Attached files
| file | filename |
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| EX-32.1 - GREM USA 10Q/A, CERTIFICATION 906 - GREM USA | gremusaexh32_1.htm |
| EX-31.1 - GREM USA 10Q/A, CERTIFICATION 302 - GREM USA | gremusaexh31_1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment#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, 2008
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _______________ to _______________
Commission file number: 000-30567
GREM USA
(Exact name of small business issuer as specified in its charter)
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Nevada
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35-2281610
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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160 Lake Brantley Drive
Longwood, FL 32779
(Address of principal executive offices)
(260) 445-7000
(Registrants telephone number, including area code)
_____________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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. o 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 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). x Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company; as defined within Rule 12b-2 of the Exchange Act.
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o
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
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x
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). x Yes o No
The number of shares outstanding of each of the issuer's classes of common equity as of June 30, 2012 was 1,808,997,481 shares of common stock.
Contents
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Page
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Number
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Explanatory Note
This amendment to the Company’s quarterly report on Form 10-Q/A (originally filed as a Form 10-QSB) for the period ending June 30, 2008 is being filed because our previous independent audit firm Jasper & Hall, who reviewed the original Form 10-Q filed on May 20, 2008 had their registration revoked by the Public Company Accounting Oversight Board (“PCAOB”) on October 21, 2008.
On March 2, 2009 we dismissed Jasper & Hall, P.C., as our independent registered public account firm and engaged the accounting firm of Patrick Rodgers, CPA, PA as our new independent registered public accounting firm.
Therefore, the original 10-Q (now amended and being refilled on Form 10-Q/A) was reviewed by an audit firm that subsequent to the original filing was no longer registered with the PCAOB. As a result, the Company elected to have our original Form 10-Q (now amended and being refilled on Form 10-Q/A) reviewed by our new audit firm Patrick Rodgers, CPA, PA.
Additionally, this amendment includes a correction and reclassification of compensation expense originally reported during the quarter ended June 30, 2008. Compensation expense in the amount of $300,000 was incorrectly recorded as officer compensation, when no amount should have been recorded. Consulting expense in the amount of $281,000 should have been recorded during the quarter ended June 30, 2008. The financial statements included with this Form 10-Q/A reflect this $19,000 decrease in total expenses. See Note 12 to the included notes to the financial statements.
Except as discussed above, we have not modified or updated disclosures presented in the original filing on Form 10-Q, except as required to reflect the effects of the restatement and the regrouping of expense items into new, functional categories in this amended quarterly report. According, this amended quarterly report does not reflect events occurring after our original filing on Form 10-Q or modify or update those disclosures affected by subsequent events, except as specifically referenced herein. Information not affected by the restatement is unchanged and reflects the disclosures made at the time the original filing on Form 10-Q.
The following items have been amended as a result and to the extent of the restatement only.
Part I. Item 1. Financial Statements (Unaudited):
Balance Sheet – June 30, 2008 (as restated)
Statement of Operations – Six months ended June 30, 2008 (as restated)
Statement of Cash Flows –Six months ended June 30, 2008 (as restated)
Notes to Financial Statements
Item 2. Management Discussion and Plan of Operation
PART I - FINANCIAL INFORMATION
Item 1 - Interim Financial Statements (Unaudited)
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GREM USA
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Balance Sheets
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June 30,
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December 31,
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2008
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2007
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(Unaudited)
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Assets
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Current assets
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Cash
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$ | 1,328 | $ | 692 | ||||
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Deposits
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1,834 | 1,834 | ||||||
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Total current assets
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3,162 | 2,526 | ||||||
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Property and equipment, net
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347,915 | 362,235 | ||||||
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Total assets
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$ | 351,077 | $ | 364,761 | ||||
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Liabilities and stockholders' deficiency
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Current liabilities
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Accounts payable and accrued liabilites
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$ | 57,740 | $ | 55,069 | ||||
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Accrued management services
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1,302,664 | 1,307,864 | ||||||
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Advances from related parties
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85,461 | 12,960 | ||||||
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Current portion of long-term debt
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236,076 | 236,076 | ||||||
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Total current liabilities
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1,681,941 | 1,611,969 | ||||||
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Long-term debt, net of current portion
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397,219 | 404,984 | ||||||
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Total liabilities
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2,079,160 | 2,016,953 | ||||||
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Stockholders' deficiency
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Preferred stock, $.001 par value; 10,000,000 shares authorized,
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5,200,000 and none issued and outstanding at June 30, 2008
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and December 31, 2007, respectively
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$ | 5,200 | $ | - | ||||
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Common stock, $.001 par value; 4,990,000,000 shares
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authorized, 588,997,481 and 45,016,245 shares issued and outstanding
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| at June 30, 2008 and December 31, 2008, respectively | 588,997 | 5,016 | ||||||
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Additional paid-in capital
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35,611,465 | 35,750,647 | ||||||
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Treasury stock
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(60,593 | ) | (60,593 | ) | ||||
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Accumulated deficit
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(37,873,152 | ) | (37,347,262 | ) | ||||
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Total stockholders' deficiency
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(1,728,083 | ) | (1,652,192 | ) | ||||
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Total liabilities and stockholders' deficiency
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$ | 351,077 | $ | 364,761 | ||||
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GREM USA
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Statements of Operations
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(Unaudited)
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Three Months Ended
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Six Months Ended
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June 30,
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June 30,
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2008
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2007
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2008
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2007
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Sales
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- | 9,800 | 3,040 | 14,600 | ||||||||||||
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Expenses:
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Management compensation
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- | 300,000 | - | 600,000 | ||||||||||||
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Consulting fees
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281,000 | 644,800 | 444,800 | 648,000 | ||||||||||||
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Selling, general and administrative expenses
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6,629 | 22,738 | 31,185 | 76,131 | ||||||||||||
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Depreciation
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7,156 | 7,156 | 14,320 | 14,320 | ||||||||||||
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Total expenses
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294,785 | 974,694 | 490,305 | 1,338,451 | ||||||||||||
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Net operating income (loss)
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(294,785 | ) | (964,894 | ) | (487,265 | ) | (1,323,851 | ) | ||||||||
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Other income (expense)
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Interest income
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- | 46 | 4 | 366 | ||||||||||||
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Interest expense
