment of George Powell as its CEO and Director, the Company changed its business model to offer eco-friendly corporate apparel primarily constructed from recycled textiles.



The Company is a publicly held Nevada corporation, whose common stock trades on the OTC Market Group, Inc.’s Pink Sheets under the trading symbol, “ CGAC. ”



Basis of Presentation



The accompanying unaudited interim condensed financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“ GAAP ”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. For further information, refer to the financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2016.



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 certain estimates and assumptions that affect the reported amounts and timing of revenues and expenses, the reported amounts and classification of assets and liabilities, and the disclosure of contingent assets and liabilities. These estimates and assumptions are based on the Company’s historical results as well as management’s future expectations. The Company’s actual results could vary materially from management’s estimates and assumptions. Additionally, interim results may not be indicative of the Company’s results for future interim periods, or the Company’s annual results.



Cash and Cash Equivalents



Cash and cash equivalents include cash on hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. At March 31, 2017, the company did not have any cash equivalents.



Accounts Receivable



Accounts receivable are not collateralized and interest is not accrued on past due accounts. Periodically, management reviews the adequacy of its provision for doubtful accounts based on historical bad debt expense results and current economic conditions using factors based on the aging of its accounts receivable. After management has exhausted all collection efforts, management writes off receivables and the related reserve. Additionally, the Company may identify additional allowance requirements based on indications that a specific customer may be experiencing financial difficulties. Actual bad debt results could differ materially from these estimates.



Inventories



Inventories are stated at the lower of cost (first-in, first-out) or market. The Company periodically reviews its inventories for indications of slow movement and obsolescence and records an allowance when it is deemed necessary.






5






Revenue Recognition



The Company recognizes gross sales when persuasive evidence of an arrangement exists, title transfer has occurred, the price is fixed or readily determinable, and collection is probable. It recognizes revenue in accordance with Accounting Standards Codification (“ ASC ”) 605, Revenue Recognition (“ ASC 605 ”).



Stock Based Compensation



The Company from time to time issues shares of common stock for services. These issuances have been valued based upon the quoted market price of the shares.



Disclosure About Fair Value of Financial Instruments



The Company estimates that the fair value of all financial instruments at March 31, 2017 and December 31, 2016, do not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying condensed balance sheets. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange.



Derivative Financial Instruments



The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses the Black-Scholes-Merton pricing model to value the derivative instruments. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.



The Company has determined that certain convertible debt instruments outstanding as of the date of these financial statements include an exercise price “ reset ” adjustment that qualifies as derivative financial instruments under the provisions of ASC 815-40, Derivatives and Hedging - Contracts in an Entity’s Own Stock (“ ASC 815-40 ”). Certain of the convertible debentures have a variable exercise price, thus are convertible into an indeterminate number of shares for which we cannot determine if we have sufficient authorized shares to settle the transaction with. Accordingly, the embedded conversion option is a derivative liability and is marked to market through earnings at the end of each reporting period. Any change in fair value during the period recorded in earnings as “ Other income (expense) - gain (loss) on change in derivative liabilities. ”



Carrying Value Fair Value Measurements
Using Fair Value Hierarchy
Level 1 Level 2 Level 3
Derivative liability – December 31, 2016 $ 1,525,135 $ — $ — $ 1,525,135
Derivative liability – March 31, 2017 $ 1,251,179 $ — $ — $ 1,251,179

Balance at December 31, 2016 $ 1,525,135
Revaluation due to insufficient shares available for issuance (561,447 )
Conversion (56,758 )
Change in derivative liability during the three months March 31, 2017 344,249
Balance March 31, 2017 $ 1,251,179






6






Net Income (Loss) Per Share



Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Any anti-dilutive effects on net income (loss) per share are excluded. The Company has 534,399,820 potentially dilutive securities outstanding as of March 31, 2017.



Income Taxes



The Company accounts for income taxes in accordance with FASB ASC 740, “ Income Taxes, ” which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.



The Company has adopted the provisions of FASB ASC 740-10-05 Accounting for Uncertainty in Income Taxes . The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The ASC 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. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Open tax-years subject to IRS examination include 2013 - 2016.



Recent Accounting Pronouncements



In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters into a lease, with some specified scope exemptions. The guidance in this ASU supersedes Topic 840, Leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For public companies, the amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the impact of adopting ASU No. 2016-02 on our financial statements.



In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) that clarifies how to apply revenue recognition guidance related to whether an entity is a principal or an agent. ASU 2016-08 clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer and provides additional guidance about how to apply the control principle when services are provided and when goods or services are combined with other goods or services. The effective date for ASU 2016-08 is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14 , for annual reporting periods beginning after December 15, 2017, including interim periods within those years. The Company has not yet determined the impact of ASU 2016-08 on its financial statements.



In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation, or ASU No. 2016-09. The areas for simplification in this ASU involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, the amendments in this ASU are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be applied prospectively. An entity may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method.






7






In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing , which provides further guidance on identifying performance obligations and improves the operability and understandability of licensing implementation guidance. The effective date for ASU 2016-10 is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14 , for annual reporting periods beginning after December 15, 2017, including interim periods within those years. The Company has not yet determined the impact of ASU 2016-10 on its financial statements.



NOTE 2 PROPERTY AND EQUIPMENT, NET



Property and equipment consists of the following:



March 31, 2017 December 31, 2016

Computer equipment $ 16,783 $ 16,783
16,783 16,783
Less accumulated depreciation (4,661 ) (3,821 )
Total $ 12,122 $ 12,962



The aggregate depreciation charge to operations was $840 and $658 for the three months ended March 31, 2017 and 2016, respectively. The depreciation policies followed by the Company are described in Note 1.



NOTE 3 NOTES PAYABLE



During June 2016, the Company issued a $200,000 promissory note in connection with the Asset Purchase Agreement, see Note 9. The note carries interest at 10% per annum and is due June 23, 2018. Total outstanding debt was $200,000 and $200,000 at March 31, 2017 and December 31, 2016, respectively. The accrued interest on the note was $15,397 and $10,466 at March 31, 2017 and December 31, 2016, respectively.



During July 2016, the Company issued a promissory note in the amount of $82,500. The note is currently in default. The note contains an original issue discount in the amount of $7,500. The remaining balance due at March 31, 2017 and December 31, 2016 was $82,500 and $82,500, respectively. The accrued interest on the note was $26,238 and $8,945 at March 31, 2017 and December 31, 2016, respectively.



During September 2016, the Company issued a promissory note in the amount of $10,000. The note is due in six months. The note contains an original issue discount in the amount of $650. The remaining balance due at March 31, 2017 and December 31, 2016 was $-0- and $95, respectively. Interest accrues at 12% and is paid daily. The accrued interest on the note was $-0- and $-0- at March 31, 2017 and December 31, 2016, respectively. The balance of this note was paid in February 2017.



During January 2017, the Company issued a promissory note in the amount of $20,000. The note was due February 15, 2017. The note requires an interest payment of $5,000 upon repayment. The remaining balance due at March 31, 2017 and December 31, 2016 was $20,000 and $-0-, respectively. The accrued interest on the note was $5,000 and $-0- at March 31, 2017 and December 31, 2016, respectively. The balance of this note and accrued interest was paid in April 2017.






8






NOTE 4 CONVERTIBLE NOTES



On May 1, 2014, the Company entered into an agreement with Anubis Capital Partners, a business advisor. The agreement calls for monthly payments of $2,500 in service fees along with the issuance of a $500,000 fully earned convertible debt that accrues interest at 8% per annum. The holder has the option to convert any balance of principal and interest into common stock of the Company. The rate of conversion for the note is calculated as the lowest of the 20 trading closing prices immediately preceding such conversion, discounted by 50%. During December 2015, the Company issued 25,000,000 shares of common stock in payment of $212,500 of principal on this convertible debt. At March 31, 2017 and December 31, 2016, $20,000 and $20,000 was owed in services fees, accrued interest was $94,403 and $88,795 and the outstanding convertible debt was $261,500 and $287,500, respectively.



