Freedom Environmental Services, Inc. - FORM 10-Q

Attached files

file	filename
EX-32.1 - EXHIBIT 32.1 - Freedom Environmental Services, Inc.	ex321.htm
EX-31.2 - EXHIBIT 31.2 - Freedom Environmental Services, Inc.	ex312.htm
EX-32.2 - EXHIBIT 32.2 - Freedom Environmental Services, Inc.	ex322.htm
EX-31.1 - EXHIBIT 31.1 - Freedom Environmental Services, Inc.	ex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2010

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT For the transition period from N/A to N/A

Commission File No. 000-53388

FREEDOM ENVRIONMENTAL SERVICES, INC.

(Name of small business issuer as specified in its charter)

Delaware	27-3218629
( State or other jurisdiction of incorporation or organization)	( IRS Employer Identification No.)

7380 West Sand Lake Road, Suite 543, Orlando, FL 32819

(Address of principal executive offices)

(407) 658-6100

(Issuer’s telephone number)

Indicate by check mark whether the Registrant (1) has filed all reports required 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 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 o No x

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

Large accelerated filer	¨	Accelerated filer	¨
Non–Accelerated filer	¨	Small reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at August 12, 2010
Common stock, $0.001 par value		86,167,861

FREEDOM ENVIRONMENTAL SERVICES, INC.

INDEX TO FORM 10-Q FILING

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009

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		PAGE
PART I - FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements	1
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Income	3
	Condensed Consolidated Statement of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management Discussion & Analysis of Financial Condition and Results of Operations	19
Item 3	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Removed and Reserved	31
Item 5	Other information	31
Item 6.	Exhibits	31


CERTIFICATIONS

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

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PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements

The accompanying reviewed interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2009. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three and six months ended June 30, 2010 are not necessarily indicative of the results that can be expected for the year ending December 31, 2010.

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FREEDOM ENVIRONMENTAL SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	June 30,			December 31,
	2010			2009

ASSETS:

CURRENT ASSETS
Cash	$	65		$	-
Accounts receivables, net		3,589			10,952
Total current assets		3,653			10,952

PROPERTY AND EQUIPMENT, net		-			2,354

TOTAL ASSETS	$	3,653		$	13,306

LIABILITIES AND STOCKHOLDERS' EQUITY:

CURRENT LIABILITIES:
Bank overdraft	$	-		$	5,037
Accounts payable		136,261			160,831
Disputed accounts payables		80,489			-
Accrued expenses and other liabilities		554,046			807,090
Line of credit		13,177			13,177
Note payable - shareholder		-			95,000
Note payable - current		55,076			672,860
Total current liabilities		839,050			1,753,995


TOTAL LIABILITIES		839,050			1,753,995

CONTINGENCIES AND COMMITMENTS		-			-

STOCKHOLDERS' EQUITY:
Preferred stock series A, $.001 par value, 75,000,000 shares
authorized; none issued and outstanding
as of June 30, 2010 and December 31, 2009, respectively		-			-
Common stock, $.001 par value, 100,000,000 shares authorized;
34,601,164 and 16,917,707 issued and outstanding
as of June 30, 2010 and December 31, 2009, respectively		34,602			16,917
Additional paid-in capital		19,992,263			16,181,099
Accumulated deficit		(20,862,261	)		(17,938,705	)
Total stockholders' equity		(835,397	)	$	(1,740,689	)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	3,653		$	13,306

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

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FREEDOM ENVIRONMENTAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)

	Three Months						Six Months
	June 30,						June 30,
	2010			2009			2010			2009

Revenue	$	33,531		$	66,450		$	136,122		$	96,112
Total		33,531			66,450			136,122			96,112

Cost of Goods Sold		10,456			14,371			53,690			22,870
Gross Profits		23,075			52,079			82,432			73,242

OPERATING EXPENSES:
General and administrative		327,583			274,847			1,101,344			466,798
Selling and marketing		1,421			1,090			660,335			7,663
Depreciation and amortization		176			2,178			2,354			4,356
Total operating expenses		329,180			278,115			1,764,033			478,817
OPERATING LOSS		(306,104	)		(226,036	)		(1,681,600	)		(405,575	)

OTHER (INCOME) AND EXPENSES
Interest expense		570,845			54,534			1,241,956			74,191
Total other (income) expense		570,845			54,534			1,241,956			74,191

NET LOSS	$	(876,949	)	$	(280,570	)	$	(2,923,556	)	$	(479,766	)

NET LOSS PER SHARE:
Basic and diluted:	$	(0.03	)	$	(0.01	)	$	(0.11	)	$	(0.01	)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted:		30,937,026			35,158,093			27,512,448			35,158,093

The accompanying notes are an integral part of these condensed consolidated financial statements

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FREEDOM ENVIRONMENTAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Six Months Ended
	June 30,
	2010			2009

Net loss	$	(2,923,556	)	$	(479,766	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization		2,354			4,356
Common stock issued for services		1,443,160			-
Common stock issued for interest expense		1,150,192
Common stock issued for the conversion of debt		401,612			-
Beneficial conversion feature		162,500			-
Changes in operating assets and liabilities:
Accounts receivables		7,366			(14,955	)
Deposits		-			11,738
Accounts payables		55,919			43,027
Accrued liabilities		(344,445	)		263,792
Advances to affiliate		-			(6,488	)
Net cash used in operating activities		(44,898	)		(178,296	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of bank overdraft		(5,037	)		(20,471	)
Proceeds affiliated note payable		50,000			-
Repayment from notes payables		-			(11,682	)
Advances from note payable		-			219,110
Net cash provided by financing activities		44,963			186,957

INCREASE (DECREASE) IN CASH		65			8,661
CASH, BEGINNING OF PERIOD		-			-
CASH, END OF PERIOD	$	65		$	8,661

Supplemental disclosure operating activities

Interest expense	$	1,241,956		$	74,191
Taxes paid	$	-		$	-

Supplemental disclosure for non cash investing and financing activities

Common shares issued for cost of raising capital	$	-		$	17,430

The accompanying notes are an integral part of these condensed consolidated financial statements

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FREEDOM ENVIRONMENTAL SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009

NOTE 1 - DESCRIPTION OF BUSINESS

Freedom Environmental Services, Inc. (the “Company”) was incorporated under the laws of the State of Delaware on October 6, 1978 as United States Aircraft Corp and has undergone numerous name changes, the most recent being on June 11, 2008 when the Company amended its certificate of incorporation in order to change its name from BMXP Holdings, Inc. to Freedom Environmental Services, Inc.

Freedom Environmental Services, Inc., formerly known as BMXP Holdings, Inc. from August 2006 to June 2008, a Delaware corporation, was formerly organized as Neo-vision Corp during the years 2001-2002 and subsequently was Storage Suites America, Inc. from November 2002 to December 2004 and Bio-Matrix Scientific Group, Inc. from December 2004 to August 2006.