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(20,524 | ) | (17,493 | ) | (38,629 | ) | (33,895 | ) | ||||||||
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Total other income (expense)
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(20,524 | ) | (17,447 | ) | (38,625 | ) | (33,529 | ) | ||||||||
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Net income (loss)
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(315,309 | ) | (982,341 | ) | (525,890 | ) | (1,357,380 | ) | ||||||||
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Basic and diluted loss per share:
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Net loss per weighted average share,
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| basis and fully diluted | (0 | ) | (0 | ) | (0 | ) | (0 | ) | ||||||||
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Weighted average number of common
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shares outstanding, basic and fully diluted
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372,843,635 | 4,694,974 | 260,212,951 | 3,801,828 | ||||||||||||
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GREM USA
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STATEMENTS OF CASH FLOWS
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(Unaudited)
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Six Months Ended
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June 30,
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2008
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2007
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Cash flows from operating activities:
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Net loss
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$ | (525,890 | ) | $ | (1,357,380 | ) | ||
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Adjustment to reconcile net loss to net
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net cash used by operating activities:
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Depreciation
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14,320 | 14,320 | ||||||
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Stock issued for services
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444,800 | 2,163,700 | ||||||
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Changes in operating assets and liabilities:
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Inventory
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- | (508 | ) | |||||
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Accounts receivable
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- | 7,478 | ||||||
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Interest receivable
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- | (207 | ) | |||||
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Accounts payable
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2,670 | 31,669 | ||||||
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Accrued management services
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(900,146 | ) | ||||||
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Net cash used in operating activities
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(64,100 | ) | (41,074 | ) | ||||
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Cash flows from investing activities
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- | - | ||||||
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Cash flows from financing activities
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Payments on note payable
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(19,265 | ) | (6,495 | ) | ||||
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Repayments on advances from related parties
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- | - | ||||||
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Proceeds from related party loan to the company
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84,001 | 44,164 | ||||||
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Net cash provided by investing activities
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64,736 | 37,669 | ||||||
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Net incresase in cash
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636 | (3,405 | ) | |||||
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Cash, beginning of period
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692 | 12,803 | ||||||
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Cash, end of period
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$ | 1,328 | $ | 9,398 | ||||
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Supplemental Disclosures of Cash Flow Information
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Interest
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$ | 44,608 | $ | 53,638 | ||||
GREM USA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
Note 1 – Description of Business
The interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.
These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in conjunction with the financial statements of the Company for the period ended December 31, 2007 and notes thereto included in the Company's Form 10-KSB. The Company follows the same accounting policies in the preparation of interim reports.
Results of operations for the interim periods are not indicative of annual results.
GREM USA (the Company) was incorporated in the state of Nevada on March 26, 1999 under the name Last Company Clothing, Inc. (“LCC”). In February 2001, LCC entered into an “Agreement and Plan of Merger” with Premier ASP, Inc, whereby LCC acquired 100% of all the outstanding stock of Premier ASP. Inc. and subsequently changed its name to Premier Axium Asp. Inc. On August 9, 2002, the Company changed its name to Core Solutions, Inc. On May 2, 2003, the Company changed its name to Sunshine Ventures, Inc. On May 30, 2003, the Company changed its name to Christine’s Precious Petal, Inc. On July 29, 2003, the Company changed its name to Global Business Markets, Inc. On December 29, 2004, the Company changed its name to GREM USA.
Note 2 – Summary of significant Accounting Policies
Long-Lived Assets
In accordance with Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360 “Property, Plant, and Equipment,” the Company records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. There were no impairment charges during the periods ended June 30, 2008 and December 31, 2007.
Fair Value of Financial Instruments
The fair values of the Company’s assets and liabilities that qualify as financial instruments under FASB ASC Topic 825, “Financial Instruments,” approximate their carrying amounts presented in the accompanying consolidated statements of financial condition at June 30, 2008 and December 31, 2007.
Revenue recognition
In accordance with the FASB ASC Topic 605, “Revenue Recognition,” the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured.
GREM USA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
Note 2 – Summary of significant Accounting Policies (Continued)
Income Taxes
The Company accounts for income taxes in accordance with FASB ASC Topic 740 “Income Taxes,” which requires accounting for deferred income taxes under the asset and liability method. Deferred income tax asset and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on the enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce the deferred income tax assets to the amount expected to be realized.
In accordance with GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company files an income tax return in the U.S. federal jurisdiction, and may file income tax returns in various U.S. state and local jurisdictions. Generally the Company is no longer subject to income tax examinations by major taxing authorities for years before 2005. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. De-recognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce net assets. This policy also provides guidance on thresholds, measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition that is intended to provide better financial statement comparability among different entities. It must be applied to all existing tax positions upon initial adoption and the cumulative effect, if any, is to be reported as an adjustment to stockholder’s equity as of January 1, 2009. Based on its analysis, the Company has determined that the adoption of this policy did not have a material impact on the Company’s financial statements upon adoption. However, management’s conclusions regarding this policy may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulations and interpretations thereof.
Comprehensive Income
The Company complies with FASB ASC Topic 220, “Comprehensive Income,” which establishes rules for the reporting and display of comprehensive income (loss) and its components. FASB ASC Topic 220 requires the Company’s change in foreign currency translation adjustments to be included in other comprehensive loss, and is reflected as a separate component of stockholders’ equity.
Stock-Based Compensation
The Company complies with FASB ASC Topic 718 “Compensation – Stock Compensation,” which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. FASB ASC Topic 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. FASB ASC Topic 718 requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award (usually the vesting period). No compensation costs are recognized for equity instruments for which employees do not render the requisite service. The grant-date fair value of employee share options and similar instruments will be estimated using
GREM USA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
Note 2 – Summary of significant Accounting Policies (Continued)
Stock-Based Compensation (Continued)
option-pricing models adjusted for the unique characteristics of those instruments (unless observable market prices for the same or similar instruments are available). If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. No employee stock options or stock awards vested during 2008 or 2007 under FASB ASC 718. For the six month periods ended June 30, 2008 and 2007, the Company recorded stock-based compensation expense of $444,800 and $2,163,700, respectively.
Recently-Enacted Accounting Standards
In December 2010, FASB issued ASC ASU 2010-28, “When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (Topic 350) — Intangibles — Goodwill and Other.” ASU 2010-28 amends the criteria for performing Step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts and requires performing Step 2, if qualitative factors indicate that it is more likely than not that goodwill impairment exists. The amendments to this update are effective for us in the first quarter of 2011. Any impairment to be recorded upon adoption will be recognized as an adjustment to our beginning retained earnings. The Company adopted the pronouncement on January 1, 2011 resulting in no impact to the Company’s financial statements.
