Freedom Environmental Services, Inc. - FORM 10-Q

Attached files

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

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2011

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

Commission File No. 000-53388

FREEDOM ENVRIONMENTAL SERVICES, INC.

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

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

11372 United Way, Orlando, Florida 32824

(Address of principal executive offices) (Zip Code)

(407) 905-5000

Registrant’s telephone number, including area code

Indicate by check mark whether the Registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days:

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No x

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

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

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

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

Class		Outstanding at October 14, 2011
Common stock, $0.001 par value		128,343,434

FREEDOM ENVIRONMENTAL SERVICES, INC.

INDEX TO FORM 10-Q FILING

FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010

TABLE OF CONTENTS

		PAGE
PART I - FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Consolidated Balance Sheets	2
	Consolidated Statements of Operations	3
	Consolidated Statement of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management Discussion & Analysis of Financial Condition and Results of Operations	16
Item 3	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	20

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Removed and Reserved	24
Item 5	Other information	25
Item 6.	Exhibits	25


CERTIFICATIONS

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

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements

The accompanying reviewed interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results that can be expected for the year ending December 31, 2011.

FREEDOM ENVIRONMENTAL SERVICES, INC.

CONSOLIDATED BALANCE SHEETS


ASSETS:
	March 31, 2011			December 31, 2010
	(unaudited)
CURRENT ASSETS
Cash	$	60,667		$	175,134
Accounts recievables - net of allowance of $54,564 and $45,300		224,578			238,618
Inventory		66,908			70,658
Prepaid expenses		-			5,230
Total current assets		352,153			489,640

Property, plant and equipment, net accumulated depreciation of $264,218 and $154,197		1,974,323			2,154,349
Deposit		175,000			-
Intangible assets (customer list)- net of accumulated amortization of $30,097 and $20,000		171,846			181,943
TOTAL ASSETS	$	2,673,322		$	2,825,932

LIABILITIES AND STOCKHOLDERS' DEFICIT:

CURRENT LIABILITIES:
Bank overdraft	$	14,332		$	-
Accounts payable		296,845			440,895
Accrued expenses		236,410			184,546
Accrued interest-related parties		11,277			30,938
Line of credit		32,027			13,177
Notes payable		244,000			749,000
Notes payable - related party, net of unamortized discount of $28,616		495,585			456,900
Convertible notes payable		32,500			114,500
Current portion of long-term notes payable		103,895			320,031
Other current liabilities		42,800			-
Total current liabilities		1,509,671			2,309,987

Long-term notes payable		739,969			-
TOTAL LIABILITIES		2,249,640			2,309,987

COMMITMENTS AND CONTINGENCIES		-			-

STOCKHOLDERS' DEFICIT:
Preferred stock, $0.001 par value, 75,000,000 shares
authorized; Series A, Convertible 5,736,333 and 3,177,111 issued and outstanding
as of March 31, 2011 and December 31, 2010, respectively		5,736			3,177
Common stock, $0.001 par value, 200,000,000 shares authorized;
121,018,334 and 103,444,517 issued and outstanding
as of March 31, 2011 and December 31, 2010,respectively		121,018			103,445
Additional paid-in capital		21,130,618			20,888,927
Accumulated deficit		(20,833,690	)		(20,479,604	)
Total stockholders' deficit		423,682			515,945

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	2,673,322		$	2,825,932

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

FREEDOM ENVIRONMENTAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)



	Three Months Ended
	March 31,
	2011			2010


Revenue	$	1,390,505		$	102,591
Total		1,390,505			102,591

COST OF SALES		941,021			43,234

GROSS PROFIT		449,484			59,357

OPERATING EXPENSES:
General and administrative		671,074			770,147
Selling and marketing		92,600			662,529
Depreciation and amortization expense		10,097			2,178
Gain on sale of assets		(1,995	)		-
Total operating expenses		771,776			1,434,854
OPERATING LOSS		(322,293	)		(1,375,497	)

OTHER (INCOME) AND EXPENSE:
Interest expense		31,793			671,111
Total other expense		31,793			671,111

NET LOSS	$	(354,086	)	$	(2,046,607	)

NET LOSS PER SHARE:
Basic and diluted	$	(0.00	)	$	(0.09	)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and diluted		107,262,932			23,977,596

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

FREEDOM ENVIRONMENTAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)



	Three Months
	March 31
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$	(354,086	)	$	(2,046,607	)
Adjustments to reconcile net loss to net cash
proviced by (used in) operating activities:
Bad debt expense		11,463			-
Depreciation and amortization		126,821			2,178
Gain on sale of assets		(1,995	)		-
Amortization of debt discount		4,088			-
Common stock issued for compensation		99,350			1,307,610
Common stock issued for interest expense		-			523,329
Common stock issued for conversion of debt		-			236,250
Beneficial conversion feature		-			112,500
Changes in operating assets and liabilities:
Accounts receivables		2,577			(696	)
Prepaid expenses and other current assets		5,230			-
Inventory		3,750			-
Accounts payables		(144,050	)		26,240
Accrued expenses		84,394			(103,652	)
Accrued interest - related parties		(19,661	)		-
Deferred Liabilities		42,800			-
Net cash used in operating activities		(139,319	)		57,152

