GTII 10-K Annual Report Dec. 31, 2012 | Alphaminr
GLOBAL TECH INDUSTRIES GROUP, INC.
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GTII 10-K Fiscal year ended Dec. 31, 2012

Balance Sheet
Cash Flow
Income Statement
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10-K 1 ttii_10k.htm ANNUAL REPORT ttii_10k.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
Commission file number : 000-10210
TREE TOP INDUSTRIES, INC.
Nevada
83-0250943
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
511 Sixth Avenue, Suite 800, New York,
New York
10011
(Address of principal executive offices)
(Zip Code)
(775) 261-3728
Registrant’s telephone number, including
area code:
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Shares, par value $0.001 per share
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ¨ No þ
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 þ
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 past 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 þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (all as defined in Rule 12b-2 of the Exchange Act).
Large Accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No þ
The aggregate market value of voting stock held by non-affiliates of the registrant was approximately $7,250,000 as of June 30, 2012 (computed by reference to the last sale price of a share of the registrant’s common stock on that date as reported by Financial Industry Regulatory Authority Bulletin Board).
There were 5,949,097 shares outstanding of the registrant’s common stock as of April 15, 2013.
3
9
9
Item 4.
Mine Safety Disclosures
10
12
15
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
44
46
50
53
53
53
PART IV
54
56
Certifications
General
Tree Top Industries, Inc. (“TTI”, “Tree Top”, “we”. “our”, “us”, “the Company”, “management”) is a Nevada corporation which has been operating under several different names since 1980.
Western Exploration, Inc., a Nevada corporation, was formed on July 24, 1980. In 1990, Western Exploration, Inc. changed its name to Nugget Exploration, Inc. On November 10, 1999, a wholly owned subsidiary of Nugget Exploration, Inc., Nugget Holdings Corporation merged with and into GoHealthMD, Inc., a Delaware corporation. Shortly thereafter, Nugget Exploration, Inc. changed its name to GoHealthMD, Inc. a Nevada corporation.
On August 18, 2004, GoHealthMD, Inc., the Nevada Corporation, changed its name to Tree Top Industries, Inc. GoHealthMD, Inc. continues to exist as a Delaware corporation and wholly owned subsidiary of Tree Top Industries, Inc. MLN, Inc., BioEnergy Applied Technologies, Inc. (“BAT”),, Eye Care Centers International, Inc., GoHealthMD Nano Pharmaceuticals, Inc., TTI Strategic Acquisitions and Equity Group, Inc. and TTII Oil & Gas, Inc., a Delaware corporation are also wholly owned subsidiaries of Tree Top Industries, Inc. Several of these subsidiaries have been formed by Tree Top in the anticipation of technologies, products or services being acquired. Not all subsidiaries are currently active.
Effective August 12, 2009, Tree Top completed a stock exchange with BAT, BioEnergy Systems Management Inc., Wimase Limited and Energetic Systems Inc., LLC. whereby Tree Top acquired 100% of the issued and outstanding stock of BAT.  BAT is the originator of various proprietary, clean-tech, environmentally friendly technologies and intellectual properties in the areas of hazardous waste destruction, energetic materials, chemical recycling processes, and coal gasification. BAT also maintains unique electrolytic technology that simplifies the production of bio fuels, specifically biodiesel and its byproducts.  Tree Top acquired all of the issued and outstanding shares of BAT. Tree Top issued 35,000 shares of its common stock, par value $.001 per share, to the stockholders of BAT in exchange for the transfer of all of the issued and outstanding shares of common stock of BAT by such stockholders.
BAT was acquired to exploit its key intellectual properties, which have been applied to the construction of systems and equipment designed to facilitate the destruction of pharmaceutical, medical, biological, chemical, red bag and other hazardous wastes, with clean reusable energy produced as a byproduct. The system utilizes cold plasma technology to initiate a chemical reaction inside the unit. The chemical reaction causes enough heat to facilitate the waste destruction, resulting in a drastically reduced carbon footprint, as no incineration is needed.  The energy needed to start the process is the equivalent of only five light bulbs, resulting in a significantly lower cost of operation. The unit is relatively compact, can be retrofitted into existing structures or made mobile for smaller venues, and can be scaled up to meet the hazardous waste destruction needs of almost any user. Tree Top is actively engaged in developing a business platform to showcase the BAT technologies, and will spend the majority of its resources in support of this opportunity.
The Company also owns NetThruster, Inc., a Nevada corporation (“NetThruster”), which was formally known as Ludicrous, Inc. (“Ludicrous”). On January 28, 2011, the Board of Directors of Tree Top adopted resolutions approving the disposition by the Company of all of the common stock of its wholly-owned subsidiary, NetThruster, Inc., a Delaware corporation (“NetThruster”), in a spin-off to Tree Top’s shareholders on a pro rata basis (the “Spin-Off”). Thereafter, NetThruster would be owned by Tree Top’s shareholders. David Reichman, the CEO of Tree Top was named Chairman of the Board, CEO and CFO of NetThruster. Kathy M. Griffin was named a Director and corporate secretary. The Board of Directors of NetThruster is comprised of David Reichman and Kathy Griffin. On February 9, 2011, Tree Top entered into a distribution agreement with NetThruster (the “Distribution Agreement”). The Spin-Off is governed by the Distribution Agreement. A copy of the Distribution Agreement is attached hereto as exhibit 10.5. The Spin-Off was disclosed in a Form 8-K, filed on February 9, 2011, which announced that the NetThruster division would be spun-off into a separate entity.

Tree Top owns all of the issued and outstanding shares of common stock of NetThruster. NetThruster currently had no shares of preferred stock issued or outstanding. Pursuant to the Distribution Agreement, Tree Top had agreed to distribute all of the common stock of NetThruster to Tree Top’s shareholders, such that each shareholder of record of Tree Top common stock on February 14, 2011 (the “Distribution Record Date”) would receive one share of the common stock of NetThruster for every share of Tree Top’s common stock owned by such shareholder. Each Tree Top shareholder must have proof of ownership of the Tree Top common stock in order to be eligible to receive the distribution of the common stock of NetThruster in the Spin-Off. Tree Top expected to make the distribution for the Spin-Off on or before March 10, 2011. Subsequent to that date, Tree Top, upon authorization and a resolution from the Board of Directors, decided to postpone the spin-off indefinitely until management had more time and the information needed to effectively calculate the cost and possible result of such spin-off.
On April 18, 2011, Tree Top signed a non-binding term sheet agreement with Sky Corporation, doo, a Belgrade, Serbia based event production and management company. Sky Corporation is a distributor of professional musical equipment across the Adriatic region, and is the largest retailer of musical instruments and equipment in Serbia. Sky Corporation is a distributor for over 80 brands in the fields of music and light equipment. Sky Solutions doo, a division of Sky Corporation, is one of the largest production companies in Eastern Europe. Adriatic Region Distribution doo, a division of Sky Corporation, is a regional distribution company for musical and sound/light equipment. Sky Music, doo is another division of Sky Corporation. Sky Music, doo’s main activity is selling professional audio and light equipment, as well as installing it in discothèques, clubs, public institutions, venues, and concert halls. Sky Corporation’s growth plan calls for double digit growth over the next three years and a planned expansion into the rest of Eastern Europe and eventually to Western Europe. The term agreement expired on July 18, 2011, but Tree Top and Sky Corporation signed an extension to the Letter of Intent on November 15, 2011 . The extension has since expired.
On May 24, 2011, Tree Top signed an engagement letter with PIN Financial, LLC. PIN Financial was engaged by Tree Top to use their best efforts to successfully complete a private placement of the securities of Tree Top for the purposes of a bridge loan and a capital raise. On January 9, 2012, Tree Top disengaged with PIN Financial, for lack of performance on the part of PIN Financial. No payment was made by Tree Top to PIN Financial and the two parties mutually disengaged on the above mentioned date.
On May 25, 2011, Tree Top signed a licensing agreement with WorldWithoutBlindness (“WWB”) for the right to market and sell their patented eye screening equipment on a global basis outside the United States, for a period of two years. Eye Care Centers International, Inc . was formed to support the further growth and development of (“WWB”), an organization whose primary mission is to bring patented eye screening equipment to the developing world. The WWB technology uses objective parameters instead of traditional subjective eye chart examinations, to screen children as young as six months old. The screening can accurately indicate predisposition for glaucoma and other eye diseases which can lead to blindness, as well as a host of other possible diseases, completely unrelated to eyesight. Tree Top’s management, upon approval by the board of directors, made a trip to Canar, Ecuador, among other cities, to observe how how the test markets would be set up. The Company is currently formulating the test results from the past year to evaluate it’s economic viability.
On October 12, 2011, Tree Top signed a binding term sheet agreement with Adesso Biosciences, Ltd. to acquire 93% of the outstanding stock of Adesso Diagnostics, LLC and 47.5% of the outstanding stock of Adeda Therapeutics, Ltd., both subsidiaries of Adesso Biosciences Ltd. Adesso Diagnostics is the holder of an exclusive license with Columbia University for two patents in the fields of molecular science and nanoscience. Adeda Therapeutics is involved in the development of a novel sinus medication system. Tree Top and Adesso Biosciences engaged in the mutual due diligence phase of the acquisition; as of yet, the expected acquisition has not closed, nor is it expected to close in the first quarter of 2013.
On December 31, 2012, Tree Top and its new subsidiary, TTII Oil & Gas, Inc., a Delaware corporation, signed a binding asset purchase agreement with American Resource Technologies, Inc. (“ARUR”), a Kansas corporation, to acquire all of the assets of ARUR for a purchase price of $513,538, which was paid in the form of shares of Tree Top’s common stock as described in the asset purchase agreement, which was disclosed in an 8 – K and is attached as an exhibit incorporated by reference.  Subsequent to the Company’s purchase of the assets and the termination of the operator, a mechanics lien was filed against the property claiming approximately $200,000 in fees  are due to the previous operator. The Company is aggressively defending the action, however at December 31, 2012, due to the lien, the Company impaired the recorded cost, leaving no value associated with the acquisition. See Note 11 for detail of the assets acquired from ARUR.
History
Western Exploration, Inc., a Nevada corporation, was formed on July 24, 1980. In 1990, Western Exploration, Inc. changed its name to Nugget Exploration, Inc. On November 10, 1999, a wholly owned subsidiary of Nugget Exploration, Inc., Nugget Holdings Corporation merged with and into GoHealthMD, Inc., a Delaware corporation. Shortly thereafter, Nugget Exploration, Inc. changed its name to GoHealthMD, Inc. a Nevada corporation.
On August 18, 2004, GoHealthMD, Inc., the Nevada Corporation, changed its name to Tree Top Industries, Inc. GoHealthMD, Inc. continues to exist as a wholly owned subsidiary of Tree Top Industries, Inc. NetThruster, Inc., MLN, Inc. BioEnergy Applied Technologies, Inc., . , Eye Care Centers International, Inc., GoHealthMD Nano Pharmaceuticals, Inc., TTI Strategic Acquisitions and Equity Group, Inc., and TTII Oil & Gas, Inc., a Delaware corporation, are also wholly owned subsidiaries of Tree Top Industries, Inc.
Effective October 19, 2007, TTI entered into an Agreement and Plan of Reorganization (the “Agreement”) with all of the stockholders of Ludicrous pursuant to which TTI agreed to acquire all of the issued and outstanding common stock of Ludicrous from the stockholders in consideration for the issuance of a total of 680,000 newly issued shares of TTI’s common stock, allocated among the stockholders of Ludicrous on a pro rata basis. Accordingly, after the closing of the stock exchange on November 1, 2007 as contemplated by the Agreement, Ludicrous became a wholly owned subsidiary of TTI, and the prior shareholders of Ludicrous became the majority shareholders of TTI. In the Agreement, the stockholders of Ludicrous agreed to confer upon a designee of TTI, voting power over their shares of TTI’s common stock acquired by them for a period equal to the lesser of (i) two years or (ii) the sale of the common stock by the stockholder in accordance with Rule 144 of the Securities Act of 1933. However, the shares of the two (2) largest stockholders, James Black, and The Davis Family, who held an aggregate of over 80% of the issued and outstanding shares of common stock of Ludicrous, were each required to execute a two (2) year lock-up agreement. The business combination between TTI and Ludicrous closed on November 1, 2007, and David Reichman, the Chief Executive Officer of TTI, was designated by TTI to be the voting trustee for 680,000 outstanding shares of TTI currently owned by the prior stockholders of Ludicrous. Subsequently, due to the departure of James Black and the non-development and deployment of the technology, approximately 72% or 490,000 shares were cancelled and or returned to the Company.

On April 24, 2009, Tree Top entered into a stock exchange agreement (the “Exchange Agreement”) with BAT, BioEnergy Systems Management Inc ., Wimase Limited and Energetic Systems Inc., LLC. Under the terms of the Exchange Agreement, the Company agreed to acquire all of the issued and outstanding shares of BAT.  The acquisition resulted in BAT becoming a wholly-owned subsidiary of the Company. The Exchange Agreement called for the issuance of a total of 35,000 shares of common stock of the Company, par value $.001 per share, in exchange for the transfer of all of the issued and outstanding shares of common stock of BAT to the Company.
BAT is the originator and incubator of environmentally friendly technologies useful in the areas of energetic materials, chemicals and chemical processes, gasification, and the safe and novel destruction of biological and other hazardous wastes. The Company has been focused on the incubation growth and commercialization of novel technology platforms designed to address the fundamental limitations of many of today’s technologies and businesses. The Company will seek to provide key technologies to the biofuels sector, designed to help make biofuels more cost effective and of a higher quality.
BAT is also the originator of various proprietary, clean-tech, environmentally-friendly technologies and intellectual properties in the areas of hazardous waste destruction, energetic materials, chemical recycling processes, and coal gasification. BAT also maintains unique electrolytic technology that simplifies the production of bio fuels, specifically biodiesel and its byproducts.
BAT was acquired by Tree Top in August of 2009 in order to exploit its key intellectual properties, which have been applied to the construction of systems and equipment designed to facilitate the destruction of pharmaceutical, medical, biological, chemical, red bag and other hazardous wastes, with clean reusable energy produced as a byproduct. The system utilizes cold plasma technology to initiate a chemical reaction inside the unit. The chemical reaction causes enough heat to facilitate the waste destruction, resulting in a drastically reduced carbon footprint, as no incineration is needed.  The energy needed to start the process is the equivalent of only five light bulbs, resulting in a significantly lower cost of operation. The unit is relatively compact, can be retrofitted into existing structures or made mobile for smaller venues, and can be scaled up to meet the hazardous waste destruction needs of almost any user.
Research and Development
Although Tree Top’s staff is limited, it continues to monitor new developments and any emerging technologies.
Intellectual Property
Tree Top’s success depends in part upon it’s ability to protect it’s core technology and other intellectual capital. To accomplish this, Tree Top relies on a combination of intellectual property rights, including patents, trade secrets, copyrights, trademarks, domain registrations and contractual protections. With the acquisition of Adesso Biosciences, Tree Top will acquire two patents, associated intellectual properties, and other proprietary information in the field of molecular science.
With the acquisition of BAT, Tree Top acquired fifteen (15) intellectual properties pertaining to the construction of the mobile configuration and operation of the glyd-arc medical waste destruction unit, as well as an enhanced configuration and novel method for coal gasification.
As of December 31, 2012, Tree Top had received no patents in the United States and no patents in foreign jurisdictions. Tree Top has no pending patent applications in the United States and no pending patent applications in foreign jurisdictions. It had received no trademarks and had no pending trademark applications in the United States. It had no pending trademark applications in foreign countries and no non-U.S. trademark applications had been issued.
Tree Top generally controls access to and use of its software and other confidential information through (a) the use of internal and external controls, including physical and electronic security, contractual protections with employees, contractors, customers and partners, and (b) domestic and foreign copyright laws.
Government Regulation
BAT
According to the Environmental Protection Agency (“EPA”), no registration of the BAT system is required because the waste destruction process does not involve incineration. Incineration processes are subject to regulation by the EPA. However, any hazardous waste destruction system that is constructed will be subject to the state laws and regulations where the system is located, as well as any regulations pertaining to the storage, transporting and/or destroying hazardous waste.  BAT is also subject to government laws and regulations governing health, safety, working conditions, employee relations, wrongful termination, wages, taxes and other matters applicable to businesses in general.
NetThruster
NetThruster is subject to various federal, state and local laws affecting the telecommunications and Internet industries. Laws and regulations that apply to communications and commerce conducted over the Internet are becoming more prevalent, both in the United States and internationally, and may impose additional burdens on companies conducting business online or providing Internet-related services such as ours. The laws relating to the liability of private network operators for information carried on or disseminated through their networks are unsettled, both in the United States and abroad. Network operators have been sued in the past, sometimes successfully, based on the content of material disseminated through their networks. The Federal Trade Commission and equivalent state agencies regulate advertising and representations made by businesses in the sale of their products, which apply to us. NetThruster is also subject to government laws and regulations governing health, safety, working conditions, employee relations, wrongful termination, wages, taxes and other matters applicable to businesses in general.
GoHealthMD Nano Pharmaceuticals, Inc.
Governmental authorities in the U.S. and other countries extensively regulate the research, development, testing, manufacture, labeling, promotion, advertising, distribution and marketing, among other things, of biologic products. All of our foreseeable product candidates are expected to be regulated.
In the U.S., the Food and Drug Administration (“FDA”) regulates drug products under the Federal Food, Drug and Cosmetic Act, and other laws within the Public Health Service Act. Failure to comply with applicable U.S. requirements, both before and after approval, may subject us to administrative and judicial sanctions, such as a delay in approving or refusal by the FDA to approve pending applications, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, and/or criminal prosecutions. Before our biologic products are marketed they must be approved by the FDA. The steps required before a novel product is approved by the FDA include: (1) pre-clinical laboratory, animal, and formulation tests; (2) submission to the FDA of an Investigational New Drug Application (“IND”) for human clinical testing, which must become effective before human clinical trials may begin; (3) adequate and well-controlled clinical trials to establish the safety and effectiveness of the product for each indication for which approval is sought; (4) submission to the FDA of a New Drug Application (“NDA”); (5) satisfactory completion of a FDA inspection of the manufacturing facility or facilities at which the drug product is produced to assess compliance with Current Good Manufacturing Practice (“cGMP”); and FDA review and finally (6) approval of an NDA.
Other countries where we are considering developing and marketing our products have similar drug regulation regimes.