During the year ended December 31, 2014, the Company issued $173,500 of convertible notes. The convertible notes carry interest at 10% per annum and are due 24 months from the date of issuance, June 2016 through September 2016. The note holders have the option to convert into shares of the Company’s common stock after 180 days at 50% of the market price. During April and May of 2015, the Company issued 14,660,440 shares of common stock upon conversion of $173,500 of principal amount outstanding under these convertible notes. Total outstanding convertible debt was $-0- and $-0- at March 31, 2017 and December 31, 2016, respectively. At March 31, 2017 and December 31, 2016, the accrued interest on the convertible notes was $12,027 and $12,027, respectively.



During December 2015, the Company issued a convertible note in the amount of $175,000. The convertible note was due in one year and is currently in default, and contains a prepayment penalty of $25,000. The holder has the option to convert any balance of principal into common stock of the Company. The rate of conversion for the note is calculated as the lowest of the 10 trading closing prices immediately preceding such conversion, discounted by 32.5%. During December 2016, the Company issued 12,000,000 shares of common stock upon conversion of $13,770 of principal amount outstanding under this convertible note. The remaining balance due at March 31, 2017 and December 31, 2016 was $161,730 and $161,730, respectively.



During June 2016, the Company sold a convertible note in the principal amount of $121,325. The convertible note is due in one year and contains an original issue discount in the amount of $15,825. The holder has the option to convert any balance of principal into common stock of the Company after the initial 180 days. The rate of conversion for this note is calculated as the average of the three lowest closing prices of the Company’s common stock during the 20 trading days immediately preceding such conversion, discounted by 50%. The remaining balance due at March 31, 2017 and December 31, 2016 was $65,884 and $73,989, respectively. Interest accrues at 12% per annum and is paid daily. The accrued interest on the note was $-0- and $-0- at March 31, 2017 and December 31, 2016, respectively.



During September 2016, the Company sold a convertible note in the principal amount of $63,825. The convertible note is due in one year and contains an original issue discount in the amount of $13,825. The holder has the option to convert any balance of principal into common stock of the Company after the initial 180 days. The rate of conversion for this note is calculated as the average of the three lowest closing prices of the Company’s common stock during the 20 trading days immediately preceding such conversion, discounted by 50%. The remaining balance due at March 31, 2017 and December 31, 2016 was $49,380 and $53,481, respectively. Interest accrues at 12% per annum and is paid daily. The accrued interest on the note was $-0- and $-0- at March 31, 2017 and December 31, 2016, respectively.



Derivative Liability



On May 1, 2014, the Company secured $500,000 in the form of a convertible promissory note. The note bears interest at the rate of 8% per annum until it matures, or until there is an event of default. The note matured on May 1, 2015. The holder has the option to convert any balance of principal and interest into common stock of the Company. The rate of conversion for the note is calculated as the lowest of the 20 trading closing prices immediately preceding such conversion, discounted by 50%. A total of $287,500 remains outstanding as of December 31, 2016, and a total of $212,500 was converted into shares of common stock.



On December 3, 2015, the Company secured $175,000 in the form of a convertible promissory note. The note does not bear interest until or unless there is an event of default. The note matured on December 3, 2016. The holder has the option to convert any balance of principal into common stock of the Company. The rate of conversion for the note is calculated as the lowest of the 10 trading closing prices immediately preceding such conversion, discounted by 32.5%.






9






On June 15, 2016, the Company secured $121,325 in the form of a convertible promissory note. The note bears interest at 12% per annum. The note matures on June 15, 2017. The holder has the option to convert any balance of principal into common stock of the Company after the initial 180 days. The rate of conversion for this note is calculated as the average of the three lowest closing prices of the Company’s common stock during the 20 trading days immediately preceding such conversion, discounted by 50%.



On September 23, 2016, the Company secured $63,825 in the form of a convertible promissory note. The note bears interest at 12% per annum. The note matures on September 23, 2017. The holder has the option to convert any balance of principal into common stock of the Company after the initial 180 days. The rate of conversion for this note is calculated as the average of the three lowest closing prices of the Company’s common stock during the 20 trading days immediately preceding such conversion, discounted by 50%.



Due to the variable conversion price associated with these convertible promissory notes, the Company has determined that the conversion feature is considered a derivative liability. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date.



The initial fair values of the embedded debt derivatives of $500,842, $227,746, $322,660 and $108,458 were charged to current period operations as interest expenses. The fair value of the described embedded derivative was determined using the Black-Scholes Model with the following assumptions:



(1) risk free interest rate of 0.10% to 0.45%
(2) dividend yield of 0%;
(3) volatility factor of 248% to 435%;
(4) an expected life of the conversion feature of 365 days; and
(5) estimated fair value of the Company’s common stock of $0.006 to $0.008 per share.



During the three months ended March 31, 2017, the Company recorded a gain on fair value of derivative of $84,603.



The following table represents the Company’s derivative liability activity for the three months ended March 31, 2017:



Balance at December 31, 2016 $ 1,525,135
Revaluation due to insufficient shares available for issuance (561,447 )
Conversion (56,758 )
Change in derivative liability during the three months ended March 31, 2017 344,249
Balance March 31, 2017 $ 1,251,179



NOTE 5 DERIVATIVE FINANCIAL INSTRUMENTS



The following table presents the components of the Company’s derivative financial instruments associated with convertible promissory notes (See Note 4) which have no observable market data and are derived using the Black-Scholes option pricing model measured at fair value on a recurring basis, using Level 1 and 3 inputs to the fair value hierarchy, at March 31, 2017 and December 31, 2016:



March 31, 2017 December 31, 2016
Embedded conversion features $ 1,251,179 $ 963,688
Insufficient shares — 561,447
Derivative liability $ 1,251,179 $ 1,525,135


These derivative financial instruments arise as a result of applying ASC 815 Derivative and Hedging (“ ASC 815 ”), which requires the Company to make a determination whether an equity-linked financial instrument, or embedded feature, is indexed to the entity’s own stock. This guidance applies to any freestanding financial instrument or embedded features that have the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity’s own stock.






10






During the three months ended March 31, 2017, the Company had outstanding notes with embedded conversion features and the Company did not, at this date, have a sufficient number of authorized and available shares of common stock to settle the outstanding contracts which triggered the requirement to account for these instruments as derivative financial instruments until such time as the Company has sufficient authorized shares.



NOTE 6 LEASE COMMITMENTS



Laguna Beach Office



The Company is obligated under a commercial real estate lease agreement. The lease is for a term of 60 months which began February 1, 2016 and expires January 31, 2021. The lease calls for current monthly rental payments of $3,438.



Dallas Office



The Company is obligated under a commercial real estate sublease agreement. The sublease is for a term of seven months which began on August 1, 2016 and expires on February 28, 2017. The lease calls for current monthly rental payments of $2,200.



Rental expense for the three months ended March 31, 2017 and 2016 was $7,134 and $13,254, respectively. Future minimum rental payments for the remaining terms are as follows:



Year Ending December 31, Amount
2018 – remaining nine months $ 30,942
2019 41,256
2020 41,256
2021 3,438
Total $ 116,892



NOTE 7 STOCKHOLDERS’ EQUITY



On January 9, 2017, the Company issued 10,000,000 shares of its restricted common stock to its then newly appointed Director and COO, as a signing bonus for his appointment to the Company’s Board of Directors. The shares had a fair market value of $30,000.



