GREENKRAFT, INC. - Annual Report: 2018 (Form 10-K)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

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

For the transition period from ___________ to ___________.

Commission file number 000-53047

GREENKRAFT, INC.

(Exact name of registrant as specified in its charter)

2530 S. Birch Street

Santa Ana, California 92707

(Address of principal executive offices)

(714) 545-7777

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common Stock, $0.001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ] No [X]

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 [X]

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 (§ 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 [X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer and “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [  ] Accelerated filer [  ] Non-accelerated filer [X] Emerging growth reporting company [  ] Smaller reporting Company [X]

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 Act) Yes [  ] No [X]

As of June 30, 2018, which was the last business day of the registrant’s most recent second fiscal quarter, the aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant was $7,777,601 based on our closing price of $0.074 per share. For the purposes of the foregoing calculation only, all directors, executive officers, related parties and holders of more than 10% of the issued and outstanding common stock of the registrant have been deemed affiliates.

As of May 10, 2019 the registrant’s outstanding stock consisted of 105,102,718 common shares.

GREENKRAFT, INC.

Form 10-K

TABLE OF CONTENTS

PART I

ITEM 1. DESCRIPTION OF BUSINESS

Forward-looking Statements

This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable laws, including the securities laws of the United States, we do not intend to update any of the forward-looking statements so as to conform these statements to actual results.

As used in this annual report, the terms “we”, “us”, “our”, “the Company”, and “Greenkraft” mean Greenkraft, Inc., unless otherwise indicated.

All dollar amounts refer to US dollars unless otherwise indicated.

Overview

We were incorporated on September 27, 2006 in Nevada as Sunrise Global, Inc. Until closing of the Acquisition of Greenkraft on December 6, 2013 (as described below), we were a recycled industrial waste resale company. On December 27, 2013, we changed our corporate name to Greenkraft, Inc. from Sunrise Global, Inc., which reflected our acquisition of Greenkraft resulting in us now conducting Greenkraft’s business. Concurrent with the name change, we effectuated a 2-for-1 forward split, also effective December 27, 2013.

We are a manufacturer and distributor of automotive products. We manufacture commercial forward trucks for vehicle classes 4, 5, 6, and 7 (GVW ranging from 14,001 lbs. to 33,000 lbs.) in alternative fuels. We also manufacture and sell alternative fuel systems to convert petroleum based fuels to natural gas and propane fuels.

Our executive offices are located at 2530 S. Birch Street, Santa Ana, CA 92707. Our telephone number is (714) 545-7777 and our Internet address is www.greenkraftinc.com.

Acquisition of Greenkraft, Inc.

On December 5, 2013, we entered into a Share Exchange Agreement (the “Purchase Agreement”) with the sole stockholder (the “Stockholder”) of Greenkraft, Inc., a California corporation (“Greenkraft”), pursuant to which, on December 6, 2013 (the “Closing Date”), we issued 83,000,000 shares of our common stock to the Stockholder in consideration of the Stockholder’s transfer of all of his Greenkraft shares to our wholly-owned acquisition subsidiary, Greenkraft, Inc, a Nevada corporation (the “Acquisition Subsidiary)., at which time Greenkraft became Acquisition Subsidiary’s wholly owned subsidiary (the “Acquisition”).

Prior to the Acquisition, Greenkraft was our controlling stockholder, owning approximately 68% of our common stock which it purchased in May 2014. In addition, George Gemayel, Greenkraft’s sole shareholder, president and director, was appointed as our president and sole director in connection with their purchase of the controlling interest in May 2013.

As a condition to the closing of the Acquisition, on the Closing Date, 4,600,000 shares of our issued and outstanding common stock previously held by Greenkraft were cancelled pursuant to the terms of the Purchase Agreement (the “Cancelled Shares”).

Following the Acquisition, we now conduct operations through our wholly-owned subsidiary, Greenkraft.

Industry Overview

The combination of environmental pressures, regulations, and alternative fuel vehicle initiatives has resulted in the transportation industry offering environmentally friendly, fuel-efficient vehicles. Currently automotive manufacturers are actively engaged in the competitive pursuit of innovative, clean, alternative fuel vehicles – particularly as they strive to meet new emissions rules and contribute to reducing greenhouse gases. These alternative fuel vehicles can provide needed performance, sustained mobility, and immediate emissions reductions in the industry. Compressed natural gas (CNG) and liquefied petroleum gas (LPG) are abundantly available in the US, and a growing network of fueling stations exists in California. Light- and medium-duty service trucks are utilized by a growing business sector. Developing these vehicles to run on CNG, LPG, and electric will offer a cleaner fuel choice for these business operators without sacrificing availability, safety, or convenience.

Natural gas powers about 112,000 vehicles in the United State and roughly 14.8 million vehicles worldwide. Natural gas vehicles which can run on compressed natural gas are good choices for high mileage centrally fueled fleets which operate within a limited area. For vehicles needing to travel long distances, liquefied natural gas is a good choice. CNG and LNG are considered alternative fuels under the Energy Policy Act of 1992.

Today’s fleets are increasingly interested in medium and heavy duty vehicles that use alternative fuels or advanced technologies that can help reduce operating costs, meet emission requirements and support US energy independence. Vehicle and engine manufacturers are responding to this interest with a wide range of options across a steadily growing number of vehicle applications.

In the absence of federal legislation, individual states have initiated and passed bills to provide incentives to encourage the use of domestic energy sources such as natural gas. Texas Senate Bills 20 and 385 have been passed and authorize funding for approximately $16 million for natural gas vehicle rebates, which includes converting heavy-duty fleet vehicles to natural gas, and $4 million per year for the next two years for the establishment of natural gas stations between the cities of Dallas, San Antonio and Houston. California, through the California Energy Commission CEC with funds through Assembly Bill 118, has established the Natural Gas Vehicle Buy-Down Program, a rebate program to incentivize the deployment of natural gas and propane vehicles in all weight classes in California.