Oil & Gas Properties

Oil and gas properties are subject to various levels of government controls and regulations in the United States. Legislation affecting the oil and gas industry has been pervasive and is under constant review for amendment or expansion. Pursuant to such legislation, numerous federal, state and local departments and agencies have issued extensive rules and regulations binding on the oil and gas industry and its individual members, some of which carry substantial penalties for failure to comply. Such laws and regulations have a significant impact on oil and gas drilling, gas processing plants and production activities, increase the cost of doing business and, consequently, affect profitability. Inasmuch as new legislation affecting the oil and gas industry is commonplace and existing laws and regulations are frequently amended or reinterpreted, we are unable to predict the future cost or impact of complying with such laws and regulations. A breach or violation of such laws and regulations may result in the imposition of fines and penalties. At present, we do not believe that compliance with environmental legislation and regulations will have a material effect on our operations; however, any changes in environmental legislation or regulations or in our activities may cause compliance with such legislation and/or regulation to have a material impact on our operation. In addition, certain types of operations require the submission and approval of environmental impact assessments. Environmental legislation is evolving in a manner that means stricter standards, and enforcement, fines and penalties for non-compliance are becoming more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations has a potential to reduce the profitability of operations. We intend to ensure that we comply fully with all environmental regulations relating to our operations.
Competition
BAT
There are currently no direct competitors offering this new and novel technology into the waste destruction market.  The major companies that deal in hazardous waste management are companies such as Waste Management, Inc. Those companies treat, haul and store hazardous waste in landfills across the country. Some companies destroy hazardous waste, or any carbon based waste in general, through incineration, which produces a significant carbon footprint and can be as expensive as the storing model. The BAT technology would destroy the hazardous waste completely through the use of a chemical process, which involves minor energy output to begin, and produces no carbon footprint at the end. The competitive disadvantage for the BAT process is that it is uncommercialized technology at present, which makes the process of acquiring adequate funding more difficult.
NetThruster
The content delivery network market is highly competitive and is characterized by constantly declining prices and multiple types of vendors offering varying combinations of computing and bandwidth to content providers. A few of NetThruster’s current competitors, as well as a number of NetThruster’s potential competitors, have longer operating histories, greater name recognition, broader customer relationships and industry alliances, and substantially greater financial, technical and marketing resources than we do. NetThruster’s primary competitors include content delivery service providers such as Limelight Networks, Akamai, Level 3 Communications and Internap Network Services Corporation, which acquired VitalStream. Also, as a result of the growth of the content delivery market, a number of companies are attempting to enter the market, either directly or indirectly, some of which may become significant competitors of NetThruster in the future. Internationally, NetThruster competes with local content delivery service providers, many of which are very well positioned within their local markets.
We believe that the principal competitive factors affecting the content delivery market include such attributes as:
●
Performance, as measured by file delivery time and end-user media consumption rates;
●
Scalability; both in terms of average capacity and special event capacity;
●
Proprietary software designed to efficiently locate and deliver large media files;
●
Ease of implementation;
●
Flexibility in designing delivery systems for unique content types and mixes;
●
Reliability; and
●
Cost efficiency.
Because of the above situation, our continued inability to raise sufficient capital and our focus on the BAT technology, we ceased further development of the NetThruster technology. Furthermore, on January 28, 2011, the Board of Directors of TreeTop adopted resolutions approving the disposition by the Company of all of the common stock of NetThruster in the Spin-Off. However, Tree Top management, upon a resolution by the board of directors, decided to postpone the spin-off of NetThruster indefinitely.
GoHealthMD Nano Pharmaceuticals, Inc.
This subsidiary has been organized for the future acquisition of companies involved in the treatment of human disease through nanotechnology and molecular diagnostics. However, such acquisitions have not yet been completed. Therefore this subsidiary is currently inactive with no operations. However, other companies, such as Nanoshpere, Inc., are in the treatment of human disease through nanotechnology and the molecular diagnostics industry.

Oil & Gas Properties:

Oil and gas exploration, and acquisition of undeveloped properties are highly competitive and speculative businesses. We compete with a number of other companies, including major oil and gas companies and other independent operators that are more experienced and which have greater financial resources. We do not hold a significant competitive position in the oil and gas industry.
Employees
As of December 31, 2012, we employed two people on a full-time basis.  Both employees are in executive positions. We project that during the next 12 months, our workforce is likely to increase. To support our need for technical staffing, we have established relationships with technical staffing organizations that continuously offer qualified personnel to meet our requirements.
Seasonality
Our operations are not expected to be affected by seasonal fluctuations, although our cash flow may be affected by fluctuations in the timing of cash receipts from our potential future customers.
Currently, TTI does not lease, rent or own any property, other than its office which acts only as a mail receipt center.
During April 2012, the Company filed suit in Los Angeles Superior Court against GeoGreen Biofuels, Inc. and related parties, relating to GeoGreen's failure to repay $192,000 advanced pursuant to a Bridge Loan Term Sheet. GeoGreen filed a cross-complaint against the Company and two of its officers. GeoGreen later amended its cross-complaint to state claims against third parties. Although litigation is inherently unpredictable, TTI is confident in its position, and intends to pursue the action aggressively. Written discovery has been exchanged, but depositions have not yet been taken. Trial is set for November 18, 2013.
During March 2013, the Company was named in an action pertaining to the 75% working interest in the Ownbey Lease. Subsequent to the Company’s purchase of the assets and the termination of the operator, a mechanics lien was filed against the property claiming approximately $200,000 in fees are due to the previous operator. The Company is aggressively defending the action.

TTI’s common stock is quoted through the over-the-counter market on the OTC Market Group, Inc. Board (“OTCQB”) and the Financial Industry Regulatory Authority Bulletin Board (“OTC Bulletin Board”) under the symbol “TTII.” Prior to 2010, there was limited trading of TTI’s common stock. Liquidity improved in 2010. The following table sets forth high and low sales prices of TTI common stock for each fiscal quarter for the last two fiscal years as reported by the OTCBB Bulletin Board, based on closing prices. The prices in the table reflect inter-dealer prices, without retail markup, markdown or commission and may not represent actual transactions. The stock prices have been restated for the 100 to 1 reverse stock split..
Year Ended December 31, 2011
High
Low
First Quarter ended March 31, 2011
$
11.00
$
1.50
Second Quarter ended June 30, 2011
$
2.30
$
1.00
Third Quarter ended September 30, 2011
$
1.60
$
.70
Fourth Quarter ended December 31, 2011
$
4.00
$
1.20
Year Ended December 31, 2012
High
Low
First Quarter ended March 31, 2012
$
4.18
$
3.30
Second Quarter ended June 30, 2012
$
5.00
$
2.40
Third Quarter ended September 30, 2012
$
3.00
$
.32
Fourth Quarter ended December 31, 2012
$
1.60
$
.74
As of April 15, 2013, there were approximately 546 record holders of TTI’s common stock, not including shares held in “street name” in brokerage accounts, which are unknown. As of April 15, 2013, there were approximately 5,949,097 shares of TTI’s common stock outstanding on record.


Dividends
TTI has not declared or paid any cash dividends on its common stock.
Transfer Agent and Registrar
.
The transfer agent and registrar for TTI’s common stock is Direct Transfer, LLC, issuerservices@issuerdirect.com, telephone 919-460-4000.
Repurchases of Our Securities
None of the shares of our common stock were repurchased by the Company during the fiscal year ended December 31, 2012.
Sales of Our Unregistered Securities during 2012 Not Previously Disclosed
In January 2012, the Company issued 346,139 shares to be held in escrow for the close of the Adesso agreement. These shares are not considered issued and outstanding.

On February 6, 2012, the Board authorized the issuance of 15,000 shares to a consultant, valued at $60,000, the market value on the day of grant.

On February 14, 2012, the Board authorized the issuance of 26,898 for the conversion of a convertible note payable and interest in the amount of $51,583.

On February 14, 2012, the Board authorized the issuance of 12,820 for cash of $25,000 pursuant to the Adesso acquisition agreement.

On March 2, 2012, the Board authorized the issuance of 7,500 shares for services valued at $30,000, the market value on the day of grant.

On March 28, 2012, the Board authorized the issuance of 15,000 shares for legal services valued at $60,000, the market value on the day of grant.

On June 6, 2012, the Board authorized the issuance of 25,000 shares for services valued at $87,500, the market value on the day of grant.

On August 8, 2012, the Board authorized the issuance of 1,615,000 shares for services, rent and charitable contributions, valued at $3,230,000, the market value on the day of grant.

On August 13, 2012, Board authorized the issuance of 100,000 shares for services valued at $145,000, the market value on the day of grant.

On August 14, 2012, Board authorized the issuance of 39,682 shares for services valued at $39,286, the market value on the day of grant.

On October 29, 2012, the Board authorized the issuance of 400,000 shares to the Company’s Employee Stock Option Trust account. The issuance was valued at $476,000, the fair market price listed on the day of issuance. Pursuant to the guidance in SOP 93-6, the value of the shares issued into the ESOP account is recorded as a contra equity account rather than an asset.
On October 29, 2012, Board authorized the issuance of 50,000 shares for services valued at $59,500, the market value on the day of grant.
On December 28, 2012, the Board effected a 100 to 1 reverse stock split. All per share information in these financial statements have been retroactively restated to reflect the split. 54 fractional shares were issued pursuant to the stock split.

On December 29, 2012, the Board authorized the issuance of 113,000 shares for services valued at $146,900, the market value on the day of grant.

On December 31, 2012, the Board authorized the issuance of 466,853 shares for the assets of ARUR. The value assigned to the assets was $513,538, the market value on the day of grant.
Cautionary Statements
This Form 10-K may contain “forward-looking statements,” as that term is used in federal securities laws, about Tree Top’s consolidated financial condition, results of operations and business. These statements include, among others:
●
statements concerning the potential benefits that may be experienced from business activities and certain transactions contemplated or completed; and
●
statements of our expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts. These statements may be made expressly in this Form 10-K. You can find many of these statements by looking for words such as “believes,” “expects,” “anticipates,” “estimates,” “opines,” or similar expressions used in this Form 10-K. These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause our actual results to be materially different from any future results expressed or implied in those statements. The most important facts that could prevent us from achieving our stated goals include, but are not limited to, the following:
a)
volatility or decline of Tree Top’s stock price; potential fluctuation of quarterly results;
b)
Potential fluctuation of quarterly results;
c)
failure to earn revenues or profits;
d)
inadequate capital to continue or expand our business, and inability to raise additional capital or financing to implement our business plans;
e)
failure to commercialize our technology or to make sales;
f)
decline in demand for our products and services;
g)
rapid adverse changes in markets;
h)
litigation with or legal claims and allegations by outside parties against TTI, including but not limited to challenges to intellectual property rights;
i)
insufficient revenues to cover operating costs; and
j)
failure of the BAT technology to function properly.
There is no assurance that we will be profitable, we may not be able to successfully develop, manage or market our products and services, we may not be able to attract and retain qualified executives and technology personnel, we may not be able to obtain customers for our products or services, our products and services may become obsolete, government regulation may hinder our business, additional dilution in outstanding stock ownership may be incurred due to the issuance of more shares, warrants and stock options, or the exercise of outstanding warrants and stock options, and other risks inherent in our businesses.
Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. We caution you not to place undue reliance on the statements, which speak only as of the date of this Form 10-K. The cautionary statements contained or referred to in this section should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. We do not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this Form 10-K, or to reflect the occurrence of unanticipated events.
PLAN OF OPERATIONS
In considering the entire waste destruction business and analyzing where the opportunities can be found, it is apparent that the pharmaceutical, medical, biological, chemical, and red bag waste industries should be the best fit for the BAT technology, both from an environmental and a cost structure perspective.
While municipal, restaurant and/or household wastes cost upwards of $ .30 per pound to incinerate or store, hazardous waste disposal has been calculated at upwards of $2.00 per pound, without taking the volatility of the price of fuel into account. This is because, in order to comply with governmental and environmental regulations, a work-intensive system of processing, handling, storing, transporting, and finally burying hazardous waste is required at most pharmaceutical companies.  Once hazardous waste has been produced, its disposition is the responsibility of the producer thereafter. If there is an environmental issue resulting from hazardous waste production, the waste generator is solely responsible.

In spite of this, many companies who produce hazardous waste in the pharmaceutical industry and biological / hospital red bag waste area currently use conventional haul-destroy companies and methods to eliminate the waste.  This exposes them to several increased costs, including:
●
environmental costs
●
transportation costs
●
insurance costs
●
storage costs
●
overall handling costs
The BAT technology allows companies to destroy hazardous material streams in-line before they exit the consolidated system, and therefore such companies never become hazardous waste generators. This provides a commercial solution for the processing of hazardous waste in-house and on demand at local sites. Byproducts from the system are essentially water and carbon dioxide, plus trace amounts of organics. The system specifically eliminates oxides of nitrogen, chlorine gas, and other toxic gasses typically produced by conventional incinerators. The process is completely “green”, converting all the waste into water, carbon dioxide and nitrogen. And, the technology allows for the potential capturing of reusable energy. This excess energy, in the form of heat, can be utilized within other facility operations.
In the next twelve months, Tree Top plans to target the pharmaceutical industry on a global basis. In the United States alone, the top pharmaceutical companies produce upwards of 600,000,000 pounds of active pharmaceutical intermediates waste per year. That translates into over $1.2 billion dollars of cost connected to the management of hazardous waste. Tree Top will be taking steps to produce several working demonstration units that can be showcased to the pharmaceutical industry. We will be actively seeking partners who may want to share the cost of building the units and testing them at their facilities. On the international side, we have acquired a strategic partner, Asia Pacific Capital, who will be making introductions for us to industry insiders in Vietnam and China. We are also actively pursuing, through partnerships with other individuals, government agencies to position us in front of possible funding partners.

Management also expects to assess our oil and gas properties and formulate a plan to rework various wells to bring them online and generate monthly oil production. The Company will also assess the potential expansion of additional wells in order to increase the oil production and revenue source.
This plan is totally dependent on the Chairman, David Reichman’s continued support, as well as our ability to raise capital. Execution of the business plan is subject to this constraint as well as the finding of sufficient funding.
RESULTS OF OPERATIONS
We realized revenues of $-0- during the year ended December 31, 2012. We presently do not have a steady source of revenue. Our operating expenses increased from $1,618,304 in 2011 to $5,214,619 in 2012. The increase was primarily the result of stock compensation expenses to officers, directors and consultants. General and administrative expenses decreased from $413,226 to $359,195 or 15%. Compensation and professional fees increased by $3,138,876, due to the increase in stock based compensation given to employees and others.  Depreciation expense decreased from $32,762 to $30,694.
Our net loss increased by $4,128,883 from $1,689,254 in 2011 to $5,818,137 in 2012. This translates to a $.79 increase in loss per share from $(0.60) in 2011 to $(1.39) in 2012. Included in our net loss was $4,026,843 and $681,508 for the value of common stock and common stock purchase warrants and options which were issued in 2012 and 2011 respectively. Excluding these non cash expenses, our net loss would have been $1,791,294 and $1,007,746, respectively. We expect that our losses will continue to be approximately $100,000 per month until we are able to establish a reliable revenue flow.


LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2012 we had cash on hand of $0 compared to $517 at December 31, 2011. We used cash in our operations of $90,461 in 2012 compared to $314,036 in 2011, a 247% decrease. We also used cash of $95,256 in 2012 in our investing activities compared to $0 in 2011. We raised $25,000 and $25,000 from the sale of our common stock or exercises of stock options in 2012 and 2011, respectively. Additionally, we raised $110,427 and $369,345 from related party loans in 2012 and 2011, and $188,000 and $75,000 from other notes payable, respectively. We anticipate that we will continue to have a negative cash flow from operations of approximately $100,000 per month for 2013. We do not have sufficient cash on hand at December 31, 2012 to cover our negative cash flow. We will attempt to raise capital through the sale of our common stock or through debt financing.
Some of Tree Top’s past due obligations, including $338,000 of accounts payable, and $113,000 of notes payable and judgments, some of which are duplicative, were incurred or obtained prior to 2005. No actions have been taken by any of the applicable creditors. Action by any such creditor would materially decrease our liquidity. Tree Top has no credit facilities with which to resolve these outstanding obligations from prior years, but will fully resolve them upon a successful capital raise and monetary action of the business.  This may have a negative impact on our future liquidity in the event we must prioritize the repayment of these obligations when capital becomes available. Tree Top shall attempt to negotiate favorable repayment schedules, if and when any applicable creditor takes any collection related actions. In addition, there is an amount due to officers and Directors equal to $3,853,391 as of December 31, 2012 and $3,186,130 as of December 31, 2011 respectively, which may increase if such officers and/or Directors continue to provide additional sums of money and/or services that are payable upon demand. Our liquidity would decrease materially if any such officer or Director demanded repayment. These loans must be considered in any capital raise and could continue to restrict our liquidity upon such capital raise if repayment is thereby demanded. Tree Top shall attempt to cause these officers and Directors to request repayment in a way as to not materially harm Tree Top’s liquidity.
Any remedy to our current lack of liquidity must take into account all the foregoing liabilities. Tree Top intends to continue its pursuit to raise capital in order to monetize its business and pay all its liabilities. Capital raise plans are under consideration but it cannot be assured that they will materialize in the current economic environment. Currently, Tree Top is without adequate financing or assets. Because no actions have been taken on the aforementioned past due obligations and demand has not been made by the applicable officers or Directors, we are unable to accurately quantify the effect the overdue accounts have on Tree Top’s financial condition, liquidity and capital resources. However, in the event that all of these obligations and notes payable were required to be paid in an amount equal to the full balance of each, Tree Top would not be able to meet the obligations based upon its current financial status.  The liquidity shortfall of $5,610,504 would cause Tree Top to default and, further, would put our continued viability in jeopardy.
CONTRACTUAL OBLIGATIONS
None
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. These principles require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, cash flow and related disclosure of contingent assets and liabilities. Our estimates include those related to revenue recognition, accounts receivable reserves, income and other taxes, stock-based compensation and equipment and contingent obligations. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.
We define our “critical accounting policies” as those U.S. generally accepted accounting principles that require us to make subjective estimates about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as well as the specific manner in which we apply those principles. Our estimates are based upon assumptions and judgments about matters that are highly uncertain at the time the accounting estimate is made and applied and require us to continually assess a range of potential outcomes. A detailed discussion of the critical accounting policies that most affect our company is located in Footnote 2 of the notes to our financial statements.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Tree Top Industries, Inc.
(A Development Stage Company)
We have audited the accompanying consolidated balance sheets of Tree Top Industries, Inc. (A Development Stage Company) as of December 31, 2012 and 2011, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated  financial position of Tree Top Industries, Inc. (A Development Stage Company) as of December 31, 2012 and 2011, and the  consolidated results of its operations and cash flows for the periods described above in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that Tree Top Industries, Inc. will continue as a going concern. As discussed in Note 1 to the consolidated  financial statements, the Company incurred a net loss of $5,818,138 during the fiscal year ended December 31, 2012,  has an accumulated deficit of $149,366,479 and is in default on several notes payable. The Company also has negative working capital,  negative cash flows from operations, and is dependent on financing to continue operations. These issues raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern.
/s/ M&K CPAS, PLLC
www.mkacpas.com
Houston, Texas
April 16, 2013


Tree Top Industries, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
December 31,
2012
December 31,
2011
ASSETS
CURRENT ASSETS
Cash
$
-
$
517
Total Current Assets
-
517
PROPERTY AND EQUIPMENT, NET
8,824
39,518
MARKETABLE SECURITIES
54,624
-
TOTAL ASSETS
$
63,448
$
40,035
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses
$
949,933
$
676,853
Accrued interest payable
166,982
134,179
Due to officers and directors
3,853,391
3,186,130
Convertible notes
100,000
50,000
Notes payable
88,000
-
Notes payable - in default
597,860
597,860
Total Current Liabilities
5,756,166
4,645,022
Total Liabilities
5,756,166
4,645,022
STOCKHOLDERS’ (DEFICIT)
Preferred stock, $0.001 par value, 50,000 shares authorized,-0- shares issued and outstanding
-
-
Common stock, $0.001 par value, 10,000,000 shares authorized, 6,680,613 and 3,793,803 shares issued and 5,880,613 and 3,393,803 outstanding, respectively
6,680
379,380
Additional paid-in capital
145,843,081
140,263,974
Unearned ESOP Shares
(2,176,000
)
(1,700,000
)
(Deficit) accumulated during the development stage
(149,366,479
)
(143,548,341
)
Total Stockholders’ (Deficit)
(5,692,718
)
(4,604,987
)
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
$
63,448
$
40,035
The accompanying notes are an integral part of these consolidated financial statements.


Tree Top Industries, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
For the
Years Ended
December 31,
From
Inception
on August 1,
2007 through
December 31,
2012
2011
2012
(Unaudited)
REVENUES, net
$
-
$
-
$
2,967
COST OF SALES, net
-
-
-
GROSS PROFIT
-
-
2,967
OPERATING EXPENSES
General and administrative
359,194
413,226
6,082,885
Impairment of assets
513,538
-
2,788,538
Compensation and professional fees
4,311,192
1,172,316
139,582,136
Depreciation
30,694
32,762
157,571
Total Operating Expenses
5,214,619
1,618,304
148,611,130
OPERATING LOSS
( 5,214,619
)
(1,618,304
)
(148,440,096
)
OTHER INCOME (EXPENSES)
Loss on disposal of assets
-
-
(2,915
)
Gain on debt forgiveness
-
63,865
63,865
Interest income
-
-
9
Gain/(Loss) on marketable securities
(40,632)
-
(40,632)
Financing expenses
(400,000)
-
(400,000)
Interest expense
(162,887
)
(134,815
)
(378,643
)
Total Other Income (Expenses)
(603,519
)
(70,950
)
(758,316
)
LOSS BEFORE INCOME TAXES
(5,818,138
)
(1,689,254
)
(149,366,479
)
INCOME TAX EXPENSE
-
-
-
NET LOSS
$
(5,818,138
)
$
(1,689,254
)
$
(149,366,479
)
BASIC AND DILUTED LOSS PER SHARE
$
(1.39
)
$
(0.60
)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING,
BASIC AND DILUTED
4,185,667
2,804,939
The accompanying notes are an integral part of these consolidated financial statements.
17
Tree Top Industries, Inc.
(A Development Stage Company)
Consolidated Statement of Stockholders’ Equity (Deficit)
From Inception on August 1, 2007 through December 31, 2012

Deficit
Accumulated
During the
Development
Stage
Additional
Paid-In
Capital
Unearned
ESOP
Shares
Preferred Stock
Common Stock
Total
Equity
Shares
Amount
Shares
Amount
Balance, August 1, 2007 (inception)
-
$
-
-
$
-
$
-
$
-
$
-
Issuance of founder shares at inception at $0.007 per share
-
-
680,000
680
499,320
-
-
500,000
Shares issued in recapitalization
-
-
9,878
10
(10
)
-
-
-
Stock options issued for services at $0.74 per share
-
-
-
-
1,494,298
-
-
1,494,298
Stock options issued for cash at $0.10 per share
-
-
-
-
200,000
-
-
200,000
Stock options issued for services at $0.85 per share
-
-
-
-
126,210
-
-
126,210
Exercise of stock options at $0.25 per share
-
-
5,000
5
124,995
-
-
125,000
Shares issued for services at $0.85 per share
-
-
25,900
26
2,201,474
-
-
2,201,500
Shares issued for services at $2.00 per share
-
-
2,500
2
499,998
-
-
500,000
Net loss for the year ended December 31, 2007
-
-
-
-
-
-
(5,657,322
)
(5,657,322
)
18
Balance, December 31, 2007 (Unaudited)
-
$
-
723,278
$
723
$
5,146,285
$
-
$
(5,657,322
)
(510,314
)
Fractional shares
-
-
6
-
-
-
-
-
Exercise of stock options  at $0.25 per share
-
-
11,000
11
724,989
-
-
725,000
Common stock cancelled
-
-
(246,000
)
(246
)
246
-
-
-
Stock options granted for services
-
-
-
-
1,993,000
-
-
1,993,000
Exchange of Ludicrous, Inc. stock options for Tree Top stock options
-
-
-
-
932,779
-
-
932,779
Net loss for the year ended December 31, 2008
-
-
-
-
-
-
(4,140,807
)
(4,140,807
)
Balance, December 31, 2008 (Unaudited)
-
-
488,284
488
8,797,299
-
(9,798,129
)
(1,000,342
)
Stock options granted for services
-
-
-
-
32,145,311
-
-
32,145,311
Common stock issued for services
-
-
748,500
749
68,881,251
-
-
68,882,000
Common stock issued for acquisition of subsidiary
-
-
35,000
35
2,274,965
-
-
2,275,000
Common stock issued for cash
-
-
3,157
3
110,497
-
-
110,500
Stock based compensation earned
-
-
-
-
241,983
-
-
241,983
19
Net loss for the year ended December 31, 2009
-
-
-
-
-
-
(104,945,249
)
(104,945,249
)
Balance, December 31, 2009 (Unaudited)
-
$
-
1,274,941
$
1,275
$
112,451,306
$
-
$
(114,743,378
)
(2,290,797
)
Stock options granted for services
-
-
-
-
8,024,977
-
-
8,024,977
Valuation of stock option re-pricing
-
-
-
-
153,965
-
-
153,965
Common stock issued for services
-
-
1,234,850
1,235
17,243,560
-
-
17,244,795
Common stock issued for cash
-
-
2,200
2
2,198
-
-
2,200
Stock based compensation earned
-
-
-
-
213,910
-
-
213,910
Imputed interest - loan
-
-
-
-
12,446
-
-
12,446
Contribution from shareholders
-
-
-
-
50,375
-
-
50,375
Common stock issued to ESOP
-
-
200,000
200
1,099,800
(1,100,000
)
-
-
Net loss for the year ended December 31, 2010
-
-
-
-
-
-
(27,115,709
)
(27,115,709
)
Balance, December 31, 2010 (Unaudited)
-
$
-
2,711,991
$
2,712
$
139,252,537
$
(1,100,000
)
$
(141,859,087
)
$
(3,703,838
)
The accompanying notes are an integral part of these consolidated financial statements.
20
Valuation of Beneficial Conversion Feature
-
-
-
-
75,000
-
-
75,000
Common stock issued for cancellation of options
-
-
579,400
579
114,622
-
-
115,201
Common stock issued for services
-
-
253,000
253
430,957
-
-
431,210
Cancellation of common stock
-
-
(65,000
)
(65
)
65
-
-
-
Common stock issued for cash
-
-
29,412
29
24,971
-
-
25,000
Stock based compensation earned
-
-
-
-
64,107
-
-
64,107
Imputed interest - loan
-
-
-
-
13,440
-
-
13,440
Common Stock issued for rent
-
-
50,000
50
37,450
-
-
37,500
Common Stock issued for convertible debt
-
-
35,000
35
26,612
-
-
26,647
Common stock issued to ESOP
-
-
200,000
200
599,800
(600,000
)
-
-
Net loss for the year ended December 31, 2011
-
-
-
-
-
-
(1,689,254
)
(1,689,254
)
Balance, December 31, 2011
-
$
-
3,793,803
$
3,793
$
140,639,561
$
(1,700,000
)
$
(143,548,341
)
$
(4,604,987
)
Valuation of Beneficial Conversion Feature
-
-
-
-
100,000
-
-
100,000
Common stock issued for services
-
-
1,930,183
1,930
3,756,256
-
-
3,758,186
Common stock issued for asset acquisition
-
-
466,853
467
513,071
-
-
513,538
Common stock issued for cash
-
-
12,821
13
24,987
-
-
25,000
Stock based compensation earned
-
-
-
-
168,660
-
-
168,660
Imputed interest - loan
-
-
-
-
13,440
-
-
13,440
Common Stock issued for rent
-
-
50,000
50
99,950
-
-
100,000
Common Stock issued for convertible debt
-
-
26,899
27
51,556
-
-
51,583
Common stock issued to ESOP
-
-
400,000
400
475,600
(476,000
)
-
-
Fractional shares
54
-
-
-
-
-
Net loss for the year ended December 31, 2012
-
-
-
-
-
-
(5,818,138
)
(5,818,138
)
Balance, December 31, 2012
-
$
-
6,680,613
$
6,680
$
145,843,081
$
(2,176,000
)
$
(149,366,479
)
$
(5,692,718
)
The accompanying notes are an integral part of these consolidated financial statements.


Tree Top Industries, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
For the Years Ended
December 31,
From
Inception on
August 1, 2007
through
December 31,
2012
2011
2012
(Unaudited)
CASH FLOW FROM OPERATING ACTIVITIES
Net loss
$
(5,818,138
)
$
(1,689,254
)
$
(149,366,479
)
Adjustments to reconcile net loss to net used in operating activities:
Bad debt expense
-
-
192,000
Depreciation and amortization
30,694
32,762
157,571
Stock issued for option cancellation
-
115,201
115,201
Stock issued for rent
100,000
37,500
137,500
Gain on debt settlement
-
(63,865)
(63,865
)
Loss on marketable securities
40,632
-
40,632
Stock options granted for services rendered
-
-
44,870,540
Impairment of long lived assets
513,538
-
513,538
Impairment of intangible assets
-
-
2,275,000
Common stock issued for services rendered
3,926,843
495,317
93,706,348
Imputed interest on loan
13,440
13,440
39,327
Loss on disposal of fixed assets
-
-
2,915
Amortization of debt discount
100,000
75,000
175,000
Changes in operating assets and liabilities
(Increase) decrease in prepaid expenses
-
-
-
Increase (decrease) in accounts payable and accrued expenses
1,002,530
669,863
3,867,232
Net Cash Used in Operating Activities
(90,461
)
(314,036
)
(3,337,540
)
CASH FLOW FROM INVESTING ACTIVITIES
Cash advanced on note receivable
-
-
(192,000
)
Cash received in acquisition
-
-
44,303
Cash paid for marketable securities
(95,256)
-
(95,256)
Cash paid for property and equipment
-
-
(169,310
)
Net Cash Used in Investing Activities
(95,256)
-
(412,263
)
CASH FLOW FROM FINANCING ACTIVITIES
Bank overdraft
-
-
-
Cash contribution from shareholders
-
-
50,375
Cash received from issuance of common stock
25,000
25,000
1,712,700
Cash received from notes payable
188,000
75,000
747,860
Cash paid to related party loans
(138,227
)
(157,466
)
(576,433
)
Cash received from related party loans
110,427
369,345
1,815,301
Net Cash Provided by Financing Activities
185,200
311,879
3,749,803
NET INCREASE (DECREASE) IN CASH
(517
)
(2,157
)
-
CASH AT BEGINNING OF PERIOD
517
2,674
-
CASH AT END OF PERIOD
$
-
$
517
$
-
The accompanying notes are an integral part of these consolidated financial statements.


Tree Top Industries, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
For the Years Ended
December 31,
From Inception
on August 1,
2007 through
December 31,
2012
2011
2012
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION CASH PAID FOR:
Interest
$
-
$
-
$
-
Income
Taxes
-
-
-
NON-CASH INVESTING AND FINANCING ACTIVITIES
Conversion of Debenture
$
50,000
$
25,000
$
75,000
Common stock issued for acquisition of subsidiary
$
-
$
-
$
2,275,000
Common stock issued to ESOP
$
476,000
$
600,000
$
2,176,000
Common stock issued for business acquisition $
513,538
$
-
$
513,538
Note discount from beneficial conversion feature $
100,000
$
50,000
$
150,000
The accompanying notes are an integral part of these consolidated financial statements.


NOTE 1 - NATURE OF OPERATIONS
A)      HISTORY
Western Exploration, Inc., a Nevada corporation, was formed on July 24, 1980. In 1990, Western Exploration, Inc. changed its name to Nugget Exploration, Inc. On November 10, 1999, a wholly owned subsidiary of Nugget Exploration, Inc., Nugget Holdings Corporation merged with and into GoHealthMD, Inc., a Delaware corporation. Shortly thereafter, Nugget Exploration, Inc. changed its name to GoHealthMD, Inc. a Nevada corporation.
On August 18, 2004, GoHealthMD, Inc., the Nevada Corporation, changed its name to Tree Top Industries, Inc. GoHealthMD, Inc. continues to exist as a Delaware corporation and wholly owned subsidiary of Tree Top Industries, Inc. NetThruster, Inc., BioEnergy Applied Technologies, Inc., Universal Energy and Services Group, Inc. and International Eye Care Centers, Inc. are also wholly owned subsidiaries of Tree Top Industries, Inc.
On April 24, 2009, the Company entered into a stock exchange agreement (the “Exchange Agreement”) with BioEnergy Applied Technologies Inc., a Nevada corporation (“BAT”), BioEnergy Systems Management Inc., Wimase Limited and Energetic Systems Inc., LLC. Under the terms of the Exchange Agreement, the Company agreed to acquire all of the issued and outstanding shares of BAT. The acquisition resulted in BAT becoming a wholly-owned subsidiary of the Company upon closing. The Exchange Agreement calls for the issuance of a total of 35,000 shares of common stock of the Company, par value $.0001 per share, in exchange for the transfer of all of the issued and outstanding shares of common stock of BAT to the Company.
BAT is the originator and incubator of environmentally friendly technologies useful in the areas of energetic materials, chemicals and chemical processes, gasification, and the safe and novel destruction of biological and other hazardous wastes. The Company has been focused on the incubation growth and commercialization of novel technology platforms designed to address the fundamental limitations of many of today’s technologies and businesses. The Company will seek to provide key technologies to the biofuels sector, designed to help make biofuels more cost effective and of a higher quality.

In January 2012, the Company organized a wholly owned subsidiary named “TTII STRATEGIC ACQUISITIONS & EQUITY GROUP, INC. - DE”. The subsidiary was organized to facilitate and assist with funding the company’s several subsidiaries and projects.