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment		26,645			-
Purchase of equipment		(39,108	)		-
Deposit for business acquisition		(175,000	)		-
Net cash provided by (used in) investing activities		(187,463	)		-

CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft		14,332			(5,037	)
Repayment of notes payable		(475,423	)		(51,250	)
Proceeds from notes payable		606,106			-
Proceeds from notes payable - related parties		67,300			-
Advances from affiliate		-			9,908
Net cash provided by (used in) financing activities		212,315			(46,379	)

NET INCREASE (DECREASE) IN CASH		(114,467	)		10,773
CASH, BEGINNING OF PERIOD		175,134			-
CASH, END OF PERIOD	$	60,667		$	10,773

SUPPLEMENTAL CASH FLOW INFORMATION

Interest paid	$	52,086		$	137,940
Taxes paid	$	-		$	-

NONCASH INVESTING AND FINANCING TRANSACTIONS
Issuance of common stock for the conversion of debt	$	86,000		$	-
Common stock issued to settle accrued compensation	$	10,615		$	-
Common stock issued for the acqusition of equipment	$	15,240		$	-
Common stock issued for note payable-debt discount	$	32,704		$	-
Preferred stock issued to settle accrued compensation	$	17,915		$	-

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

FREEDOM ENVIRONMENTAL SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010

NOTE 1 - DESCRIPTION OF BUSINESS

Freedom Environmental Services, Inc. (the “Company” or “Freedom”) provides wastewater management and recycling services to its customers through its different divisions. In 2010, the Company acquired the assets and certain liabilities of Brownies Waste Water Solutions, Inc. (“Brownies”) which has been a staple in the Central Florida market since 1948, providing commercial and residential septic services. These services include drain field installation, maintenance and repair; grease trap cleaning, maintenance, installation and repair; full service commercial and residential plumbing; sewer drain cleaning, backflow testing, repairs and certifications; lift station cleaning, maintenance, repairs, bio-solids transportation and recycling. Prior to the acquisition of Brownies, Brownies purchased the equipment of Vac and Jet Services which was a defunct company with two Vactors trucks equipment purchased in July 5, 2010.

On December 13, 2010, Freedom purchased the equipment of Clean Fuel, LLC and placed that equipment into its wholly owned subsidiary, Grease Recovery Solutions, LLC (“Grease”). Grease handles all of the Company’s restaurant, resort and theme park services which include grease trap cleaning, sewer drain cleaning and waste cooking oil for recycling.

In February 2011, the Company entered into a letter of intention with David M. Hickman in Pennsylvania to purchase the equipment, inventory and customer list from a company owned by Mr. Hickman. The Company is in the process of due diligence and has escrowed a non-refundable deposit of $175,000 towards the purchase, which is classified in the accompanying balance sheet as a long-term deposit. Mr. Hickman has granted the Company an extension to complete the due diligence by December 31, 2011. The Company anticipates entering into a definitive agreement by the end of 2011. Mr. Hickman provides sanitation services throughout Pennsylvania. Mr. Hickman’s company provides all aspects of commercial and residential services including septic system cleaning, maintenance and installation. We plan to expand that business to the current services lines that we provide in the State of Florida.

NOTE 2 - BASIS OF PRESENTATION

Interim Financial Statements

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month periods ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. While management of the Company believes that the disclosures presented herein are adequate and not misleading, these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the footnotes thereto for the fiscal year ended December 31, 2010 as filed with the Securities and Exchange Commission as an exhibit to our Form 10-K.

NOTE 3 - GOING CONCERN

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern. However, the Company has a net loss for the three months ended March 31, 2011 of $354,086, an accumulated deficit at March 31, 2011 of $20,833,690, cash flows used in operating activities of $139,319 and needs additional cash flows to maintain its operations.

These factors raise doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company’s continued existence is dependent upon management’s ability to develop profitable operations, continued contributions from the Company’s executive officers to finance its operations and the ability to obtain additional funding sources to explore potential strategic relationships and to provide capital and other resources for the further development and marketing of the Company’s products and business.

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Use of Estimates and Assumptions

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

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

Revenue Recognition

Revenue includes provision of services. The Company recognizes revenue from provision of services at the time evidence of an arrangement exists, fees are contractually fixed or determinable, collection is reasonably assured through historical collection results and regular credit evaluations, and there are no uncertainties regarding customer acceptance.

Accounts Receivable and Allowance for Uncollectible Accounts

Substantially all of the Company’s accounts receivable balance is related to trade receivables. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company will maintain allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments for services. Accounts with known financial issues are first reviewed and specific estimates are recorded. The remaining accounts receivable balances are then grouped in categories by the amount of days the balance is past due, and the estimated loss is calculated as a percentage of the total category based upon past history. Account balances are charged off against the allowance when it is probable the receivable will not be recovered. The Company reserved $54,564 as allowance for doubtful accounts at March 31, 2011 and recorded $11,463 bad debt expense during the three months ended March 31, 2011.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At March 31, 2011, cash and cash equivalents include cash on hand and cash in the bank and the FDIC insures these deposits up to $250,000.