Our Principal Products and Services

We currently offer three main products and services at this time:

Commercial Forward Cab Trucks with Alternative Fuels

We currently offer commercial trucks (Classes 4, 5, 6, 7) with dedicated natural gas and propane fuel system for 6.0 liter Greenkraft/General Motor (GM) engines for 14,000 lbs. and above gross vehicle weight rating (GVWR) trucks and custom chassis manufacturers. We offer a range of Class 4-7 cab-forward trucks based on chassis from JAC, China’s Anhui Jianghuai Automobile Company. We then install 6.0-liter GM engines and our CNG or LPG fuel systems and for CNG we add Quantum Technologies’ tanks in the vehicle. The CNG fuel systems are assembled by Greenkraft using parts manufactured by various suppliers. The chassis and cabin are imported from overseas and the powertrain is assembled in the chassis. Prior to order of the chassis, we provided specific design specifications to JAC to ensure that the chassis comply with US guidelines and specifications. We have received California Air Resources Board (CARB) and U.S. Environmental Protection Agency (EPA) certification of 2017 and 2018 dedicated-compressed natural gas fuel systems for its 6.0-liter GM engines for 14,000 lbs. and above GVWR trucks. We use our strategic partner, CEE, LLC for the testing of its engines prior to applying for the CARB and EPA certifications referred to above. In addition, we used CEE, LLC and G&K Automotive, another strategic partner, in connection with research and development activities. See “—Strategic Partners” below.

Customers

Our end users are Fleet Operators, Cities, and Businesses, and distribute through dealers.

Funding for the incremental cost of the vehicles was provided by the California Energy Commission (CEC) and the Mobile Source for Pollution Reduction Review Committee. The CEC provides up to (i) $20,000 per vehicle that are up to 26,000 LBS GVWR and (ii) $26,000 per vehicle that are over 26,000 LBS GVWR. These funds are paid directly to us and taken in as deposits until actual delivery of the vehicles at which time it is deemed revenue. We have received $2,024,004 million from the CEC related to the sale of CNG and propane trucks.

In addition, we have dealer relationships with each of (i) Superior Transportation for sales of CNG and LPG vehicles in Texas (ii) A.R. Natural Gas Fueling Systems for sales of our CNG vehicles in Pennsylvania, (iii) Demary Trucks, (iv) Taylor Trucks in Indiana, and (v) AZ commercial trucks in Arizona, We are adding new dealers in 2018. We have had discussions with other dealers throughout the United States and intend to enter into formal relationships with these dealers upon completion and assembly of additional truck inventory. There is no guarantee that we will enter into additional contracts or formal relationships with its current customers and additional dealers.

Convert Vehicles for Alternative Fuels

In addition to our offering of new commercial trucks in alternative fuels, we can convert other existing vehicles (such as vehicles manufactured by Ford or GM that do not currently run on alternative fuels) to allow engines to run on CNG or LPG instead of gas or diesel. We have converted vehicles for many dealers.

Suppliers

We have supplier relationships with each of Anhui Jianghuai Automobile Company (JAC Motors), General Motors and Quantum Technologies for supply of the chassis, engine and CNG tanks, respectively.

Anhui Jianghuai Automobile Company (JAC Motors)—Chassis

In October 2012, Greenkraft entered into an agreement with JAC Motors, a Chinese Truck Chassis Manufacturer for the supply of its chassis and cabins. Greenkraft is entitled to use the JAC brand name for manufacturing and distribution of its trucks. The Agreement is for a term of 5-years and was renewed for an additional 5-years.

Greenkraft has relationships with other chassis suppliers. In the event that its relationship with JAC Motors is terminated, Greenkraft is confident that it could procure a relationship with an alternative chassis supplier on commercially reasonable terms.

General Motors (GM)—Engines/Power Trains

In October 2011, Greenkraft entered into an agreement with GM under which Greenkraft will have access to GM motors and power trains for insertion into their alternative fuel trucks. The agreement is for a 3-year term and is renewable every three years. The current agreement is until December 31, 2020. Greenkraft has relationships with other suppliers of engines and power trains. In the event that Greenkraft’s agreement with GM is terminated, it is confident that it could execute agreements with other suppliers for its engines on commercially reasonable terms.

Strategic Partners

We have a strategic relationship with CEE, LLC, an emission laboratory of which George Gemayel is the managing member. CEE, LLC is recognized by EPA and CARB and has certified vehicles for over 30 years. Greenkraft will continue to use CEE for testing of its engines to ensure CARB and EPA compliance.

We also work with an automotive technical division in the automotive safety compliance industry called G&K Automotive Conversion Inc. (“G&K”). G&K is a California based company founded in 1982 to modify and certify foreign motor vehicles to meet the stringent vehicle safety and emission standards of the United States. G&K is certified as a Registered Importer (“RI”) by the Department of Transportation (“DOT”) and is certified as an Independent Commercial Importer (“ICI”) by the Environmental Protection Agency (“EPA”). G&K is also recognized by the California Air Resources board (“CARB”) as an approved motor vehicle modifier. G&K is able to provide DOT, EPA, and CARB certification services at a full-service state-of-the-art facility in Santa Ana, California. Mr. George Gemayel is the president and controlling shareholder of G&K. We do not have a written agreement with G&K governing this relationship.

Sales Distribution Strategy

As discussed above, we already have distribution agreements in place with several dealers. In the event that our relationship with any dealers are terminated, we have relationships with other dealers that we can activate and believe we could enter into additional agreements on commercially reasonable terms. We intend to enter into distribution agreements with other dealers for other territories in the United States. We believe partnering with dealers for distribution of its trucks will have certain advantages such as, experienced trained sales force, service network, and existing customer base and should also serve to reduce marketing costs.

Employees

As of December 31, 2018, we have 6 employees and many subcontractors.