On June 24, 2008 the Company acquired 100% of the membership interests in Freedom Environmental Services, LLC (“FELC”), a Florida Limited Liability Company established December 27, 2007, for consideration consisting of 20,704,427 shares of the common stock of the Company. This acquisition was a reverse acquisition by Freedom Environmental Services, LLC. In the share exchange, the former shareholders of Freedom Environmental, LLC received common shares in the Company. As a result of this transaction, the former members of FELC held approximately 59% of the voting capital stock of the Company immediately after the transaction and the composition of the senior management of the Company became the senior management of FELC. For financial accounting purposes, this acquisition was a reverse acquisition of the Company by FELC under the purchase method of accounting, and was treated as a recapitalization with FELC as the acquirer in accordance with ASC Topic 805. Accordingly, the historical financial statements presented are those of FELC. The reasons for the share exchange are as follows:

·	The share exchange allows for the shareholders of Freedom Environmental Services, LLC. to receive shares of common stock with increased liquidity and stronger market value;

·	The ability of the combined companies to utilize publicly-traded securities in capital raising transactions and as consideration in connection with future potential mergers or acquisitions.

On June 24, 2008, the former management and directors of the Company resigned and the former members of FELC were appointed as officers and directors, including Michael S. Borish as Chairman of the Board of Directors and Chief Executive Officer.

The Company, through its wholly owned subsidiary FELC, is in the business of providing Wastewater and Storm-water System Management, Grease and Organics Collection and Disposition and Commercial Plumbing and Water System Management to commercial customers and wastewater management services to residential customers. The Company also intends to develop and produce fuels and natural bio-organic products (such as fertilizer) derived from waste and by-products

The Company’s plans in this area consist of attempting to develop Vertical Organic Collection System platforms within regional and super-regional metropolitan areas by acquiring market leading operators as platforms and utilizing this business model in building regional facilities to produce high grade fuel and bio-organic nutrient products converted from commercial, industrial and residential waste products in the southeast and nationwide. There can be no assurance given that such leading operators will be acquired.

NOTE 2 - GOING CONCERN ISSUES

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern. However, the Company has period end losses from operations in June 30, 2010. The Company has net losses for the six months ended June 30, 2010 and 2009 of $2,923,556 and $479,766 respectively and accumulated net loss of $20,862,261 and $17,938,705, respectively. Further, the Company has inadequate working capital to maintain or develop its operations, and is dependent upon funds from private investors and the support of certain stockholders.

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While the Company is continuing to increase sales, other sources of funds will be necessary for the current year. Management may attempt to raise additional funds by way of a public or private offering. While the Company believes in the viability of its strategy to improve sales volume and in its ability to raise additional funds, there can be no assurances to that effect. The Company shareholders have continued to advance funds to the Company but there can be no assurance that future advances will be made available.

These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company’s existence is dependent upon management’s ability to develop profitable operations and to resolve its liquidity problems. Management anticipates the Company will attain profitable status and improve its liquidity through the continued effort to grow its sales channels.

NOTE 3 - BASIS OF PRESENTATION

Interim Financial Statements

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month periods ended June 30, 2010 and 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. While management of the Company believes that the disclosures presented herein and adequate and not misleading, these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the footnotes thereto for the fiscal year ended December 31, 2009 as filed with the Securities and Exchange Commission as an exhibit to our Form 10-K.

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. Significant accounting policies are as follows:

Use of Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net sales and expenses recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates.

These estimates and assumptions also affect the reported amounts of revenues, costs and expenses during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.

Revenue Recognition

The Company recognizes revenue from service sales in accordance with Topic 605 “Revenue Recognition in Financial Statements” which is at the time customers are invoiced and risk of loss has passed to the customer, evidence of an arrangement exists, fees are contractually fixed or determinable, collection is reasonably assured through historical collection results and regular credit evaluations, and there are no uncertainties regarding customer acceptance of the service.

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Accounts Receivable

Substantially all of the Company’s accounts receivable balance is related to trade receivables. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company will maintain allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments for products. Accounts with known financial issues are first reviewed and specific estimates are recorded. The remaining accounts receivable balances are then grouped in categories by the amount of days the balance is past due, and the estimated loss is calculated as a percentage of the total category based upon past history. Account balances are charged off against the allowance when it is probable the receivable will not be recovered. The Company reserved $2,392 and $25,693 related to bad debt and doubtful accounts, respectively, during the quarter ended June 30, 2010 and year ended December 31, 2009.

Allowance for Doubtful Accounts

The determination of collectibility of the Company’s accounts receivable requires management to make frequent judgments and estimates in order to determine the appropriate amount of allowance needed for doubtful accounts. The Company’s allowance for doubtful accounts is estimated to cover the risk of loss related to accounts receivable. This allowance is maintained at a level we consider appropriate based on historical and other factors that affect collectibility. These factors include historical trends of write-offs, recoveries and credit losses, the careful monitoring of customer credit quality, and projected economic and market conditions. Different assumptions or changes in economic circumstances could result in changes to the allowance.

Advertising Expense

The Company follows the provisions of ASC Topic 408, “Reporting on Advertising Costs,” in accounting for advertising costs. Advertising costs are charged to expense as incurred and are included in sales and marketing expenses in the accompanying financial statements. The Company recognized advertising expenses of $189 and $7,662 for the six months ended June 30, 2010 and 2009, respectively.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At June 30, 2010, cash and cash equivalents include cash on hand and cash in the bank.

Property and Equipment

Property and equipment is recorded at cost and depreciated over the estimated useful lives of the assets using principally the straight-line method. When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and proceeds realized. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized.

The range of estimated useful lives used to calculated depreciation for principal items of property and equipment are as follows:

Asset Category		Depreciation/ Amortization Period
Furniture and Fixture		3 Years
Office equipment		3 Years
Leasehold improvements		5 Years

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Goodwill and Other Intangible Assets

The Company adopted Statement of Financial Accounting Standard (“FASB”) Accounting Standards Codification (“ASC”) Topic 350 Goodwill and Other Intangible Assets, effective July 1, 2002. In accordance with (“ASC Topic 350”) "Goodwill and Other Intangible Assets," goodwill, represents the excess of the purchase price and related costs over the value assigned to net tangible and identifiable intangible assets of businesses acquired and accounted for under the purchase method, acquired in business combinations is assigned to reporting units that are expected to benefit from the synergies of the combination as of the acquisition date. Under this standard, goodwill and intangibles with indefinite useful lives are no longer amortized. The Company assesses goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter, or more frequently if events and circumstances indicate impairment may have occurred in accordance with ASC Topic 350. If the carrying value of a reporting unit's goodwill exceeds its implied fair value, the Company records an impairment loss equal to the difference. ASC Topic 350 also requires that the fair value of indefinite-lived purchased intangible assets be estimated and compared to the carrying value. The Company recognizes an impairment loss when the estimated fair value of the indefinite-lived purchased intangible assets is less than the carrying value.

Impairment of Long-Lived Assets

In accordance with ASC Topic 360, long-lived assets, such as property, plant, and equipment, and purchased intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and other intangible assets are tested for impairment. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. There were no events or changes in circumstances that necessitated an impairment of long lived assets.

Income Taxes

Deferred income taxes are provided based on the provisions of ASC Topic 740, "Accounting for Income Taxes", to reflect the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company adopted the provisions of ASC Topic 740; "Accounting For Uncertainty In Income Taxes-An Interpretation Of ASC Topic 740 ("ASC Topic 740"). ASC Topic 740 contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating the Company's tax positions and tax benefits, which may require periodic adjustments. At June 30, 2010, the Company did not record any liabilities for uncertain tax positions.