Inventory

The Company’s inventory is carried at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method. The Company’s inventory is comprised of supplies and parts used in the Company’s operations. The Company evaluates the need to record adjustments for obsolescence for inventory on a regular basis. At March 31, 2011, the value of the Company’s inventory was $66,908 and at December 31, 2010, the value of the Company’s inventory was $70,658.

Property and Equipment

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

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price and related costs over the value assigned to net tangible and identifiable intangible assets of businesses acquired and accounted for under the purchase method. Goodwill acquired in business combinations is assigned to reporting units that are expected to benefit from the synergies of the combination as of the acquisition date. Under this standard, goodwill and intangibles with indefinite useful lives are no longer amortized. The Company assesses goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter, or more frequently if events and circumstances indicate impairment may have occurred in accordance with ASC Topic 350. If the carrying value of a reporting unit's goodwill exceeds its implied fair value, the Company records an impairment loss equal to the difference. ASC Topic 350 also requires that the fair value of indefinite-lived purchased intangible assets be estimated and compared to the carrying value. The Company recognizes an impairment loss when the estimated fair value of the indefinite-lived purchased intangible assets is less than the carrying value. Management has assessed the intangible assets and has not recognized any impairment of assets for the three months ended March 31, 2011.

Intangible assets subject to amortization, which consist of customer lists, are amortized over their expected life of 5 years.

Impairment of Long-Lived Assets

Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and other intangible assets are tested for impairment. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Income Taxes

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

The Company adopted the provisions of ASC Topic 740, Accounting For Uncertainty In Income Taxes-An Interpretation of ASC Topic 740 ("ASC Topic 740"). ASC Topic 740 contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating the Company's tax positions and tax benefits, which may require periodic adjustments. At March 31, 2011, the Company did not record any liabilities for uncertain tax positions.

Share-Based Compensation

The Company measures the cost of services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. Compensation cost is recognized over the vesting or requisite service period. The Black-Scholes option-pricing model is used to estimate the fair value of options or warrants granted.

Basic and Diluted Net Loss Per Share

Basic income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. Diluted earnings per share reflects the potential dilution that could occur if stock options, warrants, and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.

Diluted loss per share is the same as basic loss per share during periods where net losses are incurred since the inclusion of the potential common stock equivalents would be anti-dilutive as a result of the net loss.

At March 31, 2011, common stock equivalents consisted of no options and 6,000,000 of common stock warrants with an exercise price of $0.10 or $0.05 per share, which exceed the Company’s stock price as of March 31, 2011.

Concentration of Credit Risk

All of the Company’s cash and cash equivalents are maintained in regional and national financial institutions. The Company has exposure to credit risk to the extent that its cash and cash equivalents exceed amounts covered by the U.S. federal deposit insurance; however, the Company has not experienced any losses in such accounts. In management’s opinion, the capitalization and operating history of the financial institutions are such that the likelihood of material loss is remote.

Fair Value of Financial Instruments

The Company's financial instruments consist primarily of cash, accounts payable and accrued expenses, and debt. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.

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

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

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

Reclassifications

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

Recent Accounting Pronouncements

No accounting standards or interpretations issued recently are expected to a have a material impact on the Company’s consolidated financial position, operations or cash flows.

NOTE 5 - PROPERTY AND EQUIPMENT

The Company’s property and equipment as of March 31, 2011 and December 31, 2010 are as follows:

		March 31,	December 31,
	2011			2010
Trucks and Autos	$	447,114		$	447,114
Large Equipment		1,051,795			1,150,085
Machinery and Equipment		531,968			503,683
Office Equipment		14,146			14,146
Electrical Equipment		193,518			193,518
Total property and equipment		2,238,541			2,308,546
Accumulated depreciation		(264,218)			(154,197)
Total	$	1,974,323		$	2,154,349

Depreciation expense for the three months ended March 31, 2011 and 2010 was $116,724 and $2,178, respectively; approximately $116,724 and $0 of depreciation expense was included in cost of sales in the accompanying consolidated statements of operations for the three months ended March 31, 2011 and 2010, respectively.

