Attached files
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q/A
(Amendment No. 1)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED MARCH 31, 2009
COMMISSION FILE NO.: 0-33513
GS ENVIROSERVICES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 20-8563731
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(State of other jurisdiction of (IRS Employer
incorporation or organization) entification No.)
590 South Street East, Raynham, MA 02767
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(Address of principal executive offices) (Zip Code)
(617) 413-3639
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(Registrant's telephone number including area code)
Check mark whether the issuer (1) 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 as required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No __.
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files.) Yes ___ No ___
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check One)
Large accelerated filer Accelerated filer
--- ---
Non-accelerated filer Smaller reporting company X
--- ---
Indicate by check mark whether the registrant is a shell company as defined in
rule 12-b-2 of the Exchange Act Yes__No X
The number of outstanding shares of common stock as of May 15, 2009 was
15,574,594
Amendment No. 1
This amendment is being filed in order to change the disclosure set forth in
Item 4.
GS ENVIROSERVICES, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10Q/A
FOR THE FISCAL QUARTER ENDED MARCH 31, 2009
TABLE OF CONTENTS
Page No
Part I Financial Information
Item 1. Financial Statements (unaudited)...............................................................3
Consolidated Balance Sheets - March 31, 2009 (unaudited) and December 31, 2008.................4
Consolidated Statements of Operations - for the Three Months
Ended March 31, 2009 (unaudited) and 2008 (unaudited).........................................5
Consolidated Statements of Cash Flows - for the Three Months
Ended March 31, 2009 (unaudited) and 2008 (unaudited).........................................6
Notes to Consolidated Financial Statements.....................................................7
Item 2. Management's Discussion and Analysis...........................................................9
Item 3 Quantitative and Qualitative Disclosures about Market Risk....................................10
Item 4. Controls and Procedures.......................................................................10
Part II Other Information
Item 1. Legal Proceedings.............................................................................11
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds...................................11
Item 3. Defaults Upon Senior Securities...............................................................11
Item 4. Submission of Matters to a Vote of Security Holders...........................................11
Item 5. Other Information ............................................................................11
Item 6. Exhibits .....................................................................................11
Signatures 12
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) FOR MARCH 31, 2009
3
GS ENVIROSERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2009 (UNAUDITED) AND DECEMBER 31, 2008
ASSETS: 3/31/09 12/31/08
----------------------------
Current assets:
Cash $ 126,811 $ 198,078
Prepaid expenses 22,302 2,282
Other receivables -- 48,667
----------- -----------
Total current assets 149,113 249,027
----------- -----------
TOTAL ASSETS 149,113 249,027
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts Payable 2,002 --
Accrued expenses 30,643 30,643
----------- -----------
Total current liabilities 32,645 30,643
----------- -----------
Total liabilities: 32,645 30,643
----------- -----------
Stockholders' equity:
Common stock, $.001 par value, 100,000,000 shares authorized; 15,573,594
shares issued and outstanding as of 3/31/09
and 15,574,594 shares issued and outstanding as of 12/31/08 15,574 15,574
Additional paid-in capital 5,353,072 5,353,072
Retained deficit (5,252,178) (5,150,262)
----------- -----------
Total stockholders' equity 116,468 218,384
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 149,113 $ 249,027
=========== ===========
The notes to the Consolidated Financial Statements are an
integral part of these statements.
