Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10Q
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(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2011
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
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 29-1284382
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(State of Incorporation) (IRS Employer ID Number)
190 NW SPANISH RIVER BLVD., SUITE 101, BOCA RATON, FL 33431
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(Address of principal executive offices)
(561)417-0644
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(Registrant's Telephone number)
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 past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to the filing requirements for
the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 for Regulation S-T (ss.232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated file, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller
reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [ X ]
Indicate the number of share outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of August 18, 2011, there were 52,100,632 shares of the registrant's common
stock issued and outstanding.
PAGE
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 1
Balance Sheets - June 30, 2011 and December 31, 2010 (Audited) F-1
Statements of Operations -
Three and six months ended June 30, 2011 and 2010 and
From June 3, 1983 (Inception) to June 30, 2011 F-2
Statements of Cash Flows -
Six months ended June 30, 2011 and 2010 and
From June 3, 1983 (Inception) to June 30, 2011 F-3
Notes to the Financial Statements F-4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 2
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- NOT APPLICABLE 9
Item 4. Controls and Procedures 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings -NOT APPLICABLE 9
Item 1A. Risk Factors - NOT APPLICABLE 9
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities - NOT APPLICABLE 11
Item 4. Removed and Reserved 11
Item 5. Other Information - NOT APPLICABLE 11
Item 6. Exhibits 11
SIGNATURES 12
PART I
ITEM 1. FINANCIAL STATEMENTS
----------------------------
-1-
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (F/K/A GMMT, INC.)
(A Development Stage Company)
Condensed Consolidated Balance Sheets
ASSETS
June 30, December 31,
2011 2010
Unaudited Restated
-------------------- ------------------
CURRENT ASSETS
Cash $ 2,808,960 $ 216,200
Advance to consultant 20,000 -
Other current assets 52,808 174,745
-------------------- ------------------
Total Current Assets 2,881,768 390,945
-------------------- ------------------
Equity investment 1,391,597 1,767,882
Prepaid licensing fee, net 90,000 93,333
Property and equipment, net 1,694,090 384,743
Intangible assets, net 199,867 207,267
-------------------- ------------------
TOTAL ASSETS $ 6,257,322 $ 2,844,170
==================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 670,014 $ 907,685
Due to investee 6,626 412,409
Related party payable 10,400 35,400
Current portion of long-term debt 63,090 -
Convertible debt, net 1,203,916 2,378,583
Liability to issue stock 1,871,132 239,133
-------------------- ------------------
Total Current Liabilities 3,825,178 3,973,210
Long-term debt 123,151 -
-------------------- ------------------
Total Liabilities 3,948,329 3,973,210
-------------------- ------------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.001 par value, 100,000,000
shares authorized, 49,276,177 and 28,710,656
shares issued and outstanding, respectively 49,277 28,711
Additional paid-in capital 26,010,779 5,312,288
Deficit accumulated during the development stage (23,632,809) (6,461,255)
Accumulated other comprehensive loss (9,525) (8,784)
-------------------- ------------------
Total Latitude Solutions, Inc. Stockholders' Equity (Deficit) 2,417,722 (1,129,040)
Noncontrolling Interest in Consolidated Subsidiary (108,729) -
-------------------- ------------------
Total Stockholders' Equity (Deficit) 2,308,993 (1,129,040)
-------------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 6,257,322 $ 2,844,170
==================== ==================
See accompanying notes to condensed consolidated financial statements.
F-1
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (F/K/A GMMT, INC.)
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended For the Six Months Ended From Inception
June 30, June 30, on June 3,
--------------------------- --------------------------- 1983 Through
2011 2010 2011 2010 June 30,
(Restated) (Restated) 2011
------------- ------------ ------------- ------------ ------------
REVENUES $ - $ - $ - $ - $ -
------------- ------------ ------------- ------------ ------------
EXPENSES
Consulting fees 13,026,697 149,130 13,668,090 282,750 15,437,990
General and administrative 534,344 91,957 797,399 161,898 1,674,626
Legal and accounting expense 87,855 57,568 145,160 80,207 479,256
License fees 80,000 - 140,000 - 140,000
Rent expense 28,895 14,340 55,381 25,335 203,770
Salaries expense 663,916 136,475 1,123,549 216,550 1,945,327
Travel expense 144,454 39,524 240,989 62,976 676,319
------------- ------------ ------------- ------------ ------------
Total Expenses 14,566,161 488,994 16,170,568 829,716 20,557,288
------------- ------------ ------------- ------------ ------------
LOSS FROM OPERATIONS (14,566,161) (488,994) (16,170,568) (829,716) (20,557,288)
OTHER INCOME (EXPENSE)
Acquisition expense - - - - (350,000)
Finance costs pursuant to debt issuance (405,768) (199,907) (814,250) (335,151) (2,039,398)
Gain on settlement of accrued expenses - - 150,000 - 150,000
Interest expense (23,206) (29,411) (63,386) (50,561) (208,677)
Interest income 913 - 936 - 936
Equity in losses of investee (136,758) - (383,015) (107,386) (737,111)
------------- ------------ ------------- ------------ ------------
Total Other (Expense) (564,819) (229,318) (1,109,715) (493,098) (3,184,250)
------------- ------------ ------------- ------------ ------------
NET LOSS (15,130,980) (718,312) (17,280,283) (1,322,814) (23,741,538)
NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST (75,250) - (108,729) - (108,729)
------------- ------------ ------------- ------------ ------------
NET LOSS ATTRIBUTABLE TO LATITUDE SOLUTIONS, INC. $(15,055,730) $ (718,312) $(17,171,554) $(1,322,814) $(23,632,809)
============= ============ ============= ============ ============
LOSS PER SHARE ATTRIBUTABLE TO LATITUDE
SOLUTIONS, INC. - BASIC AND DILUTED $ (0.36) $ (0.03) $ (0.47) $ (0.06)
============= ============ ============= ============
WEIGHTED AVERAGE OUTSTANDING
SHARES - BASIC AND DILUTED 42,018,643 23,482,952 36,454,956 22,544,421
============= ============ ============= ============
See accompanying notes to condensed consolidated financial statements.
F-2
LATITUDE SOLUTIONS INC. & SUBSIDIARIES (F/K/A GMMT, INC.)
