Attached files
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EX-23.2 - CONSENT OF ACCOUNTING FIRM - GMS Capital Corp. | ex23-2.htm |
EX-32.1 - CERTIFICATION CEO - GMS Capital Corp. | ex32-1.htm |
EX-31.1 - CERTIFICATION CEO - GMS Capital Corp. | ex31-1.htm |
EX-32.2 - CERTIFICATION CFO - GMS Capital Corp. | ex32-2.htm |
EX-31.2 - CERTIFICATION CFO - GMS Capital Corp. | ex31-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-K/A
Amendment 2
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For
the Fiscal Year Ended December 31, 2008
Commission
File Number: 333-151684
GMS
CAPITAL CORP
(Name
of registrant as specified in its charter)
FLORIDA
|
26-1094541
|
(State
or other jurisdiction
of
incorporation or organization)
|
(IRS
Employer
Identification
No.)
|
3456
Melrose Ave.
Montreal,
Quebec H4A2S1 Canada
(Address
of principal executive offices)
(514)
287-0103
(Registrant’s
telephone number, including area code)
Securities Registered Under
Section 12(b) of the Exchange Act:
None
Securities Registered Under
Section 12(g) of the Exchange Act:
Common
Stock, $0.001
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o No x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act from their obligations under
those Sections. Yes x No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes ¨ No ¨
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x
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 file, 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.
Large
accelerated filer o
|
Accelerated
filer
o
|
Non-accelerated
filer o(Do not check if a
smaller reporting company)
|
Smaller
reporting company x
|
Indicate
if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o
No x
No
exchange or over the counter market exists for our common stock. The most recent
price paid for our common stock in a private placement was $0.10 which closed on
October 1, 2007.
State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter. Solely for purposes of the foregoing calculation, all of the
registrant’s directors and officers are deemed to be
affiliates. $_____________
The
number of shares outstanding of the registrant’s Common Stock, par value $.001
per share (the “Common Stock”), as of February
8, 2010 , was 5,115,400.
Documents
incorporated by reference
None.
GMS CAPITAL CORP.
Report
on Form 10-K
For
the Fiscal Year Ended December 31, 2008
Page
|
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PART
I
|
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Item
1.
|
Business
|
1
|
Item
1A.
|
Risk
Factors
|
5 |
Item
1B.
|
Unresolved
Staff Comments
|
14
|
Item
2.
|
Properties
|
14 |
Item
3.
|
Legal
Proceedings
|
14 |
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
14 |
PART
II
|
||
Item
5.
|
Market
for Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
|
15 |
Item
6.
|
Selected
Financial Data
|
15 |
Item
7.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
15 |
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk.
|
23 |
Item
8.
|
Financial
Statements and Supplementary Data
|
24 |
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
25 |
Item
9A.
|
Controls
and Procedures
|
25 |
Item
9B.
|
Other
Information
|
25 |
PART
III
|
||
Item
10.
|
Directors,
Executive Officers and Corporate Governance
|
25 |
Item
11.
|
Executive
Compensation
|
27 |
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
28 |
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
28 |
Item
14
|
Principal
Accountant Fees and Services
|
29 |
PART
IV
|
||
Item
15.
|
Exhibits
|
30 |
SIGNATURES | 31 |
FORWARD-LOOKING
STATEMENTS
This
Annual Report on Form 10-K contains, in addition to historical information,
forward-looking statements regarding GMS Capital Corp. (the
“Company” or “GMS”), which represent the Company's expectations or
beliefs including, but not limited to, statements concerning the Company's
operations, performance, financial condition, business strategies, and other
information and that involve substantial risks and uncertainties. The Company's
actual results of operations, some of which are beyond the Company's control,
could differ materially. For this purpose, any statements contained in this
Report that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may," "will," "expect," "believe," "anticipate," "intend,"
"could," "estimate," or "continue" or the negative or other variations thereof
or comparable terminology are intended to identify forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, history of operating losses and accumulated deficit; need for
additional financing; dependence on future sales of our services; competition;
dependence on management; risks related to proprietary rights; government
regulation; and other factors described under "Risk Factors" and throughout this
Annual Report on Form 10-K. Actual results may differ materially from those
projected. These forward-looking statements represent our judgment as of the
date of the filing of this Annual Report on Form 10-K. We disclaim any intent or
obligation to update these forward-looking statements.
PART I
ITEM
1.
|
BUSINESS
|
GMS
Capital Corp. was incorporated in Canada on March 9, 2000 under the name
"Metratech Retail Systems Inc." for the development and sales of specialized
inventory management software. The Company re-incorporated itself in
the State of Florida on September 18, 2007 and was subsequently renamed "GMS
Capital Corp." in order to raise capital on the US public markets to realize its
objectives of investing in its development and marketing plans.
The
details of the merger and re-incorporation are as follows:
The
2,578,000 issued and outstanding shares of Metratech Retail Systems Inc. were
converted to 2,578,000 shares of GMS Capital Corp. Each shareholder
of the Company received one share of GMS Capital Corp. for every share of
Metratech Retail Systems Inc. The three directors of Metratech Retail
Systems Inc., George
Metrakos, Marcel
Côté and Spiro Krallis were replaced by George Metrakos on the
board of directors of the newly incorporated company.
On
October 1, 2007, the Company issued an additional 2,537,400 shares at a price of
$0.10 per share in order to compensate shareholders and external consultants to
perform the consulting work necessary to complete the company's
prospectus.
GMS
decided to reincorporate itself under the laws of the State of Florida in order
to take advantage of opportunities available to public entities in the
US. The reincorporation saw existing shareholders receive the
equivalent number of shares in the Florida corporation as they held in the
company prior to reincorporation. The reincorporation in no way has
changed the capital structure of the Company.
History
of Key Agreements
On July
10, 2000, founding shareholders entered into a term sheet for the partnership
agreement representing the ownership structure of Metratech Retail Systems
Inc. While a final partnership agreement was never executed, the Term
sheet is enforceable against the parties. The agreement outlined the
share structure to represent initial investments made by the founding
shareholders, along with roles and responsibilities of the President, Secretary
and CEO of the Corporation.
On April
1, 2000, the Company entered into a Non-Disclosure Agreement with MGA Concept, a
software development firm in Montreal, Canada which outlined the roles and
responsibilities of MGA Concept as it relates to their provision of software
programming services to the Company. MGA Concept went on to provide
all the consulting services required by the Company to develop, test and deploy
its software.
On
October 16, 2000, George Metrakos, acting on behalf of the Company, entered into
an agreement with Junior Active Designs Inc., a supplier to Retailer Wal-Mart
Stores, in order to learn and record all of the requirements set forth by
Wal-Mart Stores with respect to the management of inventory within their Retail
Stores. The Agreement outlined that all of the rights, title and
interest in any inventions, improvements, discoveries, processes, know-how and
trade secrets discovered by Mr. Metrakos as it pertained to any software
development at Junior Active Designs Inc. would be the property of George
Metrakos in order to utilize and transfer to Metratech Retail Systems Inc. for
its use in the development and marketing of its software.
1
Description
of Business
Principal
products or services and their markets
The
Company's software, known as "ManageThePipe", permits suppliers to major
retailers such as Wal-Mart to predict the amount of inventory required in the
near future in order to meet the sales demands for its products on retail store
shelves. The software collects data such as production schedules,
shipping schedules, historic sales and current retail store inventories in order
to calculate an estimate of future inventory requirements for each item that a
supplier sells through major retailers such as Wal-Mart Stores.
Our
Company has invested in the research and development of our inventory management
software which collects data and performs forecast calculations. Our technology
consists of proprietary software programming however, we have no specific legal
entitlement that does not permit someone else from utilizing the same base
software languages in order to produce similar inventory management software
offerings.
Base
software languages are the language building blocks used by programmers to
translate the desired logic sequences into a message that the computer can
understand and execute. An example of a logic sequence is “if the
user wishes to predict the future sales of their product based on historical
sales”, the software should calculate a forecast based on mathematical models
provided in its logic tables to calculate the forecasted values. The combination
and use of these building blocks is known as ‘software code”, and hence this
combination, created by the Company’s programmers, along with “off-the-shelf”
computer hardware (ie. Equipment that is readily available by computer companies
such as servers) is collectively referred to as “our technology and trade
secrets”.
We
therefore cannot be certain that others will not gain access to our technology.
In order to protect this proprietary technology, we hold non-disclosure and
confidentiality agreements and understandings with our employees, consultants,
re-sellers, distributors, wholesalers and technology partners. We cannot
guarantee that our technology and trade secrets will not be stolen, challenged,
invalidated or circumvented. If any of these were to occur, we would suffer from
a decreased competitive advantage, resulting in lower profitability due to
decreased sales.
The
Company offers the following products and services to customers utilizing its
ManageThePipe inventory management software:
-
Installation and configuration of the software within the customer's computer network
-
Professional and consulting services to assist the customer to optimize their inventory to meet sales demands
-
Maintenance services in order to assist the customer in ensuring daily importation of data from various sources into the ManageThePipe software
-
Software subscription fees for the use of the software on the premises of the customer.
Distribution
methods of the products or services
To date,
our Sales & Marketing expenses have been limited to commission-based sales
costs and minimal marketing expenses. As a result, there is very little brand
awareness for our products and services. We believe a strategic marketing
campaign is necessary to achieve the customer base growth that we anticipate due
to significant investments in customer acquisition. The bulk of this investment
is due to costs related to promoting our brand through advertising in different
media, along with analysis of new market segments and product placement
strategies.
The main
market segment where we will invest in Sales & Marketing is that of the
Canadian small to medium sized manufacturer or importer of goods that are sold
through retail stores to the general public. These investments
include travel, participation in industry trade shows and print/on-line media
within industry publications and web sites.
Direct
Sales.
We
solicit customers directly in order to purchase our products and services. Upon
acceptance of our offer, our customers sign a Service Agreement.
2
Sales
Through a Value-Added Reseller.
A
Value-Added Reseller typically re-sells our software in combination with other
software also offered by the Value-Added Reseller, providing a customized and
complete solution for the customer. Other software which is
compatible with the ManageThePipe software includes production planning
software, enterprise resource planning software and sales analysis
software.
In the
case of any sale, the Company enters into a services agreement with the
customer.
Status
of any publicly announced new product or service
ManageThePipe
software was in a pre-commercialization phase with the deployment of the first
version of the software at a garment manufacturing facility in July of
2002. The software has since been deployed in numerous customer
facilities and is available for sale in its current state.
The
software installation, use and maintenance represent a first year investment of
$25,000 followed by yearly subscription fees of $12,000.
Competitive
Business Conditions
There are
numerous software products existing on the market which provide solutions to the
challenges of inventory management on retailer store shelves on a daily
basis. They can be classified by the following
categories:
Larger,
established software companies for larger multinational companies:
The
following corporations involved in inventory managementand are not a direct
competitors to The Company's software product, ManageThePipe: Demantra,
Viewlocity, Riverone, Verticalnet, Steelwedge and Evant. These
companies, present in a wide range of industry sectors, produce completely
integrated software involved from sourcing of raw materials, delivery,
manufacturing, packaging and all other elements of production (known as
"end-to-end" software) of goods sold to consumers. These complete
end-to-end softwares sell at a very high cost (+1M$), which require a high level
of integration. ManageThePipe is focused solely on smaller to medium
sized companies who are Suppliers of Major Retailers.
Enterprise
Resource Planning Software (ERP)
ERP
systems (ex. SAP, JD Edwards, Manugistics, Navision, etc.) are primarily
internally focused back-office systems, that is that they are involved in
monitoring the daily transactions of a business, from invoicing, to production
of packing slips and delivery confirmations. The result of such a
complex software is that it is cumbersome and has a long implementation cycle
inside the business. A long implementation cycle means that the
business implementing an ERP solution have to consider at least six months of
time to integrate the software, transfer the company's existing operations into
the new software and provide sufficient training to employees. Due to
this longer implementation time, these softwares are not competition to
ManageThePipe.
Direct
Competition to ManageThePipe:
The
following competitors sell to mid to large Suppliers of Major
Retailers:
Demand
Management Inc. (MO, USA) (www.demandsolutions.com) founded in
1985.
Thrive
Technologies (GA, USA) (www.thrivetech.com), founded in 2001.
Vendor
Managed Technologies (MI, USA) (www.vmtsoftware.com) Founded in
1998.
3
The
inventory management software industry is highly competitive, rapidly evolving
and subject to constant technological change and to intense marketing by
different providers of functionally similar services. Since there are few, if
any, substantial barriers to entry, we expect that new competitors are likely to
enter our markets. Most, if not all, of our competitors are significantly larger
and have substantially greater market presence and longer operating history as
well as greater financial, technical, operational, marketing, personnel and
other resources than we do.
Competitive
Advantages
Today,
Major Retailers such as Wal-Mart are relying on their suppliers to make
inventory replenishment decisions, that is deciding which stores should get
which products and at what quantity, in order to ensure that the retail shelves
remain adequately stocked to meet consumer demand. As a result,
Suppliers utilize inventory management software and forecasting software in
order to assist them to make a decision about how much product to manufacture or
import, how much to stock in their warehouse and how much to ship to each
store.
We
believe that we have the following competitive advantages:
(1)
Competitive Pricing
Our use
our proprietary software enables us to provide customers with competitive
pricing for their inventory management needs. Nonetheless, there can be no
assurance that we will be able to successfully compete with major software
suppliers in present and prospective markets. While there can be no assurances,
we believe that by offering competitive pricing we will be able to compete in
our present and prospective markets.
(2)
Advantages of Equipment and Technology
We rely
on our own internally-developed software to meet the needs of our customers. We
will need to continue to select, invest in and develop new and enhanced
technology to remain competitive. Our future success will also depend on our
operational and financial ability to develop information technology solutions
that keep pace with evolving industry standards and changing client demands. Our
business is highly dependent on our software systems, the temporary or permanent
loss of which could materially and adversely affect our business.