NOTE 6 – NOTES PAYABLE

Notes payable are as follows:

	March 31, 2011			December 31, 2010
Advance from a unrelated third party bearing no interest per annum and due on demand.	$	145,000		$	100,000

Line of credit with an unrelated third party bearing interest at LIBOR plus 3% and due on demand.		13,177			13,177

Note payable to Reunion Bank bearing interest at prime (3.25%) plus 2% per annum, due and payable on October 28, 2015 with a monthly principal and interest payment of $6,295, secured by the assets of the Company and recorded liens on certain equipment of the Company, guaranteed by the Company’s president.		305,283			320,031

Note payable to Reunion Bank bearing interest at prime (3.25%) plus 2% per annum, due and payable on February 15, 2016 with a monthly principal and interest payment of $5,920, secured by the assets of the Company and recorded liens on certain equipment of the Company, guaranteed by the Company’s president.		538,581			-

Line of credit with an unrelated third party bearing interest at prime (3.25%) plus 2% per annum, due and payable on September 30, 2011 with a monthly interest payment.		18,851			-

Convertible note bearing interest at 8% per annum, maturity date in February 2011. The company evaluated the terms of the note and recorded a beneficial conversion feature in the amount of $59,644 at the inception of the agreement. This note, together with accrued interest, was converted into 5,311,475 shares of the Company’s common stock during the period ended March 31, 2011.		-			32,000

Convertible note bearing interest at 8% per annum, maturity date in August 2011. The company evaluated the terms of the note and recorded a beneficial conversion feature in the amount of $29,500 at the inception of the agreement. This note was repaid in June 2011.		32,500			32,500

Convertible note bearing interest at 8% per annum, maturity date in April 2011. The company evaluated the terms of the note and recorded a beneficial conversion feature in the amount of $50,000 at the inception of the agreement. This note, together with accrued interest, was converted into 4,945,802 shares of the Company’s common stock during the period ended March 31, 2011.		-			50,000

Promissory note with an unrelated third party bearing no interest per annum requires a monthly payment of $2,500 and matures in June 2012. The Company disputes this note payable as representation of the fitness of the equipment purchased from Vac & Jet were not fully disclosed.		60,000			60,000

Note with an unrelated third party bearing no interest, requires a monthly payment of $1,500 and matures in October 2012.		39,000			39,000

Note with an affiliated company bearing interest at 18% per annum and due on demand.		322,500			322,500

Note with an affiliated company bearing interest at 18% per annum and due on demand.		126,700			59,400

Note with a related party bearing interest at 18% per annum. The note was secured by 10,000,000 shares of the Company’s common stock. During 2011 this note was refinanced.		-			75,000

On March 13, 2011, the Company entered into a contract with Dr. Scott Levine, a related party, where as Dr. Levine agreed to loan $75,000 dollars in exchange for 1,000,000 restricted shares of common stock (not issued as of March 31, 2011) and 1,000,000 stock warrants. The relative fair value of the common stock and warrants were $32,704 in total resulting in an initial discount. For the three months ended March 31, 2011, $4,088 related to the debt discount was amortized into interest expense. The note is due on July 15, 2011, bears interest at an annualized rate of 16% and is collateralized by 10,000,000 shares of the Company’s common stock. Mr. Levine has verbally agreed to extend the note until the Company secures financing. Mr. Levine exercised the warrants on May 17, 2011 for $50,000.		46,384			-

Note with an unrelated third party bearing no interest, due on March 31, 2011. During 2011, this note was paid in full.		-			550,000
Total Notes and Line of Credit Payable		1,647,976			1,653,608
less: Current Portion		(908,007	)		(1,653,608	)
Long-Term Portion	$	739,969		$	-

Principal payments for the $550,000 and $325,000 notes payables for each of the five succeeding years are as follows at March 31, 2011:

2011		$	108,090
2013			114,015
2014			120,183
2015			111,768
2016			320,276
Total	$	$	774,332

Reunion Bank Loan Covenants

In October, 2010, the Company entered into a 5-year note agreement with Reunion Bank for the amount of $325,000 with a balance of $305,283 as of March 31, 2011. On February 16, 2011, the Company entered into another 5-year note agreement for the principal of $550,000 with a required balloon payment of $317,345 on the 60th payment. Reunion Bank loan covenants, which the Company was in compliance with at March 31, 2011, are as follows:

·	The Company is to maintain 1.25X Debt Coverage Ratio;

·	Brownies is to maintain Tangible Net Worth of $400,000;

·	The Company agrees that no dividends will be paid without Bank consent;

·	The Company agrees to provide internally prepared financial statements quarterly;

·	The Company will provide tax returns annually; and,

·	Guarantors (Michael Borish individually and the Company) to provide tax returns /financial statements annually

NOTE 7 – COMMITMENT AND CONTINGENCIES

As a result of the business combination with Brownies in 2010 (see Note 10 – Business Combination), the Company assumed liabilities which included an outstanding invoice of $21,000 for required cleanup in Orange County, Florida, $18,000 of unpaid personal property taxes from 2008 and 2009 and a claim made by Shelly Septic for $57,000. The Company settled the $21,000 matter in Orange County. The Company acknowledged that as a matter of statute the $18,000 in personal property taxes would attach to the equipment acquired in the Brownies transaction and has made arrangements to pay these unpaid taxes. The Company is in negotiations in settling the matter with Shelley Septic.

NOTE 8– RELATED PARTY TRANSACTIONS

On January 7, 2011, the Company issued 800,000 and 1,759,000 preferred shares to Michael Ciarlone and Michael Borish for the settlement of $17,915 in accrued compensation.