Concentration of Credit Risk

The Company maintains its operating cash balances in banks located in Sand Lake, Florida. The Federal Depository Insurance Corporation (FDIC) insures accounts at each institution up to $250,000.

Earnings Per Share

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Basic income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options, warrants, and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company. Diluted loss per share is the same as basic loss per share, because the effects of the additional securities, a result of the net loss would be anti-dilutive.

Fair Value of Financial Instruments

The Company's financial instruments consist primarily of cash, accounts payable and accrued expenses, and debt. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments. The estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from future earnings or cash flows.

The Company adopted ASC Topic 820, Fair Value Measurements (“ASC Topic 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition of fair value which focuses on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.

The three-level hierarchy for fair value measurements is defined as follows:

	Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets;
	Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable or the asset or liability other than quoted prices, either directly or indirectly including inputs in markets that are not considered to be active;
	Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value. measurement

Reclassification

Certain prior period amounts have been reclassified to conform to current year presentations.

Recent Accounting Pronouncements

Recent accounting pronouncements that the Company has adopted or that will be required to adopt in the future are summarized below.

In January 2010, the FASB issued an amendment to ASC 505, Equity, where entities that declare dividends to shareholders that may be paid in cash or shares at the election of the shareholders are considered to be a share issuance that is reflected prospectively in EPS, and is not accounted for as a stock dividend. This standard is effective for interim and annual periods ending on or after December 15, 2009 and is to be applied on a retrospective basis. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.

On February 24, 2010, the FASB issued guidance in the “Subsequent Events” topic of the FASC to provide updates including: (1) requiring the company to evaluate subsequent events through the date in which the financial statements are issued; (2) amending the glossary of the “Subsequent Events” topic to include the definition of “SEC filer” and exclude the definition of “Public entity”; and (3) eliminating the requirement to disclose the date through which subsequent events have been evaluated. This guidance was prospectively effective upon issuance. The adoption of this guidance did not impact the Company’s results of operations of financial condition.

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In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance became effective for us with the reporting period beginning January 1, 2010, except for the disclosure on the roll forward activities for Level 3 fair value measurements, which will become effective for us with the reporting period beginning July 1, 2011. Other than requiring additional disclosures, adoption of this new guidance did not have a material impact on our financial statements.

On July 1, 2009, we adopted guidance issued by the FASB on business combinations. The guidance retains the fundamental requirements that the acquisition method of accounting (previously referred to as the purchase method of accounting) be used for all business combinations, but requires a number of changes, including changes in the way assets and liabilities are recognized and measured as a result of business combinations. It also requires the capitalization of in-process research and development at fair value and requires the expensing of acquisition-related costs as incurred. Adoption of the new guidance did not have a material impact on our financial statements.

On July 1, 2009, guidance issued by the FASB those changes the accounting and reporting for non-controlling interests. Non-controlling interests are to be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control are to be accounted for as equity transactions. In addition, net income attributable to a non-controlling interest is to be included in net income and, upon a loss of control, the interest sold, as well as any interest retained, is to be recorded at fair value with any gain or loss recognized in net income. Adoption of the new guidance did not have a material impact on our financial statements.

On July 1, 2009, we adopted guidance on fair value measurement for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Adoption of the new guidance did not have a material impact on our financial statements.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

NOTE 5 - PROPERTY AND EQUIPMENT

The Company’s fixed assets as of June 30, 2010 and December 31, 2009 are as follows:

	June 30,		December 31,
	2010			2009
Equipment	$	17,131		$	17,131
Accumulated depreciation		(17,131)			(14,777	)
Total	$	-		$	2,354

Depreciation expense for the six months ended June 30, 2010 is $2,354 compared to $4,356 for June 30, 2009.

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NOTE 6 – NOTE PAYABLE


The Company had the following notes payable outstanding as of June 30, 2010 and December 31, 2009:
		2010		2009
The Company entered into a convertible promissory note with a shareholder of the Company and a related party on December 11, 2008 in the amount of $600,000. The promissory note had convertible beneficial feature which allowed the holder on the inception of the convertible promissory note into the company’s common stock equal to 50% of the market price of the corporation’s common stock on the date of conversion. The notes had an annual interest rate of 15% and are delinquent which now has an annual interest rate of 25%.	$	-	$	271,875

The Company entered into a convertible promissory note with a related party company (Resort Marketing) owned by the Company’s chief executive officer on December 22 2008 in the amount of $95,000. The promissory note had convertible beneficial feature which allowed the holder on the inception of the convertible promissory note into the company’s common stock equal to 50% of the market price of the corporation’s common stock on the date of conversion. The notes have an annual interest rate of 15%. As of		-		95,000

The Company receives advances from its officers and related parties during the regular course of business. The advances from its officers have an annual rate of 15%.		-		395,911

The Company has a line of credit with Royal Bank of Canada. The line is for one year and carries an interest rate of LIBOR +3%.		13,177		13,177
The Company has advances from prior officers of the Company. The advance are due upon demand		5,076		5,076

The Company a $50,000 convertible notes with an interest of 8%. The note holder may convert the note at its discretion. The note has not term of expiration. The company recorded a $50,000 interest expense as a beneficial conversion feature at the inception of the agreement. Furthermore the note has specific provisions which should the company be in default off would result in the Company incurring standard liquidated damages. The company was in default of one of the provisions of the note and accrued interest expense in the amount of $5,000 reflecting standard liquidated damages.		50,000		0
Total Notes Payable	$	68,253	$	781,038
less: Current Portion		(63,253)		(781,038)

Long Term Portion	$	-	$	-

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During the six months ended June, 30, 2010, the CEO of the Company forgave $671,384 of debt of the company and the amount was offset to additional paid in capital.

NOTE 7 – COMMITMENT AND CONTINGENCIES

The Company has entered into various consulting agreements with outside consultants. However, certain of these agreements included additional compensation on the basis of performance. The consulting agreements are with key shareholders and advisers that are instrumental to the success of the Company and its development of its products.

NOTE 8– RELATED PARTY TRANSACTIONS

On January 15, 2010, Company issued 3,083,333 shares of common stock to its sole officer. The common shares were issued and accepted by the Company’s officers at the closing trading price of $.2 and the Company recorded $185,000 reduced accrued liabilities and the remaining amount of $431,666 was interest expense.

On February 2, 2010, Company issued 355,000 shares of common stock to a debt holder. The common shares were issued and accepted by the Company’s shareholder at the closing trading price of $.2744 and the Company recorded $28,500 reduced shareholder notes payable of the Company and the remaining amount of $68,912 was interest expense.

On March 12, 2010, Company issued 325,000 shares of common stock to a debt holder. The common shares were issued and accepted by the Company’s shareholder at the closing trading price of $.135 and the Company recorded $22,750 reduced shareholder notes payable of the Company and the remaining amount of $22,750 was interest expense.

On January 1, 2010 the Company agreed to a penalty clause to accelerate the interest rate to a debt holder form 15% to 25%. Further the Company is willing to have the debt holder exercise and convert the debt for an additional 750,000 shares of the Company’s common stock effective January 1, 2010. The strike price of that stock has been calculated at zero and the Company had a beneficial conversion feature of $112,500 and this was expensed to interest expense.

