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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, 2013

 

¨           Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ___ to ____

 

Commission File Number 1-11248

 

GREEN TECHNOLOGY SOLUTIONS, INC.

(formerly Sunrise Energy Resources, Inc.)

(Exact name of Registrant as specified in its charter)

 

Delaware   84-0938688
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification Number)

 

2880 Zanker Road, Suite 203    
San Jose, CA   95134
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (408) 432-7285

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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). Yes x 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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ¨ Accelerated filer ¨
Non-accelerated filer ¨ Smaller reporting company x
(Do not check if a smaller reporting company)    

 

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

 

As of May 14, 2013, the Registrant had 45,475,966 shares of common stock issued and outstanding.

 

 
 

  

GREEN TECHNOLOGY SOLUTIONS, INC.

 

FORM 10-Q

TABLE OF CONTENTS

 

    Page
PART I. FINANCIAL INFORMATION  
     
Item 1. Consolidated Financial Statements (unaudited)  
     
  Consolidated Balance Sheets – March 31, 2013 and December 31, 2012 (unaudited) 3
     
  Consolidated Statements of Operations – for the three months ended March 31, 2013 and 2012 and for the period from June 12, 2010 (date of re-entry to development stage) through March 31, 2013 (unaudited) 4
     
  Consolidated Statements of Changes in Stockholders’ Deficit – for the period from June 12, 2010 (date of re-entry to development stage) through March 31, 2013 (unaudited) 5
     
  Consolidated Statements of Cash Flows - for the three months ended March 31, 2013 and 2012 and for the period from June 12, 2010 (date of re-entry to development stage) through March 31, 2013 (unaudited) 6
     
  Notes to the Consolidated Financial Statements (Unaudited) 7
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 10
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk 14
     
Item 4. Controls and Procedures 14
     
PART II. OTHER INFORMATION  
     
Item 1. Legal Proceedings 15
     
Item 1A. Risk Factors 15
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 15
     
Item 3. Defaults upon Senior Securities 15
     
Item 4. [Removed and Reserved] 15
     
Item 5. Other Information 15
     
Item 6. Exhibits 16
     
SIGNATURES 16

 

2
 

  

PART I.

 

GREEN TECHNOLOGY SOLUTIONS, INC.

(a development stage company)

CONSOLIDATED BALANCE SHEETS

 

 

 

   March 31,
2013
   December 31,
2012
 
   (Unaudited)     
ASSETS          
           
CURRENT ASSETS          
Cash and cash equivalents  $10,970   $872 
Total current assets   10,970    872 
           
TOTAL ASSETS  $10,970   $872 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
           
CURRENT LIABILITIES          
Accounts payable  $109,168   $76,153 
Advances payable   317,248    263,648 
Total current liabilities   426,416    339,801 
           
Convertible notes payable, net of discount of $223,477 and $326,580, respectively   72,861    163,653 
           
TOTAL LIABILITIES   499,277    503,454 
           
STOCKHOLDERS’ DEFICIT          
Common Stock, $0.001 par value, 75,000,000 authorized, 41,475,966 and 34,202,694 issued and outstanding as of March 31, 2013 and December 31, 2012, respectively   41,476    34,203 
Additional paid-in capital   10,071,557    9,868,728 
Common stock payable   5,000    5,000 
Accumulated deficit   (7,113,753)   (7,113,753)
Deficit accumulated during the development stage   (3,492,587)   (3,296,760)
Total stockholders' deficit   (488,307)   (502,582)
           
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT  $10,970   $872 

 

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

 

3
 

  

GREEN TECHNOLOGY SOLUTIONS, INC.

(a development stage company)

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

   Three months ended   For the period
from
June 12, 2010
(date of
re-entry to
development
stage)
through
 
   March 31,   March 31, 
   2013   2012   2013 
             
OPERATING EXPENSES               
Sales, general and administrative expenses  $76,517   $77,231   $1,748,994 
                
LOSS FROM OPERATIONS   (76,517)   (77,231)   (1,748,994)
                
OTHER EXPENSES               
Interest expenses, net   (119,310)   (896,876)   (1,463,593)
Impairment of investments   -    -    (280,000)
Total other income (expense)   (119,310)   (896,876)   (1,743,593)
                
NET LOSS  $(195,827)  $(974,107)  $(3,492,587)
                
NET LOSS PER COMMON SHARE – Basic and fully diluted  $(0.01)  $(0.04)     
                
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING   37,672,243    27,830,030      

 

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

 

4
 

  

GREEN TECHNOLOGY SOLUTIONS, INC.