In April 2010, the FASB issued ASU No. 2010-13, “Compensation - Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades,” which addresses the classification of a share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security trades. Topic 718 is amended to clarify that a share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades shall not be considered to contain a market, performance or service condition. Therefore, such an award is not to be classified as a liability if it otherwise qualifies as equity classification. The amendments in this update should be applied by recording a cumulative-effect adjustment to the opening balance of retained earnings. The cumulative-effect adjustment should be calculated for all awards outstanding as of the beginning of the fiscal year in which the amendments are initially applied, as if the amendments had been applied consistently since the inception of the award. ASU No. 2010-13 is effective for interim and annual periods beginning on or after December 15, 2010 and is not expected to have a material impact on the Company’s consolidated financial position or results of operations. The Company adopted the pronouncement on January 1, 2011 resulting in no impact to the Company’s financial statements.
In January 2010, the FASB issued Accounting Standards Update 2010-06, “Fair Value Measurements and Disclosures (Topic 820) - Improving Disclosures about Fair Value Measurements” (ASU 2010-06), to require new disclosures related to transfers into and out of Levels 1 and 2 of the fair value hierarchy and additional disclosure requirements related to Level 3 measurements. The guidance also clarifies existing fair value measurement disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. The additional disclosure requirements are effective for the first reporting period beginning after December 15, 2009, except for the additional disclosure requirements related to Level 3 measurements, which are effective for fiscal years beginning after December 15, 2010. The Company adopted the pronouncement on January 1, 2011 resulting in no impact to the Company’s financial statement.
GREM USA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
Note 2 – Summary of significant Accounting Policies (Continued)
Loss Per Common Share
The Company complies with the accounting and disclosure requirements of FASB ASC 260, “Earnings Per Share.” Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per common share incorporates the dilutive effect of common stock equivalents on an average basis during the period.
Note 3 – Going Concern
The Company has an accumulated deficit as of June 30, 2008 of approximately $37.9 million. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern.
The Company has a minimum cash balance, has incurred losses since inception, and it does not have source of revenue sufficient to cover its operating expenses. As of June 30, 2008, the current liabilities exceed the current assets by $1,728,000. As shown in the financial statements, the Company incurred a net loss of approximately $315,000 for the six months then ended.
The future success of the Company is likely dependent on its ability to attain additional capital to develop its proposed products and ultimately, upon its ability to attain future profitable operations. There can be no assurance that the Company will be successful in obtaining such financing, or that it will attain positive cash flow from operations.
Note 4 – Property, Plant and Equipment
Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful life of the asset.
The following summarizes the components of property, plant, and equipment:
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June 30,
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December 31,
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2008
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2007
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Depreciable Life
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Land
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$ | 15,000 | $ | 15,000 | N/A | |||||||
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Building
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285,300 | 285,300 |
27.5 years
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Office furniture
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2,650 | 2,650 |
5 years
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Equipment
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122,650 | 122,650 |
5 - 7 years
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| $ | 425,600 | $ | 425,600 | |||||||||
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Accumulated depreciation
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(77,685 | ) | (63,365 | ) | ||||||||
| $ | 347,915 | $ | 362,235 | |||||||||
GREM USA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
Note 5 – Notes Payable and Convertible Debenture
Notes payable at June 30, 2008 consisted of the following:
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Principal &
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Interest Due
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Balance
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Interest
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Date
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Due
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Unsecured note payable to an individual
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10 | % |
April 2008
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$ | 150,000 | ||||
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Unsecured note payable to an individual
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10 | % |
May 2008
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30,000 | |||||
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Unsecured note payable to an individual
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10 | % |
May 2008
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20,000 | |||||
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Unsecured note payable to a company
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10 | % |
June 2008
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15,000 | |||||
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Loan payable to Bayview Loan Servicing, monthly
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installments of principal and interest and real estate
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taxes in the amount of $5,476, maturing July 2021.
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10.75 | % |
July 2021
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416,377 | |||||
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Notes payable to a company, monthly installments
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of principal and interest of $959, maturing September 2007.
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8.0 | % |
September 2007
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1,918 | |||||
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Total notes payable
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633,295 | ||||||||
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Less: current portion
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(236,076 | ) | |||||||
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Total long-term debt
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$ | 397,219 | |||||||
As of June 30, 2008, the Company is in default of its note payable to Advanced Molded Products, Inc. Under the terms of the note agreement, the interest rate rises to 12% in the event of default and Grem USA becomes liable for collection fees, including legal fees. As of June 30, 2008, the Company still owed $1,918 on this note plus accrued interest. GREM USA has not accrued for the additional fees and penalties as they are not considered material to GREM’s financial statements. The Company anticipates repaying this note in full by the end of December 2008.
On May 2, 2008, the Company became in default of its $150,000 note payable to David A. and Kathleen S. King. Under the terms of the note agreement, GREM USA becomes liable for all reasonable costs and expenses, including legal fees for collection of this note. GREM USA has not accrued for these potential costs as the Company is currently renegotiating repayments terms with Mr. And Mrs. King. On December 4, 2008, this debt obligation was assumed by the Company’s majority shareholder.
On June 1, 2008, the Company became in default of its $30,000 note payable Glen and Christina Maggart. Under the terms of the note agreement, GREM USA becomes liable for all reasonable costs and expenses, including legal fees for collection of this note. GREM USA has not accrued for these potential costs as the Company is currently renegotiating repayments terms with Mr. And Mrs. Maggart. On December 4, 2008, this debt obligation was assumed by the Company’s majority shareholder.
On June 1, 2008, the Company became in default of its $20,000 note payable Stephen King. Under the terms of the note agreement, GREM USA becomes liable for all reasonable costs and expenses, including legal fees for collection of this note. GREM USA has not accrued for these potential costs as the Company is currently renegotiating repayments terms with Mr. King. On December 4, 2008, this debt obligation was assumed by the Company’s majority shareholder.
On July 1, 2008, the Company became in default of its $15,000 note payable to Stanley Sutphin. Under the terms of the note agreement, GREM USA becomes liable for all reasonable costs and expenses, including legal fees for collection of this note. GREM USA has not accrued for these potential costs as the Company is currently renegotiating repayments terms with Mr. Sutphin. On December 4, 2008, this debt obligation was assumed by the Company’s majority shareholder.