Intellectual Property

We believe that intellectual property protection will be important to our ability to successfully compete in the alternative fuel truck industry. We currently own all rights and patents associated with the Invention “LPG Fuel System” described under Application Number 61908022. This invention relates to the conversion of vehicles to run on LPG. We are currently in the process of recording a formal notice of assignment related to this invention with the United States Patent and Trademark Office.

We intend to rely on a combination of trademark, copyright, certifications and trade secret laws and disclosure restrictions to protect our intellectual property rights. We intend to maintain a policy requiring our employees, consultants and other third parties to enter into confidentiality and proprietary rights agreements and to control access to software, documentation and other proprietary information.

We will enter into confidentiality and invention assignment agreements with our employees and contractors, and nondisclosure agreements with parties with whom we conduct business in order to limit access to and disclosure of our proprietary information.

We will aggressively protect our intellectual property rights by relying on federal, state and common law rights, as well as a variety of administrative procedures. We will pursue the registration of our trademarks, copyrights, and domain names in the U.S. and international jurisdictions.

The steps we have taken to protect our intellectual property rights may not be adequate. Third parties may infringe or misappropriate our proprietary rights. Competitors may also independently develop technologies that are substantially equivalent or superior to the technologies we employ in our services. Failure to protect our proprietary rights adequately could significantly harm our competitive position and results of operations.

Governmental Programs, Incentives and Regulations

California Energy Commission (CEC)

The California Energy Commission was providing buy-downs related to the purchase of alternative fuel trucks to cover the incremental cost of purchasing alternative fuel vehicles. Greenkraft received $2,024,000 from the CEC of which (i) $400,000 was applied to the buy-down of 20 CNG vehicles; (ii) $340,000 was applied to the buy down of 17 CNG vehicles (iii) $400,000 was applied to the buy down of 40 propane vehicles of 14,500 lbs and $884,000 was applied to large CNG vehicles. These amounts were recognized as deferred revenue. These amounts were to be used per truck. Several incentives were received and revenues were recognized. From the amounts received $1.284 million was in the company’s books as deferred income. In 3^rd quarter 2017 the company agreed to return these amounts because of the age of the incentives and apply for new ones. Therefore, the company has converted this amount from deferred income to debt and once new incentives are received the company will apply the new incentives as income per vehicle once the vehicles are sold. The Company began returning the funds to the CEC at a rate of $20,000 per month in 2017.

California Alternative Energy and Advanced Transportation Financing Authority Tax Incentives

We intend to apply for an arrangement with the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) that could result in an exemption from California state sales and use taxes for sale of our trucks.

Regulatory Credits

In connection with the delivery and placement into service of our alternative fuel vehicles in the United States, we may be able to earn various tradable regulatory credits that can be sold to other manufacturers.

Under the Environmental Protection Agency’s (EPA) national greenhouse gas (GHG) emission standards, vehicle manufacturers are required to meet fleet-wide average carbon dioxide emissions standards for cars and trucks at increasingly lower levels annually from 2012 – 2025. Those manufacturers whose fleet wide average fails to meet such standards have a deficit in their emission profile. Those manufacturers whose fleet wide average performs better than such standards may earn credits. Manufacturers may sell excess credits to other manufacturers who can apply such credits to comply with these regulatory requirements. As a manufacturer if we earn GHG credits established by this standard we may enter into contracts for the sale of credits with several automotive manufacturers, if and when such credits are earned by us.

Regulation—EPA Emissions & Certificate of Conformity

Our products are sold to commercial users. Our alternative fuel engines are subject to approval for the U.S. EPA as well as state agencies such as the CARB. We have received Certificates of Conformity from the EPA and Executive Order from CARB for our natural gas and propane fuel engines that go into vehicles (in excess of 14,000 lbs.) We have received certificates for the past few years for the following engines GM 4.8 liter, 6.0 liter, 8.0 liter and Ford 6.8 liter.

Competition

Competition in the automotive industry is intense and evolving. We believe the impact of new regulatory requirements for vehicle emissions, technological advances in powertrain and shifting customer needs and expectations are causing the industry to evolve in the direction of alternative fuel vehicles. We believe the primary competitive factors in our markets include but are not limited to:

The worldwide automotive market, particularly for alternative fuel vehicles, is highly competitive today and we expect it will become even more so in the future.

Most of our current and potential competitors have significantly greater financial, technical, manufacturing, marketing and other resources than we do and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and support of their products. Virtually all of our competitors have more extensive customer bases and broader customer and industry relationships than we do. In addition, almost all of these companies have longer operating histories and greater name recognition than we do. Our competitors may be in a stronger position to respond quickly to new technologies and may be able to design, develop, market and sell their products more effectively.

ITEM 1A. RISK FACTORS

Not required.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our corporate headquarters are located at 2530 S. Birch Street, Santa Ana, CA 92707 and our telephone number is (714) 545-7777. The property where our corporate offices are located is owned by First Standard Real Estate LLC, an entity which is controlled by our President George Gemayel. We have a lease agreement with First Standard Real Estate, LLC, which lease a portion of the building as 20,000 square feet of garage area at a rate of $10,000 per month for a term of 5 years with one month free. The property at our headquarters has space for expansion that Greenkraft may use in the future.

ITEM 3. LEGAL PROCEEDINGS

We know of no material pending or active legal proceedings to which we are a party or concerning any of our properties. We are not aware of any legal proceedings contemplated by any governmental authority against us.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

There is a limited public market for our common shares. Our common shares are quoted on the OTCQB Sheets under the symbol “GKIT”. Trading in stocks quoted on the OTCQB is often thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated to a company’s operations or business prospects. We cannot assure you that there will be a market in the future for our common stock.

OTCQB securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTCQB securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTCQB issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.

Number of Holders

As of December 31, 2018, we had approximately 94 shareholders of record of our common stock.