Existing
and Probable Governmental Regulation
The
software industry is not a regulated industry.
Research
and Development
The
Company occasionally incurs costs on activities that relate to research and
development of new products. Research and development costs are expensed as
incurred. Certain of these costs are reduced by government grants and investment
tax credits where applicable. The Company did not incur Research and
Development expenses during 2007 and 2008.
Compliance
with Environmental Laws
We did
not incur any costs in connection with the compliance with any federal, state,
or local environmental laws.
CORPORATE
OFFICES
The
Company's executive offices are currently located at 3456 Melrose Ave., Montreal
Quebec H4A2S1 Canada.
EMPLOYEES
The
Company has no full time employees and has three part time
employees.
4
ITEM
1A.
|
RISK
FACTORS
|
Any
investment in our common shares involves a high degree of risk and is subject to
many uncertainties. These risks and uncertainties may adversely affect our
business, operating results and financial condition. All of our material risks
and uncertainties are described below. If any of the following risks actually
occur, our business, financial condition, results or operations could be
materially and adversely affected. The trading of our common stock, once
established, could decline, and you may lose all or part of your investment
therein. You should acquire shares of our common stock only if you can afford to
lose your entire investment. In order to attain an appreciation for these risks
and uncertainties, you should read this Prospectus in its entirety and consider,
including the Financial Statements and Notes, prior to making an investment in
our common stock.
As used
in this prospectus, the terms "we," "us," "our," "the Company" and "GMS" mean
GMS Capital; Corp., a Florida corporation, unless the context indicates a
different meaning.
Risks
associated with forward-looking statements.
This
prospectus contains certain forward-looking statements regarding management's
plans and objectives for future operations, including plans and objectives
relating to our planned marketing efforts and future economic performance. The
forward-looking statements and associated risks set forth in this prospectus
include or relate to:
(1) Our
ability to obtain a meaningful degree of consumer acceptance for our products
now and in the future,
(2) Our
ability to market our products on a global basis at competitive prices now and
in the future,
(3) Our
ability to maintain brand-name recognition for our products now and in the
future,
(4) Our
ability to maintain an effective distributors network,
(5) Our
success in forecasting demand for our products now and in the
future,
(6) Our
ability to maintain pricing and thereby maintain adequate profit margins,
and
(7) Our
ability to obtain and retain sufficient capital for future
operations.
Decreasing
market prices for our products and services due to increasing competition may
cause us to lower our prices to remain competitive, which could delay or prevent
our future profitability.
Currently,
our prices are lower than those of many of our competitors for comparable
software products and services. However, market prices for business analysis
software have decreased over the last few years, and we anticipate that prices
will continue to decrease. This information is based on the experience of the
Company's management working in the business analytics software
industry. Such competition or continued price decreases may require
us to lower our prices to remain competitive, may result in reduced revenue, a
loss of customers, or a decrease in customer growth and may delay or prevent our
future profitability. Since we have priced our products as an upfront commitment
to the customer of approximately $40,000, a decrease in more than 60% of this
price will render each of our installations to be at a loss, considering the
professional services costs required to spend for the installation and on-going
delivery of service to the customer. The value of your investment in
the common shares would therefore be affected due to the lack of profitability
in this scenario, and you could even lose your entire investment.
5
Business
Analysis Software may fail to gain acceptance among suppliers to major retailers
and hence the growth of the business will be limited, lowering the profitability
of the business.
If
business analysis software such as our inventory management solutions fail to
gain acceptance among suppliers to major retailers, our ability to grow our
business will be limited, which could affect the profitability of our business.
The market for business analysis and inventory management software has only in
the last 10 years begun to develop and is rapidly evolving. We currently
generate most of our revenue from the sale of professional services as we have
not been able to increase significantly the sales of our software. If
our sales and marketing plan fail to increase the number of customers using our
software, our ability to grow our business will be limited. As a result, the
value of your investment in the common shares would be affected, and you could
even lose your entire investment.
Our
software to date is not sufficiently developed or advanced in order to offer a
simple and efficient means of installing it within the customer's
premises.
Customers
must therefore incur additional professional service fees in order to install
and utilize the software on their premises, increasing the cost of ownership to
the customer. As such, there remains a higher barrier to new customer
acquisition due to these higher costs versus our competition. The
result may be our inability to acquire enough customers, reducing our revenues
and hence our profitability. If such a scenario is not overcome, the
value of our common stock will fall and you could lose your entire
investment.
Our
software may have flaws which could result in a reduction of customer appeal and
hence reduce the profitability of our operations.
Flaws in
our technology and systems could cause our customers to commit errors in their
management of their inventory, resulting in lost sales opportunities for their
products on retail shelves or the overstock of items in
warehouses. These errors will result in reduced revenues and higher
costs to our customers and hence will greatly reduce the appeal of our software
and services. Such flaws will damage our reputation, cause us to lose
customers and limit our growth which could affect the profitability and
operations of our business. Such an effect would result in the value
of your investment in the common shares to be affected, and you could even lose
your entire investment.
Because
much of our potential success and value lies in our use of internally developed
software, if we fail to protect the software, it could affect the profitability
and operations of our business.
Our
ability to compete effectively is dependent in large part upon the maintenance
and continued development of internally developed software. To date, we have
relied on trade secret laws, as well as confidentiality procedures and licensing
arrangements, to establish and protect our rights to our software. We typically
enter into confidentiality or license agreements with our employees,
consultants, customers and vendors in an effort to control access to, and
distribution of, technology, software, documentation and other
information. Despite these precautions, it may be possible for a
third party to copy or otherwise obtain and use this software without
authorization.
Policing
unauthorized use of our software is difficult. The steps we take may not prevent
misappropriation of the software we rely on. In addition, effective protection
may be unavailable or limited in some jurisdictions outside the United States
and Canada. Litigation may be necessary in the future to enforce or protect our
rights, or to determine the validity and scope of the rights of others. That
litigation could cause us to incur substantial costs and divert resources away
from our daily business, which in turn could materially adversely affect our
business through decreasing profitability and negative corporate image to our
customers, causing a higher rate of customer defection. As a result, the value
of your investment in the common shares would be affected, and you could even
lose your entire investment.
6
We
cannot guarantee that our software technology and trade secrets will not be
stolen, decreasing our competitive advantage, resulting in lower profitability
due to decreased sales.
Our
Company has invested in the research and development of our software technology
which permits the calculation and estimated sales forecast of consumer product
inventory within a retail store. This technology has been developed by our
employees and consultants and is owned entirely by us. The
programming and configuration of our software technology together with the
computer hardware and software required for our services to function is
proprietary to our company. We rely on trade secrets and proprietary
know-how to protect this technology. We cannot assure you that our technology
will not be breached, that we will have adequate remedies for any breach, or
that our trade secrets and proprietary know-how will not otherwise become known
or be independently discovered by others. If such a breach were to occur, our
brand, reputation, and growth will be negatively impacted. As a result, we would
incur extra expense to acquire new customers to replace those which have been
acquired by the increased competitive presence, decreasing our profitability as
expenses would increase. As a result, the value of your investment in the common
shares would be affected, and you could even lose your entire
investment.
We
Do Not Currently Hold a Professional or Product Liability Insurance Policy
Required to Sufficiently Protect Us and We Remain Exposed To Potential Liability
Claims.
We do not
currently hold a professional or product liability insurance policy. We intend
to purchase a professional and product liability insurance policy from the
proceeds of this offering. Professional and product liability insurance coverage
is specifically tailored to the delivery of our software and professional
services to our customers. For example, a customer whose software is not
functional due to a service outage or has produced a mathematical result that is
incorrect due to a software flaw may sue us for damages related to the
customer's inability to properly anticipate the required inventory levels to
properly meet sales demand. Professional liability insurance exists to cover the
Company for any costs associated with the legal defense, or any penalties
awarded to the plaintiff in such cases where judgment could be rendered against
us in case of loss in court. Such penalties could be large monetary funds that a
judge could force us to pay in the event where damages have been awarded to the
plaintiff.
Our
business exposes us to potential professional liability which is prevalent in
the business analytics software industry. While we have adequate licensing
agreements which indicate that we cannot guarantee 100% accuracy, these
licensing agreements cannot guarantee that we will not be sued for damages. The
company currently has no specific professional or product liability insurance.
The company intends to purchase professional and product liability insurance
which will help to defray costs to the company for defense against damage
claims. The Company does not foresee any difficulties in obtaining such a
policy, as the company has already been approved and a quotation submitted for
such coverage by a Canadian Insurance Company. In this proposal, the Insurance
Company is aware of the geographical locations of our client base, which is
predominantly in Canada however includes a small amount in the US and
International. There can be no assurance that the coverage the commercial
general liability insurance policy provides will be adequate to satisfy all
claims that may arise. Regardless of merit or eventual outcome, such claims may
result in decreased demand for a product, injury to our reputation and loss of
revenues. Thus, a product liability claim may result in losses that could be
material, affecting the value of the common shares of the company, and you could
even lose your entire investment.
Our
limited operating history may not serve as an adequate basis to judge our future
prospects and results of operations.
Our
Company began its operations in 2000. Our limited operating history in the
industry may not provide a meaningful basis on which to evaluate our business.
We cannot assure you that we will maintain our profitability or that we will not
incur net losses in the future. We expect that our operating expenses will
increase as we expand. Any significant failure to realize anticipated revenue
growth could result in significant operating losses. We will continue to
encounter risks and difficulties frequently experienced by companies at a
similar stage of development, including our potential failure to:
7
-
maintain our proprietary technology;
-
expand our product offerings and maintain the high quality of our products;
-
manage our expanding operations, including the integration of any future acquisitions;
-
obtain sufficient working capital to support our expansion and to fill customers' orders in time;
-
maintain adequate control of our expenses;
-
implement our product development, marketing, sales, and acquisition strategies and adapt and modify them as needed;
-
anticipate and adapt to changing conditions in the software industry markets in which we operate as well as the impact of any changes in government regulation, mergers and acquisitions involving our competitors, technological developments and other significant competitive and market dynamics.
If we are
not successful in addressing any or all of these risks, our business may be
materially and adversely affected.
We
may encounter substantial competition in our business and our failure to compete
effectively may adversely affect our ability to generate revenue.
We
believe that existing and new competitors will continue to improve their
products and to introduce new products with competitive price and performance
characteristics. We expect that we will be required to continue to invest in
product development and productivity improvements to compete effectively in our
markets. Our competitors could develop a more efficient product or undertake
more aggressive and costly marketing campaigns than ours, which may adversely
affect our marketing strategies and could have a material adverse effect on our
business, results of operations and financial condition.
Our major
competitors may be better able than we to successfully endure downturns in our
industry. In periods of reduced demand for our products, we can either choose to
maintain market share by reducing our selling prices to meet competition or
maintain selling prices, which would likely sacrifice market share. Sales and
overall profitability would be reduced in either case. In addition, we cannot
assure you that additional competitors will not enter our existing markets, or
that we will be able to compete successfully against existing or new
competition.
We
may not be able to prevent others from unauthorized use of our software, which
could harm our business and competitive position.
Our
success depends, in part, on our ability to protect our proprietary
technologies. The process of seeking patent protection can be lengthy and
expensive and we cannot ensure you that our existing or future issued software
copyrights will be sufficient to provide us with meaningful protection or
commercial advantages.
We also
cannot assure you that our current or potential competitors do not have, and
will not obtain, patents that will prevent, limit or interfere with our ability
to make, use or sell our products in either the US or other
countries.
8
We
will require additional capital to fund our operations beyond the next 3 months
and, if it is not available, we will be forced to reduce our planned development
and marketing efforts, which will reduce our sales revenues.
We
believe that our existing working capital and cash available from operations
will enable us to meet our working capital requirements for the next 3 months.
From this point onwards, unless we experience an increase in revenues from the
current level, we will need additional capital. The development and marketing of
new products and the expansion of distribution channels and associated support
personnel requires a significant commitment of resources. In addition, if the
markets for our products develop more slowly than anticipated, or if we fail to
establish significant market share and achieve sufficient net revenues, we may
continue to consume significant amounts of capital. As a result, we could be
required to raise additional capital. To the extent that we raise additional
capital through the sale of equity or convertible debt securities, the issuance
of such securities could result in dilution of the shares held by existing
stockholders. If additional funds are raised through the issuance of debt
securities, such securities may provide the holders certain rights, preferences,
and privileges senior to those of common stockholders, and the terms of such
debt could impose restrictions on our operations. We cannot assure you that
additional capital, if required, will be available on acceptable terms, or at
all. If we are unable to obtain sufficient amounts of additional capital, we may
be required to reduce the scope of our planned product development and marketing
efforts, which could harm our business, financial condition and operating
results.
We
may not have adequate internal accounting controls. While we have certain
internal procedures in our budgeting, forecasting and in the management and
allocation of funds, our internal controls may not be adequate.
We are
constantly striving to improve our internal accounting controls. We hope to
develop an adequate internal accounting control to budget, forecast, manage and
allocate our funds and account for them. There is no guarantee that such
improvements will be adequate or successful or that such improvements will be
carried out on a timely basis. If we do not have adequate internal accounting
controls, we may not be able to appropriately budget, forecast and manage our
funds, we may also be unable to prepare accurate accounts on a timely basis to
meet our continuing financial reporting obligations and we may not be able to
satisfy our obligations under US securities laws.
Failure
to achieve and maintain effective internal controls in accordance
with section 404 of the Sarbanes-Oxley act could have a material
adverse effect on our business and operating results.
It may be
time consuming, difficult and costly for us to develop and implement the
additional internal controls, processes and reporting procedures required by the
Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal
auditing and other finance staff in order to develop and implement appropriate
additional internal controls, processes and reporting procedures. If we are
unable to comply with these requirements of the Sarbanes-Oxley Act, we may not
be able to obtain the independent accountant certifications that the
Sarbanes-Oxley Act requires of publicly traded companies.