GREM USA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
Note 6 – Common Stock
On February 22, 2007, the Company filed with the Secretary of State of the State of Nevada, a Certificate of Change (the “Certificate”) to the Company’s Articles of Incorporation. The Certificate is effective as of February 22, 2007, (the “Effective Date”) and effects a 4-for-1 reverse stock split of the Company’s issued and outstanding shares of Common stock, par value $.001(the “Reverse Split”). The number of shares of Common Stock the Company is authorized to issue remains unchanged at 5,000,000,000. As of the Effective Date, every 4 shares of the Company’s issued and outstanding Common Stock, $.001 par value, automatically converted to one share of Common Stock, $.001 par value. No fractional shares were issued in connection with the Reverse Split. Fractional shares were rounded up to the next whole share. The Reverse Split did not alter any voting rights or other terms of the Company’s Common Stock. As a result of the Reverse Split, beginning March 2, 2007, the Company’s Common Stock began trading on the OTC Bulletin Board under the trading symbol GRUS.
On February 6, 2008, the Company filed with the Secretary of State of the State of Nevada, a Certificate of Amendment (the "Certificate") to the Company's Articles of Incorporation. The Certificate is effective as of February 6, 2008, (the "Effective Date"). The number of shares of Common Stock the Company is authorized to issue is 4,990,000,000. In addition, the company authorized 10,000,000 shares of $0.001 par value preferred stock. The same certificate of amendment also affects a 1000-for-1 reverse stock split of the Company's issued and outstanding shares of Common stock, par value $0.001(the "Reverse Split").
As of February 2, 2008, every 1000 shares of the Company's issued and outstanding Common Stock, $0.001 par value, automatically converted to 1 share of Common Stock, $0.001 par value. No fractional shares were issued in connection with the Reverse Split. Fractional shares will be rounded down to the next whole share. The Reverse Split did not alter any voting rights or other terms of the Company's Common Stock.
As a result of the Reverse Split, beginning February 6, 2008, the Company's Common Stock began trading on the OTC Bulletin Board under the trading symbol GRMU.
All share and per share amounts in the accompanying financial statements of the Company and notes thereto have been retroactively adjusted to give effect to the stock splits.
Note 7 – Preferred Stock
As discussed more fully in Note 6, above, the Company issued 5,200,000 of newly created Series A Preferred Stock. The preferred shares were issued at their par value of $0.001 per share. Such Series A preferred stock is convertible into common shares of the Company on a one-for-one thousand basis at any time at the option of the holder.
Note 8 – Treasury Stock
On October 01, 2006, the Company bought back 65,000,000 shares registered in the name of GREM USA. Also, on August 10, 2006 the Company bought back 9,000,000 shares of its $0.001 par value restricted common stock from J. Pat Taylor for $5,400 cash. As of June 30, 2008, these repurchased shares are held in treasury and are available for future reissuance
GREM USA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
Note 9 – Stockholders' Equity
The following stock transactions occurred during the six months ended June 30, 2008:
On February 19, 2008, the Company issued 4,000,000 shares of its $0.001 par value common stock to a third party valued at $2,800.
On February 21, 2008, the Company issued 10,000,000 shares of its $0.001 par value common stock to a third party valued at $7,000.
On February 27, 2008, the Company issued 80,000,000 shares of its $0.001 par value common stock to a third party valued at $56,000.
On March 6, 2008, the Company issued 60,000,000 shares of its $0.001 par value common stock to a third party valued at $42,000.
On March 13, 2008, the Company issued 80,000,000 shares of its $0.001 par value common stock to a third party valued at $56,000.
On April 24, 2008, the Company issued 60,000,000 shares of its $0.001 par value common stock to a third party valued at $72,000.
On May 2, 2008, the Company issued 70,000,000 shares of its $0.001 par value common stock to a third party valued at $49,000.
On June 4, 2008, the Company issued 130,000,000 shares of its $0.001 par value common stock to a third party valued at $52,000.
On June 17, 2008, the Company issued 90,000,000 shares of its $0.001 par value common stock to a third party valued at $108,000
Note 10 – Related Party Transaction
In the six month periods ended June 30, 2008 and 2007, the Company accrued management fees totaling $-0- and $600,000, respectively, for services performed by its president and majority shareholder.
In November 2007, the Company received a cash advance from its president and majority shareholder, Edward Miers in the amount of $1,400. During the six months ended June 30, 2008, Edward Miers advanced an additional $85,401 to the Company to fund the Company’s short-term operating needs.
In December 2007, the Company received a cash advance from one of its consultants and shareholders, Matthew Lettau in the amount of $11,560 and this amount was repaid in full during the six month period ended June 30, 2008.
During the six month period ended June 30, 2008, the Company issued 584,000,000 shares were issued to a consultant for services rendered. These shares were valued at $444,800.
GREM USA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
Note 11 – Fair Value Measurement
Valuation of Investments in Securities at Fair Value – Definition and Hierarchy
In accordance with GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches. In accordance with GAAP, a fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows:
Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 securities. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.
Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors including, the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined.
Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities existed. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for securities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement.
Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy.
Valuation Techniques
The Company values investment in securities that are freely tradable and are listed on a national securities exchange or reported on the NASDAQ national market at their last sales price as of the last business day of the year.
GREM USA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
Note 11 – Fair Value Measurement (Continued)
Valuation of Investments in Securities at Fair Value – Definition and Hierarchy (Continued)
Government Bonds
The fair value of sovereign government bonds is generally based on quoted prices in active markets. When quoted prices are not available, fair value is determined based on a valuation model that uses inputs that include interest-rate yield curves, cross-currency-basis index spreads, and country credit spreads similar to the bond in terms of issuer, maturity and seniority.
Certificate of Deposits
The fair value of the bank certificate of deposits is based on the face value of the certificate of deposits.
Derivative Contracts
The Company records its derivative activities at fair value. Gains and losses from derivative contracts are included in trading income in the statement of operations. Derivative contracts include future and option contracts related to foreign currencies, government bonds and other securities. Government bonds are generally categorized in Level 1 of the fair value hierarchy.
The fair value of the derivate contacts traded by the Company is generally based on quoted prices in active markets on national exchanges. The derivative contracts, such as options and futures, which are listed on a national securities exchange or reported on the NASDAQ national market, are generally categorized in Level 1 of the fair value hierarchy. During the periods ended June 30, 2008 and December 31, 2007, the Company did not engage in trading of derivate contracts.
Offsetting of Amounts Related to Certain Contracts
The Company has elected to offset fair value amounts recognized for cash collateral receivables and payables against fair value amounts recognized for net derivative positions executed with the same counterparty under the same master netting arrangement. There were no cash collateral receivables or net derivative positions at June 30, 2008.