On July 16, 2010, the Company cancelled 1,541,667 shares of common stock to our CEO. The common shares were issued and cancelled by the CEO at the closing trading price of $.025 and the Company recorded $38,542 as an increase in accrued expenses.

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On July 16, 2010, the Company issued 208,364 shares of common stock to our CEO. The common shares were issued and accepted by the CEO at the closing trading price of $.025 and the Company recorded $5,209 as a reduction in accrued expenses.

On April 13, 2010 the Company issued 500,000 shares of common stock to a debt holder. The common shares were issued and accepted by the Company’s shareholder at the closing trading price of $.245 and the Company recorded $70,000 reduced shareholder notes payable of the Company and the remaining amount of $52,500 was interest expense.

On May 3, 2010 the Company issued 444,444 shares of common stock to a debt holder. The common shares were issued and accepted by the Company’s shareholder at the closing trading price of $.19 and the Company recorded $40,000 reduced shareholder notes payable of the Company and the remaining amount of $44,444 was interest expense.

On May 4, 2010 the Company issued 1,600,000 shares of common stock to a debt holder. The common shares were issued and accepted by the Company’s shareholder at the closing trading price of $.22 and the Company recorded $20,800 reduced shareholder notes payable of the Company and the remaining amount of $331,200 was interest expense.

On May 11, 2010 the Company issued 737,180 shares of common stock to a debt holder. The common shares were issued and accepted by the Company’s shareholder at the closing trading price of $.178 and the Company recorded $57,500 reduced shareholder notes payable of the Company and the remaining amount of $73,718 was interest expense.

On May 18, 2010 the Company issued 642,500 shares of common stock to a debt holder. The common shares were issued and accepted by the Company’s shareholder at the closing trading price of $.07 and the Company recorded $44,975 reduced shareholder notes payable of the Company.

On May 27, 2010 the Company cancelled 680,000 shares of common stock to a debt holder. The common shares were issued and accepted by the Company’s shareholder at the closing trading price of $.14 and the Company recorded $51,250 increase shareholder notes payable of the Company and the remaining amount of $91,662 was interest expense. The company initially issued stock for the conversion of debt on February 2, 2010 for $28,000 and March 3, 2010 for $27,500. The conversion was reversed due and returned to its original status as the Shareholder pursued a new opportunity of conversion to an outside third party.

On May 28, 2010 the Company issued 1,000,000 shares of common stock to a debt holder. The common shares were issued and accepted by the Company’s shareholder at the closing trading price of $.08 and the Company recorded $35,000 reduced shareholder notes payable of the Company and the remaining amount of $45,000 was interest expense.

On June 14, 2010 the Company issued 2,000,000 shares of common stock to a debt holder. The common shares were issued and accepted by the Company’s shareholder at the closing trading price of $.06 and the Company recorded $40,000 reduced shareholder notes payable of the Company and the remaining amount of $80,000 was interest expense.

During the six months ended June, 30, 2010, the CEO of the Company forgave $671,384 of debt of the company and the amount was offset to additional paid in capital.

NOTE 9 - NET LOSS PER SHARE

Basic loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share for the six months ended June 30, 2010 and 2009 is the same as basic loss per share. For the six months ended June 30, 2010 and 2009, the following potential shares of common stock that would have been issuable have been excluded from the calculation of diluted loss per share because the effects, as a result of our net loss, would be anti-dilutive.

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The following table represents the computation of basic and diluted losses per share at June 30, 2010 and 2009.

	June 30
	2010			2009
Losses available for common shareholders		(2,923,556)			(479,766)

Basic and diluted weighted average common shares outstanding		27,512,448			35,158,093

Basic and diluted loss per share	$	(0.11)	$		(0.01)

Net loss per share is based upon the weighted average shares of common stock outstanding.

NOTE 10 - EQUITY

As of June 30, 2010 the Company authorized 100,000,000 shares of common stock, at $.001 par value and 34,601,164 are issued and outstanding. The authorized 75,000,000 shares of preferred stock, at $.001 par value and none are issued and outstanding as of June 30, 2010.

COMMON SHARES

On January 25, 2010, the Company issued 550,000 shares of common stock to a consultant. The common shares were issued and accepted by the consultant at the closing trading price of $.2 and recorded $110,000 as consulting expense.

On January 25, 2010, the Company issued 11,000 shares of common stock to a consultant. The common shares were issued and accepted by the landlord at the closing trading price of $.2 and the Company recorded $2,200 as rent expense.

On January 27, 2010, the Company issued 1,490,000 shares of common stock to a consultant. The common shares were issued and accepted by the consultant at the closing trading price of $.2 and the Company recorded $298,000 as a consulting expense.

On February 2, 2010, the Company issued 275,000 shares of common stock to a consultant. The common shares were issued and accepted by the consultant at the closing trading price of $.27 and the Company recorded $75,460 as a consulting expense.

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On March 2, 2010, the Company issued 2,075,000 shares of common stock to a consultant. The common shares were issued and accepted by the consultant at the closing trading price of $.23 and the Company recorded $477,250 as a consulting expense.

On March 15, 2010, the Company issued 60,000 shares of common stock to a consultant. The common shares were issued and accepted by the consultant at the closing trading price of $.135 and the Company recorded $8,100 as a consulting expense.

On March 18, 2010, the Company issued 300,000 shares of common stock to a consultant. The common shares were issued and accepted by the consultant at the closing trading price of $.15 and the Company recorded $45,000 as a consulting expense.

On March 30, 2010, the Company issued 1,080,000 shares of common stock to a consultant. The common shares were issued and accepted by the consultant at the closing trading price of $.27 and the Company recorded $291,600 as a consulting expense.

On May 11, 2010, the Company issued 250,000 shares of common stock to a consultant. The common shares were issued and accepted by the consultant at the closing trading price of $.178 and the Company recorded $44,500 as a consulting expense.

On May 27, 2010 the Company cancelled 680,000 shares of common stock to a debt holder. The common shares were issued and accepted by the Company’s shareholder at the closing trading price of $.14 and the Company recorded $51,250 increase shareholder notes payable of the Company and the remaining amount of $91,662 was interest expense. . The company initially issued stock for the conversion of debt on February 2, 2010 for $28,000 and March 3, 2010 for $27,500. The conversion was reversed due and returned to its original status as the Shareholder pursued a new opportunity of conversion to an outside third party.

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On May 28, 2010, the Company issued 400,000 shares of common stock to a consultant. The common shares were issued and accepted by the consultant at the closing trading price of $.07 and the Company recorded $28,000 as a consulting expense.

On June 7, 2010, the Company issued 750,000 shares of common stock to a consultant. The common shares were issued and accepted by the consultant at the closing trading price of $.051 and the Company recorded $38,500 as a consulting expense.

On June 9, 2010, the Company issued 100,000 shares of common stock to a consultant. The common shares were issued and accepted by the consultant at the closing trading price of $.0455 and the Company recorded $4,550 as a consulting expense.

On June 10, 2010, the Company issued 60,000 shares of common stock to a consultant. The common shares were issued and accepted by the consultant at the closing trading price of $.04 and the Company recorded $2,400 as a consulting expense.

On June 29, 2010, the Company issued 125,000 shares of common stock to a consultant. The common shares were issued and accepted by the consultant at the closing trading price of $.022 and the Company recorded $2,750 as a consulting expense.