If we
fail to comply in a timely manner with the requirements of Section 404 of the
Sarbanes-Oxley Act regarding internal control over financial reporting or to
remedy any material weaknesses in our internal controls that we may identify,
such failure could result in material misstatements in our financial statements,
cause investors to lose confidence in our reported financial information and
have a negative effect on the trading price of our common stock.
9
Pursuant
to Section 404 of the Sarbanes-Oxley Act and current SEC regulations, we are be
required to prepare assessments regarding internal controls over financial
reporting, furnish a report by our management on our internal control over
financial reporting. We have begun the process of documenting and testing our
internal control procedures in order to satisfy these requirements, which is
likely to result in increased general and administrative expenses and may shift
management time and attention from revenue-generating activities to compliance
activities. While our management is expending significant resources in an effort
to complete this important project, there can be no assurance that we will be
able to achieve our objective on a timely basis. There also can be no assurance
that our auditors will be able to issue an unqualified opinion on management's
assessment of the effectiveness of our internal control over financial
reporting. Failure to achieve and maintain an effective internal control
environment or complete our Section 404 certifications could have a material
adverse effect on our stock price.
In
addition, in connection with our on-going assessment of the effectiveness
of our internal control over financial reporting, we may discover
“material weaknesses” in our internal controls as defined in standards
established by the Public Company Accounting Oversight Board, or the PCAOB.
A material weakness is a significant deficiency, or combination of
significant deficiencies, that results in more than a remote likelihood
that a material misstatement of the annual or interim financial statements
will not be prevented or detected. The PCAOB defines “significant
deficiency” as a deficiency that results in more than a remote likelihood
that a misstatement of the financial statements that is more than
inconsequential will not be prevented or detected.
In the
event that a material weakness is identified, we will employ
qualified personnel and adopt and implement policies and procedures to
address any material weaknesses that we identify. However, the process of
designing and implementing effective internal controls is a continuous
effort that requires us to anticipate and react to changes in our business
and the economic and regulatory environments and to expend significant
resources to maintain a system of internal controls that is adequate to
satisfy our reporting obligations as a public company. We cannot assure you
that the measures we will take will remediate any material weaknesses that
we may identify or that we will implement and maintain adequate controls
over our financial process and reporting in the future.
Any
failure to complete our assessment of our internal control over
financial reporting, to remediate any material weaknesses that we may
identify or to implement new or improved controls, or difficulties
encountered in their implementation, could harm our operating results,
cause us to fail to meet our reporting obligations or result in material
misstatements in our financial statements. Any such failure could also
adversely affect the results of the periodic management evaluations of our
internal controls and, in the case of a failure to remediate any material
weaknesses that we may identify, would adversely affect the annual auditor
attestation reports regarding the effectiveness of our internal control over
financial reporting that are required under Section 404 of the
Sarbanes-Oxley Act. Inadequate internal controls could also cause investors
to lose confidence in our reported financial information, which could have
a negative effect on the trading price of our common stock.
Once publicly
trading, the application of the “penny stock” rules could adversely affect the
market price of our common shares and increase your transaction costs to sell
those shares. The securities and exchange commission has adopted rule 3a51-1
which establishes the definition of a “penny stock,” for the purposes relevant
to us, as any equity security that has a market price of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, rule
15g-9 require:
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•
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that
a broker or dealer approve a person’s account for transactions in penny
stocks; and
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•
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the
broker or dealer receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to
be purchased
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10
In order
to approve a person’s account for transactions in penny stocks, the broker or
dealer must:
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•
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obtain
financial information and investment experience objectives of the person;
and
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•
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make
a reasonable determination that the transactions in penny stocks are
suitable for that person and the person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks.
|
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the SEC relating to the penny stock market,
which, in highlight form:
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•
|
sets
forth the basis on which the broker or dealer made the suitability
determination; and
|
|
•
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that
the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
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•
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Generally,
brokers may be less willing to execute transactions in securities subject
to the “penny stock” rules. This may make it more difficult for investors
to dispose of our common stock and cause a decline in the market value of
our stock.
|
The
market price for our common shares is particularly volatile given our status as
a relatively unknown company with a small and thinly traded public float,
limited operating history and lack of profits which could lead to wide
fluctuations in our share price. The price at which you purchase our common
shares may not be indicative of the price that will prevail in the trading
market. You may be unable to sell your common shares at or above your purchase
price, which may result in substantial losses to you.
The
market for our common shares is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than a seasoned issuer for the indefinite future.
The volatility in our share price is attributable to a number of factors. First,
as noted above, our common shares are sporadically and thinly traded. As a
consequence of this lack of liquidity, the trading of relatively small
quantities of shares by our shareholders may disproportionately influence the
price of those shares in either direction. The price for our shares could, for
example, decline precipitously in the event that a large number of our common
shares are sold on the market without commensurate demand, as compared to a
seasoned issuer which could better absorb those sales without adverse impact on
its share price. Secondly, we are a speculative or “risky” investment due to our
limited operating history and lack of profits to date, and uncertainty of future
market acceptance for our potential products. As a consequence of this enhanced
risk, more risk-adverse investors may, under the fear of losing all or most of
their investment in the event of negative news or lack of progress, be more
inclined to sell their shares on the market more quickly and at greater
discounts than would be the case with the stock of a seasoned issuer. Many of
these factors are beyond our control and may decrease the market price of our
common shares, regardless of our operating performance. We cannot make any
predictions or projections as to what the prevailing market price for our common
shares will be at any time, including as to whether our common shares will
sustain their current market prices, or as to what effect that the sale of
shares or the availability of common shares for sale at any time will have on
the prevailing market price.
11
Shareholders
should be aware that, according to SEC Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include (1) control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer;
(2) manipulation of prices through prearranged matching of purchases and
sales and false and misleading press releases; (3) boiler room practices
involving high-pressure sales tactics and unrealistic price projections by
inexperienced sales persons; (4) excessive and undisclosed bid-ask
differential and markups by selling broker-dealers; and (5) the wholesale
dumping of the same securities by promoters and broker-dealers after prices have
been manipulated to a desired level, along with the resulting inevitable
collapse of those prices and with consequent investor losses. Our management is
aware of the abuses that have occurred historically in the penny stock market.
Although we do not expect to be in a position to dictate the behavior of the
market or of broker-dealers who participate in the market, management will
strive within the confines of practical limitations to prevent the described
patterns from being established with respect to our securities. The occurrence
of these patterns or practices could increase the volatility of our share price.
Volatility
in our common share price may subject us to securities litigation, thereby
diverting our resources that may have a material effect on our profitability and
results of operations.
As
discussed in the preceding risk factor, the market for our common shares is
characterized by significant price volatility when compared to seasoned issuers,
and we expect that our share price will continue to be more volatile than a
seasoned issuer for the indefinite future. In the past, plaintiffs have often
initiated securities class action litigation against a company following periods
of volatility in the market price of its securities. We may in the future be the
target of similar litigation. Securities litigation could result in substantial
costs and liabilities and could divert management’s attention and resources.
We
will incur increased costs as a result of being a public company, which could
affect our profitability and operating results.
The
Sarbanes-Oxley Act of 2002 and the new rules subsequently implemented by the
Securities and Exchange Commissions, the Nasdaq National Market and the Public
Company Accounting Oversight Board have imposed various new requirements on
public companies, including requiring changes in corporate governance practices.
We expect these rules and regulations to increase our legal and financial
compliance costs and to make some activities more time-consuming and costly. We
expect to spend between $50,000 to $100,000 in legal and accounting expenses
annually to comply with Sarbanes-Oxley. These costs could affect profitability
and our results of operations.
We
do not have "key man" insurance on our Chairman and CEO, on whom we rely for the
management of our business.
We
depend, to a large extent, on the abilities and participation of our current
management team, but have a particular reliance upon Mr. George Metrakos, the
Company's Chairman of the Board and CEO. The loss of the services of Mr. George
Metrakos for any reason, may have a material adverse effect on our business and
prospects. We cannot assure you that their services will continue to be
available to us, or that we will be able to find a suitable replacement for
either of them. We do not carry key man life insurance for any key
personnel.
We
may not be able to hire and retain qualified personnel to support our growth and
if we are unable to retain or hire such personnel in the future, our ability to
improve our products and implement our business objectives could be adversely
affected.
If one or
more of our senior executives or other key personnel are unable or unwilling to
continue in their present positions, we may not be able to replace them easily
or at all, and our business may be disrupted and our financial condition and
results of operations may be materially and adversely affected. Competition for
senior management and senior technology personnel is intense, the pool of
qualified candidates is very limited, and we may not be able to retain the
services of our senior executives or senior technology personnel, or attract and
retain high-quality senior executives or senior technology personnel in the
future. Considering our current cash position, we do not have adequate
cash resources to hire and retain key personel should our current offering fail
to raise adequate funding. Such failure could materially and adversely
affect our future growth and financial condition.
12
We
currently do not carry any product liability or other similar insurance. We
cannot assure you that we would not face liability in the event of the failure
of any of our products. Should our inventory management software fail
to correctly calculate estimated inventory levels recommended to meet a specific
sales forecast for example, and our customer produces or purchases a large
amount of inventory as a result, then we can face significant legal expenses in
resolving the situation with the customer. While our service
agreement absolves responsibility of the company due to errors and omissions, we
do not hold adequate insurance coverage for such liabilities and hence will not
have adequate financial resources to defend ourselves under any lawsuits filed.
Risks
Related to Our Common Stock.
Future
sales of substantial amounts of common stock pursuant to Rule 144 under the
Securities Act of 1933 or otherwise by certain shareholders could have a
material adverse impact on the market price for the common stock at the time.
There are presently 5,115,400 outstanding shares of our common stock held by
shareholders which are deemed "restricted securities" as defined by Rule 144
under the Securities Act of which 4,569,900 are held by
affiliates. Within these affiliated shares, 2,578,000 are subject to
the limitations placed on shares that would be subject to the comments from
Kenneth Worm to Richard Wolffe. Under certain circumstances, these shares may be
sold without registration pursuant to the provisions of rule
144. Rule 144 permits, under certain circumstances, the sale of
restricted securities without any quantity limitations by a person who is not an
affiliate of ours and has satisfied a six month holding period. Any sales of
shares by shareholders pursuant to rule 144 may have a depressive effect on the
price of our common stock.
To
date, we have not paid any cash dividends and no cash dividends will be paid in
the foreseeable future.
We do not
anticipate paying cash dividends on our common stock in the foreseeable future,
and we cannot assure an investor that funds will be legally available to pay
dividends or that even if the funds are available, that the dividends will be
paid.
There
is no public (trading) market for our common stock and there is no assurance
that the common stock will ever trade on a recognized exchange or dealers'
network; therefore, our investors may not be able to sell their
shares.
Our
common stock is not listed on any exchange or quoted on any similar quotation
service, and there is currently no public market for our common stock. We have
not taken any steps to enable our common stock to be quoted on the OTC Bulletin
Board, and can provide no assurance that our common stock will ever be quoted on
any quotation service or that any market for our common stock will ever develop.
As a result, stockholders may be unable to liquidate their investments, or may
encounter considerable delay in selling shares of our common stock. Likewise,
stockholders may be unable to sell their common shares at or above the purchase
price, which may result in substantial losses to stockholders. There can be no
assurances that we be listed on the OTC Bulletin Board.
13
We
are responsible for the indemnification of our officers and
directors.
Our
Bylaws provide for the indemnification of our directors, officers, employees,
and agents, under certain circumstances, against costs and expenses incurred by
them in any litigation to which they become a party arising from their
association with or activities on our behalf. Consequently, we may be required
to expend substantial funds to satisfy these indemnity obligations.
ITEM
1B.
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UNRESOLVED
STAFF COMMENTS
|
None.
PROPERTIES
|
The
Company's executive offices are currently located at 1224 Washington Ave, Miami
Beach Florida 33139.
LEGAL
PROCEEDINGS
|
During
the past five years, none of the following occurred with respect to a present or
former director or executive officer of the Company: (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
offenses); (3) being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of any competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his 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 a federal or
state securities or commodities law, and the judgment has not been reversed,
suspended or vacated.
We are not a party to
any pending material legal proceedings and are not aware of any threatened or
contemplated proceeding by any governmental authority against the Company.
Notwithstanding, from time to time, the Company is subject to legal proceedings
and claims in the ordinary course of business, including employment-related and
trade related claims.
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
None.
14
PART II
MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
|
At
present, our securities are not traded publicly. There is no assurance that a
trading market will develop, or, if developed, that it will be
sustained.
Recent
Sales of Unregistered Securities
None.
Dividend
Policy
We have
never declared or paid cash dividends on our capital stock and do not plan to
pay any cash dividends in the foreseeable future. Our current policy is to
retain all of our earnings to finance future growth.
Repurchases
by the Company
During
the last Fiscal Year we did not repurchase any shares of our common stock on our
own behalf or for any affiliated purchaser.
Equity
Compensation Plan Information
None.
ITEM
6.
|
SELECTED
FINANCIAL DATA
|
Not
required.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The
following discussion and analysis should be read in conjunction with the
consolidated financial statements included elsewhere in this report and the
information described under the caption "Risk Factors" found in Part 1. Readers
should also be cautioned that results of any reported period are often not
indicative of results for any future period.
15
We were
reincorporated in the State of Florida as "GMS CAPITAL
CORP" in 2007. Prior to this reincorporation, the Company was doing
business as "Metratech Retail Systems Inc.", a Canadian Corporation since
2000. Our revenues are derived primarily from the collection of
software subscription-based licensing revenues and professional services to
business customers.
Trends
in Our Industry and Business
A number
of trends in our industry and business have a significant effect on our results
of operations and are important to an understanding of our financial statements.
These trends include:
Decreasing Prices for Consumer
Goods. The prices for everyday consumer goods continually decrease
due to increased competition among major Retailers. As a result,
Retailers are continuously searching for innovative ways to reduce their costs
from their suppliers. This cost reduction pressure has resulted in an
increasing requirement for Retailers to rely on their suppliers to manage their
inventory so that the Retailers do not have to spend money and dedicate
resources to this important task.