Note 12 – Restatement
The Company has restated its financial statements as of and for the three months ended June 30, 2008, to reflect the correction and reclassification of compensation expense originally reported during the quarter ended June 30, 2008. Compensation expense in the amount of $300,000 was incorrectly recorded as officer compensation, when no amount should have been recorded. Consulting expense in the amount of $281,000 should have been recorded during the quarter ended June 30, 2008. The financial statements included with this Form 10-Q/A reflect this $19,000 decrease in total expenses. The Company’s summarized financial statements comparing the restated financial statements to those originally recorded are as follows:
GREM USA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
Note 12 – Restatement (Continued)
|
Balance Sheet at June 30, 2008
|
||||||||||||
|
Original
|
Change
|
Restated
|
||||||||||
|
Total assets
|
$ | 351,077 | $ | - | $ | 351,077 | ||||||
|
Total liabilities
|
$ | 2,078,160 | $ | 1,000 | $ | 2,079,160 | ||||||
| - | ||||||||||||
|
Stcokholders' deficit
|
$ | (1,727,083 | ) | $ | (1,000 | ) | $ | (1,728,083 | ) | |||
|
Statement of Income
|
||||||||||||
|
For the Three Months Ended June 30, 2008
|
||||||||||||
|
Original
|
Change
|
Restated
|
||||||||||
|
Sales
|
- | $ | - | $ | - | |||||||
|
Management compensation
|
$ | 300,000 | (300,000 | ) | - | |||||||
|
Consulting fees
|
- | 281,000 | 281,000 | |||||||||
|
Selling, and General administrative expenses
|
6,630 | (1 | ) | 6,629 | ||||||||
|
Depreciation
|
7,156 | - | 7,156 | |||||||||
|
Other (income) expense
|
20,524 | - | 20,524 | |||||||||
|
Total expenses
|
334,310 | (19,001 | ) | 315,309 | ||||||||
|
Net loss
|
(334,310 | ) | (19,001 | ) | (315,309 | ) | ||||||
|
Basic and diluted loss per share
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | |||
|
Weighted average common shares
|
||||||||||||
|
outstanding
|
200,499,758 | 172,343,877 | 372,843,635 | |||||||||
GREM USA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
Note 12 – Restatement (Continued)
|
Statement of Income
|
||||||||||||
|
For the Six Months Ended June 30, 2008
|
||||||||||||
|
Original
|
Change
|
Restated
|
||||||||||
|
Sales
|
3,040 | $ | - | $ | 3,040 | |||||||
|
Management compensation
|
$ | 600,000 | (600,000 | ) | - | |||||||
|
Consulting fees
|
- | 444,800 | 444,800 | |||||||||
|
Selling, and General administrative expenses
|
31,185 | - | 31,185 | |||||||||
|
Depreciation
|
14,320 | - | 14,320 | |||||||||
|
Other (income) expense
|
38,625 | - | 38,625 | |||||||||
|
Total expenses
|
684,130 | (155,200 | ) | 528,930 | ||||||||
|
Net loss
|
(681,090 | ) | (155,200 | ) | (525,890 | ) | ||||||
|
Basic and diluted loss per share
|
$ | (0.00 | ) | $ | 0.00 | $ | (0.00 | ) | ||||
|
Weighted average common shares
|
||||||||||||
|
outstanding
|
328,576,681 | (68,363,732 | ) | 260,212,949 | ||||||||
GREM USA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
Note 12 – Restatement (Continued)
|
Statements of Cash Flows
|
||||||||||||
|
Six Months Ended June 30, 2008
|
||||||||||||
|
Original
|
Change
|
Restated
|
||||||||||
|
Cash flows from operating activities
|
||||||||||||
|
Net loss
|
$ | (681,090 | ) | $ | 155,200 | $ | (525,890 | ) | ||||
|
Adjustments to reconcile net loss
|
||||||||||||
|
used by operations:
|
||||||||||||
|
Depreciation
|
14,320 | - | 14,320 | |||||||||
|
Stock issued for services
|
606,199 | (161,399 | ) | 444,800 | ||||||||
|
Changes in assets and liabilities:
|
- | |||||||||||
|
Accounts payable
|
752 | 1,918 | 2,670 | |||||||||
|
Accrued management fee
|
(6,199 | ) | 6,199 | - | ||||||||
|
Net cash used by operating activities
|
(66,018 | ) | 1,918 | (64,100 | ) | |||||||
|
Cash flows from investing activities
|
||||||||||||
|
Net effect of recapitalization
|
||||||||||||
|
Net cash provided by investing activities
|
- | - | - | |||||||||
|
Cash flows from financing activities
|
||||||||||||
|
Proceeds from related party advances
|
85,919 | (1,918 | ) | 84,001 | ||||||||
|
Repayment of related party advances
|
(11,500 | ) | 11,500 | - | ||||||||
|
Repayment of notes payable
|
(7,765 | ) | (11,500 | ) | (19,265 | ) | ||||||
|
Net cash provided by financing activities
|
66,654 | (1,918 | ) | 64,736 | ||||||||
|
Net increase in cash
|
636 | - | 636 | |||||||||
|
Cash, beginning of period
|
692 | - | 692 | |||||||||
|
Cash, end of period
|
$ | 1,328 | $ | - | $ | 1,328 | ||||||
|
Supplemental disclosures of cash
|
||||||||||||
|
information
|
||||||||||||
|
Interest
|
$ | - | $ | - | $ | - | ||||||
GREM USA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
Note 13 – Subsequent Events
On July 21, 2008, the Company issued 120,000,000 shares of its $0.001 par value common stock to a third party valued at $72,000.
On August 25, 2008, the Company issued 250,000,000 shares of its $0.001 par value common stock to a third party valued at $100,000.
On October 10, 2008, the Company issued 300,000,000 shares of its $0.001 par value common stock to a third party valued at $30,000.
On November 4, 2008, the Company issued 550,000,000 shares of its $0.001 par value common stock to a third party valued at $55,000.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements – Safe Harbor
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.
Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect,” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement.
Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:
|
●
|
Our current lack of working capital;
|
|
●
|
Our ability to successfully market and sell our products;
|
|
●
|
Deterioration in general or regional economic conditions;
|
|
●
|
Adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
|
|
●
|
Our ability to continue to issue shares of our common stock in exchange for consultant services;
|
|
●
|
Our ability to continue to issue shares of our common stock due to the limited number of authorized shares remaining under our Articles of Incorporation, as amended;
|
|
●
|
Risks and benefits associated with moving our operations to a new facility;
|
|
●
|
Whether we could be deemed a shell company under Rule 12b-2 of the Exchange Act;
|
|
●
|
The unavailability of funds for capital expenditures; and
|
|
●
|
Operational inefficiencies in distribution or other systems.
|
For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see “Factors That May Affect Our Plan of Operation” in this document and in our Annual Report on Form 10-KSB for the year ended December 31, 2007.