On January 21, 2011, the Company issued 816,540 in common shares for the settlement of $10,615 in accrued compensation to its CEO and COO.

On March 13, 2011, the Company entered into a contract with Dr. Scott Levine, where as Dr. Levine agreed to loan $75,000 to the Company in exchange for one million restricted shares of common stock and warrants to acquire one million shares of the Company’s common stock at an exercise price of $0.05 per share. The note is due on July 15, 2011 and collateralized by 10,000,000 shares of the Company’s common stock.

NOTE 9- EQUITY

Preferred Stock

The Company authorized 75,000,000 shares of preferred stock, at $0.001 par value of which 5,736,333 are Series A Convertible preferred shares issued and outstanding as of March 31, 2010. The Corporation established and designates the rights and preferences of a Series A Convertible Preferred Stock, and reserves 75,000,000 shares of preferred stock against its issuance, such rights, preferences and designations. Each share of the Series A Convertible Preferred Stock shall have 300 votes on all matters presented to be voted by the holders of common stock and is convertible to common stock on a one for one basis. During the three months ended March 31, 2011, the Company issued 1,759,000 and 800,000 shares of Series A Convertible Preferred Stock to its CEO and COO, respectively, for settlement of accrued compensation in the amount of $17,915 in total.

Common Stock

As of March 31, 2011 the Company had authorized 200,000,000 shares of common stock, at $0.001 par value and 120,018,334 are issued and outstanding.

During the three months ended March 31, 2011, the Company issued 600,000 common shares for the acquisition of equipment from Clean Fuel LLC valued at $15,240 ($0.025 per share based upon the market price at the date of issuance); 5,900,000 common shares for consulting services of $99,350, valued at the market price of the Company’s common stock on the date of issuance); 816,540 common shares to settle accrued compensation of $10,615; and 10,257,277 shares of common stock for principal and accrued interest on convertible debt in the amount of $96,615.

Warrants

The Company values all warrants using the Black-Scholes option-pricing model. Critical assumptions for the Black-Scholes option-pricing model include the market value of the stock price at the time of issuance, the risk-free interest rate corresponding to the term of the warrant, the volatility of the Company’s stock price, dividend yield on the common stock, as well as the exercise price and term of the warrant. The warrants are not subject to any form of vesting schedule and, therefore, are exercisable by the holders anytime at their discretion during the life of the warrant. No discounts were applied to the valuation determined by the Black Scholes option-pricing model.

The Company has 6,000,000 warrants but no options outstanding as of March 31, 2011. Outstanding warrants include 5,000,000 warrants to purchase common stock of the Company at a $0.10 exercise price which are fully vested and have a three year expected life and expire December 13, 2013 and were valued at $95,308 using the Black-Scholes option-pricing model. The following inputs and assumptions were used in the option-pricing model:

Expected Dividend yield	None
Volatility		287.81	%
Weighted average risk free interest rate		5.53	%
Weighted average expected life (in years)	3.00

In March 2011, in connection with the $75,000 Levine note discussed above in Note 6, the Company issued 1,000,000 warrants to purchase common stock of the Company at a $0.05 exercise price which are fully vested, have a three year expected life (expire March 1, 2014) and were valued at $28,991 using the Black-Scholes option-pricing model, which was treated as a discount to the related note. The following inputs and assumptions were used in the option-pricing model:

Expected Dividend yield	None
Volatility		419.40	%
Weighted average risk free interest rate		0.75	%
Weighted average expected life (in years)	3.00

NOTE 10 – BUSINESS COMBINATION

On July 17, 2010, the Company entered into a purchase agreement (the “Asset Purchase Agreement”) with the owners of Brownies Waste Water Solutions, Inc., B&P Environmental Services LLC (Michael J. Ciarlone, Harvey Blonder and Gary A. Goldstein and Anita Goldstein, Robin and Robert Bailey, hereinafter referred to as the “Sellers”). Pursuant to the Asset Purchase Agreement, and upon the terms and subject to the conditions thereof, the Company purchased all of the Member Interests of B&P Environmental Services LLC and all of the issued and outstanding shares of Brownies Waste Water Solutions, Inc. (the “Acquisition”). The purchase price for the Acquisition consisted of the issuance of a net aggregate of 46,666,667 shares which includes 48,000,000 common shares issued in the transactions and the respectively 1,333,333 common shares cancelled in consideration (the “Share Consideration”) to the parties that comprise the holders of both/or Member Interests of B&P Environmental Services LLC and issued and outstanding shares of Brownies Waste Water Solutions, Inc.

There was not a pre-existing relationship between the sellers and the Company prior to the transaction.

The Company acquired a substantial amount of assets in the transaction, which are considered to meet the definition of a business in accordance with FASB codification Topic 805, "Business Combinations", and as such, the Company accounted for the acquisition as a business combination.