Dividend Policy

We have not declared any cash dividends on our common stock since our inception and do not anticipate paying such dividends in the foreseeable future. We plan to retain any future earnings for use in our business. Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as the Board of Directors deems relevant.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

Greenkraft had some account payable that was converted to a note during the quarter ended March 31, 2017 and the Company re-classed it to notes payable. The term of the notes is due on demand. Simple interest of 1% is payable upon demand. Prior to maturity the notes may be converted for common stock at a conversion price of $0.001. In 2018 a $2,000 note was converted as well to 2,000,000 shares leaving $5,500 in a convertible note.

Equity Compensation Plan Information

We do not have in effect any compensation plans under which our equity securities are authorized for issuance and we do not have any outstanding stock options.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

We did not purchase any of our shares of common stock or other securities during our fourth quarter of our fiscal year ended December 31, 2018.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Safe Harbor

This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology including, “could” “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential” and the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this Annual Report.

Overview

RESULTS OF OPERATIONS

Working Capital

Cash Flows

Operating Revenues

During the year ended December 31, 2018 we earned revenues of $434,168 compared to revenues of $1,153,429 at the year ended December 31, 2017.

Operating Expenses and Net Loss

During the year ended December 31, 2018, we incurred operating expenses of $548,075 compared with operating expenses of $1,420,196 during the year ended December 31, 2017.

For the year ended December 31, 2018, we incurred a net loss of $692,941 compared with a net loss of $1,031,877 for the year ended December 31, 2017.

Liquidity and Capital Resources

As at December 31, 2018, we had a cash and cash equivalents balance of $23,876 and total assets of $1,987,915 compared with $18,339 of cash and total assets of $2,090,055 as at December 31, 2017. The increase in cash was due to some sales and line we used.

As at December 31, 2018, we had total liabilities of $4,592,720 compared with total liabilities of $4,711,120 at December 31, 2017. The decrease in total liabilities was due to the line of credit and accounts payable being paid off in 2018.

As at December 31, 2018, we had a working capital of $671,062 compared with a working capital deficit of $843,466 as at December 31, 2017.

Cash flow from Operating Activities

During the year ended December 31, 2018, the cash used by operating activities total $519,463 compared to the cash provided by total $360,739 during the year ended December 31, 2017. The cash was primarily used to pay out accounts payable in 2018 related to the inventory purchase for the e-vehicle project.

Cash flow from Investing Activities

During the year ended December 31, 2018, the cash provided by investing activities total $0 compared to the cash used in total $0 during the year ended December 31, 2017. Annual amounts primarily consist of capital expenditures to support our manufacturing efforts.

Cash flow from Financing Activities

During the year ended December 31, 2018, the cash provided by financing activities total $525,000 compared with total $0 during the year ended December 31, 2017.

Liquidity

The accompanying financial statements have been prepared in accordance to FASB Subtopic 205-40, Presentation of Financial Statements—Going Concern. In connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). Greenkraft’s management evaluated the current financial situation and believes the company is able to continue as a going concern within one year.

During the year ended December 31, 2018, the Company incurred a loss from continuing operation of $510,741 and a net loss $692,941, the stockholders’ deficit was $2,604,805 and the working capital was $671,062. The working capital deficit has been majority funded by accounts payable to its related parties and related party debt. Based on the financial support letter from the CEO of Greenkraft, he and his related party entities, has no present or future plans or intentions to (A) liquidate Greenkraft, Inc.; (B) sell or otherwise dispose of all, or a significant portion of, its investment in the Company or otherwise change its capital structure; (C) discontinue providing financial support to Greenkraft, Inc; or (D) pursue the collection if the company has cash flow issues. The Company is expected to have sufficient cash flow to cover the normal business operations for the twelve months-ended December 31, 2019. For the next 12 months following this filing, the Company will continue to receive sales orders, recognize revenue by selling the qualified trucks for the government incentive program, committed financial support from the owner and his related parties to fund its ongoing operation until the Company is able to meet its own obligation as they become due.

Management believes they will have sufficient funds to support their business based on the following: (a) revenues derived from signing up new dealers’ contracts and delivering alternative fuel trucks to them; (b) reclassify accounts payable- related parties and related parties’ debt as non- current liabilities in the amounts of $816,334 and $1,901,916 as of December 31, 2018 and 2017, respectively, which is related to the financial support letter from the CEO, and (c) the CEO can raise additional funds needed to support our business plan. Management intends to seek new capital from owners and related parties to provide needed funds, as necessary. However, there can be no assurance that the Company can raise any additional funds, or if it can, that such funds will be on terms acceptable to the Company.

The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GREENKRAFT, INC.

Index to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Greenkraft, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Greenkraft, Inc. (“the Company”) as of December 31, 2018 and 2017, and the related statements of operations, changes in stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Fruci & Associates II, PLLC

Fruci & Associates II, PLLC

We have served as the Company’s auditor since 2018.

Spokane, Washington

May 10, 2019  

GREENKRAFT, INC.

BALANCE SHEETS

The accompanying notes are an integral part of these financial statements.

GREENKRAFT, INC.

STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these financial statements.

GREENKRAFT, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

The accompanying notes are an integral part of these financial statements.

GREENKRAFT, INC.

STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these financial statements.

GREENKRAFT, INC.

NOTES TO THE FINANCIAL STATEMENTS

December 31, 2018

NOTE 1—ORGANIZATION AND BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Business. Greenkraft, Inc. is a manufacturer and distributor of automotive products. We manufacture commercial forward cabin trucks for vehicles weighing from 14,001 lbs. to 33,000 lbs. in alternative fuels. We also manufacture and sell alternative fuel systems to convert petroleum-based fuels to natural gas and propane fuels.

Basis of Presentation – The accompanying financial statements of the Company were prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).

Reclassifications - Certain prior year amounts have been reclassified to conform with the current year presentation.

Use of estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States necessarily requires management to make estimates and assumptions that affect the amounts reported in the financial statements. We regularly evaluate estimates and judgments based on historical experience and other relevant facts and circumstances. Actual results could differ from those estimates.