During 2012, the Company organized TTII Oil & Gas, Inc., a Delaware corporation, as also wholly owned subsidiaries of Tree Top Industries, Inc., for the purpose of acquiring the assets of American Resource Technologies, Inc.

On December 31, 2012, Tree Top and its new subsidiary, TTII Oil & Gas, Inc., a Delaware corporation, signed a binding asset purchase agreement with American Resource Technologies, Inc. (“ARUR”), a Kansas corporation, to acquire all of the assets of ARUR for a purchase price of $513,538, which was paid from the issuance of 466,853 shares of Tree Top’s common stock as described in the asset purchase agreement. Pursuant to the asset purchase agreement, the Company acquired a 75% working interest in the Ownbey oil & gas Lease in the state of Kansas. In addition, there were various receivables, notes receivable, 25% equity investments in inactive entities and a gun sight patent.

Subsequent to the Company’s purchase of the assets and the termination of the operator,  a mechanics lien was filed against the property claiming approximately $200,000 in fees  are due to the previous operator. The Company is aggressively defending the action, however at December 31, 2012, due to the lien and loss of title to the assets, the Company impaired the recorded cost, leaving no value associated with the acquisition. See Note 11 for detail of the assets acquired from ARUR.
The Company has not realized significant revenues as of December 31, 2012 and is classified as a development stage enterprise in accordance with ASC 915.
B)       GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred a net loss of $5,650,071 during the fiscal year ended December 31, 2012 and has an accumulated deficit of $149,198,412. During 2011 the Company incurred losses totaling $1,689,254 and is in default on several notes payable (see Note 5). The Company also has negative working capital of $5,756,164 and $4,644,505 at the years ended December 31, 2012 and 2011, respectively, and negative cash flow from operations of $90,461 and $314,036.
Since inception (August 1, 2007) through December 31, 2012, the Company has not generated any significant business. Through the date of these financial statements viable operations have not been achieved and the Company has been unsuccessful in raising all the capital that it requires. The Company has had no revenues and requires substantial financing. Most of the financing has been provided by David Reichman, the present Chief Executive Officer and Chairman. The Company is dependent upon his ability and willingness to continue to provide such financing which is required to meet reporting and filing requirements of a public company.
In order for the Company to remain a going concern, it will need to continue to receive funds from equity or debt financing. There can be no assurance that the Company will continue to receive any proceeds from equity offerings or that the Company will be able to obtain the necessary funds to finance its operations. These conditions raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
A)      PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Ludicrous, Inc., BioEnergy Applied Technologies Inc., GoHealthMD, Inc., MLN, Inc., Universal Energy and Services Group, Inc. Sky Entertainment, Inc., Eye Care Centers International, Inc., GoHealthMD Nano Pharmaceuticals, Inc., TTI Strategic Acquisitions and Equity Group, Inc. and TTII Oil & Gas, Inc.. All subsidiaries of the Company currently have no financial activity. All significant inter-company balances and transactions have been eliminated.
B)      USE OF MANAGEMENT’S ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. These financial statements have material estimates for valuation of stock and option transactions.
C)      CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents are maintained with major financial institutions in the U S. Deposits held with these banks at times exceed $250,000 of insurance provided on such deposits. The Company has not experienced any losses in such accounts and believes that it is not exposed to any significant credit risk on cash and cash equivalents. At December 31, 2012 and 2011, no excess existed. There were no cash equivalents at December 31, 2012 and 2011.
D)      FIXED ASSETS
Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, ranging from 3 to 7 years for furniture, fixtures, machinery and equipment. Leasehold improvements are amortized over the lesser of the term of the lease or the economic life of the asset. Routine repairs and maintenance are expensed when incurred.
E)      INCOME TAXES
The Company applies ASC 740 which requires the asset and liability method of accounting for income taxes. The asset and liability method requires that the current or deferred tax consequences of all events recognized in the financial statements are measured by applying the provisions of enacted tax laws to determine the amount of taxes payable or refundable currently or in future years. Deferred tax assets are reviewed for recoverability and the Company records a valuation allowance to reduce its deferred tax assets when it is more likely than not that all or some portion of the deferred tax assets will not be recovered.
The Company adopted ASC 740 at the beginning of fiscal year 2008. This interpretation requires recognition and measurement of uncertain tax positions using a “more-likely-than-not” approach, requiring the recognition and measurement of uncertain tax positions. The adoption of ASC 740 had no material impact on the Company’s financial statements. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will to be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
F)      REVENUE RECOGNITION
We recognize service revenues in accordance with ASC 605 Revenue Recognition and Revenue Arrangements with Multiple Deliverables. Revenue is recognized when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. At the inception of a customer contract for service, we make an assessment as to that customer’s ability to pay for the services provided. If we subsequently determine that collection from that customer is not reasonably assured, we record an allowance for doubtful accounts and bad debt expense for all of that customer’s unpaid invoices and cease recognizing revenue for continued services provided until cash is received.
G)      STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation in accordance with the provisions of ASC 718. ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the reward- known as the requisite service period. No compensation cost is recognized for equity instruments for which employees do not render the requisite service. The grant-date fair value of employee share options and similar instruments are estimated using the Black Scholes option-pricing model adjusted for the unique characteristics of those instruments.
Equity instruments issued to non-employees are recorded at their fair values as determined in accordance with ASC 718 and ASC 595, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods and Services”, and are periodically revalued as the stock options vest and are recognized as expense over the related service period.
H)      INTANGIBLE ASSETS AND BUSINESS COMBINATIONS
The Company adopted ASC 805, “Business Combinations”, and ASC 350, “Goodwill and Other Intangible Assets”, effective June 2001 and revised in December 2007. ASC 805 requires the use of the purchase method of accounting for any business combinations initiated after June 30, 2002, and further clarifies the criteria to recognize intangible assets separately from goodwill. Under ASC 350, goodwill and indefinite−life intangible assets are no longer amortized, but are reviewed for impairment annually.
With the acquisition of the assets of ARUR, the company acquired a patent for a gun sight. Since there was no available determinable value to the patent, no allocation of the purchase price was assigned to the patent. In addition, the Company acquired a 75% working interest in an Oil & Gas lease in the state of Kansas. Subsequent to the acquisition, the previous operator filed a mechanics lien on the property. The Company determined that due to this lien and loss of title to the assets, that the cost allocation to this asset would be written off as an impairment of a long lived asset. The Company acquired various minority equity ownerships in inactive companies in Brazil and uncollectible receivables, therefore no purchase price allocation was assigned to these assets.  No other intangible assets were acquired from this purchase.
I)      FAIR VALUE OF FINANCIAL INSTRUMENTS
On January 1, 2008, the Company adopted ASC 820, “Fair Value Measurements” ASC 820 defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:
o
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
o
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
o
Level 3 inputs to the valuation methodology are unobservable and significant to the fair measurement.
The carrying amounts reported in the balance sheets for cash and cash equivalents, and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The carrying value of notes payable approximates fair value because negotiated terms and conditions are consistent with current market rates as of December 31, 2012 and 2011.
Marketable securities are reported at the quoted and listed market rates of the securities held at the year end.
The following table presents the Company’s Marketable securities and Notes Payable within the fair value hierarchy utilized to measure fair value on a recurring basis as of December 31, 2012 and 2011:
Level 1
Level 2
Level 3
Marketable Securities – 2012
54,624
-0-
-0-
Marketable Securities – 2011
-0-
-0-
-0-
Notes payable - 2012
-0-
-0-
$
785,860
Notes payable - 2011
-0-
-0-
$
647,860
The following table presents a Level 3 reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs as of December 31, 2012 and 2011:
Notes payable
Balance, December 31, 2010
$
597,860
Purchases, sales, issuances and settlements (net)
50,000
Balance, December 31, 2011
647,860
Purchases, sales, issuances and settlements (net)
138,000
Balance, December 31, 2012
$
785,860
J)      BASIC AND DILUTED LOSS PER SHARE
The Company calculates earnings per share in accordance with ASC 260, “Computation of Earnings Per Share.” Basic loss per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share gives effect to dilutive convertible securities, options, warrants and other potential common stock outstanding during the period; only in periods in which such effect is dilutive. For 2012 and 2011, no common stock equivalent shares were excluded from the calculation as their effects are anti-dilutive, respectively. The ESOP shares issued during 2012 and 2011 have also been excluded from the calculation as they were issued but not outstanding.
For the Years Ended
December 31,
2012
2011
Loss (numerator)
$
(5,818,138
)
$
(1,689,254
)
Shares (denominator)
4,185,667
2,804,939
Basic and diluted loss per share
$
(1.39
)
$
(0.60
)
K)       RECENT ACCOUNTING PRONOUNCEMENTS
In October 2012, the FASB issued Accounting Standards Update (“ASU”) 2012-07 “Entertainment-Films (Topic 926): Accounting for Fair Value Information that Arises after the Measurement Date and Its Inclusion in the Impariment Analysis of Unamortized film Costs”. This pronouncement does not apply to the Company and will not be discussed.

In October 2012, the FASB issued Accounting Standards Update (“ASU”) 2012-06 “Business Combinations (Topic 805) Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution”. This pronouncement does not apply to the Company and will not be discussed.
In July 2012, the FASB issued Accounting Standards Update (“ASU”) 2012-02 “Intangibles-Goodwill and Other (Topic 350) Testing Goodwill for Impairment”. Under the amendments in this Update, an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Subtopic 350-30. An entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The adoption of ASU 2012-02 by the Company is not expected to have a material impact on the Company’s financial statements.

In December 2011, the FASB issued Accounting Standards Update (“ASU") 2011-11 “Balance Sheet (Topic 210) Disclosures about Offsetting Assets and Liabilities”. The amendments in this Update require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. This guidance is effective for interim and annual periods beginning after January 1, 2013. The adoption of ASU 2011-08 by the Company is not expected to have a material impact on the Company’s consolidated financial statements.
In September 2011, the FASB issued Accounting Standards Update (“ASU”) 2011-08 “Intangibles-Goodwill and Other (Topic 350) Testing Goodwill for Impairment”. Under the amendments in this Update, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit, as described in paragraph 350-20-35-4. If the carrying amount of a reporting unit exceeds its fair value, then the entity is required to perform the second step of the goodwill impairment test to measure the amount of the impairment loss, if any, as described in paragraph 350-20-35-9. This guidance is effective for interim and annual periods beginning after December 15, 2011. The adoption of ASU 2011-08 by the Company did not have a material impact on the Company’s consolidated financial statements.
In June 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-05,” Comprehensive Income (Topic 220) Presentation of Comprehensive Income”. The objective of this Update is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. To increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS), the FASB decided to eliminate the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity, among other amendments in this Update. This guidance is effective for interim and annual periods beginning after December 15, 2011. The adoption of ASU 2011-05 by the Company did not have a material impact on the Company’s consolidated financial statements.
In May 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-04, which is included in the Codification under ASC 820 “Fair Value Measurement (Topic 820) Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”. The amendments in this Update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the Board does not intend for the amendments in this Update to result in a change in the application of the requirements in Topic 820.Some of the amendments clarify the Board’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. This guidance is effective for interim and annual periods beginning after December 15, 2011.. The adoption of ASU 2010-11 by the Company did not not have a material impact on the Company’s consolidated financial statements.
L)        BENEFICIAL CONVERSION FEATURE OF DEBENTURES AND CONVERTIBLE NOTES .
In accordance with FASB ASC 470-20, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios , we recognize the advantageous value of conversion rights attached to convertible debt. Such rights give the debt holder the ability to convert his debt into common stock at a price per share that is less than the trading price to the public on the day the loan is made to us. The beneficial value is calculated as the intrinsic value (the market price of the stock at the commitment date in excess of the conversion rate) of the beneficial conversion feature of the debentures and related accruing interest, and is recorded as a discount to the related debt and an addition to additional paid in capital. The discount is amortized over the remaining outstanding period of related debt using the interest method.

M) IMPAIRMENT OF LONG-LIVED ASSETS

The Company has adopted FASB ASC 360 “ Accounting for the Impairment or Disposal of Long-Lived Assets," which requires that long-lived assets to be held and used be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Oil and gas interests accounted for under the full cost method are subject to a ceiling test, described below, and are excluded from this requirement.

N)       OIL AND GAS INTERESTS

The Company utilizes the full cost method of accounting for oil and gas activities. Under this method, subject to a limitation based on estimated value, all costs associated with property acquisition, exploration and development, including costs of unsuccessful exploration; are capitalized within a cost center. No gain or loss is recognized upon the sale or abandonment of undeveloped or producing oil and gas interests unless the sale represents a significant portion of oil and gas interests and the gain significantly alters the relationship between capitalized costs and proved oil and gas reserves of the cost center. Depreciation, depletion and amortization of oil and gas interests is computed on the units of production method based on proved reserves. Amortizable costs include estimates of future development costs of proved undeveloped reserves.

Capitalized costs of oil and gas interests may not exceed an amount equal to the present value, discounted at 10%, of the estimated future net cash flows from proved oil and gas reserves plus the cost, or estimated fair market value, if lower, of unproved interests. Should capitalized costs exceed this ceiling, an impairment is recognized. The present value of estimated future net cash flows is computed by applying average prices, in the preceding twelve months, of oil and gas to estimated future production of proved oil and gas reserves as of year-end, less estimated future expenditures to be incurred in developing and producing the proved reserves and assuming continuation of existing economic conditions.

O)       ASSET RETIREMENT OBLIGATIONS

The Company follows FASB ASC 410-20 "Accounting for Asset Retirement Obligations," which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs.

FASB ASC 410-20 requires recognition of the present value of obligations associated with the retirement of tangible long-lived assets in the period in which it is incurred. The liability is capitalized as part of the related long-lived asset's carrying amount.

Over time, accretion of the liability is recognized as an operating expense and the capitalized cost is depreciated over the expected useful life of the related asset. The Company's asset retirement obligations are related to the plugging, dismantlement, removal, site reclamation and similar activities of its oil and gas exploration activities.
P) Investments – Equity Method

The Company  accounts for its investment in private entities using the equity method for investments where the Company’s shares held are in excess of 20% of the outstanding  shares of the investee.  The Company acquired a 25% equity investment in three entities from Brazil. Due to the inactivity of the entities, the Company did not allocate any purchase price to these investments. The Company  evaluates  its  cost  investments  for  impairment  of  value annually.  If cost investments  become marketable they are  reclassified to Marketable  Securities-Available  for Sale.
Investments are as follows:
Balance, December 31, 2011
$ -0-
Investments acquired in ARUR asset purchase
-0-
Realized gains and losses
-0-
Unrealized gains and losses
-0-
Balance, December 31, 2012
$ -0-
Q)              Marketable Securities-Available for Sale
The   Company   purchased  marketable   securities  during 2012. The Company's  marketable securities are classified as "available  for sale".  Accordingly,  the Company  originally  recognizes  the  shares at the market value purchased.  The shares  are  evaluated  quarterly  using the specific identification method. Any unrealized holding gains or losses are reported as Other Comprehensive Income and as a separate component of  stockholder's  equity.  Realized  gains and losses are included in earnings. Also other than temporary impairments are recorded as a loss on marketable securities in the statements of operations.

NOTE 3 - RELATED PARTY TRANSACTIONS
Due to officers and directors as of December 31, 2012 and 2011 totals $3,853,391 and $3,186,130, respectively. These balances consist of net cash advances, bonuses, unpaid wages and unpaid expense reimbursements due to David Reichman and Kathy Griffin. The payables are unsecured, due on demand and do not bear interest. During 2012 Mr. Reichman advanced $110,427 to the Company to cover operating expenses, and was repaid $138,227. During 2011 Mr. Reichman advanced $369,345 to the Company and was repaid $157,466. At December 31, 2012 and 2011, the balances due each officer are as follows: Mr. Reichman: $3,304,634 and $2,817,373, respectively, and Mrs. Griffin: $548,757 and $368,757, respectively.
NOTE 4 - FIXED ASSETS
Depreciation expense was $30,694 and $32,762 during the years ended December 31, 2012 and 2011, respectively.
Fixed assets consist of the following:
2012
2011
Computer equipment
$
128,311
$
128,311
Office equipment
22,600
22,600
Telephone equipment
12,900
12,900
163,811
163,811
Accumulated Depreciation
(154,987
)
(124,293
)
$
8,824
$
39,518
NOTE 5 - NOTES PAYABLE AND CONVERTIBLE NOTES - IN DEFAULT
(a)
NOTES PAYABLE:
Notes payable consist of various notes bearing interest at rates from 5% to 9%, which are unsecured with original due dates between August 2000 and July 2013. All of the notes are unpaid to date and several are in default and are thus classified as current liabilities. At December 31, 2012, notes payable amounted to $785,860. Below is a discussion of the details to the notes payable and a table summarizing the notes owed by the Company.
During 2002, the Company settled a trade payable in litigation by executing a note payable to a company on the amount of $18,000, interest accrues at 6% per annum, unsecured, due September 1, 2002, in default. Accrued interest at December 31, 2012 is $12,240.
Also during 2002, in settlement of another trade payable, the Company executed a note payable to a Company in the amount of $30,000, interest accrues at 6% per annum, unsecured, due September 12, 2002, in default. Accrued interest at December 31, 2012 is $17,899.
During 2000, the company executed a note payable to an individual in the amount of $25,000, interest accrues at 5% per annum, unsecured, due August 31, 2000, in default. Accrued interest at December 31, 2012 is $17.087.
In 2002, the Company settled an obligation with a consultant by executing a note payable for $40,000, interest accrues at 7% per annum, unsecured, due July 10, 2002, in default. Accrued interest at December 31, 2012 is $29,887.
On December 27, 2009, the Company executed a note payable to an individual for various advances to the Company in the amount of $292,860, interest accrues at 9% per annum, unsecured, and is due upon demand after 6 months of execution. No demand has been made as of the date of these financial statements. Accrued interest at December 31, 2012 is $88,927.
In January 27, 2010, the Company executed a note payable to a corporation in the amount of $192,000, bears no interest and is due on demand after 6 months of execution and is unsecured. No demand has been made at the date of these financial statements. Interest expense in the amount of $13,440 has been imputed for this note in 2012. An offsetting entry to Paid in Capital was made in connection with this adjustment.