4
GS ENVIROSERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (UNAUDITED)
3/31/09 3/31/08
--------------------------------
Revenues
Cost of revenues $ -- $ --
Gross profit -- --
-------------- --------------
Operating expenses:
Stock based compensation -- 25,370
General and administrative expenses 102,829 351,699
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Total operating expenses 102,829 377,069
-------------- --------------
Operating loss (102,829) (377,069)
-------------- --------------
Other income (expense):
Miscellaneous income 3,126 --
Interest income 489 --
Change in fair value of derivative instruments -- 1,308,472
Amortization of debt discount -- (1,510,453)
Interest expense - related party -- (6,133)
Cost of reduction for guarantee -- (1,388,667)
Interest expense -- (46,810)
-------------- --------------
Total other income (expense), net 3,615 (1,643,591)
-------------- --------------
Loss before provision for income taxes (99,214) (2,020,660)
Provision for income taxes 2,702 49,093
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Net loss from continuing operations $ (101,916) $ (2,069,753)
============== ==============
Discontinued Operations:
Income from discontinued operations, net of tax of $0 -- 252,293
-------------- --------------
Total discontinued operations -- 252,293
============== ==============
Net loss $ (101,916) $ (1,817,460)
============== ==============
Earnings (loss) per share
Basic
Loss from continuing operations $ (0.01) $ (0.06)
Income (loss) from discontinued operations -- 0.01
-------------- --------------
Net loss per share - basic $ (0.01) $ (0.05)
============== ==============
Diluted
Loss from continuing operations $ (0.01) $ (0.06)
Income (loss) from discontinued operations -- 0.01
-------------- --------------
Net loss per share - diluted $ (0.01) $ (0.05)
============== ==============
Weighted average shares of common stock outstanding
Basic 15,573,594 32,112,224
Diluted 15,573,594 32,114,224
The notes to the Consolidated Financial Statements are an
integral part of these statements.
5
GS ENVIROSERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 (UNAUDITED)
AND MARCH 31, 2008 (UNAUDITED)
3/31/09 3/31/08
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss from continuing operations $ (101,916) $(2,069,753)
Adjustments to reconcile net loss to net cash used in operating activities:
Allowance for bad debt 15,443 --
Stock based consulting fee -- 140,000
Cost of reduction for guarantee -- 1,388,667
Deferred taxes -- 31,011
Stock based compensation -- 25,370
Change in fair value of derivative instruments -- (1,308,472)
Amortization of debt discount -- 1,510,453
Changes in assets and liabilities
Accounts payable 2,002 71,862
Accrued expenses -- (57,191)
Prepaid expenses (20,020) (25,756)
Other receivables 33,224 --
Interest payable - related party -- 4,883
----------- -----------
Net cash flows from continuing operations (71,267) (288,926)
Net cash flows from discontinued operations -- 196,703
----------- -----------
Net cash flows from operations (71,267) (92,223)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from note receivable - affiliate -- 350,000
----------- -----------
Net cash provided by investing activities -- 350,000
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit -- 520,000
Repayment of line of credit -- (550,000)
Repayment of convertible debenture -- (1,027,777)
Proceeds from convertible debentures - related party -- 700,000
Proceeds from convertible debenture -- 100,000
----------- -----------
Net cash used in financing activities -- (257,777)
----------- -----------
Decrease in cash (71,267) --
Cash at beginning of period 198,078 --
----------- -----------
Cash at end of period $ 126,811 $ --
=========== ===========
The notes to the Consolidated Financial Statements are an
integral part of these statements.
6
GS ENVIROSERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1 DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The consolidated interim financial statements included herein have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission with regard to Regulation S-K and, in the opinion of
management, include all adjustments which, except as described elsewhere herein,
are of a normal recurring nature, necessary for a fair presentation of the
financial position, results of operations, and cash flows for the periods
presented. The results for interim periods are not necessarily indicative of
results for the entire year. The financial statements presented herein should be
read in connection with the financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2008.
On June 20, 2008, GS EnviroServices, Inc. (the "Company") completed an Asset and
Stock Purchase Agreement (the "Agreement") with Triumvirate Environmental, Inc.
("Triumvirate"). The Company sold substantially all of the assets of Enviro-Safe
and 100% of the capital stock of Enviro-Safe (NE). Triumvirate assumed
responsibility for certain designated liabilities of Enviro-Safe, including its
trade payables, accrued expenses, and certain identified executory contracts. As
a result of the Agreement, the assets and liabilities of Enviro-Safe Corp. and
Enviro-Safe Corporation (NE) have been presented as assets and liabilities of
discontinued operations as of December 31, 2007 and the operations of
Enviro-Safe and Enviro-Safe (NE) have been presented as discontinued operations
in the accompanying consolidated statements of operations for the period ended
March 31, 2008.