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
From Inception
on June 3,
Six Months Ended June 30, 1983 Through
2011 2010 June 30,
Restated 2011
------------------- -------------------- -------------------
OPERATING ACTIVITIES
Net loss $ (17,280,283) $ (1,322,814) $ (23,741,538)
Adjustments to reconcile net loss to
net cash used by operating activities:
Services contributed by shareholders - - 16,100
Financing costs 814,250 335,151 2,039,398
Common stock issued or to be
issued for services 9,044,306 130,256 9,607,355
Warrants issued for services 4,286,055 - 4,432,089
Depreciation and amortization expense 26,397 13,184 55,304
Equity in losses of investee 383,015 107,386 737,111
Changes in operating assets and liabilities:
Increase in advance to consultant (20,000) - (20,000)
Decrease (increase) in other current assets 121,937 (21,801) (52,808)
(Decrease) increase in accounts
payable and accrued expenses (156,393) 128,316 828,910
------------------- -------------------- -------------------
Net Cash Used by
Operating Activities (2,780,716) (630,322) (6,098,079)
------------------- -------------------- -------------------
INVESTING ACTIVITIES
Capital contributions to investee (7,471) (106,019) (163,231)
Purchase of plant and equipment (1,132,262) (264,072) (1,527,122)
Purchase of intangible assets - (102,000) (102,000)
Payments to investee (405,783) (140,233) (993,374)
------------------- -------------------- -------------------
Net Cash Used by
Investing Activities (1,545,516) (612,324) (2,785,727)
------------------- -------------------- -------------------
FINANCING ACTIVITIES
Proceeds from related party payable - - 35,400
Repayment of related party payable (25,000) - (25,000)
Proceeds from convertible debt 691,000 1,454,200 5,068,961
Repayments of convertible debt (116,000) - (121,000)
Repayments of long term debt (6,508) - (6,508)
Proceeds from short term debt 100,000 - 100,000
Repayment of short term debt (100,000) - (100,000)
Sale of common stock 6,375,500 - 6,740,913
------------------- -------------------- -------------------
Net Cash Provided by
Financing Activities 6,918,992 1,454,200 11,692,766
------------------- -------------------- -------------------
NET INCREASE IN CASH 2,592,760 211,554 2,808,960
CASH AT BEGINNING OF PERIOD 216,200 2,133 -
------------------- -------------------- -------------------
CASH AT END OF PERIOD $ 2,808,960 $ 213,687 $ 2,808,960
=================== ==================== ===================
See accompanying notes to condensed consolidated financial statements.
F-3
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2011
(UNAUDITED)
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.
On February 9, 2011, the Company, along with four other entities,
formed a Nevada Limited Liability Company named Latitude Energy
Services, LLC. This new entity plans to conduct operations in the
water remediation business. The Company owns a seventy percent (70%)
interest in Latitude Energy Services, LLC.
BASIS OF PRESENTATION
The accompanying unaudited condensed 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., and its 70% owned subsidiary,
Latitude Energy Services, LLC (collectively the "Company"). All
intercompany balances and transactions have been eliminated in
consolidation.
The accompanying unaudited condensed consolidated financial statements
were prepared using generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and
Regulation S-X. Accordingly, these financial statements do not include
all information or notes required by generally accepted accounting
principles for annual financial statements and should be read together
with the Company's 2010 Annual Report on Form 10-K.
The Company's accounting policies are in accordance with United States
generally accepted accounting principles. The preparation of financial
statements in conformity with these 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 expenses during the reported period. Ultimate
results could differ from the estimates of management.
In the opinion of management, the condensed consolidated financial
statements included herein contain all adjustments necessary to
present fairly the Company's financial position as of June 30, 2011
and the results of its operations and cash flows for the six months
ended June 30, 2011 and 2010. Such adjustments are of a normal
recurring nature. In addition, certain reclassifications of prior
period balances have been made to conform to 2011 classifications. The
results of operations for the six months ended June 30, 2011 may not
be indicative of results for the full year.
F-4
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2011
(UNAUDITED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
--------------------------------------------------------------------------------
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
Vehicles 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.
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
$199,867 and $207,267 at June 30, 2011 and December 31, 2010,
respectively. Amortization expense related to the intangible assets
was $7,400 and $7,333 for the six months ended June 30, 2011 and 2010,
respectively.
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 June 30, 2011, the Company had not
experienced impairment losses on its long-lived assets.
F-5
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2011
(UNAUDITED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
--------------------------------------------------------------------------------
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
The Company's leased plants 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.
Leasing and royalty revenues will include revenues from the leasing of
the plants, and a per gallon royalty fee. These services will be
provided to customers ongoing and will be billed on a monthly 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 will consist primarily of repairs and maintenance
and depreciation on leased plants and any other related selling and
servicing costs.
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.
The Company's computation of basic and diluted loss per share for the
six months ended June 30, 2011 and 2010, respectively, excludes the
following potentially dilutive securities because the effect of their
inclusion would be anti-dilutive.
June 30, 2011 June 30, 2010
------------------- -------------------
Convertible debt 1,374,461 2,059,011
Stock warrants 25,132,846 2,280,011
------------------- -------------------
26,507,307 4,339,022
=================== ===================
F-6
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2011
(UNAUDITED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
--------------------------------------------------------------------------------
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 and penalties related to
unrecognized tax benefits, if and when required, will be classified as
part of interest expense and general and administrative expenses,
respectively, in the consolidated statements 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. A
liability for uncertain tax positions would then be recorded if the
Company determined it is more likely than not that a position would
not 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 June 30, 2011, the Company does not believe any uncertain tax
positions exist that would result in the Company having a liability to
the taxing authorities. The Company's policy is to classify interest
and penalties related to unrecognized tax benefits, if and when
required, as part of interest expense and general and administrative
expense, respectively, in the condensed consolidated statements of
operations. The Company's tax returns for the years ended 2007 through
2010 are subject to examination by the federal and state tax
authorities.
The adoption of ASC 740 did not have an impact on the Company's
financial position and results of operations.
F-7
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2011
(UNAUDITED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
--------------------------------------------------------------------------------
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.
The Company's short-term financial instruments consist primarily of
cash, accounts payable and accrued expenses, and convertible debt. The
carrying amount of convertible debt, net of discount, approximates
fair value because current interest rates available to the Company for
debt with similar terms and maturities are substantially the same. The
other aforementioned financial instruments approximate fair value due
to their short-term maturities.
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 June 30, 2011 and December 31, 2010,
the Company's accumulated other comprehensive loss of $9,525 and
$8,784, respectively, is comprised of the accumulated foreign currency
translation adjustments related to the Company's equity investment.