Concentration of credit risk – Financial instruments which potentially subject the Company to concentrations of credit risk consist of cash and trade receivables. The Company places its cash with high credit quality financial institutions. At times, such cash may be in excess of the FDIC limit. With respect to trade receivables, the Company routinely assesses the financial strength of its customers and, as a consequence, believes that the receivable credit risk exposure is limited.

Cash and cash equivalents – Cash equivalents are highly liquid investments with an original maturity of three months or less.

Accounts Receivable – Trade accounts receivable consist of amounts due from the sale of trucks. Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within 90 days of receipt of the invoice. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts based on historical collection experience and a review of the current status of trade accounts receivable. There are no amounts considered uncollectable as of December 31, 2018 and 2017.

Inventories – Inventories are primarily raw materials. Inventories are valued at the lower of cost, as determined on a weighted average cost basis, or market. Market value is determined by reference to selling prices after the balance sheet date or to management’s estimates based on prevailing market conditions. Management writes down the inventories to market value if it is below cost. Management also regularly evaluates the composition of its inventories to identify slow-moving and obsolete inventories to determine if valuation allowance is required. Costs of raw material inventories include purchase and related costs incurred in bringing the products to their present location and condition. No allowance was deemed necessary by management as of December 31, 2018 and 2017, respectively.

Property and equipment – Property and equipment are carried at the cost of acquisition or construction and depreciated over the estimated useful lives of the assets. Costs associated with repair and maintenance are expensed as incurred. Costs associated with improvements which extend the life, increase the capacity or improve the efficiency of our property and equipment are capitalized and depreciated over the remaining life of the related asset. Gains and losses on dispositions of equipment are reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are ten years for all the equipment held by the Company. Depreciation expense of $28,052 and $10,944 are recognized for the years ended December 31, 2018 and 2017, respectively.

Research and development – Costs incurred in connection with the development of new products and manufacturing methods are charged to selling, general and administrative expenses as incurred. During the years ended December 31, 2018 and 2017, $0 and $162, respectively, were expensed as research and development costs.

Long Lived Assets - In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360, Property, Plant and Equipment, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicated that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and a current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life.

Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. No impairment was deemed necessary by management as of December 31, 2018 and 2017, respectively.

Revenue recognition – The Company recognizes revenue in accordance with ASC 606, “Revenue from Contracts with Customers” (“ASC 606”). In accordance with ASC 606, the Company applies the following methodology to recognize revenue:

Accordingly, the Company recognizes specific components of revenue as described below:

1. Parts – Performance obligation to deliver “X” parts are recognized as products are shipped. Typically there is not a large volume of parts (recently), thus contract price allocated to performance obligations (ratable parts) as shipped.

2. Service – “Right to invoice” practical expedient pursuant to 606-10-55-18, billed at hourly rates plus parts.

3. Trucks – Performance obligation to deliver system. Recognition of revenue at a point in time, given recognition over time criteria not met pursuant to 606-10-25-24. Final transfer of control passed to customer upon receipt and final acceptance. When the truck is accepted by the customer the final invoice is issued and all deferred revenue is recognized along with the related work in process costs for the truck. Trucks generally take 90 days to manufacture, assemble and then ship to our various customers. As of December 31, 2018 and December 31, 2017 customer deposits were $475,995 and $475,995 respectively.

Estimated warranty obligations are recorded at the time of sale and amortized over the two year warranty period. As of December 31, 2018 and December 31, 2017, warranty liability was $111,023 and $112,000. The company does not offer its customers the option to purchase a warranty separately, thus warranties are accounted for under ASC 460.

Income taxes - Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse.

We have net operating loss carry forwards available to reduce future taxable income. Future tax benefits for these net operating losses carry forwards are recognized to the extent that realization of these benefits is considered more likely than not. To the extent that we will not realize a future tax benefit, a valuation allowance is established.

Earning or Loss per Share - The Company accounts for earnings per share pursuant to ASC 260, Earnings per Share, which requires disclosure on the financial statements of “basic” and “diluted” earnings (loss) per share. Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each year. As there was a net loss for the year ended December 31, 2018 and 2017, basic and diluted losses per share are the same for the year ended December 31, 2018 and 2017 as any potentially dilutive shares would be considered anti-dilutive.

Related Parties - A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

Recently issued accounting pronouncements – Certain reclassifications have been made to the prior period financial information to conform to the presentation used in the financial statements for the year ended December 31, 2018.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Clarification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which eliminates the diversity in practice related to classification of certain cash receipts and payments in the statement of cash flows, by adding or clarifying guidance on eight specific cash flow issues. This new guidance was effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years and early adoption is permitted, including adoption in an interim period. The adoption of this ASU has had no material impact on the Company’s financial statements and disclosures.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”), which provides guidance that will require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This new guidance was effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years and early adoption is permitted, including adoption in an interim period. The adoption of this ASU has had no material impact of the Company’s Statement of Cash Flows.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU clarifies an entity’s ability to modify the terms or conditions of a share-based payment award presented. An entity should account for the effects of a modification unless all the following are met: the fair value of the modified award has not changed from the fair value on the date of issuance; the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and, the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. This new guidance was effective for annual reporting periods beginning after December 15, 2017, including interim periods within those periods. The adoption of this ASU has had no material impact on the Company’s financial statements and disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The ASU requires that a lessee recognize the assets and liabilities that arise from operating 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 leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. This new guidance will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual reporting periods, and early adoption is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently in the process of evaluating the potential effect that the adoption of this standard will have on its financial position and results of operations.

NOTE 2 – RELATED PARTY TRANSACTIONS

The Defiance Company, LLC is a distribution company owned by the Company’s president and controlling stockholder. As of December 31, 2018 and December 31, 2017, accounts payable to the Defiance was $285,389 for both years, respectively. The amount of $285,389 was reclassified to long term accounts payable related party in first quarter 2017. This debt does not require interest and there is no maturity date at this time.

As of December 31, 2018 and December 31, 2017, the Company has notes payable for the amount of $1,901,916 both years, to its President and his related entities. All amounts are due, are unsecured and do not bear interest. This amount was reclassified to long term related party debt because the company’s president does not expect repayment during the next 12 months.