On February 9, 2017, the Company entered into an Advertising Services Agreement (the “ Advertising Agreement ”) with Cicero Consulting Group, LLC (“ Cicero ”), pursuant to which Cicero agreed to provide marketing and advertising services to the Company for a term of six months. In consideration for agreeing to provide those services the Company agreed to issue Cicero 32 million shares of common stock. The value of the 32,000,000 shares is $96,000. Due to the terms of the agreement, $32,000 has been recorded in the statement of operations for the three months ended March 31, 2017 and $64,000 remains as prepaid expense to be amortized through July 2017.



On March 22, 2017, we issued 20 million shares of common stock to Anubis Capital Partners in connection with the conversion of debt valued at $26,000.



Series A Preferred Stock



On May 22, 2015, the Company designated a series of Series A Preferred Stock. The holders of the Series A Preferred Stock are not entitled to receive dividends paid on the Company’s common stock. The holders of the Series A Preferred Stock are not entitled to any liquidation preferences. The shares of the Series A Preferred Stock have no conversion rights. The Series A Preferred Stock provide the holder thereof the power to vote on all shareholder matters (including, but not limited to at every meeting of the stockholders of the Company and upon any action taken by stockholders of the Company with or without a meeting) equal to fifty-one percent (51%) of the total vote. Following the third anniversary of the original issuance of the Series A Preferred Stock, the Company has the option with (a) the unanimous consent or approval of all members of the Board of Directors of the Company; (b) the approval of the holders of a majority of the outstanding shares of Series A Preferred Stock; and (c) the approval of any interest or option holder(s) of such Series A Preferred Stock, to redeem any and all outstanding shares of the Series A Preferred Stock by paying the holders a redemption price of $100 per share.






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Series B Preferred Stock



On December 7, 2015, the Company designated a series of Series B Preferred Stock. The Series B Preferred Stock have an original issue price and liquidation preference (pro rata with the common stock) of $10.00 per share. The Series B Preferred Stock provides the holders thereof the right to convert such shares of Series B Preferred Stock into common stock on a 100-for-one basis, provided that no conversion can result in the conversion of more than that number of shares of Series B Preferred Stock, if any, such that, upon such conversion, the aggregate beneficial ownership of the Company’s common stock of any such holder and all persons affiliated with any such holder as described in Rule 13d-3 is more than 4.99% of the Company’s common stock then outstanding (the “ Maximum Percentage ”). For so long as any shares of the Series B Convertible Preferred Stock remain issued and outstanding, the holders thereof are entitled to vote that number of votes as equals the number of shares of common stock into which such holder’s aggregate shares of Series B Convertible Preferred Stock are convertible, subject to the Maximum Percentage.



On December 7, 2015, the Company entered into an Exchange Agreement (the “ Exchange ”) with its shareholder, Dr. Eric H. Scheffey, whereby Dr. Scheffey exchanged forty million (40,000,000) shares of the Company’s restricted common stock for 40,000 shares of the Company’s Series B Preferred Stock.



On January 4, 2016, the Company sold 25,000 shares of its restricted Series B Preferred Stock in connection with a Subscription Agreement dated December 7, 2015 (the January 1, 2016 payment) and received $250,000. The intrinsic value, the difference between the subscription price and the underlying price of the common stock on the date of the subscription agreement, has been valued at $250,000. Accordingly, this Discount attributable to beneficial conversion privilege of preferred stock has been recorded as a dividend in the current period and an increase in additional paid-in capital.



NOTE 8 GOING CONCERN





The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. The Company has had only limited revenues since inception. Since inception, it has incurred significant losses to date, and as of March 31, 2017, has an accumulated deficit of approximately $14,400,000 and has negative working capital of $2,362,000. These factors raise substantial doubt about the Company's ability to continue as a going concern. The Company’s ability to continue its operations is uncertain and is dependent upon its ability to implement a business plan sufficient to generate a positive cash flow and/or raise capital to fund its operations. These financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue operations in the normal course of business.





NOTE 9 ASSET PURCHASE AGREEMENT



Effective on June 23, 2016, the Company entered into an Asset Purchase Agreement with 10Star LLC (“ 10Star ” and the “ Purchase Agreement ”), pursuant to which, the Company purchased certain contracts, relating to 10Star’s “ On the Border ” and “ 7-Eleven ” accounts (the “ Purchased Accounts ”).



The purchase price paid for the Assets at closing on June 23, 2016, was (a) $50,000 in cash; (b) 5 million shares of restricted common stock; and (c) a promissory note in the amount of $200,000 (the “ Promissory Note ”). During December 2016, the asset value of $280,000 was considered fully impaired. As such, the entire value of $280,000 less the accumulated amortization in the amount of $60,000, was written off.



Amounts due under the Promissory Note accrue interest at the rate of 10% per annum (12% upon the occurrence of an event of default), with all interest payable on the maturity date of the Promissory Note, June 23, 2018, provided that the amounts owed under the Promissory Note can be pre-paid in whole or part at any time prior to maturity. Until the earlier of (a) the maturity date of the Promissory Note; and (b) the date the Promissory Note is paid in full, we are required to pay 10Star fifty percent (50%) of the Gross Profits generated by us in connection with the Purchased Accounts, no later than the end of the calendar month following the month during which we generate such Gross Profits and receive payment in connection therewith. “ Gross Profit ” means: (x) the total gross revenues derived from the Purchased Accounts, less (y) (i) cost of goods sold, (ii) returns, (iii) discounts, (iv) adjustments, and (v) allowances, and those other items that are customarily subtracted from total gross revenue to determine gross profit in accordance with generally accepted accounting principles (“ GAAP ”). Each payment is credited first to accrued interest and second to principal. The Promissory Note contains standard and customary events of default. The Promissory Note is unsecured and 10Star has no right to any collateral or security interests in connection therewith.






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NOTE 10 EMPLOYMENT AGREEMENTS



As part of, and as a required term and condition of the Purchase Agreement, the Company entered into executive employment agreements with Aaron Luna and William Joseph (J.B.) Hill, to serve as Executive Vice Presidents of the Company in May 2016, in anticipation of the Acquisition.



The employment agreements each have substantially similar terms, including an effective date of April 1, 2016, an initial term of one year (automatically renewable thereafter for additional one year terms in the event neither party provides the other notice of non-renewal at least 30 days prior to the end of the then term). Both agreements include a base salary as determined by the Board of Directors in its sole and absolute discretion in addition to an equity consideration of 3.75 million restricted shares of common stock to Mr. Luna and 3.25 million restricted shares of common stock to Mr. Hill (the “ Restricted Shares ”), which Restricted Shares are subject to forfeiture and cancellation until March 31, 2017, pursuant to Restricted Stock Award Agreements. In addition to the base salary described above, the executives were to receive a commission on our net sales.



Both Mr. Luna and Mr. Hill subsequently terminated their services with the Company in October 2016, and all Restricted Shares have been forfeited, provided that such shares have not yet been cancelled to date.



NOTE 11 SUBSEQUENT EVENTS



On April 12, 2017, our Board of Directors and majority shareholder (i.e., George J. Powell, III, the Company’s Chief Executive Officer and Director, who holds (i) 1,000 shares of Series A Preferred Stock, which provides the holder thereof the right to vote 51% of the vote on all shareholder matters and (ii) 89,115,016 shares of the Company’s outstanding common stock), via a written consent to action without meeting, approved the filing of a Certificate of Amendment to our Articles of Incorporation to increase the authorized common stock of the Company, from one billion (1,000,000,000) shares of common stock, $0.001 par value per share, to one billion, nine hundred and ninety million (1,990,000,000) shares of common stock, $0.001 par value share (the “ Amendment ”). The increase in authorized shares is reflected in the balance sheets.