On August 28, 2012, the Company executed a note payable to a corporation in the amount of $12,000, interest accrues at 6% per annum, unsecured, due on demand after 8 months of execution. Accrued interest at December 31, 2012 is $247.

On September 17, 2012, the Company executed a note payable to a corporation in the amount of $20,000, interest accrues at 6% per annum, unsecured, due after 8 months of execution. Accrued interest at December 31, 2012 is $346.

On October 18, 2012, the Company executed a note payable to a corporation in the amount of $12,000, interest accrues at 6% per annum, unsecured, due after 8 months of execution. Accrued interest at December 31, 2012 is $148.

On November 26, 2012, the Company executed a note payable to a corporation in the amount of $20,000, interest accrues at 6% per annum, unsecured, due after 8 months of execution. Accrued interest at December 31, 2012 is $118.

On December 3, 2012, the Company executed a note payable to a corporation in the amount of $5,000, interest accrues at 6% per annum, unsecured, due after 8 months of execution. Accrued interest at December 31, 2012 is $24.

On December 13, 2012, the Company executed a note payable to a corporation in the amount of $19,000, interest accrues at 6% per annum, unsecured, due after 8 months of execution. Accrued interest at December 31, 2012 is $59.
None of the above notes are convertible or have any covenants.
(b)
CONVERTIBLE NOTES:
During March 2011, the Company engaged in four separate convertible note agreements in the total amount of $75,000, with two individuals. Because the conversion feature was beneficial, a note discount using the intrinsic value was recorded as a contra liability, with the offsetting entry to paid in capital. The note discount was equal to each respective note principal amount. The discount was accreted over the life of the respective notes using the effective interest method. The accretion was recorded as interest expense in the amount of $75,000 for the year ended December 31, 2011. One of the Convertible Notes was converted on June 6, 2011 through the issuance of 35,000 shares of common stock. The remaining Convertible Notes were converted on February 14, 2012 through the issuance of  26,899 shares of common stock. No gain or loss was recognized on any conversions, due to conversions within the terms of the agreements.
During April 2012, the Company engaged in one convertible note agreement with one individual. Because the conversion feature was beneficial, a note discount using the intrinsic value was recorded as a contra liability, with the offsetting entry to paid in capital. The note discount was equal to each respective note principal amount. The discount was accreted over the life of the respective notes using the effective interest method. The accretion was recorded as interest expense in the amount of $100,000 for the year ended December 31, 2012. The note discount was fully amortized at December 31, 2012 .
The details of the convertible debentures outstanding as of December 31, 2012 and 2011 are as follows:
2011 2012
April 12, 2012 - Convertible Note payable to an individual, convertible into 100,000 shares of Common stock on the date of maturity, due on December 12, 2012, unsecured, Conversion shares limited to total available authorized shares, in default
$ -
100,000
March 2011 – Convertible Note payable to two individuals Convertible into shares at 200% of note value upon conversion, Due in June 2011 and September 2011, unsecured
50,000 -
Total Convertible Notes
$
50,000
$
100,000
(c) Additional detail to all Notes Payable and Convertible Notes Payable is as follows:
Interest
Interest Expense
Principal
Rate
12/31/2012
12/31/2011
Maturity
$ 19,000 6.00 % 59 -
8/13/2013
5,000 6.00 % 24 -
8/3/2013
20,000 6.00 % 118 -
7/26/2013
12,000 6.00 % 148 -
6/18/2013
20,000 6.00 % 346 -
5/17/2002
12,000 6.00 % 247 -
4/28/2002
100,000 0 % -
12/12/2012
292,860 9.00 % $ 26,356 $ 26,356
6/27/2010
192,000 0 % 13,440 13,440
Demand
18,000 6.00 % 1,080 1,080
9/1/2002
30,000 6.00 % 1,800 1,800
9/12/2002
25,000 5.00 % 1,252 1,252
8/31/2000
40,000 7.00 % 2,800 2,800
7/10/2002
$ 785,860 $ 47,670 $ 46,728
At December 31, 2012 and 2011, accrued interest on the outstanding notes payable and convertible notes was $166,982 and $134,178, respectively. Interest expense on the outstanding notes amounted to $47,670 and $46,728 for the years ended December 31, 2012 and 2011, including the imputed interest discussed above.
NOTE 6 - INCOME TAXES
The FASB has issued FASB ASC 740-10 (Prior authoritative literature: Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109” (FIN 48)). FASB ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with prior literature FASB Statement No. 109, Accounting for Income Taxes. This standard requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by FASB ASC 740-10.
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Deferred tax assets and the valuation account are as follows:
2012
2011
Deferred tax assets:
NOL carryover
$
5,031,557
$
3,753,800
Valuation allowance
( 5,031,557
)
(3,753,800
)
Net deferred tax asset
$
-
$
-
The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates of 39% to pretax income from continuing operations for the years ended December 31, 2012 and 2011.
The components of income tax expense are as follows:
2012
2011
Book loss
$
(5,818,138
)
$
(1,689,254
)
Stock based compensation
4,026,843
660,508
Gain on debt settlement
-
(63,865)
Impairment of assets
513,538
-
Valuation allowance
1,277,757
1,092,611
$
-
$
-
The Company has adopted FASB ASC 740-10 to account for income taxes. The Company currently has no issues creating timing differences that would mandate deferred tax expense. Net operating losses would create possible tax assets in future years. Due to the uncertainty of the utilization of net operating loss carry forwards, an evaluation allowance has been made to the extent of any tax benefit that net operating losses may generate. A provision for income taxes has not been made due to net operating loss carry-forwards of $10,757,300 and $9,625,200 as of December 31, 2012 and 2011, respectively, which may be offset against future taxable income from 2028 through 2032. No tax benefit has been reported in the financial statements.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
December 31,
2012
2011
Beginning balance
$
-
$
-
Additions based on tax positions related to current year
-
-
Additions for tax positions of prior years
-
-
Reductions for tax positions of prior years
-
-
Reductions in benefit due to income tax expense
-
-
Ending balance
$
-
$
-
The Company did not have any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months.
The Company includes interest and penalties arising from the underpayment of income taxes in the consolidated statements of operations in the provision for income taxes. As of December 31, 2012 and 2011, the Company had no accrued interest or penalties related to uncertain tax positions.
The tax years that remain subject to examination by major taxing jurisdictions are for the years ended December 31, 2012, 2011 and 2010.
NOTE 7 - STOCKHOLDERS’ DEFICIT
A)      NUMBER OF SHARES AUTHORIZED
Under the Company’s charter, 750,000 shares of $0.001 par value common stock were authorized as of December 31, 2006. On November 28, 2007, the stockholders approved the increase in the Company’s authorized shares of common stock from 750,000 to 3.50 million shares, changed the par value to $0.001 and authorized 50,000 shares of $0.001 par value “blank check” preferred stock. On December 18, 2011, the Board of Directors approved an increase in the Company’s authorized common stock to 10,000,000. On December 28, 2012, the Board of Directors approved a 100 to 1 reverse stock split. All per share information in these financial statements have been retroactively restated for the reverse stock split. As of December 31, 2012 and 2011, 6,680,613 and 3,793,802 shares of common stock are issued and 5,880,613 and 3,393,802 shares are outstanding, respectively. The difference between the issued and outstanding shares are the ESOP shares being held in trust. There were no shares of preferred stock issued and outstanding.
B)      PREFERRED STOCK
As described above, the stockholders voted to authorize 50,000 shares of “blank check” preferred stock. The terms, rights and features of the preferred stock will be determined by the Board of Directors upon issuance. Subject to the provisions of the Company’s certificate of amendment to the articles of incorporation and the limitations prescribed by law, the Board of Directors would be expressly authorized, at its discretion, to adopt resolutions to issue shares, to fix the number of shares and to change the number of shares constituting any series and to provide for or change the voting powers, designations, preferences and relative, participating, optional or other special rights, qualifications, limitations or restrictions thereof, including dividend rights (including whether the dividends are cumulative), dividend rates, terms of redemption (including sinking fund provisions), redemption prices, conversion rights and liquidation preferences of the shares constituting any series of the preferred stock, in each case without any further action or vote by the stockholders. The Board of Directors would be required to make any determination to issue shares of preferred stock based on its judgment as to the best interests of the Company.
C)      ISSUANCES OF COMMON STOCK
Effective November 1, 2007, the Company closed an Agreement and Plan of Reorganization with Ludicrous and the stockholders of Ludicrous received 680,000 shares of the Company’s common stock. The disclosure of shares issued and outstanding for the Company has been restated to inception as though a forward stock split had occurred.
On December 6, 2007, the Board of Directors authorized the issuance of 2,000 shares of common stock to its directors, valued at $400,000, for services rendered to the Company.
On September 24, 2007, the Board of Directors authorized the issuance of 25,500 shares of common stock to David Reichman, valued at $2,167,500, for services rendered to the Company. The shares were issued on November 1, 2007.
On September 24, 2007, the Board of Directors authorized the issuance of 400 shares of common stock to its directors, valued at $34,000, for services rendered to the Company. The shares were issued on November 1, 2007.
On December 6, 2007, the Board of Directors authorized the issuance of 500 shares of common stock to its attorney, valued at $100,000, for services rendered to the Company.
On December 17, 2007, the Company issued 5,000 shares of common stock relating to the exercise of 500,000 options. The Company received proceeds totaling $125,000.
On January 16, 2008, the Board of Directors authorized the grant of 2,500 shares of common stock relating to the exercise of 250,000 options. The Company received proceeds totaling $62,500.
On March 26, 2008, the Board of Directors authorized the issuance of 8,500 shares of common stock relating to the exercise of 8,500 options. The Company received proceeds totaling $662,500.
During the year ended December 31, 2008, the Company authorized the grant of 10,000 of stock options. The Company recorded an expense of $527,805 at the date of grant.
During the year ended December 31, 2008, the Company cancelled 246,000 shares with a par value of $0.001.
During 2008 the Company authorized the exchange of options to purchase shares of Ludicrous common stock for options to purchase common stock of the Company. The Company revalued the options and recorded $932,779 as additional compensation expense for incremental value of the Company’s options.
On February 13, 2009, the Board of Directors authorized the issuance of 125,000 shares of common stock to officers and directors and consultants, valued at $37,500,000 for services rendered to the Company. The shares were valued at the fair market price listed on the day of grant.
On April 28, 2009, the Board of Directors authorized the issuance of 39,500 shares of common stock to officers and directors and consultants, valued at $2,054,000, for services rendered to the Company. The shares were valued at the fair market price listed on the day of grant.
On May 28, 2009, the Board of Directors authorized the issuance of 10,000 shares of common stock to officers and directors and consultants, valued at $520,000, for services rendered to the Company. The shares were valued at the fair market price listed on the day of grant.
On July 9, 2009, the Board of Directors authorized the issuance of 35,000 shares of common stock, valued at $2,275,000 for the acquisition of BAT, including environmental remediation technology. The issuance was valued at the fair market price of the shares listed on the date of closing on August 13, 2009.
On August 21, 2009, the Board of Directors authorized the issuance of 10,000 shares of its common stock for future legal services. The shares were valued at $1,040,000, the fair market price listed on the day of issuance. $241,983 of the issuance was earned during 2009 and the remainder ($798,017) was deferred until earned. During 2010 an additional $213,910 was earned.
On December 16, 2009, the Board of Directors authorized the issuance of 559,000 shares of common stock to officers and directors and consultants, valued at $29,068,000, for services rendered to the Company. The shares were valued at the fair market price listed on the day of grant. 10,000 shares of this issuance was for future legal services and was deferred in the amount of $520,000 until services are rendered.
On December 20, 2009, the Board of Directors authorized the issuance of 5,000 shares of common stock to consultants valued at $260,000. The shares were valued at the fair market price listed on the day of grant.
During October 2009, the Company authorized the issuance of 3,157 shares of common stock for cash received, totaling $110,500.
During February 2010, the Board of Directors authorized the issuance of 5,000 shares to a consultant, valued at $260,000. The shares were valued at the fair market price listed on the day of grant.
During April 2010 the Board of Directors authorized the issuance of 125,000 shares to five board members, valued at $4,125,000. The shares were valued at the fair market price listed on the day of grant.
During April 2010, the Board of Directors authorized the issuance of 150,000 shares to officers of the company, valued at $3,900,000. The shares were valued at the fair market price listed on the day of grant.
During April 2010, the Board of Directors authorized the issuance of 10,000 shares to four consultants, valued at $260,000. The shares were valued at the fair market price listed on the day of grant.
During May 2010, the Board of Directors authorized the issuance of 53,850 shares to 6 individuals and a corporation for consulting services rendered. The value of this issuance was $1,077,000, the fair market price listed on the day of grant.
During September 2010, the Board of Directors authorized the issuance of 80,000 shares to seven universities as an incentive. The valuation of the issuance was $440,000, the fair market price listed on the day of grant.
During September 2010, the Board of Directors authorized the issuance of 120,000 shares to three individuals as an incentive. The issuance was valued at $660,000, the fair market price listed on the day of grant.
During September 2010, the Board of Directors authorized the issuance of 200,000 shares to an Employee Stock Option Trust. The issuance was valued at $1,100,000, the fair market price listed on the day of issuance. Pursuant to the guidance in SOP 93-6, the value of the shares issued into the ESOP account is recorded as a contra equity account rather than an asset.
During October 2010, the Board of Directors authorized the issuance of 7,000 shares to several individuals as an incentive. The issuance was valued at $38,500, the fair market price listed on the day of grant.
During October 2010, the Board of Directors authorized the issuance of 30,000 shares to an individual as an incentive. The issuance was valued at $186,000, the fair market price listed on the day of grant.
During November 2010, the Board of Directors authorized the issuance of 34,000 shares to 3 individuals as incentives or for services rendered, valued at $532,300, the fair market price listed on the day of grant.
During November 2010, the Board of Directors authorized the issuance of 2,200 shares for cash of $2,200.
During December 2010, the Board of Directors authorized the issuance of 20,000 shares for legal services valued at $186,000, the fair market price listed on the day of grant.
During December 2010, the Board of Directors authorized the issuance of 50,000 shares to board member valued at $465,000, the fair market price listed on the day of grant.
During December 2010, the Board of Directors authorized the issuance of 550,000 shares to officers valued at $5,115,000, the fair market price listed on the day of grant.
During 2010, the Company received a contribution from a shareholder in the amount of $50,375. The contribution was recorded as an increase to Additional Paid in Capital.
As discussed above in Note 5, the Company recorded imputed interest on a non-interest bearing note. The imputed interest was recorded as an increase to Additional Paid in Capital in the amount of $12,446.
On February 18, 2011, the Board of Directors authorized the issuance of 20,000 shares of common stock to a Tree Top investor and shareholder for the continued use of his apartment in New York City by the president. The issuance was valued at $48,200, the market price at the date of authorization.
During March 2011, the Company agreed to settle the outstanding balance due to the Crone Law group and recorded an additional vesting of the shares held by them that had been deferred, and recorded consulting expense of $64,107. This left a balance of unused and unearned shares of 15,000 shares for future issuance to cover additional fees. In April 2011, the 15,000 shares were cancelled and returned to the Company.
On June 6, 2011, the Company accepted the return of 35,000 shares held in escrow, and cancelled them. On the same day the Company issued 35,000 shares to a Note Holder as payment on a $25,000 note with accrued interest of $1,647. The number of shares issued were within the terms of the convertible note agreement therefore no gain or loss was recorded on the conversion.
The recording of the beneficial conversion features on the convertible notes discussed previously required an increase in paid in capital in the amount of $75,000.
On August 16, 2011, the Board of Directors authorized the issuance of 579,400 shares of common stock to the officers, directors for the cancellation of all outstanding options, and 80,000 shares to consultants to the Company for services rendered. The Company recorded an expense of $115,201 in connection with the issuance of shares for options, which is the difference between the value of the options at the cancellation date and the value of the shares at the date of grant. The Company also recorded $60,000 in connection with the shares issued to the consultants, valued at the market price on the day of grant. On this same day the board authorized the issuance of 50,000 common shares to Highest Star for the continued use of their office in Burbank California. This issuance was recorded as rent expense in the amount of $37,500, the market price on the date of grant.
On November 14, 2011, the Board of Directors approved the cancellation of the 50,000 shares held for issuance to various colleges and universities as approved in September 2010. The universities had not yet accepted the issuances and the Board opted to cancel the shares.
Also on November 14, 2011, the company authorized the issuance of 29,412 for cash of $25,000 pursuant to the Adesso agreement disclosed in this annual report.
On December 21, 2011, the company authorized the issuance of 12,000 shares to the transfer agent for services to be included in 2012. The share issuance was valued at $36,000, the market value on the day of grant, and has been deferred until the services have been performed in 2012.
On December 28, 2011, the Board authorized the issuance of 15,000 shares to a consultant, valued at $45,000, the market value on the day of grant.
On December 29, 2011, the Board authorized the issuance of 126,000 to various consultants of the Company for services performed or to be performed in 2012. The issuance was valued at $378,000, however $99,990 was deferred compensation to be recorded in 2012 when the services are performed.
On December 29, 2011, the Board authorized the issuance of 200,000 shares to the Company’s Employee Stock Option Trust account. The issuance was valued at $600,000, the fair market price listed on the day of issuance. Pursuant to the guidance in SOP 93-6, the value of the shares issued into the ESOP account is recorded as a contra equity account rather than an asset.
During the twelve months ended December 31, 2011, the Company recorded imputed interest on a non-interest bearing note in the amount of $13,440, with an increase in paid in capital.

