Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2010
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _____________
Commission file number: 000-54194
LATITUDE SOLUTIONS, INC.
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(Exact name of registrant as specified in its charter)
Nevada 26-1284382
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State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
190 NW Spanish River Blvd., Suite 101
Boca Raton, FL 33431
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(561) 417-0644
Securities registered pursuant to Section 12(b) of the Act:
Title of each class registered Name of each exchange
on which registered
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Not Applicable Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK
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(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Yes |_| No |X|
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. |_|
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |_| No |X|
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Website, if any, every Interactive Data file required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files)
Yes |_| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. |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
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check One).
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Large accelerated filer [___] Accelerated filer [___]
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Non-accelerated filer [___] Smaller reporting company [_X_]
(Do not check if a smaller
reporting company)
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Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |_| No |X|
The aggregate market value of voting stock held by non-affiliates (18,264,748
shares) of the registrant as of April 13, 2011 was $27,397,122.
There were 34,127,315 shares outstanding of the registrant's Common Stock as of
April 11, 2011.
TABLE OF CONTENTS
PART I
ITEM 1 Business 1
ITEM 1 A. Risk Factors 10
ITEM 1 B. Unresolved Staff Comments 17
ITEM 2 Properties 18
ITEM 3 Legal Proceedings 18
ITEM 4 Removed and Reserved 18
PART II
ITEM 5 Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 19
ITEM 6 Selected Financial Data 34
ITEM 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 34
ITEM 7 A. Quantitative and Qualitative Disclosures About Market Risk 40
ITEM 8 Financial Statements and Supplementary Data 40
ITEM 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 40
ITEM 9 A. Controls and Procedures 40
ITEM 9 A(T). Controls and Procedures 40
ITEM 9B Other Information 40
PART III
ITEM 10 Directors, Executive Officers, and Corporate Governance 41
ITEM 11 Executive Compensation 44
ITEM 12 Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 49
ITEM 13 Certain Relationships and Related Transactions, and Director
Independence 51
ITEM 14 Principal Accounting Fees and Services 51
PART IV
ITEM 15 Exhibits, Financial Statement Schedules 52
SIGNATURES 79
EXPLANATORY NOTE
LATITUDE SOLUTIONS, INC., (THE "COMPANY"), IS FILING THIS AMENDMENT TO ITS
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2010 FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 2011, FOR THE SOLE PURPOSE OF
AMENDING THE DISCLOSURES IN THE FINANCIAL STATEMENTS AND THE NOTES TO THE
FINANCIAL STATEMENTS INCLUDED IN PART II - ITEM 8 AND AMENDING THE DISCLOSURES
IN PART I - ITEM 1A, PART II - ITEM 5 AND PART II - ITEM 7 OF THIS FILING.
THIS AMENDMENT DOES NOT REFLECT EVENTS OCCURRING AFTER THE ORIGINAL FILING
EXCEPT AS NOTED ABOVE. EXCEPT FOR THE FOREGOING AMENDED INFORMATION, THIS FORM
10-K/A CONTINUES TO SPEAK AS OF THE DATE OF THE ORIGINAL FILING AND THE COMPANY
HAS NOT OTHERWISE UPDATED DISCLOSURES CONTAINED THEREIN OR HEREIN TO REFLECT
EVENTS THAT OCCURRED AT A LATER DATE.
FORWARD LOOKING STATEMENTS
THIS DOCUMENT INCLUDES FORWARD-LOOKING STATEMENTS, INCLUDING, WITHOUT
LIMITATION, STATEMENTS RELATING TO LATITUDE SOLUTIONS, INC. ("LATITUDE") PLANS,
STRATEGIES, OBJECTIVES, EXPECTATIONS, INTENTIONS AND ADEQUACY OF RESOURCES.
THESE FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES,
AND OTHER FACTORS THAT MAY CAUSE LATITUDE'S ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS. THESE
FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: ABILITY OF LATITUDE'S TO IMPLEMENT
ITS BUSINESS STRATEGY; ABILITY TO OBTAIN ADDITIONAL FINANCING; LATITUDES LIMITED
OPERATING HISTORY; UNKNOWN LIABILITIES ASSOCIATED WITH FUTURE ACQUISITIONS;
ABILITY TO MANAGE GROWTH; SIGNIFICANT COMPETITION; ABILITY TO ATTRACT AND RETAIN
TALENTED EMPLOYEES; AND FUTURE GOVERNMENT REGULATIONS; AND OTHER FACTORS
DESCRIBED IN THIS DOCUMENT OR IN OTHER OF LATITUDE'S FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION. LATITUDE IS UNDER NO OBLIGATION, TO PUBLICLY UPDATE OR
REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION,
FUTURE EVENTS OR OTHERWISE.
For further information about these and other risks, uncertainties and factors,
please review the disclosure included in this report under Item 1A "Risk
Factors."
PART I
ITEM 1. BUSINESS
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HISTORY
Latitude Solutions, Inc. (hereafter "LSI" or "the Company") was originally
incorporated in the State of Idaho on June 10, 1983 to acquire and develop
mineral claims located in the Miller Mountain Mining District near Idaho City,
Idaho. Because the Company did not have the necessary funds to maintain the
claims and continue to pay the necessary assessment fees related to the claims,
the claims were abandoned in 1997 and written off. In March 2007, we changed our
corporate domicile from the State of Idaho to the State of Nevada by effecting a
change of domicile merger with a Nevada corporation named Genex Biopharma, Inc.
that was created in October 2005. We then changed the name of the surviving
Nevada Corporation to GMMT, Inc. In July 2009, we amended the Articles of
Incorporation to change our name to Latitude Solutions, Inc.
In July 2009, we affected a reverse stock split of our issued and outstanding
shares of common stock on a one share for 23.1975 shares basis. As a result of
the stock split, the number of shares of our issued and outstanding common stock
was decreased to approximately 500,000 shares. The reverse stock split did not
alter the par value of our common stock and, accordingly, the reverse split did
not affect our total stockholders' equity. The reverse stock split was
unanimously approved by our board of directors and by a majority of our
stockholders by written consent.
Latitude Solutions, Inc., through four subsidiaries, has operations based upon
its proprietary technologies.
- Latitude Clean Tech Group, Inc. provides products, processes and
solutions for contaminated water applications.
- Latitude Energy Services ("LES") provides water remediation services
to the Oil, Gas and Energy industries worldwide utilizing innovative
and patented technologies developed by its majority equity holder,
Latitude Solutions, Inc. ("LSI") and is subsidiary companies. LES will
market and own and operate remediation/processing units for its
clients under strict licensing and leasing agreements to insure
quality of service, protect the integrity and efficacy of the
technology.
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- 6709800 Canada, Inc. dba GpsLatitude, the Company's third subsidiary,
is the technology/software/hardware group, which provides wireless
telemetry/live video streaming and security products for Mobile
Assets, Public Security, Corporate and National Security applications.
- Trinity Solutions, Inc., the Company's fourth operating subsidiary, is
the Company's internal business marketing subsidiary which provides
sales and marketing support to the other subsidiaries.
We maintain offices in Boca Raton, Florida; Denver, Colorado; Montreal, Quebec,
Canada; Alberta, Canada and Riyadh, Saudi Arabia. Our principal executive
offices are located at 190 NW Spanish River Blvd., Suite 101, Boca Raton,
Florida 33431 and our telephone number is (561) 417-0644. The Company maintains
a website at www.lsiworldwide.com, such website is not incorporated into or a
part of this filing.
ACQUISITION OF 6709800 CANADA, INC. OPERATING AS GPSLATITUDE, TRINITY SOLUTIONS,
INC., AND LATITUDE CLEAN TECH GROUP, INC.
On March 24, 2009, we entered into agreements to acquire 6709800 Canada, Inc.
dba GpsLatitude, Trinity Solutions, Inc. and Latitude Clean Tech Group, Inc.
through our wholly-owned subsidiary, GMMT Acquisitions, Inc. ("GMMT
Acquisitions") Under the terms of the agreements, GMMT Merger, Inc. ("GMMT
Merger") acquired 50% of the issued and outstanding shares of 6709800 Canada dba
GpsLatitude and 100% of all the stock in Trinity Solutions, Inc. and Latitude
Clean Tech Group, Inc. GMMT Acquisitions then merged with and into GMMT Merger,
with GMMT Merger, Inc. being the surviving corporate entity. In consideration
for the acquisitions, we issued to the stockholders of GMMT Merger 19.5 million
shares of common stock, post split to reflect the 1 share for 23.1975 shares
basis that we affected prior to the closing of the transaction. Upon completion
of the acquisitions, we changed our corporate name to Latitude Solutions, Inc.
Latitude Energy Services, LLC was organized in the state of Nevada on February
8, 2011. LSI has a 70% equity ownership in LES, the remaining 30% equity
ownership is owned by third party entities. LSI is one of five managers of the
LLC, the other four managers are from the 30% equity owners of the LLC.
The final corporate structure is as follows:
LATITUDE SOLUTIONS, INC.
(A Nevada Corporation)
Harvey Kaye, President-CEO-Director
Matthew Cohen, COO-CFO-Director
Jan Rowinski, Executive Vice-President-Director
Warren V. Blasland, Jr., Executive Vice-President-Director
/ / \ \
/ / \ \
/ / \ \
/ / \ \
/ / \ \
LATITUDE CLEAN TECH GROUP, INC. LATITUDE ENERGY SERVICES, LLC TRINITY SOLUTIONS, INC. 6709800 CANADA, INC.
(A Florida Corporation) (A Nevada Limited (A Florida Corporation) (DBA GPSLATITUDE)
(Wholly-owned subsidiary of Liability Company - (Wholly-owned subsidiary of (A Canadian Corporation) 50% owned
Latitude Solutions, Inc.) 70% owned subsidiary of Latitude Solutions, Inc.) subsidiary of Latitude Solutions, Inc.
Warren Blasland, CEO-Director Latitude Solutions, Inc.) Jan Rowinski, President/CEO-Director
Ray Harlow, CEO
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LATITUDE SOLUTIONS, INC.
Our proprietary technologies and operations reside in four subsidiaries,
discussed in greater detail under Operational Divisions.
LATITUDE CLEAN TECH GROUP, INC. ("LCTG")
Latitude Clean Tech Group, Inc., a wholly-owned subsidiary, is a Florida
corporation and is the contaminated water remediation company. LCTG provides
products, processes and solutions for contaminated water issues resulting from
various oil/gas drilling operations including water used in hydraulic
fractionizing of wells, contaminated water relating to the Alberta oil sands,
and mining operations producing contaminated water.
LATITUDE ENERGY SERVICES, LLC ("LES")
Latitude Energy Services, LLC ("LES") provides water remediation services to the
Oil, Gas and Energy industries worldwide utilizing innovative and patented
technologies developed by its majority equity owner, Latitude Solutions, Inc.
("LSI") and its subsidiary companies. LES will market, own and operate
remediation/processing units for its clients under strict licensing and leasing
agreements to insure quality of service, protect the integrity and efficacy of
the technology and to maximize financial benefits to the company.
6709800 CANADA, INC. OPERATING AS GPSLATITUDE
GpsLatitude is a Canadian corporation and is the Company's technology/software
hardware group, which provides wireless telemetry/live video streaming security
products to mobile assets and people.
TRINITY SOLUTIONS, INC. ("TRINITY SOLUTIONS")
Trinity Solutions is a Florida corporation designed to provide the Company with
marketing and sales capabilities to identify the opportunities available for
federal and state contracts and other governmental business opportunities.
Trinity Solutions has entered into a strategic alliance with Applied Geo
Technologies, a tribally chartered corporation wholly owned by the Mississippi
Band of Choctaw Indians d/b/a Chahta Enterprises. This strategic alliance will
allow us to actively compete for and participate in technology and government
related contracts.
Trinity Solutions intends to market the Company's products and services through
not only direct marketing efforts, but also through the development of strategic
alliances, licensing agreements, vendor and distributor agreements where and
when applicable. Those agreements that are in place are discussed in greater
detail below.
Each of our four subsidiaries contains proprietary technologies, research and
development capabilities for new products as well as marketing capabilities for
both government and commercial sectors.
OUR PRODUCTS AND STRATEGY
LATITUDE CLEAN TECH GROUP, INC. ("LATITUDE CLEAN TECH GROUP")
Latitude Clean Tech Group's proprietary Electrolytic Precipitation (EP)(TM)
technology provides a cost effective, efficient and environmentally sound means
of treating large amounts of contaminated water resulting from oil and gas
extraction projects worldwide. The Company has the exclusive worldwide license
for a proprietary EP technology which has proven to be highly scalable into
large industrial applications as well as smaller special use operations.
Further, the Company has filed a U.S. provisional patent application reflecting
recent new technology breakthroughs. The technology can provide high pollutant
removal efficiencies of a wide variety or both organic and inorganic pollutants
from water. The Company's technology requires a small footprint and is
configured for mobile capability.
Latitude Clean Tech Group is initially focusing its sales and marketing efforts
for its Electrolytic Precipitation technology service on government and large
corporate clients. In light of the increasing issues related to major industrial
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produced water pollution, mining, oil/ natural gas (hydraulic fracturing),
contaminated water related issues, together with ever increasing expenditures
for defense, surveillance and anti-terrorism requirements, there is a growing
market for the Company's technologies, both domestically and possibly
internationally.
Latitude Clean Tech Group intends to market their proprietary technology not
only directly through their efforts and the efforts of Trinity Solutions, but
also in the development of industry relationships, which could take the form of
licensing agreements, agency agreements and strategic alliances.
Recognizing the long term effects of the British Petroleum (BP) oil spill in the
Gulf of Mexico, Latitude Clean Tech Group has entered into a Consulting
Agreement with the Laurino Group on June 8, 2010. Commodore Dante Laurino, CEO
of Laurino Consulting Group, also serves the nation as a volunteer as the
Assistant National Commodore of the Readiness-Support Group of the U.S. Coast
Guard Auxiliary. Together we have entered into a number of discussions with both
government and private entities to provide a comprehensive plan to deal with the
Gulf disaster.
The Consulting Agreement with Laurino Consulting, provides for Laurino to
provide Latitude Clean Tech Group with professional consulting services in the
area of corporate development, business development, and strategic planning
support as requested. In return for such services, Laurino Consulting receives
$5,000 a month. In addition, Laurino Consulting will receive 5% of all gross
income from the sales, licensing, leasing, financing or other use of the
Latitude EP technology for its services in connection with such services. The
Consulting Agreement also provides for Laurino Consulting, in the event of the
consummation of an equity or debt financing identified by Laurino to receive 10%
percent of the amount invested by any identified investor, and (ii) warrants to
purchase common shares of Latitude Solution. The calculation of the number of
shares underlying the warrant shall be equal to 5% percent times the
consideration received by Latitude Clean Tech divided by the fair market value
per share of Latitude Solution's common shares.
As additional bonus compensation, Laurino Group was issued 50,000 shares of the
restricted common stock of Latitude Solutions.
The Consulting Agreement has a term of one year.
ALBERTA OIL SANDS
One of the world's worst ecological disasters can be found in the Oil Sands
tailings ponds mining operations in the Fort McMurray/Fort McKay areas of
Alberta, Canada. As a result of oil recovery operations, tailings ponds which
contain residual contaminated water have been deposited in a man-made lake of
some 50 square miles which continues to expand. Latitude Clean Tech Group has
accelerated its efforts to introduce and deploy its proprietary water treatment
technology to address the environmental issues related to the extraction of oil
from the Oil Sands in Alberta and is in discussions with CNRL, Shell and
Syncrude.
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CLEAN TECH
MARKET APPLICATIONS
WATER
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600 GPM & LARGER 600 GPM & SMALLER
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A. OIL/GAS A. MILITARY POTABLE WATER
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1. Alberta Oil Sands 1. Support Troops in Field
2. Shale Bed; Frac & Product H2O 2. Military Bases
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B. MINE WASTES B. TRIBAL (U.S. & CANADA)
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1. Gold Mines 1. Potable Water
2. Copper Mines 2. Sanitary Wastes
3. Diamond Mines
4. Coal Mines
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LICENSE AGREEMENT WITH SEPARATECH CANADA, INC.
On February 15, 2011, LSI entered into a License Agreement ("the Separatech
License") with Separatech Canada, Inc. ("Separatech.")
The Separatech License provides the Company with access to exclusive usage of
Separatech's specified patents to use, test, develop, package, promote, to sell
and provide license products exclusively in North America. Separatech has
developed a technology for separating oil-in-water emulsions based on
encapsulated granular polyurethane media, which then can be used with the
Company's Electrolytic Precipitation (EP)(TM) technology to treat contaminated
water resulting from oil and gas extraction projects.
The License provides for the Company to construct a Pilot Plant for
development of the licensed products. In addition, the Company will pay a total
licensing fee of $330,000 in the first year. In addition, the Company will pay a
total licensing fee of $1.8 million in installments over the five year term. The
License provides for a royalty fee based on the number of barrels per day.
The License has a term of at least 5 years, the expiration of the last to expire
licensed patents. The Term will automatically renew for additional 5 years,
unless written notice is given by either party.
LICENSE AGREEMENT WITH CRUCIBLE ENTERPRISES, LTD.
On November 8, 2010, LCTG entered into an Agent Agreement with Crucible
Enterprises, Ltd. As part of the Agent Agreement, Crucible Enterprises has
agreed to act as LCTG's non-exclusive supplier's agent for sales, representation
and distribution of its products. The Agent Agreement has a term of one year and
will self-renew for a term of three years unless written notice is given to
discontinue the agreement. The Agent Agreement provides for a 10% monthly
royalty to be paid to Crucible Enterprises based upon the gross revenue of the
products and an annual royalty to be based upon the gross revenue of products
sold annually, at the following rates:
GROSS REVENUES %
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$5,000,000 annually 12.5%
$10,000,000 annually 15%
LATITUDE ENERGY SERVICES, LLC
Latitude Energy Services ("LES") provides water remediation services to the oil,
gas and energy industries worldwide utilizing innovative and patented
technologies developed by its majority equity owner Latitude Solutions, Inc.
("LSI") and its subsidiary companies. LES will market, own and operate
remediation/processing units for its clients under strict licensing and leasing
agreements to insure quality of service, protect the integrity and efficacy of
the technology and to maximize financial benefits to the company.
LES will service clients in all aspects of the oil, gas and energy Industries
including but not limited to oil and gas drilling and production operations,
refining and associated processing operations, synthetic crude production
operations and associated tailing or storage sites, pipeline and distribution
operations and other associated operations.
HYDRAULIC FRACTURING-SHALE BEDS, OIL GAS SHALE BEDS
LES is aggressively developing opportunities relating to the remediation of the
large volumes of contaminated water resulting from the use of hydraulic
fracturing process in various shale deposits particularly the Barnett Shale in
Texas and the Marcellus shale located in New York, Pennsylvania and Ohio.
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6709800 CANADA, INC. DBA GPSLATITUDE ("GPSLATITUDE ") - TECHNOLOGY/SOFTWARE
HARDWARE GROUP
GpsLatitude offers a line of secure, intelligent, mobile wireless gateways that
offer secure, cost effective and always-on live data exchange between any remote
mobile device to a control center and back to any mobile device(s). This data
exchange is available on a global scale. The technologies' ability to
inexpensively capture and transmit real time, full environment (360o) video and
audio as well as sophisticated telemetry and wireless data allows for a broad
range of applications.
GpsLatitude's technology is focused into the following markets:
-Early responders, Police, Firefighters
-Public Transportation
-Military
-Broadcast
GpsLatitude's research and development activities are focused on the development
of improvements to its current products and technology. The mobile wireless
gateways are considered developed and proven and are being marketed to potential
customers.
GpsLatitude markets their wireless gateways not only directly through their
efforts and the efforts of Trinity Solutions, but also in the development of
industry relationships, which could take the form of licensing agreements,
agency agreements and strategic alliances.
Currently, the Royal Canadian Mounted Police (RCMP) are utilizing the Company's
products.
On August 6, 2010, GpsLatitude entered into an Alliance Marketing Agreement
("Alliance Agreement") with Bell Mobility, Inc. to co-market and co-sell Bell
services combing with the wireless applications of GpsLatitude. The Alliance
Agreement has a term of one year and can be renewed for additional one year
terms, if the parties agree.
In February 2010, GpsLatitude was a speaker at the General Dynamic Itronix's
European Business Partner Summit, as part of the General Dynamic's ACES Partner
Program. The program has been developed by General Dynamic in order to develop
long-term business relationships with partners. At the time of this filing,
GpsLatitude has been offered and accepted an invitation to be a part of the ACES
Partner Program. There is no written agreement between GpsLatitude and General
Dynamic at this time.
TRINITY SOLUTIONS, INC. ("TRINITY SOLUTIONS") - SALES AND MARKETING DEVELOPMENT
GROUP
Trinity Solutions is designed to maximize the opportunities available for
federal and state contracts and other business opportunities. Trinity Solutions
is designed to provide Latitude Solution's other business units, strategic
partners and licensees with advantages to capture portions of these funds by
utilizing strategic business alliances with selected tribes and other
governmental strategic relationships.
Marketing advantages in the federal marketplace result from the unique contract
bidding status of tribal "Super Certified" (8a, Hub Zone, Small Disadvantaged
Business (SDB), and Disadvantaged Business Entity (DBE)) accreditation derived
from the Small Business Administration and the U.S. Department of
Transportation.
On December 18, 2008, Trinity Solutions entered into a Strategic Alliance
Agreement with Applied Geo Technologies, a tribally chartered corporation wholly
owned by the Mississippi Band of Choctaw Indians d/b/a Chahta Enterprises. This
strategic alliance will allow us to actively compete for and participate in
technology and government related contracts. The Strategic Alliance Agreement
had an initial term of one year (December 17, 2009) and self renews for
successive one year terms, unless either party two months prior to the term date
gives written notice.
The Strategic Alliance Agreement provides for both parties to work together to
bring together specific mutually beneficial projects that maximize the relative
strengths of each party and minimize potential weak areas of either party by the
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use of the other parties recognized areas of strength. Each party bears its own
costs arising out of the obligations of the Strategic Alliance Agreement and
compensation to be determined on a project by project basis.
LSI's subsidiaries contain proprietary technologies, research and development
capabilities for new products as well as robust marketing capabilities for both
government and commercial sectors. Latitude Solutions, Inc. has capability to
provide its subsidiaries' strategic partners and licensee's access to the
markets for the future by addressing the needs of critical governmental
departments which receive full budget funding for defense, anti-terrorism and
critical infrastructure needs as part of the nation's new infrastructure
stimulus package.
COMPETITION
LATITUDE CLEAN TECH AND LATITUDE ENERGY
The companies that we compete with are larger and in many situations better
capitalized then our operations. We compete against companies such as Seimen's,
General Electric and Ecosphere, among others. Latitude Clean Tech's and LES's
primary competitors/alternatives are companies that provide solutions either on
the front end or back end.
We have not been able to identify a competitor that can provide the solution to
water problems pertaining to the remediation of suspended solids and colloidal
suspensions. The competitive advantages of our technology, includes the low cost
of operation, the ability to recycle large volumes of wastewater, the size and
footprint of our units compared to technologies currently being offered.
Additionally, our technology destroys the cells of viruses, bacteria, cysts,
parasites, while removing heavy metals and emulsions.
Energy companies use many different methods and approaches in dealing with
various types of oily waters resulting from oil recovery operations. The primary
method of dealing with these waters throughout the United States is hauling them
to permitted underground injection sites. We treat the oily waters at the well
site. We believe that our pricing structure combined with the mobility of our
solution and the ability to recycle large volumes provides an alternative to
current methods that energy companies will prefer.
GPSLATITUDE
The law enforcement in-car video market is highly competitive. Digital in-car
video is a quickly evolving technology, and the market continues to grow as
digital technology gains widespread acceptance. Outdated analog video systems
are being replaced by digital systems, and many communities are purchasing
in-car video for the first time.
GpsLatitude's products meet the needs of the high-end mobile video market. We
believe that our major competitors in the law enforcement sector are L-3
Communications, MobileVision, Panasonic, and Coban Technologies, Inc. Some of
these competitors have significant advantages over the Company, including
greater financial, technical, marketing or manufacturing resources, preferred
vendor status with existing customer base, more extensive distribution channels,
or faster response times to new or emerging technologies. Additionally, new
competitors may enter the market with new products and technology. The Company
seeks to offset these potential exposures in the market place through expansion
of its strategic partnerships, such as Bell Canada.
RESEARCH AND DEVELOPMENT
All research and development costs are charged to results of operations as
incurred. These expenses relate to salaries, consulting fees and other expenses
related to the development of technology that allows for the wireless transfer
of data to mobile receivers. These costs are included in operating expenses and
are net of research and development reimbursements received from the Canadian
Revenue Agency and from Revenue Quebec. These costs were $31,104 and $39,959 for
the years ended January 31, 2010 and 2009.
In connection with the proprietary technology of Latitude Clean Tech Group, the
Company holds a patent application and trademarks, as discussed below.
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FACILITIES
The corporate headquarters for Latitude Solutions, Inc. operates out of Boca
Raton, Florida, and operates out of an office building that occupies over 3,000
square feet. This space also includes our corporate headquarters for Latitude
Clean Tech Group, Inc., Latitude Energy Services, LLC and Trinity Solutions,
Inc. The space is rented under a lease agreement for a period of 5 years and an
annual rent of $66,000.
Latitude Clean Tech Group, Inc. operates out of Boca Raton, Florida, and
operates out of a warehouse building that occupies over 3,000 square feet. This
space is rented under a lease agreement for a period of 1 year and an annual
rent of $12,000
GpsLatitude is headquartered in Montreal, Canada and is operating in a facility
that is in the city of Montreal, Borough of St. Laurent, Province of Quebec. .
We recently entered into a lease agreement that provides 5,000 square feet of
office, production and laboratory space being part of the building. The lease is
for a period of 10 years. As part of the lease agreement, we pay $60,000
annually in rent.