Manufacturers and Importers are
Suppliers whose core competencies are not Retailer store shelf inventory
management. Suppliers are typically experts at shipping their goods
based on confirmed orders from Retailers. With the requirement for
Suppliers, imposed by their Retailers, to make decisions as to when, how much
and to which store that they should be shipping their goods, the Supplier is
forced to behave outside of their core competency. As a result, the
Supplier is looking for ways to alleviate this burden through the acquisition of
specific software designed to meet their inventory management
needs.
We
generate revenues from the installation of our ManageThePipe software on the
premises of our customers, along with the Professional services required to
install, train and support our customers on the use of the software. Our cost of
sales include our salaries, consultant fees, sales and marketing, product
development and administration required for us to deliver the software and
professional services.
Results
of Operations, Fiscal
Year End December 31, 2008 versus 2007
The
Company recorded sales of $38,400 of which $12,262 was subscription revenue,
$20,064 was professional services and $6,074 was maintenance revenue for the
year ended December 31, 2008 as compared to $73,104 of
which $10,827 was subscription revenue and $62,277 was professional
services for the year ended December 31, 2007.
The
Company's total expenses before interest and income taxes were $38,833 for the
year ended December 31, 2008 compared to $292,712 for the year ended December
31, 2007, primarily as a consequence of a decrease in professional services
related to the costs associated with the raising of capital through the US
public market system and the writing of the Company's offering prospectus in
2007. In
particular, there was a decrease in selling, general and administrative expenses
from $280,056 to $28,076 as the company reduced its expenditures in professional
services from the
prior year- the Company issued $253,740
worth of stock to pay for professional services during 2007 which was not
required in 2008. There was a decrease in depreciation from $12,656 to $10,757
related to no new acquisitions of equipment during the fiscal
year.
16
As a
result, the Company had a net income (loss) of ($63,276) for the year ended
December 31, 2008 compared to a net income (loss) of ($233,314) for the year
ended December 31, 2007. The principal reasons for company's net loss for the
year ended December 31, 2008 as compared to the prior period is because the
company issued $253,740 worth of stock to pay for professional services during
2007 which was not required in 2008.
Plan
of Operations and Need for Additional Financing
The
Company's plan of operations for 2008 is to build a subscriber base of suppliers
to major retailers who purchase software on a monthly subscription basis. Along
with the subscription revenues, the Company will also sell professional
services, maintenance and software fees to the same customers.
Liquidity
and Capital Resources
For the
year ended December 31, 2008:
On The
Company's balance sheet as of December 31, 2008, the Company had assets
consisting of cash in the amount of $1,461, accounts receivable in the amount of
$2,646 and other current assets of $1,053. The Company has expended its cash in
furtherance of its business plan, including primarily expenditure of funds to
pay legal and accounting expenses, and to maintain service delivery to its
customers. Consequently, the Company's balance sheet as of December 31, 2008
reflects a deficit accumulated of ($454,865) and a stockholders equity of
($14,541).
The
Company was used $56,272 of cash in operating activities in 2008 compared to
being provided $30,834 in 2007. This change was attributable in large part to
the reduction of net income due to a decrease in sales.
The
Company was provided $20,680 in cash from investing activities compared to being
provided $6,483 in 2007. This change was attributable to a disposal of
fixed assets during the year.
The Company had net
cash provided by financing activities of $18,563 in 2008 compared to a use of
$41,764 in 2007. This change was primarily attributable to an increase of
proceeds provided from officers.
Critical
Accounting Policies and Estimates
Management's
Discussion and Analysis of Financial Conditions and Results of Operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
When preparing our financial statements, we make estimates and judgments that
affect the reported amounts on our balance sheets and income statements, and our
related disclosure about contingent assets and liabilities. We continually
evaluate our estimates, including those related to revenue, allowance for
doubtful accounts, reserves for income taxes, and litigation. We base our
estimates on historical experience and on various other assumptions, which we
believe to be reasonable in order to form the basis for making judgments about
the carrying values of assets and liabilities that are not readily ascertained
from other sources. Actual results may deviate from these estimates if
alternative assumptions or condition are used.
17
Recent
Accounting Pronouncements
In
September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” This
standard defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosure about fair
value measurements. This statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007. Early adoption is
encouraged. The adoption of SFAS 157 is not expected to have a material impact
on the financial statements.
In
February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities – Including an Amendment of FASB Statement No.
115”, (“FAS 159”) which permits entities to choose to measure many financial
instruments and certain other items at fair value at specified election dates. A
business entity is required to report unrealized gains and losses on items for
which the fair value option has been elected in earnings at each subsequent
reporting date. This statement is expected to expand the use of fair value
measurement. FAS 159 is effective for financial statements issued for fiscal
years beginning after November 15, 2007, and interim periods within those fiscal
years.
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, an amendment of Accounting Research Bulletin
No 51” (SFAS 160). SFAS 160 establishes accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent,
changes in a parent’s ownership of a noncontrolling interest, calculation and
disclosure of the consolidated net income attributable to the parent and the
noncontrolling interest, changes in a parent’s ownership interest while the
parent retains its controlling financial interest and fair value measurement of
any retained noncontrolling equity investment. SFAS 160 is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. Early adoption is prohibited.
Management is determining the impact that the adoption of SFAS No. 160 will have
on the Company’s financial position, results of operations or cash
flows.
In
December 2007, the FASB issued SFAS 141R, Business Combinations (“SFAS 141R”),
which replaces FASB SFAS 141, Business Combinations. This Statement
retains the fundamental requirements in SFAS 141 that the acquisition method of
accounting be used for all business combinations and for an acquirer to be
identified for each business combination. SFAS 141R defines the acquirer as the
entity that obtains control of one or more businesses in the business
combination and establishes the acquisition date as the date that the acquirer
achieves control. SFAS 141R will require an entity to record
separately from the business combination the direct costs, where previously
these costs were included in the total allocated cost of the
acquisition. SFAS 141R will require an entity to recognize the assets
acquired, liabilities assumed, and any non-controlling interest in the acquired
at the acquisition date, at their fair values as of that date. This
compares to the cost allocation method previously required by SFAS No.
141.
SFAS 141R
will require an entity to recognize as an asset or liability at fair value for
certain contingencies, either contractual or non-contractual, if certain
criteria are met. Finally, SFAS 141R will require an entity to
recognize contingent consideration at the date of acquisition, based on the fair
value at that date. This Statement will be effective for business
combinations completed on or after the first annual reporting period beginning
on or after December 15, 2008. Early adoption of this standard is not
permitted and the standards are to be applied prospectively
only. Upon adoption of this standard, there would be no impact to the
Company’s results of operations and financial condition for acquisitions
previously completed. The adoption of SFAS No. 141R is not expected
to have a material effect on the Company’s financial position, results of
operations or cash flows.
18
In
December 2007, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 110, “Use of a Simplified Method in Developing Expected Term of
Share Options” (“SAB 110”). SAB 110 expenses the current view of the staff that
it will accept a company’s election to use the simplified method discussed in
Staff Accounting Bulletin No. 107, “Share Based Payment”, (“SAB 107”), for
estimating the expected term of “plain vanilla” share options regardless of
whether the company has sufficient information to make more refined estimates.
SAB 110 became effective for the Company on January 1, 2008. The adoption of SAB
110 is not expected to have a material impact on the Company’s financial
position.
In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities, an amendment of FASB Statement No. 133 (“SFAS 161”).
SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging
activities. These enhanced disclosures will discuss: how and why an entity uses
derivative instruments; how derivative instruments and related hedged items are
accounted for under SFAS 133 and its related interpretations; and how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008. The Company does not believe that SFAS 161 will have an impact on
their results of operations or financial position.
In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (SFAS 162). SFAS 162 makes the hierarchy of generally
accepted accounting principles explicitly and directly applicable to preparers
of financial statements, a step that recognizes preparers’ responsibilities for
selecting the accounting principles for their financial statements. The
effective date for SFAS 162 is 60 days following the U.S. Securities and
Exchange Commission’s approval of the Public Company Accounting Oversight
Board’s related amendments to remove the GAAP hierarchy from auditing standards,
where it has resided for some time. The adoption of SFAS 162 will not have an
impact on the Company’s results of operations or financial
position.
In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts – an interpretation of SFAS No. 60” (SFAS 163). SFAS 163
prescribes accounting for insures of financial obligations, bringing consistency
to recognizing and recording premiums and to loss recognition. SFAS 163 also
requires expanded disclosures about financial guarantee insurance contracts.
Except for some disclosures, SFAS 163 is effective for financial statements
issued for fiscal years beginning after December 15, 2008. The adoption of SFAS
163 will not have an impact on the Company’s results of operations or financial
position.
Other
accounting standards that have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date and
are not expected to have a material impact on the financial statements upon
adoption.
19
Convertible
Instruments
The
Company reviews the terms of convertible debt and equity securities for
indications requiring bifurcation, and separate accounting, for the embedded
conversion feature. Generally, embedded conversion features where the ability to
physical or net-share settle the conversion option is not within the control of
the Company are bifurcated and accounted for as a derivative financial
instrument. (See Derivative Financial Instruments below). Bifurcation of the
embedded derivative instrument requires allocation of the proceeds first to the
fair value of the embedded derivative instrument with the residual allocated to
the debt instrument. The resulting discount to the face value of the debt
instrument is amortized through periodic charges to interest expense using the
Effective Interest Method.
Derivative
Financial Instruments
The
Company generally does not use derivative financial instruments to hedge
exposures to cash-flow or market risks. However, certain other financial
instruments, such as warrants or options to acquire common stock and the
embedded conversion features of debt and preferred instruments that are indexed
to the Company's common stock, are classified as liabilities when either (a) the
holder possesses rights to net-cash settlement or (b) physical or net share
settlement is not within the control of the Company. In such instances, net-cash
settlement is assumed for financial accounting and reporting, even when the
terms of the underlying contracts do not provide for net-cash settlement. Such
financial instruments are initially recorded at fair value and subsequently
adjusted to fair value at the close of each reporting period.
Fixed
Assets
Fixed
assets are stated at cost. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets;
●
|
Automobiles-
3 years
|
●
|
Computer
equipment - 3 years
|
●
|
Furniture
and fixtures - 5 years.
|
Impairment
of Long-Lived Assets
Long-lived
assets, primarily fixed assets, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets might
not be recoverable. The Company does perform a periodic assessment of assets for
impairment in the absence of such information or indicators. Conditions that
would necessitate an impairment assessment include a significant decline in the
observable market value of an asset, a significant change in the extent or
manner in which an asset is used, or a significant adverse change that would
indicate that the carrying amount of an asset or group of assets is not
recoverable. For long-lived assets to be held and used, the Company recognizes
an impairment loss only if its carrying amount is not recoverable through its
undiscounted cash flows and measures the impairment loss based on the difference
between the carrying amount and estimated fair value.
The
Company has not issued options or warrants to purchase stock in these periods.
If there were options or warrants outstanding they would not be included in the
computation of diluted EPS because inclusion would have been
antidilutive.
20
Revenue
Recognition
The
Company generates revenue from the following primary sources: (1) licensing
software products; (2) providing customer technical support (referred to as
maintenance); and (3) providing professional services, such as consulting and
education.
The
Company recognizes revenue pursuant to the requirements of Statement of Position
(SOP) 97-2, “Software Revenue Recognition,” issued by the American Institute of
Certified Public Accountants, as amended by SOP 98-9 “Modification of SOP 97-2,
Software Revenue Recognition, With Respect to Certain Transactions.” In
accordance with SOP 97-2, the Company begins to recognize revenue from licensing
and supporting its software products when all of the following criteria are met:
(1) the Company has evidence of an arrangement with a customer; (2) the Company
delivers the products; (3) license agreement terms are deemed fixed or
determinable and free of contingencies or uncertainties that may alter the
agreement such that it may not be complete and final; and (4) collection is
probable.
The
Company’s software licenses generally do not include acceptance provisions. An
acceptance provision allows a customer to test the software for a defined period
of time before committing to license the software. If a license agreement were
to include an acceptance provision, the Company would not record deferred
subscription value or recognize revenue until the earlier of the receipt of a
written customer acceptance or, if not notified by the customer to cancel the
license agreement, the expiration of the acceptance period.
Under the
Company’s business model, software license agreements frequently include
flexible contractual provisions that, among other things, allow customers to
receive unspecified future software products for no additional fee. These
agreements combine the right to use the software products with maintenance for
the term of the agreement. Under these agreements, once all four of the above
noted revenue recognition criteria are met, the Company is required to recognize
revenue ratably over the term of the license agreement.
Under the
Company’s business model, a relatively small percentage of the Company’s revenue
related to certain products is recognized on an up-front or perpetual basis once
all revenue recognition criteria are met in accordance with SOP 97-2 as
described above, and is reported in the “Software fees and other” line of the
Statements of Operations. License agreements pertaining to such products do not
include the right to receive unspecified future software products, and
maintenance is deferred and subsequently recognized over the term of the
maintenance period. In the event such license agreements are executed within
close proximity or in contemplation of other license agreements with the same
customer which are recognized on a subscription basis, the contracts may be
considered a single multi-element agreement, and as such all revenue is deferred
and recognized as “Subscription revenue” in the Statements of
Operations.
Maintenance
revenue is derived from two primary sources: (1) combined license and
maintenance agreements recorded under the prior business model; and (2)
stand-alone maintenance agreements.