In January , 2012, the Company issued 346,139 shares to be held in escrow for the close of the Adesso agreement. These shares are not considered issued and outstanding.

On February 6, 2012, the Board authorized the issuance of 15,000 shares to a consultant, valued at $60,000, the market value on the day of grant.

On February 14, 2012, the Board authorized the issuance of 26,898 for the conversion of a convertible note payable and interest in the amount of $51,583. The market value of the share issued equaled the accrued interest and note balance. No gain or loss was recognized on the conversion.

On February 14, 2012, the Board authorized the issuance of 12,820 for cash of $25,000 pursuant to the Adesso acquisition agreement.

On March 2, 2012, the Board authorized the issuance of 7,500 shares for services valued at $30,000, the market value on the day of grant.

On March 28, 2012, the Board authorized the issuance of 15,000 shares for legal services valued at $60,000, the market value on the day of grant.

On June 6, 2012, the Board authorized the issuance of 25,000 shares for services valued at $87,500, the market value on the day of grant.

On August 8, 2012, the Board authorized the issuance of 1,615,000 shares for services, rent and charitable contributions, valued at $3,230,000, the market value on the day of grant.

On August 13, 2012, Board authorized the issuance of 100,000 shares for services valued at $145,000, the market value on the day of grant.

On August 14, 2012, Board authorized the issuance of 39,682 shares for services valued at $39,286, the market value on the day of grant.
On October 29, 2012, the Board authorized the issuance of 400,000 shares to the Company’s Employee Stock Option Trust account. The issuance was valued at $476,000, the fair market price listed on the day of issuance. Pursuant to the guidance in SOP 93-6, the value of the shares issued into the ESOP account is recorded as a contra equity account rather than an asset.
On October 29, 2012, Board authorized the issuance of 50,000 shares for services valued at $59,500, the market value on the day of grant.
On December 28, 2012, the Board effected a 100 to 1 reverse stock split. All per share information in these financial statements have been retroactively restated to reflect the split. 54 fractional shares were issued pursuant to the stock split.

On December 29, 2012, the Board authorized the issuance of 113,000 shares for services valued at $146,900, the market value on the day of grant.

On December 31, 2012, the Board authorized the issuance of 466,853 shares for the assets of ARUR. The value assigned to the assets was $513,538, the market value on the day of grant.

During the twelve months ended December 31, 2012, the Company recorded imputed interest on a non-interest bearing note in the amount of $13,440, with an increase in paid in capital.
During 2012, the Company recorded $100,000 in paid in capital due to the beneficial conversion feature of convertible notes payable.
D)      2007 OMNIBUS STOCK AND INCENTIVE PLAN
On September 24, 2007, the Board of Directors authorized the creation of the 2007 Omnibus Stock and Incentive Plan (the “2007 Plan”). The 2007 Plan was approved by the stockholders on November 28, 2007. An aggregate of 60,000 shares of common stock are reserved for issuance and available for awards under the 2007 Plan.
Awards under the 2007 Plan may include non-qualified stock options, incentive stock options, stock appreciation rights (“SARs”), restricted shares of common stock, restricted units and performance awards. For a complete description of the Plan, see Tree Top’s Form 8-K filed with the SEC on November 7, 2007.
E)      STOCK BASED COMPENSATION
The stock options authorized by the Company prior to the acquisition of Ludicrous, Inc. are accepted by the combined company and included in the following disclosure. On October 1, 2007, the Company issued three-year options to purchase a total of 20,000 shares of its common stock at an exercise price of $25 per share to two outside consultants. Each stock option was sold for a price of $10 per option for a total of $200,000. The options expire on September 30, 2010. The term of the options is divided into two periods, the Primary Option Period which is from October 1, 2007 through September 30, 2008 and the Secondary Option Period which is from October 1, 2008 through September 30, 2010. The exercise of the options has been restricted during the Primary Option Period. The option holders can only exercise a maximum of 2,500 shares during any calendar quarter through September 30, 2008. Therefore, during the entire Primary Option Period, the option holders can each exercise a maximum of 10,000 shares of common stock. There are no restrictions during the Secondary Option period. The fair value of the options as calculated under the Black-Scholes model totaled $1,694,298. For the year ended December 31, 2007, the Company recognized $1,494,298 of compensation expense related to these options.
On October 1, 2007, pursuant to his employment agreement, the Company issued five year options to David Reichman to purchase 12,000 shares of its common stock at an exercise price of $55 per share. The shares vest in 24 equal installments of 500 stock options each, commencing on October 1, 2007. The fair value of the options as calculated under the Black-Scholes model totaled $1,009,678.
The fair values of the 2007 options issued were determined using the following assumptions: risk free rate of 3.71% to 4.05%, no dividend yield, an expected life of three years and a volatility factor of 312.9% to 285.7%.
Effective January 1, 2008, the Company’s Board of Directors approved for issuance 2,500 stock options to each of its four directors, to be issued effective January 1, 2008, with an exercise price of $450 per share, expiring in 2018. The options vest 1/24th upon grant and then 1/24th each subsequent month. The fair value of the options as calculated under the Black-Scholes model totaled $4,498,441 which vested over a 2 year period. For the year ended December 31, 2010 and 2009, the Company recognized $0 and $2,604,854 of compensation expense related to these options, respectively. The fair value of these options was determined using the following assumptions: risk free rate of 3.45%, no dividend yield, an expected life of five years and a volatility factor of 318%.
During the year ended December 31, 2008, the Company recorded the value of 10,000 stock options issued to a shareholder with an exercise price of $100 per share, expiring in 2018. The fair value of the options as calculated under the Black-Scholes model totaled $527,805 which was recorded as compensation expense. The fair value of these options was determined using the following assumptions: risk free rate of 3.48%, no dividend yield, an expected life of five years and a volatility factor of 191%.
On February 13, 2009, the Company recorded the value of 50,000 stock options issued to members of the Board of Directors and a consultant with an exercise price of $120 per share, expiring in 2019. The fair value of the options as calculated under the Black-Scholes model totaled $14,981,194 which was recorded as compensation expense. The fair value of these options was determined using the following assumptions: risk free rate of 1.88%, no dividend yield, an expected life of 5 years and a volatility factor of 275%.
On May 28, 2009, the Company recorded the value of 70,000 stock options issued to members of the Board of Directors and a consultant with an exercise price of $55 per share, expiring in 2019. The fair value of the options as calculated under the Black-Scholes model totaled $3,639,297 which was recorded as compensation expense. The fair value of these options was determined using the following assumptions: risk free rate of 2.46%, no dividend yield, an expected life of 5 years and a volatility factor of 333%.
On December 16, 2009, the Company recorded the value of 210,000 stock options issued to members of the Board of Directors and a consultant with an exercise price of $52 per share, expiring in 2019. The fair value of the options as calculated under the Black-Scholes model totaled $10,919,967 which was recorded as compensation expense. The fair value of these options was determined using the following assumptions: risk free rate of 2.35%, no dividend yield, an expected life of 5 years and a volatility factor of 417%.
On May 25, 2010, the Company granted 275,000 options to the officers and directors of the Company with an exercise price of $26 per share, expiring in 2020. The fair value of the options as calculated under the Black-Scholes model totaled $8,024,977 which was recorded as option expense. The fair value of these options was determined using the following assumptions: risk free rate of 2.61%, no dividend yield, an expected life of 5 years and a volatility factor of 417%.
Also on May 25, 2010, the Company’s board of directors approved the re-valuation of all previously issued and outstanding options. The original terms of the options remained in effect; the only change was the exercise price, which was changed to $20 for all options. The fair value of the re-valuation of the 657,000 options outstanding was determined using the Black-Scholes model and totaled $153,965, using the following assumptions: risk free rate of 0.17% to 2.01%, no dividend yield, expected lives between .25 and 5 years, and volatility factor of 418%. The options were valued originally at $12,736,806, and with the new terms the value was determined to be $12,890,771, thus the difference recorded for the re-valuation was an additional expense of $153,965.
On August 16, 2011, the Board of Directors authorized the issuance of 579,400 shares of common stock to the officers, directors for the cancellation of all outstanding options. The Company recorded an expense of $115,201 in connection with the issuance of shares for options, which is the difference between the value of the options at the cancellation date and the value of the shares at the date of grant. The options were valued at the cancellation date using the Black-Scholes model using the following assumptions: risk free rate of 0.33%, no dividend yield, expected lives between 2.25 and 3.75 years, and a volatility factor of 193%.
A summary of the Company’s stock option activity is as follows for the years ended December 31, 2012 and 2011 and was retroactively restated for the change in conversion price as noted above:
Range of
Weighted
Remaining
Exercise
Average
Contractual
Prices
Exercise
Life
SHARES
Per Share
Price
(Years)
Options outstanding at December 31, 2010
615,000
$
20
20
3.99
Granted
-
-
-
-
Exercised
-
-
-
-
Expired
(615,000
)
20
20
-
Options outstanding at December 31, 2011
-
$
-
$
-
-
Granted
-
-
-
-
Exercised
-
-
-
-
Expired/Forfeited
-
20
20
Options outstanding at December 31, 2012
-
$
-
$
-
-
F)      STOCK WARRANTS
In conjunction with the stock issued for cash during the year ended December 31, 2009 the Company issued a total of 6,314 warrants. Each unit of common stock sold included 10 class A warrants and 10 class B warrants. Class A warrants have a strike price of $50 and are exercisable for 180 days from issuance. Class B warrants have a strike price of $100 and are exercisable for one year from the date of issuance.
A summary of the Company’s stock warrant activity is as follows for the years ended December 31, 2012 and 2011:
Range of
Weighted
Remaining
Exercise
Average
Contractual
Prices
Exercise
Life
SHARES
Per Share
Price
(Years)
Warrants outstanding at December 31, 2010
6,314
$
50-100
75
0.5
Granted
-
-
-
-
Exercised
-
-
-
-
Expired
6,314
50-100
75
-
Warrants outstanding at December 31, 2011
6,314
$
50-100
$
75
0.5
Granted
-
-
-
-
Exercised
-
-
-
-
Expired
6,314
$
50-100
75
-
Warrants outstanding at December 31, 2012
-
$
-
$
-
-
The aggregate intrinsic value of stock warrants outstanding and exercisable at December 31, 2012 and 2011 totaled $0 and $0, respectively. The weighted average grant date fair value of warrants granted during the periods ended December 31, 2012 and 2011 is $0 and $0, respectively. The fair value of warrants vested during the years ended December 31, 2012 and 2011 totaled $0 and $0, respectively.
G) DEFERRED STOCK COMPENSATION
During 2009, the Company issued 20,000 shares at separate times as a retainer for legal work to be performed. 10,000 shares were valued at $104 per share and the second 10,000 shares were valued at $52. A deferral of $1,560,000 was established initially and decreased as legal services were performed and the shares were released from trust. During 2011, the company realized an additional $64,107 in compensation related to this deferral. Then in April 2011, the remaining 15,000 shares were returned to treasury.
During December 2011, the Company issued 41,166 shares to service providers for services to be performed in 2012. The Company recorded deferred compensation of $135,990 pursuant to these future services, and will record the expense and paid in capital as the service periods occur.
During each quarter of 2012, the Company valued the shares earned by our professionals, based on the market value of the Company’s stock at the quarter end. The Company recorded professional fees of $168,660 during 2012, related to these deferred stock issuances.

As of December 31, 2012 and 2011, the balance remaining in the deferral account is $0 and  $135,990, respectively. The deferral is presented on the balance sheet net with Additional Paid in Capital.
H) UNEARNED ESOP SHARES
During 2010, the Company issued 200,000 shares to a Trust account for the future benefit of the employees of the Company. These shares have been recorded as Unearned ESOP Shares on the balance sheet as a contra equity account, pursuant to the guidance of SOP 93-6. The value recorded for the ESOP shares was the fair value of the shares at the date of issuance, of $1,100,000.
In December 2011, the Company issued an additional 200,000 shares to the ESOP Trust account for the future benefit of the employees of the Company. These shares have been recorded as Unearned ESOP Shares on the balance sheet as a contra equity account, pursuant to the guidance of SOP 93-6. The value recorded for the ESOP shares was the fair value of the shares at the date of issuance, of $600,000.

In December 2012, the Company issued an additional 400,000 shares to the ESOP Trust account for the future benefit of the employees of the Company. These shares have been recorded as Unearned ESOP Shares on the balance sheet as a contra equity account, pursuant to the guidance of SOP 93-6. The value recorded for the ESOP shares was the fair value of the shares at the date of issuance, of $476,000.

The total balance at December 31, 2012 and 2011 was $2,176,000 and $1,700,000, respectively.
NOTE 8- COMMITMENTS AND CONTINGENCIES
A) LEASES
Tree Top Industries, Inc. currently does not lease, rent or own any property.
B) LITIGATION
The Company was a defendant in a lawsuit from a supplier that is alleging non-payment of amounts owed for services rendered. The amount asserted was $54,712 and a judgment was entered in the matter for $55,512. Tree Top has included this amount in accounts payable at December 31, 2012 and 2011.
The Company was a defendant in a lawsuit from another supplier also alleging non-payment of amounts owed for services rendered. The amount asserted was $4,298. A judgment was entered for $4,352 and the Company has included this amount in accounts payable at December 31, 2012 and 2011.
The Company was a defendant in a lawsuit from a third supplier also alleging non-payment of amounts owed for services rendered. The amount asserted was $9,675. Management has included this amount in accounts payable at December 31, 2012 and December 31, 2011. All the notes payable discussed in this section, were incurred before 2002 and before present management took control of the company.
The Company was a defendant in a lawsuit from a supplier alleging nonpayment of amounts owed for services rendered. Management settled this lawsuit on November 30, 2001 and issued a note payable for $18,000 due September 1, 2002 with interest at 6% per annum in full settlement of this claim. As reflected in Notes Payable, the amount due on this note remains unpaid, and management has indicated that it has received no demand for payment from this note holder.
The Company was a defendant in a lawsuit from another supplier also alleging nonpayment of amounts owed for services rendered. This lawsuit was settled on May 1, 2002 by issuing a non interest bearing note payable for $25,000 due on September 12, 2002. The Company defaulted on this note, has not paid it to date and received a notice of motion dated October 22, 2002, seeking entry of a judgment for $30,000 plus interest effective December 6, 2002. The Company adjusted the note balance to $30,000 and has recorded interest expense at 6% per annum from May 1, 2002, the date of settlement, through the end of 2012.
The Company was a defendant in another lawsuit from a former consultant alleging nonpayment of amounts owed for services rendered. Management has executed a note payable to this plaintiff for $40,000 which was due on July 10, 2002 and remains unpaid. Pursuant to the terms of this note, the Company has recorded interest payable at 7% for the period July 10, 2002 through December 31, 2012.
TTI has filed suit in United States District Court against Dr. Steven Hoefflin for libel. The suit seeks redress in the form of enjoining the shareholder from any further harassment and in the form of damages from the shareholder and others who have allegedly abetted the shareholder’s actions. This case was dismissed in New York and we are currently evaluating if it would be productive to file the claim in the Los Angeles County Federal Court.
In addition, this same shareholder filed a third party cross complaint against TTI and one of its officers, in Los Angeles Superior Court. On May 25, 2010, the third party litigation case brought by Dr. Steven Hoefflin against TTI, and one of its officers, in LA Superior Court, index No .BC 392424, was dismissed with prejudice.