Latitude Solutions, Inc. entered into a lease providing space for a laboratory
in Colorado Springs, Colorado. The term of the lease is for 5 years and the
first year's obligation in rent is $18,400.
NUMBER OF PERSONS EMPLOYED
As of December 31, 2010, the Company including its divisions has 16 full-time
employees and 1 part-time employee.
GOVERNMENT REGULATION
When we completed the acquisition of GpsLatitude and Trinity Solutions, our
business became subject to certain government regulations and dealing with
various government agencies. Certain GpsLatitude products rely on global
positioning systems that are controlled, monitored, maintained and operated by
the United States Department of Defense, which does not currently charge users
for access to satellite signals. The U.S. government may revise or add to
existing policies that could change the way users of the systems do business.
Also, global positioning system technology is dependent on the use of the
Standard Positioning Service ("SPS") provided by U.S. Government satellites,
which operate in radio frequency bands that are globally allocated for radio
navigation satellite services. The assignment of spectrum is controlled by the
International Telecommunications Union ("ITU"). The Federal Communications
Commission ("FCC") is responsible for the assignment of spectrum for
non-government use in the U.S., in accordance with ITU regulations. Any ITU or
FCC reallocation of radio frequency spectrum, including frequency band
segmentation or sharing of spectrum, could cause interference with the reception
of signals, which could affect the utility and reliability of equipment. Any new
technologies and services, such as ultra-wideband technologies, which
GpsLatitude may propose, will have to be approved by the FCC.
Trinity Solutions is designed to provide the Company with marketing and sales
capabilities to identify the opportunities available for federal and state
government contracts. If the Company is to enter into contracts with and federal
or state government entities, the Company could become subject to those entities
jurisdiction and regulations.
As a result, the Company may deal with numerous federal agencies and entities,
including the Departments of Defense, Energy, Justice, Health and Human
Services, Homeland Security, State, and Transportation. Similar government
authorities exist in other countries and regulate our state or provincial
efforts.
-8-
The Company would be required to comply with and would be affected by laws and
regulations relating to the formation, administration, and performance of U.S.
Government and other contracts. These laws and regulations, include among other
things:
o require certification and disclosure of all cost or pricing data in
connection with certain contract negotiations;
o impose specific and unique cost accounting practices that may differ
from U.S. generally accepted accounting principles (GAAP) and
therefore require reconciliation;
o impose acquisition regulations that define allowable and unallowable
costs and otherwise govern our right to reimbursement under certain
cost-based U.S. Government contracts; and
o restrict the use and dissemination of information classified for
national security purposes and the export of certain products and
technical data.
Government contracts are conditioned upon the continuing availability of
legislative appropriations. Long-term government contracts and related orders
are subject to cancellation if appropriations for subsequent performance periods
become unavailable. Congress usually appropriates funds on a fiscal-year basis
even though contract performance may extend over many years. Consequently, at
the outset of a program, the contract is usually partially funded, and Congress
annually determines if additional funds are to be appropriated to the contract.
The U.S. Government and other governments may terminate any of our government
contracts or subcontracts either at their convenience or for default based on
performance.
OFF BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
DESCRIPTION OF PROPERTIES/ASSETS
Real Estate. None.
Title to properties. None.
Patents. Provisional Patent Application #US
61/356,027 for "Method and for
producing high volumes of clean
water by Electro Coagulation", filed
with the United States Patent Office
on June 17, 2010. Currently, the
application is in the one year
holding stage of the patent grant
process.
Trademarks Integrated Water Technologies Serial # 85020427
Integrated Water Systems Serial #85019655
Integrated Water Solutions Serial #85019721
Clean Tech Serial #85066606
Electro Precipitation Serial #85066594
-9-
ITEM 1A. RISK FACTORS
---------------------
FORWARD LOOKING STATEMENTS
THIS DOCUMENT INCLUDES FORWARD-LOOKING STATEMENTS, INCLUDING, WITHOUT
LIMITATION, STATEMENTS RELATING TO LSI'S PLANS, STRATEGIES, OBJECTIVES,
EXPECTATIONS, INTENTIONS AND ADEQUACY OF RESOURCES. THESE FORWARD-LOOKING
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES, AND OTHER FACTORS
THAT MAY CAUSE LSI'S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO BE
MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS. THESE FACTORS INCLUDE,
AMONG OTHERS, THE FOLLOWING: ABILITY OF LSI TO IMPLEMENT ITS BUSINESS STRATEGY;
ABILITY TO OBTAIN ADDITIONAL FINANCING; LSI'S LIMITED OPERATING HISTORY; UNKNOWN
LIABILITIES ASSOCIATED WITH FUTURE ACQUISITIONS; ABILITY TO MANAGE GROWTH;
SIGNIFICANT COMPETITION; ABILITY TO ATTRACT AND RETAIN TALENTED EMPLOYEES; AND
FUTURE GOVERNMENT REGULATIONS; AND OTHER FACTORS DESCRIBED IN THIS REGISTRATION
STATEMENT OR IN OTHER OF LSI'S FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION. LSI IS UNDER NO OBLIGATION, TO PUBLICLY UPDATE OR REVISE ANY
FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
EVENTS OR OTHERWISE.
RISK FACTORS RELATING TO THE COMPANY AND BUSINESS
The following risk factors, as well as all other information set forth elsewhere
in this registration statement, should be carefully considered before purchasing
any of the shares of our common stock.
LSI HAS LIMITED WORKING CAPITAL AND LIMITED CASH FUNDS.
The capital needs of LSI are projected to be $4,500,000 during the first 12
months of operations as outlined in the 12 Month Budget on Page 35. Such funds
are not fully committed, at this time.
LSI has limited funds, and such funds may not be adequate to carry out the
business plan. The ultimate success of LSI may depend upon its ability to raise
additional capital. LSI has investigated the availability, source, or terms that
might govern the acquisition of additional capital. If additional capital is
needed, there is no assurance that funds will be available from any source or,
if available, that they can be obtained on terms acceptable to LSI. If not
available, LSI's operations will be limited to those that can be financed with
its modest capital.
WE HAVE NO REVENUES TO SUSTAIN OUR OPERATIONS.
We are currently developing our business and have generated no revenues. We are
not able to predict whether we will be able to develop our business and generate
significant revenues. If we are not able to complete the successful development
of our business plan, generate significant revenues and attain sustainable
operations, then our business will fail.
WE HAVE CONVERTIBLE DEBT WHICH IS CONVERTIBLE INTO OUR COMMON STOCK. A
CONVERSION OF SUCH DEBT COULD HAVE A DILUTIVE EFFECT TO EXISTING SHAREHOLDERS.
At December 31, 2010 and December 31, 2009, we have outstanding convertible
notes payable of $2,378,583 and $717,302 which is net of a discount of $409,428
and $108,509, respectively. Such notes are due six months from the date of
issuance and are convertible into shares of our common stock in whole or in part
at a conversion price of $1.00 per share. When the note payables are converted
into shares of our common stock this could have a dilutive effect to the
holdings of our existing shareholders.
WE WILL INCUR EXPENSES IN CONNECTION WITH OUR SEC FILING REQUIREMENTS AND WE MAY
NOT BE ABLE TO MEET SUCH COSTS, WHICH COULD JEOPARDIZE OUR FILING STATUS WITH
THE SEC.
We expect to incur operational expenses as a result of becoming a public company
in order to meet the filing requirements of the SEC. We may see an increase in
our legal and accounting expenses as a result of such requirements. We estimate
-10-
such costs on an annualized basis to be approximately $75,000, which includes
both the annual audit and the review of the quarterly reports by our auditors.
These costs can increase significantly if the Company is subject comment from
the SEC on its filings and/or we are required to file supplemental filings for
transactions and activities. If we are not compliant in meeting the filing
requirements of the SEC, we could lose our status as a 1934 Act Company, which
could compromise our ability to raise funds.
WE HAVE A MINIMAL OPERATING HISTORY, SO INVESTORS HAVE NO WAY TO GAUGE OUR LONG
TERM PERFORMANCE.
Our current operations were begun in March 2009. During the year ended December
31, 2010, we did not recognize revenues from our operational activities. During
the year ended December 31, 2010, we recognized a net loss of ($4,315,476) on a
consolidated basis. We must be regarded as a development venture with all of the
unforeseen costs, expenses, problems, and difficulties to which such ventures
are subject. Our venture must be considered highly speculative.
WE MAY BE UNABLE TO OBTAIN AND RETAIN APPROPRIATE PATENT AND TRADEMARK
PROTECTION OF OUR PRODUCTS AND SERVICES
We protect our intellectual property rights through patents, trademarks, trade
names, trade secrets and a variety of other measures. However, these measures
may be inadequate to protect our intellectual property or other proprietary
information.
o Trade secrets may become known by third parties. Our trade secrets or
proprietary technology may become known or be independently developed
by competitors.
o Rights to patent applications and trade secrets may be invalidated.
Disputes may arise with third parties over the ownership of our
intellectual property rights. Patents may be invalidated, circumvented
or challenged, and the rights granted under the patent application
that provide us with a competitive advantage may be nullified.
o Problems with future patent applications. Pending or future patent
applications may not be approved, or the scope of the granted patent
may be less than the coverage sought.
o Infringement claims by third parties. Infringement, invalidity, right
to use or ownership claims by third parties or claims for
indemnification may be asserted by third parties in the future. If any
claims or actions are asserted against us, we can attempt to obtain a
license for that third party's intellectual property rights. However,
the third party may not provide a license under reasonable terms, or
may not provide us with a license at all.
o Litigation may be required to protect intellectual property rights.
Litigation may be necessary to protect our intellectual property
rights and trade secrets, to determine the validity of and scope of
the rights of third parties or to defend against claims of
infringement or invalidity by third parties. Such litigation could be
expensive, would divert resources and management's time from our sales
and marketing efforts, and could have a materially adverse effect on
our business, financial condition and results of operations.
OUR SUCCESS DEPENDS SUBSTANTIALLY ON THE CONTINUED RETENTION OF CERTAIN KEY
PERSONNEL AND OUR ABILITY TO HIRE AND RETAIN QUALIFIED PERSONNEL IN THE FUTURE
TO SUPPORT OUR GROWTH.
If one or more of our senior executives or other key personnel are unable or
unwilling to continue in their present positions, we may not be able to replace
them easily or at all. As a result, our business may be disrupted and our
financial condition and results of operations may be materially and adversely
affected. While we depend on the abilities and participation of our current
management team generally, we have a particular reliance upon Mr. Harvey Kaye,
Chief Executive Officer and Mr. Matthew J. Cohen, Chief Operating Officer and
Chief Financial Officer. The loss of the services of Mr. Kaye or Mr. Cohen for
any reason could significantly impact our business and results of operations.
-11-
OUR OFFICERS AND DIRECTORS MAY HAVE CONFLICTS OF INTEREST WHICH MAY NOT BE
RESOLVED FAVORABLY TO US.
Certain conflicts of interest may exist between us and our officers and
directors. Our Officers and Directors have other business interests to which
they devote their attention and may be expected to continue to do so although
management time should be devoted to our business. As a result, conflicts of
interest may arise that can be resolved only through exercise of such judgment
as is consistent with fiduciary duties to us.
LSI IS A HOLDING COMPANY, AND THERE ARE LIMITATIONS ON ITS ABILITY TO RECEIVE
DISTRIBUTIONS FROM ITS SUBSIDIARIES.
We conduct all of our operations through subsidiaries and are dependent upon
dividends or other intercompany transfers of funds from our subsidiaries to meet
our obligations. Moreover, some of our subsidiaries are currently, or are
expected in the future to be, limited in their ability to pay dividends or make
distributions to us by the terms of their financing agreements. We cannot make
any assurances that we will be able to continue to fund our activities in such
manner.
OUR OFFICERS AND DIRECTORS ARE THE MAJORITY SHAREHOLDERS OF THE COMPANY. AS
SUCH, THERE IS A POSSIBILITY OF THEM CONTROLLING THE COMPANY TO THE DETRIMENT OF
OUTSIDERS.
Messrs. Kaye, Cohen, Blasland and Rowinski, officers and directors of the
Company, are majority shareholders of the Company. As such they will be able to
control the operations and the direction of the Company with very little outside
influence.
In addition, all are directors of the Company and as such have the ability to
approve and set their employment agreements and compensation with very little
outside influence. In addition, the employment agreements of all four
individuals provide for a cash bonus of equivalent to 15% of the prior twelve
(12) month's annual compensation, contingent on the Company reaching revenue,
and gross profit targets per year as defined in writing with the Board of
Directors before the commencement of each fiscal year.
RISK FACTORS RELATING TO THE COMPANY'S SUBSIDIARIES
LATITUDE CLEAN TECH GROUP, LATITUDE ENERGY SERVICES, GPSLATITUDE AND TRINITY
SOLUTIONS HAVE LIMITED OPERATING HISTORIES AND LSI WAS INACTIVE FOR SEVERAL
YEARS. IF WE FAIL TO GENERATE PROFITS IN THE FUTURE, WE MAY EXHAUST OUR CAPITAL
RESOURCES AND BE FORCED TO DISCONTINUE OPERATIONS.
Latitude Clean Tech Group and Trinity Solutions were organized in 2009 and have
a limited operating history. Latitude Energy Services was organized in February
2011 and has a limited operating history. GpsLatitude was created in February
2007, specifically to develop and design mobile wireless products and also has a
limited operating history. The potential for us to generate profits depends on
many factors, including the following:
o our ability to secure adequate funding to facilitate the anticipated
business plan and goals of GpsLatitude, Latitude Clean Tech Group,
Latitude Energy Services and Trinity Solutions;
o the size and timing of future client contracts, milestone achievement,
service delivery and client acceptance;
o success in developing, maintaining and enhancing strategic
relationships with potential business partners;
o actions by competitors towards the development and marketing of
technologies, products and services that will compete directly with
ours;
o the costs of maintaining and expanding operations; and
o our ability to attract and retain a qualified work force.
-12-
We cannot assure you that we will achieve any of the foregoing factors or
realize profitability in the immediate future or at any time.
SOME OF OUR GPSLATITUDE PRODUCTS RELY ON A GLOBAL POSITIONING SYSTEM THAT MAY BE
SUBJECT TO TECHNOLOGICAL DIFFICULTIES AND FAILURES.
Certain GpsLatitude's products rely on a global positioning system, which is a
satellite-based navigation and positioning systems consisting of a constellation
of orbiting satellites. The satellites and their ground control and monitoring
stations are maintained and operated by the United States Department of Defense,
which does not currently charge users for access to the satellite signals. These
satellites and their ground support systems are complex electronic systems
subject to electronic and mechanical failures and possible sabotage. The
satellites were originally designed to have lives of 7.5 years and are subject
to damage by the hostile space environment in which they operate. However, of
the current deployment of satellites in place, some have been operating for more
than 13 years. If a significant number of satellites were to become inoperable,
unavailable or are not replaced, it would impair the current utility
GpsLatitude's global positioning system products and have a material negative
effect on our business. In addition, there can be no assurance that the U.S.
government will remain committed to the operation and maintenance of global
positioning system satellites over a long period, or that the policies of the
U.S. government that provide for the use of the system without charge and
without accuracy degradation, will remain unchanged. Any curtailment of the
operating capability of the satellites could result in decreased user capability
for some of GpsLatitude's products, thereby impacting markets and prospective
sales.
ANY REALLOCATION OF RADIO FREQUENCY SPECTRUM COULD CAUSE INTERFERENCE WITH THE
RECEPTION OF GLOBAL POSITIONING SYSTEM SIGNAL, WHICH COULD HARM GPSLATITUDE
BUSINESS.
Global positioning system technology is dependent on the use of the Standard
Positioning Service ("SPS") provided by U.S. Government satellites. A global
positioning system operates in radio frequency bands that are globally allocated
for radio navigation satellite services. The assignment of spectrum is
controlled by an international organization known as the International
Telecommunications Union ("ITU"). The Federal Communications Commission ("FCC")
is responsible for the assignment of spectrum for non-government use in the U.S.
in accordance with ITU regulations. Any ITU or FCC reallocation of radio
frequency spectrum, including frequency band segmentation or sharing of
spectrum, could cause interference with the reception of signal and may
materially and adversely affect the utility and reliability of GpsLatitude
products, which would, in turn, have a material adverse effect on operating
results. In addition, emissions from mobile satellite service and other
equipment operating in adjacent frequency bands or in band, may materially and
adversely affect the utility and reliability of our products, which could result
in a material adverse effect on our operating results. The FCC continually
receives proposals for new technologies and services, such as ultra-wideband
technologies, which may seek to operate in, or across, the radio frequency bands
currently used by the GPS SPS. Adverse decisions by the FCC that result in
harmful interference to the delivery of the signal may materially and adversely
affect the utility and reliability of GpsLatitude products, which could result
in a material adverse effect on our business and financial condition.
IF WE FAIL TO KEEP UP WITH CHANGES AFFECTING OUR TECHNOLOGY AND THE MARKETS THAT
WE SERVICE, WE WILL BECOME LESS COMPETITIVE AND THUS ADVERSELY AFFECT FUTURE
FINANCIAL PERFORMANCE.
We expect that a significant portion of our future revenue will be derived from
sales of newly introduced technology and products. In order to remain
competitive and serve customers effectively, we must respond on a timely and
cost-efficient basis to changes in technology, industry standards and procedures
and customer preferences. In some cases these changes may be significant and the
cost to comply with these changes may be substantial. Also, there can be no
assurance that development stage products can be successfully completed or, if
developed, will achieve significant customer acceptance. We may need to license
new technologies to respond to technological change. These licenses may not be
available to us on terms that we can accept or may materially change the gross
profits that we are able to obtain on our products. We cannot assure you that we
will be able to adapt to any technological and product changes in the future or
that we will have the financial resources to keep up with changes in the
marketplace. Also, the cost of adapting to new technology, products and services
may have a material and adverse effect on our operating results.
-13-
FAILURE TO OBTAIN REQUIRED CERTIFICATIONS OF OUR PRODUCTS ON A TIMELY BASIS
COULD HARM OUR BUSINESS.
We have certain products that are subject to certifications before they can be
sold. To the extent required, certification is an expensive and time-consuming
process that requires significant focus and resources. With respect to the
healthcare industry and FCC certification is required and would cost in excess
of $5,000. In addition, United Laboratory Certification may be required for a
cost of $25,000. An inability to obtain, or excessive delay in obtaining, such
certifications could have an adverse effect on our ability to introduce some of
our existing or new products.
WE RELY ON INDEPENDENT DEALERS AND DISTRIBUTORS TO SELL OUR PRODUCTS AND ANY
DISRUPTION TO THESE CHANNELS WOULD HARM OUR BUSINESS.
Because we anticipate marketing a majority of our products to independent
dealers and distributors, we are subject to many risks, including risks related
to their inventory levels and support for our products. If dealers and
distributors do not have sufficient levels of inventory, or if they do not
maintain sufficient levels to meet customer demand, our sales could be
negatively impacted.
BECAUSE OF THE PRODUCTS AND SERVICES WE WILL OFFER, WE MAY BECOME SUBJECT TO
SIGNIFICANT PRODUCT LIABILITY EXPOSURE.
We will be dependent on third party suppliers for various components used in our
current technology and products. Some of the components that we procure from
third party suppliers include semiconductors and memory chips, batteries and
microprocessors, some of which are the sole source of the components. The cost,
quality and availability of components are essential to the successful
production and sale of our products. Any significant disruption in the source of
these components could seriously impact production of our products and seriously
harm our ability to market these products.
IF WE ARE UNABLE TO COMPETE EFFECTIVELY WITH EXISTING OR NEW COMPETITORS, OUR
RESULTING LOSS OF COMPETITIVE POSITION COULD RESULT IN PRICE REDUCTIONS, FEWER
CUSTOMER ORDERS, REDUCED MARGINS AND LOSS OF MARKET SHARE.
There are numerous competitors in the market places in which we will be
marketing our products and we expect competition to increase in the future. Many
of our competitors have significantly greater financial, technical and marketing
resources than we do. These competitors may be able to respond more rapidly to
new or emerging technologies or changes in customer requirements. They may also
be able to devote greater resources to the development, promotion and sale of
their products. Increased competition could result in price reductions, fewer
customer orders, reduced margins and loss of market share. Our failure to
compete successfully against current or future competitors could seriously harm
our business, financial condition and results of operations.
WE MAY NOT BE ABLE TO MANAGE FUTURE GROWTH EFFECTIVELY, WHICH COULD ADVERSELY
AFFECT OUR OPERATIONS AND FINANCIAL PERFORMANCE.
The ability to manage and operate our business as we execute our development and
growth strategy will require effective planning. Significant rapid growth could
strain management and internal resources and cause other problems that could
adversely affect our financial performance. We expect that our efforts to grow
will place a significant strain on personnel, management systems, infrastructure
and other resources. Our ability to manage future growth effectively will also
require us to successfully attract, train, motivate, retain and manage new
employees and continue to update and improve our operational, financial and
management controls and procedures. Further, our ability to successfully offer
our products and implement our business plan in a rapidly evolving market
requires an effective planning and management process. We plan to increase the
scope of our operations domestically and our anticipated growth in future
operations will continue to place, a significant strain on our management
systems and resources. If we do not manage our growth effectively, our
operations could be adversely affected, resulting in slower growth and a failure
to achieve or sustain profitability.
-14-
GROSS MARGINS FOR OUR PRODUCTS MAY FLUCTUATE OR ERODE IN THE FUTURE.
Our future overall gross margin may fluctuate from period to period due to a
number of factors, including product mix, competition and unit volumes. In
particular, the average selling prices of a specific product tend to decrease
over that product's life. To offset such decreases, we intend to rely primarily
on component cost reduction, obtaining yield improvements and corresponding cost
reductions in the manufacture of existing products and on introducing new
products that incorporate advanced features and therefore can be sold at higher
average selling prices. However, there can be no assurance that we will be able
to obtain any such yield improvements or cost reductions or introduce any such
new products in the future. To the extent that such cost reductions and new
product introductions do not occur in a timely manner or our products do not
achieve market acceptance, our business, financial condition and results of
operations could be materially adversely affected.
OUR BUSINESS IS SUBJECT TO ECONOMIC, POLITICAL AND OTHER RISKS ASSOCIATED WITH
INTERNATIONAL SALES AND OPERATIONS.
Our business is subject to various risks associated with doing business
internationally. We estimate that approximately 20% of our net sales in the next
12 months could represent products shipped to international destinations,
specifically in Denmark, Saudi Arabia, Lebanon and Africa. Accordingly, our
business, financial condition and results of operations could be harmed by a
variety of international factors, including:
o changes in foreign currency exchange rates;
o changes in a specific country's or region's political or economic
conditions;
o trade protection measures and import or export licensing requirements;
o potentially negative consequences from changes in tax laws;
o difficulty in managing widespread sales and manufacturing operations;
o acts of war, terrorism, or political unrest; and
o less effective protection of intellectual property.
If any of these risks become reality, we would most likely experience business
difficulties that would negatively affect our results of operations.
RISKS RELATING TO OWNERSHIP LSI COMMON STOCK
THERE IS A LIMITED TRADING MARKET FOR LSI'S COMMON STOCK, THEREBY LIMITING A
SHAREHOLDERS' OPPORTUNITY TO SELL SUCH COMMON STOCK.
Currently, only a limited trading market exists for LSI's common stock. The
common stock trades on the Over The Counter QB Market (OTCQB) under the symbol
"LATI." The OTCQB is a limited market and subject to substantial restrictions
and limitations in comparison to the NASDAQ system. Any broker/dealer that makes
a market in the Company's stock or other person that buys or sells LSI stock
could have a significant influence over its price at any given time. LSI cannot
assure its shareholders that a greater market for LSI's common stock will be
sustained. There is no assurance that LSI's common stock will have any greater
liquidity than shares that do not trade on a public market. A shareholder may be
required to retain their shares for an indefinite period of time, and may not be
able to liquidate their shares in the event of an emergency or for any other
reasons.
THE REGULATION OF PENNY STOCKS BY SEC AND FINRA MAY DISCOURAGE THE TRADABILITY
OF OUR SECURITIES.
We are a "penny stock" company. Our securities currently trade on the Pink
Sheets market and are subject to a Securities and Exchange Commission rule that
-15-
imposes special sales practice requirements upon broker-dealers who sell such
securities to persons other than established customers or accredited investors.
For purposes of the rule, the phrase "accredited investors" means, in general
terms, institutions with assets in excess of $5,000,000, or individuals having a
net worth in excess of $1,000,000 or having an annual income that exceeds
$200,000 (or that, when combined with a spouse's income, exceeds $300,000). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Effectively, this discourages
broker-dealers from executing trades in penny stocks. Consequently, the rule
will affect the ability of purchasers in this offering to sell their securities
in any market that might develop therefore because it imposes additional
regulatory burdens on penny stock transactions.
In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2,
15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange
Act of 1934, as amended. Because our securities constitute "penny stocks" within
the meaning of the rules, the rules would apply to us and to our securities. The
rules will further affect the ability of owners of shares to sell our securities
in any market that might develop for them because it imposes additional
regulatory burdens on penny stock transactions.
Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the security by one or a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and undisclosed
bid-ask differentials and markups by selling broker-dealers; and (v) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired consequent shareholder 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 COMPANY WILL PAY NO FORESEEABLE DIVIDENDS IN THE FUTURE.
LSI has not paid dividends on its common stock and do not ever anticipate paying
such dividends in the foreseeable future.
RULE 144 SALES IN THE FUTURE MAY HAVE A DEPRESSIVE EFFECT ON LSI STOCK PRICE.