Under the
prior business model, maintenance and license fees were generally combined into
a single license agreement. The maintenance portion was deferred and amortized
into revenue over the initial license agreement term. Certain of these license
agreements have not reached the end of their initial terms and, therefore,
continue to amortize. This amortization is recorded to the “Maintenance” line
item in the Statements of Operations. The deferred maintenance portion, which
was optional to the customer, was determined using its fair value based on
annual, fixed maintenance renewal rates stated in the agreement. For license
agreements entered into under the Company’s current business model, maintenance
and license fees continue to be combined; however, the maintenance is inclusive
for the entire term of the arrangement. The Company reports such combined fees
on the “Subscription revenue” line item in the Statements of
Operations.
The
Company also records stand-alone maintenance revenue earned from customers who
elect optional maintenance. Revenue from such renewals is recognized on the
“Maintenance” line item in the Statements of Operations over the term of the
renewal agreement.
The
“Deferred maintenance revenue” line item on the Company’s Balance Sheets
principally represents payments received in advance of maintenance services to
be rendered.
21
Revenue
from professional service arrangements is generally recognized as the services
are performed. Revenue from committed professional services arrangements that
are sold as part of a software transaction is deferred and recognized on a
ratable basis over the life of the related software transaction. If it is not
probable that a project will be completed or the payment will be received,
revenue is deferred until the uncertainty is removed.
Revenue
from sales to distributors, resellers, and value-added resellers (VARs)
commences when all four of the SOP 97-2 revenue recognition criteria noted above
are met and when these entities sell the software product to their customers.
This is commonly referred to as the sell-through method. Revenue from the sale
of products to distributors, resellers and VARs under licenses that include the
right for the end-users to receive certain unspecified future software products
is recognized on a ratable basis.
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 date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. On an on-going basis, the Company evaluates its
estimates, including, but not limited to, those related to investment tax
credits, bad debts, income taxes and contingencies. The Company bases its
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Actual results could differ
from those estimates.
Comprehensive
Income
The
Company adopted Statement of Financial Accounting Standards No, 130, “Reporting
Comprehensive Income,” (SFAS No. 130). SFAS No. 130 requires the reporting of
comprehensive income in addition to net income from
operations. Comprehensive income is a more inclusive financial
reporting methodology that includes disclosure of information that historically
has not been recognized in the calculation of net income.
Research
and Development
The
Company occasionally incurs costs on activities that relate to research and
development of new products. Research and development costs are expensed as
incurred. Certain of these costs are reduced by government grants and investment
tax credits where applicable. The Company did not incur Research and
Development expenses during 2007 and 2008.
Stock-Based
Compensation
On
December 16, 2004, the Financial Accounting Standards Board ("FASB") published
Statement of Financial Accounting Standards No. 123 (Revised 2004), "Share-Based
Payment" ("SFAS 123R"). SFAS 123R requires that compensation cost related to
share-based payment transactions be recognized in the financial statements.
Share-based payment transactions within the scope of SFAS 123R include stock
options, restricted stock plans, performance-based awards, stock appreciation
rights, and employee share purchase plans. The provisions of SFAS 123R, as
amended, are effective for small business issuers beginning as of the next
fiscal year after December 15, 2005. The Company has adopted the provisions of
SFAS 123R for its fiscal year ended December 31, 2007 and 2008. The adoption of
this principle had no effect on the Company's operations.
22
On
January 1, 2006, the Company adopted the provisions of FAS No. 123R "Share-Based
Payment" ("FAS 123R") which requires recognition of stock-based compensation
expense for all share-based payments based on fair value. Prior to January 1,
2006, the Company measured compensation expense for all of its share-based
compensation using the intrinsic value method prescribed by Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related interpretations. The Company has provided pro
forma disclosure amounts in accordance with FAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure - an amendment of FASB
Statement No. 123" ("FAS 148"), as if the fair value method defined by FAS No.
123, "Accounting for Stock Based Compensation" ("FAS 123") had been applied to
its stock-based compensation.
The
Company has elected to use the modified-prospective approach method. Under that
transition method, the calculated expense in 2006 is equivalent to compensation
expense for all awards granted prior to, but not yet vested as of January 1,
2006, based on the grant-date fair values estimated in accordance with the
original provisions of FAS 123. Stock-based compensation expense for all awards
granted after January 1, 2006 is based on the grant-date fair values estimated
in accordance with the provisions of FAS 123R. The Company recognizes these
compensation costs, net of an estimated forfeiture rate, on a pro rata basis
over the requisite service period of each vesting tranche of each award. The
Company considers voluntary termination behavior as well as trends of actual
option forfeitures when estimating the forfeiture rate.
The
Company measures compensation expense for its non-employee stock-based
compensation under the Financial Accounting Standards Board (FASB) Emerging
Issues Task Force (EITF) Issue No. 96-18, "Accounting for Equity Instruments
that are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services". The fair value of the option issued is used to
measure the transaction, as this is more reliable than the fair value of the
services received. The fair value is measured at the value of the Company's
common stock on the date that the commitment for performance by the counterparty
has been reached or the counterparty's performance is complete. The fair value
of the equity instrument is charged directly to compensation expense and
additional paid-in capital.
Segment
Information
The
Company follows the provisions of SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information". This standard requires that companies
disclose operating segments based on the manner in which management
disaggregates the Company in making internal operating decisions.
ITEM
7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Not
required.
23
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS INC.)
FINANCIAL
STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
INDEX
TO FINANCIAL STATEMENTS
Page(s)
|
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
Balance
Sheets as of December 31, 2008 and 2007
|
F-2
|
Statements
of Operations and Comprehensive Income (Loss)
|
|
For
the Years Ended December 31, 2008 and 2007
|
F-3
|
Statement
of Changes in Stockholders' Equity (Deficit)
|
|
For
the Years Ended December 31, 2008 and 2007
|
F-4
|
Statements
of Cash Flows For the Years Ended
|
|
December
31, 2008 and 2007
|
F-5
|
Notes
to Financial Statements
|
F-6
|
24
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors
GMS
Capital Corp.
Montreal,
Canada
We have
audited the accompanying balance sheets of GMS Capital Corp. (the “Company”) as
of December 31, 2008 and 2007 and the related statements of operations, changes
in stockholders’ equity (deficit), and cash flows for the years then ended.
These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
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 financial statements are free of material misstatement. We were
not engaged to perform an audit of the Company’s internal control over financial
reporting. Our audits 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 financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of GMS Capital Corp. as of December
31, 2008 and 2007, and the results of its statements of operations, changes in
stockholders’ equity (deficit), and cash flows for the years then ended in
conformity with U.S. generally accepted accounting principles.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has sustained operating losses and capital
deficits that raise substantial doubt about its ability to continue as a going
concern. Management’s plans in regard to these matters are also
described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/
KBL,
LLP
|
|
|||
New
York, NY
February
19, 2009
|
|
F-1
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS, INC.)
BALANCE
SHEETS
DECEMBER
31, 2008 AND 2007
ASSETS
|
||||||||
(IN
US$)
|
||||||||
2008
|
2007
|
|||||||
Current
Assets:
|
||||||||
Cash
and cash equivalents
|
$ | 1,461 | $ | 11,993 | ||||
Accounts
receivable, net
|
2,646 | 15,971 | ||||||
Other
current assets
|
1,053 | - | ||||||
Due
from related companies
|
- | 9,373 | ||||||
Total
Current Assets
|
5,160 | 37,337 | ||||||
Fixed
assets, net of depreciation
|
10,371 | 25,102 | ||||||
TOTAL
ASSETS
|
$ | 15,531 | $ | 62,439 | ||||
LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||
LIABILITIES
|
||||||||
Current
Liabilities:
|
||||||||
Advances
- Shareholders
|
$ | 26,970 | $ | 44 | ||||
Line
of credit
|
1,862 | 82 | ||||||
Due
to related companies
|
1,240 | - | ||||||
Loan
payable
|
- | 12,426 | ||||||
Deferred
revenue
|
- | 1,084 | ||||||
Accounts
payable and accrued expenses
|
- | 6,150 | ||||||
Total
Current Liabilities
|
30,072 | 19,786 | ||||||
Total
Liabilities
|
30,072 | 19,786 | ||||||
STOCKHOLDERS'
EQUITY (DEFICIT)
|
||||||||
Common
stock, $.001 Par Value; 100,000,000 shares authorized
|
||||||||
and
5,115,400 shares issued and outstanding, respectively
|
5,115 | 5,115 | ||||||
Additional
paid-in capital
|
461,425 | 461,425 | ||||||
Accumulated
deficit
|
(454,865 | ) | (391,589 | ) | ||||
Accumulated
other comprehensive income (loss)
|
(26,216 | ) | (32,298 | ) | ||||
Total
Stockholders' Equity (Deficit)
|
(14,541 | ) | 42,653 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | 15,531 | $ | 62,439 |
The
accompanying notes are an integral part of the financial
statements.
F-2
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS, INC.)
STATEMENTS
OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
IN
US$
|
||||||||
2008
|
2007
|
|||||||
OPERATING
REVENUES
|
||||||||
Sales
|
$ | 38,400 | $ | 73,104 | ||||
COST
OF SALES
|
||||||||
Purchases
|
68,285 | 10,441 | ||||||
Total
Cost of Sales
|
68,285 | 10,441 | ||||||
GROSS
PROFIT (LOSS)
|
(29,885 | ) | 62,663 | |||||
OPERATING
EXPENSES
|
||||||||
Selling,
general and administrative
|
28,076 | 280,056 | ||||||
Depreciation
|
10,757 | 12,656 | ||||||
Total
Operating Expenses
|
38,833 | 292,712 | ||||||
LOSS
BEFORE OTHER INCOME (EXPENSE)
|
(68,718 | ) | (230,049 | ) | ||||
OTHER
INCOME (EXPENSE)
|
||||||||
Interest
expense
|
(2,367 | ) | (3,265 | ) | ||||
Gain
on asset disposal
|
7,809 | - | ||||||
Total
Other Income (Expense)
|
5,442 | (3,265 | ) | |||||
NET
LOSS BEFORE PROVISION
|
||||||||
FOR
INCOME TAXES
|
(63,276 | ) | (233,314 | ) | ||||
Provision
for Income Taxes
|
- | - | ||||||
NET
LOSS APPLICABLE
|
||||||||
TO
COMMON SHARES
|
$ | (63,276 | ) | $ | (233,314 | ) | ||
NET
LOSS PER BASIC AND DILUTED SHARES
|
||||||||
BASIC
AND DILUTED
|
$ | (0.01 | ) | $ | (0.07 | ) | ||
WEIGHTED
AVERAGE NUMBER OF COMMON
|
||||||||
SHARES
OUTSTANDING - BASIC AND DILUTED
|
5,115,400 | 3,212,350 | ||||||
COMPREHENSIVE
INCOME (LOSS)
|
||||||||
Net
loss
|
$ | (63,276 | ) | $ | (233,314 | ) | ||
Other
comprehensive income (loss)
|
||||||||
Currency
translation adjustments
|
6,082 | 8,040 | ||||||
Comprehensive
income (loss)
|
$ | (57,194 | ) | $ | (225,274 | ) |
The
accompanying notes are an integral part of the financial
statements.
F-3
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMES, INC.)
STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE
YEARS ENDED DECEMBER 31, 2008 AND 2007
IN
US$
|
||||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||
Additional
|
Other
|
|||||||||||||||||||||||
Common
Stock
|
Paid-in | Accumulated |
Comprehenisve
|
|||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Income
(Loss)
|
Total
|
|||||||||||||||||||
Balance
December 31, 2006
|
2,578,000 | 2,578 | 210,222 | (158,275 | ) | (40,338 | ) | 14,187 | ||||||||||||||||
Shares
of stock issued for services
|
2,537,400 | 2,537 | 251,203 | - | - | 253,740 | ||||||||||||||||||
Net
loss for the year ended December 31, 2007
|
- | - | - | (233,314 | ) | 8,040 | (225,274 | ) | ||||||||||||||||
Balance
December 31, 2007
|
5,115,400 | 5,115 | 461,425 | (391,589 | ) | (32,298 | ) | 42,653 | ||||||||||||||||
Net
loss for the year ended December 31, 2008
|
- | - | - | (63,276 | ) | 6,082 | (57,194 | ) | ||||||||||||||||
Balance
December 31, 2008
|
5,115,400 | $ | 5,115 | $ | 461,425 | $ | (454,865 | ) | $ | (26,216 | ) | $ | (14,541 | ) |
The
accompanying notes are an integral part of the financial
statements.
F-4
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS, INC.)
STATEMENTS
OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
IN
US$
|
||||||||
2008
|
2007
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
loss
|
$ | (63,276 | ) | $ | (233,314 | ) | ||
Adjustments
to reconcile net loss to net cash
|
||||||||
provided
by (used in) operating activities:
|
||||||||
Depreciation
|
10,757 | 12,656 | ||||||
Shares
issued for services
|
- | 253,740 | ||||||
Gain
on sale of disposition of assets
|
(7,809 | ) | - | |||||
Changes
in assets and liabilities
|
||||||||
Decrease
in accounts receivable
|
11,195 | 10,302 | ||||||
Increase
(decrease) in deferred revenue
|
(1,084 | ) | 1,084 | |||||
(Decrease)
in accounts payable and
|
||||||||
and
accrued expenses
|
(6,055 | ) | (13,634 | ) | ||||
Total
adjustments
|
7,004 | 264,148 | ||||||
Net
cash provided by (used in) operating activities
|
(56,272 | ) | 30,834 | |||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Acquisitions
(disposal) of fixed assets
|
11,695 | (1,454 | ) | |||||
Decrease
in due to/from related parties
|
8,985 | 7,937 | ||||||
Net
cash provided by investing activities
|
20,680 | 6,483 | ||||||
CASH
FLOWS FROM FINANCING ACTIVITES
|
||||||||
Repayments
of loan payable
|
(10,112 | ) | (6,779 | ) | ||||
Proceeds
from line of credit, net of repayments
|
1,795 | (23,561 | ) | |||||
Proceeds
from officers, net of repayments
|
26,880 | (11,424 | ) | |||||
Net
cash provided by (used in) financing activities
|
18,563 | (41,764 | ) | |||||
Effect
of foreign currency
|
6,497 | 7,132 | ||||||
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(10,532 | ) | 2,685 | |||||
CASH
AND CASH EQUIVALENTS - BEGINNING OF YEAR
|
11,993 | 9,308 | ||||||
CASH
AND CASH EQUIVALENTS - END OF YEAR
|
$ | 1,461 | $ | 11,993 | ||||
CASH
PAID DURING THE YEAR FOR:
|
||||||||
Interest
expense
|
$ | 2,367 | $ | 3,265 |
The
accompanying notes are an integral part of the financial
statements.