The Company’s president is a member of CEE, LLC which performs emission testing services. During the 12 months ended December 31, 2018, Greenkraft did not have any services performed by CEE, LLC. Greenkraft owes $5,945 to CEE, LLC as of December 31, 2018 and December 31, 2017, for previous service services provided by CEE, LLC however this amount was also reclassified to long term related party debt in 2017. This debt does not require interest and there is no maturity date at this time.

G&K Automotive Conversion Inc. is an automotive safety compliance company that can provide services to Greenkraft as necessary. The president of the company is also the president and controlling shareholder of G&K. There is no amount due to G&K from Greenkraft as of December 31, 2018 and December 31, 2017.

First Warner Properties LLC is the owner of 2215 S. Standard Ave Santa Ana Ca 92707. The company’s president is a member of First Warner. Greenkraft leased the property as assembly plant from First Warner. The term of the lease agreement was from July 2014 to July 2019, with a monthly rent of $27,500. Greenkraft terminated this lease as of August 2016. As of December 31, 2018 and December 31, 2017, Greenkraft owed First Warner Properties $525,000 both years, respectively. This debt does not require interest and there is no maturity date at this time.

First Standard Real Estate LLC is the owner of 2530 South Birch Street, Santa Ana, CA 92707. Greenkraft’s president is a member of First Standard Real Estate LLC. Greenkraft leased a portion of the building designated as 20,000 square feet garage area. The term of the lease agreement is from September 1, 2016 to December 31, 2021, with a monthly rent of $10,000. As of December 31, 2018 and December 31, 2017, Greenkraft owes rent expense of $250,000 and $130,000 to First Standard Real Estate LLC, respectively.

Gem Works LLC is a separate company in the automotive business for vehicles and its owner is related to our Company’s CEO. During 2017 Greenkraft charged Gem Work, LLC $180,152 net sales of e-vehicle acting as agent after gross and net revenue analysis.

The Company reclassified accounts payable- related parties of $816,334 and related parties’ debt of $1,901,916 as non- current liabilities as of March 31, 2017. These amounts were reclassified to long term related party debt because the company’s president does not expect repayment through 2019. This debt does not require interest and there is no maturity date at this time.

During the year ended December 31, 2018, $525,000 provided by the CEO was forgiven.

NOTE 3- PROPERTY AND EQUIPMENT

For the years ended December 31, 2018 and 2017, depreciation expense of fixed assets totaled approximately $28,052 and $10,944, respectively. For the year 2018 we did not purchase fixed assets. Fixed assets comprised the following as of December 31, 2018 and 2017.

NOTE 4 – INVENTORIES

NOTE 5 – CONVERTIBLE NOTES

In 2018 $2,000 was converted to 2,000,000 shares and the company recognized a loss on conversion of $182,200 shown on statements of operation.

On April 22, 2016, the holder of convertible note converted $7,500 of principal to 7,500,000 common shares.

As of December 31, 2018 and 2017 convertible notes had a balance of $5,500 and $7,500 respectively.

The outstanding note is convertible at a rate of 0.001 into shares of common stock.

NOTE 6- COMMON STOCK

As of December 31 2018 and 2017, the Company had 400,000,000 Common shares authorized with a par value of $.0001 per share, of which 105,102,718 and 103,102,718 shares were issued and outstanding, respectively. In 2018 $2,000 was converted to 2,000,000 shares and the company recognized a loss on conversion of $182,200 shown on statement of operation.

NOTE 7 - LONG TERM DEBT

The Company has long term debt of $704,000 from amounts converted from deferred income of $1.284 million to long term debt which consist of incentives received by the CEC that were converted to debt due to age of incentives and for the company to apply to new incentives available by the CEC. The payment terms require $20,000 per month for approximately 64 months and the terms do not require interest.

NOTE 8 - SHORT TERM DEBT

Company has short term debt of $240,000 which is part of 12 months of amounts to be paid for incentives from the $1.284 million company received in the past.

NOTE 9 – COMMITMENT AND CONTINGENCIES

The Company leases space for its offices and warehouse under lease expiring 5 years after September 1, 2017. Rent expense was $120,000 for both 2017 and 2018, payable in installments of $10,000 per month. The future minimum lease payments under these operating leases are as follows below,

NOTE 10 - STOCK ISSUANCE

On May 27, 2017, the Company issued 6,670,000 shares of its common stock pursuant to a Board Resolution that provided for the stock issuance to officers, employees, and directors of the Company. There is no vesting period, or restriction to sell in 12 months. As a result the Company recorded the stock based compensation expense $867,100 based on the closed price on the grant date.

NOTE 11 – PROVISION FOR INCOME TAXES

Greenkraft uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. During fiscal 2018, the company incurred net losses and, therefore, had no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The Company has evaluated Staff Accounting Bulletin No. 118 regarding the impact of the decreased tax rates of the Tax Cuts & Jobs Act. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The U.S. federal income tax rate of 21% is being used due to the new tax law recently enacted.

As of December 31, 2018, the tax years 2015 through 2017, are subject to examination by the federal taxing authorities.

At December 31, 2018 and 2017, deferred tax assets consisted of the following:

NOTE 12 - LIQUIDITY

The accompanying financial statements have been prepared in accordance to FASB Subtopic 205-40, Presentation of Financial Statements—Going Concern. In connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). Greenkraft’s management evaluated the current financial situation of the company and believes the company is able to continue as a going concern within one year.