The Amendment did not change (a) the number of authorized shares of our preferred stock, which remained ten million (10,000,000) shares of preferred stock, $0.001 par value per share; (b) the rights of our Board of Directors to designate the rights and preferences of such preferred stock (as further described in our Articles of Amendment, as amended); or (c) the previously designated series of our preferred stock.



On April 13, 2017, the Company filed the Amendment with the Nevada Secretary of State, which became effective on the same date.



On April 12, 2017, pursuant to a Note Purchase Agreement, we sold a 10% Convertible Debenture in the principal amount of $32,500 (which included a $5,000 original issue discount) to Sojourn Investments, LP (“ Sojourn ” and the “ Sojourn Debenture ”). The principal amount of the debenture accrues at 10% per annum until paid or converted into common stock (18% upon the occurrence of an event of default). The Sojourn Debenture has a maturity date of January 12, 2018, provided the debenture can be repaid at any time, provided that if repaid more than 30 days after the issuance date, we are required to pay 130% of the principal amount of the debenture, together with accrued interest.



The Sojourn Debenture is convertible into shares of our common stock at any time, at a conversion price equal to 58% of the average of the lowest three (3) closing prices during the prior 20 trading days.



In the event we fail to deliver the shares of common stock issuable upon conversion of the debenture within three business days of our receipt of a conversion notice, we are required to pay Sojourn $1,000 per day for each day that we fail to deliver such shares for up to the first 30 days that the failure continues.



At no time may the Sojourn Debenture be converted into shares of our common stock if such conversion would result in Sojourn and its affiliates owning an aggregate of in excess of 4.99% of the then outstanding shares of our common stock.






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The Sojourn Debenture provides for standard and customary events of default such as failing to timely make payments under the Sojourn Debenture when due and the failure of the Company to timely comply with the Exchange Act reporting requirements. Additionally, upon the occurrence of certain defaults, as described in the Sojourn Debenture , we are required to pay Sojourn liquidated damages in addition to the amount owed under the Sojourn Debenture .



We hope to repay the Sojourn Debenture prior to any conversion. In the event that the Sojourn Debenture is not repaid in cash in its entirety, Company shareholders may suffer dilution if and to the extent that the balance of the Sojourn Debenture is converted into common stock.



On April 17, 2017, we sold Carebourn a Convertible Promissory Note in the principal amount of $135,575 (the “ April 2017 Carebourn Convertible Note ”), pursuant to a Securities Purchase Agreement, dated April 17, 2017. The April 2017 Carebourn Convertible Note bears interest at the rate of 12% per annum (22% upon an event of default) and is due and payable on April 17, 2018. The April 2017 Carebourn Convertible Note had an original issue discount of $27,075. In addition, we paid $8,500 of Carebourn’s expenses and attorney fees in connection with the sale of the note, which were included in the principal amount of the note.



Periodic payments are due by us on the April 2017 Carebourn Convertible Note at the rate of $565 per day ($135,575 / 240 days)(the “ Repayment Amount ”), via direct withdrawal from our bank account. The Repayment Amount automatically adjusts to a prorated higher amount in the amount any penalties or events of default occur under the April 2017 Carebourn Convertible Note.



The April 2017 Carebourn Convertible Note provides for standard and customary events of default such as failing to timely make payments under the April 2017 Carebourn Convertible Note when due, the failure of the Company to timely comply with the Exchange Act reporting requirements and the failure to maintain a listing on the OTCQB. Additionally, upon the occurrence of certain defaults, as described in the April 2017 Carebourn Convertible Note, we are required to pay Carebourn liquidated damages in addition to the amount owed under the April 2017 Carebourn Convertible Note.



The principal amount of the April 2017 Carebourn Convertible Note and all accrued interest is convertible at the option of the holder thereof into our common stock at any time following the 180th day after the April 2017 Carebourn Convertible Note was issued. The conversion price of the April 2017 Carebourn Convertible Note is equal to 50% of the average of the lowest three (3) trading prices of the Company’s common stock during the twenty trading days prior to the conversion date.



In the event we fail to deliver the shares of common stock issuable upon conversion of the note within three business days of our receipt of a conversion notice, we are required to pay Carebourn $1,500 per day for each day that we fail to deliver such shares.



At no time may the April 2017 Carebourn Convertible Note be converted into shares of our common stock if such conversion would result in Carebourn and its affiliates owning an aggregate of in excess of 4.99% of the then outstanding shares of our common stock.



We may prepay in full the unpaid principal and interest on the April 2017 Carebourn Convertible Note, with at least 20 trading days’ notice, (a) any time prior to the 180th day after the issuance date, by paying 130% of the principal amount of the note together with accrued interest thereon; and (b) any time after the 180th day after the issuance date and prior to the 364 th day after issuance, by paying 150% of the principal amount of the note together with accrued interest thereon.



The April 2017 Carebourn Convertible Note also contains customary positive and negative covenants.



We hope to repay the April 2017 Carebourn Convertible Note prior to any conversion. In the event that the April 2017 Carebourn Convertible Note is not repaid in cash in its entirety, Company shareholders may suffer dilution if and to the extent that the balance of the April 2017 Carebourn Convertible Note is converted into common stock.



On April 7, 2017, we issued 21,481,481 shares of common stock to Anubis Capital Partners in connection with the conversion of debt.





On April 11, 2017, we issued 32 million shares of common stock which were due pursuant to the terms of the February 9, 2017 Consulting Agreement. These shares were valued at $0.003 per share or $96,000.




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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations



CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION



This Quarterly Report on Form 10-Q contains “ forward looking statements ” (as that term is defined in Section 27A(i)(1) of the Securities Act), including statements concerning plans, objectives, goals, strategies, expectations, future events or performance and underlying assumptions and other statements which are other than statements of historical facts. In some cases, you can identify forward-looking statements by terminology such as “ may ”, “ should ”, “ expect ”, “ plan ”, “ intend ”, “ anticipate ”, “ believe ”, “ estimate ”, “ predict ”, “ potential ” or “ continue ”, the negative of such terms or other comparable terminology. In evaluating these statements, you should consider various factors, including the assumptions, risks and uncertainties outlined in this report, if any, and our Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on May 22, 2017, under the heading “ Risk Factors ”. These factors or any of them may cause our actual results to differ materially from any forward-looking statement made in this report. Forward-looking statements in this report include, among others, statements regarding our capital needs, business plans, and expectations.



While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding future events, our actual results will likely vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Some of the risks and assumptions include, but are not limited to: our need for additional financing; our limited operating history; our history of operating losses; the competitive environment in which we operate; the level of government regulation, including environmental regulation; changes in governmental regulation and administrative practices; our dependence on key personnel; our ability to fully implement our business plan; our ability to effectively manage our growth; and other regulatory, legislative and judicial developments.



We advise the reader that these cautionary remarks expressly qualify in their entirety all forward-looking statements attributable to us or persons acting on our behalf.



The forward-looking statements in this report are made as of the date of this report and we do not intend or undertake to update any of the forward-looking statements to conform these statements to actual results, except as required by applicable law, including the securities laws of the United States.



The following is management’s discussion and analysis of the significant factors that affected the Company’s financial position and results of operations during the periods included in the accompanying unaudited consolidated financial statements. You should read this in conjunction with the discussion under “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ” and the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016, and the unaudited consolidated financial statements included in this quarterly report. Expectations of future financial condition and results of operations are based upon current business plans and may change.



Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our consolidated financial statements included above under “ Part I - Financial Information ” - “ Item 1. Financial Statements ”.



In this Quarterly Report on Form 10-Q, we may rely on and refer to information regarding our industry which comes from market research reports, analyst reports and other publicly available information. Although we believe that this information is reliable, we cannot guarantee the accuracy and completeness of this information, and we have not independently verified any of it.