A portion of the outstanding shares of common stock are held by LSI present
officers, directors, and affiliate stockholders as "restricted securities"
within the meaning of Rule 144 under the Securities Act of 1933, as amended. As
restricted Shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other applicable
exemptions from registration under the Act and as required under applicable
state securities laws. Rule 144 provides in essence that a person who has held
restricted securities for six months may, under certain conditions, sell every
three months, in brokerage transactions, a number of shares that does not exceed
the greater of 1.0% of a company's outstanding common stock or the average
weekly trading volume during the four calendar weeks prior to the sale. There is
no limit on the amount of restricted securities that may be sold by a
non-affiliate after the owner has held the restricted securities for a period of
two years. A sale under Rule 144 or under any other exemption from the Act, if
available, or pursuant to subsequent registration of shares of common stock of
present stockholders, may have a depressive effect upon the price of the common
stock in any market that may develop.
LSI INVESTORS MAY SUFFER FUTURE DILUTION DUE TO ISSUANCES OF SHARES FOR VARIOUS
CONSIDERATIONS IN THE FUTURE.
There may be substantial dilution to LSI shareholders as a result of future
decisions of the Board to issue shares without shareholder approval for cash,
services, or acquisitions.
-16-
LSI STOCK WILL IN ALL LIKELIHOOD BE THINLY TRADED AND AS A RESULT AN INVESTOR
MAY BE UNABLE TO SELL AT OR NEAR ASK PRICES OR AT ALL IF THE INVESTOR NEEDS TO
LIQUIDATE SHARES.
The shares of LSI's common stock is thinly-traded in the OTCQB, meaning that the
number of persons interested in purchasing LSI common shares at or near ask
prices at any given time may be relatively small or non-existent. This situation
is attributable to a number of factors, including the fact that LSI is a small
company which is relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community that generate or
influence sales volume, and that even if LSI came to the attention of such
persons, they tend to be risk-averse and would be reluctant to follow an
unproven, early stage company such as LSI or purchase or recommend the purchase
of any of LSI's securities until such time as LSI becomes more seasoned and
viable. As a consequence, there may be periods of several days or more when
trading activity in LSI securities is minimal or non-existent, as compared to a
seasoned issuer which has a large and steady volume of trading activity that
will generally support continuous sales without an adverse effect on securities
price. LSI cannot give you any assurance that a broader or more active public
trading market for LSI common securities will develop or be sustained, or that
any trading levels will be sustained. Due to these conditions, LSI can give
investors no assurance that they will be able to sell their shares at or near
ask prices or at all if the investor needs money or otherwise desires to
liquidate the securities of LSI.
TRADING IN OUR SHARES IN THE PUBLIC MARKET WILL MOST LIKELY BE VOLATILE BECAUSE
OF FACTORS BEYOND OUR CONTROL.
There can be no assurance that our shares will continue to be quoted on the
OTCQB or that they will be accepted for trading on another recognized trading
market, or that if they are, there will be an active trading market for the
shares. Accordingly, it could be difficult for holders of our common stock to
liquidate their shares.
The market price of our common stock could be subject to significant
fluctuations and the market price could be subject to any of the following
factors:
o our failure to achieve and maintain profitability;
o changes in earnings estimates and recommendations by financial
analysts;
o actual or anticipated variations in our quarterly and annual results
of operations;
o changes in market valuations of similar companies;
o announcements by us or our competitors of significant contracts, new
services, acquisitions, commercial relationships, joint ventures or
capital commitments;
o loss of significant clients or customers;
o loss of significant strategic relationships; and
o general market, political and economic conditions.
In the past, following periods of extreme volatility in the market price of a
company's securities, securities class action litigation has often been
instituted. A securities class action suit against us could result in
substantial costs and divert our management's time and attention, which would
otherwise be used to benefit our business.
ITEM 1B. UNRESOLVED STAFF COMMENTS
----------------------------------
Not Applicable.
-17-
ITEM 2. PROPERTIES
-------------------
Our executive offices are located at 190 NW Spanish River Blvd., Suite 101, Boca
Raton, Florida 33431 and the telephone number is (561) 417-0644 and the
facsimile number is (561) 417-0560. We pay a monthly charge of $5,500 to use the
office space for our operations. The lease has a term of 5 years. This space
also includes our corporate headquarters for Latitude Clean Tech Group, Inc.,
Trinity Solutions, Inc. and Latitude Energy Services, LLC.
During the year ended December 31, 2010, the Company completed construction of
its water plant with a capacity to treat 200 gallons per minute. The water plant
is located at our manufacturing facility located in Colorado Springs, Colorado.
GPSLATITUDE
Latitude Clean Tech Group, Inc. operates a lab out of Boca Raton, Florida, out
of a warehouse building that occupies over 3,000 square feet. This space is
rented under a lease agreement for a period of 1 year and an annual rent of
$12,000
GpsLatitude is headquartered in Montreal, Canada and is operating in a facility
that is in the city of Montreal, Borough of St. Laurent, Province of Quebec. We
recently entered into a lease agreement that provides 5,000 square feet of
office, production and laboratory space being part of the building. The lease is
for a period of 10 years. As part of the lease agreement, we pay $60,000
annually in rent.
Latitude Solutions, Inc. entered into a lease providing space for a laboratory
in Colorado Springs, Colorado. The term of the lease is for 5 years and the
first year's obligation in rent is $18,400.
ITEM 3. LEGAL PROCEEDINGS
--------------------------
LSI anticipates that it (including any future subsidiaries) will from time to
time become subject to claims and legal proceedings arising in the ordinary
course of business. It is not feasible to predict the outcome of any such
proceedings and LSI cannot assure that their ultimate disposition will not have
a materially adverse effect on LSI's business, financial condition, cash flows
or results of operations. As of the filing of this document we are not a party
to any pending legal proceedings, nor are we aware of any civil proceeding or
government authority contemplating any legal proceeding.
ITEM 4. (REMOVED AND RESERVED)
-------------------------------
(REMAINDER OF PAGE LEFT BLANK INTENTIONALLY)
-18-
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
--------------------------------------------------------------------------------
MARKET INFORMATION
There is a limited public trading market for the common stock. The Company's
symbol is "LATI" on the OTCQB.
HIGH LOW
QUARTER ENDED:
December 31, 2010 $3.50 $2.50
September 30, 2010 $4.50 $3.50
June 30, 2010 $4.00 $3.00
March 31, 2010 $3.00 $2.00
HIGH LOW
QUARTER ENDED:
December 31, 2009 $2.50 $1.25
September 30, 2009 $5.3793 $1.00
June 30, 2009 $5.7991 $0.2320
March 31, 2009 $5.7991 $5.7991
HOLDERS
As of December 31, 2010, we had approximately 277 shareholders of record of our
common stock.
DIVIDENDS
As of the filing of this document, we have not paid any dividends to
shareholders. There are no restrictions which would limit our ability to pay
dividends on common equity or that are likely to do so in the future. The Nevada
Revised Statutes, however, do prohibit us from declaring dividends where, after
giving effect to the distribution of the dividend; we would not be able to pay
our debts as they become due in the usual course of business; or our total
assets would be less than the sum of the total liabilities plus the amount that
would be needed to satisfy the rights of shareholders who have preferential
rights superior to those receiving the distribution.
(REMAINDER OF PAGE LEFT BLANK INTENTIONALLY)
-19-
RECENT SALES OF UNREGISTERED SECURITIES
We have sold securities within the past two years without registering the
securities under the Securities Act of 1933 as shown in the following tables:
SHARES ISSUED FOR PRIVATE OFFERING
NUMBER OF SALES PRICE
DATE OF SHARES (VALUE) NATURE OF
ISSUANCE NAME ISSUED TRANSACTION TRANSACTION
---------------- -- ---------------------------------------------------- -- ----------- -- ---------------- -- --------------------
6/10/2009 Blasland & Associates, LLC 431 $0.20 Private Offering
6/10/2009 Donald P. Blasland 3,233 $0.20 Private Offering
6/10/2009 Robert M. Blasland 431 $0.20 Private Offering
6/10/2009 Kenneth Paul Blizzard & Amy Carol Blizzard 2,156 $0.20 Private Offering
6/10/2009 James W. Bohlig 431 $0.20 Private Offering
6/10/2009 Brent Dooley 1,078 $0.20 Private Offering
6/10/2009 Mark R. George 5,389 $0.20 Private Offering
6/10/2009 Mark R. George 5,389 $0.20 Private Offering
6/10/2009 Bruce J. Holtzman 5,389 $0.20 Private Offering
6/10/2009 Bruce J. Holtzman 2,156 $0.20 Private Offering
6/10/2009 Eugene P. Hunt and Patricia J. Hunt, JTWROS 9,754 $0.20 Private Offering
6/10/2009 Eugene P. Hunt and Patricia J. Hunt, JTWROS 16,167 $0.20 Private Offering
6/10/2009 William M. Kimbrough, Trustee William M Kimbrough
Rev. Living Trust U/A 8/6/1993 1,078 $0.20 Private Offering
6/10/2009 Lori J. Kirman 2,156 $0.20 Private Offering
6/10/2009 Rick L. Kremer and Kathleen Kremer JTWROS 4,311 $0.20 Private Offering
6/10/2009 Richard L. Lehman 647 $0.20 Private Offering
6/10/2009 Dr. Nigel A. Lewis and Mrs. Lorna E. Lewis 862 $0.20 Private Offering
6/10/2009 Michael Martin 2,156 $0.20 Private Offering
6/10/2009 Saturday Holdings, Inc. 5,389 $0.20 Private Offering
6/10/2009 Joseph R. Nicolosi 4,311 $0.20 Private Offering
6/10/2009 Mario Saccente 431 $0.20 Private Offering
6/10/2009 Edward F. Saroney, III 2,695 $0.20 Private Offering
6/10/2009 Donald Vanderbrook 1,078 $0.20 Private Offering
6/10/2009 Larry Vozzo 862 $0.20 Private Offering
6/10/2009 Vroman Family Investments, LLC 431 $0.20 Private Offering
-----------
TOTAL PRIVATE OFFERING SHARES 78,411
===========
-20-
EXEMPTION FROM REGISTRATION CLAIMED
Sales and issuances by Company of the unregistered securities listed above were
made by the Company in reliance upon Rule 506 of Regulation D to the individuals
listed above. All of the individuals and/or entities listed above that purchased
the unregistered securities were all known to the Company and its management,
through pre-existing business relationships, as long standing business
associates, friends, and employees. All purchasers were provided access to all
material information, which they requested, and all information necessary to
verify such information and were afforded access to management of the Company in
connection with their purchases. All purchasers of the unregistered securities
acquired such securities for investment and not with a view toward distribution,
acknowledging such intent to the Company. All certificates or agreements
representing such securities that were issued contained restrictive legends,
prohibiting further transfer of the certificates or agreements representing such
securities, without such securities either being first registered or otherwise
exempt from registration in any further resale or disposition. Each purchaser
made written representation under Rule 506 of Regulation D, including net worth
and sophistication. The Company required written representation that each
purchaser who was not an accredited investor, either alone or with his purchaser
representative, had such knowledge and experience in financial and business
matters that he was capable of evaluating the merits and risks of the
prospective investment, and the issuer reasonably believed (based on written
representations) immediately prior to making any sale that the purchaser came
within this description.
SHARES ISSUED FOR COMPENSATION OR SERVICES
SALES PRICE
NUMBER OF SHARES (VALUE)
DATE OF ISSUANCE NAME ISSUED TRANSACTION NATURE OF TRANSACTION
----------------- ----- ------------------------------ -- --------------------- -- ---------------- -- ------------------------
7/27/2009 Mark Kalmbach 250,000 $0.20 Compensation
7/27/2009 Gene Hunt 150,000 $0.20 Consulting Services
7/27/2009 Barry Zeiger 6,500 $0.20 Consulting Services
7/30/2009 (1) Kenneth Koock 50,000 $0.20 Consulting Services
10/13/2009 Evan Dooley 10,000 $0.20 Consulting Services
10/13/2009 Robert Bouvette 10,000 $0.20 Consulting Services
10/13/2009 Alvin Laroque 50,000 $0.20 Consulting Services
11/19/2009 Blue Future, Inc. 25,000 $0.20 Consulting Services
11/19/2009 Nathalie St. Pierre 10,000 $0.20 Consulting Services
11/19/2009 Wakabayashi 200,000 $0.20 Consulting Services
12/30/2009 Frank Bendetto 25,000 $0.20 Consulting Services
1/5/2010 Robert Benko 25,000 $0.20 Consulting Services
2/2/2010 Peter Ochinko 25,000 $0.20 Consulting Services
2/19/2010 Robert Benko 20,000 $0.20 Consulting Services
3/22/2010 MD Associates 200,000 $0.20 Consulting Services
3/22/2010 (1) Kenneth Koock 50,000 $0.20 Consulting Services
4/19/2010 Barry Zeiger 8,100 $0.20 Consulting Services
4/22/2010 Brent Dooley 2,700 $0.20 Consulting Services
4/26/2010 Kurt Hankins & Lynette Hankins, JTWROS 7,000 $0.20 Consulting Services
4/26/2010 Clint Young 5,000 $0.20 Consulting Services
4/26/2010 Richard C Murphy and Julie L Murphy 20,000 $0.20 Consulting Services
4/26/2010 Lanny Thacker 5,000 $0.20 Consulting Services
4/26/2010 Chris Riggio 20,000 $0.20 Consulting Services
4/26/2010 Gary Bolhuis and Denise E Bolhuis 42,600 $0.20 Consulting Services
4/26/2010 Jerry Christopherson 10,000 $0.20 Consulting Services
4/26/2010 Neal Spear 10,000 $0.20 Consulting Services
4/26/2010 Richard A Impens and Anna M Impens 25,000 $0.20 Consulting Services
-21-
SALES PRICE
NUMBER OF SHARES (VALUE)
DATE OF ISSUANCE NAME ISSUED TRANSACTION NATURE OF TRANSACTION
----------------- ----- ------------------------------ -- --------------------- -- ---------------- -- ------------------------
4/26/2010 Jerry Juhlin and Fran Juhlin 5,000 $0.20 Consulting Services
4/26/2010 Russell Spear and Rose Spear 10,000 $0.20 Consulting Services
4/26/2010 Don Pottoff and Jane Pottoff 10,000 $0.20 Consulting Services
4/26/2010 Shawn Kierscht and Marie Louise Kierscht 15,000 $0.20 Consulting Services
4/26/2010 Bob Cornell Construction 24,500 $0.20 Consulting Services
4/26/2010 Tim Meisner 78,000 $0.20 Consulting Services
4/26/2010 Tim Meisner 38,100 $0.20 Consulting Services
4/26/2010 Scott Riley 14,000 $0.20 Consulting Services
4/26/2010 Mark Spear and Mindi Spear 5,000 $0.20 Consulting Services
4/26/2010 Kurt Hankins and Lynette Hankins 27,500 $0.20 Consulting Services
4/26/2010 Terry O'Kane and Peggy O'Kane 1,000 $0.20 Consulting Services
4/26/2010 Torsten Arnold 5,882 $0.20 Consulting Services
8/23/2010 Buzzbahn 100,000 $0.20 Consulting Services
8/23/2010 Robert Carter 200,000 $0.20 Consulting Services
8/23/2010 Benko 55,000 $0.20 Consulting Services
8/23/2010 (1) Koock 200,000 $0.20 Consulting Services
8/23/2010 Conrad Rodgers 35,000 $0.20 Consulting Services
8/23/2010 William Pritchard 35,000 $0.20 Consulting Services
8/23/2010 John Lee 35,000 $0.20 Consulting Services
8/23/2010 Jerry Smith 35,000 $0.20 Consulting Services
8/31/2010 Brent Dooley 40,000 $0.20 Consulting Services
10/21/2010 Illia Petkov 50,000 $0.20 Consulting Services
10/26/2010 Brent Dooley 18,500 $0.20 Consulting Services
12/2/2010 Peaches Giunter Blank 125,000 $0.20 Consulting Services
--------------
TOTAL CONSULTING SERVICES SHARES 2,424,382
==============
MATERIAL RELATIONSHIPS
(1) Director
EXEMPTION FROM REGISTRATION CLAIMED
All of the sales by Company of the unregistered securities listed immediately
above were made by the Company in reliance upon Section 4(2) of the Act. All of
the individuals and/or entities listed above that purchased the unregistered
securities were all known to the Company and its management, through
pre-existing business relationships, as long standing business associates,
friends, and employees. All purchasers were provided access to all material
information, which they requested, and all information necessary to verify such
information and were afforded access to management of the Company in connection
with their purchases. All purchasers of the unregistered securities acquired
such securities for investment and not with a view toward distribution,
acknowledging such intent to the Company. All certificates or agreements
representing such securities that were issued contained restrictive legends,
prohibiting further transfer of the certificates or agreements representing such
securities, without such securities either being first registered or otherwise
exempt from registration in any further resale or disposition.
-22-
SHARES ISSUED FOR THE MERGER
SALES PRICE
NUMBER OF (VALUE) NATURE OF
DATE OF ISSUANCE NAME SHARES ISSUED TRANSACTION TRANSACTION
------------------------- ---- ---------------------------------------- ---- -------------- -- --------------- --- ---------------
7/31/2009 Blasland & Associates, LLC 4,569 $0.21 Merger
7/31/2009 Donald P. Blasland 34,267 $0.21 Merger
7/31/2009 Robert M. Blasland 4,569 $0.21 Merger
7/31/2009 Kenneth Paul Blizzard & Amy Carol
Blizzard 22,845 $0.21 Merger
7/31/2009 James W. Bohlig 4,569 $0.21 Merger
7/31/2009 Brent Dooley 11,422 $0.21 Merger
7/31/2009 Mark R. George 57,111 $0.21 Merger
7/31/2009 Mark R. George 57,111 $0.21 Merger
7/31/2009 Bruce J. Holtzman 57,111 $0.21 Merger
7/31/2009 Bruce J. Holtzman 22,845 $0.21 Merger
7/31/2009 Eugene P. Hunt and Patricia J. Hunt,
JTWROS 103,372 $0.21 Merger
7/31/2009 Eugene P. Hunt and Patricia J. Hunt,
JTWROS 171,334 $0.21 Merger
7/31/2009 William M. Kimbrough, Trustee William
M Kimbrough Rev. Living Trust U/A
8/6/1993 11,422 $0.21 Merger
7/31/2009 Lori J. Kirman 22,845 $0.21 Merger
7/31/2009 Rick L. Kremer and Kathleen Kremer
JTWROS 45,689 $0.21 Merger
7/31/2009 Richard L. Lehman 6,853 $0.21 Merger
7/31/2009 Dr. Nigel A. Lewis and Mrs. Lorna E.
Lewis 9,138 $0.21 Merger
7/31/2009 Michael Martin 22,845 $0.21 Merger
7/31/2009 Saturday Holdings, Inc. 57,111 $0.21 Merger
7/31/2009 Joseph R. Nicolosi 45,689 $0.21 Merger
7/31/2009 Mario Saccente 4,569 $0.21 Merger
7/31/2009 Edward F. Saroney, III 28,556 $0.21 Merger
7/31/2009 Donald Vanderbrook 11,422 $0.21 Merger
7/31/2009 Larry Vozzo 9,138 $0.21 Merger
7/31/2009 Vroman Family Investments, LLC 4,569 $0.21 Merger
7/31/2009 Edward F. Cowle 1,564,315 $0.21 Merger
7/31/2009 H. Deworth Williams 1,368,958 $0.21 Merger
7/31/2009 Geoff Williams 827,501 $0.21 Merger
7/31/2009 Leonard E. Neilson 160,000 $0.21 Merger
7/31/2009 (1) Hawk Management Group, Inc. 1,283,333 $0.21 Merger
7/31/2009 Victor Cordell 958,333 $0.21 Merger
7/31/2009 Caleb V. Cordell 50,000 $0.21 Merger
7/31/2009 Samuel V. Cordell 50,000 $0.21 Merger
7/31/2009 Jennifer K. DiSenso 50,000 $0.21 Merger
7/31/2009 Joshua V. Cordell 50,000 $0.21 Merger
7/31/2009 Daniel V. Cordell 50,000 $0.21 Merger
7/31/2009 David Skinner 25,000 $0.21 Merger
7/31/2009 Mark Kalmbach 50,000 $0.21 Merger
7/31/2009 (2) Warren Blasland. 1,230,333 $0.21 Merger
7/31/2009 Brian Blasland 50,000 $0.21 Merger
-23-
SALES PRICE
NUMBER OF (VALUE) NATURE OF
DATE OF ISSUANCE NAME SHARES ISSUED TRANSACTION TRANSACTION
------------------------- ---- ---------------------------------------- ---- -------------- -- --------------- --- ---------------
7/31/2009 Bonnie Montgomery Wagner 1,000 $0.21 Merger
7/31/2009 Catherine Pettygrove 1,000 $0.21 Merger
7/31/2009 Tonya Moore 1,000 $0.21 Merger
7/31/2009 (3) Jan Rowinski 1,283,334 $0.21 Merger
7/31/2009 Harvey Klebanoff 2,023,960 $0.21 Merger
7/31/2009 Helen Klebanoff 2,023,960 $0.21 Merger
7/31/2009 William Kimbrough 10,000 $0.21 Merger
7/31/2009 Mark George 50,000 $0.21 Merger
7/31/2009 Marc Clair 50,000 $0.21 Merger
7/31/2009 Robert Clair 25,000 $0.21 Merger
7/31/2009 Robert Carter 50,000 $0.21 Merger
7/31/2009 Julie Bloch C/F Lexie Bloch UGMA Florida 50,000 $0.21 Merger
7/31/2009 Leonard Block and Julie Bloch 200,000 $0.21 Merger
7/31/2009 Randi Kant 200,000 $0.21 Merger
7/31/2009 Gene Hunt 50,000 $0.21 Merger
7/31/2009 Eric Clair 5,000 $0.21 Merger
7/31/2009 Adam Clair 2,000 $0.21 Merger
--------------
TOTAL MERGER SHARES 14,624,998
==============
MATERIAL RELATIONSHIPS
(1) Beneficially Matthew J. Cohen, Chief Operating Officer and Chief
Financial Officer, Latitude Solutions, Inc. / Hawk Management Group,
Inc.
(2) Chief Executive Officer, Latitude Clean Tech Group, Inc. and Executive
Vice President and Director of Latitude Solutions, Inc.
(3) Chief Executive Officer of GpsLatitude and Executive Vice President
and Director of Latitude Solutions, Inc.
EXEMPTION FROM REGISTRATION CLAIMED
All of the sales by Company of the unregistered securities listed immediately
above were made by the Company in reliance upon Section 4(2) of the Act. All of
the individuals and/or entities listed above that purchased the unregistered
securities were all known to the Company and its management, through
pre-existing business relationships, as long standing business associates,
friends, and employees. All purchasers were provided access to all material
information, which they requested, and all information necessary to verify such
information and were afforded access to management of the Company in connection
with their purchases. All purchasers of the unregistered securities acquired
such securities for investment and not with a view toward distribution,
acknowledging such intent to the Company. All certificates or agreements
representing such securities that were issued contained restrictive legends,
prohibiting further transfer of the certificates or agreements representing such
securities, without such securities either being first registered or otherwise
exempt from registration in any further resale or disposition.
-24-
SHARES ISSUED PURSUANT TO AGREEMENTS
NUMBER OF SALES PRICE
DATE OF SHARES (VALUE)
ISSUANCE NAME ISSUED TRANSACTION NATURE OF TRANSACTION
---------------- ---- ------------------------------------- -- ------------- -- --------------- -- ---------------------------------
7/27/2009 Solucorp Industries 500,000 $0.20 License & Purchase Agreement
8/3/2009 (1) Jan Rowinski 1,608,750 $0.20 Stock Purchase Agreement
8/3/2009 Aladin Gaston 1,608,750 $0.20 Stock Purchase Agreement
8/3/2009 Jacques Faguy 975,000 $0.20 Stock Purchase Agreement
8/3/2009 Karen Jones 48,750 $0.20 Stock Purchase Agreement
8/3/2009 Micro Innovation, Inc. 633,750 $0.20 Stock Purchase Agreement
3/22/2010 (2) F & F T William Gilmore 600,000 $0.20 Agreement
-------------
TOTAL AGREEMENT SHARES 5,975,000
=============
MATERIAL RELATIONSHIPS
(1) President/Chief Executive Officer of GpsLatitude and Executive Vice
President and Director of Latitude Solutions, Inc.
(2) President and Chief Technology Officer of Latitude Clean Tech Group,
Inc.
EXEMPTION FROM REGISTRATION CLAIMED
All of the sales by Company of the unregistered securities listed immediately
above were made by the Company in reliance upon Section 4(2) of the Act. All of
the individuals and/or entities listed above that purchased the unregistered
securities were all known to the Company and its management, through
pre-existing business relationships, as long standing business associates,
friends, and employees. All purchasers were provided access to all material
information, which they requested, and all information necessary to verify such
information and were afforded access to management of the Company in connection
with their purchases. All purchasers of the unregistered securities acquired
such securities for investment and not with a view toward distribution,
acknowledging such intent to the Company. All certificates or agreements
representing such securities that were issued contained restrictive legends,
prohibiting further transfer of the certificates or agreements representing such
securities, without such securities either being first registered or otherwise
exempt from registration in any further resale or disposition.