F-8
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2011
(UNAUDITED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
--------------------------------------------------------------------------------
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 sales 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."
NON-CONTROLLING INTEREST
The Company accounts for its 70% interest in Latitude Energy Services,
LLC in accordance with ASC 810, "CONSOLIDATION", and accordingly, the
Company has presented noncontrolling interest as a component of equity
on its condensed unaudited consolidated balance sheets and reports
non-controlling interest loss under the heading "loss attributable to
noncontrolling interest" in the condensed unaudited consolidated
statements of operations.
CONCENTRATION OF RISK
The Company does not have any off-balance-sheet concentrations of
credit risk. The Company expects cash and accounts receivable to be
the two assets most likely to subject the Company to concentrations of
credit risk. The Company's policy is to maintain its cash with high
credit quality financial institutions to limit its risk of loss
exposure. The Company plans to minimize its accounts receivable credit
risk by transacting contractual arrangements with customers that have
been subjected to stringent credit evaluations and structuring the
contracts in a manner that lessens inherent credit risks.
F-9
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2011
(UNAUDITED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
--------------------------------------------------------------------------------
CONCENTRATION OF RISK (CONTINUED)
As of June 30, 2011, the Company maintained its cash in four financial
institutions. The Company's cash balance at June 30, 2011 exceeded the
federally insured limits by $200,937. As of December 31, 2010, the
Company's cash balance was fully insured. The Company has not
experienced any losses in its bank accounts through June 30, 2011.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In May 2011, the Financial Accounting Standards Board (FASB) issued a
new accounting standard update (ASU No. 2011-04), which amends the
fair value measurement guidance and includes some enhanced disclosure
requirements. The most significant change in disclosures is an
expansion of the information required for Level 3 measurements based
on unobservable inputs. The standard is effective for fiscal years
beginning after December 15, 2011. The Company will adopt this
standard in the first quarter of 2012 and is currently evaluating its
impact on the Company's financial statements and disclosures.
In June 2011, the FASB issued a new accounting standard (ASU No.
2011-05), which eliminates the current option to report other
comprehensive income and its components in the statement of
stockholders' equity. Instead, an entity will be required to present
items of net income and other comprehensive income in one continuous
statement or in two separate, but consecutive, statements. The
standard is effective for fiscal years beginning after December 15,
2011. The Company will adopt this standard in the first quarter of
2012.
NOTE 2 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
--------------------------------------------------------------
The accompanying June 30, 2010 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 determined the fair value of the warrants
contained a mathematical flaw.
As a result of the aforementioned restatement, net loss for the three
months ended June 30, 2010 was restated from $1,355,405 to $718,312
and loss per share - basic and diluted was restated from $0.06 to
$0.03. Net loss for the six months ended June 30, 2010 was restated
from $2,441,863 to $1,322,814 and loss per share - basic and diluted
was restated from $0.11 to $0.06.
F-10
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2011
(UNAUDITED)
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 the Company's recurring losses or accumulated deficit.
The Company currently has no revenue source and is incurring losses.
These factors raise substantial doubt about the Company's ability to
continue as a going concern. Management plans to finance the Company's
operations through the issuance of equity 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 - 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.
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 June 30, 2011.
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 this affiliate as of June
30, 2011 and December 31, 2010 totaled $6,626 and $412,409,
respectively.
F-11
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2011
(UNAUDITED)
NOTE 4 - EQUITY INVESTMENT (CONTINUED)
--------------------------------------
The Company has calculated the components of the Investment in GPS
Latitude as of June 30, 2011 to be as follows:
Goodwill 1,050,781
Net Liabilities assumed at July 31, 2009 (75,781)
---------------
975,000
Contributed capital, including $6,626 not paid
as of June 30, 2011 1,163,233
Estimated proportionate share in losses
of investee, including foreign currency
translation losses of $9,525 (746,636)
---------------
Book Value $ 1,391,597
===============
GPS Latitude has a fiscal year end of January 31. The following is
summarized unaudited financial information of GPS Latitude as of June
30, 2011 and for the five month period then ended:
June 30, 2011
--------------------
Balance Sheet:
Other current assets $ 229,646
Noncurrent assets 8,305
Current liabilities (626,020)
Noncurrent liabilities (282,633)
--------------------
Total Stockholders' Deficit $ ( 670,702)
====================
Operating Results
Loss from operations $ ( 715,017)
Revenue 39,263
Interest Expense (4,537)
--------------------
Net loss (680,291)
--------------------
Loss on Foreign Exchange (4,925)
--------------------
Comprehensive Loss $ ( 685,216)
====================
F-12
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2011
(UNAUDITED)
NOTE 4 - EQUITY INVESTMENT (CONTINUED)
--------------------------------------
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 5 - 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 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 $90,000 and $93,333 at June 30,
2011 and December 31, 2010, respectively. Amortization expense related
to the intangible asset was $3,333 and $3,333 for the six months ended
June 30, 2011 and 2010.
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
--------------------------------------
At June 30, 2011 and December 31, 2010, property and equipment
consisted of the following:
2011 2010
---------------- ----------------
Equipment $ 183,711 $ 35,752
Furniture and fixtures 24,539 11,421
Plants under construction 1,267,955 345,076
Vehicles 241,055 -
---------------- ----------------
1,717,260 392,249
Less accumulated Depreciation 23,170 7,506
---------------- ----------------
$ 1,694,090 $ 384,743
================ ================
Plants under construction represent electro-precipitation 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.
The Company purchased vehicles costing $207,209 for a combination of
notes payable, secured by the vehicles, of $192,749 and cash of
$14,460. The Company makes monthly payments of $5,524 towards
principal and interest on the notes.
Depreciation expense for the six months ended June 30, 2011 and 2010
was $15,664 and $2,518, respectively.
F-13
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2011
(UNAUDITED)
NOTE 7 - 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 $10,400 and $35,400 as of June 30, 2011 and
December 31, 2010, respectively. These amounts are non-interest
bearing and payable on demand.
In January 2011, the Company purchased a vehicle from an officer. The
purchase price of $33,846 was based on the estimated fair value of the
vehicle and is included in fixed assets under the vehicles category as
shown in Note 6.
NOTE 8 - CONVERTIBLE DEBT
-------------------------
At June 30, 2011 and December 31, 2010, the Company had convertible
notes payable outstanding of $1,203,916 and $2,378,583, respectively,
which was net of a discount of $170,545 and $409,428, respectively.