Management determined that the Company was the acquirer in the business combination in accordance with FASB codification Topic 805, "Business Combinations", based on the following factors: (i) there was not a change in control of the Company, since the Sellers did not obtain a controlling financial interest or the power to control the Company through a lesser percentage of ownership, by contract, lease, agreement with other stockholders, or by court decree; (ii) the Company was the entity in the transaction that issued its equity instruments, and in a business combination, the acquirer usually is the entity that issues its equity interests; (iii) the Company’s directors retained the largest relative voting rights of the Company post-transaction; and (iv) the composition of the Company’s board of directors and management did not change post-acquisition.

The reasons for the acquisition were that the companies had similar business models that allow the company to expand its operations and services. Also, with the acquisition of Brownies the Company can expand its market share of the sewage disposal market.

The acquisition gave rise to goodwill which was impaired immediately and an intangible asset, a client list, with an estimated life of five years because of management’s belief that the client list had value but did not have an economic useful life longer than a period of five years.

The net purchase price paid for the Acquisition was 46,666,667 restricted shares of the Company’s common stock. The shares had a quoted market price of $.025 per share on July 17, 2010 or an aggregate quoted market value of approximately $1,166,667. The results of Brownies’ operations since July 17, 2010 have been included in the consolidated financial statements. The following table summarizes the consideration paid by the Company and the amounts of the assets acquired and liabilities assumed at the acquisition date. The purchase price for the Acquisition consisted of the issuance of a net aggregate of 46,666,667 shares which includes 48,000,000 common shares issued in the transactions net of the 1,333,333 common shares cancelled (the “Share Consideration”) to the parties that comprise the holders of both/or Member Interests of B&P Environmental Services LLC and issued and outstanding shares of Brownies Waste Water Solutions, Inc.

Purchase Price Allocation	July 17, 2010
Fair Value of Consideration:
Equity instruments (46,666,667 common shares of Freedom Environmental Services, Inc.)	$	1,166,667
Fair Value of Assets acquired:
Cash		207,163
Assets:
Equipment		1,308,390
Prepaid expense		1,625
Accounts receivables		297,219
Inventory Client list		34,266 200,000
Total assets		2,048,663
Fair Value of Liabilities assumed:
Liabilities		1,014,591
Fair value of net assets		1,034,072
Goodwill		132,595
Total purchase price	$	1,166,667

Liabilities Assumed:
Royal Bank of Canada	$	13,177
Convertible Note Payable		50,000
Notes Payable Vac& Jet		60,000
Notes Payable Caterpillar		39,000
Notes Payable Resort Marketing		322,500
Notes Payable Security Fortress Ltd		264,800
Accounts Payable		265,814
Total Liabilities Assumed	$	1,014,591

The following unaudited proforma consolidated results of operations have been prepared as if the Acquisition occurred at the beginning of each period presented.

	Three Months Ended March 31,
	2011			2010
Revenues	$	1,390,505		$	1,220,380
Net Loss		(354,086	)		(2,093,783	)
Net loss per share basic and diluted		(0.00	)		(0.03	)

Weighted average of shares outstanding		107,262,932			70,644,263

NOTE 11 – ASSETS PURCHASED

On December 13, 2010, the Company entered into an Asset Purchase Agreement (the “APA”) with Clean Fuel, LLC. Pursuant to the APA, and upon the terms and subject to the conditions thereof, the Company agreed to purchase equipment from Clean Fuel, LLC. The purchase price for the assets consisted of $850,000 in cash and 5,000,000 warrants at a $0.10 exercise price which are fully vested and have a three- year life at the date of closing of the APA. The value of the warrants based on Black Scholes is $95,308.

The APA closed on December 13, 2010. The equipment was put in Grease, a wholly-owned subsidiary of Freedom, This equipment purchased from Clean Fuel LLC was idle prior to the acquisition.

The fair value of the consideration and the assets acquired is based on the aggregate value of the cash and the Black Scholes value of the warrants that was exchanged for the property and equipment as shown below:

	December 13, 2010
Fair Value of Consideration:
Cash	$	757,000
Equity instruments (5,000,000 warrants at a $.10 exercise price)		95,308
Equity instruments (600,000 common shares, $0.0254 per share)		15,240
Total Purchase Price	$	867,548
Fair Value of Assets acquired:
Assets:
Property and Equipment	$	867,548
Fair value of total assets	$	945,308

NOTE 11– SUBSEQUENT EVENTS

We have evaluated subsequent events through the date the consolidated financial statements were issued, and have determined that the following events are reasonably likely to impact the financial statements and require disclosure:

On April 28, 2011, the Company issued 2,000,000 of common shares (1,000,000 each to Michael Ciarlone and Michael Borish) in lieu of compensation and recorded $58,000 in compensation expense.

In June 2011, the Company paid $48,000 (principal and prepayment penalties) to satisfy the $32,500 convertible note due in August 2011.

On October 12, 2011, the Company issued 5,200,000 common shares for consulting service.

In October 2011, the Company issued a promissory note with principal amount of $125,000 to a unrelated party. The interest rate on the note is 10% and the maturity date is February, 2012. In connection with this note, the company also issued 125,000 common shares to the unrelated party.