(REMAINDER OF PAGE LEFT BLANK INTENTIONALLY)
-25-
SHARES ISSUED ON CONVERSION OF PROMISSORY NOTES IN 2009
NUMBER OF SALES PRICE
SHARES (VALUE) NATURE OF
DATE OF ISSUANCE NAME ISSUED TRANSACTION TRANSACTION
------------------------- - ----------------------------------------- -- ------------- -- ---------------- -- ----------------
11/6/2009 Cathy E. Bell and Roger L. Bell, JT 25,000 $0.20 Notes
11/6/2009 Cathy E. Bell and Roger L. Bell, JT 25,000 $0.20 Notes
Andrew Zebulon Besch or Katie Elizabeth
11/6/2009 Besch, JT 10,000 $0.20 Notes
11/6/2009 Donald P. Blasland 10,000 $0.20 Notes
11/6/2009 Dennis Bollig and Darlene Bollig JTWROS 100,000 $0.20 Notes
11/6/2009 John D. Brown 10,000 $0.20 Notes
11/6/2009 John D. Brown 10,000 $0.20 Notes
11/6/2009 Steven Chan 5,000 $0.20 Notes
11/6/2009 Wayne A. Clegg 20,000 $0.20 Notes
11/6/2009 Gilbert Dickson 25,000 $0.20 Notes
11/6/2009 Jeremy Dickson 25,000 $0.20 Notes
11/6/2009 Philip Dooley and Dana Dooley, JTWROS 10,000 $0.20 Notes
Douglas Neil Ferris and/or Maxine
11/6/2009 Ferris, JTWROS 15,261 $0.20 Notes
11/6/2009 David Flick & Shirley Flick, JTWROS 10,000 $0.20 Notes
Rick Fuerstenau and Marci Fuerstenau,
11/6/2009 JTWROS 18,000 $0.20 Notes
11/6/2009 Mark R. George 20,000 $0.20 Notes
11/6/2009 Kurt Hankins & Lynette Hankins, JTWROS 7,500 $0.20 Notes
11/6/2009 Dennis Holden 5,000 $0.20 Notes
11/6/2009 Bruce J. Holtzman 10,000 $0.20 Notes
11/6/2009 Duane E. Hunt & Lynda B. Hunt, JT 5,000 $0.20 Notes
11/6/2009 Eugene Hunt and Patricia Hunt, JT 20,000 $0.20 Notes
11/6/2009 Eugene Hunt and Patricia Hunt, JT 51,500 $0.20 Notes
11/6/2009 Eugene Hunt and Patricia Hunt, JT 9,500 $0.20 Notes
11/6/2009 Eugene Hunt and Patricia Hunt, JT 2,000 $0.20 Notes
11/6/2009 Michael Martin 10,000 $0.20 Notes
11/6/2009 Jelt, LLC 15,000 $0.20 Notes
11/6/2009 Terry O'Kane & Peggy O'Kane, JTWROS 7,500 $0.20 Notes
11/6/2009 John Charles Reding 5,000 $0.20 Notes
-26-
NUMBER OF SALES PRICE
SHARES (VALUE) NATURE OF
DATE OF ISSUANCE NAME ISSUED TRANSACTION TRANSACTION
------------------------- - ----------------------------------------- -- ------------- -- ---------------- -- ----------------
11/6/2009 Charles James Reding or Lori Ann 10,000 $0.20 Notes
Reding, JT
11/6/2009 John Charles Reding 10,000 $0.20 Notes
11/6/2009 Keith Rhodes 10,000 $0.20 Notes
11/6/2009 Lynda C. Schwartz 5,000 $0.20 Notes
11/6/2009 James S. Shaver & Ann M. Shaver, JTWROS 10,000 $0.20 Notes
Lanny Thacker & Virginia Thacker,
11/6/2009 JTWROS 15,000 $0.20 Notes
11/6/2009 Mary Anne Toohey 10,000 $0.20 Notes
11/6/2009 Stephen F. Walker 20,000 $0.20 Notes
11/6/2009 Lance Warren 10,000 $0.20 Notes
11/6/2009 Wes Werbury 10,000 $0.20 Notes
11/6/2009 Edward B. Wolf 5,000 $0.20 Notes
-------------
TOTAL NOTE SHARES 601,261
=============
EXEMPTION FROM REGISTRATION CLAIMED
Sales and issuances by Company of the unregistered securities listed above were
made by the Company in reliance upon Rule 506 of Regulation D to the individuals
listed above. All of the individuals and/or entities listed above that purchased
the unregistered securities were all known to the Company and its management,
through pre-existing business relationships, as long standing business
associates, friends, and employees. All purchasers were provided access to all
material information, which they requested, and all information necessary to
verify such information and were afforded access to management of the Company in
connection with their purchases. All purchasers of the unregistered securities
acquired such securities for investment and not with a view toward distribution,
acknowledging such intent to the Company. All certificates or agreements
representing such securities that were issued contained restrictive legends,
prohibiting further transfer of the certificates or agreements representing such
securities, without such securities either being first registered or otherwise
exempt from registration in any further resale or disposition. Each purchaser
made written representation under Rule 506 of Regulation D, including net worth
and sophistication. The Company required written representation that each
purchaser who was not an accredited investor, either alone or with his purchaser
representative, had such knowledge and experience in financial and business
matters that he was capable of evaluating the merits and risks of the
prospective investment, and the issuer reasonably believed (based on written
representations) immediately prior to making any sale that the purchaser came
within this description.
SHARES ISSUED ON CONVERSION OF PROMISSORY NOTES IN 2010
During the year ended December 31, 2009 and during the year ended December 31,
2010, the Company issued convertible notes payable amounting to $825,811 and
$3,552,150, respectively. These convertible notes mature at various times within
six months from date of issuance, have an interest rate of 7% and include a
beneficial conversion feature which allows the holder to convert the notes into
common stock and warrants at a conversion price of $1.00 per share. The holders
of the notes have converted the notes into shares of restricted common stock and
warrants beginning in April 2010.
-27-
NUMBER OF SALES PRICE
DATE OF SHARES (VALUE)
ISSUANCE NAME ISSUED TRANSACTION NATURE OF TRANSACTION
---------------- -- ----------------------------------------------- ---- ------------ --- ---------------- -- ----------------------
4/23/2010 David Flick & Shirley Flick, JTWROS 10,583 $1.00 Conversion Shares
4/23/2010 Rick Fuerstenau and Marci Fuerstenau, JTWROS 19,050 $1.00 Conversion Shares
4/23/2010 Mark R. George 21,283 $1.00 Conversion Shares
4/23/2010 Kurt Hankins & Lynette Hankins, JTWROS 7,981 $1.00 Conversion Shares
4/23/2010 Dennis Holden 5,204 $1.00 Conversion Shares
4/23/2010 Eugene Hunt and Patricia Hunt, JT 21,400 $1.00 Conversion Shares
4/23/2010 Eugene Hunt and Patricia Hunt, JT 55,105 $1.00 Conversion Shares
4/23/2010 Eugene Hunt and Patricia Hunt, JT 10,165 $1.00 Conversion Shares
4/23/2010 Eugene Hunt and Patricia Hunt, JT 2,128 $1.00 Conversion Shares
4/23/2010 Jelt, LLC 15,788 $1.00 Conversion Shares
4/23/2010 Terry O'Kane & Peggy O'Kane, JTWROS 7,938 $1.00 Conversion Shares
4/23/2010 Lanny Thacker & Virginia Thacker, JTWROS 15,875 $1.00 Conversion Shares
4/23/2010 Stephen F. Walker 20,816 $1.00 Conversion Shares
4/23/2010 Lance Warren 10,408 $1.00 Conversion Shares
8/17/2010 John Charles Reding 5,408 $1.00 Conversion Shares
8/17/2010 Cathy E. Bell and Roger L. Bell, JT 26,750 $1.00 Conversion Shares
8/17/2010 Duane E. Hunt & Lynda B. Hunt, JT 5,379 $1.00 Conversion Shares
8/17/2010 Wayne A. Clegg 21,400 $1.00 Conversion Shares
8/17/2010 Edward B. Wolf 5,350 $1.00 Conversion Shares
8/17/2010 Dennis Bollig and Darlene Bollig JTWROS 106,417 $1.00 Conversion Shares
8/17/2010 Andrew Zebulon Besch or Katie Elizabeth
Besch, JTWROS 10,642 $1.00 Conversion Shares
8/17/2010 Charles James Reding or Lori Ann Reding,
JTWROS 10,642 $1.00 Conversion Shares
8/17/2010 John Charles Reding 10,642 $1.00 Conversion Shares
8/17/2010 Bruce J. Holtzman 10,642 $1.00 Conversion Shares
8/17/2010 Lynda C. Schwartz 5,321 $1.00 Conversion Shares
8/17/2010 Philip Dooley and Dana Dooley, JTWROS 10,700 $1.00 Conversion Shares
8/17/2010 Philip Dooley and Dana Dooley, JTWROS 2,000 $1.00 Conversion Shares
8/17/2010 Mary Anne Toohey 10,700 $1.00 Conversion Shares
8/17/2010 Michael Martin 10,583 $1.00 Conversion Shares
8/17/2010 Robert Scott Thorp 15,700 $1.00 Conversion Shares
8/17/2010 Gilbert Dickson 26,167 $1.00 Conversion Shares
8/17/2010 Wes Werbowy 10,467 $1.00 Conversion Shares
8/17/2010 Dwayne L. Nyman 10,408 $1.00 Conversion Shares
8/17/2010 Michael A. Wagner and Patrice L. Wagner 5,204 $1.00 Conversion Shares
8/17/2010 Mark A. Klein 26,021 $1.00 Conversion Shares
8/17/2010 Randall G. Jorgenson 26,458 $1.00 Conversion Shares
8/17/2010 Wayne A. Clegg 26,021 $1.00 Conversion Shares
8/17/2010 Gary L. Rochleau or Janice M. Rochleau, JTWROS 10,408 $1.00 Conversion Shares
Gregory A. Rochleau or Kelly R. Rochleau,
8/17/2010 JTWROS 10,408 $1.00 Conversion Shares
-28-
NUMBER OF SALES PRICE
DATE OF SHARES (VALUE)
ISSUANCE NAME ISSUED TRANSACTION NATURE OF TRANSACTION
---------------- -- ----------------------------------------------- ---- ------------ --- ---------------- -- ----------------------
8/17/2010 Terry O'Kane & Peggy O'Kane, JTWROS 12,334 $1.00 Conversion Shares
8/17/2010 Calvin Boekelman 5,204 $1.00 Conversion Shares
8/17/2010 Joan Widletz 15,612 $1.00 Conversion Shares
8/17/2010 Gregory Manning & Georgiana Manning, JT 10,408 $1.00 Conversion Shares
8/17/2010 Torston K. Arnold 10,408 $1.00 Conversion Shares
8/17/2010 Wayne A. Clegg 10,408 $1.00 Conversion Shares
8/17/2010 Tami Hankins 5,204 $1.00 Conversion Shares
8/17/2010 Eugene Hunt and Patricia Hunt, JT 729 $1.00 Conversion Shares
8/17/2010 Jelt, LLC 5,204 $1.00 Conversion Shares
8/17/2010 John T. McGuire 4,684 $1.00 Conversion Shares
8/17/2010 Mark J. Miller 10,408 $1.00 Conversion Shares
8/17/2010 Eric C. Moe 7,806 $1.00 Conversion Shares
8/17/2010 Robert Scott Thorp 10,408 $1.00 Conversion Shares
8/17/2010 Michael Moe 11,449 $1.00 Conversion Shares
8/17/2010 Eugene Hunt and Patricia Hunt, JT 79,103 $1.00 Conversion Shares
8/17/2010 Scott Riley & Pam Riley, Tenants in Common 10,408 $1.00 Conversion Shares
8/17/2010 Kurt Hankins & Lynette Hankins, JTWROS 10,408 $1.00 Conversion Shares
8/17/2010 Tri-Square Construction, LLC 62,450 $1.00 Conversion Shares
8/17/2010 Hunt Rental, LLC 208,167 $1.00 Conversion Shares
8/17/2010 Dean Meyer 2,082 $1.00 Conversion Shares
8/17/2010 CareyCo Financial Group, Inc. 401K plan ROTH 11,449 $1.00 Conversion Shares
8/17/2010 Mark Spear & Mindi Spear, JTWROS 13,010 $1.00 Conversion Shares
8/17/2010 Eugene Hunt and Patricia Hunt, JT 49,440 $1.00 Conversion Shares
10/13/2010 Albert Clement 5,204 $1.00 Conversion Shares
10/13/2010 Mark A. Klein 26,021 $1.00 Conversion Shares
10/13/2010 Mark J. Miller 31,225 $1.00 Conversion Shares
10/13/2010 Eugene Hunt and Patricia Hunt, JT 11,813 $1.00 Conversion Shares
10/13/2010 Terry O'Kane & Peggy O'Kane, JTWROS 9,003 $1.00 Conversion Shares
10/13/2010 Bill Meyer 15,613 $1.00 Conversion Shares
10/13/2010 Steve Mueller & Nancy Mueller, JTWROS 5,204 $1.00 Conversion Shares
10/13/2010 Jerry Christopherson 20,817 $1.00 Conversion Shares
10/13/2010 Paul Trauger 15,613 $1.00 Conversion Shares
Wiernicki & Senyshyn, P.A. retirement Plan
12/6/2010 and Trust Roth 10,467 $1.00 Conversion Shares
12/6/2010 Mark A. Klein 2,290 $1.00 Conversion Shares
12/6/2010 Dennis Holden 5,204 $1.00 Conversion Shares
12/6/2010 Allied Investment Properties, LLC 10,408 $1.00 Conversion Shares
12/6/2010 Michael E. Mulliniks 10,408 $1.00 Conversion Shares
12/6/2010 Rick Fuerstenau and Marci Fuerstenau, JTWROS 4,163 $1.00 Conversion Shares
12/6/2010 Jackson Kent Grizzard 12,490 $1.00 Conversion Shares
12/6/2010 Paul Trauger 10,408 $1.00 Conversion Shares
12/6/2010 David Flick & Shirley Flick, JTWROS 5,204 $1.00 Conversion Shares
-29-
NUMBER OF SALES PRICE
DATE OF SHARES (VALUE)
ISSUANCE NAME ISSUED TRANSACTION NATURE OF TRANSACTION
---------------- -- ----------------------------------------------- ---- ------------ --- ---------------- -- ----------------------
12/6/2010 Tim Meisner 44,964 $1.00 Conversion Shares
12/6/2010 Robert N. Becker & Mary C. Becker, JTWROS 103,500 $1.00 Conversion Shares
12/6/2010 Jack Colen & Arlen P. Colen, JTWROS 10,408 $1.00 Conversion Shares
12/6/2010 Tim Meisner 75,981 $1.00 Conversion Shares
12/6/2010 Jack Colen & Arlen P. Colen, JTWROS 5,204 $1.00 Conversion Shares
12/31/2010 Thomas Nedved 10,408 $1.00 Conversion Shares
12/31/2010 George Mark 21,337 $1.00 Conversion Shares
12/31/2010 Jelt, LLC 7,806 $1.00 Conversion Shares
12/31/2010 Wayne A. Clegg 7,806 $1.00 Conversion Shares
12/31/2010 Paul Trauger 10,408 $1.00 Conversion Shares
12/31/2010 Tim Meisner 168,927 $1.00 Conversion Shares
12/31/2010 Scott J. Richardson 26,021 $1.00 Conversion Shares
12/31/2010 Meisner Roofing & Building Maintenance Inc. 85,348 $1.00 Conversion Shares
12/31/2010 Michael Moe 14,572 $1.00 Conversion Shares
12/31/2010 Dwayne L. Nyman 10,408 $1.00 Conversion Shares
12/31/2010 Mark Spear & Mindi Spear, JTWROS 5,204 $1.00 Conversion Shares
12/31/2010 George E. Otis 10,350 $1.00 Conversion Shares
12/31/2010 Bogomil Banchev 5,175 $1.00 Conversion Shares
12/31/2010 Terry O'Kane & Peggy O'Kane, JTWROS 16,560 $1.00 Conversion Shares
12/31/2010 Stephen F. Walker 31,050 $1.00 Conversion Shares
12/31/2010 Steven D. Dass 5,175 $1.00 Conversion Shares
12/31/2010 Theodore Sall 2,070 $1.00 Conversion Shares
12/31/2010 Douglas L. Wilhelm 10,350 $1.00 Conversion Shares
------------
TOTAL CONVERSION SHARES
2,110,932
============
EXEMPTION FROM REGISTRATION CLAIMED
Sales and issuances by Company of the unregistered securities listed above were
made by the Company in reliance upon Rule 506 of Regulation D to the individuals
listed above. All of the individuals and/or entities listed above that purchased
the unregistered securities were all known to the Company and its management,
through pre-existing business relationships, as long standing business
associates, friends, and employees. All purchasers were provided access to all
material information, which they requested, and all information necessary to
verify such information and were afforded access to management of the Company in
connection with their purchases. All purchasers of the unregistered securities
acquired such securities for investment and not with a view toward distribution,
acknowledging such intent to the Company. All certificates or agreements
representing such securities that were issued contained restrictive legends,
prohibiting further transfer of the certificates or agreements representing such
securities, without such securities either being first registered or otherwise
exempt from registration in any further resale or disposition. Each purchaser
made written representation under Rule 506 of Regulation D, including net worth
and sophistication. The Company required written representation that each
purchaser who was not an accredited investor, either alone or with his purchaser
representative, had such knowledge and experience in financial and business
matters that he was capable of evaluating the merits and risks of the
prospective investment, and the issuer reasonably believed (based on written
representations) immediately prior to making any sale that the purchaser came
within this description.
ADDITIONAL SHARES ISSUED WITH CONVERSION OF NOTES
SALES PRICE
NUMBER OF (VALUE)
DATE OF ISSUANCE NAME SHARES ISSUED TRANSACTION NATURE OF TRANSACTION
----------------- -- -------------------------------------------------- -- --------------- -- ------------ -- ----------------------
1/20/2010 Calvin Beokleman 5,000 $0.13 Additional Note Shares
1/20/2010 Wayne A. Clegg 25,000 $0.13 Additional Note Shares
1/20/2010 Wayne A. Clegg 10,000 $0.13 Additional Note Shares
1/20/2010 Albert Clement 5,000 $0.13 Additional Note Shares
-30-
SALES PRICE
NUMBER OF (VALUE)
DATE OF ISSUANCE NAME SHARES ISSUED TRANSACTION NATURE OF TRANSACTION
----------------- -- -------------------------------------------------- -- --------------- -- ------------ -- ----------------------
1/20/2010 Tami Hankins 5,000 $0.13 Additional Note Shares
1/20/2010 Randall G. Jorgensen 25,000 $0.13 Additional Note Shares
1/20/2010 Mark A Klein 25,000 $0.13 Additional Note Shares
1/20/2010 Gregory Manning & Georgiana Manning 10,000 $0.13 Additional Note Shares
1/20/2010 John T. McGuire 4,500 $0.13 Additional Note Shares
1/20/2010 Mark J. Miller 10,000 $0.13 Additional Note Shares
1/20/2010 Eric C. Moe 7,500 $0.13 Additional Note Shares
1/20/2010 Jelt, LLC 5,000 $0.13 Additional Note Shares
1/20/2010 Dwayne L. Nyman 10,000 $0.13 Additional Note Shares
1/20/2010 Terry O'Kane & Peggy O'Kane 11,850 $0.13 Additional Note Shares
1/20/2010 Gary L. Rochleay or Janice M. Rochleau 10,000 $0.13 Additional Note Shares
1/20/2010 Gregory A. Rochleaul or Kelly Rochleau 10,000 $0.13 Additional Note Shares
1/20/2010 Robert Scott Thorp 15,000 $0.13 Additional Note Shares
1/20/2010 Robert Scott Thorp 10,000 $0.13 Additional Note Shares
1/20/2010 Michael A. Wagner and Patrice L. Wagner 5,000 $0.13 Additional Note Shares
1/20/2010 Joan Widlitz 15,000 $0.13 Additional Note Shares
4/23/2010 Torsten A. Arnold 10,000 $0.14 Additional Note Shares
4/23/2010 Eugene Hunt and Patricia Hunt, JT 700 $0.14 Additional Note Shares
4/23/2010 Michael Moe 11,000 $0.14 Additional Note Shares
4/23/2010 Eugene Hunt and Patricia Hunt, JT 76,000 $0.14 Additional Note Shares
4/23/2010 Scott Riley & Pam Riley, JT 10,000 $0.14 Additional Note Shares
4/23/2010 Kurt Hankins & Lynette Hankins, JTWROS 10,000 $0.14 Additional Note Shares
4/23/2010 Tri-Square Construction, LLC 35,000 $0.14 Additional Note Shares
4/23/2010 Hunt Rental, LLC 200,000 $0.14 Additional Note Shares
4/23/2010 Dean Meyer 2,000 $0.14 Additional Note Shares
4/23/2010 Claudia Kiwi 10,000 $0.14 Additional Note Shares
4/23/2010 Linda Creta 5,000 $0.14 Additional Note Shares
4/23/2010 CaryCo Financial Group, Inc. 401K plan ROTH 11,000 $0.14 Additional Note Shares
4/23/2010 Mark Spear & Mindi Spear, JTWROS 12,500 $0.14 Additional Note Shares
4/23/2010 Deborah Lindstrom 10,000 $0.14 Additional Note Shares
4/23/2010 Mark A. Klein 25,000 $0.14 Additional Note Shares
4/23/2010 Eugene Hunt and Patricia Hunt, JT 47,500 $0.14 Additional Note Shares
4/23/2010 Mark J. Miller 30,000 $0.14 Additional Note Shares
4/23/2010 Jerry Christopherson 20,000 $0.14 Additional Note Shares
Wiernicki & Senyshyn, P.A. Retirement Plan and
4/23/2010 Trust Roth 10,000 $0.14 Additional Note Shares
4/23/2010 Paul Trauger 15,000 $0.14 Additional Note Shares
4/23/2010 Mark A. Klein 2,200 $0.14 Additional Note Shares
4/23/2010 Dennis Holden 5,000 $0.14 Additional Note Shares
4/23/2010 Linda C. Johnson & Barry A. Johnson, JTWROS 100,000 $0.14 Additional Note Shares
4/23/2010 Michael E. Mulliniks 10,000 $0.14 Additional Note Shares
4/23/2010 Rick Fuerstenau and Marci Fuerstenau, JTWROS 4,000 $0.14 Additional Note Shares
4/23/2010 Jackson Kent Grizzard 12,000 $0.14 Additional Note Shares
4/23/2010 Paul Trauger 10,000 $0.14 Additional Note Shares
4/23/2010 David Flick & Shirley Flick, JTWROS 5,000 $0.14 Additional Note Shares
4/23/2010 Tim Meisner 43,200 $0.14 Additional Note Shares
8/17/2010 Tri-Square Construction, LLC 25,000 $0.14 Additional Note Shares
8/17/2010 Eugene Hunt and Patricia Hunt, JT 11,350 $0.14 Additional Note Shares
-31-
SALES PRICE
NUMBER OF (VALUE)
DATE OF ISSUANCE NAME SHARES ISSUED TRANSACTION NATURE OF TRANSACTION
----------------- -- -------------------------------------------------- -- --------------- -- ------------ -- ----------------------
8/17/2010 Terry O'Kane & Peggy O'Kane, JTWROS 8,650 $0.14 Additional Note Shares
8/17/2010 Bill Meyer 15,000 $0.14 Additional Note Shares
8/17/2010 Steve Mueller & Nancy Mueller, JTWROS 5,000 $0.14 Additional Note Shares
8/17/2010 Allied Investment Properties, LLC 10,000 $0.14 Additional Note Shares
8/17/2010 Robert N. Becker & Mary C. Becker, JTWROS 100,000 $0.14 Additional Note Shares
8/17/2010 Jack Colen & Arlene P. Colen, JTWROS 10,000 $0.14 Additional Note Shares
8/17/2010 Tim Meisner 73,000 $0.14 Additional Note Shares
8/17/2010 Jack Colen & Arlene P. Colen, JTWROS 5,000 $0.14 Additional Note Shares
8/17/2010 Thomas Nedved 10,000 $0.14 Additional Note Shares
8/17/2010 Mark R. George 20,500 $0.14 Additional Note Shares
8/17/2010 Jelt, LLC 7,500 $0.14 Additional Note Shares
8/17/2010 Wayne A. Clegg 7,500 $0.14 Additional Note Shares
8/17/2010 Paul Trauger 10,000 $0.14 Additional Note Shares
8/17/2010 Tim Meisner 162,300 $0.14 Additional Note Shares
8/17/2010 Scott J. Richardson 25,000 $0.14 Additional Note Shares
8/17/2010 Meisner Roofing & Building Maintenance Inc. 82,000 $0.14 Additional Note Shares
8/17/2010 Brendon Wade Bluestein & Nancy Lynn Bluestein 33,000 $0.14 Additional Note Shares
8/17/2010 Michael Moe 14,000 $0.14 Additional Note Shares
8/17/2010 Dwayne L. Nyman 10,000 $0.14 Additional Note Shares
8/17/2010 Mark Spear & Mindi Spear, JTWROS 5,000 $0.14 Additional Note Shares
8/17/2010 Georgia E. Otis 10,000 $0.14 Additional Note Shares
8/17/2010 Bogomil Banchev 5,000 $0.14 Additional Note Shares
8/17/2010 Terry O'Kane & Peggy O'Kane, JTWROS 16,000 $0.14 Additional Note Shares
8/17/2010 Stephen F. Walker 30,000 $0.14 Additional Note Shares
8/17/2010 Steven D. Dass 5,000 $0.14 Additional Note Shares
8/17/2010 Theodore Sall 2,000 $0.14 Additional Note Shares
8/17/2010 Douglas L Wilhelm 10,000 $0.14 Additional Note Shares
8/17/2010 Ilia Petkov 25,000 $0.14 Additional Note Shares
8/17/2010 Joseph R. Nicolosi 10,000 $0.14 Additional Note Shares
8/17/2010 Janice Joy and Todd Joy, JT 5,000 $0.14 Additional Note Shares
8/17/2010 Robbert Lewis Wiss 10,000 $0.14 Additional Note Shares
8/17/2010 Mark R. George 30,000 $0.14 Additional Note Shares
8/17/2010 Paul Trauger 5,000 $0.14 Additional Note Shares
8/17/2010 Thomas N.T. Mullen 25,000 $0.14 Additional Note Shares
8/17/2010 E. Duane Meyer 100,000 $0.14 Additional Note Shares
8/17/2010 James B. Dixon 10,000 $0.14 Additional Note Shares
8/17/2010 Wilhelm Charitable Remainder Trust 10,000 $0.14 Additional Note Shares
8/17/2010 Mark D. Roy & Audrey J. Roy, JTWROS 26,000 $0.14 Additional Note Shares
8/17/2010 Scott J. Richardson 25,000 $0.14 Additional Note Shares
8/17/2010 Robert C. Parson & Margaret E. Parson, JTWROS 12,500 $0.14 Additional Note Shares
8/17/2010 Jane S. Gunnels 10,000 $0.14 Additional Note Shares
8/17/2010 Cynthia Williams 30,000 $0.14 Additional Note Shares
9/10/2010 Barry Johnson 75,000 $0.14 Additional Note Shares
9/10/2010 Barry Johnson 75,000 $0.14 Additional Note Shares
10/13/2010 Michael Martin 5,000 $0.14 Additional Note Shares
10/13/2010 Claudia Kiwi 5,000 $0.14 Additional Note Shares
10/13/2010 Barbara Quist & Anthony Davis, JTWROS 10,000 $0.14 Additional Note Shares
-32-
SALES PRICE
NUMBER OF (VALUE)
DATE OF ISSUANCE NAME SHARES ISSUED TRANSACTION NATURE OF TRANSACTION
----------------- -- -------------------------------------------------- -- --------------- -- ------------ -- ----------------------
10/13/2010 Marjorie Lynch 20,000 $0.14 Additional Note Shares
B. Dudley Tarlton, IV. and Lynette A. Tarlton,
10/13/2010 JTWROS 10,000 $0.14 Additional Note Shares
10/13/2010 Robbin Lee & Joseph Kennedy, JTTN 10,000 $0.14 Additional Note Shares
10/13/2010 Logan A. Lee 5,000 $0.14 Additional Note Shares
10/13/2010 Daniel R. Lawless 7,500 $0.14 Additional Note Shares
10/13/2010 Brownell Family Trust, (est. 2/16/1988) 15,000 $0.14 Additional Note Shares
10/13/2010 Robert C. Parson & Margaret E. Parson, JTWROS 5,000 $0.14 Additional Note Shares
10/13/2010 Joel Vander Leest & Cheryl Vander Leest, JTWROS 10,000 $0.14 Additional Note Shares
10/13/2010 Douglas L Wilhelm 5,000 $0.14 Additional Note Shares
John Pomonis, Jane Linnehan, Janette Moskin,
10/13/2010 JTWROS 7,500 $0.14 Additional Note Shares
10/13/2010 Leonore Becker or Audrey Becker, JTWROS 25,000 $0.14 Additional Note Shares
10/13/2010 Walker Family Limited Partnership 100,000 $0.14 Additional Note Shares
10/13/2010 Jay Newman 10,000 $0.14 Additional Note Shares
Brendon Wade Bluestein & Nancy Lynn Bluestein,
10/13/2010 JTWROS 16,000 $0.14 Additional Note Shares
10/13/2010 Jelt, LLC 7,500 $0.14 Additional Note Shares
10/13/2010 Scott Riley & Pam Riley, JT 20,000 $0.14 Additional Note Shares
10/13/2010 Eric C. Moe 1,500 $0.14 Additional Note Shares
10/13/2010 Robert A. Walde 5,000 $0.14 Additional Note Shares
10/13/2010 Scott J. Richardson 12,500 $0.14 Additional Note Shares
11/15/2010 Kyoung WonLee 300,000 $0.14 Additional Note Shares
12/1/2010 Daniel R. Lawless 3,500 $0.14 Additional Note Shares
12/1/2010 Steven Guyer 110,000 $0.14 Additional Note Shares
12/6/2010 Joyce Peluso 5,000 $0.14 Additional Note Shares
12/6/2010 Mark R. George 10,000 $0.14 Additional Note Shares
12/6/2010 Neal E. Massey 20,000 $0.14 Additional Note Shares
12/6/2010 E. Duane Myer 50,000 $0.14 Additional Note Shares
12/6/2010 Keith Rhodes 12,000 $0.14 Additional Note Shares
12/6/2010 Jill N. Marburger 250,000 $0.14 Additional Note Shares
12/6/2010 Daniel R. Lawless 7,500 $0.14 Additional Note Shares
12/6/2010 David P. Lawless 5,000 $0.14 Additional Note Shares
12/6/2010 Mark R. George 6,250 $0.14 Additional Note Shares
12/6/2010 The Bibicoff Family Trust, dated May 6, 2000 150,000 $0.14 Additional Note Shares
12/6/2010 Joseph B. Thomas V and Margareth G Thomas, JTRWOS 30,000 $0.14 Additional Note Shares
12/6/2010 Jack Colen & Arlene P. Colen, JTWROS 7,500 $0.14 Additional Note Shares
12/6/2010 Alan R. Greenberg 25,000 $0.14 Additional Note Shares
12/6/2010 Keith Rhodes 5,000 $0.14 Additional Note Shares
12/8/2010 MLPF&S as Cust FBO Bennet Scauzzo 25,000 $0.14 Additional Note Shares
12/14/2010 Schafer and Company, LLC 10,000 $0.14 Additional Note Shares
12/14/2010 Eugene Hunt and Patricia Hunt, JT 26,600 $0.14 Additional Note Shares
12/14/2010 Kurt Hankins & Lynette Hankins, JTWROS 15,000 $0.14 Additional Note Shares
12/14/2010 Jerry Christopherson 40,000 $0.14 Additional Note Shares
12/14/2010 Calvin Boekelman 2,000 $0.14 Additional Note Shares
12/14/2010 Clint Young 5,000 $0.14 Additional Note Shares
-33-
SALES PRICE
NUMBER OF (VALUE)
DATE OF ISSUANCE NAME SHARES ISSUED TRANSACTION NATURE OF TRANSACTION
----------------- -- -------------------------------------------------- -- --------------- -- ------------ -- ----------------------
12/14/2010 Michael Moe 1,000 $0.14 Additional Note Shares
12/14/2010 Eric C. Moe 10,600 $0.14 Additional Note Shares
12/30/2010 Dwayne L. Nyman 65,000 $0.14 Additional Note Shares
--------------
TOTAL ADDITIONAL NOTE SHARES 3,686,700
==============
EXEMPTION FROM REGISTRATION CLAIMED
Sales and issuances by Company of the unregistered securities listed above were
made by the Company in reliance upon Rule 506 of Regulation D to the individuals
listed above. All of the individuals and/or entities listed above that purchased
the unregistered securities were all known to the Company and its management,
through pre-existing business relationships, as long standing business
associates, friends, and employees. All purchasers were provided access to all
material information, which they requested, and all information necessary to
verify such information and were afforded access to management of the Company in
connection with their purchases. All purchasers of the unregistered securities
acquired such securities for investment and not with a view toward distribution,
acknowledging such intent to the Company. All certificates or agreements
representing such securities that were issued contained restrictive legends,
prohibiting further transfer of the certificates or agreements representing such
securities, without such securities either being first registered or otherwise
exempt from registration in any further resale or disposition. Each purchaser
made written representation under Rule 506 of Regulation D, including net worth
and sophistication. The Company required written representation that each
purchaser who was not an accredited investor, either alone or with his purchaser
representative, had such knowledge and experience in financial and business
matters that he was capable of evaluating the merits and risks of the
prospective investment, and the issuer reasonably believed (based on written
representations) immediately prior to making any sale that the purchaser came
within this description.