During the year ended December 31, 2018, the Company incurred a loss from continuing operations of $510,741, and a net loss $692,941 and the stockholders’ deficit was $2,604,805 and the working capital was $671,062. The working capital has been majority funded by accounts payable to its related parties and related party debt. Based on the financial support letter from the CEO of Greenkraft, he and his related party entities, have no present or future plans or intentions to (A) liquidate Greenkraft, Inc.; (B) sell or otherwise dispose of all, or a significant portion of, its investment in the Company or otherwise change its capital structure; (C) discontinue providing financial support to Greenkraft, Inc; or (D) pursue the collection if the company has cash flow issues. The Company is expected to have sufficient cash flow to cover the normal business operation for the twelve month-ended December 31, 2019. In the next 12 months, the Company will continue to receive sales orders, recognize revenue by selling the qualified trucks for the government incentive program, committed financial support from the owner and his related parties to fund its ongoing operation until the Company is able to meet its own obligations as they become due.

Management believes they will have sufficient funds to support their business based on the following: (a) revenues derived from signing up new dealers’ contracts and delivering alternative fuel trucks to them; (b) reclassifying accounts payable- related parties and related parties’ debt as non- current liabilities in amount of $816,334 and $1,901,916, respectively, which is related to the financial support letter from the CEO, and (c) the CEO can raise additional funds needed to support our business plan. Management intends to seek new capital from owners and related parties to provide needed funds, as necessary. However, there can be no assurance that the Company can raise any additional funds, or if it can, that such funds will be on terms acceptable to the Company.

NOTE 13 – SUBSEQUENT EVENTS

In accordance with ASC 855-10, Subsequent Events¸ we have analyzed our operations subsequent to December 31, 2018, through the date the financial statements were available to be issued and have determined that we do not have any material subsequent events to disclose in these financial statements other than the following.

Greenkraft purchased 2,000,000 million shares that were initially converted from a convertible note and have gone back to Greenkraft as treasury stock in April 2019.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

In 2018 we changed auditors from Simon & Edward LLP to Fruci & Associates II, PLLC. There were no disagreements with either firm.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2018 (the “Evaluation Date”). Based upon the evaluation of our disclosure controls and procedures as of the Evaluation Date, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective because of the identification of material weaknesses in our internal control over financial reporting which are identified below, which we view as an integral part of our disclosure controls and procedures.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Our internal controls over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and our receipts and expenditures of are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal controls over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal controls over financial reporting as of December 31, 2018. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO-2013) in Internal Control-Integrated Framework. Based on its evaluation, our management concluded that there are material weaknesses in our internal control over financial reporting and Management has concluded that our internal controls over financial reporting are ineffective as of December 31, 2018. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses which existed as of December 31, 2018 are:

Financial Reporting Systems: We did not have a robust financial consolidation system throughout the period and as a result, adjustments were required in order to produce financial statements for external reporting purposes.

Internal controls over financial reporting:

We do have not effective policies and procedures in place to provide adequate, independent oversight over financial reporting, timely preparation and review of accounting records, and there is a lack of segregation of duties. Also, due to lack of resources and personnel, the Company is unable to properly design or implement a control environment over financial reporting that would be deemed necessary to maintain effective control, ensure accuracy, timeliness, completeness and integrity of financial data, and perform continual and ongoing monitoring of controls and risks.

Fruci & Associates II, PLLC our registered independent public accounting firm, was not required to and has not issued a report concerning the effectiveness of our internal control over financial reporting as of December 31, 2018.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal year ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Officers

Our bylaws allow the number of directors to be fixed by the Board of Directors. Our Board of Directors has fixed the number of directors at five.

Our current directors and officers are as follows:

The directors will serve as directors until our next shareholder meeting or until a successor is elected who accepts the position. Officers hold their positions at the will of the Board of Directors. There are no arrangements, agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of our affairs.

George Gemayel, President, Secretary and Chairman of the Board of Directors. Mr. Gemayel was appointed as President, Secretary and Chairman of our Board of Directors on May 16, 2013. Mr. Gemayal has extensive knowledge and experience in the automotive industry and in the fields of automotive emissions and testing. In 2008, Mr. Gemayel founded Greenkraft, Inc., a privately held manufacturer of trucks, engines, and alternative fuel systems that are powered by natural gas and propane fuels, and has been its Chief Executive Officer since that time. Since 1982, Mr. Gemayel has also been the President and sole director and shareholder of G & K Automotive, Inc., a California corporation that modifies and certifies foreign motor vehicles. Since 2000, Mr. Gemayel has been a member of CEE, LLC, a California limited liability company and full service vehicle and engine testing facility.

Sosi Bardakjian, Chief Financial Officer and Director. Ms. Bardakjian was appointed as our Chief Financial Officer and as a director in connection with the consummation of the Acquisition. Ms. Bardakjian has been Chief Financial Officer of Greenkraft since its formation in October 2008. Ms. Bardakjian graduated with double major in international business & finance from California State University Long Beach.

Evan Ginsburg, Director. Mr. Ginsburg was appointed as a Director in connection with the consummation of the Acquisition. Mr. Ginsburg is an attorney, licensed to practice and in good standing in the State of California. Since 1998, Mr. Ginsburg has been the name partner in the Evan L. Ginsburg Law Offices. Mr. Ginsburg received his undergraduate degree from Western Michigan University and his law degree from Western State University.

Assadour (Ace) Sarafian, Director. Mr. Sarafian was appointed as a Director in connection with the consummation of the Acquisition. Since 1990, Mr. Sarafian has owned and operated Media Imports, Inc., a wholesale jewelry company.

Miguel Pulido, Director. Mr. Pulido was appointed as a Director in connection with the consummation of the Acquisition. Mr. Pulido currently serves as the Mayor of Santa Ana, a position he has occupied since 1994. Prior to his election as Mayor of Santa Ana, Mr. Pulido served on the Santa Ana City Council from 1986 to 1994. Mr. Pulido also currently serves on the Governing Board of the South Coast Air Quality Management District (AQMD), which is responsible for air pollution control and clean air standards to protect public health. Mr. Pulido also serves as the Chair of the Energy Committee within the U.S. Conference of Mayors, a national organization dedicated to advocating public policy initiatives and funding programs to benefit cities. He is also a board member of the Fullerton Community Bank, Great Park Corporation, Pacific Symphony, Discovery Science Center, the UCI Foundation, and the Bowers Museum President’s Advisory Council.