These convertible notes mature at various times within six months from
date of issuance, have an interest rate of 7% and 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.
NOTE 9- STOCKHOLDERS' DEFICIT
-----------------------------
COMMON STOCK
For the six months ended June 30, 2011, the Company issued common
stock as follows:
(a) 850,000 shares for professional fees valued at $0.20 per share in
January 2011.
(b) 978,700 bonus shares in connection with convertible debt valued
at $0.20 per share in January 2011.
(c) 625,000 shares for professional fees valued at $0.50 per share in
February 2011.
(d) 566,000 bonus shares in connection with convertible debt valued
at $0.50 per share in March 2011.
(e) 1,036,964 shares for conversion of convertible debt and accrued
interest valued at $1.00 per share in March 2011.
(f) 1,360,000 shares and warrants for cash valued at $0.50 per share
pursuant to a private placement offering in March 2011.
(g) 150,000 shares for professional fees valued at $1.50 per share in
April 2011.
(h) 259,537 shares for conversion of convertible debt and accrued
interest valued at $1.00 per share in April 2011.
(i) 8,375,998 shares and warrants for cash valued at $0.50 per share
pursuant to a private placement offering in April 2011.
(j) 35,000 shares for professional fees valued at $0.50 per share in
April 2011.
(k) 440,753 shares for conversion of convertible debt and accrued
interest valued at $1.00 per share in May 2011.
(l) 415,000 shares and warrants for cash valued at $0.50 per share
pursuant to a private placement offering in May 2011.
(m) 332,574 shares for conversion of convertible debt and accrued
interest valued at $1.00 per share in June 2011.
F-14
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2011
(UNAUDITED)
NOTE 9- STOCKHOLDERS' DEFICIT (CONTINUED)
-----------------------------------------
COMMON STOCK (CONTINUED)
(n) 2,100,000 shares and warrants for cash valued at $0.50 per share
pursuant to a private placement offering in June 2011.
(o) 1,440,000 shares for professional fees valued at $1.50 per share
in June 2011.
(p) 2,250,000 shares to officers for services rendered valued at
$1.97 per share in June 2011.
(q) 650,000 shares were retired in June 2011. These shares were
originally issued to a third party consultant in July 2009, but
it was determined that the individual did not perform the
services underlying the payment of common stock and the shares
were returned and retired.
At June 30, 2011 and December 31, 2010, respectively, the Company had
a liability to issue stock of $1,871,132 and $239,133, respectively.
The balance at June 30, 2011 is comprised of the following shares for
professional services: (a) 150,000 shares valued at $1.85 per share;
(b) 150,000 shares values at $0.20 per share; (c) 900,000 shares
valued at $1.35 per share; and (d) 135,000 shares valued at $2.02 per
share as well as 500,000 shares valued at $0.15 per share (relative
fair value) for cash received during the second quarter of 2011. 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.
NOTE 10 - STOCK PURCHASE WARRANTS
---------------------------------
During the six months ended June 30, 2011, 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 8, upon conversion of outstanding notes and the
issuance of stock for cash as discussed in Note 9 and for services
rendered by consultants.
A summary of the change in stock purchase warrants for the six months
ended June 30, 2011 is as follows:
Weighted
Weighted Average
Number of Average Remaining
Warrants Exercise Contractual
Six months ended June 30, 2011: Outstanding Price Life (Years)
----------- ------- ------------
Balance, December 31, 2010 7,348,895 $ 1.25 4.25
Warrants issued - 2011 17,783,951 1.26 4.78
----------- -------- ------------
Balance, June 30, 2011 25,132,846 $ 1.26 4.55
----------- -------- ------------
F-15
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2011
(UNAUDITED)
NOTE 10 - STOCK PURCHASE WARRANTS (CONTINUED)
---------------------------------------------
The balance of outstanding and exercisable common stock warrants at
June 30, 2011 is as follows:
Remaining
Number of Warrants Contractual
Outstanding Exercise Price Life (Years)
-------------------- ---------------- ----------------
7,348,895 $1.25 4.25
17,783,951 $1.26 4.78
The fair value of stock purchase warrants granted were calculated
using the Black-Scholes option pricing model using the following
assumptions:
Six Months Ended
June 30, 2011 June 30, 2010
-------------- -------------
(Restated)
Risk free interest rate .43% - .85% .61% - 1.14%
Expected volatility 218% - 223% 229% - 234%
Expected term of stock warrant
in years 2.5 2.5
Expected dividend yield 0% 0%
Average value per option $0.16 - $1.92 $0.17
Expected volatility is based on historical volatility 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.
NOTE 11 - COMMITMENTS
---------------------
On January 1, 2011, the Company entered into a five year employment
agreement to hire a Vice-President of Marketing primarily to further
develop the business interests the Company. After the initial five
year term, the employment shall automatically be extended on the same
terms and conditions for successive one-year renewal periods, unless
terminated by either party with ninety days prior notice.
F-16
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2011
(UNAUDITED)
NOTE 11 - COMMITMENTS (CONTINUED)
---------------------------------
The marketing executive's minimum compensation in year one shall not
be less than $96,000 per year. Annual salary reviews are required and
compensation shall be increased annually by a percentage at least
equal to the increase in the Consumer Price Index. The executive shall
also be entitled to 300,000 shares of the Company's common stock as
follows: 150,000 shares at inception, 75,000 shares ninety days from
inception and 75,000 shares one-hundred eighty days from inception.
On January 27, 2011 the Company issued the executive 150,000 shares
valued at $0.20 and 75,000 shares valued at $1.50 per share were
issued on April 19, 2011. The Company recorded compensation expense of
$142,500 for the shares issued.
On January 12, 2011, the Company entered into a Sales/Marketing
Agreement with a consultant whereby said individual will serve as a
non-exclusive sales agent to sell and market water purification
plants, systems, or other water cleaning technology services. The
consultant shall have the exclusive right to sell and market to
specific prospective customers designated and approved by the Company
for a period of one year.
The consultant shall be paid 20% for all sales and 10% of any
royalties during the term of the agreement. The Company shall pay the
consultant $5,000 monthly commencing January 15, 2011 and thereafter
for the duration of the agreement and shall be entitled to be issued
300,000 shares of the Company's common stock as follows: (a) 150,000
shares upon execution of the agreement (b) 75,000 shares ninety days
from the agreement date and (c) 75,000 shares one-hundred eighty days
from the agreement date.