None of the above listed shareholders are registered broker-dealers or are
associates of a registered broker-dealer.
ISSUER PURCHASES OF EQUITY SECURITIES
LSI did not repurchase any shares of its common stock during the year ended
December 31, 2010.
ITEM 6. SELECTED FINANCIAL DATA
--------------------------------
Not applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
--------------------------------------------------------------------------------
MANAGEMENTS' DISCUSSION AND ANALYSIS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR AUDITED
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED HEREIN.
THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS, SUCH AS STATEMENTS RELATING
TO OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS, PLANS, OBJECTIVES, FUTURE
PERFORMANCE AND BUSINESS OPERATIONS. THESE STATEMENTS RELATE TO EXPECTATIONS
CONCERNING MATTERS THAT ARE NOT HISTORICAL FACTS. THESE FORWARD-LOOKING
STATEMENTS REFLECT OUR CURRENT VIEWS AND EXPECTATIONS BASED LARGELY UPON THE
INFORMATION CURRENTLY AVAILABLE TO US AND ARE SUBJECT TO INHERENT RISKS AND
UNCERTAINTIES. ALTHOUGH WE BELIEVE OUR EXPECTATIONS ARE BASED ON REASONABLE
ASSUMPTIONS, THEY ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND THERE ARE A
NUMBER OF IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. BY MAKING
THESE FORWARD-LOOKING STATEMENTS, WE DO NOT UNDERTAKE TO UPDATE THEM IN ANY
MANNER EXCEPT AS MAY BE REQUIRED BY OUR DISCLOSURE OBLIGATIONS IN FILINGS WE
MAKE WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE FEDERAL SECURITIES
LAWS. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM OUR FORWARD-LOOKING
STATEMENTS.
-34-
THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S REPORT ON THE COMPANY'S
FINANCIAL STATEMENTS AS OF DECEMBER 31, 2010 INCLUDES A "GOING CONCERN"
EXPLANATORY PARAGRAPH THAT DESCRIBES SUBSTANTIAL DOUBT ABOUT THE COMPANY'S
ABILITY TO CONTINUE AS A GOING CONCERN.
Latitude Solutions, Inc., through three subsidiaries, has operations based upon
its proprietary technologies.
Latitude Clean Tech Group, Inc. provides products, processes and solutions for
contaminated water applications. LCTG provides products, processes and solutions
for contaminated water issues resulting from various oil/gas drilling operations
including water used in hydraulic fractionizing of wells, contaminated water
relating to the Alberta oil sands, and mining operations producing contaminated
water. In light of the increasing issues related to major industrial produced
water pollution, mining, oil/ natural gas (hydraulic fracturing), contaminated
water related issues, together with ever increasing expenditures for defense,
surveillance and anti-terrorism requirements, there is a growing market for the
Company's technologies, both domestically and possibly internationally.
6709800 Canada, Inc. dba GpsLatitude, the Company's second subsidiary, is the
technology/software/hardware group, which provides wireless telemetry/live video
streaming and security products for Mobile Assets, Public Security, Corporate
and National Security applications. The Company has established a marketing
strategic alliance with U.S. defense contractor, General Dynamics, as well as
with Bell Canada to jointly market the Company's technologies. Additionally, the
Royal Canadian Mounted Police (RCMP) are utilizing the Company's products.
Trinity Solutions, Inc., the Company's third operating subsidiary, is the
Company's internal business marketing subsidiary which provides sales and
marketing support to the other subsidiaries.
On February 8, 2011, Latitude Energy Services, LLC was organized in the state of
Nevada. LSI has a 70% equity ownership in LES, the remaining 30% equity
ownership is owned by third party entities. LSI is one of five managers of the
LLC, the other four managers are from the 30% equity owners of the LLC. Latitude
Energy Services, LLC will provide water remediation services to the Oil, Gas and
Energy industries worldwide utilizing innovative and patented technologies
developed by its majority equity owner, Latitude Solutions, Inc. ("LSI") and its
subsidiary companies.
Our Budget for operations in next year is as follows:
MAXIMUM
-------------------------
Operational Expenses:
Legal Fees (Registration Statement) $50,000
Legal Fees (Other) $43,000
Accounting $75,000
Transfer Agent Fees $45,000
Salaries $2,356,000
Rent $176,750
Finance Costs $550,000
Advertising $341,000
Business Development $195,000
Travel and Entertainment $496,000
Insurances $99,000
-------------------------
$4,426,750
Based on our current cash reserves as of December 31, 2010 of $216,200 we have
an operational budget of six months. The budget of $4.4 million will be
supported by fundraising, of which no funds are committed are not. We have not
generated any revenues to date. We account for our ownership in GpsLatitude as
an equity investment recognizing gains and losses on that investment. If we are
unable to begin to generate enough revenue, through our other subsidiaries, to
cover our operational costs, we will need to seek additional sources of funds.
Currently, we have NO committed source for any funds as of date hereof. No
representation is made that any funds will be available when needed. In the
event funds cannot be raised if and when needed, we may not be able to carry out
our business plan and could fail in business as a result of these uncertainties.
-35-
RESTATEMENT OF FINANCIAL STATEMENTS
The financial statements for the years ended December 31, 2010 and 2009 have
been restated to reflect debt discount on convertible debt and to correct the
fair value of warrants and bonus shares issued pursuant to convertible debt and
consulting fees. Management determined that the debt discount had been
erroneously recorded as finance costs and that the Black-Scholes calculation
used to determine the fair value of the warrants contained a mathematical error.
As a consequence of the above restatement, convertible debt, net was restated
from $2,788,011 and $825,811 to $2,378,583 and $717,302 at December 31, 2010 and
2009, respectively; liability to issue stock was restated from $198,065 and
$39,576 to $239,133 and $54,910 at December 31, 2010 and 2009, respectively;
additional paid in capital was restated from $8,989,196 and $2,397,940 to
$5,312,288 and $1,887,119 at December 31, 2010 and 2009, respectively;
accumulated deficit was restated from $10,506,523 and $2,749,775 to $6,461,255
and $2,145,779 at December 31, 2010 and 2009, respectively; consulting fees were
restated from $1,729,462 to $839,007 in 2010; finance costs pursuant to debt
issuance were restated from $3,554,150 and $825,811 to $1,003,333 and $221,815
in 2010 and 2009, respectively; net loss was restated from $7,756,748 and
$2,490,788 to $4,315,476 and $1,886,792 in 2010 and 2009, respectively, and loss
per share - basic and diluted was restated from $0.33 and $1.06 to $0.18 and
$0.81 in 2010 and 2009, respectively.
RESULTS OF OPERATIONS
COMPARISON OF THE YEAR ENDED DECEMBER 31, 2010 WITH THE YEAR ENDED DECEMBER 31, 2009
For the Years Ended
December 31, Change
---------------------------------- ------------------------------
2010 2009 $ %
----------------- ---------------- ----------------- ------------
REVENUES $ - $ - $ - -%
COST OF REVENUES - - - -
----------------- ---------------- ----------------- ------------
GROSS PROFIT (LOSS) - - - -
----------------- ---------------- ----------------- ------------
OPERATING EXPENSES
Legal and accounting expense 192,106 53,282 138,824 260.5%
Consulting fees 839,007 878,393 39,386 (4.5%)
Rent expense 69,048 57,341 11,707 20.4%
Salaries expense 762,790 20,988 741,802 353.4%
Travel expense 251,301 141,601 109,700 77.5%
General and administrative 772,637 89,239 683,398 766%
----------------- ---------------- ----------------- ------------
Total expenses 2,886,889 1,240,844 1,646,045 132.7%
----------------- ---------------- ----------------- ------------
LOSS FROM OPERATIONS (2,886,889) (1,240,844) 1,646,045 132.7%
----------------- ---------------- ----------------- ------------
OTHER EXPENSES
Acquisition expense - 350,000 (350,000) (100%)
Finance costs 1,003,333 221,815 781,518 352.3%
Interest expense 120,886 24,405 96,481 395.3%
Equity in losses to investee 304,368 49,728 254,640 512.1%
----------------- ---------------- ----------------- ------------
Total other expense 1,428,587 645,948 782,639 121.1%
----------------- ---------------- ----------------- ------------
NET LOSS (4,315,476) (1,886,792) 2,428,684 128.8%
----------------- ---------------- ----------------- ------------
LOSS PER SHARE $ (0.18) $ (0.81) $ (0.63) (77.7%)
WEIGHTED AVERAGE OUTSTANDING
SHARES
BASIC AND DILUTED 23,415,247 2,342,017
-36-
REVENUES
The Company did not recognize any revenue from its operations other then GPS
Latitude during the years ended December 31, 2010 and 2009. During the year
ended December 31, 2010, the Company had completed construction of its water
plant with a capacity to treat 200 gallons per minute. While currently being
used for demonstrations, we expect to utilize this facility to initiate the
generation of revenues during the year ended December 31, 2011.
OPERATING EXPENSES
Operating expenses for the year ended December 31, 2010 were $2,886,889 as
compared to $1,240,844 for the year ended December 31, 2009, an increase of
$1,646,045 or 132%. The increase was primarily caused by a $741,802 increase in
salaries expenses related to the deployment of staff to supervise and operate
our equipment in the field and an increase in travel related expenses of
$109,700 which resulted from our proof of concept customer demonstrations.
Additional increases of $138,824 in legal and accounting expenses as a result of
our efforts to register with the Securities and Exchange Commission and $683,398
in general and administrative expenses contributed to the increase over the
prior year.
LOSS FROM OPERATIONS
Loss from operations for the year ended December 31, 2010 was $2,886,889
compared to a loss of $1,240,844 for the year ended December 31, 2009, an
increase of $1,646,045 or 132.7%. The increase in the loss from operations in
2010 versus 2009 was due to the increases in operating expenses identified
above.
INTEREST EXPENSE
Interest expense was $120,866 for the year ended December 31, 2010 as compared
to $24,405 for the year ended December 31, 2009, an increase of $96,481 or
395.3%. This amount is a result of the Company's notes payable that were
converted into common stock and related to actual and accrued interest expense.
NET LOSSES
During the year ended December 31, 2010, the Company recognized a net loss of
$4,315,476 compared to $1,886,792 for the year ended December 31, 2009. The
Company's net loss increased $2,428,684 during the year ended December 31, 2010
when compared to the year ended December 31, 2009. The primary reasons for this
increase was an increase in operating expenses of $1,646,045, plus an increase
in finance costs of $781,518 caused by the increase in debt financing. The
amount of $350,000 is attributed to the acquisition of the public shell.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2010, the Company had total current assets of $ 216,200,
consisting solely of cash on hand. At December 31, 2010, we had total current
liabilities of $3,973,210, consisting of $907,685 in accounts payable and
accrued liabilities, $412,409 due to investee, $35,400 related party payable,
convertible debt, net of $2,378,583 and a liability to issue common stock of
$239,133. At December 31, 2010, the Company has a working capital deficit of
$3,757,010.
Net cash used in operating activities was $2,234,918 for the year ended December
31, 2010, compared to $862,652 for the year ended December 31, 2009. This
increase in cash used relates to the significantly higher cash expenses during
the year ended December 31, 2010 due to an increase in operating activities
including an increase in consulting and travel expenses. During the year ended
December 31, 2010, net losses of $4,315,476 were offset by non-cash items of
$1,003,333 in financing costs, $385,970 in common stock for services, $146,034
in warrants issued for services, $28,134 in depreciation expense and $304,368 in
equity loss in the GPS Latitude investment.
-37-
The Company's net cash used in investing activities was $1,123,165 for the year
ended December 31, 2010 compared to net cash used in investing activities of
$117,046 for the year ended December 31, 2009. In 2010 the Company invested
$373,879 in plant and equipment.
The Company's net cash provided by financing activities was $3,572,150 for the
year ended December 31, 2010 compared to net cash provided by financing
activities of $980,974 for the year ended December 31, 2009. During the year
ended December 31, 2010, the Company received $3,552,150 in proceeds from the
issuance of convertible debt and $25,000 from a related party payable.
At December 31, 2010 and 2009, the Company had convertible notes payable
outstanding of $2,378,583 and $717,302, respectively, which was net of a
discount of $409,428 and $108,509, respectively. These convertible notes mature
at various times within six months from date of issuance, have an interest rate
of 7% and include a beneficial conversion feature which allows the holder to
convert the notes into common stock at a conversion price of $1.00 per share. In
connection with these convertible notes, the Company issued warrants expiring
five years from date of issuance which allow the holders to purchase shares of
common stock at $1.25 per share and issued a share of common stock for every
dollar borrowed.
At December 31, 2010 and 2009, the Company had a liability to issue stock of
$239,133 and $54,910, respectively. The balance at December 31, 2010 is
comprised of $170,739 of bonus shares to be issued in 2011 and $68,394 of stock
to be issued for legal and consulting services rendered in 2010. The balance at
December 31, 2009 is comprised of $44,910 of bonus shares issued in 2010 and
$10,000 of consulting services rendered in 2009.
As of December 31, 2010, $705,061 of the outstanding convertible notes payable
have reached their maturity date and $479,800 of this amount has been converted
to stock subsequent to December 31, 2010.
Convertible debt with beneficial conversion features, whereby the conversion
feature is "in the money," is accounted for in accordance with guidelines
established by ASC 470-20, "DEBT WITH CONVERSION AND OTHER OPTIONS." The
relative fair value of the beneficial conversion feature and other embedded
features are individually valued at fair market value and are either expensed or
amortized over the term of the related instruments. The Company has recognized
the respective values of these features as a discount to the convertible debt
and is amortizing the discount over the term of the notes.
NEED FOR ADDITIONAL FINANCING
The Company anticipates the need for an additional $6- $10 million in financing
over the next twelve months in order to fund the building of additional water
units which is marketed under the Companies trade mark brand named Integrated
Water Systems(TM). Management is currently exploring several financing
alternatives including both debt and equity financing. However there can be no
assurances that these alternatives will come to fruition or that if the Company
needs to raise capital for working capital purposes, it will be successful.
CRITICAL ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid instruments, with an initial maturity of
three months or less to be cash equivalents.
-38-
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is provided for on the
straight line method over the estimated useful lives of the related assets as
follows:
Furniture and fixtures 5 to 7 years
Computer equipment 5 years
Equipment 5 to 7 years
Software 3 to 5 years
The cost of maintenance and repairs is charged to expense in the period
incurred. Expenditures that increase the useful lives of assets are capitalized
and depreciated over the remaining useful lives of the assets. When items are
retires or disposed of, the cost and accumulated depreciation are removed from
the accounts and any gain or loss is included in income.
INTANGIBLE ASSETS
In accordance with FASB ASC 350-25, "INTANGIBLES - GOODWILL AND OTHER", the
Company acquired a patent that is being amortized over its useful life of
fifteen years. The Company purchased the patent through the issuance of 600,000
shares of common stock with a fair value of $120,000 and a cash payment of
$100,000. Additionally, the Company capitalized patent fees of $2,000. The
Company's balance of intangible assets on the balance sheet net of accumulated
amortization was $207,267 and $0 at December 31, 2010 and 2009, respectively.
Amortization expense related to the intangible assets was $14,733 and $0 for the
years ended December 31, 2010 and 2009, respectively. Amortization expenses
related to intangible assets is expected to be approximately $14,800 each year
for 2011 through 2015.
EQUITY INVESTMENTS
The Company follows ASC 323-10, "INVESTMENTS" to account for investments in
entities in which the Company has a 20% to 50% interest or otherwise exercises
significant influence. These investments are carried at cost, adjusted for the
Company's proportionate share of undistributed earnings or losses of Investee.
REVENUE RECOGNITION AND COST OF REVENUES
Machinery and royalty revenues will be recognized when there is pervasive
evidence of the arrangement, delivery has occurred, the price is fixed and
determinable and collectability is reasonably assured.
Licensing and other services will include revenues from technology licensing and
maintenance services. These services are provided to customers ongoing and will
be billed up front on a monthly or quarterly basis and recognized as revenue
equally during the term of the arrangement in accordance with ASC 605-25,
"MULTIPLE ELEMENT ARRANGEMENTS". Since inception, no revenue has been generated.
Costs of revenues for the Company will consist primarily of costs to purchase
machinery and equipment and the shipping costs necessary to distribute products
to customers.
FINANCIAL INSTRUMENTS
The Company adopted the provisions of ASC 820, "FAIR VALUE MEASUREMENTS AND
DISCLOSURES", effective January 1, 2008. ASC 820 defines fair value, establishes
a framework for measuring fair value under generally accepted accounting
principles and enhances disclosures about fair value measurements.
Fair value is defined as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. Valuation techniques used to measure fair
value, as required by ASC 820, must maximize the use of observable inputs and
minimize the use of unobservable inputs.
-39-
The standard describes a fair value hierarchy based on three levels of inputs,
of which the first two are considered observable and the last unobservable, that
may be used to measure fair value. The Company's assessment of the significance
of a particular input to the fair value measurements requires judgment, and may
affect the valuation of the assets and liabilities being measured and their
placement within the fair value hierarchy.
o Level 1 - Quoted prices in active markets for identical assets or
liabilities.
o Level 2 - Inputs other than Level 1 that are observable, either
directly or indirectly, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
o Level 3 - Unobservable inputs that are supported by little or no
market activity and that are significant to the fair value of the
assets or liabilities
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------
LSI's operations do not employ financial instruments or derivatives which are
market sensitive. Short term funds are held in non-interest bearing accounts and
funds held for longer periods are placed in interest bearing accounts. Large
amounts of funds, if available, will be distributed among multiple financial
institutions to reduce risk of loss. Our cash holdings do not generate any
significant interest income.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
The restated audited financial statements of Latitude Solutions, Inc. for the
two-years ended December 31, 2010 and 2009, and for the period from June 3, 1983
(inception) through December 31, 2010 appear as pages 54 through 78.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
--------------------------------------------------------------------------------
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
--------------------------------
This annual report does not include a report of management's assessment
regarding internal control over financial reporting or an attestation report of
the company's registered public accounting firm due to a transition period
established by rules of the Securities and Exchange Commission for newly public
companies.
ITEM 9A(T). CONTROLS AND PROCEDURES
-----------------------------------
This annual report does not include a report of management's assessment
regarding internal control over financial reporting or an attestation report of
the company's registered public accounting firm due to a transition period
established by rules of the Securities and Exchange Commission for newly public
companies.
ITEM 9B. OTHER INFORMATION
---------------------------
Not applicable.