2 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of GS
EnviroService's discontinued operations of Enviro-Safe Corporation and
Enviro-Safe Corporation (NE). All significant accounts and transactions have
been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
BASIC AND DILUTED EARNINGS PER SHARE ("EPS")
Basic (loss) earnings per share is computed by dividing net income by the
weighted average common shares outstanding during a period. Diluted (loss)
earnings per share is based on the treasury stock method and includes the effect
from potential issuance of common stock such as shares issuable pursuant to the
exercise of all stock options, warrants and conversion of debentures. Common
share equivalents have been excluded where their inclusion would be
anti-dilutive. A reconciliation of the numerators and denominators of basic and
diluted (loss) earnings per share for continuing operations for the three months
ended March 31, 2009 consisted of the following:
3 Months Ended 3 Months Ended
March 31, 2009 March 31, 2008
Basic Dilutive Basic Dilutive
----------- ---------- ---------- ----------
Weighted average number of shares outstanding 15,573,594 15,573,594 32,112,224 32,112,224
Common stock equivalent shares -- -- -- --
---------- ---------- ---------- ----------
Total weighted average and equivalent shares 15,573,594 15,573,594 32,112,224 32,112,224
========== ========== ========== ==========
3 DISCONTINUED OPERATIONS
On June 20, 2008, the Company completed an Asset and Stock Purchase with
Triumvirate Environmental, Inc. (the "Agreement"). Pursuant to the Agreement,
the Company sold substantially all of the assets of Enviro-Safe and 100% of the
capital stock of Enviro-Safe (NE). As a result of the Agreement, their
operations through the date of sale have been presented as discontinued in the
accompanying consolidated statements of operations.
7
4 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The following is a summary of supplemental disclosures of cash flow information:
2009 2008
--------------------------------
Cash paid during the period for the following:
Interest $ -- $ 93,693
Income taxes 2,702 (10,900)
------------ --------------
Total 2,702 82,793
============ ==============
Supplemental Schedule of Non-Cash Investing and Financing Activities:
Issuance of convertible debenture for reduction of guarantee $ -- $ 1,388,667
Purchase of treasury stock by issuance of convertible debenture -- 611,333
------------ --------------
Total $ -- $ 2,000,000
=========== =============
5 INCOME TAXES
The Company provides for income taxes using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
The expense from income taxes as of March 31, 2009 and March 31, 2008 consisted
of the following:
Current benefit: 2009 2008
---- ----
Federal $ -- $ 45,893
State (2,702) 3,200
--------------- ---------------
Total current expense (benefit) $ (2,702) $ 49,903
============== ==============
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
periods in which the deferred tax assets are deductible, management believes it
is not likely that the Company will realize the benefits of these deductible
differences.
The Company's total deferred tax assets and valuation allowance is as follows:
Total deferred tax assets $ 1,030,000 $ 31,011
Less valuation allowance (1,030,000) --
--------------- ---------------
Net Deferred tax assets -- --
=============== ===============
As of March 31, 2009, the Company has available approximately $1,030,000 of net
operating loss carry-forwards which may be used to reduce future federal and
state taxable income and expire in December 2028 and 2013 respectively.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
FORWARD LOOKING STATEMENTS
In addition to historical information, this Report contains forward-looking
statements, which are generally identifiable by use of the words "believes,"
"expects," "intends," "anticipates," "plans to," "estimates," "projects," or
similar expressions. These forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those reflected in these forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed in the
section entitled "Description of Business - Business Risk Factors" in our Annual
Report on Form 10-K for the year ended December 31, 2008. Readers are cautioned
not to place undue reliance on these forward-looking statements, which reflect
management's opinions only as of the date hereof. We undertake no obligation to
revise or publicly release the results of any revision to these forward-looking
statements. Readers should carefully review the risk factors described in other
documents GS EnviroServices, Inc. files from time to time with the Securities
and Exchange Commission (the "SEC").
On June 20, 2008, the Company completed an Asset and Stock Purchase Agreement
with Triumvirate Environmental, Inc. ("Triumvirate"). The assets sold were
substantially all of the assets of Enviro-Safe and 100% of the capital stock of
Enviro-Safe (NE). Triumvirate assumed responsibility for certain designated
liabilities of Enviro-Safe, including its trade payables, its accrued expenses,
and certain identified executory contracts. As a result of the sale, the assets
and liabilities of Enviro-Safe Corp. and Enviro-Safe Corporation (NE) are
presented as assets and liabilities to be disposed of in prior periods and their
operations are presented as discontinued in the accompanying consolidated
statements of operations.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2009 VERSUS THE THREE MONTHS ENDED MARCH 31, 2008
GENERAL AND ADMINISTRATIVE
General and administrative ("G&A") expenses for the three months ended March 31,
2009 were $102,829 as compared to $351,699 for the corresponding period in 2008.