F-5
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS INC.)
FINANCIAL
STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
1-
|
ORGANIZATION AND BASIS
OF PRESENTATION
|
GMS
Capital Corp. (the “Company”), a Florida Corporation, was founded on March 9,
2000 originally doing business as Metratech Retail Systems Inc., a Canadian
Corporation up until the reincorporation as GMS Capital Corp. in the State of
Florida on September 18, 2007, in order to develop and market inventory
management software for suppliers to major retailers, which enable suppliers to
forecast consumer demand for their products and to optimize their production and
inventory accordingly.
The
Company's objective in the reincorporation in the state of Florida is to raise
capital through the issuance of stock on the public markets in the US once
achieving regulatory approval. This capital raised will be utilized
to further the promotion of The Company's flagship software product,
ManageThePipe, a specialized inventory management software for small to medium
sized businesses who sell their products via large chain retail sales outlets
known as “big box chains”.
Prior to
its reincorporation as GMS, the Company had grown primarily in the provinces of
Quebec and British Columbia, Canada through the installation of its software via
direct sales to customers. While sales to date of the software have
occurred via a direct sales channel, the Company will look to add further
distribution channels to other sectors in the United States and Canada in the
coming year.
Going
Concern
As shown
in the accompanying financial statements the Company has incurred a net loss of
$63,276 and $233,314 for the years ended December 31, 2008
and 2007, respectively, and has, an accumulated deficit of $454,865 and a
working capital deficiency of $24,912 as of December 31, 2008. This
financial performance, along with the Company’s limited customer base exposes
them to significant risk of future revenues. The Company has been
searching for new distribution channels to sell their software and services to
provide additional revenues to support their operations. There is no
guarantee that the Company will be able to raise additional capital or generate
the increase in revenues sought; however the Company has recently begun a
reincorporation process and has gone effective with a registration statement of
Form S-1 to raise additional capital under GMS Capital Corp.
Management
believes that the Company’s capital requirements will depend on many factors.
These factors include the increase in sales through its existing channel as well
as the Company’s ability to continue to expand its distribution
channels.
In the
near term, the Company will look to sell part or all of its complete offering as
outlined it its Prospectus. There can be no assurance that management will be
able to raise sufficient capital, under terms satisfactory to the Company, if at
all.
F-6
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS INC.)
FINANCIAL
STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
1-
|
ORGANIZATION AND BASIS
OF PRESENTATION (CONTINUED)
|
Going Concern
(Continued)
The
financial statements do not include any adjustments relating to the carrying
amounts of recorded assets or the carrying amounts and classification of
recorded liabilities that may be required should the Company be unable to
continue as a going concern.
NOTE
2-
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
|
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 date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. On an on-going basis, the Company
evaluates its estimates, including, but not limited to, those related to
investment tax credits, bad debts, income taxes and contingencies. The Company
bases its estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results
could differ from those estimates.
Cash and Cash
Equivalents
The
Company considers all highly liquid debt instruments and other short-term
investments with an initial maturity of three months or less to be cash
equivalents.
Comprehensive
Income
The
Company adopted Statement of Financial Accounting Standards No, 130, “Reporting
Comprehensive Income,” (SFAS No. 130). SFAS No. 130 requires the reporting of
comprehensive income in addition to net income from operations.
Comprehensive
income is a more inclusive financial reporting methodology that includes
disclosure of information that historically has not been recognized in the
calculation of net income.
F-7
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS INC.)
FINANCIAL
STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
2-
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
|
Fair Value of Financial
Instruments (other than Derivative Financial Instruments)
The
carrying amounts reported in the balance sheets for cash and cash equivalents,
accounts receivable and accounts payable approximate fair value because of the
immediate or short-term maturity of these financial instruments. For
the notes payable, the carrying amount reported is based upon the incremental
borrowing rates otherwise available to the Company for similar borrowings. For
the convertible debentures, fair values were calculated at net present value
using the Company’s weighted average borrowing rate for debt instruments without
conversion features applied to total future cash flows of the
instruments.
Currency
Translation
The
Company’s functional currency is the Canadian dollar, while the Company reports
its currency in the US dollar. The Company records these translation adjustments
as accumulated other comprehensive income (loss). For the years ended December
31, 2008 and 2007, the Company had translations gains of $6,082 and $8,040,
respectively.
Research and
Development
The
Company occasionally incurs costs on activities that relate to research and
development of new products. Research and development costs are expensed as
incurred. Certain of these costs are reduced by government grants and investment
tax credits where applicable. The Company did not incur Research and
Development expenses during 2007 and 2008.
F-8
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS INC.)
FINANCIAL
STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
2-
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
|
Revenue
Recognition
The
Company generates revenue from the following primary sources: (1) licensing
software products; (2) providing customer technical support (referred to as
maintenance); and (3) providing professional services, such as consulting
and education.
The
Company recognizes revenue pursuant to the requirements of Statement of Position
(SOP) 97-2, “Software Revenue Recognition,” issued by the American
Institute of Certified Public Accountants, as amended by SOP 98-9 “Modification
of SOP 97-2, Software Revenue Recognition, With Respect to Certain
Transactions.” In accordance with SOP 97-2, the Company begins to recognize
revenue from licensing and supporting its software products when all of the
following criteria are met: (1) the Company has evidence of an arrangement
with a customer; (2) the Company delivers the products; (3) license
agreement terms are deemed fixed or determinable and free of contingencies or
uncertainties that may alter the agreement such that it may not be complete and
final; and (4) collection is probable.
The
Company’s software licenses generally do not include acceptance provisions. An
acceptance provision allows a customer to test the software for a defined period
of time before committing to license the software. If a license agreement were
to include an acceptance provision, the Company would not record deferred
subscription value or recognize revenue until the earlier of the receipt of a
written customer acceptance or, if not notified by the customer to cancel the
license agreement, the expiration of the acceptance period.
Under the
Company’s business model, software license agreements frequently include
flexible contractual provisions that, among other things, allow customers to
receive unspecified future software products for no additional fee. These
agreements combine the right to use the software products with maintenance for
the term of the agreement. Under these agreements, once all four of the above
noted revenue recognition criteria are met, the Company is required to recognize
revenue ratably over the term of the license agreement.
F-9
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS INC.)
FINANCIAL
STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
2-
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
|
Revenue Recognition
(Continued)
Under the
Company’s business model, a relatively small percentage of the Company’s revenue
related to certain products is recognized on an up-front or perpetual basis once
all revenue recognition criteria are met in accordance with SOP 97-2 as
described above, and is reported in the “Software fees and other” line of the
Statements of Operations. License agreements pertaining to such products do not
include the right to receive unspecified future software products, and
maintenance is deferred and subsequently recognized over the term of the
maintenance period. In the event such license agreements are executed within
close proximity or in contemplation of other license agreements with the same
customer which are recognized on a subscription basis, the contracts may be
considered a single multi-element agreement, and as such all revenue is deferred
and recognized as “Subscription revenue” in the Statements of
Operations.
Maintenance
revenue is derived from two primary sources: (1) combined license and
maintenance agreements recorded under the prior business model; and (2)
stand-alone maintenance agreements.
Under the
prior business model, maintenance and license fees were generally combined into
a single license agreement. The maintenance portion was deferred and amortized
into revenue over the initial license agreement term. Certain of these license
agreements have not reached the end of their initial terms and, therefore,
continue to amortize. This amortization is recorded to the “Maintenance” line
item in the Statements of Operations. The deferred maintenance portion, which
was optional to the customer, was determined using its fair value based on
annual, fixed maintenance renewal rates stated in the agreement. For license
agreements entered into under the Company’s current business model, maintenance
and license fees continue to be combined; however, the maintenance is inclusive
for the entire term of the arrangement. The Company reports such combined fees
on the “Subscription revenue” line item in the Statements of
Operations.
The
Company also records stand-alone maintenance revenue earned from customers who
elect optional maintenance. Revenue from such renewals is recognized on the
“Maintenance” line item in the Statements of Operations over the term of the
renewal agreement.
The
“Deferred maintenance revenue” line item on the Company’s Balance Sheets
principally represents payments received in advance of maintenance services to
be rendered.
F-10
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS INC.)
FINANCIAL
STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
2-
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
|
Revenue Recognition
(Continued)
Revenue
from professional service arrangements is generally recognized as the services
are performed. Revenue from committed professional services arrangements that
are sold as part of a software transaction is deferred and recognized on a
ratable basis over the life of the related software transaction. If it is not
probable that a project will be completed or the payment will be received,
revenue is deferred until the uncertainty is removed.
Revenue
from sales to distributors, resellers, and value-added resellers (VARs)
commences when all four of the SOP 97-2 revenue recognition criteria noted above
are met and when these entities sell the software product to their customers.
This is commonly referred to as the sell-through method. Revenue from the sale
of products to distributors, resellers and VARs under licenses that include the
right for the end-users to receive certain unspecified future software products
is recognized on a ratable basis.
Accounts
Receivable
The
Company conducts business and extends credit based on an evaluation of the
customers’ financial condition, generally without requiring
collateral.
Exposure
to losses on receivables is expected to vary by customer due to the financial
condition of each customer. The Company monitors exposure to credit losses and
maintains allowances for anticipated losses considered necessary under the
circumstances. The Company has an allowance for doubtful accounts of $0 at
December 31, 2008 and 2007.
Accounts
receivable are generally due within 30 days and collateral is not required.
Unbilled accounts receivable represents amounts due from customers for which
billing statements have not been generated and sent to the
customers.
Income
Taxes
The
Company accounts for income taxes utilizing the liability method of
accounting. Under the liability method, deferred taxes are determined
based on differences between financial statement and tax bases of assets and
liabilities at enacted tax rates in effect in years in which differences are
expected to reverse. Valuation allowances are established, when
necessary, to reduce deferred tax assets to amounts that are expected to be
realized.
F-11
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS INC.)
FINANCIAL
STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
2-
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
|
Advertising
Costs
The
Company expenses the costs associated with advertising as
incurred. Advertising expenses for the years ended December 31, 2008
and 2007 are included in general and administrative expenses in the statements
of operations.
Fixed
Assets
Fixed
assets are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets; automobiles
– 3 years, computer equipment – 3 years, furniture and fixtures – 5 years and
leasehold improvements- 5 years.
When
assets are retired or otherwise disposed of, the costs and related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
recognized in income for the period. The cost of maintenance and
repairs is charged to income as incurred; significant renewals and betterments
are capitalized. Deduction is made for retirements resulting from
renewals or betterments.
Impairment of Long-Lived
Assets
Long-lived
assets, primarily fixed assets, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets might
not be recoverable. The Company does perform a periodic assessment of assets for
impairment in the absence of such information or indicators. Conditions that
would necessitate an impairment assessment include a significant decline in the
observable market value of an asset, a significant change in the extent or
manner in which an asset is used, or a significant adverse change that would
indicate that the carrying amount of an asset or group of assets is not
recoverable. For long-lived assets to be held and used, the Company recognizes
an impairment loss only if its carrying amount is not recoverable through its
undiscounted cash flows and measures the impairment loss based on the difference
between the carrying amount and estimated fair value.
Loss Per Share of Common
Stock
Basic net
loss per common share is computed using the weighted average number of common
shares outstanding. Diluted earnings per share (EPS) includes
additional dilution from common stock equivalents, such as stock issuable
pursuant to the exercise of stock options and warrants. Common stock
equivalents were not included in the computation of diluted earnings per share
when the Company reported a loss because to do so would be antidilutive for
periods presented.
F-12
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS INC.)
FINANCIAL
STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
2-
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
|
Loss Per Share of Common
Stock (Continued)
The
following is a reconciliation of the computation for basic and diluted
EPS:
December
31,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
Net
Loss
|
$ | (63,276 | ) | $ | (233,314 | ) | ||
Weighted-average
common shares
|
||||||||
Outstanding
(Basic)
|
5,115,400 | 3,212,350 | ||||||
Weighted-average
common stock
|
||||||||
Equivalents
|
||||||||
Stock
options
|
- | - | ||||||
Warrants
|
- | - | ||||||
Weighted-average
common shares
|
||||||||
Outstanding
(Diluted)
|
5,115,400 | 3,212,350 |
The
Company has not issued options or warrants to purchase stock in these periods.
If there were options or warrants outstanding they would not be included in the
computation of diluted EPS because inclusion would have been
antidilutive.
Stock-Based
Compensation
On
December 16, 2004, the Financial Accounting Standards Board (“FASB”) published
Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment” (“SFAS
123R”). SFAS 123R requires that compensation cost related to
share-based payment transactions be recognized in the financial statements.
Share-based payment transactions within the scope of SFAS 123R include stock
options, restricted stock plans, performance-based awards, stock appreciation
rights, and employee share purchase plans. The provisions of SFAS
123R, as amended, are effective for small business issuers beginning as of the
next fiscal year after December 15, 2005. The Company has adopted the
provisions of SFAS 123R for its year ended December 31, 2006. The adoption of
this principle had no effect on the Company’s operations.
F-13
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS INC.)