On June 29, 2010, the Company issued 50,000 shares of common stock to a consultant. The common shares were issued and accepted by the consultant at the closing trading price of $.022 and the Company recorded $1,100 as a consulting expense.

The Company has no warrants or options outstanding as of June 30, 2010.

NOTE 11 - INCOME TAXES

The Company adopted ASC Topic 740 which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between consolidated financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes are insignificant.

For income tax reporting purposes, the Company’s aggregate unused net operating losses approximate $20,862,261 which expire in various years through 2030, subject to limitations of Section 382 of the Internal Revenue Code, as amended. The Company has provided a valuation reserve against the full amount of the net operating loss benefit, because in the opinion of management based upon the earning history of the Company, it is more likely than not that the benefits will not be realized.

Under the Tax Reform Act of 1986, the benefits from net operating losses carried forward may be impaired or limited on certain circumstances. Events which may cause limitations in the amount of net operating losses that the Company may utilize in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. The impact of any limitations that may be imposed for future issuances of equity securities, including issuances with respect to acquisitions have not been determined.

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The provision (benefit) for income taxes from continued operations for the three months ended June 30, 2010 and 2009 consist of the following:


		June 30, 2010	June 30, 2009
Current:
Federal	$
State

Deferred:
Federal	$	940,333	154,312
State		157,872	25,907
		1,098,205	74,826
Benefit from the operating loss carryforward		(1,098,205)	(180,219)
(Benefit) provision for income taxes, net	$	-	-

The difference between income tax expense computed by applying the federal statutory corporate tax rate and actual income tax expense is as follows:


	June 30, 2010	June 30, 2009

Statutory federal income tax rate	34.0%	34.0%
State income taxes and other	5.4%	5.4%
Valuation allowance	(39.40%)	(39.40%)
Effective tax rate	-	-

Deferred income taxes result from temporary differences in the recognition of income and expenses for the financial reporting purposes and for tax purposes. The tax effect of these temporary differences representing deferred tax asset and liabilities result principally from the following:


		June 30, 2010	June 30, 2009

Net operating loss carryforward		1,098,205	180,219
Valuation allowance		(1,098,205)	(180,219)

Deferred income tax asset	$	-	-

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NOTE 12 – SUBSEQUENT EVENTS

In accordance with the Subsequent Events Topic of the FASB ASC 855, we have evaluated subsequent events, and have determined that the following events are reasonably likely to impact the financial statements:

On July 8, 2010 the Company issued 2,500,000 shares of common stock to a debt holder. The common shares were issued and accepted by the Company’s shareholder at the closing trading price of $.0268 and the Company recorded $25,000 reduced shareholder notes payable of the Company and the remaining amount of $42,000 was interest expense.

On July 9, 2010, the Company issued 1,000,000 shares of common stock to a consultant. The common shares were issued and accepted by the consultant at the closing trading price of $.0268 and the Company recorded $26,800 as a consulting expense.

On July 16, 2010, the Company issued 1,400,000 shares of common stock to a consultant. The common shares were issued and accepted by the consultant at the closing trading price of $.025 and the Company recorded $35,000 as an expense.

Asset Purchase Agreement

On July 17, 2010, we entered into a Purchase Agreement (the “Purchase Agreement”) with Brownies WasteWater Solutions, Inc., B&P Environmental Services LLC, Michael J. Ciarlone, Harvey Blonder and Gary A. Goldstein and Anita Goldstein, Robin and Robert Bailey and Michael Borish. Pursuant to the Purchase Agreement, and upon the terms and subject to the conditions thereof, our Company agreed to purchase all of the Member Interests of B&P Environmental Services LLC and all of the issued and outstanding shares of Brownies WasteWater Solutions, Inc. (the “Acquisition”). The purchase price for the Acquisition consists of the issuance at the closing of the Acquisition of an aggregate of 48,000,000 shares of the Company’s common stock (the “Share Consideration”) to the parties that comprise the holders of both/or Member Interests of B&P Environmental Services LLC and issued and outstanding shares of Brownies WasteWater Solutions, Inc. Consequently, the recipients of the Share Consideration represent, in the aggregate, over fifty percent of the issued and outstanding shares of the Company, resulting in a change of control of the Company.

The foregoing description of the Purchase Agreement is only a summary, does not purport to be complete, and is qualified in its entirety by reference to the copy of the Purchase Agreement filed as Exhibit 2.1 in the Form 8-K filed on July 18, 2010.

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In this Quarterly Report on Form 10-Q, “Company,” “our company,” “us,” and “our” refer to Freedom Environmental Services, Inc. and its subsidiaries, unless the context requires otherwise.

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Management’s Discussion and Analysis contains various “forward looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding future events or the future financial performance of the Company that involve risks and uncertainties. Certain statements included in this Form 10-Q, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to “anticipates”, “believes”, “plans”, “expects”, “future” and similar statements or expressions, identify forward looking statements. Any forward-looking statements herein are subject to certain risks and uncertainties in the Company’s business, including but not limited to, reliance on key customers and competition in its markets, market demand, delayed payments of accounts receivables, technological developments, maintenance of relationships with key suppliers, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which may be beyond the control of the Company. Management will elect additional changes to revenue recognition to comply with the most conservative SEC recognition on a forward going accrual basis as the model is replicated with other similar markets (i.e. SBDC). The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth therein.

Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.

In addition, the foregoing factors may affect generally our business, results of operations and financial position. Forward-looking statements speak only as of the date the statement was made. We do not undertake and specifically decline any obligation to update any forward-looking statements.

Overview

We were incorporated under the laws of the State of Delaware on October 6, 1978 as United States Aircraft Corp and we have undergone numerous name changes, the most recent being on June 11, 2008 when we amended our certificate of incorporation to change our name from BMXP Holdings, Inc. to Freedom Environmental Services, Inc.

Freedom Environmental Services, Inc., formerly known as BMXP Holdings, Inc. from August 2006 to June 2008 was formerly organized as Neo-vision Corp during the years 2001-2002 and subsequently was Storage Suites America, Inc. from November 2002 to December 2004 and Bio-Matrix Scientific Group, Inc. from December 2004 to August 2006.

On December 6, 2004, we acquired Bio-Matrix Scientific, Inc. (Bio), a Delaware corporation, and changed our name to Bio-Matrix Scientific Group, Inc. This transaction has been accounted for as a recapitalization or reverse merger whereby Bio would be considered the accounting acquirer, and the accounting history of the acquirer would be carried forward as the history for us and no goodwill would be recorded.

From May 23, 2007 to June 24, 2008, we were a “shell company” as that term is defined in Rule 405 promulgated under the Securities Act of 1933, as amended.

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On June 24, 2008 we acquired 100% of the membership interests in Freedom Environmental Services, LLC (“FELC”), a Florida Limited Liability Company, for consideration consisting of 20,704,427 shares of our common stock of the Issuer.

As a result of this transaction, the former members of FELC held approximately 59% of our voting capital stock immediately after the transaction and the composition of our senior management became the senior management of FELC. For financial accounting purposes, this acquisition was a reverse acquisition of the Issuer by FELC under the purchase method of accounting, and was treated as a recapitalization with FELC as the acquirer in accordance with Paragraph 17 of SFAS 141.