Unless the context requires otherwise, references to the “ Company, ” “ we, ” “ us, ” “ our, ” “ Code Green ” and “ Code Green Apparel Corp. ” refer specifically to Code Green Apparel Corp.



In addition, unless the context otherwise requires and for the purposes of this report only:



● “ Exchange Act ” refers to the Securities Exchange Act of 1934, as amended;
● “ SEC ” or the “ Commission ” refers to the United States Securities and Exchange Commission; and






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● “ Securities Act ” refers to the Securities Act of 1933, as amended.



Description of Business



The Company was incorporated in Nevada on December 11, 2007.



The Company is engaged in the business of manufacturing, selling, marketing and outfitting companies of all sizes and industries with eco-friendly apparel made from recycled textiles. The corporate apparel market encompasses a wide variety of apparel products and accessories ranging from customized uniforms to caps, t-shirts and aprons. We believe that many of these companies are actively seeking ways to incorporate being more environmentally friendly into their company and would entertain mandating that all uniforms be manufactured from recycled fabrics. As all of our products are eco-friendly, our strategy is to emphasize the sustainability features while at the same time providing our products at market competitive rates.



Code Green reduces the environmental impact of the apparel industry by designing, manufacturing and distributing apparel products from eco-friendly and sustainable textiles. It supports both the uniform needs and sustainability initiatives of companies worldwide, by offering a complete line of recycled apparel in the form of T-shirts, hats, polo shirts, pants, shorts, aprons, jackets and accessories. In addition, the Company fulfills recycled clothing needs for organizations of all sizes hosting promotional, fundraising and special events. Its apparel collection is also available to distributors and screen printers through its wholesale distribution channel.



Recent Transactions:



In September 2016, we entered into a factoring agreement, whereby we sold $14,590 in accounts receivable for $10,000.



On September 23, 2016, we sold Carebourn Capital, L.P. (“ Carebourn ”) a Convertible Promissory Note in the principal amount of $63,825, representing $55,000 borrowed from Carebourn and an original issue discount of $8,325 (the “ September 2016 Carebourn Convertible Note ”), pursuant to a Securities Purchase Agreement, dated September 23, 2016. The September 2016 Carebourn Convertible Note bears interest at the rate of 12% per annum (22% upon an event of default) and is due and payable on September 23, 2017.



The principal amount of the September 2016 Carebourn Convertible Note and all accrued interest is convertible at the option of the holder thereof into our common stock at any time following the 180th day after the September 2016 Carebourn Convertible Note was issued. The conversion price of the September 2016 Carebourn Convertible Note is equal to 50% of the average of the lowest three trading prices of our common stock for the 20 trading days prior to the conversion date. At no time can the September 2016 Carebourn Convertible Note be converted into shares of our common stock if such conversion results in Carebourn and its affiliates owning an aggregate of in excess of 4.99% of the then outstanding shares of our common stock, subject to the waiver of such limitation by Carebourn with at least 61 days prior written notice.



The September 2016 Carebourn Convertible Note provides for customary events of default and contains customary positive and negative covenants. Additionally, upon the occurrence of certain fundamental defaults, as described in the September 2016 Carebourn Convertible Note , we are required to pay Carebourn liquidated damages in addition to the amount owed under the September 2016 Carebourn Convertible Note.



We have the right to prepay in full the unpaid principal and interest on the September 2016 Carebourn Convertible Note, upon notice, any time prior to the 364 th day after the issuance date of the note, subject to payment of a prepayment amount ranging from 130% to 150% of the then outstanding balance on the September 2016 Carebourn Convertible Note (inclusive of accrued and unpaid interest and any default amounts then owing), depending on when such prepayment is made.



We paid $10,000 in fees to a related party of Carebourn’s and $1,000 in attorney’s fees in connection with the sale of the September 2016 Carebourn Convertible Note.






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In the event that the September 2016 Carebourn Convertible Note is not repaid in cash in its entirety, Company shareholders may suffer dilution if and to the extent that the balance of the September 2016 Carebourn Convertible Note is converted into common stock.



On April 12, 2017, our Board of Directors and majority shareholder (i.e., George J. Powell, III, the Company’s Chief Executive Officer and Director, who holds 1,000 shares of Series A Preferred Stock, which provides the holder thereof the right to vote 51% of the vote on all shareholder matters), via a written consent to action without meeting, approved the filing of a Certificate of Amendment to our Articles of Incorporation to increase the authorized common stock of the Company, from one billion (1,000,000,000) shares of common stock, $0.001 par value per share, to one billion, nine hundred and ninety million (1,990,000,000) shares of common stock, $0.001 par value share (the “ Amendment ”).



The Amendment did not change (a) the number of authorized shares of our preferred stock, which remained ten million (10,000,000) shares of preferred stock, $0.001 par value per share; (b) the rights of our Board of Directors to designate the rights and preferences of such preferred stock (as further described in our Articles of Amendment, as amended); or (c) the previously designated series of our preferred stock.



On April 13, 2017, the Company filed the Amendment with the Nevada Secretary of State, which became effective on the same date.



In April 2017, the Company entered into a consulting agreement with a consultant, pursuant to which the consultant agreed to provide business consulting services to the company for a term of three months (extendable at the option of the parties), and the Company agreed to pay the consultant $25,000 per month in consideration for such services, with $25,000 due upon the parties’ entry into the agreement, $25,000 due in 15 days and $25,000 due in 30 days.



On April 12, 2017, pursuant to a Note Purchase Agreement, we sold a 10% Convertible Debenture in the principal amount of $32,500 (which included a $5,000 original issue discount) to Sojourn Investments, LP (“ Sojourn ” and the “ Sojourn Debenture ”). The principal amount of the debenture accrues at 10% per annum until paid or converted into common stock (18% upon the occurrence of an event of default). The Sojourn Debenture has a maturity date of January 12, 2018, provided the debenture can be repaid at any time, provided that if repaid more than 30 days after the issuance date, we are required to pay 130% of the principal amount of the debenture, together with accrued interest.



The Sojourn Debenture is convertible into shares of our common stock at any time, at a conversion price equal to 58% of the average of the lowest three (3) closing prices during the prior 20 trading days.



In the event we fail to deliver the shares of common stock issuable upon conversion of the debenture within three business days of our receipt of a conversion notice, we are required to pay Sojourn $1,000 per day for each day that we fail to deliver such shares for up to the first 30 days that the failure continues.



At no time may the Sojourn Debenture be converted into shares of our common stock if such conversion would result in Sojourn and its affiliates owning an aggregate of in excess of 4.99% of the then outstanding shares of our common stock.



The Sojourn Debenture provides for standard and customary events of default such as failing to timely make payments under the Sojourn Debenture when due and the failure of the Company to timely comply with the Exchange Act reporting requirements. Additionally, upon the occurrence of certain defaults, as described in the Sojourn Debenture , we are required to pay Sojourn liquidated damages in addition to the amount owed under the Sojourn Debenture .



We hope to repay the Sojourn Debenture prior to any conversion. In the event that the Sojourn Debenture is not repaid in cash in its entirety, Company shareholders may suffer dilution if and to the extent that the balance of the Sojourn Debenture is converted into common stock.






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On April 17, 2017, we sold Carebourn a Convertible Promissory Note in the principal amount of $135,575 (the “ April 2017 Carebourn Convertible Note ”), pursuant to a Securities Purchase Agreement, dated April 17, 2017. The April 2017 Carebourn Convertible Note bears interest at the rate of 12% per annum (22% upon an event of default) and is due and payable on April 17, 2018. The April 2017 Carebourn Convertible Note had an original issue discount of $27,075. In addition, we paid $8,500 of Carebourn’s expenses and attorney fees in connection with the sale of the note, which were included in the principal amount of the note.