The consultant was issued 150,000 shares valued at $0.20 per share on
January 27, 2011 and 75,000 shares valued at $1.50 per share on April
19, 2011. The Company recorded consulting fees of $142,500 for the
shares issued.
On February 9, 2011, the Company entered into a five year office and
laboratory lease agreement in Colorado commencing June 1, 2011 through
May 31, 2016 for aggregate rent of $102,226. The amount is to be paid
monthly over the term of the lease term.
Future minimum lease payments for this office space are as follows:
YEAR AMOUNT
---- -----------
2011 $ 9,250
2012 19,040
2013 19,992
2014 20,991
2015 22,041
Thereafter 9,370
-----------
$ 100,684
F-17
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2011
(UNAUDITED)
NOTE 11 - COMMITMENTS (CONTINUED)
---------------------------------
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. The Company paid license fees of $60,000 through
March 31, 2011 and commencing in April 2011 and for the duration of
the term of the agreement, the Company is obligated to pay $30,000 per
month.
Future minimum license fees are as follows:
YEAR AMOUNT
---- ----------
2011 $ 180,000
2012 360,000
2013 360,000
2014 360,000
2015 360,000
----------
$1,620,000
On April 1, 2011, the Company entered into a financial services
agreement for services including, but not limited to, investor
relations, corporate record keeping, accounting and preparation of the
Company's regulatory filings. The term of the agreement is for a
minimum of thirty-six months and shall renew automatically on a month
to month basis thereafter unless either party terminates the agreement
within ninety days of the automatic renewal period. The Company shall
pay the financial services consultant $3,000 per month commencing May
1, 2011.
On April 1, 2011, the Company entered into a one year consulting
agreement for the purpose of obtaining professional services in the
areas of corporate structure, strategic planning, and capital and
business development and implementation. The agreement was amended on
June 24, 2011. The amended agreement obligates the Company to issue
1,575,000 common shares and 1,575,000 warrants which entitles the
consultant to purchase common shares for a five year at $1.25 per
share. On June 20, 2011, the Company issued 1,440,000 shares at $1.50
per share, and recorded consulting fees expense of $2,160,000. As of
June 30, 2011, the Company's balance sheet includes as a liability to
issue stock the remaining 135,000 unissued shares valued at $2.02 per
share for a total of $272,700.
On May 2, 2011, the Company entered into a consulting agreement. In
exchange for services pertaining to corporate development,
communications, investor relations and strategic planning, the
consultant will be paid $6,500 per month for one year and will receive
100,000 warrants to purchase 100,000 shares for a five year period at
$1.25 per share. Upon execution of the agreement the consultant was
entitled to 50,000 warrants and 50,000 warrants shall be issued upon
the one year anniversary of the agreement.
F-18
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2011
(UNAUDITED)
NOTE 11 - COMMITMENTS (CONTINUED)
---------------------------------
On June 16, 2010, the Company entered into a one year agreement to
obtain advisory and consulting services pertaining to business
development, financing, and strategic planning matters. On May 2,
2011, the compensation portion of the agreement was amended. The
amended agreement obligates the Company to issue to the consultant
900,000 shares as of the amended agreement date. The Company's balance
sheet includes a liability to issue stock of $1,215,000 for the
900,000 unissued shares valued at $1.35 per share (see Note 15).
The Company is obligated under the terms of a three year employment
agreement entered into with its Vice-President of Engineering and
Production effective May 30, 2010. The executive's compensation in
year one was $120,000 and shall be increased annually by a percentage
at least equal to the increase in the Consumer Price Index. The
executive was also entitled to 300,000 shares of stock. The Company's
balance sheet includes a liability to issue stock of $307,500 for
300,000 unissued shares as of June 30, 2011 (see Note 15).
The Company entered into a Patented Technology and Services Purchase
Agreement on January 1, 2010 for the acquisition of certain
proprietary intellectual properties concerning the treatment of water
by the use of electro-precipitation. The Company is obligated to pay a
five percent royalty on the first $6,000,000 of gross revenues earned
from sales, use or other transfers of equipment based upon the
patented technology transferred to the Company pursuant to the
agreement.
Subsequent to June 30, 2011, the Company entered into an office lease
covering its new Boca Raton, Florida headquarters. The lease term is
for three years commencing on September 1, 2011 and contains a three
year renewal option. The estimated monthly rent including sales tax,
but subject to change for the Company's allocated portion of the
building's annual operating expense factor is as follows: (a) Year 1 -
$10,163 (b) Year 2 - $10,995 (c) Year 3 - $11,550.
NOTE 12 - INCOME TAXES
----------------------
A reconciliation of the differences between the effective income tax
rate and the statutory federal tax rate for the six months ended June
30, 2011 and the year ended December 31, 2010 are as follows:
2010
2011 Restated
----------- ------------
(Restated)
----------- ------------
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)
----------- -----------
- % - %
=========== ===========
F-19
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2011
(UNAUDITED)
NOTE 12 - INCOME TAXES (CONTINUED)
----------------------------------
The tax effect of temporary differences that give rise to significant
portions of the deferred tax asset and liabilities at June 30, 2011
and December 31, 2010 consisted of the following:
June 30, December 31,
Deferred Tax Assets 2011 2010
----------------- ---------------
(Restated)
Net Operating Loss
Carryforward $ 8,933,941 $ 2,431,370
----------------- --------------
Total Non-current Deferred 8,933,941 2,431,370
Tax Asset
Non-current Deferred Tax
Liabilities (2,074,026) (350,640)
----------------- --------------
Net Non-current Deferred Tax 6,859,915 2,080,730
Asset
Valuation Allowance (6,859,915) (2,080,730)
----------------- --------------
Total Net Deferred Tax Asset $ - $ -
================= ==============
As of June 30, 2011, the Company had a net operating loss carry
forward for income tax reporting purposes of $23,741,538 that may be
offset against future taxable income through 2031. 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.