Michael S. Borish was named Chairman of the Board of Directors and was appointed Chief Executive Officer.

Principal products or services and their markets;

Through FELC we provide Wastewater and Storm-water System Management, Grease and Organics Collection and Disposition, and Commercial Plumbing and Water System Management to the commercial, industrial, and municipal markets throughout Central Florida as well as septic system maintenance and repair to the residential market throughout Central Florida.

Wastewater and Storm-water System Management includes providing services to the commercial and municipal sector such as the installation and repair of the components of waste collection and disposition, potable water and exterior drainage systems.

Grease and Organics Collection and Disposition include the collection and disposal of grease waste from commercial restaurants and hotels as well as raw sewerage from septic tanks, both residential and commercial.

Commercial Plumbing services include pump systems installation, repairs and maintenance and general activities related to the profession of plumbing.

Labor required providing these services are made available either through existing employees or by subcontractors depending on the demands of the project and availability of resources.

We also intend to develop and produce fuels and natural bio-organic products (such as fertilizer) derived from waste and byproducts.

Our plans in this area consist of attempting to develop a series of Vertical Organic Collection System platforms within regional and super-regional metropolitan areas by acquiring market leading operators as platforms and utilizing this business model in building regional facilities to produce high grade fuel and bio-organic nutrient products converted from commercial, industrial and residential waste products in the southeast and nationwide (“Biofuel”).

A Vertical Organic Collection System platform would be defined by us as a business enterprise which would control each step in the production of Biofuel.

It is anticipated that this enterprise would:

(a)	Collect raw waste (grease and septage) from customers which would constitute the raw material of Biofuel
(b)	Transport the raw materials to a processing facility controlled by the enterprise where waste convertible into

Biofuel (“Feedstock”) would be separated from unusable waste which would be disposed of in an appropriate manner. (c) Convert the feedstock into Biofuel

It is our belief that, by controlling each step of the Biofuel production process, we will be able to compete effectively due to economies of scale.

Our current strategy to enter the field of Biofuel production is contingent upon the acquisition of entities possessing the resources which would enable us to control each step of the Biofuel production process. As of the date of this document, except as described in this filing, we are not party to any agreement with any entity which may possess or entities which collectively may possess these resources and can provide no assurance as to when or if we may acquire any such entity or entities.

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Distribution methods of the products or services:

To date, FELC has entered into contracts to provide its services primarily through competitive bidding on various projects.

New product or service;

In May of 2008 FELC had entered into a Letter of Intent to purchase a twenty acre parcel of land to be utilized to establish a wastewater treatment facility/ biofuel facility. Upon conducting due diligence, management of FELC determined the land was unusable for its purposes and abandoned the proposed purchase. Management of FELC has since identified suitably zoned land which it feels would be adequate for the establishment of a waste collection and treatment plant and has entered into negotiations to obtain a long term lease for that property. No assurance can be given that such a lease may be obtained by us.

In July of 2008, we announced the development of Neighbors Protecting Neighbors (“NPN”), a pre-paid Residential Protection System for personal, communal and multi-family septic systems. It is our current intention to commence sales of NPN subsequent to the acquisition of property suitable for the establishment of a waste collection and treatment plant.

Asset Purchase Agreement

Competitive business conditions, the issuer’s competitive position in the industry, and methods of competition:

FELC, our operating subsidiary has yet to achieve substantial revenues or profits. The industries in which we compete and intend to compete are highly competitive and, especially in the area of biofuel production, characterized by rapid technological advancement. Many of our competitors have greater resources than we do.

We compete in our current areas of operation by offering what we believe to be superior service at competitive prices. We also intend to be competitive by acquiring operating companies in the Wastewater Services sector and developing commercial applications to convert our vertically collected waste to fuel and organic nutrients (fertilizer).

Sources and availability of raw materials and the names of principal suppliers:

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The supplies and materials required to conduct our operations are available through a wide variety of sources and are currently obtained through a wide variety of sources.

We are not party to any long term agreements.

The need for any government approval of principal products or services and the status of any requested government approvals:

FELC’s operations are subject to various federal, state, and local laws and regulations regarding environmental matters and other aspects of the operation of a sewer and drain cleaning and plumbing services business. For certain other activities, such as septic tank and grease pumping, FELC is subject to state and local environmental health and sanitation regulations. FELC’s current activities also require licensure as a Certified Plumbing Contractor by the State of Florida, a condition satisfied by FELC.

The production of high grade fuel and bio-organic nutrient products converted from commercial, industrial and residential waste products are highly regulated industries and we may have to satisfy numerous mandatory procedures, regulations, and safety standards established by federal and state regulatory agencies.

Effect of existing or probable governmental regulations on the business;

There is legislation currently enacted which we feel may have a beneficial impact on our operations by encouraging the usage of biofuels:

On December 19, 2007, President Bush signed into law the Energy Independence and Security Act of 2007 (Energy Act of 2007). The Energy Act of 2007 provides for an increase in the supply of alternative fuel sources by setting a mandatory Renewable Fuel Standard (RFS) requiring fuel producers to use at least 36 billion gallons of biofuel by 2022, 16 billion gallon of which must come from cellulosic derived fuel. Additionally, the Energy Act of 2007 called for reducing U.S. demand for oil by setting a national fuel economy standard of 35 miles per gallon by 2020 – which will increase fuel economy standards by 40 percent and save billions of gallons of fuel.

The Energy Policy Act of 1992:

The Energy Policy Act of 1992 (EPAct) was amended in 1998 to include biodiesel as an option for covered fleets to meet a portion of their annual Alternative Fuel Vehicle (AFV) acquisition requirements through the purchase and use of biodiesel.

Under the Biodiesel Fuel Use Credits provisions, fleets may choose to operate existing diesel vehicles that weigh more than 8500 lbs on blends of biodiesel in lieu of purchasing a new AFV. The biodiesel component of the fuel blend must constitute at least 20% of the volume of the fuel (B20). The fleet may count the biodiesel portion of that blend towards their annual AFV requirement. For each 450 gallons of biodiesel purchased and consumed, a full vehicle credit is awarded.

Energy Policy Act of 2005

Section 1501( Renewable Content of Gasoline (Renewable Fuels Standard) of the Energy Policy Act of 2005 establishes a program requiring gasoline sold in the United States to be mixed with increasing amounts of renewable fuel (usually ethanol) on an annual average basis.

We believe that, due to rising fuel prices, the greater demand for fuel on a worldwide basis and the need to reduce dependence on foreign fuel sources, Federal and State regulatory bodies will continue to enact legislation promoting the use of renewable fuels.

National Pollutant Discharge Elimination System (NPDES):

The Clean Water Act prohibits anybody from discharging "pollutants" through a "point source" into a "water of the United States" unless they have an NPDES permit. The permit will contain limits on what you can discharge, monitoring and reporting requirements, and other provisions to ensure that the discharge does not hurt water quality or people's health. In essence, the permit translates general requirements of the Clean Water Act into specific provisions tailored to the operations of each person discharging pollutants.

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NPDES permits are issued by states that have obtained EPA approval to issue permits or by EPA Regions in states without such approval. In 1995, the Florida Department of Environmental Protection received authorization from the U.S. Environmental Protection Agency (EPA) to administer the NPDES wastewater program in Florida.