* * * * * * * * * * * *

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

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

Forward-Looking Statements

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

Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.

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

Our Company

We provide wastewater management and recycling services to our customers throughout our different divisions. Brownies Waste Water Solutions is a staple in the Central Florida market since 1948, providing commercial and residential septic services. These services include drain field installation maintenance and repair; grease trap cleaning, maintenance, installation and repair; full service commercial and residential plumbing; sewer drain cleaning, backflow testing, repairs and certifications; lift station cleaning, maintenance, repairs, bio-solids transportation and recycling. Vac and Jet Services covers Freedom’s industrial, municipal and commercial customers. Grease Recovery Solutions handles all of our restaurant, resort and theme park services which include grease trap cleaning, sewer drain cleaning and waste cooking oil for recycling. David M Hickman sanitation services will soon be our Pennsylvania operations. This division handles all aspects of commercial and residential services including septic system cleaning, maintenance and installation.

Corporate History

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

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

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

Principal products or services and their markets

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

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

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

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

New product or service

Currently, Freedom has been processing by collecting, transporting and distributing those oil products to dumping sites for processing. We have entered into a letter of intent with a Company in Pennsylvania who has a processing center that will reduce our cost of processing the Biofuel with third parties.

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

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

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

It is anticipated that this enterprise would:

(a)	Collect raw waste (grease and septage) from customers which would constitute the raw material of Biofuel

(b)	Transport the raw materials to a processing facility controlled by the enterprise where waste convertible into Biofuel (“Feedstock”) would be separated from unusable waste which would be disposed of in an appropriate manner.

(c)	Convert the feedstock into Biofuel

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

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

The industries in which we compete and intend to compete are highly competitive and, especially in the area of biofuel production, characterized by rapid technological advancement. Many of our competitors have greater resources than we do.

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

Sources and availability of labor, raw materials and the names of principal suppliers

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

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

Capital Resources

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

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

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

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

Results of Operations

Revenues for the three months ended March 31, 2011 were $1,390,505, compared to $102,591 for the three months ended March 31, 2010. This current increase was primarily attributable to our acquisition of Brownies Waste Water Solutions, Inc.

Cost of goods sold for the three months ended March 31, 2011 was $941,021, compared to $43,234 for the three months ended March 31, 2010. This current increase was primarily attributable to our acquisition of Brownies Waste Water Solutions, Inc.

General and administrative expense for the three months ended March 31, 2011 was $763,674, compared to $770,147 for the three months ended March 31,2010. General and administrative expense for the three months ended March 31, 2011, included a substantial amount of non-cash, non-recurring expenses related to the issuance of common stock.

Selling and marketing expense for the three months ended March 31, 2011 and 2010 were $0 and $662,529, respectively. Selling and marketing expense for the three months ended March 31, 2010 included a substantial amount of non-cash, non-recurring expenses related to the issuance of common stock.

Net loss for the three months ended March 31, 2011 was $354,086, compared to $2,046,607 for the three months ended March 31, 2010. A substantial portion of the net loss for the three months ended March 31, 2010 were non-cash, and believed by management to be non-recurring. Non-cash, non-recurring expenses related to the issuance of common stock was $1,420,110 for services for the three months ended March 31, 2010.

Liquidity and Capital Resources

Our cash (used in) provided by operating activities are ($139,319) and $57,152 for the three months ended March 31, 2011 and 2010, respectively. The decrease is mainly attributable to the acquisition of Brownies Waste Water Solutions, Inc.

Cash used by investing activities was $187,463 and $0 for the three months ended March 31, 2011 and 2010, respectively. We acquired new equipment for our company in 2011.

Cash provided by and (used in) financing activities was $212,315 and ($46,379) for the three months ended March 31, 2011 and 2010, respectively. During the three months ended March 31, 2011, we received proceeds from notes payables and lines of credit of $606,106, repaid note payables of $475,423, and received proceeds from related parties of $67,300.

The Company has a net loss for the three months ended March 31, 2011 of $354,086, an accumulated deficit at March 31, 2011 of $20,833,690, cash flows used in operating activities of $139,319 and needs additional cash flows to maintain its operations.

Off-Balance sheet arrangements

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

WHERE YOU CAN FIND MORE INFORMATION

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

ITEM 4. CONTROLS AND PROCEDURES

(a)	Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures were designed to provide reasonable assurance that the controls and procedures would meet their objectives. As required by SEC Rule 13a-15(b), our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective since the Company has been ineffective in filing timely.

Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining adequate internal control over our financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management has used the framework set forth in the report entitled Internal Control-Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission, known as COSO, to evaluate the effectiveness of our internal control over financial reporting. Based on this assessment, our Chief Executive Officer and Chief Financial Officer have concluded that our internal control over financial reporting was effective as of March 31, 2011. There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

(b)	Changes in Internal Controls Over Financial Reporting

There have been no changes in our internal controls over financial reporting or in other factors that could materially affect, or are reasonably likely to affect, our internal controls over financial reporting during the quarter ended March 31, 2011. There have not been any significant changes in the Company's critical accounting policies identified since the Company filed its Annual Report on Form 10-K as of December 31, 2010.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

The Company became aware that one of the shareholders of Brownies Waste Water Solutions, (“Brownies”) Inc., prior to the acquisition, allegedly misappropriated $15,000 of the Company’s funds (the “Funds”) by attempting to transfer or pass through funds of an unrelated bankrupt company through the Company’s bank accounts to disguise them as services Brownies was to perform when in fact it was an attempt to disguise it as legal services for the shareholder. The Company contacted Bank of America who was the single largest creditor in the unrelated bankrupt company and returned the funds to the bankruptcy court. The Company contacted the Bankruptcy Trustees Office as to the action of the shareholder and they are investigating the shareholder to determine the next course of action. The Company is investigating the accounting records to determine if there are additional improprieties prior to the purchase of Brownies. If the Company finds additional improprieties, the Company will contact the proper regulatory authorities.

The Company became aware the sellers of Brownies failed to disclose in the Asset Purchase Agreement two additional liabilities; which included an outstanding invoice of $21,000 for required cleanup in Orange County, Florida, and $18,000 of unpaid personal property taxes. The Company is investigating if there are any additional undisclosed liabilities in the acquisition of Brownies and has sought legal counsel to determine the next course of action.

The Company is a Defendants in a pending litigation with Harvey Blonder, Gary Goldstein, and Robin Bailey v. Freedom Environmental Services, Inc., and Michael Borish, individually. This case is pending in the Circuit Court of the Ninth Judicial Circuit, in and for Orange County, Florida, Case No. 2010-CA-026477-0 related to the acquisition of Brownies Waste Water Solutions in July 17, 2010. The Original Complaint was Dismissed on a Motion to Dismiss Failure to State a Claim and the Court allowed the Plaintiffs to file an Amended Complaint. The Amended Complaint was filed on June 3, 2011 which alleges – Declaratory Relief, Fraudulent Inducement to Enter a Contract, Negligent Misrepresentation, Breach of Contract Warranties, Accounting, and Rescission of Purchase Agreement. The Company considered this litigation frivolous and vehemently denies all allegations. The case in pending in State Court and the Company is vigorously litigating this case.

ITEM 1A - RISK FACTORS

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

Our Common Stock Is Subject To Penny Stock Regulation

Our shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act. The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on the NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the registrant's net tangible assets; or exempted from the definition by the Commission. Since our shares are deemed to be "penny stock", trading in the shares will be subject to additional sales practice requirements on broker/dealers who sell penny stock to persons other than established customers and accredited investors.

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

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

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

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

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

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

Operating History And Lack Of Profits Which Could Lead To Wide Fluctuations In Our Share Price. The Price At Which You Purchase Our Common Shares May Not Be Indicative Of The Price That Will Prevail In The Trading Market. You May Be Unable To Sell Your Common Shares At Or Above Your Purchase Price, Which May Result In Substantial Losses To You. The Market Price For Our Common Shares Is Particularly Volatile Given Our Status As A Relatively Unknown Company With A Small And Thinly Traded Public Float, Limited

The market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common shares are sporadically and thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or “risky” investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.

Shareholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.

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

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

Volatility in our common share price may subject us to securities litigation, thereby diverting our resources that may have a material effect on our profitability and results of operations.

As discussed in the preceding risk factors, the market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.

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

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

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

Special Note Regarding Forward-Looking Statements

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

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

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

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

The Company issued 11,073,817 shares of common stock to its debt holders for the conversion of their debt and accrued interest, and issued 5,900,000 shares of common stock to consultants. The Company issued 600,000 common shares related to the acquisition of its assets (See Note 9 to the Financial Statements). The offer and sale of such shares of our common stock were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Rule 506 promulgated under the Securities Act of 1933 and in Section 4(2) of the Securities Act of 1933. A legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequent registered under the Securities Act of 1933 or transferred in a transaction exempt from registration under the Securities Act of 1933.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There were no defaults upon senior securities during the period ended March 31, 2011.

ITEM 4. REMOVED AND RESERVED.

ITEM 5. OTHER INFORMATION

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

ITEM 6. EXHIBITS

Exhibits filed herein for March 31, 2011

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
32.2	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
10.2	Asset Purchase Agreement Schedule
10.3	Security Fortress LLC Promissory Note
10.4	CEO Employment Agreement
10.5	COO Employment Agreement

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Registrant Date: October 17, 2011		Freedom Environmental Services, Inc. By: /s/ Michael Borish
		Michael Borish
		Chief Executive Officer (Principal Executive Officer)

Registrant Date: October 17, 2011		Freedom Environmental Services, Inc. By: /s/ Michael Borish
		Michael Borish
		Chief Financial Officer (Principal Financial Officer)

Freedom Environmental Services, Inc. - FORM 10-Q - October 17, 2011

Attached files

Freedom Environmental Services, Inc. Reports