During April 2012, the Company filed suit in Los Angeles Superior Court against GeoGreen Biofuels, Inc. and related parties, relating to GeoGreen's failure to repay $192,000 advanced pursuant to a Bridge Loan Term Sheet. GeoGreen filed a cross-complaint against the Company and two of its officers. GeoGreen later amended its cross-complaint to state claims against third parties. Although litigation is inherently unpredictable, TTI is confident in its position, and intends to pursue the action aggressively. Written discovery has been exchanged, but depositions have not yet been taken. Trial is set for November 18, 2013.
Pursuant to the asset purchase agreement with ARUR, the Company has a contingent liability to payback notes payable in the amount of approximately $400,000 if the Company is successful in collecting on certain accounts receivable. If the receivables are not collected, there is no obligation on the Company to pay off the debt.
During March 2013, the Company was named in an action pertaining to the 75% working interest in the Ownbey Lease. Subsequent to the Company’s purchase of the assets and the termination of the operator,  a mechanics lien was filed against the property claiming approximately $200,000 in fees  are due to the previous operator. The Company is aggressively defending the action.
C) EMPLOYMENT AGREEMENT
Effective October 1, 2007, the Company entered into a two-year employment agreement with David Reichman, Chief Executive Officer, pursuant to which Mr. Reichman was paid an annual salary of $250,000, payable in semi-monthly installments. In addition, Mr. Reichman may be paid a bonus or bonuses during each year, as determined at the sole discretion of the Board of Directors and receive stock options to purchase 1.2 million shares of common stock as discussed above. During the year ended December 31, 2009, the Board of Directors approved the extension of this contract an additional two years from the date of expiration, at an annual salary of $500,000. During the year ended December 31, 2012, the Board of Directors approved the extension of this contract until December 31, 2013 with a salary of $1 . Mr. Reichman’s salary has been accruing because Tree Top is without the resources to pay the salary in full. This employment agreement was filed on November 7, 2007, as exhibit 99.2 to a current report of the Company on Form 8-K and is incorporated herein by reference.
Effective April 1, 2009, the Company entered into a three-year employment agreement with Kathy Griffin, President, pursuant to which Mrs. Griffin was paid an annual salary of $127,500, payable in semi-monthly installments. In addition, Mrs. Griffin may be paid a bonus or bonuses during each year, as determined at the discretion of the CEO, and receive stock options to purchase shares of common stock as discussed above. Mrs. Griffin was given a salary increase effective April 1, 2010 to an annual salary of $180,000. This salary increase accrued in 2010 because Tree Top was without resources to pay the salary increase. This employment agreement was filed on March 25, 2010 as exhibit 10.1 to a current report of the Company on Form 8-K and is incorporated herein by reference. Mrs. Griffin’s employment contact has been extended at December 31, 2012 until December 31, 2013, with a salary of $1 .
NOTE 9 - MATERIAL AGREEMENTS
On May 11, 2011, the Company entered an agreement with World Without Blindness, Inc. (WWB), wherein, the Company’s wholly owned subsidiary Eye Care Centers International, Inc. was granted the global rights, exclusive of the United States, to represent WWB to the public for 24 months. No assets or liabilities were recorded pursuant to this agreement.
On October 12, 2011, the Company signed a “Term Sheet Agreement” (the “Agreement”), between GoHealth, MD, Inc. (“GoHealth”) a wholly owned subsidiary of Tree Top Industries, Inc. (“TreeTop”) and Adesso Biosciences Limited, a Cayman Island corporation. Adesso Biosciences Limited is the majority owner of Adesso Diagnostics Ltd., (“Adesso”) and a 47.5% owner of Adeda Therapeutics, Ltd. (“Adeda”),which companies are being investigated to be potentially acquired by GoHealth. Upon closing and approval of the Board of Directors of all entities involved, GoHealth will acquire 93% of the stock of Adesso and 47.5% of the stock of Adeda in exchange for GoHealth convertible preferred stock with two provisions, either of which is exercisable after 2 years and one day, converting into a majority of common stock of GoHealth or converting into Tree Top common shares. In addition, at closing Tree Top will issue 10% of its outstanding stock to the shareholders of Adesso and Adeda. The entire agreement was filed in an 8-K dated October 18, 2011. Pursuant to this agreement, on November 14, 2011, the Company issued Adesso 29,412 shares of common stock for cash of $25,000. Subsequently, in January , 2012, the Company issued an additional 346,139 shares to be held in escrow for the close of the Agreement. Also on February 14, 2012, the Company issued 12,820 share for cash of $25,000 pursuant to the agreement.

ARUR Asset Purchase Agreement

On December 31, 2012, Tree Top and its new subsidiary, TTII Oil & Gas, Inc., a Delaware corporation, signed a binding asset purchase agreement with American Resource Technologies, Inc. (“ARUR”), a Kansas corporation, to acquire all of the assets of ARUR for a purchase price of $513,538, which was paid in the form of 466,853 shares of Tree Top’s common stock as described in the asset purchase agreement . See Note 11 for details.
NOTE 10 - NOTE RECEIVABLE
On January 15, 2010, the Company entered into a loan agreement with GeoGreen Biofuels, Inc. (“GeoGreen”), which is effective as of December 1, 2009. Under the terms of the Agreement, the Company agreed to finance the final stages of a facility build-out in order to begin processing waste cooking oils into biofuels. Under the terms of the agreement, the Company shall also help GeoGreen secure additional financing. Furthermore, the Agreement provides the Company with the right of first refusal on future equity financings of GeoGreen. To date, the Company has advanced a total of approximately $192,000 to GeoGreen. During 2010 the Company ceased funding GeoGreen, as it was suffering financially and went out of business. The Company tried to collect on the $192,000 Note with no success, therefore an allowance for doubtful collection of $192,000 was established. During 2009, the Company advanced $13,000 to GeoGreen which was allowed for in the 2009 balance sheet with the remaining $179,000 being allowed for during 2010.
Pursuant to the ARUR asset purchase agreement, the Company acquired various notes receivable in total of $550,000, which were due in 2010 and 2011. Management had assessed the collectability of these notes receivable and has deemed them uncollectible. Therefore, no value has been recorded for these notes receivable.
Notes receivable detail is as follows:
Note receivable from GeoGreen Biofuels, Inc., 0% interest rate, due 5/1/2010, unsecured
$ 192,000
Note receivable from Ameribras Energy, Inc., 0% interest rate, due 5/13/2010, unsecured
100,000
Note receivable from Ameribras Energy, Inc., 0% interest rate, due 6/15/2010, unsecured
100,000
Note receivable from Brazil Asset Management, Inc., 0% interest rate, due 3/26/2011, unsecured
350,000
Total
742,000
Allowance for doubtful collection
(742,000 )
Net Balance
-0-

NOTE 11 - ASSET PURCHASES AND OIL & GAS PROPERTIES

On December 31 2012, Tree Top and its new subsidiary, TTII Oil & Gas, Inc., a Delaware corporation, signed a binding asset purchase agreement with American Resource Technologies, Inc. (“ARUR”), a Kansas corporation, to acquire all of the assets of ARUR for a purchase price of $513,538, which was paid in the form of 466,853 shares of Tree Top’s common stock as described in the asset purchase agreement. The assets purchase from ARUR are as follows:
●
75% working interest in the Ownbey Oil & Gas leases in Chautauqua County Kansas, with associated equipment and oil field assets
●
A 1 to 2 mile shut down natural gas pipeline located in Montgomery County Kansas
●
Common Stock interest representing 25% of the common stock of Brasil Asset Management, Inc.
●
Common Stock interest representing 25% of the common stock of Thor Geotrac.
●
Common Stock interest representing 25% of the common stock of Ameribras Oklahoma.
●
Account receivable from skyberCorp do Brasil (Ameribras) due1/1/2011 in the amount of $3,600,000
●
Account receivable from Brasil Asset Management Projectos Limitada (BAMB) due 1/1/2012 in the amount of $3,600,000
●
Promissory Note Receivable from Ameribras Energy, Inc, due 5/13/2010, in the amount of $100,000
●
Promissory Note Receivable from Ameribras Energy, Inc, due 6/15/2010, in the amount of $100,000
●
Promissory Note Receivable from Brasil Asset Management, Inc, due3/26/2011, in the amount of $350,000
●
Contract for Revenue with Brasil Asset Mangement, Inc. (BAMO), in the amount of $1,000,000 due and payable on or before 1/30/11.
●
Gun sight patent acquired from Century Technologies, Inc.

Although no liabilities were assumed in the purchase agreement, a contingent liability is attached if the receivables are collected by the Company. The contingent liabilities are approximately $400,000. The Company has not recorded the liability because the event precipitating the liability has not occurred and is not likely to occur in the future and the fair value is zero.

The assets were purchased with the issuance of 466,853 shares and were valued at market value at the grant date as $513,538. The allocation of the purchase price is as follows:
75% working interest in Oil & Gas lease: $ 513,538
Recorded value 513,538
All accounts and notes receivable were deemed uncollectable due to the age and circumstances, and therefore were assessed no value in the asset purchase.  The equity ownerships were also deemed to be impaired due to the inactive nature of the entities, and were not allocated any value. The gun sight patent was also not readily assessable as to value and no purchase price was allocated to this asset.

Subsequent to the Company’s purchase of the assets and the termination of the operator,  a mechanics lien was filed against the property claiming approximately $200,000 in fees  are due to the previous operator. The Company is aggressively defending the action, however at December 31, 2012, due to the lien and loss of title to the assets, the Company impaired the recorded cost, leaving no value associated with the acquisition.The Company recorded an impairment on long lived assets in the amount of $513,538.

Because of the mechanics lien which impaired the title to the Oil and Gas properties, the Company has not recorded any asset retirement obligations or assets related to this transaction.

NOTE 12 - MARKETABLE SECURITIES AVAILABLE FOR SALE

In May 2012, the Company acquired 2,052 shares of Facebook stock (FB) for $95,256 plus fees. The value of the shares at December 31, 2012 in the amount of $54,624  had decreased, giving rise to an unrealized loss of $40,632 for the year ended December 31, 2012. The Company evaluated the prospects of it’s investments in relation to the severity and duration of the impairment. Based on that evaluation, the Company does consider the shares to be other than temporarily impaired at December 31, 2012, and recorded a loss on marketable securities in the statement of operations.

NOTE 13 - SUBSEQUENT EVENTS
In accordance with ASC 855-10 Company management reviewed all material events through the date of this report and there are no material subsequent events to report other than those reported below.

On January 28, 2013, the Board authorized the issuance of 68,484 shares for legal services.
During March 2013, the Company was named in an action pertaining to the 75% working interest in the Ownbey Lease. Subsequent to the Company’s purchase of the assets and the termination of the operator,  a mechanics lien was filed against the property claiming approximately $200,000 in fees are due to the previous operator. The Company is aggressively defending the action.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information we are required to disclose is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Commission. David Reichman, our Chief Executive Officer and our Principal Accounting Officer, is responsible for establishing and maintaining our disclosure controls and procedures.
Under the supervision and with the participation of our management, including the Chief Executive Officer and Principal Accounting Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Principal Accounting Officer has concluded that, as of December 31, 2012, these disclosure controls and procedures were not effective to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rule and forms; and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Principal Accounting Officer, as appropriate to allow timely decisions regarding required disclosure. The Company’s controls are not effective due to a lack of the segregation of duties.  The Company lacks the appropriate personnel to handle all the varying recording and reporting tasks on a timely basis.  The Company plans to address these material weaknesses as resources become available by hiring additional professional staff, such as a Chief Financial Officer, as funding becomes available, outsourcing certain aspects of the recording and reporting functions, and separating responsibilities.
The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the registrant’s principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
o
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;
o
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and
o
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant’s assets that could have a material effect on the financial statements.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the Chief Executive Officer and Principal Accounting Officer and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
The framework our management uses to evaluate the effectiveness of our internal control over financial reporting is based on the guidance provided by the Committee of Sponsoring Organizations of the Treadway Commission in its 1992 report: INTERNAL CONTROL - INTEGRATED FRAMEWORK. Based on our evaluation under the framework described above, our management has concluded that our internal control over financial reporting was ineffective as of December 31, 2012 due to the same material weaknesses that rendered our disclosure controls and procedures ineffective. The Company’s internal control over financial reporting is not effective due to a lack of sufficient resources to hire a support staff in order to separate duties between different individuals. The Company lacks the appropriate personnel to handle all the varying recording and reporting tasks on a timely basis.  The Company plans to address these material weaknesses as resources become available by hiring additional professional staff, such as a Chief Financial Officer, as funding becomes available, outsourcing certain aspects of the recording and reporting functions, and separating responsibilities.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation requirements by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.
Changes in Internal Controls over Financial Reporting
During the year ended December 31, 2012 there was no significant change in our internal controls over financial reporting or in other factors that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Inherent Limitations over Internal Controls
TTI’s management does not expect that its disclosure controls or its internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. 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. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within TTI have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or management override of the controls. The design of any system of controls is based in part on 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. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Our disclosure controls and procedures are designed to provide reasonable assurance of that our reports will be accurate. Our Chief Executive Officer and Principal Accounting Officer concludes that our disclosure controls and procedures were not effective at that reasonable assurance level, as of the end of the period covered by this Form 10-K due to the lack of sufficient segregation of duties and the lack of appropriate personnel. The Company plans to address these material weaknesses as resources become available by hiring additional professional staff, such as a Chief Financial Officer, as funding becomes available, outsourcing certain aspects of the recording and reporting functions, and separating responsibilities.  Our future reports shall also indicate that our disclosure controls and procedures are designed for this reason and shall indicate the related conclusion by the Chief Executive Officer and Principal Accounting Officer as to their effectiveness.
As of December 31, 2012, the Board of Directors consisted of five Directors. The Board of Directors has determined that each of the Directors, with the exception of Mr. Reichman and Mrs. Griffin, qualifies as “independent” as defined by SEC rules. In making this determination, the Board has concluded that none of these members has a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a Director.
During the fiscal year ended December 31, 2012, the Board of Directors held a total of 12 meetings.  Mr. Reichman, Mr. Benintendo, Mr. Gilbert and Mrs. Griffin attended at least 75% of the meetings of the Board of Directors and at least 75% of the meetings of the committees on which he or she served.  Mr. Hantman did not attend 75% of the meetings.
The Board of Directors is currently comprised as follows:
David Reichman is the Chairman of the Board and Chief Executive Officer, and has been an executive officer for more than five years. Previously, for more than 27 years, Mr. Reichman maintained a Business Management and Tax Law consulting group. He is an enrolled agent and licensed by the US Treasury/Internal Revenue Service. In addition to his Tax Law Consulting practice, Mr. Reichman was Co -General Partner and Tax Matters Partner in Harrison Re-cycling Associates, a company that maintained and operated the first recycling equipment for non-biodegradable Styrofoam and Styrene plastic in North America. Prior to that, from early 1970 to late April 1975, Mr. Reichman was employed by The American Express Company, where he held several positions, including Manager, Budget and Cost. During his tenure at American Express, Mr. Reichman created and developed, together with Control Data Corporation, the Flexible Budgeting for Management Control of International Operations Program , as well as the use of Time-Share computer equipment.  Mr. Reichman’s education includes an MBA from Northeastern University through the Harvard Case Study Program, as well as specialized education in financial and scientific theory from The Wharton School of University of Pennsylvania and IBM Systems Scientific Institute.
Kathy M. Griffin, President of the Company is also a member of the Board of Directors. Mrs. Griffin has been with the Company for two years, and has over thirty years of significant professional experience, on the domestic and international scene. Mrs. Griffin has significant experience in marketing, sales, new business development and general business management, both in the United States and internationally. Mrs. Griffin started her career at Superior Brands, where, from December, 1977 to December, 1990, she held several positions, including International Marketing Manager. She was responsible for the successful start up and implementation of the first international joint venture for Superior Brands, Inc.  In addition, Mrs. Griffin managed Koning USA, Inc., a consumer products marketing company from 1993 to 2004, and, from January, 2006 to February 2009, was employed as an executive in the New Business Development Group, by Shuster Laboratories, Inc., a division of Specialized Technology Resources, Inc., a global provider of supply chain services, corporate social responsibility, and consulting services.  Mrs. Griffin’s education includes a Bachelor’s degree from Boston College University, as well as advanced study in International Relations through the University of Massachusetts John McCormack Institute for Public Policy and the American Marketing Association.
Frank Benintendo, Secretary has been a Director and Secretary of TTI since 2004. Mr. Benintendo has spent over 40 years in the graphic arts/communication field. Mr. Benintendo is currently the Chief Creative Director of Dale & Thomas Popcorn Inc. From 1999-2000, he was the director of Internet development at ProTeam.Com and from 1998 to 1999 he was responsible for the creative/marketing of a brand driven company to transform each of the company’s niche-market catalog businesses into an e-commerce retailer. Mr. Benintendo’s skills and background were attractive to TTI since the Company has no creative staff. Mr. Benintendo has designed the current TTI logo, designed and updated all stationary, presentation material and marketing tools and has worked several versions of the TTI website, including the current iteration.
Don Gilbert, Treasurer, has been a Director of TTI since November 2006 and a member of the Audit Committee since November 1, 2007. Since 1995, Mr. Gilbert has been an Enrolled Agent, licensed to practice before the U.S. Treasury Department and Department of Taxation for all 50 States. Mr. Gilbert worked with the U.S. Treasury Department from 1960 to 1994 in various capacities. Mr. Gilbert is a member of the New York State Society of Enrolled Agents.  Having worked in the corporate world with executives across the country, Mr. Gilbert has accumulated business connections that may be helpful to Tree Top.
Robert Hantman, Director,  resigned in December, 2012. His resignation was disclosed in an 8 – K filing, which is attached here as an exhibit incorporated by reference.
The executive officers of TTI are as follows:
Name Position
David I. Reichman Chairman and CEO
Kathy M. Griffin President
Committees of the Board of Directors
The Board of Directors currently has four standing committees: the Audit Committee, the Compensation Committee, Outside Advisory Committee, and the Science & Technology Committee.
Family Relationships
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.
Involvement in Certain Legal Proceedings
To the best of our knowledge, during the past five years, none of the following occurred with respect to a present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Code of Conduct
We have adopted a Code of Conduct that governs the required ethical conduct of our Directors, officers and employees. The text of the Code of Conduct has been posted on TTI’s website and can be viewed at www.TreeTopIndustriesInc.com. Any waiver of the provisions of the Code of Conduct for executive officers and Directors may be made only by the Audit Committee and, in the case of a waiver for members of the Audit Committee, by the Board of Directors. Any such waivers will be promptly disclosed to our shareholders.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our Directors and executive officers and persons who own more than 10% of a registered class of our equity securities, to file with the SEC and the OTCQB initial reports of ownership and reports of changes in ownership of shares of common stock of TTI. Officers, Directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.
Prior to the date of this filing, each of our Directors failed to file Form 3s and/or Form 4s in a timely manner. However, this was corrected on July 19, 2010, by the filing of all of the required Form 3s and Form 4s by each of the Directors.
Robert Hantman should have filed a Form 3 on February 19, 2009, disclosing his receipt of 21,000 shares of common stock of TTI. Frank Benintendo and Donald Gilbert should have filed Form 4s on February 19, 2009, disclosing their respective receipt of 10,000 shares of common stock of TTI. David Reichman should have filed a Form 4 on February 19, 2009, disclosing his receipt of 39,000 shares of common stock of TTI. Kathy Griffin should have filed a Form 3 on June 8, 2009, disclosing her receipt of 24,000 shares of common stock of TTI. David Reichman should have filed a Form 4 on December 30, 2009, disclosing his receipt of 460,000 shares of common stock of TTI. Kathy Griffin should have filed a Form 4 on May 6, 2010, disclosing her receipt of 75,000 shares of common stock of TTI. On May 25, 2010:, Frank Benintendo should have filed a Form 4 disclosing receipt of 51,667 options; Donald Gilbert should have filed a Form 4 disclosing receipt of 51,666 options; Kathy Griffin should have filed a Form 4 disclosing receipt of 95,000 options; Robert Hantman should have filed a Form 4 disclosing receipt of 49,166 options and David Reichman should have filed a Form 4 disclosing receipt of 263,667 options.
Prior to the date of this filing, David Reichman failed to file a Form 4 in a timely manner.  However, this was corrected on April 8 th , 2011, by the filing the required Form 4.
David Reichman should have filed a Form 4 on December 29th, 2010 disclosing his receipt of 510,000 shares of common stock.
Board Vacancies
In the event of a vacancy on the Board of Directors, the Board will seek to identify and evaluate director candidates. Such evaluation involves (i) soliciting recommendations, (ii) meetings and background material relating to potential candidates and (iii) interviews of selected potential candidates by members of the Board of Directors.
In considering whether to recommend any particular candidate for inclusion in the Board of Directors’ slate of recommended director nominees, the Board reviews each potential candidate’s integrity, business acumen, knowledge of our business and industry, experience, diligence, absence of conflicts of interest and the ability to act in the interest of all stockholders. We believe that the backgrounds and qualifications of our Directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will best allow the Board of Directors to fulfill its responsibilities.
Stockholders may recommend individuals to the Board for consideration as potential director candidates by submitting their names, together with appropriate biographical information and background materials and a statement as to whether the stockholder or group of stockholders making the recommendation has beneficially owned more than 5% of our common shares for at least a year as of the date such recommendation is made. The recommendation should be sent to the Board of Directors, c/o Frank Benintendo, Secretary, Tree Top Industries, Inc. 511 Sixth Avenue, Suite 800, New York, N.Y. 10011. Assuming that appropriate biographical and background material has been provided on a timely basis, the committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates recommended by our Board or others. If the Board of Directors determines to nominate a stockholder-recommended candidate and recommends his or her election, then his or her name will be included in the proxy card for the next annual meeting.
Nominating Committee
We do not currently have a nominating committee. We feel this is appropriate due to the small size of our company. Therefore, this function is handled directly by the Board of Directors.
Audit Committee
Our Audit Committee was established in accordance with section 3(a) (58) (A) of the Exchange Act. It is chaired by Donald Gilbert, a former US Treasury/IRS executive. Our Audit Committee does not have charter. Our Audit Committee has reviewed and discussed the audited financial statements with management, and has discussed with the independent auditors the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380),1 and as adopted by the Public Company Accounting Oversight Board in Rule 3200T;
The Audit Committee has received the written disclosures and the letter from the independent accountant required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the Audit Committee concerning independence, and has discussed with the independent accountant the independent accountant's independence; and
The Audit Committee recommended to the Board of Directors that the audited financial statements be included in TTI's annual report on Form 10-K.
The following table sets forth the aggregate compensation earned by our Chief Executive Officer and others officers during 2012 and 2011.
Name
and
Principal Position
Year
Salary
($)
Bonuses
Stock
Awards
($’s)(1)
Option
Awards
($000’s)
Non-
Equity
Incentive
Plan
Compensation
($)
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
All other
compensation
(in excess
of
$10,000)
Total
($)
David Reichman,
2012
500,000 - 978,500 $ - - - - 978,000
CEO
2011
500,000 - 560,000 - 560,000
Kathy Griffin,
2012
180,000 - 369,750 - 369,750
President
2011
180,000 - 380,000 - - - - 380,000
__________
(1)
Stock issuances have been made to both Mr. Reichman and Mrs. Griffin as compensation for their continued work and support of Tree Top, without salary.
The Board determined the compensation for David Reichman, Chairman and Chief Executive Officer for 2012. Mr. Reichman’s salary remained at $500,000 for 2012. This is less than the competitive labor market median for someone with his skills and talents, but reflective of the Company’s current cash position. The Company has entered into an employment agreement with Mr. Reichman regarding his responsibility for implementing the policies adopted by the Board of Directors.   Due to Mr. Reichman’s continued willingness to forego his salary payment while the Company attempts to raise capital, the Board of Directors decided to issue 675,000 shares of Tree Top common stock to Mr. Reichman on August 12, 2012. On December 29, 2012, the board and Mr. Reichman agreed that the company would continue to receive his services through December, 2013, at an annual salary of $1.00.