Periodic payments are due by us on the April 2017 Carebourn Convertible Note at the rate of $565 per day ($135,575 / 240 days)(the “ Repayment Amount ”), via direct withdrawal from our bank account. The Repayment Amount automatically adjusts to a prorated higher amount in the amount any penalties or events of default occur under the April 2017 Carebourn Convertible Note.



The April 2017 Carebourn Convertible Note provides for standard and customary events of default such as failing to timely make payments under the April 2017 Carebourn Convertible Note when due, the failure of the Company to timely comply with the Exchange Act reporting requirements and the failure to maintain a listing on the OTCQB. Additionally, upon the occurrence of certain defaults, as described in the April 2017 Carebourn Convertible Note, we are required to pay Carebourn liquidated damages in addition to the amount owed under the April 2017 Carebourn Convertible Note.



The principal amount of the April 2017 Carebourn Convertible Note and all accrued interest is convertible at the option of the holder thereof into our common stock at any time following the 180th day after the April 2017 Carebourn Convertible Note was issued. The conversion price of the April 2017 Carebourn Convertible Note is equal to 50% of the average of the lowest three (3) trading prices of the Company’s common stock during the twenty trading days prior to the conversion date.



In the event we fail to deliver the shares of common stock issuable upon conversion of the note within three business days of our receipt of a conversion notice, we are required to pay Carebourn $1,500 per day for each day that we fail to deliver such shares.



At no time may the April 2017 Carebourn Convertible Note be converted into shares of our common stock if such conversion would result in Carebourn and its affiliates owning an aggregate of in excess of 4.99% of the then outstanding shares of our common stock.



We may prepay in full the unpaid principal and interest on the April 2017 Carebourn Convertible Note, with at least 20 trading days’ notice, (a) any time prior to the 180th day after the issuance date, by paying 130% of the principal amount of the note together with accrued interest thereon; and (b) any time after the 180th day after the issuance date and prior to the 364 th day after issuance, by paying 150% of the principal amount of the note together with accrued interest thereon.



The April 2017 Carebourn Convertible Note also contains customary positive and negative covenants.



We hope to repay the April 2017 Carebourn Convertible Note prior to any conversion. In the event that the April 2017 Carebourn Convertible Note is not repaid in cash in its entirety, Company shareholders may suffer dilution if and to the extent that the balance of the April 2017 Carebourn Convertible Note is converted into common stock.



Plan of Operations



We have commenced shipping products to several customers, including Frisco Rivet and numerous specialty based accounts. We are also working diligently to finalize programs with numerous other accounts. Notwithstanding the above, we believe we need $1.5 million of additional funding for production in the near term and for our operations for the next 12 months and $2.5 million for our operations over the next 24 months. We plan to raise funding subsequent to the date of this report through the sale of debt or equity, which may not be available on favorable terms, if at all. We require additional funding to (a) fund production on new programs that are coming on line; (b) fund additional sales and marketing programs to enhance revenue growth; (c) fund development of and warehouse inventory for an E-Commerce site; (d) fund synergistic acquisitions; and (e) to bridge operational working capital until such time, if ever, as we can generate sufficient revenues to support our expenses. If we are unable to access additional capital moving forward, it will hurt our ability to grow and to generate future revenues. We may not be able to increase sales or obtain additional financing, if necessary, at a level to meet our current obligations to continue as a going concern.






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Results of Operations



Three months ended March 31, 2017 versus the three months ended March 31, 2016



The following table presents the Company’s results of operations for the three months ended March 31, 2017 compared to the three months ended March 31, 2016




For Quarter Ended
March 31,
2017 2016 $ Change % Change

Revenue $ 33,479 $ 18,237 $ 15,242 83.6 %
Cost Of Goods Sold (24,628 ) (15,198 ) (9,430 ) 62.0 %

Gross Profit 8,851 3,039 5,812 191.2 %

Operating Expenses
Selling, general and administrative 89,074 375,296 (286,222 ) (76.3 %)

Total Operating Expenses 89,074 375,296 (286,222 ) (76.3 %)

Loss From Operations (80,233 ) (372,257 ) 292,024 (78.4 %)

Other Income (Expense)
Gain on conversion 22,757 — 22,757 100.0 %
Change in fair value of derivative (344,249 ) 154,014 (498,263 ) (323.5 %)
Derivative liability expense – insufficient shares 561,447 (254,303 ) 815,750 (320.8 %)
Interest expense (49,183 ) (11,967 ) (37,216 ) 311.0 %

Total Other Income (Expense) 190,772 (112,256 ) 303,028 (269.9 %)

Net Income (Loss) $ 110,549 $ (484,513 ) $ 595,062 (122.8 %)



Revenue and Gross Loss



During the three months ended March 31, 2017, the Company generated $33,479 in revenues through the sale of goods with associated costs of $24,628. The Company recognized a gross profit of $8,851 for the three months ended March 31, 2017. During the three months ended March 31, 2016, the Company generated $18,237 in revenues through the sale of goods with associated costs of $15,198. The Company recognized a gross profit of $3,039 for the three months ended March 31, 2016.



Operating expenses



The Company incurred $89,074 in selling, general and administrative expenses for the three months ended March 31, 2017, a $286,222 decrease from the $375,296 in selling, general and administrative expenses incurred during the three months ended March 31, 2016. This decrease is directly related to the limited cash resources which the Company had during the three months ending March 31, 2017. Selling, general and administrative expenses consist of expenses the Company incurs during day-to-day operations.






19






During the three months ended March 31, 2017, the Company incurred $1,000 of consulting expenses, which are included under selling, general and administrative expenses. The Company incurred $33,387 consulting expenses during the three months ended March 31, 2016. Consulting expenses relate to the development of products within the corporate logo wear industry made from sustainable textiles.



During the three months ended March 31, 2017, the Company incurred $852 of legal, accounting and professional expenses, which are included under selling, general and administrative expenses, which is a $151,219 decrease from the $152,071 incurred during the three months ended March 31, 2016. Legal, accounting and professional expenses relate to the Company’s registration statement and other filings with the Securities and Exchange Commission. The main reason for the decrease in professional fees was the cost of the preparation of the Company’s Form S-1 registration statement during the prior period. Additionally, the Company did not have the resources in place to begin work on its required periodic reports during the three months ending March 31, 2017.



During the three months ended March 31, 2017, the Company incurred $656 of product development expenses, which are included under selling, general and administrative expenses, which is a $24,588 decrease compared to the $25,244 incurred during the three months ended March 31, 2017. The product development costs relate to the development of products within the corporate logo wear industry made from sustainable textiles, and were higher in the prior period as the Company was just starting its operations during that period. In the near term the Company expects product development expenses to remain consistent but over time and as revenue increases, we anticipate product development expenses to level out as a percentage of sales. As we get requests for products from new clients we anticipate our development costs spiking, as each customer will want specific items developed for their specific needs. We will likely experience ups and downs with regards to product development costs for these specific reasons in the foreseeable future.



During the three months ended March 31, 2017, the Company incurred $10,908 of travel expenses, which are included under selling, general and administrative expenses, which is a $40,249 decrease from the $51,157 incurred during the three months ended March 31, 2016. Travel expenses relate to the efforts by management to meet with new customers and potential customers and vary from period-to-period. Over time the Company expects to see a leveling off of these costs; however, as the Company grows the Company anticipates these expenses increasing.



During the three months ended March 31, 2017, the Company recorded $ 62,000 of non-cash compensation related to the stock issuance to the Company’s COO and a consultant, which is included under selling, general and administrative expenses. During the three months ended March 31, 2016, the Company recorded $75,000 of non-cash compensation related to the stock issuance to the Company’s COO and a consultant.