-40-
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
---------------------------------------------------------------
The following table sets forth information as to persons who currently serve as
LSI's directors or executive officers, including their ages as of December 31,
2010.
NAME AGE POSITION
------------------------ ----- -------------------------------------------------
Harvey Kaye 70 Chief Executive Officer, President and
Chairman of Latitude Solutions, Inc.
Matthew J. Cohen 52 Chief Operating Officer, Chief Financial Officer
and Director of Latitude Solutions, Inc.
Warren V. Blasland, Jr. 65 Executive Vice President and Director of Latitude
Solutions, Inc. and Chief Executive Officer of
Latitude Clean Tech Group, Inc.
Jan Rowinski, 57 Executive Vice President and Director of Latitude
Solutions, Inc. and Chief Executive Officer/
President of GpsLatitude
Kenneth Koock 68 Director of Latitude Solutions, Inc.
LSI officers are elected by the board of directors at the first meeting after
each annual meeting of LSI shareholders and hold office until their successors
are duly elected and qualified under LSI bylaws.
The directors named above will serve until the next annual meeting of LSI's
stockholders. Thereafter, directors will be elected for one-year terms at the
annual stockholders' meeting. Officers will hold their positions at the pleasure
of the board of directors absent any employment agreement. There is no
arrangement or understanding between the directors and officers of LSI and any
other person pursuant to which any director or officer was or is to be selected
as a director or officer.
BIOGRAPHICAL INFORMATION
HARVEY KAYE, CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
Mr. Kaye was appointed as an officer and director of Latitude Solutions, Inc. on
March 24, 2009. Mr. Kaye is formally Chairman and CEO of Gulfstream Capital
Group, Inc., from 1993 to May 2008, a merchant banking, consulting and financial
advisory organization, which provides advisory and corporate finance services to
both public and private companies. Mr. Kaye has more than 30 years of experience
in providing financing, strategic planning and administrative leadership to both
large and small companies as an entrepreneur, investment banker, chairman, chief
executive officer and director. Gulfstream has acted in a merchant banking,
financial advisory and strategic planning capacity for numerous corporations,
both public and private.
Currently, Mr. Kaye is on the Board for Angstrom Technologies, a security
company that is engaged in manufacturing UV chemicals and scanners and other
products for the security industry. Mr. Kaye has a BS in business from Temple
University.
Mr. Kaye was appointed to the board of directors because of his experience in
both development of financing and also strategic planning, experiences that are
beneficial to Latitude Solutions at this stage in its operations.
-41-
MATTHEW J. COHEN, CHIEF OPERATING OFFICER, CHIEF FINANCIAL OFFICER AND DIRECTOR
Mr. Cohen was appointed as an officer March 24, 2009 and to the board of
Latitude Solutions, Inc. on April 30, 2010. Mr. Cohen formerly served as Chief
Financial Officer of Cavit Sciences from July 2008 to June 2009; a publicly
traded company, and has also been the Chief Executive Officer and Chief
Financial Officer of Genio Group, Inc. from July 2004 to June 2006 , a public
company, as well as a member of its board of directors. Prior to these
engagements, Mr. Cohen served as the Chief Financial Officer for several
companies across a variety of industries including Sea Aerosupport, Inc. from
June 2004 to July 2006, and Life Imaging Corporation from September 2002 to
December 2003 a provider of diagnostic services and Interactive
Technologies.com, Ltd., a publicly traded benefit and services company, where he
continues today as a member of its board of directors. Mr. Cohen has a B.B.A.
degree in Accounting from New Paltz State University, New York earned in 1980.
Mr. Cohen was appointed to the board of directors not only because of his
background in management of public entities, but also because of his knowledge
of public company accounting issues.
WARREN V. BLASLAND, JR., EXECUTIVE VICE PRESIDENT AND DIRECTOR OF LATITUDE
SOLUTIONS, INC. AND CHIEF EXECUTIVE OFFICER OF LATITUDE CLEAN TECH GROUP, INC.
Mr. Blasland was appointed as an officer and to the board of Latitude Solutions,
Inc. on March 24, 2009. Mr. Blasland is a Professional Engineer who has over 30
years experience in environmental engineering, including executive
responsibility for the planning, design, construction and operation of waste
treatment, water purification, and hazardous waste facilities. Mr. Blasland is
licensed in 17 states nationwide and was President and CEO of Blasland
Consulting Services, Inc., Environmental Engineers and Scientists from 2001 to
2008. He is the founder and retired President and Chairman of Blasland, Bouck &
Lee, Inc., and is also the founder and former Chairman of BBL Environmental
Services, Inc., a national Hazardous Waste Construction Company from 1984
through 2001.
Mr. Blasland was appointed to the board of directors of the Company not only
because of his experience in management but also because of his experience in
environmental engineering, which directly correlates to the business operations
of Latitude Clean Tech Group, Inc.
JAN ROWINSKI, EXECUTIVE VICE PRESIDENT AND DIRECTOR OF LATITUDE SOLUTIONS, INC.
AND CHIEF EXECUTIVE OFFICER/PRESIDENT OF GPSLATITUDE
Mr. Rowinski was appointed as an officer and to the board of directors of
Latitude Solutions, Inc. on March 24, 2009. Mr. Rowinski is a corporate/business
development and turn-around professional, experienced in streamlining
corporations and elevating them to higher levels of performance and profit. He
has introduced technologies in U.S., Canadian and International markets.
Mr. Rowinski is the Co-Founder of GpsLatitude, a provider of security solutions
and wireless telemetry for mobile assets and people, including advanced cost
effective, integrated mobile live video streaming, tracking and live wireless
transmission solutions on available public and private radios. Mr. Rowinski was
the co-founder of MicroSlate Inc., a design and manufacture of patented, rugged
mobile/wireless pen tablets, handheld and notebook computers from June of 1989
to August of 2004. MicroSlate was a Provider of cost-effective mobile/wireless,
end-to-end enterprise hardware/software solutions for mobile workers, including
police, military, utilities, transportation, oil and gas, telecommunication and
government agencies.
Mr. Rowinski is a lecturer regarding technology and mobile/wireless computing.
Mr. Rowinski holds an MBA degree from McGill University, B.Sc. in Mathematics,
and an Electrical Engineering (DEC).
Mr. Rowinski was appointed to the board of directors of the Company because of
his long time experience in the wireless industry.
-42-
KENNETH J. KOOCK, DIRECTOR OF LATITUDE SOLUTIONS, INC.
Mr. Koock was appointed to the Board of Directors of the Company on April 30.
2010. Mr. Koock graduated Duke University in 1963 with a B.A. and was also a
graduate of St. John's Law School 1966 Juris Doctor Degree. From 1977 to 2003,
he served as Vice Chairman of M.H. Meyerson & Co. where he helped lead the
trading and investment departments. Currently, Mr. Koock is Chairman of the
Board for Angstrom Technologies, a security company that is engaged in
manufacturing UV chemicals and scanners and other products for the security
industry. Mr. Koock is also Director of U.S. Aerospace, a publicly traded
company involved in the aerospace industry. Mr. Koock was appointed a director
of the public company, Red Mountain Resources, Inc. (fka Teaching Time, Inc.) on
February 2, 2011.
Mr. Koock was appointed to the board of directors of the Company because of his
experience and knowledge in not only investment but also his experience in
management of public companies.
COMMITTEES OF THE BOARD OF DIRECTORS
LSI is managed under the direction of its board of directors.
The board of directors has no nominating, auditing committee or a compensation
committee. Therefore, the selection of person or election to the board of
directors was neither independently made nor negotiated at arm's length.
EXECUTIVE COMMITTEE
The members of the Board of Directors serve as its executive committee.
AUDIT COMMITTEE
The members of the Board of Directors serve as its audit committee.
PREVIOUS "BLANK CHECK" OR "SHELL" COMPANY INVOLVEMENT
Management of LSI has not been involved in prior private "blank-check" or
"shell" companies.
ANNUAL MEETING
The annual meeting of LSI stockholders is expected to be held at a future date
as soon as practicable. This will be an annual meeting of stockholders for the
election of directors. The annual meeting will be held at LSI's principal office
or at such other place as permitted by the laws of the State of Nevada and on
such date as may be fixed from time to time by resolution of LSI board of
directors.
CONFLICTS OF INTEREST - GENERAL.
Our directors and officers are, or may become, in their individual capacities,
officers, directors, controlling shareholder and/or partners of other entities
engaged in a variety of businesses. Thus, there exist potential conflicts of
interest including, among other things, time, efforts and corporation
opportunity, involved in participation with such other business entities. While
the officers and directors of our business are engaged full time in our business
activities, the amount of time they devote to other business may be up to
approximately 5 hours per week.
CONFLICTS OF INTEREST - CORPORATE OPPORTUNITIES
Certain of the officers and directors of the Company may be directors and/or
principal shareholders of other companies and, therefore, could face conflicts
of interest with respect to potential acquisitions. In addition, officers and
directors of the Company may in the future participate in business ventures,
which could be deemed to compete directly with the Company. Additional conflicts
of interest and non-arms length transactions may also arise in the future in the
event the Company's officers or directors are involved in the management of any
firm with which the Company transacts business. The Company's Board of Directors
has adopted a policy that the Company will not seek a merger with, or
acquisition of, any entity in which management serve as officers or directors,
or in which they or their family members own or hold a controlling ownership
interest. Although the Board of Directors could elect to change this policy, the
-43-
Board of Directors has no present intention to do so. In addition, if the
Company and other companies with which the Company's officers and directors are
affiliated both desire to take advantage of a potential business opportunity,
then the Board of Directors has agreed that said opportunity should be available
to each such company in the order in which such companies registered or became
current in the filing of annual reports under the Exchange Act subsequent to
January 1, 1997.
The Company's officers and directors may actively negotiate or otherwise consent
to the purchase of a portion of their common stock as a condition to, or in
connection with, a proposed merger or acquisition transaction. It is anticipated
that a substantial premium over the initial cost of such shares may be paid by
the purchaser in conjunction with any sale of shares by the Company's officers
and directors which is made as a condition to, or in connection with, a proposed
merger or acquisition transaction. The fact that a substantial premium may be
paid to the Company's officers and directors to acquire their shares creates a
potential conflict of interest for them in satisfying their fiduciary duties to
the Company and its other shareholders. Even though such a sale could result in
a substantial profit to them, they would be legally required to make the
decision based upon the best interests of the Company and the Company's other
shareholders, rather than their own personal pecuniary benefit.
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
The following table sets forth the fact that officers received a cash salary
during the last three fiscal years. The following table sets forth this
information by LSI, including salary, bonus and certain other compensation to
the Company's Chief Executive Officer and named executive officers for the past
three fiscal years.
Please note: Some executive officers and directors work for our Canadian
subsidiary, GpsLatitude and as such are paid a portion or all of their
compensation in Canadian Dollars. For reporting purposes, their salaries are
reported in the Company's reporting currency, US Dollars. Unless noted
otherwise, all compensation figures are in US Dollars.
(REMAINDER OF PAGE LEFT BLANK INTENTIONALLY)
-44-
EXECUTIVE COMPENSATION
The table below represents the officer's compensation of the Company's Officers
for the years ended December 31, 2010, 2009 and 2008, unless noted differently.
NON-EQUITY NON-QUALIFIED
INCENTIVE DEFERRED
STOCK OPTION PLAN COMPENSATION ALL OTHER
SALARY BONUS AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL
NAME & POSITION YEAR ($) ($) ($) ($) ($) ($) ($) ($)
------------------- -------- ----------- --------- -------- ---------- -------------- ----------- ------------ -----------
Harvey Kaye, 2010 $183,789 $0 $0 $0 $0 $0 $0 $183,789
Chief Executive 2009 $159,782 $0 $0 $0 $0 $0 $0 $159,782
Officer and 2008 $0 $0 $0 $0 $0 $0 $0 $0
President (1)
Matthew J. Cohen, 2010 $193,724 $0 $0 $0 $0 $0 $0 $193,724
COO & Chief 2009 $146,000 $0 $0 $0 $0 $0 $0 $146,000
Financial Officer(2) 2008 $0 $0 $0 $0 $0 $0 $0 $0
Warren V.
Blasland, Jr., 2010 $174,374 $0 $0 $0 $0 $0 $0 $174,374
Executive Vice 2009 $116,000 $0 $0 $0 $0 $0 $0 $116,000
President(3) 2008 $0 $0 $0 $0 $0 $0 $0 $0
Jan Rowinski, 2010 $70,627 $0 $0 $0 $0 $0 $0 $70,627
Executive Vice 2009 $62,366 $0 $0 $0 $0 $0 $0 $62,366
President(4) 2008 $$0 $0 $0 $0 $0 $0 $0 $0
------------------- --------
(1) During the year ended December 31, 2010, the amount of $183,789 consists of
the amount of $89,451 paid to Harvey Kaye, directly, and $94,338 paid to
Gulfstream Capital Group, owned by Harvey Kaye. During the year ended December
31, 2009, the amount of $159,782 consists of a $5,000 payment made to Harvey
Kaye and the balance of $154,782 paid to Gulfstream Capital Group.
(2) During the year ended December 31, 2010, the amount of $193,724 consists of
the amount of $26,000 to Hawk Management Group, owned by Matthew Cohen's wife
and the remaining amount of $167,724 paid directly to Matthew Cohen. During the
year ended December 31, 2009, the amount of $146,000 consists of payments of
$94,000 to Hawk Management Group and the remaining amount of $52,000 paid
directly to Matthew Cohen. Pursuant to his employment agreement, Mr. Cohen
receives a $700 a month automobile allowance.
(3) During the year ended December 31, 2009, the amount of $115,750 consists of
direct payments to Warren V. Blasland, Jr. in the amount of $83,750, the amount
of $21,000 paid to Blasland Consulting and $11,000 paid to Blasland and
Associates, both companies owned by Warren V. Blasland, Jr.
(4) During the year ended December 31, 2010, the amount of $70,627 consists of
direct payment to Jan Rowinski by LSI in the amount of $25,500 U.S., the amount
of $45,127 U.S., paid by GpsLatitude for consulting services to the CSI Group, a
Company owned by Jan Rowinski. During the year ended December 31, 2009, the
amount of $62,366 consists of direct payment to Jan Rowinski by LSI in the
amount of $22,500 U.S., the amount of $$35,165 U.S., paid by GpsLatitude for
consulting services to the CSI Group. During the years ended December 31, 2010
and 2009, a portion of Mr. Rowinski's compensation was paid in Canadian Dollars,
$46,500 and $39,866 Canadian, respectively. In accordance with USGAAP, the
amount has been converted to US Dollars using a conversion based on the average
currency rate for the year ended December 31, 2010 of $0.97048 for a salary
expense of $45,127 and for the year ended December 31, 2009 of $0.88209 for a
salary expense of $35,165 US Dollars.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
Not Applicable.
LSI does not have a stock option plan as of the date of this filing. There was
no grant of stock options to the Chief Executive Officer and other named
executive officers during the fiscal years ended December 31, 2009 and 2010.
-45-
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements as of March 31, 2009, with its
key officers, as listed below. The agreements cover a five year term and provide
for annual cash compensation as described below:
NAME POSITION ANNUAL COMPENSATION
---- -------- -------------------
Harvey Kaye CEO, President $225,000
Matthew J. Cohen COO, CFO $180,000
Warren V. Blasland, Jr. Executive Vice President $180,000
Jan Rowinski Executive Vice President $180,000
During the years ended December 31, 2009 and 2010, none of the above officers
received the full annual compensation under their employment agreements. All
officers agreed to a cut in compensation during both years in order to
facilitate the Company's operational growth.
Described below are the compensation packages our Board approved for our
executive officers. The compensation agreements were approved by our board based
upon recommendations conducted by the board.
Messrs. Kaye, Cohen, Blasland and Rowinski's employment agreements provide for a
cash bonus of equivalent to 15% of the prior twelve (12) month's annual
compensation, contingent on the Company reaching revenue, and gross profit
targets per year as defined in writing with the Board of Directors before the
commencement of each fiscal year. Such targets are to be determined based upon
prior fiscal performance and using projections for future performance and
current economic conditions.
Messrs. Kaye, Cohen, Blasland and Rowinski's employment agreements provide for a
$700 per month automobile allowance, payable on a monthly basis.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
There are employment contracts, compensatory plans or arrangements, including
payments to be received from us, with respect to any of our executive officers
which would in any way result in payments to any such person because of his or
her resignation, retirement or other termination of employment with us, any
change in control of us, or a change in the person's responsibilities following
such a change in control.
All of the existing employment agreements with our executives have a term of
five years from the date of the agreement and thereafter renews for one year
terms, unless ninety days notice is given by either the employee or the Company
prior to the renewal date.
The employment contracts provide for the Executive to be paid all amounts owed
to the Executive under the terms of the agreement upon termination or as salary
continuation for a period to be determined at the time of termination.
In the event of a change of control, the Executive shall receive all accrued
compensation; pro rata bonus; and severance equal to three times the sum of the
annual base compensation for that entire fiscal year, plus the bonus amount,
plus a cash payment of $50,000 along with any contributions that have been made
to any retirement funds. In addition, the Company would be required to provide
the executive and the executive's family with insurance for a thirty-six month
period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The LSI board of directors in its entirety acts as the compensation committee
for LSI.
STOCK OPTION PLAN
The Company intends to develop a stock option plan in the near future.
-46-
DIRECTOR COMPENSATION
The following table sets forth certain information concerning compensation paid
to our directors for services as directors, but not including compensation for
services as officers reported in the "Summary Executives Compensation Table"
during the years ended December 31, 2010 and 2009:
NON-QUALIFIED
NON-EQUITY DEFERRED
FEES INCENTIVE PLAN COMPENSATION ALL OTHER
EARNED STOCK OPTION COMPENSATION EARNINGS COMPENSATION TOTAL
NAME YEAR OR PAID AWARDS AWARDS ($) ($) ($) ($)
IN CASH ($) ($)
($)
------------------ ------ ---------- --------- ---------- ---------------- ------------------ ---------------- -----------
Harvey Kaye (1) 2010 $-0- $-0- $-0- $-0- $-0- $183,789 $183,789
2009 $-0- $-0- $-0- $-0- $-0- $159,782 $159,782
Matthew J. 2010 $-0- $-0- $-0- $-0- $-0- $193,724 $193,724
Cohen (2) 2009 $-0- $-0- $-0- $-0- $-0- $146,000 $146,000
Warren V. 2010 $-0- $-0- $-0- $-0- $-0- $174,374 $174,374
Blasland, Jr. (3) 2009 $-0- $-0- $-0- $-0- $-0- $116,000 $116,000
Jan Rowinski (4) 2010 $-0- $-0- $-0- $-0- $-0- $70,267 $70,267
2009 $-0- $-0- $-0- $-0- $-0- $62,366 $62,366
Kenneth Koock (5) 2010 $-0- $-0- $-0- $-0- $-0- $-0- $-0-
2009 $-0- $20,000 $-0- $-0- $-0- $-0- $20,000
------------------ ------
(1) Mr. Kaye serves as the CEO and President of the Company and receives a
salary for such position. During the year ended December 31, 2010, the amount of
$183,789 consists of the amount of $89,451 paid to Harvey Kaye, directly, and
$94,338 paid to Gulfstream Capital Group, owned by Harvey Kaye. During the year
ended December 31, 2009, the amount of $159,782 consists of a $5,000 payment
made to Harvey Kaye and the balance of $154,782 paid to Gulfstream Capital
Group, owned by Harvey Kaye.
(2) Mr. Cohen serves as the COO and CFO of the Company and receives a salary for
such position. During the year ended December 31, 2010, the amount of $193,724
consists of the amount of $26,000 to Hawk Management Group, owned by Matthew
Cohen's wife and the remaining amount of $167,724 paid directly to Matthew
Cohen. During the year ended December 31, 2009, the amount of $146,000 consists
of payments of $94,000 to Hawk Management Group, owned by Matthew J. Cohen's
wife, and the remaining amount of $52,000 paid directly to Matthew J. Cohen.
(3) Mr. Blasland serves as an Executive Vice President of the Company and
receives a salary for such position. During the year ended December 31, 2009,
the amount of $115,750 consists of direct payments to Warren V. Blasland, Jr. in
the amount of $83,750, the amount of $21,000 paid to Blasland Consulting and
$11,000 paid to Blasland and Associates, both companies owned by Warren V.
Blasland, Jr.
(4) Mr. Rowinski, serves as an Executive Vice President of the Company and the
President/CEO of GpsLatitude and receives a salary for such position.. During
the year ended December 31, 2010, the amount of $70,627 consists of direct
payment to Jan Rowinski by LSI in the amount of $25,500 U.S., the amount of
$45,127 U.S., paid by GpsLatitude for consulting services to the CSI Group, a
Company owned by Jan Rowinski. During the year ended December 31, 2009, the
amount of $62,366 consists of direct payment to Jan Rowinski by LSI in the
amount of $22,500 U.S., the amount of $$35,165 U.S., paid by GpsLatitude for
consulting services to the CSI Group. During the years ended December 31, 2010
and 2009, a portion of Mr. Rowinski's compensation was paid in Canadian Dollars,
$46,500 and $39,866 Canadian, respectively. In accordance with USGAAP, the
amount has been converted to US Dollars using a conversion based on the average
-47-
currency rate for the year ended December 31, 2010 of $0.97048 for a salary
expense of $45,127 and for the year ended December 31, 2009 of $0.88209 for a
salary expense of $35,165 US Dollars.
(5) During the year ended December 31, 2009, Mr. Koock received 100,000 shares
of restricted common stock for his services as a director of the Company. The
shares had a value of $20,000 or $0.20 per share.
At this time, our Directors do not receive cash compensation for serving on the
LSI Board of Directors.
OUR OFFICERS AND DIRECTORS MAY HAVE CONFLICTS OF INTERESTS AS TO CORPORATE
OPPORTUNITIES WHICH WE MAY NOT BE ABLE OR ALLOWED TO PARTICIPATE IN.
Presently there is no requirement contained in our Articles of Incorporation,
Bylaws, or minutes which requires officers and directors of our business to
disclose to us business opportunities which come to their attention. Our
officers and directors do, however, have a fiduciary duty of loyalty to us to
disclose to us any business opportunities which come to their attention, in
their capacity as an officer and/or director or otherwise. Excluded from this
duty would be opportunities which the person learns about through his
involvement as an officer and director of another company. We have no intention
of merging with or acquiring business opportunity from any affiliate or officer
or director.
LIMITATION ON LIABILITY AND INDEMNIFICATION
Latitude Solutions, Inc. is a Nevada corporation. The Nevada Revised Statutes
(NRS) provides that the articles of incorporation of a Nevada corporation may
contain a provision eliminating or limiting the personal liability of a director
to the corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director, except that any such provision may not eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to the corporation or its shareholders, (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) acts specified in Section 78 (concerning unlawful distributions), or
(iv) any transaction from which a director directly or indirectly derived an
improper personal benefit. LSI articles of incorporation contain a provision
eliminating the personal liability of directors to LSI or LSI shareholders for
monetary damages to the fullest extent provided by the NRS.
The NRS provides that a Nevada corporation must indemnify a person who was
wholly successful, on the merits or otherwise, in defense of any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal (a
"Proceeding"), in which he or she was a party because the person is or was a
director, against reasonable expenses incurred by him or her in connection with
the Proceeding, unless such indemnity is limited by the corporation's articles
of incorporation. LSI articles of incorporation do not contain any such
limitation.
The NRS provides that a Nevada corporation may indemnify a person made a party
to a Proceeding because the person is or was a director against any obligation
incurred with respect to a Proceeding to pay a judgment, settlement, penalty,
fine (including an excise tax assessed with respect to an employee benefit plan)
or reasonable expenses incurred in the Proceeding if the person conducted
himself or herself in good faith and the person reasonably believed, in the case
of conduct in an official capacity with the corporation, that the person's
conduct was in the corporation's best interests and, in all other cases, his or
her conduct was at least not opposed to the corporation's best interests and,
with respect to any criminal proceedings, the person had no reasonable cause to
believe that his or her conduct was unlawful. The Company's articles of
incorporation and bylaws allow for such indemnification. A corporation may not
indemnify a director in connection with any Proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation or, in
connection with any other Proceeding charging that the director derived an
improper personal benefit, whether or not involving actions in an official
capacity, in which Proceeding the director was judged liable on the basis that
he or she derived an improper personal benefit. Any indemnification permitted in
connection with a Proceeding by or in the right of the corporation is limited to
reasonable expenses incurred in connection with such Proceeding.
The NRS, unless otherwise provided in the articles of incorporation, a Nevada
corporation may indemnify an officer, employee, fiduciary, or agent of the
-48-
corporation to the same extent as a director and may indemnify such a person who
is not a director to a greater extent, if not inconsistent with public policy
and if provided for by its bylaws, general or specific action of its board of
directors or shareholders, or contract. LSI articles of incorporation provide
for indemnification of directors, officers, employees, fiduciaries and agents of
LSI to the full extent permitted by Nevada law.
LSI articles of incorporation also provide that LSI may purchase and maintain
insurance on behalf of any person who is or was a director or officer of LSI or
who is or was serving at the request of LSI as a director, officer or agent of
another enterprise against any liability asserted against him or her and
incurred by him or her in any such capacity or arising out of his or her status
as such, whether or not LSI would have the power to indemnify him or her against
such liability.
EQUITY COMPENSATION PLAN INFORMATION
The Company has not yet established an equity compensation plan or Incentive
Stock Option Plan, however, it intends to in the near future.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
--------------------------------------------------------------------------------
The following table sets forth information with respect to the beneficial
ownership of LSI's outstanding common stock by:
o each person who is known by LSI to be the beneficial owner of five
percent (5%) or more of LSI common stock;
o LSI's Chief Executive Officer, its other executive officers, and each
director as identified in the "Management -- Executive Compensation"
section; and
o all of the Company's directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock and options, warrants
and convertible securities that are currently exercisable or convertible within
60 days of the date of this document into shares of LSI common stock are deemed
to be outstanding and to be beneficially owned by the person holding the
options, warrants or convertible securities for the purpose of computing the
percentage ownership of the person, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
The information below is based on the number of shares of LSI's common stock
that LSI believes was beneficially owned by each person or entity as of December
31, 2010.