The Board also determined the compensation for Mrs. Griffin, President, based on her undeterred commitment to Tree Top. Her salary remained at $180,000 in 2012. Due to the fact that Mrs. Griffin was willing to forego her salary for the entire year of 2012, and any bonus due her, the Board of Directors issued 255,000 shares of common stock to Mrs. Griffin on August 12, 2012. Currently, her salary is less than the competitive labor market median for someone in her position, but reflective of the Company’s current cash position. On December 29, 2012, the board and Mrs. Griffin agreed that the company would continue to receive her services through December, 2013, at an annual salary of $1.00.
Employment Agreements
Mr. Reichman’s employment agreement provides for:
o
a twenty-four months term through December 31, 2013 at an annual base salary of $500,000;
o
at least one annual salary review by the Board of Directors;
o
participation in any discretionary bonus plan established for senior executives;
o
retirement and medical plans, customary fringe benefits, vacation and sick leave
Mrs. Griffin’s employment agreement provides for:
o
a thirty-six month term through March 31, 2012 at an annual base salary of $127,500. Mrs. Griffin was given a salary increase to $180,000 during the second year of her contract;
o
at least one annual salary review by the Chief Executive Officer;
o
participation in any discretionary bonus plan established for senior executives;
o
retirement and medical plans, customary fringe benefits, vacation and sick leave
Director Compensation
The members of the Board of Directors are compensated by grants of stock and options, in lieu of cash payments. The Directors were issued 25,000 shares of common stock in August, 2012, which were valued at $36,500 each, based on the market value on the day of grant. They were not issued any options.
Director Summary Compensation Table
2012
Name and Principal
Position
Year
Bonus
($)
Stock
Awards
($000’s)
Option
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings ($)
All
Compensation
(in excess of
$10,000)
Total
($000’s)
David Reichman,
Chairman/Director
2012
- - 36,250 - - - - 36,250
Frank Benintendo,
Treasurer/Director
2012
- - 36,250 - - - - 36,250
Don Gilbert,
Secretary/Director
2012
- - 36,250 - - - - 36,250
Kathy Griffin,
Director
2012
- - 36,250 - - - - 36,250
Robert Hantman,
Director
2012
- - 36,250 - - - - 36,250
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OPTION AWARDS
Name
(a)
Number
of
Securities
Underlying
Unexercised
options
(#) (b)
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(c)
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(d)
Option
Exercise
Price
($)
(e)
Option
Expiration
Date
($)
(f)
David I. Reichman
- N/A N/A $ - N/A
Kathy M. Griffin
- N/A N/A $ - N/A
Donald H. Gilbert
- N/A N/A $ - N/A
Frank Benintendo
- N/A N/A $ - N/A
Robert Hantman
- N/A N/A $ - N/A
On August 16, 2011, the Board of Directors authorized the issuance of 579,400 shares of common stock to the officers, directors for the cancellation of all outstanding options, and there are currently no outstanding options.
Security Ownership of Certain Beneficial Owners and Management
Title of class
Name and address of
beneficial owner (1)
Amount of
Shares
Nature of beneficial
ownership
Percent of
class (2)
Common Stock
David Reichman
2,146,075
Direct
36.1
Common Stock
Frank Benintendo
200,000
Direct
3.4
Common Stock
Don Gilbert
175,000
Direct
3.0
Common Stock
Kathy Griffin
605,014
Direct
10.2
Common Stock
Robert Hantman
81,000
Direct
1.4
______________
(1)
In care of Tree Top Industries , Inc. 511 Sixth Ave., Suite 800, New York, NY 10011
(2)
Calculated from the total of outstanding shares of common stock as of April 15,2013 (5,949,097).
The Company has not and does not provide business services to executives or Directors of the Company or their family members. The Company has no agreement with Mr. Reichman for repayment of loans, other than the Board acknowledges and agrees that such loans, both of cash, as well as non-payment of salary and expenses are due on demand and without interest, except to the extent that interest charged by a bank, credit card, or other institution or person who loaned money.  The Board also acknowledges and agrees that loans by Mrs. Griffin, specifically the non-payment of her salary, are due on demand and without interest.
Mr. Reichman is the principle shareholder in the Company, and has been since 2002. He also operates as the CEO of the company and Chairman of the Board. If not for the continued monetary support of Mr. Reichman, the Company would not have been able to meet its obligations for the last eight years. Mrs. Griffin is the second principle shareholder and is President of the Company. She has operated as President since May 28, 2009.
The aggregate amount of the loans outstanding and due to Mr. Reichman and Mrs. Griffin, is $3,853,391 and $3,186,130 as of December 31, 2012 and 2011 respectively. They are non-interest bearing, due on demand loans. At December 31, 2012 and 2011, the balances due each officer are as follows: Mr. Reichman: $3,304,634 and $2,817,373, respectively, and Mrs. Griffin: $548,757 and $368,757, respectively.
The Company’s Code of Conduct provides that when any potential conflict exists, it must be properly disclosed and an appropriate determination made by the Company. The Chairman and CEO is ultimately responsible for the determination. The Company’s policies and procedures were followed in connection with all of the above.
Director Independence
The Board of Directors has determined that each of the Directors, with the exception of Mr. Reichman and Mrs. Griffin, qualifies as “independent” directors, as that term is defined under the FINRA listing standards.
M&K CPAS, PLLC served as the Company’s independent registered public accounting firm for the years ended December 31, 2012 and 2011.
Fees for professional services rendered to the Company during the fiscal year ended December 31, 2012 were as follows:
Audit Fees
$
15,000
Audit Related Fees
-
All Other Fees
-
Total Fees
$
15,000
Fees for professional services rendered to the Company during the fiscal years ended December 31, 2011 were as follows:
Audit Fees
$
15,000
Audit Related Fees
-
All Other Fees
-
Total Fees
$
15,000
Audit Fees: The audit fees for the fiscal years ended December 31, 2012 and 2011 were for professional services rendered in connection with the audit of the Company’s annual financial statements, assistance with review of documents filed with the SEC, consents and other services required to be performed by our independent registered public accounting firm.
Audit-Related Fees: There were no audit-related fees during the fiscal years ended December 31, 2012 and December 31, 2011.
Tax Fees: No fees were billed to the Company.
All Other Fees: There were no fees billed in the fiscal years ended December 31, 2012 and 2011 for products and services provided by the independent auditors, other than the services reported above under other captions of this Item 14.
Pre-Approval Policies and Procedures
Our Board of Directors adopted resolutions in accordance with the Sarbanes-Oxley Act of 2002 requiring pre-approval of all auditing services and all audit related, tax or other services not prohibited under Section 10A(g) of the Securities Exchange Act of 1934, as amended to be performed for us by our independent auditors, subject to the de minimus exception described in Section 10A(i)(1)(B) of the Exchange Act. These resolutions authorized our independent auditor to perform audit services required in connection with the annual audit relating to the fiscal years ended December 31, 2012 and 2011. Our Board of Directors also appointed and authorized David Reichman to grant pre-approvals of other audit, audit-related, tax and other services requiring board approval to be performed for us by our independent auditor, provided that the designee, following any such pre-approvals, thereafter reports the pre-approvals of such services at the next following regular meeting of the Board. The percentage of audit-related, tax and other services that were approved by the board of directors is 100%.
The following documents are filed as part of this 10-K:
1. Financial Statements
The following documents are filed in Part II, Item 8 of this annual report on Form 10-K:
o
Report of M&K CPAS, PLLC, Independent Registered Public Accounting Firm
o
Balance Sheets as of December 31, 2012 and 2011
o
Statements of Operations for the years ended December 31, 2012 and 2011
o
Statement of Stockholders’ Deficit for the years ended December 31, 2012 and 2011
o
Statements of Cash Flows for the years ended December 31, 2012 and 2011
o
Notes to Financial Statements
2. Financial Statement Schedules
None
3. Exhibits
EXHIBIT NO.
DESCRIPTION
3.1
Articles of incorporation of Tree Top Industries, as amended (1)
3.2
By-Laws (2)
10.1
Employment Agreement, dated October 1, 2007, by and between Tree Top Industries, Inc. and David Reichman (3)
10.2
Employment Agreement, dated April 1, 2009, by and between Tree Top Industries Inc. and Kathy Griffin (4)
10.3
Bridge Loan Term Sheet, dated January 11, 2010, by and between Tree Top Industries, Inc. and GeoGreen Biofuels, Inc.(5)
10.4
Business and Financial Consulting Agreement, dated February 22, 2010 by and between Tree Top Industries, Inc. and Asia Pacific Capital Corporation(6)
10.5
Distribution Agreement, by and between Tree Top Industries, Inc. and NetThruster, Inc., dated February 9, 2011(7)
10.6
Term Agreement by and between Tree Top Industries, Inc. and Sky Corporation, doo, dated April 18, 2011 (8)
10.7
Term Agreement by and between Tree Top Industries, Inc. and Adesso Biosciences, Ltd, dated October 12, 2011(9)
10.8 Term Agreement by and between Tree Top Industries, Inc. and Stemcom, LLC d/b/a Pipeline Nutrition, dated March 1, 2012(10)
10.9 Mutual disengagement agreement by and between Tree Top Industries, Inc. and Stemcom, LLC d/b/a Pipeline Nutrition, dated March 23, 2012(11)
10.10 Reserve Equity financing agreement by and between Tree Top  Industries, Inc. and AGS Capital Group, dated August 15, 2012.(12)
10.11 Asset purchase Agreement by and between TTII Oil & Gas, Inc. a subsidiary of Tree Top Industries, Inc. and American Resource Technologies, Inc.(13)
10.12 Resignation of Mr. Robert Hantman, Esq. as a member of the board of directors(14)
Subsidiaries of the registrant
Section 302 Certification of Chief Executive Officer and Chief Financial Officer
Section 906 Certification of Chief Executive Officer
_________________
(1)
Filed November 13, 2009, as an exhibit to a Form 10-Q and incorporated herein by reference.
Filed January 3, 2012, as an exhibit to an 8 – K and incorporated herein by reference.
Filed April 12, 2013, as an exhibit to an 8 – K and incorporated herein by reference.
(2)
Filed July 19, 2010, as an exhibit to a Form 10-K/A and incorporated herein by reference.
(3)
Filed November 7, 2007, as an exhibit to a Form 8-K and incorporated herein by reference.
(4)
Filed March 25, 2010, as an exhibit to a Form 8-K and incorporated herein by reference.
(5)
Filed January 19, 2010, as an exhibit to a Form 8-K and incorporated herein by reference.
(6)
Filed July 19, 2010, as an exhibit to a Form 10-Q/A and incorporated herein by reference.
(7)
Filed February 9, 2011, as an exhibit to a Form 8-K and incorporated herein by reference.
(8)
Filed April 19, 2011, as an exhibit to a Form 8 - K and incorporated herein by reference.
(9)
Filed October 18, 2011 as an exhibit to a Form 8 - K and incorporated herein by reference.
(10) Filed March 6, 2012 as an exhibit to a Form 8 – K and incorporated herein by reference.
(11) Filed March 23, 2012 as an exhibit to a Form 8 – K and incorporated herein by reference.
(12) Filed August 21, 2012 as an exhibit to a Form 8 – K and incorporated herein by reference.
(13) Filed January 8, 2013 as an exhibit to a Form 8 – K and incorporated herein by reference.
(14) Filed January 8, 2013 as an exhibit to a Form 8 – K and incorporated herein by reference.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TREE TOP INDUSTRIES, INC.
Dated: April 16, 2013
By:
/s/ David Reichman
David Reichman,
Chairman of the Board,
Chief Executive Officer,
Chief Financial Officer and
Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By:
/s/ David Reichman
Dated: April 16, 2013
David Reichman,
Chairman of the Board,
Chief Executive Officer,
Chief Financial Officer and
Principal Accounting Officer
By:
/s/ Kathy M. Griffin
Dated: April 16, 2013
Kathy M. Griffin,
Director and President
By:
/s/ Donald Gilbert
Dated: April 16, 2013
Donald Gilbert,
Director & Treasurer
56
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