FINANCIAL
STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
2-
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
|
Stock-Based
Compensation (Continued)
On
January 1, 2006, the Company adopted the provisions of FAS No. 123R “Share-Based
Payment” (“FAS 123R”) which requires recognition of stock-based compensation
expense for all share-based payments based on fair value. Prior to January 1,
2006, the Company measured compensation expense for all of its share-based
compensation using the intrinsic value method prescribed by Accounting
Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to
Employees” (“APB 25”) and related interpretations. The Company has provided pro
forma disclosure amounts in accordance with FAS No. 148, “Accounting for
Stock-Based Compensation – Transition and Disclosure – an amendment of FASB
Statement No. 123” (“FAS 148”), as if the fair value method defined by FAS No.
123, “Accounting for Stock Based Compensation” (“FAS 123”) had been applied to
its stock-based compensation.
The
Company has elected to use the modified–prospective approach method. Under that
transition method, the calculated expense in 2006 is equivalent to compensation
expense for all awards granted prior to, but not yet vested as of January 1,
2006, based on the grant-date fair values estimated in accordance with the
original provisions of FAS 123. Stock-based compensation expense for all awards
granted after January 1, 2006 is based on the grant-date fair values estimated
in accordance with the provisions of FAS 123R. The Company recognizes these
compensation costs, net of an estimated forfeiture rate, on a pro rata basis
over the requisite service period of each vesting tranche of each award. The
Company considers voluntary termination behavior as well as trends of actual
option forfeitures when estimating the forfeiture rate.
The
Company measures compensation expense for its non-employee stock-based
compensation under the Financial Accounting Standards Board (FASB) Emerging
Issues Task Force (EITF) Issue No. 96-18, “Accounting for Equity Instruments
that are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services”. The fair value of the option
issued is used to measure the transaction, as this is more reliable than the
fair value of the services received. The fair value is measured at
the value of the Company’s common stock on the date that the commitment for
performance by the counterparty has been reached or the counterparty’s
performance is complete. The fair value of the equity instrument is charged
directly to compensation expense and additional paid-in capital.
Segment
Information
The
Company follows the provisions of SFAS No. 131, “Disclosures about Segments of an
Enterprise and Related Information”. This standard requires that
companies disclose operating segments based on the manner in which management
disaggregates the Company in making internal operating decisions.
F-14
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS INC.)
FINANCIAL
STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
2-
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
|
Recent Accounting
Pronouncements
In
September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” This
standard defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosure about fair
value measurements. This statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007. Early adoption is
encouraged. The adoption of SFAS 157 is not expected to have a material impact
on the financial statements.
In
February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities – Including an Amendment of FASB Statement No.
115”, (“FAS 159”) which permits entities to choose to measure many financial
instruments and certain other items at fair value at specified election dates. A
business entity is required to report unrealized gains and losses on items for
which the fair value option has been elected in earnings at each subsequent
reporting date. This statement is expected to expand the use of fair value
measurement. FAS 159 is effective for financial statements issued for fiscal
years beginning after November 15, 2007, and interim periods within those fiscal
years.
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, an amendment of Accounting Research Bulletin
No 51” (SFAS 160). SFAS 160 establishes accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent,
changes in a parent’s ownership of a noncontrolling interest, calculation and
disclosure of the consolidated net income attributable to the parent and the
noncontrolling interest, changes in a parent’s ownership interest while the
parent retains its controlling financial interest and fair value measurement of
any retained noncontrolling equity investment. SFAS 160 is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. Early adoption is prohibited.
Management is determining the impact that the adoption of SFAS No. 160 will have
on the Company’s financial position, results of operations or cash
flows.
F-15
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS INC.)
FINANCIAL
STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
2-
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
|
Recent Accounting
Pronouncements (Continued)
In
December 2007, the FASB issued SFAS 141R, Business Combinations (“SFAS
141R”), which replaces FASB SFAS 141, Business
Combinations. This Statement retains the fundamental
requirements in SFAS 141 that the acquisition method of accounting be used for
all business combinations and for an acquirer to be identified for each business
combination. SFAS 141R defines the acquirer as the entity that obtains control
of one or more businesses in the business combination and establishes the
acquisition date as the date that the acquirer achieves control. SFAS 141R will
require an entity to record separately from the business combination the direct
costs, where previously these costs were included in the total allocated cost of
the acquisition. SFAS 141R will require an entity to recognize the assets
acquired, liabilities assumed, and any non-controlling interest in the acquired
at the acquisition date, at their fair values as of that date. This compares to
the cost allocation method previously required by SFAS No. 141.
SFAS 141R
will require an entity to recognize as an asset or liability at fair value for
certain contingencies, either contractual or non-contractual, if certain
criteria are met. Finally, SFAS 141R will require an entity to
recognize contingent consideration at the date of acquisition, based on the fair
value at that date. This Statement will be effective for business combinations
completed on or after the first annual reporting period beginning on or after
December 15, 2008. Early adoption of this standard is not permitted and the
standards are to be applied prospectively only. Upon adoption of this standard,
there would be no impact to the Company’s results of operations and financial
condition for acquisitions previously completed. The adoption of SFAS
No. 141R is not expected to have a material effect on the Company’s financial
position, results of operations or cash flows.
In
December 2007, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 110, “Use of a
Simplified Method in Developing Expected Term of Share Options” (“SAB
110”). SAB 110 expenses the current view of the staff that it will accept a
company’s election to use the simplified method discussed in Staff Accounting
Bulletin No. 107, “Share Based
Payment”, (“SAB 107”), for estimating the expected term of “plain
vanilla” share options regardless of whether the company has sufficient
information to make more refined estimates. SAB 110 became effective for the
Company on January 1, 2008. The adoption of SAB 110 is not expected to have a
material impact on the Company’s financial position.
F-16
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS INC.)
FINANCIAL
STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
2-
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
|
Recent Accounting
Pronouncements (Continued)
In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities, an amendment of FASB Statement No. 133 (“SFAS 161”).
SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging
activities. These enhanced disclosures will discuss: how and why an entity uses
derivative instruments; how derivative instruments and related hedged items are
accounted for under SFAS 133 and its related interpretations; and how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008. The Company does not believe that SFAS 161 will have an impact on
their results of operations or financial position.
In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (SFAS 162). SFAS 162 makes the hierarchy of generally
accepted accounting principles explicitly and directly applicable to preparers
of financial statements, a step that recognizes preparers’ responsibilities for
selecting the accounting principles for their financial statements. The
effective date for SFAS 162 is 60 days following the U.S. Securities and
Exchange Commission’s approval of the Public Company Accounting Oversight
Board’s related amendments to remove the GAAP hierarchy from auditing standards,
where it has resided for some time. The adoption of SFAS 162 will not have an
impact on the Company’s results of operations or financial
position.
In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts – an interpretation of SFAS No. 60” (SFAS 163). SFAS 163
prescribes accounting for insures of financial obligations, bringing consistency
to recognizing and recording premiums and to loss recognition. SFAS 163 also
requires expanded disclosures about financial guarantee insurance contracts.
Except for some disclosures, SFAS 163 is effective for financial statements
issued for fiscal years beginning after December 15, 2008. The adoption of SFAS
163 will not have an impact on the Company’s results of operations or financial
position.
Other
accounting standards that have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date and
are not expected to have a material impact on the financial statements upon
adoption.
F-17
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS INC.)
FINANCIAL
STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
3-
|
FIXED
ASSETS
|
Fixed
assets as of December 31, 2008 and 2007 were as follows:
Estimated
Useful
|
December 31,
|
December
31,
|
||||||||||
Lives
(Years)
|
2008
|
2007
|
||||||||||
Equipment
|
5
|
$ | 1,624 | $ | 5,468 | |||||||
Vehicles
|
5
|
0 | 29,422 | |||||||||
Leasehold
improvements
|
5 | 13,994 | 28,638 | |||||||||
TOTAL:
|
15,618 | 63,528 | ||||||||||
Less:
accumulated depreciation
|
5,247 | 38,426 | ||||||||||
Property
and equipment, net
|
$ | 10,371 | $ | 25,102 |
There was
$10,757 and $12,656 charged to operations for depreciation expense for the years
ended December 31, 2008 and 2007, respectively.
The
Company disposed of its vehicle asset on June 10, 2008. The net book
value of the asset at that time, including depreciation to June 10, 2008 was
$3,543. The vehicle was sold for $11,412. As a result, he
Company realized a gain on disposition of assets of $7,809.
NOTE
4-
|
OPERATING LINE OF
CREDIT
|
On June
13, 2008, the Company established an operating line of credit of CDN$15,000 with
a bank through a credit card, with the full outstanding amount guaranteed by a
Director. The interest rate charged is a floating rate, bank prime
rate + 2%. As of December 31, 2008, the interest rate was 8.75% with
an outstanding balance of $1,862. The Company recorded interest expense of
$2,367 and $3,265 for the year ended December 31, 2008 and 2007,
respectively.
F-18
.
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS INC.)
FINANCIAL
STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
5-
|
LONG-TERM
LOAN
|
The
Company signed a five year loan agreement with BMW Financial Services in
November, 2004 for a total of $25,949 at an interest rate at the time of 6.97%
in order to purchase a vehicle. The Company was making 60 equal
payments from December, 2004 until December 2009. The Company paid the entire
balance due of this loan on June 10, 2008 with the proceeds of the sale of its
vehicle. As of December 31, 2008 and 2007, the outstanding balance
was $0 and $12,426, respectively. The Company recorded interest expense of $616
and $1,251 for the years ended December 31, 2008 and 2007,
respectively.
NOTE
6-
|
RELATED PARTY
LOANS
|
The
Company has entered into related party loans with an officer of the
Company. This loan is non-interest bearing and payable on
demand. The amounts owed as of December 31, 2008 is
$18,388.
The
Company has entered into related party loans with a company owned and controlled
by an officer of the Company. This loan is non-interest bearing and
payable on demand. The amounts owed as of December 31, 2008 is
$3,140. In addition, the Company is owed $1,900 from a company that an officer
is also an officer of the related company.
The
Company has entered into related party loans with a shareholder of the
Company. This loan is non-interest bearing and payable on
demand. The amounts owed as of December 31, 2008 is
$8,582.
NOTE
7-
|
STOCKHOLDERS’
DEFICIT
|
Common
Stock
As of
December 31, 2008, the Company has 100,000,000 shares of common stock authorized
with a par value of $0.01
As of
December 31, 2008, the Company has 5,115,400 shares of common stock issued and
outstanding.
The
Company did not issue any stock in 2008.
The
Company issued 2,537,400 shares for services during 2007 valued at
$253,740.
The
Company issued 2,578,000 shares in 2007 as replacement shares for the original
shares issued in Metratech Retail Systems, Inc. These shares were valued at
$212,800.
F-19
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS INC.)
FINANCIAL
STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
9-
|
PROVISION FOR INCOME
TAXES
|
Deferred
income taxes are determined using the liability method for the temporary
differences between the financial reporting basis and income tax basis of the
Company’s assets and liabilities. Deferred income taxes are measured
based on the tax rates expected to be in effect when the temporary differences
are included in the Company’s tax return. Deferred tax assets and
liabilities are recognized based on anticipated future tax consequences
attributable to differences between financial statement carrying amounts of
assets and liabilities and their respective tax bases.
At
December 31, 2008, deferred tax assets consist of the following:
Net
operating losses
|
$ | 154,654 | ||
Valuation
allowance
|
(154,654 | ) | ||
$ | - |
At
December 31, 2008, the Company had a net operating loss carryforward in the
amount of $454,865, available to offset future taxable income through
2028. The Company established valuation allowances equal to the full
amount of the deferred tax assets due to the uncertainty of the utilization of
the operating losses in future periods.
A
reconciliation of the Company’s effective tax rate as a percentage of income
before taxes and federal statutory rate for the years ended December 31, 2008
and 2007 is summarized as follows:
2008
|
2007
|
|||||||
Federal
statutory rate
|
(34.0 | )% | (34.0 | )% | ||||
State
income taxes, net of federal benefits
|
3.3 | 3.3 | ||||||
Valuation
allowance
|
30.7 | 30.7 | ||||||
0 | % | 0 | % |
F-20
GMS
CAPITAL CORP.
(FORMERLY
DOING BUSINESS AS METRATECH RETAIL SYSTEMS INC.)
FINANCIAL
STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
10-
|
FAIR
VALUE MEASUREMENTS
|
On
January 1, 2008, the Company adopted SFAS 157. SFAS 157 defines fair value,
provides a consistent framework for measuring fair value under generally
accepted accounting principles and expands fair value financial statement
disclosure requirements. SFAS 157’s valuation techniques are based on observable
and unobservable inputs. Observable inputs reflect readily obtainable data from
independent sources, while unobservable inputs reflect our market assumptions.
SFAS 157 classifies these inputs into the following hierarchy:
Level 1
inputs: Quoted prices for identical instruments in active markets.
Level 2
inputs: Quoted prices for similar instruments in active markets; quoted prices
for identical or similar instruments in markets that are not active; and
model-derived valuations whose inputs are observable or whose significant value
drivers are observable.
Level 3
inputs: Instruments with primarily unobservable value drivers.
The
following table represents the fair value hierarchy for those financial assets
and liabilities measured at fair value on a recurring basis as of December 31,
2008:
Level
1
|
Level
2
|
Level
3
|
Total
|
|
Cash
equivalents
|
1,461
|
-
|
-
|
1,461
|
Total
assets
|
1,461
|
-
|
-
|
1,461
|
Line
of credit
|
1,240
|
-
|
-
|
1,240
|
Total
liabilities
|
1,240
|
-
|
-
|
1,240
|
F-21
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
None.
ITEM
9A.
|
CONTROLS
AND PROCEDURES
|
We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms and that such information
is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow for timely
decisions regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
is required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Our disclosure controls and procedures were
designed to provide reasonable assurance that the controls and procedures would
meet their objectives. As required by SEC Rule 13a-15(b), our management carried
out an evaluation, with the participation of our Chief Executive and Chief
Financial Officers, of the effectiveness of the design and operation of our
disclosure controls and procedures as of the end of the period covered by this
report. Based on the foregoing, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures were effective at
the reasonable assurance level.