F-20
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2011
(UNAUDITED)
NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION
--------------------------------------------
Six Months Ended
June 30,
----------------------------
2011 2010
------------- -------------
(Restated)
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 344 $ 39
------------- -------------
Changes in non-cash financing and investing activities:
Contributions payable to GPS Latitude $ - $ 809,605
------------- -------------
Vehicle additions from issuance of long term debt $ 192,749 $ -
------------- -------------
Common stock issued for intangible asset $ - $ 120,000
------------- -------------
Common stock issued for notes payable $ 478,740 $ 139,338
(bonus shares)
------------- -------------
Common stock issued for conversion of notes
payable and accrued interest $ 2,069,828 $ 234,191
------------- -------------
NOTE 14 - GAIN ON SETTLEMENT OF ACCRUED EXPENSES
------------------------------------------------
For the six months ended June 30, 2011, the condensed consolidated
statements of operations include a gain on settlement of accrued
expenses of $150,000. This amount represents the balance that was
owed to a consultant pertaining to services the Company received in
connection with the year 2009 merger referred to in Note 1 to the
condensed consolidated financial statements.
In the first quarter of 2011, the Company settled the debt with said
consultant resulting in the aforementioned gain of $150,000.
NOTE 15 - SUBSEQUENT EVENTS
---------------------------
Management has evaluated the subsequent events through the date at
which the financial statements were issued.
On July 19, 2011, the Company's Board of Directors authorized the
issuance of 900,000 common shares pursuant to the advisory and
consulting services agreement referred to in Note 11.
On July 19, 2011, the Company's Board of Directors authorized the
issuance of 100,000 shares for consulting services rendered after
June 30, 2011.
On July 20, 2011, the Company's Board of Directors authorized the
issuance of 300,000 common shares pursuant to the terms of an
agreement dated January 1, 2010, for the acquisition of certain
proprietary intellectual properties concerning the treatment of
water by the use of electro-precipitation.
F-21
LATITUDE SOLUTIONS, INC. & SUBSIDIARIES (FKA GMMT, INC.)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2011
(UNAUDITED)
NOTE 15 - SUBSEQUENT EVENTS (CONTINUED)
---------------------------------------
On July 20, 2011, the Company's Board of Directors authorized the
issuance of 300,000 common shares pursuant to the employment
agreement with the Company's Vice-President of Engineering and
Production referred to in Note 11.
On July 26, 2011, the Company's Board of Directors authorized the
issuance of 849,455 common shares. A total of 500,000 shares pertain
to an equity raise whereby the shares were sold at $0.50 per share
along with an equivalent amount of common stock warrants exercisable
over a five year term at $1.25 per share. The remaining 349,455
shares represent stock issued from the conversion of convertible
debt and accrued interest at $1.00 per share.
On August 4, 2011, the Company and a holder of 3,000,000 of the
Company's stock warrants agreed to amend the holder's warrant to
change the exercise price to $1.00 per share and change the
expiration term to two years after the issue date. On August 9,
2011, the Company received $3,000,000 in connection with the
exercise of this stock warrant. The warrant was exercised at $1.00
per share and the Company issued 3,000,000 shares of common stock.
On August 8, 2011, the Company executed a three year office lease
agreement for its new Boca Raton, Florida headquarters. The terms of
the lease are disclosed in Note 11.
F-22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
--------------------------------------------------------------------------------
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR UNAUDITED
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED HEREIN. IN CONNECTION WITH, AND
BECAUSE WE DESIRE TO TAKE ADVANTAGE OF, THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WE CAUTION READERS REGARDING
CERTAIN FORWARD LOOKING STATEMENTS IN THE FOLLOWING DISCUSSION AND ELSEWHERE IN
THIS REPORT AND IN ANY OTHER STATEMENT MADE BY, OR ON OUR BEHALF, WHETHER OR NOT
IN FUTURE FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. FORWARD-LOOKING
STATEMENTS ARE STATEMENTS NOT BASED ON HISTORICAL INFORMATION AND WHICH RELATE
TO FUTURE OPERATIONS, STRATEGIES, FINANCIAL RESULTS OR OTHER DEVELOPMENTS.
FORWARD LOOKING STATEMENTS ARE NECESSARILY BASED UPON ESTIMATES AND ASSUMPTIONS
THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE
UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND OUR CONTROL AND MANY
OF WHICH, WITH RESPECT TO FUTURE BUSINESS DECISIONS, ARE SUBJECT TO CHANGE.
THESE UNCERTAINTIES AND CONTINGENCIES CAN AFFECT ACTUAL RESULTS AND COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD LOOKING
STATEMENTS MADE BY, OR ON OUR BEHALF. WE DISCLAIM ANY OBLIGATION TO UPDATE
FORWARD-LOOKING STATEMENTS.
THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S REPORT ON THE COMPANY'S
FINANCIAL STATEMENTS AS OF DECEMBER 31, 2010, AND FOR EACH OF THE YEARS IN THE
TWO-YEAR PERIOD THEN ENDED, INCLUDES A "GOING CONCERN" EXPLANATORY PARAGRAPH,
THAT DESCRIBES SUBSTANTIAL DOUBT ABOUT THE COMPANY'S ABILITY TO CONTINUE AS A
GOING CONCERN.
Latitude Solutions, Inc. ("LSI"), through four subsidiaries, has operations
based upon its proprietary technologies.
Latitude Clean Tech Group, Inc. ("LCTG") 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 equity investment, 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 second 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 ("LES") 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 LES,
the other four managers are from the 30% equity owners of the LLC. LES will
provide water remediation services to the Oil, Gas and Energy industries
worldwide utilizing innovative and patented technologies developed by its
majority equity owner, LSI and its subsidiary companies.