In this filing references to “Grem,” “Company,” “we,” “our,” and/or “us,” refers to GREM USA.
The following discussion should be read in conjunction with the financial statements and notes thereto.
Overview
We are a Nevada corporation formed on March 26, 1999 under the name “Last Company Clothing, Inc.” which planned to engage in the business of importing and wholesaling a line of clothing to serve the retail trade known as the “action sports” or “extreme” sports industry. After a number of name changes, on December 29, 2004 at our annual meeting of stockholders we approved a change of name to GREM USA. We have repositioned the company as a designer and manufacturer of custom handmade and mass-produced electronic guitars, amplifiers, and accessories.
Critical Accounting Policies
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to the valuation of securities owned and deferred tax assets. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. We believe the that the significant accounting policies summarized in footnote two of the unaudited financial statements filed as part of this quarterly report are critical accounting policies, which affect our judgments and estimates used in the preparation of our consolidated financial statements.
Going Concern
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has experienced significant losses. The future success of the Company is likely dependent on its ability to attain additional capital to develop its proposed products and ultimately, upon its ability to attain future profitable operations. There can be no assurance that the Company will be successful in obtaining such financing, or that it will attain positive cash flow from operations. The Company has an accumulated deficit as of June 30, 2008 of $37.9 million. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. As of June 30, 2008, the current liabilities exceed the current assets by $1,728,083. As shown in the financial statements, the Company incurred a net loss of $315,309 for the six months then ended.
Results of Operations
Results of operations for the three months ended June 30, 2008 and 2007
Revenue
The Company reported no revenue for the three months ended June 30, 2008, compared to $9,800 reported for the comparable period in 2007. The decrease in revenue was primarily attributable to the weak U.S. economy, which affected our ability to grow our business. Furthermore, production of guitars substantially decreased as the Company struggled with negative cash flow from its operations.
Expenses
For the three months ended June 30, 2008, the Company reported approximately $295,000 in operating expenses, a decrease of approximately $680,000 from approximately $965,000 reported for the comparable period in 2007. This approximate decrease is primarily attributable to a $300,000 decrease (100%) in management compensation , a $364,000 decrease (56%) in consulting expenses to $281,000 from approximately$ 645,000 reported in 2007, and a decrease of $16,100 in selling and general and administrative expenses as a result of the Company's cost cutting efforts implemented during the beginning of 2008.
Other
For the three months ended June 30, 2008 and 2007, the Company reported interest expense of approximately $20,500 and $17,500, respectively, a decrease of approximately $3,000 (17.0%), primarily due to increased interest rates charged by the Company's mortgage company.
Results of operations for the six months ended June 30, 2008 and 2007
Revenue
The Company reported approximately $3,000 in revenue for the six months ended June 30, 2008, compared to approximately $14,600 reported for the comparable period in 2007. The revenue decrease of approximately $11,600 (79%) was primarily attributable to the weak U.S. economy, which affected our ability to grow our business. Furthermore, production of guitars substantially decreased as the Company struggled with negative cash flow from its operations.
Expenses
For the six months ended June 30, 2008, the Company reported approximately $487,000 in operating expenses, a decrease of approximately $851,000 from approximately $1,338,000 reported for the comparable period in 2007. This approximate decrease in operating expenses is primarily attributable to a $600,000 decrease (100%) in management compensation, a decrease of approximately $203,000 (31%) in consulting fees, and a decrease of $45,000 (45%) in selling and general and administrative expenses, as a result of the Company's cost cutting efforts implemented during the beginning of 2008.
Other
For the six months ended June 30, 2008 and 2007, the Company reported interest expense of approximately $20,500 and $17,500, respectively, a decrease of approximately $3,000 (17.0%), primarily due to increased interest rates charged by the Company's mortgage company.
Liquidity and Capital Resources
As a company with minimal operations and not having generated revenues, we do not have the cash flow to operate our business. In the past we have been dependent on a combination of borrowed funds, the sale of our restricted common stock, and financing to facilitate our cash requirements. Until such time as we generate revenues, if at all, we plan to accrue the money expensed by Mr. Miers and will compensate him with either stock or cash when available.
A critical component of our operating plan impacting our continued existence is the ability to obtain additional capital through additional equity and/or debt financing. We do not anticipate enough positive internal operating cash flow until such time as we can generate substantial revenues, which may take the next few years to fully realize. In the event we cannot obtain the necessary capital to pursue our strategic plan, we may have to cease or significantly curtail our operations. This would materially impact our ability to continue operations.
Our near term cash requirements are to be offset through the issuance of our unrestricted common stock and through guitar sales. Since inception, we have financed cash flow requirements through debt financing and issuance of common stock for cash and services. As we expand operational activities, we may continue to experience net negative cash flows from operations, pending receipt of product sales, and will be required to obtain additional financing to fund operations through common stock offerings and debt financing to the extent necessary to provide working capital.
Over the next twelve months we believe that existing capital and anticipated funds from operations will not be sufficient to sustain operations and planned expansion. Consequently, we may be required to seek additional capital in the future to fund growth and expansion through additional equity or debt financing or credit facilities. No assurance can be made that such financing would be available, and if available it may take either the form of debt or equity. In either case, the financing could have a negative impact on our financial condition and our stockholders.
We anticipate incurring operating losses over the next twelve months. Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development. Such risks include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks we must, among other things, obtain a customer base, implement and successfully execute our business and marketing strategy, continue to develop and upgrade technology and products, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Certain Factors that may affect Future Results
Satisfaction of our cash obligations for the next 12 months.
We plan on satisfying our cash obligations over the next twelve months through additional equity and/or third party financing and through revenue generated from our anticipated guitar sales. During 2007 we were able to sustain operations through the issuance of stock for services. However, under our current plan of operation we may not have the minimal cash requirement to continue in operation for the next 12 months without additional equity or third party financing. Management anticipates the needs for additional funds but at this time is not able to determine how much will be necessary. We do not anticipate generating revenues sufficient enough to satisfy our working capital requirements within the next twelve months. Additionally, we will continue to issue stock to our consultants in lieu of making cash payment to consultants. In 2007, we issued consultants shares of our common stock valued at approximately $876,050.
Summary of any product research and development that we will perform for the term of our plan of operation.