Management’s
Annual Report on Internal Control over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control over
our financial reporting. In order to evaluate the effectiveness of internal
control over financial reporting, as required by Section 404 of the
Sarbanes-Oxley Act, management has conducted an assessment, including testing,
using the criteria in Internal Control — Integrated Framework, issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our
system of internal control over financial reporting 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. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Management has used the framework set forth in the report
entitled Internal Control-Integrated Framework published by the Committee of
Sponsoring Organizations of the Treadway Commission, known as COSO, to evaluate
the effectiveness of our internal control over financial reporting. Based on
this assessment, management has concluded that our internal control over
financial reporting was effective as of December 31, 2008.This Annual Report
does not include an attestation report of our independent registered public
accounting firm regarding internal control over financial reporting. Our
internal control over financial reporting was not subject to attestation by our
independent registered public accounting firm pursuant to temporary rules of the
SEC that permit us to provide only management’s report in this Annual
Report.
There has
been no change in our internal controls over financial reporting during our most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal controls over financial
reporting.
Changes
in Internal Controls
There
have been no changes in our internal controls over financial reporting or in
other factors that could materially affect, or are reasonably likely to affect,
our internal controls over financial reporting during the year ended December
31, 2008. There have not been any significant changes in the Company's critical
accounting policies identified since the Company filed its Form 10-K as of
December 31, 2008.
ITEM
9B.
|
OTHER
INFORMATION
|
None.
PART III
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS, AND CORPORATE
GOVERNANCE
|
The
following table sets forth as of February 8, 2010 the names, positions and
ages of our current executive officers and directors. Our directors
serve until the next annual meeting of shareholders or until their successors
are elected and qualify. Our officers are elected by the board of
directors and their terms of office are, except to the extent governed by an
employment contract, at the discretion of the board of
directors.
NAME
|
AGE
|
SERVED
SINCE
|
POSITIONS WITH
COMPANY
|
George
Metrakos
|
38
|
March,
2000
|
Chairman,
President, CEO, CFO
|
All of our directors serve until their
successors are elected and qualified by our shareholders, or until their earlier
death, retirement, resignation or removal. The following is a brief description
of the business experience of our executive officers, director and significant
employees:
25
Business
Experience of Officers and the Director and Significant Employees
GEORGE
METRAKOS, Chairman of the Board, CEO, CFO and President
Mr.
Metrakos holds a Bachelor's of Engineering from Concordia University (Montreal,
Canada) and a Master's of Business Administration (MBA) from the John Molson
School of Business at Concordia University. Mr. Metrakos has specialized in
numerous successful launches of new technologies for emerging marketplaces. He
has worked with such organizations as Philips B.V. (The Netherlands), Dow
Chemical company (USA), Hydro Quebec (Provincial Utility) and other
entrepreneurial high-tech companies. During his founding role in GMS Capital
Corp., Mr. Metrakos was recognized as entrepreneur of the year in an angel
financing competition within the Montreal business community awarded by the
Montreal Chamber of Commerce youth wing. He also currently holds the position of
President, CEO, CFO and Chairman of a public telecommunications
company.
Employer's
Name
|
Beginning
and Ending
Dates
of Employment
|
Positions
Held
|
Brief
Description of
Employer's
Business
|
|||||
George
Metrakos
|
GMS
Capital Corp.
|
March
2000 to present
|
President,
CEO, CFO and Director
|
Inventory
Management Software
|
||||
Teliphone
Corp.
|
Sep
1, 2004 to present
|
President,
CEO, CFO and Director
|
Telecommunications
Company (Public)
|
|||||
United
American Corp.
|
Nov
8, 2005 to Feb 22, 2008
|
President,
CEO, CFO and Director
|
Holding
Company (Public)
|
Mr.
Metrakos’ full-time employment is with Teliphone Corp., where he spends an
estimated 40-50 hours weekly operating. Mr. Metrakos is part-time
with GMS and oversees the activities of two part-time employees during the
process of delivery of services to customers, as well as overseeing and working
on the process of SEC-required public filings and financial statement
production. Mr. Metrakos also acts as President of Metratech Business
Solutions Inc., a holding company that he owns. There are no daily
activities in this company other than quarterly and yearly review of its
financial statements for taxation purposes.
Mr.
Metrakos, Chairman of the Board and sole Director, is also the Company’s
President, CEO and CFO. Mr. Metrakos does not receive compensation as
a Director. Mr. Metrakos does receive compensation as on officer as
disclosed in the “Executive Compensation” section.
Compliance
with Section 16(a) of the Exchange Act.
Section
16(a) of the Exchange Act requires our directors, executive officers and persons
who own more than 10% of a required class of our equity securities, to file with
the SEC initial reports of ownership and reports of changes in ownership of
common stock and other equity securities of our company. Officers, directors and
greater than 10% shareholders are required by SEC regulation to furnish us with
copies of all Section 16(a) forms they file.
As
of February 8, 2010 , the Company's
sole officer and director, George Metrakos (and Metratech Business Solutions
Inc. of which he is the beneficial owner) has filed reports required under
section 16(a).
Family
Relationships
There are
no family relationships between any two or more of our directors or executive
officers. There is no arrangement or understanding between any of our directors
or executive officers and any other person pursuant to which any director or
officer was or is to be selected as a director or officer, and there is no
arrangement, plan or understanding as to whether non-management shareholders
will exercise their voting rights to continue to elect the current board of
directors. There are also no arrangements, agreements or understandings to our
knowledge between non-management shareholders that may directly or indirectly
participate in or influence the management of our affairs.
26
Our Board
of Directors has no committees.
Because our Board of Directors consists
of only one member, we do not have a standing nominating, compensation or audit
committee. Rather, our full Board of Directors performs the functions
of these committees. Also, we do not have an audit committee
financial expert on our board of directors as that term is defined by Item
407(d)(5) of Regulation S-K promulgated by the SEC. George
Metrakos, our current director, is also an executive officer of the Company and
is therefore not independent.
EXECUTIVE
COMPENSATION
|
The
following table sets forth the information, on an accrual basis, with respect to
the compensation of our executive officers for the three years ended December
31, 2008, 2007 and 2006:
SUMMARY
COMPENSATION TABLE
Name and principal position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
awards
($)
|
Option
awards
($)
|
Nonequity
incentive
plan compensation
($)
|
Nonqualified
deferred
compensation earnings
($)
|
All
other compensation
($)
|
Total
($)
|
|||||||||
George
Metrakos
|
2008
|
$13,575
|
-
|
-
|
-
|
-
|
-
|
$4,375
|
$17,950
|
|||||||||
CEO,
CFO, President &
|
2007
|
$17,140
|
-
|
156,244
|
-
|
-
|
-
|
$8,750
|
$182,134
|
|||||||||
Chairman
|
2006
|
$3,000
|
-
|
-
|
-
|
-
|
-
|
$7,250
|
$10,250
|
Options
and Stock Appreciation Rights Grant Table
There
were no grants of stock options to the Named Executive Officers during the
fiscal year ended December 31, 2008.
Aggregated
Option Exercises and Fiscal Year-End Option Value Table
We did
not have any outstanding stock options or stock appreciation rights at end the
fiscal year ended December 31, 2008.
Long-Term
Incentive Plan Awards Table
We do not
have any Long-Term Incentive Plans.
Compensation
of Directors
During
2008, we did not compensate any of our directors for their services as board
members.
Employment
Agreements
George Metrakos, Chairman, CEO, CFO,
Principal Accounting Officer and President: George
Metrakos is currently compensated $20,000 annually. The actual amount
paid is dependent on the available cash resources in the company, and hence the
full salary is not paid unless the cash exists to pay it. The Company
does not have an employment agreement with Mr. Metrakos.
27
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
|
The
following table sets forth certain information regarding beneficial ownership of
the common stock as February 8, 2010 by (i) each person, entity or
group that is known by the Company to own beneficially more than 5% of the any
classes of outstanding Stock, (ii) each director of the Company, (iii) each of
our named Executive Officers as defined in Item 402(a)(2) of Regulation S-B; and
(iv) most highly compensated executive officers who earned in excess of $100,000
for all services in all capacities (collectively, the "Named Executive
Officers") and (iv) all directors and executive officers of the Company as a
group.
The
number and percentage of shares beneficially owned is determined in accordance
with Rule 13d-3 and 13d-5 of the Exchange Act, and the information is not
necessarily indicative of beneficial ownership for any other purpose. We believe
that each individual or entity named has sole investment and voting power with
respect to the securities indicated as beneficially owned by them, subject to
community property laws, where applicable, except where otherwise noted. Unless
otherwise stated, the address of each person is 1224 Washington Ave., Miami
Beach, Florida, 33139.
Name
|
Title
of
Class
|
Shares
Beneficially
Owned
(1)
|
Percent
Class
(1)
|
||||||
George
Metrakos (2)
|
Common
|
2,562,440 | 50.1 | % | |||||
Officers
and Directors
|
|||||||||
As
a Group (1 Person)
|
Common
|
2,562,440 | 50.1 | % | |||||
Marcel
Côté
|
Common
|
1,012,480 | 19.8 | % | |||||
Spiro
Krallis
|
Common
|
994,980 | 19.5 | % | |||||
Officers,
Directors and
|
|||||||||
Certain
Beneficial Owners
|
|||||||||
As
a group (3 persons)
|
Common
|
4,569,900 | 89.4 | % |
(1) Applicable
percentage of ownership is based on 5,115,400 shares of fully diluted common
stock effective February 8, 2010 . Beneficial
ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options that are currently
exercisable or exercisable within sixty days of February 8,
2010 are deemed to be beneficially owned by the person holding such
options for the purpose of computing the
percentage of ownership of such person, but are not treated as outstanding for
the purpose of computing the percentage ownership of any other person.
(2)
George Metrakos controls 2,562,440 shares of his stock through Metratech
Business Solutions Inc of which he is the beneficial owner.
Changes
in Control
We are
not aware of any arrangements, which may result in a change in control of the
Company.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
|
We
believe that all prior related party transactions have been entered into upon
terms no less favorable to us than those that could be obtained from
unaffiliated third parties. Our reasonable belief of fair value is based upon
proximate similar transactions with third parties or attempts to obtain the
consideration from third parties.
28
Director
Independence
The
Company is in the process of requesting to be listed on the OTCBB
(Over-the-Counter-Bulletin-Board) exchange. Since the OTCBB does not
have its own rules for director independence, the Company has adopted the
director independence definitions as proposed by the NASDAQ stock
market.
Mr.
Metrakos is not an independent director of the Company since he is also an
acting officer of the Company.
ITEM
14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
Year
ended 2008:
Audit
Fees: The aggregate fees, including expenses, billed by the Company's principal
accountant in connection with the audit of our consolidated financial statements
for the most recent fiscal year and for the review of our financial information
included in our Annual Report on Form 10-K; and our quarterly reports on Form
10-Q during the fiscal year ending December 31, 2008 was $18,000.
Audit
Related Fees: The aggregate fees, including expenses, billed by the Company's
principal accountant for services reasonably related to the audit for the year
ended December 31, 2008 were $0.00.
All Other
Fees: The aggregate fees, including expenses, billed for all other services
rendered to the Company by its principal accountant during year ended December
31, 2008 was $0.00.
Year
ended 2007:
Audit
Fees: The aggregate fees, including expenses, billed by the Company's principal
accountant in connection with the audit of our consolidated financial statements
for the most recent fiscal year and for the review of our financial information
included in our Annual Report on Form 10-KSB; and our quarterly reports on Form
10-QSB during the fiscal year ending Decmeber 31, 2008 was $18,000.
Audit
Related Fees: The aggregate fees, including expenses, billed by the Company's
principal accountant for services reasonably related to the audit for the year
ended December 31, 2007 were $0.00.
All Other
Fees: The aggregate fees, including expenses, billed for all other services
rendered to the Company by its principal accountant during year ended December
31, 2007 was $0.00.
AUDITOR
INDEPENDENCE
Our Board
of Directors considers that the work done for us in the year ended December 31,
2008 and December 31, 2007 by KBL, LL Pis compatible with maintaining his
independence.
AUDITOR'S
TIME ON TASK
All of
the work expended by KBL, LLP on our December 31, 2008 and 2007 respectively
audits were attributed to work performed by their full-time, permanent
employees.
29
PART IV
ITEM
15.
|
EXHIBITS
|
Exhibit
Number
|
Description
|
|
3.1
|
Articles
of Incorporation
|
|
3.2
|
Bylaws
|
|
10.1.
|
Term
Sheet of the Partnership Agreement, Metratech Retail Systems Inc., July
10, 2000
|
|
10.2.
|
Non-Disclosure
Agreement signed with MGA Concept, April 1, 2000
|
|
10.3.
|
Employment
and technology transfer agreement with Junior Active Designs, Inc.,
October 16, 2000
|
|
10.4.
|
Form
of Services Agreement
|
|
10.6. | GMS Capital Corp, Metratech Retail Systems, Inc. Merger Agreement | |
14.1
|
Code
of Ethics
|
|
23.2* | Consent of Independent Registered Public Accounting Firm (KBL, LLP) | |
31.1* | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. (2) | |
31.2* | Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. (2) | |
32.1* | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act. (2) | |
32.2* | Certification of Chief Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act. (2) |
* filed
herein. All other items filed previously on June 16, 2008.
30
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.
GMS
CAPITAL CORP.
|
|||
Date: February
8, 2010
|
By:
|
/s/ George
Metrakos
|
|
George
Metrakos
|
|||
Chief
Executive Officer
|
|||
GMS
CAPITAL CORP.
|
|||
Date: February
8, 2010
|
By:
|
/s/ George
Metrakos
|
|
George
Metrakos
|
|||
Principal
Accounting Officer
|
In
accordance with the Exchange Act, the report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated..
GMS
CAPITAL CORP.
|
|||
Date:
February 8, 2010
|
By:
|
/s/ George
Metrakos
|
|
George
Metrakos
|
|||
Director
|
31