-2-
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2011 WITH THE THREE MONTHS ENDED
JUNE 30, 2010
For the Three Months Ended Change
June 30,
---------------------------------------------
2011 2010 $ %
--------------------- ----------------------- ---------------- ------------
REVENUES $ - $ - $ - -%
COST OF REVENUES - - -
-
--------------------- ----------------------- ---------------- ------------
GROSS PROFIT (LOSS) - - -
-
--------------------- ----------------------- ---------------- ------------
OPERATING EXPENSES
Consulting fees 13,026,697 149,130 12,877,567 8,635.1%
General and administrative 534,344 91,957 442,387 481.0%
Legal and accounting expense 87,855 57,568 30,287 52.6%
License fees 80,000 - 80,000 100%
Rent expense 28,895 14,340 14,555 101.5%
Salaries expense 663,916 136,475 527,441 386.5%
Travel expense 144,454 39,524 104,930 265.4%
--------------------- ----------------------- ---------------- ------------
Total expenses 14,566,161 488,994 14,077,167 2,878.8%
--------------------- ----------------------- ---------------- ------------
LOSS FROM OPERATIONS (14,566,161) (488,994) 14,077,167 2,878.8%
--------------------- ----------------------- ---------------- ------------
OTHER EXPENSES
Finance costs (405,768) (199,907) 205,681 102.9%
Interest expense (23,206) (29,411) (6,205) (21.09%)
Interest income 913 - 913 100%
Equity in losses to investee (136,758) - 136,758 100%
--------------------- ----------------------- ---------------- ------------
Total other expense (564,819) (229,318) 335,501 146.3%
--------------------- ----------------------- ---------------- ------------
Loss Contributable to non-
controlling interest (75,250) - 75,250 100%
--------------------- ----------------------- ---------------- ------------
NET LOSS (15,055,730) (718,312) 14,337,418 1,995.9%
--------------------- ----------------------- ---------------- ------------
LOSS PER SHARE $ (0.36) $ (0.03) $ (0.33) (1,100%)
WEIGHTED AVERAGE OUTSTANDING SHARES
BASIC AND DILUTED 42,018,643 23,482,952
REVENUES
The Company did not recognize any revenue from its operations other then GPS
Latitude during the three months ended June 30, 2011 and 2010. 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, the Company expects to utilize this facility to
initiate the generation of revenues during the year ended December 31, 2011.
-3-
OPERATING EXPENSES
Operating expenses for the three months ended June 30, 2011 were $14,566,161 as
compared to $488,994 for the three months ended June 30, 2010, an increase of
$14,077,167 or 2,878%. The increase was primarily caused by an increase of
$12,877,567 increase in consulting fees, an increase of $442,387 in general and
administrative expenses and an increase of $527,441 in salary expenses related
to the deployment of staff to supervise and operate our equipment in the field
and an increase in travel related expenses of $104,930 which resulted from our
proof of concept customer demonstrations.
INTEREST EXPENSE
Interest expense was $23,206 for the three months ended June 30, 2011 as
compared to $29,411 for the three months ended June 30, 2010, a decrease of
$6,205 or 21.09%. 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 three months ended June 30, 2011, the Company recognized a net loss
of $15,055,730 compared to $718,312 for the three months ended June 30, 2010.
The Company's net loss increased $14,337,418 during the three months ended June
30, 2011 when compared to the three months ended June 30, 2010. The primary
reasons for this increase was an increase in operating expenses of $14,077,167,
plus an increase in finance costs of $205,681 caused by the increase in debt
financing and increase of $75,250 in losses recognized from our investee.
(REMAINING OF PAGE LEFT BLANK INTENTIONALLY)
-4-
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2011 WITH THE SIX MONTHS ENDED JUNE
30, 2010
For the Six Months Ended
June 30, Change
---------------------------------------------
2011 2010 $ %
--------------------- ----------------------- ---------------- ------------
REVENUES $ - $ - $ - -%
COST OF REVENUES - - -
-
--------------------- ----------------------- ---------------- ------------
GROSS PROFIT (LOSS) - - - -
--------------------- ----------------------- ---------------- ------------
OPERATING EXPENSES
Consulting fees 13,668,090 282,750 13,385,340 4,733.9%
General and administrative 797,399 161,898 635,501 392.5%
Legal and accounting expense 145,160 80,207 64,953 80.9%
License fees 140,000 - 140,000 100%
Rent expense 55,381 25,335 29,983 118.3%
Salaries expense 1,123,548 216,550 906,998 418.8%
Travel expense 240,989 62,976 178,013 182.6%
--------------------- ----------------------- ---------------- ------------
Total expenses 16,170,568 829,716 15,340,852 1,848.9%
--------------------- ----------------------- ---------------- ------------
LOSS FROM OPERATIONS (16,170,568) (829,716) 15,340,852 1,848.9%
--------------------- ----------------------- ---------------- ------------
OTHER EXPENSES
Finance costs (814,250) (335,151) 479,099 122.9%
Gain on settlement of accrued
expenses 150,000 - 150,000 100%
Interest expense (63,386) (50,561) 12,825 25.36%
Interest income 936 - 936 100%
Equity in losses to investee (383,015) (107,386) 275,629 256.6%
--------------------- ----------------------- ---------------- ------------
Total other expense (1,109,715) (493,098) 616,617 125%
--------------------- ----------------------- ---------------- ------------
Loss Contributable to non-
controlling interest (108,729) - 108,729 100%
--------------------- ----------------------- ---------------- ------------
NET LOSS (17,171,554) (1,322,814) 15,848,740 1,198.1%
--------------------- ----------------------- ---------------- ------------
LOSS PER SHARE $ (0.47) $ (0.06) $0.41 683.3%
WEIGHTED AVERAGE OUTSTANDING SHARES
BASIC AND DILUTED 36,454,956 22,544,421
REVENUES
The Company did not recognize any revenue from its operations other then GPS
Latitude during the six months ended June 30, 2011 and 2010. 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, the Company expects to utilize this facility to
initiate the generation of revenues during the year ended December 31, 2011.
-5-
OPERATING EXPENSES
Operating expenses for the six months ended June 30, 2011 were $16,170,568 as
compared to $829,716 for the six months ended June 30, 2010, an increase of
$15,340,852 or 1,849%. The increase was primarily caused by an increase of
$13,385,340 increase in consulting fees, an increase of $635,501 in general and
administrative expenses and an increase of $906,998 in salary expenses related
to the deployment of staff to supervise and operate our equipment in the field
and an increase in travel related expenses of $178,013 which resulted from our
proof of concept customer demonstrations.
INTEREST EXPENSE
Interest expense was $63,386 for the six months ended June 30, 2011 as compared
to $50,561 for the six months ended June 30, 2010, an increase of $12,825 or
25.3%. 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 six months ended June 30, 2011, the Company recognized a net loss of
$17,171,554 compared to $1,322,814 for the six months ended June 30, 2010. The
Company's net loss increased $15,848,740 during the six months ended June 30,
2011 when compared to the six months ended June 30, 2010. The primary reasons
for this increase was an increase in operating expenses of $15,340,852, plus an
increase in finance costs of $479,099 caused by the increase in debt financing
and increase of $108,729 in losses recognized from our investee. The Company
during the six months ended June 30, 2011 recognized a non-recurring gain on the
settlement of accrued expense of $150,000.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2011, the Company had total current assets of $2,881,768, consisting
of $2,808,960 in cash on hand, a $20,000 accrued advance to consultant and
$52,808 in other current assets. At June 30, 2011, we had total current
liabilities of $3,825,178, consisting of $670,014 in accounts payable and
accrued liabilities, $6,626 due to investee, $10,400 related party payable,
convertible debt of $1,203,916 and a liability to issue common stock of
$1,871,132. At June 30, 2011, the Company has a working capital deficit of
$943,410.