As of December 31, 2010, there are currently 100,000,000 common shares
authorized and 28,710,656 shares are issued and outstanding.
(REMAINDER OF PAGE LEFT BLANK INTENTIONALLY)
-49-
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER (1) AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNERSHIP CLASS
------------------------- ------------------------------------------------- ------------------------ ---------------
Common Stock Harvey Kaye, Chief Executive Officer, President 3,999,920 13.93%
and Chairman of Latitude Solutions, Inc. (2)
Common Stock Matthew J. Cohen, Chief Operating Officer, Chief 1,283,333 4.46%
Financial Officer and Director of Latitude
Solutions, Inc. / Hawk Management Group, Inc. (3)
Common Stock Warren V. Blasland, Jr., Executive Vice 1,230,333 4.28%
President and Director of Latitude Solutions,
Inc. and Chief Executive Officer of Latitude
Clean Tech Group, Inc.
Common Stock Jan Rowinski, Executive Vice President and 2,892,084 10.07%
Director of Latitude Solutions, Inc. and Chief
Executive Officer and President of GpsLatitude
Common Stock Kenneth Koock, Director of Latitude Solutions, 300,000 0.01%
Inc.
------------------------ ---------------
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (5 PERSONS) 9,805,670 34.15%
======================== ===============
GREATER THAN 5% SHAREHOLDERS
---------------------------------------------------------------------------
Common Stock Aladin Gaston 1,608,750 5.60%
Common Stock H. Deworth Williams 1,575,082 5.48%
Common Stock Ed Cowle 1,564,315 5.44%
Common Stock Jacques Faguy/Micro-Innovations, Inc. (4) 1,608,750 5.60%
------------------------- -------------------------------------------------
(1) The address of each person listed below, unless otherwise indicated,
is c/o 190 NW Spanish River Blvd., Suite 101, Boca Raton, Florida
33431.
(2) Mr. Kaye holds 2,023,960 shares of common stock beneficially through
his wife and 1,975,960 shares directly.
(3) Mr. Cohen, holds his share beneficially through Hawk Management Group,
Inc., a company of which his wife is the sole shareholder.
(4) Mr. Faguy holds 975,000 shares of common stock directly. He holds
633,750 shares beneficially through Micro-Innovation, Inc. a
corporation of which he is an officer, director and majority
shareholder.
Rule 13d-3 under the Securities Exchange Act of 1934 governs the determination
of beneficial ownership of securities. That rule provides that a beneficial
owner of a security includes any person who directly or indirectly has or shares
voting power and/or investment power with respect to such security. Rule 13d-3
also provides that a beneficial owner of a security includes any person who has
the right to acquire beneficial ownership of such security within sixty days,
including through the exercise of any option, warrant or conversion of a
security. Any securities not outstanding which are subject to such options,
warrants or conversion privileges are deemed to be outstanding for the purpose
of computing the percentage of outstanding securities of the class owned by such
person. Those securities are not deemed to be outstanding for the purpose of
computing the percentage of the class owned by any other person. Included in
-50-
this table are only those derivative securities with exercise prices that LSI
believes have a reasonable likelihood of being "in the money" within the next
sixty days.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------
Other than the transactions discussed below, we have not entered into any
transaction nor are there any proposed transactions in which any of our
founders, directors, executive officers, shareholders or any members of the
immediate family of any of the foregoing had or is to have a direct or indirect
material interest.
The Company entered into several employment agreements as of March 31, 2009. The
agreements cover a five year term and provide for annual cash compensation as
described below:
NAME POSITION ANNUAL COMPENSATION
----------------------- ------------------------ -------------------
Harvey Kaye CEO, President $225,000
Matthew J. Cohen COO, CFO $180,000
Warren V. Blasland, Jr. Executive Vice President $180,000
Jan Rowinski Executive Vice President $180,000
During the year ended December 31, 2009, Mr. Koock, a director, was issued
100,000 shares of restricted common stock for his services as a director of the
Company. The shares had a value of $20,000 or $0.20 per share.
The Company has a liability to stockholders for expenses paid by them on the
Company's behalf. The liability has a balance of $10,400 as of December 31, 2010
and 2009, respectively. The unsecured liability is non-interest bearing and is
payable on demand.
On September 29, 2010, an advance of $25,000 was received from Harvey Kaye, an
officer of the Company. The unsecured liability is non-interest bearing and is
payable on demand.
INTERESTS OF CERTAIN PERSONS IN THE ACQUISITION TRANSACTION
Edward F. Cowle and H. Deworth Williams, affiliates of the Company, who together
are entitled to receive a $200,000 fee that is being paid for services in
connection with the acquisitions of GpsLatitude, Trinity Solutions, Inc. and
Latitude Clean Tech Group, Inc. The services are for bringing the parties
together, negotiating the transaction and for facilitating the acquisitions.
GPS LATITUDE
In July 2009 the Company acquired a 50% ownership interest in 6709800 Canada
Inc. ("GPS Latitude"), a Canadian Company. The Company is committed to
contribute unto GPS Latitude 40% of any funds raised from future issuances of
equity or debt securities up to $1,000,000. The balance for amounts due to
(from) affiliate for the periods ended December 31, 2010 and 2009 were $412,409
and ($96,065), respectively.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
-----------------------------------------------
GENERAL. Mallah Furman and Company, P.A. ("Mallah Furman") is the Company's
principal auditing accountant firm. The Company's Board of Directors has
considered whether the provisions of audit services are compatible with
maintaining Mallah Furman's independence. The engagement of our independent
registered public accounting firm was approved by our Board of Directors prior
to the start of the audit of our consolidated financial statements for the year
ended December 31, 2010.
The following table represents aggregate fees billed to the Company for the
years ended December 31, 2010 and December 31, 2009 by Mallah Furman and
Company, P.A.
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Year Ended December 31,
2010 2009
--------------- --------------
Audit Fees $ 72,387 $ 12,000
Quarterly Review Fees $ 35,853 $ 11,000
Tax Fees $ 5,800 $ 0
All Other Fees $ 0 $ 0
--------------- --------------
Total Fees $ 114,040 $ 23,000
=============== ==============
All audit work was performed by the auditors' full time employees.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
-------------------------------------------------
The following is a complete list of exhibits filed as part of this Form 10K.
Exhibit number corresponds to the numbers in the Exhibit table of Item 601 of
Regulation S-K.
(a) Restated Audited financial statements for years ended December 31, 2010 and 2009
(b) EXHIBIT NO. DESCRIPTION
----------- -----------------------------------------------------------------------------------------------------
2.1 Merger Agreement by and between GMMT, Inc. and Genex Biopharma, Inc.*
3(i).1 Articles of Incorporation of GMMT, Inc. - Idaho*
3(i).2 Certificate of Amendment to Articles of Incorporation of GMMT, Inc. - Nevada
changing name to Latitude Solutions, Inc. *
3(i).3 Articles of Incorporation of Planetswater USA Holdings, Inc.*
3(i).4 Certificate of Amendment to Articles of Incorporation of Planetswater USA Holdings,
Inc. changing name to Latitude Clean Tech Group, Inc.*
3(i).5 Articles of Incorporation 6709800 Canada, Inc.*
3(i).6 Articles of Organization of Latitude Energy Services, LLC ****
3(ii).7 Bylaws of Latitude Solutions, Inc.*
10.1 Employment Agreement, Harvey Kaye*
10.2 Employment Agreement, Matthew J. Cohen*
10.3 Employment Agreement, Warren V. Blasland, Jr.*
10.4 Employment Agreement, Jan Rowinski*
10.5 Employment Agreement, F. William Gilmore, President and Chief Technology Officer of
Latitude Clean Tech Group, Inc. **
10.6 Agent Agreement, Crucible Enterprises, Ltd. ***
10.7 Alliance Marketing Agreement, Bell Mobility, Inc.***
10.8 Consulting Agreement, Laurino Consulting***
10.9 Amendment to Consulting Agreement, Laurino Consulting***
10.10 Strategic Alliance Agreement, Mississippi Band of Choctaw Indians d/b/a Chahta
Enterprises ***
10.11 Operating Agreement of Latitude Energy Services, LLC ****
21.1 List of Subsidiaries of Latitude Solutions, Inc. ****
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act *****
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31.2 Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act *****
32.1 Certification of Principal Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act *****
32.2 Certification of Principal Accounting Officer pursuant to Section 906 of the
Sarbanes-Oxley Act *****
----------------- --------------
*Filed as an exhibit to the Registration Statement on Form 10, filed with the
SEC on November 12, 2010.
**Filed as an exhibit to the Registration Statement on Form 10, Amendment No. 1,
filed with the SEC on January 14, 2011.
*** Filed as an exhibit to the Registration Statement on Form 10, Amendment No.
2, filed with the SEC on February 11, 2011.
****Filed as an exhibit to the Annual Report on Form 10-K, filed with the SEC on
April 15, 2011.
*****Filed herewith.
-53-
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES
(F/K/A GMMT, INC.)
Financial Statements for the Years Ended
December 31, 2010 and 2009
(Restated)
-54-
TABLE OF CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 56
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets (Restated) 57
Consolidated Statements of Operations (Restated) 58
Consolidated Statement of Stockholders' Deficit (Restated) 59-61
Consolidated Statements of Cash Flows (Restated) 62
Notes to Consolidated Financial Statements 63-78
-55-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------
To the Board of Directors and
Stockholders of Latitude Solutions, Inc. and Subsidiaries (f/k/a GMMT, Inc.)
(A Development Stage Company)
We have audited the accompanying consolidated balance sheets of Latitude
Solutions, Inc. and Subsidiaries (f/k/a GMMT, Inc.) (A Development Stage
Company) (the "Company") as of December 31, 2010 and 2009, the related
consolidated statements of operations and cash flows for the years ended
December 31, 2010 and 2009 and for the period from June 3, 1983 (inception) to
December 31, 2010, and the related consolidated statements of stockholders'
deficit for the period from June 3, 1983 (inception) to December 31, 2010. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements, assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Latitude Solutions,
Inc. and Subsidiaries (f/k/a GMMT, Inc.) (A Development Stage Company) as of
December 31, 2010 and 2009, and the results of its operations and its cash flows
for the years ended December 31, 2010 and 2009 and for the period from June 3,
1983 (inception) to December 31, 2010, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company's lack of revenue, continuing losses and
dependence on outside financing raise substantial doubt about its ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Mallah Furman
Fort Lauderdale, Florida
April 15, 2011, except for Notes 2, 9, 11, 13 and 14, as to which the date is
May 10, 2011
-56-
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (F/K/A GMMT, INC.)
(A Development Stage Company)
Consolidated Balance Sheets
(Restated)
ASSETS
December 31, December 31,
2010 2009
----------------------- --------------------
CURRENT ASSETS
Cash $ 216,200 $ 2,133
----------------------- --------------------
Total Current Assets 216,200 2,133
----------------------- --------------------
Equity investment 1,767,882 938,146
Prepaid licensing fee, net 93,333 100,000
Property, plant and equipment, net 384,743 20,208
Intangible assets, net 207,267 -
Other assets 174,745 4,423
-------------------- -----------------
TOTAL ASSETS $ 2,844,170 $ 1,064,910
======================= ====================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 907,685 $ 602,262
Due to investee 412,409 -
Related party payable 35,400 10,400
Convertible debt, net 2,378,583 717,302
Liability to issue stock 239,133 54,910
----------------------- --------------------
Total Current Liabilities 3,973,210 1,384,874
----------------------- --------------------
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value, 100,000,000
shares authorized, 28,710,656 and 21,887,814
shares issued and outstanding, respectively 28,711 21,888
Additional paid-in capital 5,312,288 1,887,119
Deficit accumulated during the development stage (6,461,255) (2,145,779)
Due from investee - (96,065)
Accumulated other comprehensive (loss) income (8,784) 12,873
----------------------- --------------------
Total Stockholders' Deficit (1,129,040) (319,964)
----------------------- --------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 2,844,170 $ 1,064,910
======================= ====================
See accompanying notes to consolidated financial statements.
-57-
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (F/K/A GMMT, INC.)
(A Development Stage Company)
Consolidated Statements of Operations
(Restated)
From Inception
on June 3,
1983 Through
For the Years Ended December 31,
December 31, 2010
------------------------------------------- -----------------------
2010 2009
-------------------- ------------------- -----------------------
REVENUES $ - $ - $ -
-------------------- ------------------- -----------------------
EXPENSES
Legal and accounting expense 192,106 53,282 334,096
Consulting fees 839,007 878,393 1,769,900
Rent expense 69,048 57,341 148,389
Salaries expense 762,790 20,988 821,778
Travel expense 251,301 141,601 435,330
General and administrative 772,637 89,239 877,227
-------------------- ------------------- -----------------------
Total Expenses 2,886,889 1,240,844 4,386,720
-------------------- ------------------- -----------------------
LOSS FROM OPERATIONS (2,886,889) (1,240,844) (4,386,720)
OTHER EXPENSES
Acquisition expense - 350,000 350,000
Finance costs pursuant to debt issuance 1,003,333 221,815 1,225,148
Interest expense 120,886 24,405 145,291
Equity in losses of investee 304,368 49,728 354,096
-------------------- ------------------- -----------------------
Total Other Expenses 1,428,587 645,948 2,074,535
-------------------- ------------------- -----------------------
LOSS BEFORE INCOME TAXES (4,315,476) (1,886,792) (6,461,255)
INCOME TAXES - - -
-------------------- ------------------- -----------------------
NET LOSS $ (4,315,476) $ (1,886,792) $ (6,461,255)
==================== =================== =======================
LOSS PER SHARE - BASIC AND DILUTED $ (0.18) $ (0.81)
==================== ===================
WEIGHTED AVERAGE
OUTSTANDING SHARES
BASIC AND DILUTED 23,415,247 2,342,017
==================== ===================
See accompanying notes to consolidated financial statements.
-58-
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (F/K/A GMMT, INC.)
(A Development Stage Company)
Consolidated Statements of Stockholders' Deficit
Deficit Accumulated
Accumulated Other
Common Stock Additional During the Due Comprehensive Total
-------------------- Paid-In Development From (Loss) Stockholders'
Shares Amount Capital Stage Investee Income Deficit
---------- --------- ---------- ----------- ------- --------- ------------
Balance at inception on
June 3, 1983 - $ - - - - - -
Common shares issued to
founders for services 421,643 422 9,358 - - - 9,780
Net loss for the period from
inception on June 3, 1984
through December 31, 2004 - - - (9,780) - - (9,780)
---------- --------- ---------- ----------- ------- --------- ------------
Balance, December 31, 2004 421,643 422 9,358 (9,780) - - -
Services contributed and
expenses paid by shareholder - - 7,500 - - - 7,500
Net loss for the year ended
December 31, 2005 - - - (11,700) - - (11,700)
---------- --------- ---------- ----------- ------- --------- ------------
Balance, December 31, 2005 421,643 422 16,858 (21,480) - - (4,200)
Services contributed by
shareholders - - 5,000 - - - 5,000
Net loss for the year ended
December 31, 2006 - - - (7,500) - - (7,500)
---------- --------- ---------- ----------- ------- --------- ------------
Balance, December 31, 2006 421,643 422 21,858 (28,980) - - (6,700)
Services contributed by
shareholders - - 3,600 - - - 3,600
Net loss for the year ended
ended December 31, 2007 - - - (7,300) - - (7,300)
---------- --------- ---------- ----------- ------- --------- ------------
Balance, December 31, 2007 421,643 422 25,458 (36,280) (10,400)
....(CONTINUED)
See accompanying notes to consolidated financial statements.
-59-
Deficit Accumulated
Accumulated Other
Common Stock Additional During the Due Comprehensive Total
-------------------- Paid-In Development From (Loss) Stockholders'
Shares Amount Capital Stage Investee Income Deficit
---------- --------- ---------- ----------- ------- --------- ------------
Common stock issued for
cash at 0.20 per share 45,322 45 210,205 - - - 210,250
Net loss for the year ended
December 31, 2008 - - - (222,707) - - (222,707)
---------- --------- ---------- ----------- ------- --------- ------------
Balance, December 31, 2008 466,965 467 235,663 (258,987) - - (22,857)
Common stock issued for
cash at $.20 per share 33,088 33 153,468 - - - 153,501
Value of beneficial conversion
feature and warrants issued in
connection with convertible debt - - 165,161 - - - 165,161
Issuance of common stock for
professional fees at $ .20 per share 786,500 787 156,514 - - - 157,301
Issuance of common stock as
prepaid licensing fee at $.20 per share 500,000 500 99,500 - - - 100,000
Issuance of common stock in
connection with merger with
Latitude Solutions, Inc. 14,625,000 14,625 (12,963) - - - 1,662
Issuance of common stock in
connection with acquistion
of investee at $ .20 per share 4,875,000 4,875 970,125 - - - 975,000
Issuance of common stock pursuant to
bonus shares issued in connection
with convertible debt 601,261 601 119,651 - - - 120,252
Net loss for the year ended
December 31, 2009 - - - (1,886,792) - - (1,886,792)
Due from investee for the year ended
December 31, 2009 - - - - (96,065) - (96,065)
Other comprehensive income for the
year ended December 31, 2009 - - - - - 12,873 12,873
---------- --------- ---------- ----------- ------- --------- ------------
Balance, December 31, 2009 (Restated) 21,887,814 21,888 1,887,119 (2,145,779) (96,065) 12,873 (319,964)
....(CONTINUED)
See accompanying notes to consolidated financial statements.
-60-
Deficit Accumulated
Accumulated Other
Common Stock Additional During the Due Comprehensive Total
-------------------- Paid-In Development From (Loss) Stockholders'
Shares Amount Capital Stage Investee Income Deficit
---------- --------- ---------- ----------- ------- --------- ------------
Issuance of common stock for
professional fees at $ .20 per share 1,637,882 1,638 325,938 - - - 327,576
Issuance of common stock pursuant to
agreement with third party at $.20 per share 600,000 600 119,400 - - - 120,000
Issuance of common stock pursuant to
bonus shares issued in connection
with convertible debt at $.20 per share 2,925,000 2,925 583,675 - - - 586,600
Issuance of common stock pursuant to
conversion shares issued in connection
with convertible debt at $1.00 per share 1,659,960 1,660 1,658,300 - - - 1,659,960
Value of beneficial conversion
feature and warrants issued in
connection with debt - - 591,822 - - - 591,822
Issuance of warrants for professional fees - - 146,034 - - - 146,034
Other comprehensive loss for the
period ended December 31, 2010 - - - - - (21,657) (21,657)
Net loss for the year ended
December 31, 2010 - - - (4,315,476) - - (4,315,476)
Offset by accrual of amounts owed
to investee - - - - 96,065 - 96,065
---------- --------- ---------- ----------- ------- --------- ------------
Balance, December 31, 2010 (Restated) 28,710,656 $ 28,711 5,312,288 (6,461,255) - (8,784) (1,129,040)
========== ========= ========== =========== ======= ========= ============
See accompanying notes to consolidated financial statements.
-61-
LATITUDE SOLUTIONS INC. & SUBSIDIARIES (F/K/A GMMT, INC.)
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Restated)
From Inception
on June 3,
1983 Through
For the Years Ended December 31, December 31,
2010 2009 2010
------------------ ------------------ -----------------
OPERATING ACTIVITIES
Net loss $ (4,315,476) $ (1,886,792) $ (6,461,255)
Adjustments to reconcile net loss to
net cash used by operating activities:
Services contributed by
shareholders - - 16,100
Financing costs 1,003,333 221,815 1,225,148
Common stock issued or to be
issued for services 385,970 167,299 563,049
Warrants issued for services 146,034 - 146,034
Depreciation and amortization expense 28,134 773 28,907
Equity in losses of investee 304,368 49,728 354,096
Changes in operating assets
and liabilities:
Increase in other assets (170,322) (4,423) (174,745)
Increase in accounts
payable and accrued expenses 383,041 588,948 985,303
------------------ ------------------ -----------------
Net Cash Used by Operating Acitvities (2,234,918) (862,652) (3,317,363)
------------------ ------------------ -----------------
INVESTING ACTIVITIES
Capital contributions to investee (155,760) - (155,760)
Purchase of plant and equipment (373,879) (20,981) (394,860)
Purchase of intangible asset (102,000) - (102,000)
Increase in due to investee (491,526) (96,065) (587,591)
------------------ ------------------ -----------------
Net Cash Used by Investing Activities (1,123,165) (117,046) (1,240,211)
------------------ ------------------ -----------------
FINANCING ACTIVITIES
Proceeds from related party payable 25,000 - 35,400
Proceeds from convertible debt 3,552,150 825,811 4,377,961
Repayments of convertible debt (5,000) - (5,000)
Sale of common stock - 155,163 365,413
------------------ ------------------ -----------------
Net Cash Provided by Financing Activities 3,572,150 980,974 4,773,774
------------------ ------------------ -----------------
NET INCREASE IN CASH 214,067 1,276 216,200
CASH AT BEGINNING OF YEAR 2,133 857 -
------------------ ------------------ -----------------
CASH AT END OF YEAR $ 216,200 $ 2,133 $ 216,200
================== ================== =================
See accompanying notes to consolidated financial statements.
-62-
LATITUDE SOLUTIONS, INC & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------
BUSINESS AND ORGANIZATION
Latitude Solutions, Inc. (FKA GMMT, INC) ("the Company") is a Nevada
Corporation incorporated on June 3, 1983. The Company is a development
stage company which has devoted most of its efforts in establishing a
business plan and seeking viable business opportunities.
On July 14, 2009, the Company exchanged a majority of its' shares for all
the outstanding shares of GMMT Merger, Inc., a company controlled by common
stockholders. As a result of the exchange, the Company acquired companies
owned by GMMT Merger, Inc. ("Trinity Solutions, Inc." and "Latitude Clean
Tech Group, Inc."), that conduct businesses in wireless live-video
technology and contaminated water remediation.
BASIS OF PRESENTATION
The accompanying consolidated interim financial statements include the
accounts of Latitude Solutions, Inc. and its wholly owned subsidiaries,
Latitude Clean Tech Group, Inc, Trinity Solutions, Inc. and GMMT Merger,
Inc. (collectively the "Company"). All intercompany balances and
transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid instruments, with an initial
maturity of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is provided for on
the straight line method over the estimated useful lives of the related
assets as follows:
Furniture and fixtures 5 to 7 years
Computer equipment 5 years
Equipment 5 to 7 years
Software 3 to 5 years
The cost of maintenance and repairs is charged to expense in the period
incurred. Expenditures that increase the useful lives of assets are
capitalized and depreciated over the remaining useful lives of the assets.
When items are retired or disposed of, the cost and accumulated
depreciation are removed from the accounts and any gain or loss is included
in income.
-63-
LATITUDE SOLUTIONS, INC & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
--------------------------------------------------------------------------------
INTANGIBLE ASSETS
In accordance with FASB ASC 350-25, "INTANGIBLES - GOODWILL AND OTHER", the
Company acquired a patent that is being amortized over its useful life of
fifteen years. The Company purchased the patent through the issuance of
600,000 shares of common stock with a fair value of $120,000 and a cash
payment of $100,000. Additionally, the Company capitalized patent fees of
$2,000. The Company's balance of intangible assets on the balance sheet net
of accumulated amortization was $207,267 and $0 at December 31, 2010 and
2009, respectively. Amortization expense related to the intangible assets
was $14,733 and $0 for the years ended December 31, 2010 and 2009,
respectively. Amortization expenses related to intangible assets is
expected to be approximately $14,800 each year for 2011 through 2015.
LONG-LIVED ASSETS
The Company's long-lived assets are reviewed for impairment in accordance
with the guidance of the FASB ASC 360-10, "PROPERTY, PLANT, AND EQUIPMENT",
whenever events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable. Recoverability of an asset to
be held and used is measured by a comparison of the carrying amount of an
asset to the future undiscounted cash flows expected to be generated by the
asset. If such asset is considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the
asset exceeds its fair value. Through December 31, 2010, the Company had
not experienced impairment losses on its long-lived assets.
EQUITY INVESTMENTS
The Company follows ASC 323-10, "INVESTMENTS" to account for investments in
entities in which the Company has a 20% to 50% interest or otherwise
exercises significant influence. These investments are carried at cost,
adjusted for the Company's proportionate share of undistributed earnings or
losses of Investee.
DEVELOPMENT STAGE COMPANY
The Company is a development stage company as defined by ASC 915-10,
"DEVELOPMENT STAGE ENTITIES." All losses accumulated since inception have
been considered as part of the Company's development stage activities.
REVENUE RECOGNITION AND COST OF REVENUES
Machinery and royalty revenues will be recognized when there is pervasive
evidence of the arrangement, delivery has occurred, the price is fixed and
determinable and collectability is reasonably assured.
Licensing and other services will include revenues from technology
licensing and maintenance services. These services are provided to
customers ongoing and will be billed up front on a monthly or quarterly
basis and recognized as revenue equally
-64-
LATITUDE SOLUTIONS, INC & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
--------------------------------------------------------------------------------
REVENUE RECOGNITION AND COST OF REVENUES (CONTINUED)
during the term of the arrangement in accordance with ASC 605-25, "MULTIPLE
ELEMENT ARRANGEMENTS". Since inception, no revenue has been generated.
Costs of revenues for the Company will consist primarily of costs to
purchase machinery and equipment and the shipping costs necessary to
distribute products to customers.