In October 2000, the EPA authorized the Florida Department of Environmental Protection (DEP) to implement the NPDES storm water permitting program in the State of Florida (with the exception of Indian country lands). The program regulates point source discharges of storm water runoff from certain industrial facilities. The operators of regulated industrial facilities must obtain an NPDES storm water permit and implement appropriate pollution prevention techniques to reduce contamination of storm water runoff.

We believe that the implementation of the NPDES has a beneficial impact on our operations as services such as the ones that we provide are required in order that permit holders may comply with applicable standards.

Costs and effects of compliance with environmental laws (federal, state and local);

We have not incurred any unusual or significant costs to remain in compliance with any environmental laws.

Loans from Senior Officers during the Interim Period consisted of the following:

Between January 1, 2008 and January 16, 2008 Edmund F. Curtis, a prior Director of the Company and President and Chief Operating Officer of the Company, has loaned FELC the amount of $ 1,893. The Company disputes this advance as the Company advanced funds Mr. Curtis that offset the balance to zero.

Between January 2, 2008 and March 3, 2008 John Holwell, a prior Director of the Company and Vice President of the Company, has loaned FELC the amount of $ 3,182. The Company disputes this advance as the Company advanced funds Mr. Howell that offset the balance to zero.

During the Interim Period a company controlled by Michael S. Borish, our Chairman of the Board and Chief Executive Officer, and Michael S. Borish have loaned FELC the amount of $ $405,818 and accrued interest of $102,752 with a total amount owing of $508,570 and on June 30, 2010 Mr. Borish cancelled the debt in accordance with the Asset Purchase Agreement executed on July 17, 2010.

We will attempt to acquire operating companies in the Wastewater Services sector and develop commercial applications to convert our vertically collected waste to energy and organic nutrients (fertilizer). We will also attempt to build and operate a waste collection and treatment plant in Central Florida. We are currently not party to any binding agreements to acquire one or more operating companies and have not completed due diligence to the extent that an estimate can be made based on reasonable assumptions as to the costs required to establish or acquire waste collection and treatment plant in Central Florida.

There is a strong possibility that, in attempting to accomplish the above, we may not be able to satisfy our cash requirements over the next twelve months and may be required to raise additional cash from outside sources.

In the event that we are required to raise additional cash from outside sources, we may issue equity securities or incur additional debt. There is no assurance that such funding, if required, will be available to us or, if available, will be available upon terms favorable to us.

Capital Resources

We are party to no binding agreements which would commit us to any material capital expenditures. We plan to attempt to acquire operating companies in the Wastewater Services sector and develop commercial applications to convert our vertically collected waste to energy and organic nutrients (fertilizer) and build and operate a significant waste collection and treatment plant in Central Florida.

We are currently investigating opportunities regarding the acquisition of companies in the Wastewater Services sector as well as the leasing or acquisition of companies in the Wastewater Services sector.

To that end, we have entered into a Letter of Intent regarding the acquisition by us of one such company. This letter of Intent is not binding on either party, and no assurance can be made that we will acquire this company.

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In the event that we enter into a binding agreement to either (a) acquire a company or companies in the Wastewater Services sector or (b) lease or acquire companies in the Wastewater Services sector we believe we will be required to undertake significant capital expenditures. Historically, our sources of liquidity have been (a) Revenues from operations (b) Loans from senior officers and (c) Bank Line of Credit totaling $13,000.

Results of Operations

Revenues for the three months ended June 30, 2010 and 2009 decreased to $33,531 from $66,450 respectively as compared to $136,122 from $96,122 for the six months ended June 30, 2010 and 2009, respectively. This current decrease was primarily attributable to our focus on the Asset Purchase Agreement of Brownies Waste Water Solutions, Inc.

Cost of goods sold for the three months ended June 30, 2010 and 2009 decreased to $10,456 from $14,371 respectively as compared to $53,690 from $22,870 for the six months ended June 30, 2010 and 2009, respectively. This current decrease was primarily attributable to our focus on the Asset Purchase Agreement of Brownies Waste Water Solutions, Inc.

General and administrative expense for the three months ended June 30, 2010 and 2009 decreased to $372,583 from $274,847 respectively as compared to $1,101,344 from $466,798 for the six months ended June 30, 2010 and 2009, respectively. General and administrative expense for the six months ended June 30, 2010, included non-cash, non-recurring expenses related to the issuance of common stock.

Selling and marketing expense for the three months ended June 30, 2010 and 2009 increased to $1,421 from $1,090 respectively as compared to $660,335 from $7,663 for the six months ended June 30, 2010 and 2009, respectively. Selling and marketing expense for the six months ended June 30, 2010, included non-cash, non-recurring expenses related to the issuance of common stock.

Net loss for the three months ended June 30, 2010 and 2009 increased to $876,949 from $280,570 respectively as compared to $2,923,556 from $479,766 for the six months ended June 30, 2010 and 2009, respectively. A substantial portion of the net loss for the six months ended June 30, 2010 were non-cash, and believed by management to be non-recurring. Non-cash, non-recurring expenses related to the issuance of common stock was $1,443,160 for services, $1,150,192 for interest expense on the conversion of debt, and $401,612 for the conversion of debt of a shareholder.

Liquidity and Capital Resources

We have maintained a minimum of three months of working capital. This reserve was intended to allow for an adequate amount of time to secure additional funds from investors as needed. To date, management has succeeded in securing capital as needed.

Our cash used in operating activities is $44,898 and $178,296 for the six months ended June 30, 2010 and 2009, respectively. The decrease is mainly attributable to the decrease in operating expenses.

Cash provided by financing activities was $44,963 and $186,957 for the six months ended June 30, 2010 and 2009, respectively. We repaid bank overdraft of $5,037 and received proceeds in a convertible note of $50,000.

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Off-Balance sheet arrangements

We have no off-balance sheet arrangements including arrangements that would affect the liquidity, capital resources, market risk support and credit risk support or other benefits.

WHERE YOU CAN FIND MORE INFORMATION

You are advised to read this Quarterly Report on Form 10-Q in conjunction with other reports and documents that we file from time to time with the SEC. In particular, please read our Quarterly Reports on Form 10-Q, Annual Report on Form 10-K, and Current Reports on Form 8-K that we file from time to time. You may obtain copies of these reports directly from us or from the SEC at the SEC’s Public Reference Room at 100 F. Street, N.E. Washington, D.C. 20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its website http://www.sec.gov.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our business is currently conducted principally in the United States. As a result, our financial results are not affected by factors such as changes in foreign currency exchange rates or economic conditions in foreign markets. We do not engage in hedging transactions to reduce our exposure to changes in currency exchange rates, although if the geographical scope of our business broadens, we may do so in the future.

Our exposure to risk for changes in interest rates relates primarily to our investments in short-term financial instruments. Investments in both fixed rate and floating rate interest earning instruments carry some interest rate risk. The fair value of fixed rate securities may fall due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Partly as a result of this, our future interest income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that have fallen in estimated fair value due to changes in interest rates. However, as substantially all of our cash equivalents consist of bank deposits and short-term money market instruments, we do not expect any material change with respect to our net income as a result of an interest rate change.

We do not hold any derivative instruments and do not engage in any hedging activities.