Net cash used in operating activities was $2,780,716 for the six months ended
June 30, 2011, compared to $630,322 for the six months ended June 30, 2010. This
increase in cash used relates to the significantly higher cash expenses during
the six months ended June 30, 2011 due to an increase in operating activities
including an increase in consulting and travel expenses. During the six months
ended June 30, 2011, net losses of $17,280,283 were offset by non-cash items of
$814,250 in financing costs, $9,044,306 in common stock for services, $4,286,055
in warrants issued for services, $26,397 in depreciation and amortization
expense and $383,015 in equity loss in the GPS Latitude investment.
The Company's net cash used in investing activities was $1,545,516 for the six
months ended June 30, 2011 compared to net cash used in investing activities of
$612,324 for the six months ended June 30, 2010. In the six months ended June
30, 2011, the Company invested $1,132,262 in plant and equipment and made
payments of $405,783 to its investment.
The Company's net cash provided by financing activities was $6,918,992 for the
six months ended June 30, 2011 compared to net cash provided by financing
activities of $1,454,200 for the six months ended June 30, 2010. During the six
months ended June 30, 2011, the Company received $6,375,500 in proceeds from the
issuance of shares of common stock, $691,000 in proceeds from the issuance of
convertible debt and received $100,000 from short term debt. During the six
months ended June 30, 2011, the Company made a payment of $116,000 on
outstanding convertible debt, payments of $100,000 on short term debt and a
payment of $25,000 on related party payable.
-6-
At June 30, 2011 and December 31, 2010, the Company had net convertible notes
payable net outstanding of $1,374,460 and $2,788,011, 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.
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.
The remaining debt discount balances as of June 30, 2011 and December 31, 2010,
of $170,544 and $409,428, respectively, are netted against the outstanding
notes.
NEED FOR ADDITIONAL FINANCING
The Company anticipates the need for an additional $6 to $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.
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
Vehicles 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
-7-
amortization was $199,867 and $207,267 at June 30, 2011 and December 31, 2010,
respectively. Amortization expense related to the intangible assets was $7,400
and $7,333 for the six months ended June 30, 2011 and 2010, respectively.
Amortization expenses related to intangible assets is expected to be
approximately $14,800 each year for 2011 through 2025.
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
The Company's leased plants 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.
Leasing and royalty revenues will include revenues from the leasing of the
plants, and a per gallon royalty fee. These services will be provided to
customers ongoing and will be billed on a monthly 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 will consist primarily of repairs and maintenance and
depreciation on leased plants and any other related selling and servicing costs.
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
-8-
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
-----------------------------------------------------------------
Not Applicable.
ITEM 4. CONTROLS AND PROCEDURES
--------------------------------
Disclosures Controls and Procedures
We have adopted and maintain disclosure controls and procedures (as such term is
defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) and that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act, is
recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Chief Financial Officer (Principal Financial Officer), as
appropriate, to allow for timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b), our Chief Executive Officer carried out an
evaluation under the supervision and with the participation of our management,
of the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period
covered by this report. Based on the foregoing evaluation, our Chief Executive
Officer has concluded that our disclosure controls and procedures are effective
in timely alerting them to material information required to be included in our
periodic SEC filings and to ensure that information required to be disclosed in
our periodic SEC filings is accumulated and communicated to our management,
including our Chief Executive Officer, to allow timely decisions regarding
required disclosure.
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended June 30, 2011, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-------------------------
None.
ITEM 1A. RISK FACTORS
---------------------
Not Applicable to Smaller Reporting Companies.
-9-
ITEM 2. CHANGES IN SECURITIES
-----------------------------
During the period of April 1, 2011 through June 30, 2011, the Company issued the
following unregistered securities.
DATE OF SALE TITLE OF SECURITIES NO. OF SHARES CONSIDERATION CLASS OF PURCHASER
------------------------------------- -------------------- ----------------- ------------------------ -------------------------
April 2011 Common Stock 150,000 $225,000 in Business Associate
professional services
April 2011 Common Stock 35,000 $17,500 in Business Associate
professional services
April 2011 Common Stock 8,375,998 $4,187,999 Business Associates
April 2011 Warrants 8,375,998 $4,187,999 Business Associates
April 2011 Common Stock 259,537 Conversion of Business Associates
Promissory Notes
May 2011 Common Stock 415,000 $207,500 Business Associates
May 2011 Warrants 415,000 $207,500 Business Associates
May 2011 Common Stock 440,573 Conversion of Business Associates
Promissory Note
May 2011 Common Stock 332,574 Conversion of Business Associates
Promissory Note
EXEMPTION FROM REGISTRATION CLAIMED
All of the above sales by the Company of its unregistered securities were made
by the Company in reliance upon Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act"). All of the individuals and/or entities that purchased
the unregistered securities were primarily existing shareholders, known to the
Company and its management, through pre-existing business relationships, as long
standing business associates. 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.
-10-
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
---------------------------------------
None.
ITEM 4. REMOVED AND RESERVED
----------------------------
ITEM 5. OTHER INFORMATION
-------------------------
None.
ITEM 6. EXHIBITS
----------------
EXHIBITS. The following is a complete list of exhibits filed as part of this
Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of
Item 601 of Regulation S-K.
Exhibit 31.1 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act
Exhibit 31.2 Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act
Exhibit 32.1 Certification of Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
Exhibit 32.2 Certification of Principal Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
101.INS XBRL Instance Document (1)
101.SCH XBRL Taxonomy Extension Schema Document (1)
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (1)
------------
(1) Pursuant to Rule 406T of Regulation S-T, this interactive data file is
deemed not filed or part of a registration statement or prospectus for purposes
of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for
purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is
not subject to liability under these sections.
-11-
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and 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.
-------------------------------------------------
(REGISTRANT)
Dated: August 22, 2011 By: /s/Harvey N. Kaye
-------------------------------------------------
Harvey N. Kaye
(Principal Executive Officer,
President and Chief Executive Officer)
Dated: August 22, 2011 By: /s/Matthew J. Cohen
-------------------------------------------------
Matthew J. Cohen,
(Chief Financial Officer/Principal
Accounting Officer/Secretary / Treasurer)
-12