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EXCEL - IDEA: XBRL DOCUMENT - Latitude Solutions, Inc.Financial_Report.xls
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EX-31 - Latitude Solutions, Inc.ex312.txt


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                -----------------

                                   FORM 10Q/A
                                 Amendment No. 1

                                -----------------

(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.
             -----------------------------------------------------
             (Exact name of registrant as specified in its charter)


         NEVADA                                             29-1284382
------------------------                            ------------------------
(State of Incorporation)                            (IRS Employer ID Number)


            2595 NW BOCA RATON BLVD., SUITE 10, BOCA RATON, FL 33431
             -----------------------------------------------------
                    (Address of principal executive offices)


                                  (561)417-0644
             -----------------------------------------------------
                         (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 ---- 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 10 Item 4. Removed and Reserved 10 Item 5. Other Information - NOT APPLICABLE 11 Item 6. Exhibits 11 SIGNATURES 12
EXPLANATORY NOTE Latitude Solutions, Inc., (the "Company"), is filing this amendment to its quarterly report on Form 10-Q for the period ended June 30, 2011 filed with the Securities and Exchange Commission on August 22, 2011, for the purpose of amending Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations and for the purpose of furnishing XBRL Interactive Data Files as Exhibit 101 in accordance with Rule 405 of Regulation S-T. This amendment does not reflect events occurring after the original filing. Except for the foregoing amended information, this Form 10-Q/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. 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 three subsidiaries and an equity investment, 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) 205,861 102.9% 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 attributable 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 $205,861 caused by the increase in debt financing and increase of $136,758 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 30,046 118.6% Salaries expense 1,123,549 216,550 906,999 418.8% Travel expense 240,989 62,976 178,013 282.6% --------------------- ----------------------- ---------------- ------------ 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) 479,099 142.9% 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 attributable 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 $906,999 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 $275,629 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 advance to a 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 investee. 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 of $1,203,916 and $2,378,583, respectively. These convertible notes mature at various times within six months from date of issuance and have an interest rate of 7%. 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. -7-
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. 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. -8-
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 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. ITEM 3. DEFAULTS UPON SENIOR SECURITIES --------------------------------------- None. ITEM 4. REMOVED AND RESERVED ---------------------------- -10-
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 30, 2011 By: /s/Harvey N. Kaye ------------------------------------------------- Harvey N. Kaye (Principal Executive Officer, President and Chief Executive Officer) Dated: August 30, 2011 By: /s/Matthew J. Cohen ------------------------------------------------- Matthew J. Cohen, (Chief Financial Officer/Principal Accounting Officer/Secretary / Treasurer) -12