Other income (expense)





During the three months ended March 31, 2017, the Company reported $49,183 of interest expense compared to $11,967 reported during the three months ended March 31, 2016. The interest expense relates to the promissory notes outstanding as described in greater detail in Notes 3 and 4 to the financial statements included herein.



During the three months ended March 31, 2017, the Company recognized a loss of $344,249 on change in fair value of derivative in connection with the valuation of the derivative liabilities (see Notes 4 and 5 of the financial statements included herein), compared to a gain on change in fair value of derivative of $154,014 for the three months ended March 31, 2016.



The Company recognized a $561,447 gain in connection with insufficient shares being available for the Company’s derivative liability for the three months ended March 31, 2017, compared to an expense of $254,303 in connection therewith for the three months ended March 31, 2016.



The Company had a $22,757 gain on the conversion of debt in connection with the conversion of amounts due under the terms of certain convertible promissory notes into shares of our common stock for the three months ended March 31, 2017.






20






Net income (loss)



The Company had net income for the three months ended March 31, 2017 of $110,549, a $595,062 increase from the net loss of $484,513 incurred during the three months ended March 31, 2016. The increase in net income was primarily due to the reasons described above.



Liquidity and Capital Resources



The Company had an accumulated deficit at March 31, 2017 of approximately $14.4 million. The Company had net income of $110,549 during the three months ended March 31, 2017, had $64,000 of current assets as of March 31, 2017, consisting solely of prepaid expenses, had only $76,122 in total assets and has negative working capital of $2,297,864, as of March 31, 2017. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to obtain additional financing or refinancing as may be required and, ultimately, to attain profitable operations. Management’s plans to eliminate the going concern situation include, but are not limited to, raising additional capital through the issuance of debt and equity, and improved cash flow management. Failure to raise additional capital or improve its performance in the next 12 months may cause the Company to significantly curtail its business activities and expansion plans within the next twelve months.



The Company had no cash as of March 31, 2017, compared to $47 as of March 31, 2016.



We had $76,122 of total assets as of March 31, 2017, consisting solely of fixed assets, net of $12,122.



We had total liabilities of $2,561,864 as of March 31, 2017, including current liabilities consisting of accounts payable and accrued expenses of $328,120, accrued interest on our convertible notes of $153,066, notes payable of $82,500, convertible notes, net of discount, of $546,999 and derivative liability of $1,251,179, and long-term liabilities consisting of notes payable, net of current portion, of $200,000.



Our outstanding promissory notes, convertible notes and derivative liability are described in greater detail in Notes 3, 4 and 5, to the financial statements attached herein and under “ Part I - Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Transactions ”, above.



Cash Flows



Three Months Ending
March 31,
2017 2016
Net cash used by operating activities $ (7,747 ) $ (240,514 )
Net cash used by investing activities $ — $ 13,928
Net cash provided by financing activities $ 7,700 $ 250,000



Operating Activities



Net cash used by operating activities for the three months ended March 31, 2017 was mainly due to non-cash items including a derivative liability of $561,447, offset by $344,248 of loss on derivative revaluation and $110,549 of net income.



Investing Activities



Net cash used by investing activities for the three months ended March 31, 2016 was solely due to the purchase of fixed assets of $13,928. We had no net cash used by investing activities for the three months ended March 31, 2017.






21






Financing Activities



Net cash provided by financing activities for the three months ended March 31, 2016, was from the sale of Series B Preferred Stock of $250,000. We had $7,700 of net cash provided by financing activities for the three months ended March 31, 2017 related to proceeds from notes payable, net of repayments.



From time to time, we may attempt to raise capital through either equity or debt offerings. Our capital requirements will depend on many factors, including, among other things, the rate at which our business grows, with corresponding demands for working capital and expansion capacity. We could be required, or may elect, to seek additional funding through public or private equity, debt financing or bank financing.



Critical Estimates and Judgments



The preparation of the Company’s financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management evaluates its estimates and judgments, including those related to receivables and accrued expenses. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable based on the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of the Company’s financial statements include estimates as to the appropriate carrying value of the Company’s intangible assets, the amount of stock compensation, and the amount of accrued liabilities that are not readily attainable from other sources. These accounting policies are described at relevant sections in this discussion and analysis and in the notes to the consolidated financial statements.



The discussion in this report contains forward-looking statements that involve risks and uncertainties. The Company’s future actual results may differ materially from the results discussed herein, including those in the forward-looking statements.



Item 3. Quantitative and Qualitative Disclosures about Market Risk



Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “ smaller reporting company, ” as defined by Rule 229.10(f)(1).



Item 4. Controls and Procedures



Evaluation of Disclosure Controls and Procedures



We have established and maintain a system of disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed with the Commission pursuant to the Exchange, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Commission and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Interim Chief Financial Officer (CFO), to allow timely decisions regarding required disclosures.



Management, with the participation of our CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. As of March 31, 2017, based on the evaluation of these disclosure controls and procedures, and in light of the reasons described below, our CEO and CFO have concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed in our reports filed with the Commission pursuant to the Exchange Act, is recorded properly, processed, summarized and reported within the time periods specified in the rules and forms of the Commission and that such information is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosures.






22





Management has identified the following control deficiencies that represent material weaknesses as of March 31, 2017:



i) Lack of segregation of duties . 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. Management will periodically reevaluate this situation.



ii) Lack of an independent audit committee . Although the Board of Directors serves as an audit committee, it is not comprised solely of independent directors. We may establish an audit committee comprised solely of independent directors when we have sufficient capital resources and working capital to attract qualified independent directors and to maintain such a committee.



iii) Insufficient number of independent directors . At the present time, our Board of Directors does not consist of a majority of independent directors, a factor that is counter to corporate governance practices as set forth by the rules of various stock exchanges.



Due to a lack of financial resources, we are not able to, and do not intend to, immediately take any action to remediate these material weaknesses. We will not be able to do so until we acquire sufficient financing to do so. We will implement further controls as circumstances, cash flow, and working capital permit. Notwithstanding the assessment that our disclosure controls and procedures were not effective and that there were material weaknesses as identified in this report, we believe that our financial statements fairly present our financial position, results of operations and cash flows for the periods covered thereby in all material respects.



Changes in Internal Control Over Financial Reporting



There were no changes in our internal control over financial reporting during the three months ended March 31, 2017, that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting, including any corrective actions with regard to significant deficiencies and material weaknesses.






23





PART II – OTHER INFORMATION



Item 1. Legal Proceedings



Although we may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business, we are not currently a party to any material legal proceeding. In addition, we are not aware of any material legal or governmental proceedings against us, or contemplated to be brought against us.



Item 1A. Risk Factors



There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Commission on May 22, 2017, under the heading “ Risk Factors ”, except as provided below, and investors should review the risks provided in the Form 10-K and below, prior to making an investment in the Company. The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in the Form 10-K for the year ended December 31, 2016, under “ Risk Factors ” and below, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.



There is substantial doubt about the Company’s ability to continue as a going concern.



The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. The Company has had only limited revenues since inception. The Company had an accumulated deficit at March 31, 2017 of approximately $14.4 million. The Company had net income of $110,549 during the three months ended March 31, 2017, had only $64,000 of current assets of March 31, 2017, consisting solely of prepaid expenses, and only $72,122 in total assets, and had no cash and negative working capital of $2,297,864 as of March 31, 2017. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to obtain additional financing or refinancing as may be required and, ultimately, to attain profitable operations. Management’s plans to eliminate the going concern situation include, but are not limited to, the raise of additional capital through issuance of debt and equity, improved cash flow management. If we are unable to raise additional funding our business would be jeopardized and the Company may not be able to continue. If we ceased operations, it is likely that all of our investors would lose their investment.



