CERTIFIED SERVICES INC - 10-Q Quarterly Report

CERTIFIED SERVICES, INC.
FORM 10-Q
For the Quarter Ended March 31, 2004

INDEX

			Page
*Part I. Financial Information*

Item 1.	Financial Statements

		Condensed Consolidated Balance Sheets at March 31, 2004 and December 31, 2003	1

		Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2004 and March 31, 2003	2

		Condensed Consolidated Statement of Shareholders' Equity for the Period January 1, 2003 through March 31, 2004	3

		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and March 31, 2003	4-5

		Notes to Condensed Consolidated Financial Statements	6-10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11-13


Item 4.	Controls and Procedures		13


*Part II. Other Information*

Item 1.	Legal Proceedings		14
Item 2.	Changes in Securities and Use of Proceeds		14
Item 6.	Exhibits and Reports on Form 8-K		14

*Signatures*			15

CERTIFIED SERVICES, INC.
FORM 10-Q
For the Quarter Ended March 31, 2004

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The unaudited condensed consolidated balance sheet of the Registrant as of March 31, 2004, the audited consolidated balance sheet at December 31, 2003, and the unaudited condensed consolidated statements of operations for the three months ended March 31, 2004 and March 31, 2003 follow. These condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to a fair statement of the Registrant's results for the interim periods presented.

Certified Services, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

		March 31, 2004		December 31, 2003
Assets		(Unaudited)
Current Assets
Cash	$	1,537,199	$	432,414
Cash, restricted		3,063,101		3,055,686
Accounts receivable		30,342,479		20,906,147
Insurance deposits		9,460,779		8,208,366
Related party receivables		1,227,515		286,385
Other current assets		2,402,878		1,153,627
Total Current Assets		48,033,951		34,042,625
Property and equipment, at cost, net of accumulated depreciation of
equipment, at cost, net of accumulated $2,130,300 and $2,029,155, respectively		1,447,424		1,617,837
Excess purchase price over net book value of assets acquired		26,466,572		26,466,572
Other assets		1,743,710		1,639,676
Total Assets	$	77,691,657	$	63,766,710

Liabilities and Shareholders' Equity
Current liabilities
Current portion of notes payable	$	5,079,472	$	5,127,382
Accounts payable		6,788,749		6,041,231
Accrued expenses		41,068,664		28,442,855
Current portion of capital lease obligations		127,148		140,299
Total Current Liabilities		53,064,033		39,751,767
Long term notes payable		5,654,995		6,227,528
Long term portion of capital lease obligations		73,409		83,506
Long term portion of workers’ compensation claims		1,721,593		2,753,011
Total Liabilities		60,514,030		48,815,812
Commitments and Contingencies
Shareholders' Equity
Preferred shares, $.001 par, 5,000,000 authorized, and 3,981 issued and outstanding in 2004 and 2003, respectively		6		5

Common shares, $.001 par, 100,000,000 authorized, 9,547,811 and 9,547,811 issued and outstanding in 2004 and 2003, respectively		9,548		9,548
Additional paid in capital		13,032,296		11,825,152
Accumulated earnings		4,135,777		3,116,193
Total Shareholders' Equity		17,177,627		14,950,898
Total Liabilities and Shareholders' Equity	$	77,691,657	$	63,766,710

See notes to the condensed consolidated financial statements.

Certified Services, Inc. and Subsidiaries

Consolidated Statements of Operations

		For the Three Months Ended March 31,
		2004		2003
Revenue (gross billings of $209 million and $161 million, less worksite employee payroll costs of $185 million		(Unaudited)		(Unaudited)
and $148 million, respectively)
	$	24,261,633	$	12,712,527

Cost of services		15,905,880		6,798,444

Gross profit		8,355,753		5,914,083

Operating expenses
Compensation and benefits		2,941,048		1,584,212
Marketing and selling		1,106,173		1,313,231
General and administrative		3,169,976		2,279,530
Interest, net		118,972		19,667

Total Operating Expenses		7,336,169		5,196,640

Net income	$	1,019,584	$	717,443


Net income per share – basic and fully diluted	$	.11	$	0.08


Weighted average number of common shares outstanding -
Basic and fully diluted		9,547,811		8,448,922

See notes to the condensed consolidated financial statements.

Certified Services, Inc. and Subsidiaries

Consolidated Statement of Stockholders' Equity

					Additional Paid-in Capital	Retained Earnings (Deficit)
	Preferred		Common Stock
	Shares	Amount	Shares	Amount			Total
Balance, January 1, 2003	2,678	$ 3	8,447,811	$ 8,448	$ 22,107,754	$ 704,490	$ 22,820,695
Issuance of shares for services			450,000	450	359,550		360,000
Issuance of shares for Assets	1,520	1			18,999,999		19,000,000
Issuance of shares in connection with forming American HR Holdings	-	-	650,000	650	577,850		578,500
Cancellation of shares issued for
Assets	-3018	-2			(37,719,998)		(37,720,000)
Preferred Series B – Issuance
of shares for assets	350	1			3,499,999		3,500,000
Preferred Series D – issuance	300	1			2,999,999		3,000,000
of shares for surplus note
Preferred Series E – issuance	100	1			999,999		1,000,000
of shares issued for cash
Net income						2,411,703	2,411,703
Balance, December 31, 2003	1,930	5	9,547,811	9,548	11,825,152	3,116,193	14,950,898

Preferred Series D – issuance	121	1			1,207,144		1,207,145
of shares for surplus note

Net Income						1,019,584	1,019,584
Balance, March 31, 2004	2,051	$ 6	9,547,811	$ 9,548	$ 13,032,296	$ 4,135,777	$ 17,177,627

See notes to the consolidated financial statements

Certified Services, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

		For the Three Months Ended March 31,
			2004		2003
Cash flows from operating activities			(Unaudited)		(Unaudited)
N(Unaudited)et income	$		1,019,584	$	717,443
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization			196,515		141,596
Bad debt expense			46,293		20,000
Issuance of stock for services			—

Nevada	88-0444079
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5101 N.W. 21st Avenue, Suite 350 Fort Lauderdale, Florida	33309
(Address of principal executive office)	(Zip Code)