G&A expense for the period ended March 31, 2008 included a $140,000 expense
related to the issuance of 2.0 million shares of stock issued to YAGI as
inducement to enter into the stock purchase agreement. G&A expense for the
period ending March 31, 2008 of $757,164 for operations to be disposed have been
excluded.
INTEREST EXPENSE
Interest expense decreased to $0 in the quarter ended March 31, 2009, as
compared to the $52,943 expense incurred in the corresponding period of 2008.
On February 11, 2008 the Company issued $500,000 in convertible debentures to
related parties. A total of $6,133 of interest was expensed for the quarter
ended March 31, 2008. In addition, in the first quarter of 2008, the Company
issued a $100,000 convertible debenture to an investor and a 2.0 million
convertible debenture to YAGI. Interest in the amount of $35,401 for these
debentures was expensed in the first quarter of 2008. Interest expense from
discontinued operations of $10,023 for the period ended March 31, 2008 has been
excluded from these numbers.
LIQUIDITY AND CAPITAL RESOURCES
The Company's activities from continuing operations used $71,267 of cash in 2009
as compared to $288,926 cash used in 2008.
Non-cash adjustments for continuing operations recorded for the three months
ended March 31, 2009 consisted of an adjustment to allowance for bad debt
totaling $15,443.
Accounts payable at March 31, 2009 totaled $2,002. Accrued expenses at March 31,
2009 totaled $30,643 equal to the December 31, 2008 balance.
The Company had a positive working capital position of $116,468 as of March 31,
2009 as compared to a positive working capital position of $218,384 as of
December 31, 2008.
9
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
The Company conducted an evaluation of the design and operation of our
disclosure controls and procedures, as defined under Rule 13a-15(e) and
15d-15(e) under the Exchange Act of 1934, as amended (the `Exchange Act"), as of
the end of the period covered by this report. The Company's disclosure controls
and procedures are designed (i) to ensure that information required to be
disclosed by it in the reports that it files or submits under the Exchange Act
is recorded, processed and summarized and reported within the time periods
specified in the SEC's rules and forms and (ii) to ensure that information
required to be disclosed in the reports the Company files or submits under the
Exchange Act is accumulated and communicated to its management, including its
Chief Executive Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure.
In the course of making our assessment of the effectiveness of our disclosure
controls and procedures, we identified a material weakness. This material
weakness consisted of inadequate staffing and supervision within the bookkeeping
and accounting operations of our company. The lack of employees prevents us from
segregating disclosure duties. The inadequate segregation of duties is a
weakness because it could lead to the untimely identification and resolution of
accounting and disclosure matters or could lead to a failure to perform timely
and effective reviews. Based on the results of this assessment, our Chief
Executive Officer and our Chief Financial Officer concluded that because of the
above condition, our disclosure controls and procedures were not effective as of
the end of the period covered by this report.
(b) Changes in internal controls.
The term "internal control over financial reporting" (defined in SEC Rule
13a-15(f)) refers to the process of a company that is designed 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 Company's management, with the
participation of the Chief Executive Officer and Chief Financial Officer, has
evaluated the Company's internal control over financial reporting to determine
whether any change occurred during the period covered by this report, and they
have concluded that there was no change to the Company's internal control over
financial reporting that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.
10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following are exhibits filed as part of the Company's Form 10-Q/A for the
period ended March 31, 2009:
Exhibit Number Description
31.1 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Exchange Act Rules13a-15(e) and 15d-15(e).
32.1 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
11
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on the date indicated.
GS EnviroServices, Inc.
By: /S/ JAMES F. GREEN
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JAMES F. GREEN
President, Chief Executive Officer
By: /S/ DORIS CHRISTIANI
--------------------------
DORIS CHRISTIANI
Chief Financial Officer
Date: May 15, 2009
12