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds



On March 22, 2017, we issued 20 million shares of common stock to Anubis Capital Partners in connection with the conversion of debt.



On April 7, 2017, we issued 21,481,481 shares of common stock to Anubis Capital Partners in connection with the conversion of debt.



On February 9, 2017, the Company entered into an Advertising Services Agreement (the “ Advertising Agreement ”) with Cicero Consulting Group, LLC (“ Cicero ”), pursuant to which Cicero agreed to provide marketing and advertising services to the Company for a term of six months. In consideration for agreeing to provide those services we issued Cicero 32 million shares of common stock.



We claim an exemption from registration pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act, and the rules and regulations promulgated thereunder in connection with the issuance described above since the foregoing issuance did not involve a public offering, the recipient was (a) an “ accredited investor ”, and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Securities Act.. With respect to the transaction described above, no general solicitation was made either by us or by any person acting on our behalf. The transaction was privately negotiated, and did not involve any kind of public solicitation. No underwriters or agents were involved in the foregoing issuance and we paid no underwriting discounts or commissions. The securities are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom.



We claim an exemption from registration provided by Section 3(a)(9) of the Securities Act for the debt conversions described above, as the securities were exchanged by us with our existing security holders in a transaction where no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange.






24





As described above under “ Part I - Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Transactions ”, on April 12, 2017, we sold Sojourn the Sojourn Debenture and on April 17, 2017, we sold Carebourn the April 2017 Carebourn Convertible Note. The note and debenture are convertible into our common stock at a discount to the trading price of our common stock as described in greater detail above. We claim an exemption from registration for the issuance of such convertible securities pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act, since the foregoing issuances did not involve a public offering, the recipients were (i) “ accredited investors ”; and/or (ii) had access to similar documentation and information as would be required in a Registration Statement under the Securities Act, and the recipients acquired the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The securities were offered without any general solicitation by us or our representatives. No underwriters or agents were involved in the foregoing issuance and we paid no underwriting discounts or commissions. The securities sold are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom. The securities were not registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.



Use of Proceeds From Sale of Registered Securities



None.



Issuer Purchases of Equity Securities



None.



Item 3. Defaults Upon Senior Securities



None.



Item 4. Mine Safety Disclosures



Not applicable.



Item 5. Other Information



None.



Item 6. Exhibits



See the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.






25





SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



Code Green Apparel Corp.

Date: May 25, 2017 By: /s/ George J. Powell, III
George J. Powell, III
Chief Executive Officer and Interim Chief Financial Officer
(Principal Executive Officer and
Principal Financial/Accounting Officer)






26





EXHIBIT INDEX





Incorporated By Reference
Exhibit
No. Description Filed
Herewith Form Exhibit Filing
Date/Period
End Date File
Number
2.1+ Asset Purchase Agreement by and between Code Green Apparel Corp., as purchaser and 10Star LLC, as seller, dated June 23, 2016 8-K 2.1 7/13/2016 333-206089
3.1 Articles and Restated By-Laws S-1 3.1 8/4/15 333-206089
3.2 Certificate of Designation of Series B Convertible Preferred Stock S-1/A 99.3 1/29/16 333-206089
3.3 Certificate of Amendment to the Articles of Incorporation of Code Green Apparel Corp. (increasing the authorized capitalization to 2,000,000,000 shares, representing 1,990,000,000 shares of common stock and 10,000,000 shares of preferred stock), as filed with the Secretary of State of Nevada on April 13, 2017 8-K 3.1 4/14/17 333-206089
10.1 Form of Investor Subscription Agreement S-1/A 10.2 11/13/15 333-206089
10.2 Employment Agreement with George J. Powell, III*** S-1/A 99.2 11/13/15 333-206089
10.3 Investor Subscription Agreement for Series B Convertible Preferred Stock S-1/A 99.4 1/29/16 333-206089
10.4 Exchange Agreement dated December 7, 2015 between the Company and Dr. Eric H. Scheffey S-1/A 99.5 1/29/16 333-206089
10.5 $150,000 Convertible Promisory Note dated December 3, 2015 between the Company and Beaufort Capital Partners, LLC S-1/A 10.5 4/11/16 333-206089
10.6 Promissory Note by Code Green Apparel Corp., in favor of 10Star LLC ($200,000) 8-K 10.1 7/13/2016 333-206089
10.7 Form of Executive Employment Agreement*** 8-K 10.2 7/13/2016 333-206089
10.8 Form of Restricted Stock Agreement*** 8-K 10.3 7/13/2016 333-206089
10.9 June 15, 2016 Securities Purchase Agreement with Carebourn Capital, L.P. 10-Q 10.4 6/30/16 333-206089
10.10 $121,325 Convertible Promissory Note owed to Carebourn Capital, L.P. 10-Q 10.5 6/30/16 333-206089
10.11 $75,000 Promissory Note dated July 23, 2016 10-Q 10.6 9/30/16 333-206089
10.12 September 23, 2016 Securities Purchase Agreement with Carebourn Capital, L.P. 10-Q 10.7 9/30/16 333-206089
10.13 September 23, 2016 $63,825 Convertible Promissory Note owed to Carebourn Capital, L.P. 10-Q 10.8 9/30/16 333-206089
10.14 Note Purchase Agreement dated April 12, 2017, by and between Code Green Apparel Corp. and Sojourn Investments, LP 8-K 10.1 4/26/17 000-53434
10.15 10% Convertible Debenture dated April 12, 2017, by Code Green Apparel Corp. in favor of Sojourn Investments, LP 8-K 10.2 4/26/17 000-53434
10.16 Securities Purchase Agreement dated April 17, 2017, by and between Code Green Apparel Corp. and Carebourn Capital, L.P. 8-K 10.3 4/26/17 000-53434
10.17 $135,575 Convertible Promissory Note dated April 17, 2017, by Code Green Apparel Corp. in favor of Carebourn Capital, L.P. 8-K 10.4 4/26/17 000-53434
16.1 Letter From K. Brice Toussaint 8-K 16.1 8/22/16 333-206089
16.2 Letter From Patrick D. Heyn, CPA, P.A. 8-K 16.1 5/17/17 000-53434
31.1 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X
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 *
101.INS XBRL Instance Document X
101.SCH XBRL Taxonomy Extension Schema Document X
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X
101.DEF XBRL Taxonomy Extension Definition Linkbase Document X
101.LAB XBRL Taxonomy Extension Label Linkbase Document X
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X



*Furnished herein.



*** Indicates management contract or compensatory plan or arrangement.



+ Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request; provided, however that Code Green Apparel Corp. may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act, for any schedule or exhibit so furnished.






27





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Latest CGAC Messages


Hazerk Thu May 25, 2017 5:10 PM (13 minutes ago)
10 q out

Jas Thu May 25, 2017 3:43 PM (1 hours ago)
Did CGAC get news today? Why are we

Hazerk Thu May 25, 2017 2:06 PM (3 hours ago)
Wake the beast!!! CGAC super thin

Hazerk Wed May 24, 2017 7:39 AM (1 day ago)
No after market trades yesterday, so that''s a

common_cents Wed May 24, 2017 7:10 AM (1 day ago)
I have been told it will be filed

Hazerk Wed May 24, 2017 6:39 AM (1 day ago)
I''m pretty sure it''s 5 days after the

Jas Tue May 23, 2017 11:23 PM (1 day ago)
When is 10q filing due again, after being

Hazerk Tue May 23, 2017 3:45 PM (2 days ago)
10q should be out soon CGAC

Hazerk Tue May 23, 2017 8:58 AM (2 days ago)
Yup, time will tell ...let''s hope for the best!!

common_cents Tue May 23, 2017 8:39 AM (2 days ago)
One can only hope.................



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