NET LOSS PER SHARE
The Company follows ASC 260-10, "EARNINGS PER SHARE" in calculating the
basic and diluted loss per share. The Company computes basic loss per share
by dividing net loss and net loss attributable to common shareholders by
the weighted average number of common shares outstanding. Diluted loss per
share considers the effect of common equivalent shares. There were no
common share equivalents at December 30, 2010 and 2009.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
INCOME TAXES
Income taxes are accounted for under the asset and liability method as
stipulated by ASC 740, "ACCOUNTING FOR INCOME Taxes". Deferred tax assets
and liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and operating loss
and tax credit carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under ASC 740, the effect on deferred tax assets and liabilities
or a change in tax rate is recognized in income in the period that includes
the enactment date. Deferred tax assets are reduced to estimated amounts to
be realized by the use of the valuation allowance. A valuation allowance is
applied when in management's view it is more likely than not (50%) that
such deferred tax will not be utilized.
Effective January 1, 2009, the Company adopted certain provisions under ASC
740, which provide interpretative guidance for the financial statement
recognition and measurement of a tax position taken or expected to be taken
in a tax return. Effective with the Company's adoption of these provisions,
interest related to the unrecognized tax benefits is recognized in the
financial statements as a component of income taxes.
-65-
LATITUDE SOLUTIONS, INC & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
--------------------------------------------------------------------------------
INCOME TAXES (CONTINUED)
The adoption of ASC 740 did not have an impact on the Company's financial
position and results of operations.
In the unlikely event that an uncertain tax position exists in which the
Company could incur income taxes, the Company would evaluate whether there
is a probability that the uncertain tax position taken would be sustained
upon examination by the taxing authorities. Reserve for uncertain tax
positions would then be recorded if the Company determined it is probable
that a position would be sustained upon examination or if a payment would
have to be made to a taxing authority and the amount is reasonably
estimable. As of December 31, 2010, the Company does not believe it has any
uncertain tax positions that would result in the Company having a liability
to the taxing authorities. The Company's tax returns are subject to
examination by the federal and state tax authorities for the years ended
2007 through 2010.
FINANCIAL INSTRUMENTS
The Company adopted the provisions of ASC 820, "FAIR VALUE MEASUREMENTS AND
DISCLOSURES", effective January 1, 2008. ASC 820 defines fair value,
establishes a framework for measuring fair value under generally accepted
accounting principles and enhances disclosures about fair value
measurements.
Fair value is defined as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. Valuation techniques used to measure
fair value, as required by ASC 820, must maximize the use of observable
inputs and minimize the use of unobservable inputs.
The standard describes a fair value hierarchy based on three levels of
inputs, of which the first two are considered observable and the last
unobservable, that may be used to measure fair value. The Company's
assessment of the significance of a particular input to the fair value
measurements requires judgment, and may affect the valuation of the assets
and liabilities being measured and their placement within the fair value
hierarchy.
o Level 1 - Quoted prices in active markets for identical assets or
liabilities.
o Level 2 - Inputs other than Level 1 that are observable, either
directly or indirectly, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
o Level 3 - Unobservable inputs that are supported by little or no
market activity and that are significant to the fair value of the
assets or liabilities.
-66-
LATITUDE SOLUTIONS, INC & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
--------------------------------------------------------------------------------
COMPREHENSIVE INCOME
ASC 220, "COMPREHENSIVE INCOME" establishes standards for the reporting and
display of comprehensive income and its components in the financial
statements. As of December 31, 2010, the Company's accumulated other
comprehensive loss of approximately $8,800 is comprised of the accumulated
foreign currency translation adjustments related to the Company's equity
investment.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company applies the fair value method of ASC 718, "SHARE BASED
PAYMENT", in accounting for its stock based compensation. This standard
states that compensation cost is measured at the grant date based on the
value of the award and is recognized over the service period, which is
usually the vesting period. As the Company does not have sufficient,
reliable and readily determinable values relating to its common stock, the
Company has used the stock value pursuant to its most recent sale of stock
for purposes of valuing stock based compensation.
COMMON STOCK PURCHASE WARRANTS
The Company accounts for common stock purchase warrants at fair value in
accordance with ASC 815-40 "DERIVATIVES AND HEDGING." The Black-Scholes
option pricing valuation method is used to determine fair value of these
warrants consistent with ASC 718, "SHARE BASED PAYMENT." Use of this method
requires that the Company make assumptions regarding stock volatility,
dividend yields, expected term of the warrants and risk-free interest
rates.
The Company accounts for transactions in which services are received in
exchange for equity instruments based on the fair value of such services
received from non-employees, in accordance with ASC 505-50 "EQUITY BASED
PAYMENTS TO Non-employees."
NOTE 2 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
--------------------------------------------------------------
The accompanying 2010 and 2009 financial statements have been restated to
reflect debt discount on convertible debt and to correct the fair value of
warrants and bonus shares issued pursuant to convertible debt and
consulting fees. Management determined that the debt discount had been
erroneously recorded as finance costs and that the Black Scholes
calculation used to determine the fair value of the warrants contained a
mathematical error.
-67-
LATITUDE SOLUTIONS, INC & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 2 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------
As a consequence of the above restatement, convertible debt, net was
restated from $2,788,011 and $825,811 to $2,378,583 and $717,302 at
December 31, 2010 and 2009, respectively; liability to issue stock was
restated from $198,065 and $39,576 to $239,133 and $54,910 at December 31,
2010 and 2009, respectively; additional paid in capital was restated from
$8,989,196 and $2,397,940 to $5,312,288 and $1,887,119 at December 31, 2010
and 2009, respectively; accumulated deficit was restated from $10,506,523
and $2,749,775 to $6,461,255 and $2,145,779 at December 31, 2010 and 2009,
respectively; consulting fees were restated from $1,729,462 to $839,007 in
2010; finance costs pursuant to debt issuance were restated from $3,554,150
and $825,811 to $1,003,333 and $221,815 in 2010 and 2009, respectively; net
loss was restated from $7,756,748 and $2,490,788 to $4,315,476 and
$1,886,792 in 2010 and 2009, respectively, and loss per share - basic and
diluted was restated from $0.33 and $1.06 to $0.18 and $0.81 in 2010 and
2009, respectively.
NOTE 3 - GOING CONCERN
----------------------
The financial statements have been prepared on a going concern basis, and
do not reflect any adjustments related to the uncertainty surrounding our
recurring losses or accumulated deficit.
The Company currently has no revenue source and is incurring losses. These
factors raise substantial doubt about our ability to continue as a going
concern. Management plans to finance the Company's operations through the
issuance of equity and debt securities. However, management cannot provide
any assurances that the Company will be successful in accomplishing any of
its plans.
The ability of the Company to continue as a going concern is dependent upon
its ability to successfully accomplish the plans described in the preceding
paragraph and eventually secure other sources of financing and attain
profitable operations. The accompanying financial statements do not include
any adjustments that might be necessary if the Company is unable to
continue as a going concern.
NOTE 4 - ACQUISITION
--------------------
As stated on Note 1, the Company acquired GMMT Merger, Inc. through a stock
exchange on July 14, 2009. In connection with the acquisition, the Company
issued 14,625,000 shares of its' stock in exchange for all the outstanding
shares of GMMT Merger, Inc. This acquisition was consummated amongst
commonly controlled entities, as a result, all assets and liabilities
acquired, which were insignificant, were recorded by the Company at their
historical cost.
NOTE 5 - EQUITY INVESTMENT
--------------------------
In July 2009 the Company acquired a 50% ownership interest in 6709800
Canada Inc. ("GPS Latitude"), a Canadian Company. The remaining 50% is
owned by four Canadian citizens and a Canadian corporation. The Company
accounts for this investment under the equity method of accounting. GPS
Latitude is engaged in providing unique wireless live-video streaming
technology and processes in Canada.
-68-
LATITUDE SOLUTIONS, INC & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 5 - EQUITY INVESTMENT (CONTINUED)
--------------------------------------
The initial investment was valued at $975,000 based on the value of the
4,800,000 shares of stock issued upon acquisition. For purposes of
determining the fair value of the consideration paid for this investment,
the Company used $ .20 per share since that was the most recent price
received during 2009 for shares privately placed with investors. During the
period, the Company recorded its proportionate share of the losses of the
investee through December 31, 2010.
The Company is committed to contribute unto GPS Latitude 40% of any funds
raised from future issuances of equity or debt securities up to $1,000,000.
The balance for amounts due to (from) this affiliate for the years ended
December 31, 2010 and 2009 were $412,409 and ($96,065), respectively.
The Company has calculated the components of the Investment to be as
follows:
Goodwill $ 1,050,781
Net Liabilities assumed at January 31, 2009 (75,781)
---------------
975,000
Contributed capital, including $412,409 not paid
as of December 31, 2010 1,155,759
Estimated proportionate share in losses of
investee, including a foreign currency
translation of $8,784 (362,877)
---------------
Book Value $ 1,767,882
===============
-69-
LATITUDE SOLUTIONS, INC & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 5 - EQUITY INVESTMENT (CONTINUED)
--------------------------------------
GPS Latitude has a fiscal year end of January 31. The following is
summarized unaudited financial information of GPS Latitude as of December
31, 2010 and for the eleven month period then ended:
December 31, 2010
-------------------
Balance Sheet:
Reimbursable R&D $178,504
Other current assets 140,451
Noncurrent assets 4,851
Current liabilities (373,896)
Noncurrent liabilities (273,635)
-------------------
Total Stockholders' Deficit ($323,725)
===================
Operating Results
Loss from operations ($742,459)
Revenue 199,968
Interest Expense (24,054)
-------------------
Net loss (566,545)
-------------------
Loss on Foreign Exchange (17,568)
-------------------
Comprehensive Loss ($584,113)
===================
GPS Latitude's functional currency is the Canadian Dollar. GPS Latitude
accounts for currency translation in accordance with ASC 830-10, "FOREIGN
CURRENCY MATTERS." Income and expenses related to its operations are
translated at weighted average exchange rates during the year. Assets and
liabilities are translated to US dollars at the exchange rate in effect at
the balance sheet date.
NOTE 6 - PREPAID LICENSING FEE
------------------------------
Prepaid licensing fee represents the unamortized costs for the use of
certain technology related to water remediation. In consideration for this
technology, the Company issued 500,000 shares of it's common stock valued
at $ .20 per share during December 2009. This amount will be amortized over
the term of the licensing agreement, which is 15 years. The Company's
balance of prepaid licensing fee on the balance sheet, net of accumulated
amortization, was $93,333 and $100,000 at December 31, 2010 and 2009,
respectively. Amortization expense related to the intangible asset was
$6,667 and $0 for the years ended December 31, 2010 and 2009, respectively.
-70-
LATITUDE SOLUTIONS, INC & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 7 - PROPERTY, PLANT AND EQUIPMENT
--------------------------------------
At December 31, 2010 and 2009, property and equipment consisted of the
following:
2010 2009
------------- ------------
Equipment $ 35,752 $ 17,695
Furniture and fixtures 11,421 3,286
Plants under construction 345,076 -
------------- ------------
392,249 20,981
Less accumulated Depreciation 7,506 773
------------- ------------
$ 384,743 $ 20,208
============= ============
Plants under construction represent electro-coagulation units in assembly
at the Company's contracted manufacturer in Colorado. These machines will
either be utilized as demonstration units or leased to potential customers
in 2011.
Depreciation expense for the years ended December 31, 2010 and 2009 was
$6,733 and $773, respectively.
NOTE 8 - RELATED PARTY TRANSACTIONS AND BALANCES
------------------------------------------------
The Company has a liability to stockholders for expenses paid by them on
the Company's behalf and advances received by the Company. The liability
has a balance of $35,400 and $10,400 as of December 31, 2010 and 2009,
respectively. These amounts are non-interest bearing and payable on demand.
NOTE 9- CONVERTIBLE DEBT
------------------------
At December 31, 2010 and 2009, the Company had convertible notes payable
outstanding of $2,378,583 and $717,302, respectively, which was net of a
discount of $409,428 and $108,509, respectively. These convertible notes
mature at various times within six months from date of issuance, have an
interest rate of 7% and include a beneficial conversion feature which
allows the holder to convert the notes into common stock at a conversion
price of $1.00 per share. In connection with these convertible notes, the
Company issued warrants expiring five years from date of issuance which
allow the holders to purchase shares of common stock at $1.25 per share and
issued a share of common stock for every dollar borrowed.
At December 31, 2010 and 2009, the Company had a liability to issue stock
of $239,133 and $54,910, respectively. The balance at December 31, 2010 is
comprised of $170,739 of bonus shares to be issued in 2011 and $68,394 of
stock to be issued for legal and consulting services rendered in 2010. The
balance at December 31, 2009 is comprised of $44,910 of bonus shares issued
in 2010 and $10,000 of consulting services rendered in 2009.
-71-
LATITUDE SOLUTIONS, INC & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 9 - CONVERTIBLE DEBT (CONTINUED)
-------------------------------------
As of December 31, 2010, $705,061 of the outstanding convertible notes
payable have reached their maturity date and $479,800 of this amount has
been converted to stock subsequent to December 31, 2010.
Convertible debt with beneficial conversion features, whereby the
conversion feature is "in the money," is accounted for in accordance with
guidelines established by ASC 470-20, "DEBT WITH CONVERSION AND OTHER
OPTIONS." The relative fair value of the beneficial conversion feature and
other embedded features are individually valued at fair market value and
are either expensed or amortized over the term of the related instruments.
The Company has recognized the respective values of these features as a
discount to the convertible debt and is amortizing the discount over the
term of the notes.
NOTE 10 - STOCKHOLDERS' DEFICIT
-------------------------------
REVERSE STOCK SPLIT
On March 24, 2009, the Company declared a reverse stock split of the common
stock. The formula provided that every 23.1975 issued and outstanding
shares of common stock of the Company be automatically reverse split into 1
share of common stock. Any resulting share ownership interest of fractional
shares was rounded up to the first integer in such a manner that all
rounding was done to the next single share. The reverse stock split was
effective July 9, 2009 for holders of record as of that date. All stock and
warrant numbers have been restated to give retroactive effect to this
reverse stock split. All per share disclosures retroactively reflect shares
outstanding or issuable as though the reverse stock split had occurred on
January 1, 2009.
COMMON STOCK
The Company issued 1,637,882 shares of the Company's common stock to
various individuals and entities during the year ended December 31, 2010 in
consideration for professional services.
The Company issued 600,000 shares of the Company's common stock to an
entity pursuant to an agreement to purchase intellectual property.
On January 12, 2010, the Company's board of directors approved the
resolution authorizing the issuance of 223,850 shares of the Company's
authorized common stock to individuals pursuant to the issuance of
additional convertible debt.
On April 23, 2010, the Company's board of directors approved the resolution
authorizing the issuance of 1,016,291 shares of the Company's authorized
common stock to individuals pursuant to the issuance of additional
convertible debt as well as shares issued pursuant to the conversion of
outstanding notes. In consideration for the conversion of notes, an
additional 234,190 warrants were issued.
-72-
LATITUDE SOLUTIONS, INC & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 10 - STOCKHOLDERS' DEFICIT (CONTINUED)
-------------------------------------------
On August 4, 2010, the Company's board of directors approved the resolution
authorizing the issuance of 2,047,922 shares of the Company's authorized
common stock to individuals pursuant to the issuance of additional
convertible debt as well as shares issued pursuant to the conversion of
outstanding notes. In consideration for the conversion of the notes, an
additional 986,622 warrants were issued.
On September 28, 2010, the Company's board of directors approved the
resolution authorizing the issuance of 453,013 shares of the Company's
authorized common stock to individuals pursuant to the issuance of
additional convertible debt as well as shares issued pursuant to the
conversion of outstanding notes. In consideration for the conversion of the
notes at this time, an additional 140,513 warrants were issued.
On December 1, 2010, the Company's board of directors approved the
resolution authorizing the issuance of 894,351 shares of the Company's
authorized common stock to individuals pursuant to the issuance of
additional convertible debt as well as shares issued pursuant to the
conversion of outstanding notes. In consideration for the conversion of the
notes at this time, an additional 311,101 warrants were issued.
NOTE 11 - STOCK PURCHASE WARRANTS
---------------------------------
During the period, the Company issued warrants (each warrant is exercisable
into one share of Company restricted common stock) in connection with the
issuance of convertible debt as discussed in Note 9, upon conversion of
outstanding notes as discussed in Note 10 and for services rendered by
various consultants during the year ended December 31, 2010.
A summary of the change in stock purchase warrants for the years ended
December 31, 2010 and 2009 is as follows:
Weighted
Weighted Average
Number of Average Remaining
Warrants Exercise Contractual
Outstanding Price Life (Years)
--------------- ------------ ---------------
Balance, January 1, 2009 - $ - -
Warrants issued 825,811 1.25 3.63
--------------- ------------ ---------------
Balance, December 31, 2009 825,811 1.25 3.63
Warrants issued 6,523,084 1.25 4.61
--------------- ------------ ---------------
Balance, December 31, 2010 7,348,895 $1.25 4.50
=============== ============ ===============
-73-
LATITUDE SOLUTIONS, INC & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 11 - STOCK PURCHASE WARRANTS (CONTINUED)
---------------------------------------------
The balance of outstanding and exercisable common stock warrants at
December 31, 2010 is as follows:
Remaining
Contractual
Number of Warrants Outstanding Exercise Price Life (Years)
------------------------------- ---------------- ---------------
825,811 $1.25 3.63
6,523,084 $1.25 4.61
The fair value of stock purchase warrants granted were calculated using the
Black-Scholes option pricing model using the following assumptions:
Years Ended
December 31, December 31,
2010 2009
---------------- --------------
(Restated) (Restated)
Risk free interest rate .35%-1.14% .93% - 1.35%
Expected volatility 214% - 234% 669% - 715%
Expected term of stock warrant in years 2.5 2.5
Expected dividend yield 0% 0%
Average value per option .16-.17 .20
Expected volatility is based on historicalolatility of the Company and
other comparable companies. Short Term U.S. Treasury rates were utilized.
The expected term of the options was calculated using the alternative
simplified method permitted by SAB 107, which defines the expected life as
the average of the contractual term of the options and the weighted average
vesting period for all option tranches. Since trading volumes and the
number of unrestricted shares are very small compared to total outstanding
shares, the value of the warrants was decreased for lack of marketability.
-74-
LATITUDE SOLUTIONS, INC & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 12 - COMMITTMENTS
----------------------
The company entered into a three year office lease agreement in Florida
beginning April 1, 2010 through March 31, 2013 and subsequently added an
addendum to the lease agreement beginning September 1, 2010 through March
31, 2013. The amount is to be paid monthly over the course of the
agreement.
Future minimum lease payments for its headquarters are as follows:
YEAR AMOUNT
---- ---------
2011 $ 68,367
2012 71,790
2013 18,164
---------
$ 158,321
=========
Rent expense for the years ended December 31, 2010 and 2009 was
approximately $69,048 and $57,341, respectively.
Subsequent to December 31, 2010, the Company entered into a license
agreement beginning February 15, 2011 through February 14, 2016 for
aggregate license fees of $1,800,000. The amount is to be paid monthly over
the course of the agreement.
Future minimum license fees are as follows:
YEAR AMOUNT
---- ----------
2011 $ 330,000
2012 360,000
2013 360,000
2014 360,000
2015 360,000
Thereafter 30,000
----------
$1,800,000
==========
Subsequent to December 31, 2010, the Company entered into a five year
office and laboratory lease agreement in Colorado beginning June 1, 2011
through May 31, 2016 for aggregate office rent of $102,226. The amount is
to be paid monthly over the course of the agreement.
Future minimum lease payments for this office are as follows:
YEAR AMOUNT
---- --------
2011 $ 10,792
2012 19,040
2013 19,992
2014 20,991
2015 22,041
Thereafter 9,370
--------
$102,226
========
-75-
LATITUDE SOLUTIONS, INC & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 13 - INCOME TAXES
----------------------
A reconciliation of the differences between the effective income tax rate
and the statutory federal tax rate for the years ended December 31, 2010
and 2009 are as follows:
2010 2009
------------ -----------
Tax benefit at U.S. statutory rate 34.00 % 34.00 %
State taxes, net of federal benefit 3.63 3.63
Change in valuation allowance (37.63) (37.63)
----------- -----------
- % - %
=========== ===========
The tax effect of temporary differences that give rise to significant
portions of the deferred tax asset and liabilities at December 31, 2010 and
2009 consisted of the following:
December 31, December 31,
Deferred Tax Assets 2010 2009
----------------- ----------------
(Restated) (Restated)
Net Operating Loss
Carryforward $ 2,431,370 $ 1,034,740
----------------- ---------------
Total Non-current Deferred 2,431,370 1,034,740
Tax Asset
Non-current Deferred Tax
Liabilities (350,640) (62,151)
----------------- ---------------
Net Non-current Deferred Tax 2,080,730 972,589
Asset
Valuation Allowance (2,080,730) (972,589)
----------------- ---------------
Total Net Deferred Tax Asset $ - $ -
================= ===============
As of December 31, 2010, the Company had a net operating loss carry forward
for income tax reporting purposes of approximately $6,461,255 that may be
offset against future taxable income through 2030. Current tax laws limit
the amount of loss available to be offset against future taxable income
when a substantial change in ownership occurs. Therefore, the amount
available to offset future taxable income may be limited. No tax asset has
been reported in the financial statements, because the Company believes
there is a 50% or greater chance the carry forwards will expire unused.
Accordingly, the potential tax benefits of the loss carry forwards are
offset by a valuation allowance of the same amount.
-76-
LATITUDE SOLUTIONS, INC & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 14 - SUPPLEMENTAL CASH FLOW INFORMATION
--------------------------------------------
Year Ended
December 31,
----------------------------
2010 2009
------------- -------------
(Restated) (Restated)
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 591 $ 361
------------- -------------
Changes in non-cash financing and investing activities:
Common stock issued for intangible asset $ 120,000 $ -
------------- -------------
Common stock issued for equipment purchase $ - $ 100,000
------------- -------------
Common stock issued for equity investment $ - $ 975,000
------------- -------------
Common stock issued for notes payable $ 586,600 $ 165,161
(bonus shares)
------------- -------------
Common stock issued for conversion of notes
payable and accrued interest $ 1,659,960 $ -
------------- -------------
Due to GPS Latitude $ 412,409 $ -
------------- -------------
NOTE 15 - SUBSEQUENT EVENTS
---------------------------
Management has evaluated the subsequent events through the date at which
the financial statements were issued.
The Company established the Latitude Solutions, Inc. 401(k) Plan effective
January 1, 2011.
On January 19, 2011 the Company issued 200,000 shares of the Company's
authorized common stock to an individual pursuant to consulting services
rendered.
On January 25, 2011 the Company issued 1,222,675 shares of the Company's
authorized common stock to individuals pursuant to the issuance of
additional convertible debt and the conversion of $431,800 of notes payable
plus accrued interest as mentioned in Note 9. These converted notes were
previously in default at December 31, 2010. In consideration for the
conversion of the notes, an additional 448,975 warrants were issued.
On January 27, 2011 the Company issued 575,000 shares of the Company's
authorized common stock to several individuals pursuant to services
rendered under various agreements.
On February 4, 2011 the Company issued 110,000 shares of the Company's
authorized common stock to several individuals pursuant to services
rendered under employment agreements.
-77-
LATITUDE SOLUTIONS, INC & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 15 - SUBSEQUENT EVENTS (CONTINUED)
---------------------------------------
On February 9, 2011 Latitude Energy Services, LLC was formed by the Company
and four other parties to own and operate a water remediation business. The
LLC has a term of thirty years unless earlier dissolved in accordance with
the provisions of the LLC's operating agreement. The Company has a 70%
controlling interest while the remaining four members have an aggregate 30%
non-controlling interest.
On February 9, 2011 the Company entered into a five year lease agreement
for lab/office space in Colorado.
On February 15, 2011 the Company entered into a license agreement with
Separatech Canada, Inc. for a term of five years. The license provides the
Company with access to exclusive usage of specified patents to use, test,
develop, package, promote, sell and provide license products exclusively in
North America. The License provides for the Company to construct a Pilot
Plant for development of the licensed products. In addition, the Company
will pay total licensing fees of $1.8 million (of which $60,000 has been
paid) to be paid in installments over the five year term.
On February 16, 2011 the Company issued 75,000 shares of the Company's
authorized common stock to an individual pursuant to consulting services
rendered.
On February 17, 2011 the Company issued 515,000 shares of the Company's
authorized common stock to various individuals pursuant to consulting
services rendered.
On March 22, 2011 the Company issued 1,358,989 shares of the Company's
authorized common stock to individuals pursuant to the issuance of
additional convertible debt and the conversion of $564,000 of notes payable
plus accrued interest as mentioned in Note 9. $48,000 of the converted
notes payable was previously in default at December 31, 2010. In
consideration for the conversion of the notes, an additional 587,989
warrants were issued.
On March 22, 2011, the Company issued 1,360,000 shares of the Company's
authorized common stock to individuals pursuant to the issuance of Equity
agreements. The equity agreements issue stock at $0.50 per share and a
total of $4,238,000 was raised to date. The agreements also issue warrants
on a 1 for 1 basis.
-78-
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.
LATITUDE SOLUTIONS, INC.
/s/ Harvey Kaye May 18, 2011
------------------------------------------------------------
Harvey Kaye
(Chief Executive Officer/Principal Executive Officer)
/s/ Matthew J. Cohen May 18, 2011
------------------------------------------------------------
Matthew J. Cohen
(Chief Financial Officer/Principal
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Harvey Kaye May 18, 2011
------------------------------------------------------------
Harvey Kaye, Chairman of the Board of Directors
/s/ Matthew J. Cohen May 18, 2011
------------------------------------------------------------
Matthew J. Cohen, Director
/s/ Jan Rowinski May 18, 2011
------------------------------------------------------------
Jan Rowinski, Director
/s/ Kenneth Koock May 18, 2011
------------------------------------------------------------
Kenneth Koock, Director
-79