Gregory Reszel has been continually researching and developing our five initial prototype guitars and at this time we have completed the design of the five prototypes. We will now focus on operations on implementing mass production capabilities once sufficient funds are available, if ever, now that we have successfully moved our operations to our newly purchased building. We expect in the near future to begin selling and shipping these five prototypes. Mr. Reszel however, will continually develop and fine tune our prototypes to constantly improve the quality and sound of the guitar. In 2007, we issued shares of our common stock to Mr. Reszel in exchange for services amounting to $38,000. No Shares have been issued during 2008.
Significant changes in the number of employees.
As of June 30, 2008, we had one employee, other than our sole officer and director, Edward Miers. We are dependent upon Edward Miers but we have also relied on the services of independent consultants and contractors to perform various professional services when needed. We believe that this use of third-party service providers enhances our ability to contain general and administrative expenses in the future, as we are not bound by long term contracts. We will need to hire full time operational staff as our operations commence. We anticipate the need for seven to twenty employees to be fully operational. However, due to our limited cash resources, we do not plan to add employees until such time as we have raised adequate funds to support our operations.
We have no operating history to use to evaluate our business.
We have no operating history for you to use to evaluate our business. We have devoted almost all of our efforts to the repositioning our company as a designer and manufacturer of custom handmade and mass-produced electronic guitars. We are in an early stage in our development and it is possible that our products may not sell in the volumes or at the prices that we anticipate, if at all. If that occurs, we would receive less than the projected income from sales of products and our profitability would suffer.
Many of our competitors are larger and have greater financial and other Resources than we do and those advantages could make it difficult for us to compete with them.
The guitar manufacturing industry is extremely competitive and includes several companies that have achieved establishing a significant market for their products and have substantially greater financial, development and marketing resources than we do. If we are unable to establish a market for our products, or effectively compete in the market, we will fail.
We expect a substantial increase in expenses and may not achieve significant profitability, this may cause our stock price to fall.
Because we are in the early stages of operations, we expect to continue to incur operating losses and to have a negative cash flow unless and until we are able to generate substantial revenues and reach profitability. We expect that during the next twelve months, as we try to develop and launch our products; our operating expenses will be increasing, especially in the areas of development, sales and marketing and brand promotion. We anticipate that we will have to incur substantial costs and expenses related to:
● hiring additional executive and administrative personnel, and additional product development personnel;
● continued development of our guitars and the development of proposed accessory products; and
● advertising, marketing, and promotional activities.
The extent of our losses in the future will depend on our ability to commence commercial operations and generate revenues on a profitable basis. To do so, we will have to develop and implement successful manufacturing, sales, and marketing programs for our guitars. No assurance can be given that we will be able to achieve this objective or that, if this objective is achieved, that we will ever be profitable. Our ability to achieve sustained profitability will depend on our ability to generate and sustain substantial revenues while maintaining reasonable expense levels. Although we intend to increase our spending on the activities listed above, these efforts may not result in the generation of sufficient revenues. If revenues are not generated, this may have a subsequent impact on our stock price and your investment.
We received an opinion from our accountants which raises doubt about our ability to continue as a going concern.
Our audited financial statements for the year ended December 31, 2007 and our unaudited financial statements for the period ended June 30, 2008 indicate that there was substantial doubt about our ability to continue as a going concern due to our need to generate cash from operations and obtain additional financing.
Because our common stock is deemed a low-priced "penny" stock, an investment in our common stock should be considered high risk and subject to marketability restrictions.
Since our common stock is a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act, it will be more difficult for investors to liquidate their investment. Until the trading price of the common stock rises above $5.00 per share, if ever, trading in our common stock is subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10.
Those rules require broker-dealers, before effecting transactions in any penny
stock, to:
● Deliver to the customer, and obtain a written receipt for, a disclosure document;
● Disclose certain price information about the stock;
● Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;
● Send monthly statements to customers with market and price information about the penny stock; and
● In some circumstances, approve the purchaser's account under certain standards and deliver written statements to the customer with information specified in the rules.
Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to sell the common stock and may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future.
The limited number of remaining authorized shares of common stock may limit our ability to issue additional shares of common stock to satisfy our operating expenses.
In the past we have relied on the ability to issue shares of our common stock to satisfy the majority of our operating expenses. We are authorized to issue 5 billion shares of common stock. As of August 1, 2008, we had 708,997,481 shares outstanding, which allows us to issue an additional 4,291,002,519 shares (approximately $2,145,501 in value) without amending our Articles of Incorporation. Our inability to issue shares of our common stock to satisfy our working capital needs may be substantially impact our ability to continue to retain the services of consultants and employees.
If we are unable to obtain additional funding our business operations will be harmed and if we do obtain additional financing our then existing stockholders will suffer substantial dilution.
We will require additional funds to initiate our sales and marketing activities. We anticipate that we will require additional funds for our continued operations for the next twelve months, depending on revenues, if and when we become fully operational. Additional capital will be required to effectively support the operations and to otherwise implement our overall business strategy. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. The inability to obtain additional capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will likely be required to curtail our marketing and development plans and possibly cease our operations. Any additional equity financing will involve substantial dilution to our then existing stockholders.
A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our ability to continue our normal operations.
A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because our operations have been primarily financed through the sale of equity securities, a decline in the price of our common stock could be especially detrimental to our liquidity and our operations. Such reductions would force us to reallocate funds from other planned uses and would have a significant negative effect on our business plans and operations, including our ability to develop new products and continue our current operations. If our stock price declines, there can be no assurance that we can raise additional capital or generate funds from operations sufficient to meet our obligations. If we are unable to raise sufficient capital in the future, we may not be able to have the resources to continue our normal operations.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
INTEREST RATE RISK. The Company's exposure to market risk for changes in interest rates relates primarily to the Company's cash and cash equivalents and outstanding debt. At June 30, 2008, the Company had $1,328 in cash and cash equivalents. Based on the investment interest rate and the balance as of June 30, 2008, a hypothetical 1% decrease in interest rates would decrease interest income by a nominal amount. The Company has not experienced any losses on deposits of cash or cash equivalents.
The Company cannot predict market fluctuations in interest rates and their impact on its variable rate debt, nor can there be any assurance that fixed rate long-term debt will be available to the Company at favorable rates, if at all. Consequently, future results may differ materially from the estimated adverse changes discussed above. Changes in interest rates do not affect the amount of
interest we pay on our fixed rate senior convertible notes, but do affect the fair value of the debt.
Item 4 - Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company's management evaluated, with the participation of the Chief Executive Officer and the Chief Financial Officer, the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, the Company's principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) (the Exchange Act) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated and communicated to our management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Controls over Financial Reporting
There was no change in the Company's internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us, which may materially affect us.