ITEM 4. CONTROLS AND PROCEDURES

(a)	Evaluation of Disclosure 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 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 Chief Executive Officer and Chief Financial Officer carried out an evaluation 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.

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Our Chief Executive Officer and Chief Financial Officer are 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, our Chief Executive Officer and Chief Financial Officer have concluded that our internal control over financial reporting was effective as of June 30, 2010. 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.

(b)	Changes in Internal Controls Over Financial Reporting

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 quarter ended June 30, 2010. There have not been any significant changes in the Company's critical accounting policies identified since the Company filed its Annual Report on Form 10-K as of December 31, 2009.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are currently not involved in any litigation except noted below that we believe could have a material adverse effect on our financial condition or results of operations. Other than described below, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting the Company, our common stock, any of our subsidiaries or of the Company’s or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

ITEM 1A - RISK FACTORS

You should carefully consider the following risk factors together with the other information contained in this Interim Report on Form 10-Q, and in prior reports pursuant to the Securities Exchange Act of 1934, as amended and the Securities Act of 1933, as amended. If any of the risks factors actually occur, our business, financial condition or results of operations could be materially adversely affected. In such cases, the trading price of our common stock could decline. We believe there are no changes that constitute material changes from the risk factors previously disclosed in the prior reports pursuant to the Securities Exchange Act of 1934, as amended and the Securities Act of 1933 and include or reiterate the following risk factors:

Our Common Stock Is Subject To Penny Stock Regulation

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Our shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act. The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule

3a51-1 provides that any equity security is considered to be penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on the NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the registrant's net tangible assets; or exempted from the definition by the Commission. Since our shares are deemed to be "penny stock", trading in the shares will be subject to additional sales practice requirements on broker/dealers who sell penny stock to persons other than established customers and accredited investors.

FINRA Sales Practice Requirements May Also Limit A Stockholder's Ability To Buy And Sell Our Stock.

In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (FINRA) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

We May Not Have Access To Sufficient Capital To Pursue Our Business And Therefore Would Be Unable To Achieve Our Planned Future Growth.

We intend to pursue a growth strategy that includes development of the Company business and technology. Currently we have limited capital which is insufficient to pursue our plans for development and growth. Our ability to implement our growth plans will depend primarily on our ability to obtain additional private or public equity or debt financing. We are currently seeking additional capital. Such financing may not be available at all, or we may be unable to locate and secure additional capital on terms and conditions that are acceptable to us. Our failure to obtain additional capital will have a material adverse effect on our business.

Because We Are Quoted On The OTCBB Pink Sheets Instead Of An Exchange Or National Quotation System, Our Investors May Have A Tougher Time Selling Their Stock Or Experience Negative Volatility On The Market Price Of Our Stock.

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Our common stock is traded on the OTCBB (“pink sheets”). The OTCBB (“pink sheets”) is often highly illiquid. There is a greater chance of volatility for securities that trade on the OTCBB (“pink sheets”) as compared to a national exchange or quotation system. This volatility may be caused by a variety of factors, including the lack of readily available price quotations, the absence of consistent administrative supervision of bid and ask quotations, lower trading volume, and market conditions. Investors in our common stock may experience high fluctuations in the market price and volume of the trading market for our securities. These fluctuations, when they occur, have a negative effect on the market price for our securities. Accordingly, our stockholders may not be able to realize a fair price from their shares when they determine to sell them or may have to hold them for a substantial period of time until the market for our common stock improves.

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.

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.

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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.

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 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

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.

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.

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We Depend Upon Key Management Personnel and the Loss of Any of Them Would Seriously Disrupt Our Operations.

The success of our company is largely dependent on the personal efforts of Michael Borish and other key executives. The loss of the services of Michael Borish or other key executives would have a material adverse effect on our business and prospects. In addition, in order for us to undertake our operations as contemplated, it will be necessary for us to locate and hire experienced personnel who are knowledgeable in the alternative fuel business. Our failure to attract and retain such experienced personnel on acceptable terms will have a material adverse impact on our ability to grow our business.

Note 2 of Our Unaudited Financial Statements for the quarter ended June 30, 2010 Contains Explanatory Language That Substantial Doubt Exists About Our Ability To Continue As A Going Concern

Note 2 of Our Unaudited Financial Statements for the quarter ended June 30, 2010 contains explanatory language that substantial doubt exists about our ability to continue as a going concern. The report states that we depend on the continued contributions of our executive officers to work effectively as a team, to execute our business strategy and to manage our business. The loss of key personnel, or their failure to work effectively, could have a material adverse effect on our business, financial condition, and results of operations. If we are unable to obtain sufficient financing in the near term or achieve profitability, then we would, in all likelihood, experience severe liquidity problems and may have to curtail our operations. If we curtail our operations, we may be placed into bankruptcy or undergo liquidation, the result of which will adversely affect the value of our common shares.

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 factors, 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.

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Compliance with changing regulation of corporate governance and public disclosure will result in additional expenses and pose challenges for our management team.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated thereunder, the Sarbanes-Oxley Act and SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the U.S. public markets. Our management team will need to devote significant time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.

SHOULD ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR PLANNED

Special Note Regarding Forward-Looking Statements

This filing contains forward-looking statements about our business, financial condition and prospects that reflect our management’s assumptions and good faith beliefs based on information currently available. We can give no assurance that the expectations indicated by such forward-looking statements will be realized. If any of our assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, our actual results may differ materially from those indicated by the forward-looking statements.

The key factors that are not within our control and that may have a direct bearing on operating results include, but are not limited to, acceptance of our proposed services and the products we expect to market, our ability to establish a customer base, managements’ ability to raise capital in the future, the retention of key employees and changes in the regulation of our industry.

There may be other risks and circumstances that management may be unable to predict. When used in this filing, words such as, “believes,” “expects,” “intends,” “plans,” “anticipates,” “estimates” and similar expressions are intended to identify and qualify forward-looking statements, although there may be certain forward-looking statements not accompanied by such expressions.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company issued 6,281,624 shares of common stock to a debt holder for the conversion of their debt, issued 1,439,000 shares of common stock to consultants, and, post-reverse split, shares issued to debt holder of 680,000 for the conversion of their debt. The offer and sale of such shares of our common stock were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Rule 506 promulgated under the Securities Act of 1933 and in Section 4(2) of the Securities Act of 1933. A legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequent registered under the Securities Act of 1933 or transferred in a transaction exempt from registration under the Securities Act of 1933.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There were no defaults upon senior securities during the period ended June 30, 2010.

ITEM 4. REMOVED AND RESERVED.

ITEM 5. OTHER INFORMATION

There is no information with respect to which information is not otherwise called for by this form.

ITEM 6. EXHIBITS

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
32.2	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

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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.

Registrant Date: August 20, 2010		Freedom Environmental Services, Inc. By: /s/ Michael Borish
		Michael Borish
		Chief Executive Officer (Principal Executive Officer)

Registrant Date: August 20, 2010		Freedom Environmental Services, Inc. By: /s/ Michael Borish
		Michael Borish
		Chief Financial Officer (Principal Financial Officer)

Freedom Environmental Services, Inc. - FORM 10-Q - August 20, 2010

Attached files

Freedom Environmental Services, Inc. Reports