Director Independence and Qualifications

Our Board of Directors has determined that Messrs. Ginsburg, Sarafian and Pulido are “independent” as defined under the standards set forth in Section 121A of the American Stock Exchange Company Guide. In making this determination, the Board of Directors considered all transactions set forth under “Certain Relationships and Related Transactions” below.

We considered Mr. Gemayel’s prior experience in the automotive industry, including his positions with G & K Automotive, Inc., a California corporation that modifies and certifies foreign motor vehicles and CEE, LLC, a California limited liability company and full service vehicle and engine testing facility in concluding that he was qualified to serve as one of our directors. Regarding Ms. Bardakjian, we considered her experience in financial and accounting experience as important factors in concluding that she was qualified to serve as one of our directors. Regarding Mr. Ginsburg, we considered his legal experience as an important factor in concluding that he was qualified to serve on our board of directors. Regarding Mr. Sarafian, we considered his experience in owning and operating a successful business for over 30 years as important factors in concluding that he was qualified to serve on our board of directors. Regarding Mr. Pulido, we considered his experience on the Energy Committee as well as the contacts and experience as Mayor of Santa Ana as important factors in concluding that he was qualified to serve as one of our directors.

Significant Employees

There are no individuals other than our directors and officers who make a significant contribution to our business.

Family Relationships

There are no family relationships among our officers or directors.

Legal Proceedings

None of our directors, executive officers, promoters or control persons has been involved in any of the following events during the past five years:

Section 16(a) Beneficial Ownership Compliance Reporting

Section 16(a) of the Securities Exchange Act of 1934 requires a company’s directors and officers, and persons who own more than ten-percent (10%) of our common stock, to file with the Securities and Exchange Commission reports of ownership on Form 3 and reports of change in ownership on Forms 4 and 5. Such officers, directors and ten-percent stockholders are also required to furnish the company with copies of all Section 16(a) reports they file. Based solely on our review of the copies of such forms received by us and on written representations from certain reporting persons, we believe that all Section 16(a) reports applicable to our officers, directors and ten-percent stockholders with respect to the fiscal year ended December 31, 2018 were filed.

Code of Ethics

We have not yet adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions because we have not yet finalized the content of such a code. Companies whose equity securities are listed for trading on the OTCQB are not currently required to implement a code of ethics.

Director Nominees

As of December 31, 2018 there have been no material changes to the procedures by which security holders may recommend nominees to our Board of Directors.

Audit Committee

The functions of the Audit Committee are currently carried out by our Board of Directors. Our Board of Directors has determined that we do not presently need an audit committee financial expert on our Board of Directors carrying out the duties of the Audit Committee. Our Board of Directors has determined that the cost of hiring a financial expert to act as one of our directors and to be a member of the Audit Committee or otherwise perform Audit Committee functions outweighs the benefits of having a financial expert on the Audit Committee.

ITEM 11. EXECUTIVE COMPENSATION

The table below shows the compensation summary for all officers and board directors. None of our other executive officers received compensation except for a minimal administrative amount for the CFO during the fiscal year ended December 31, 2018.

Summary Compensation

Our executive officers and directors did not receive any other compensation as directors or officers or any benefits.

Outstanding Equity Awards at Fiscal Year End

As of December 31, 2018, we did not have any unexercised stock options held by any of our shareholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information known to us with respect to the beneficial ownership (as defined in Instruction 4 to Item 403 of Regulation S-K under the Securities Exchange Act of 1934) of our common stock as of April 14, 2018 by (i) each person who is known by us to be the beneficial owner of more than 5% of any class of our voting securities, (ii) each of our directors and named executive officers, and (iii) all of our executive officers and directors as a group. Except as otherwise listed below, the address of each person is 2530 S. Birch Street, Santa Ana, CA 92707.

1) Calculated based on issued and outstanding shares of 105,102,718 as December 31, 2018.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension, retirement or similar benefits to our directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.

Compensation Committee

We currently do not have a compensation committee of the Board of Directors or a committee performing a similar function. It is the view of the Board that it is appropriate for us not to have such a committee because of our size and because the Board as a whole determines executive compensation. Each of our directors is also is a senior officer of the company.

Compensation Committee Report

Our Board of Directors as a whole have revised and discussed the compensation discussion and analysis disclosed in this Form 10-K and based on this review and discussion, have determined that the disclosure be included in this annual report.

Compensation of Directors

We do not pay our directors any fees for attendance at Board meetings or similar remuneration or reimburse them for any out-of-pocket expenses incurred by them in connection with our business.

Change of Control

As of December 31, 2018 we had no pension plans or compensatory plans or other arrangements which provide compensation in the event of a termination of employment or a change in our control.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Director Independence

The OTCQB on which our common shares are listed on does not have any director independence requirements. We also do not have a definition of independence as our directors also hold positions executive officer positions with us. Once we engage further directors and officers, we plan to develop a definition of independence and scrutinize our Board of Directors with regards to this definition.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit, Audit-Related and Non-Audit Fees

On February 20, 2018, the Board of Directors of the Company approved the appointment of Fruci & Associates II, PLLC as the Company’s independent registered public accounting firm, to audit the financial statements of the Company for the year-end Audit December 31, 2017. On February 22, 2018, the Board of Directors of Greenkraft Inc. (the “Company”) dismissed Benjamin & Young LLP (B&Y).

The following table represents fees for the professional audit services and fees billed for other services rendered by our current auditors and predecessor auditor.

Audit Committee Approval

Since our inception, our Board of Directors, performing the duties of the audit committee, have reviewed all audit and non-audit related fees at least annually. The Board, acting as the audit committee, pre-approved all audit related services for the year ended December 31, 2018.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The financial statement schedules are omitted because they are inapplicable or the requested information is shown in our financial statements or related notes thereto.

Exhibits

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned thereunto duly authorized.

Pursuant to the requirements of the Exchange Act this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.