Item 1A - Risk Factors
A description of the risk factors associated with our business is included under "Certain Factors That May Affect Future Results" in "Management's Discussion and Analysis of Financial Condition and Results of Operations," contained in Item 2 of Part I of this report.
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
No unregistered sales of equity securities were made during the three month period ended June 30, 2008.
RECENT ISSUANCES OF SECURITIES REGISTERED PURSUANT TO FORM S-8
The following table is a summary of the 2007 registration statements filed on Form S-8.
|
DATE FORM S-8 FILED
|
NUMBER OF SHARES REGISTERED
|
NAME OF PLAN
|
|||
|
April 9, 2007
|
560,000,000 |
GREM USA Stock Compensation Plan
|
|||
We issued shares to a third party from a Registration Statement on Form S-8 filed on April 9, 2007.
|
PERSON ISSUED TO
|
DATE OF ISSUANCE
|
NUMBER OF SHARES
|
VALUE OF SHARES | |||||||
|
Third Party
|
February 19, 2008
|
4,000,000 | $ | 2,800 | ||||||
|
Third Party
|
February 21, 2008
|
10,000,000 | $ | 70,000 | ||||||
|
Third Party
|
February 27, 2008
|
80,000,000 | $ | 56,000 | ||||||
|
Third Party
|
March 6, 2008
|
60,000,000 | $ | 42,000 | ||||||
|
Third Party
|
March 13, 2008
|
80,000,000 | $ | 56,000 | ||||||
|
Third Party
|
April 24, 2008
|
60,000,000 | $ | 72,000 | ||||||
|
Third Party
|
May 2, 2008
|
70,000,000 | $ | 49,000 | ||||||
|
Third Party
|
June 4, 2008
|
130,000,000 | $ | 52,000 | ||||||
|
Third Party
|
June 17, 2008
|
120,000,000 | $ | 108,000 | ||||||
Item 3 - Defaults Upon Senior Securities
None.
Item 4 - (Removed and Reserved)
Item 5 - Other Information
None.
Item 6 - Exhibits
Index to Exhibits
|
Exhibit
No.
|
Description
|
|
|
2.1
|
Plan of Reorganization between Last Company Clothing Inc. and Premier ASP Inc. dated February 23, 2001 (Incorporated by reference to the exhibits to Form 8-K filed on April 25, 2001)
|
|
|
2.2
|
Plan of Reorganization between Premier Axium ASP Inc. and all of the stockholders of The Savvy Employer Inc. dated July 16, 2001 (Incorporated by reference to the exhibits to Form 10-QSB filed on August 23, 2001)
|
|
|
2.3
|
Plan of Reorganization between Premier Axium ASP Inc. and all of the stockholders of Active Employment Solutions Inc. dated July 16, 2001 (Incorporated by reference to the exhibits to Form 10-QSB filed on August 23, 2001)
|
|
|
3.1
|
Articles of Incorporation dated March 26, 1999 (Incorporated by reference to the exhibits to Form 10-SB filed on May 8, 2000)
|
|
|
3.2
|
Certificate of Amendment to Articles of Incorporation dated July 12, 2000 (Incorporated by reference to the exhibits to Form S-8 filed on January 30, 2002)
|
|
|
3.3
|
Certificate of Amendment to Articles of Incorporation dated October 5, 2000 (Incorporated by reference to the exhibits to Form 10-KSB filed on February 9, 2001)
|
|
|
3.4
|
Certificate of Amendment to Articles of Incorporation dated November 16, 2000 (Incorporated by reference to the exhibits to form S-8 filed on January 30, 2002)
|
|
|
3.5
|
Certificate of Amendment to Articles of Incorporation dated March 26, 2001 (Incorporated by reference to the exhibits to Form S-8 filed on January 30, 2002)
|
|
|
3.6
|
Certificate of Amendment to Articles of Incorporation dated August 10, 2002 (Incorporated by reference to the exhibits to Form 14C filed on July 24, 2002)
|
|
|
3.7
|
Certificate of Amendment to Articles of Incorporation dated February 22, 2007 (Incorporated by reference to the exhibits to Form 8-K filed on March 7, 2007)
|
|
|
3.8
|
Bylaws dated March 25, 1999 (Incorporated by reference to the exhibits to Form 10-SB filed on May 8, 2000)
|
|
|
4.1+
|
2005 Stock Option Plan dated April 29, 2005 (Incorporated by reference to the exhibits to Form S-8 filed on August 9, 2005)
|
|
|
4.2+
|
Amendment to 2005 Stock Option Plan dated January 30, 2006 (Incorporated by reference to the exhibits to Form S-8 filed on February 3, 2006)
|
|
|
4.3+
|
Amendment to 2005 Stock Option Plan dated November 15, 2005 (Incorporated by reference to the exhibits to Form S-8 filed on November 18, 2005)
|
|
|
4.4+
|
2004 Stock Compensation Plan dated February 2, 2004 (Incorporated by reference to the exhibits to Form S-8 filed on February 13, 2004)
|
|
|
4.5+
|
2003 Benefit Plan dated February 22, 2003 (Incorporated by reference to the exhibits to Form S-8 filed on March 4, 2003).
|
|
|
4.7+
|
2002 Benefit Plan dated June 26, 2002 (Incorporated by reference to the exhibits to Form S-8 filed on July 11, 2002).
|
|
|
4.6+
|
2001 Restricted Share Plan (Incorporated by reference to the exhibits to Form S-8 filed on January 1, 2002)
|
|
|
10.1
|
Memorandum of Understanding between the Company and Taylor Ventures, LLC dated September 12, 2002 (Incorporated by reference to the exhibits to Form 10-QSB filed on November 14, 2005).
|
|
|
10.2
|
Real Estate Mortgage between the Company and Taylor Ventures, LLC, dated November 9, 2005 (Incorporated by reference to the exhibits to Form 10-QSB filed on November 14, 2005).
|
|
|
10.3
|
Real Estate Mortgage between the Company and InterBay Funding, LLC, dated July 18, 2006 (Incorporated by reference to the exhibits to Form 10-QSB filed on august 14, 2006)
|
|
____________
|
*
|
Filed herewith
|
|
+
|
Each of these Exhibits constitutes a management contract, compensatory plan, or arrangement.
|
SIGNATURES
Pursuant to the requirements 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.
|
GREM USA
|
|||
|
Date: September 9, 2012
|
By:
|
/s/ Edward Miers
|
|
|
Edward Miers, CEO
|
|||
|
Principal Executive Officer and Principal Financial Officer.
|
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