(a development stage company)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(Unaudited)

 

                       Deficit     
                       accumulated     
           Additional   Common       during the     
   Common Stock   Paid-In   Stock   Accumulated   development   Equity 
   Shares   Amount   Capital   Payable   Deficit   stage   Total 
BALANCE, JUNE 12, 2010   395   $-   $6,650,413   $-   $(7,113,753)  $-   $(463,340)
                                    
Correction in number of shares outstanding   1    -    -    -    -    -    - 
Issuance of shares for conversion of note payable   50    -    30,000    -    -    -    30,000 
Issuance of shares for conversion of note payable   66,667    67    199,933    -    -    -    200,000 
Imputed interest expense   -    -    25,808    -    -    -    25,808 
Net loss   -    -    -    -    -    (685,610)   (685,610)
                                    
BALANCE, DECEMBER 31, 2010   67,113   $67   $6,906,154   $-   $(7,113,753)  $(685,610)  $(893,142)
                                    
Issuance of shares for conversion of note payable   70,000    70    209,930    -    -    -    210,000 
Issuance of shares for consulting services   5,000    5    209,995    -    -    -    210,000 
Share rounding on reverse split   3    -    -    -    -    -    - 
Beneficial conversion feature on convertible note payable   -    -    1,179,356    -    -    -    1,179,356 
Imputed interest expense   -    -    84,126    -    -    -    84,126 
Net loss   -    -    -    -    -    (1,193,838)   (1,193,838)
                                    
BALANCE, DECEMBER 31, 2011   142,116   $142   $8,589,561   $-   $(7,113,753)  $(1,879,448)  $(418,907)
                                    
Issuance of shares for conversion of notes payable   34,056,100    34,057    987,626    -    -    -    1,021,683 
Share rounding on reverse split   4,478    4    (4)   -    -    -    - 
Beneficial conversion feature on convertible note payable   -    -    251,468    -    -    -    251,468 
Imputed interest expense   -    -    40,077    -    -    -    40,077 
Common stock payable on investment   -    -    -    5,000    -    -    5,000 
Net loss   -    -    -    -    -    (1,417,312)   (1,417,312)
                                    
BALANCE, DECEMBER 31, 2012   34,202,694   $34,203   $9,868,728   $5,000   $(7,113,753)  $(3,296,760)  $(502,582)
                                    
Issuance of shares for conversion of notes payable   7,273,272    7,273    195,661    -    -    -    202,934 
Imputed interest expense   -    -    7,168    -    -    -    7,168 
Net loss   -    -    -    -    -    (195,827)   (195,827)
                                    
BALANCE, MARCH 31, 2013   41,475,966   $41,476   $10,071,557   $5,000   $(7,113,753)  $(3,492,587)  $(488,307)

 

On November 19, 2010, the Company effected a one-for-200 reverse stock split. All share and per share numbers have been restated to reflect the reverse split.

 

On January 21, 2012, the Company effected a one-for-300 reverse stock split. All share and per share numbers have been restated to reflect the reverse split.

 

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

 

5
 

  

GREEN TECHNOLOGY SOLUTIONS, INC.

(a development stage company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

   For the three months ended
March 31,
   For the
period from
June 12,
2010 (date of
re-entry to
development
stage)
through
March 31,
 
   2013   2012   2013 
             
CASH USED IN OPERATING ACTIVITIES:               
Net loss  $(195,827)  $(974,107)  $(3,492,587)
Adjustments to reconcile net loss to net cash in operating activities:               
Impairment of investment in joint venture   -    -    280,000 
Stock issued for consulting services   -    -    210,000 
Imputed interest expense   7,168    7,490    157,179 
Amortization of discount on convertible notes payable   103,102    880,160    1,207,346 
Changes in operating assets and liabilities:               
Prepaid expenses   -         - 
Accounts payable and accrued liabilities   33,015    4,091    61,545 
Accrued interest payable   9,040    9,226    109,415 
NET CASH USED IN OPERATING ACTIVITIES   (43,502)   (73,140)   (1,467,102)
                
CASH USED IN INVESTING ACTIVITIES               
Cash used in investment in joint venture   -    -    (270,000)
NET CASH USED IN INVESTING ACTIVITIES   -    -    (270,000)
                
CASH PROVIDED BY FINANCING ACTIVITIES:               
Proceeds from advances   53,600    96,463    1,748,072 
NET CASH PROVIDED BY FINANCING ACTIVITIES   53,600    96,463    1,748,072 
                
NET INCREASE IN CASH   10,098    23,323    10,970 
CASH, at the beginning of the period   872    979    - 
                
CASH, at the end of the period  $10,970   $24,302   $10,970 
                
Supplemental Disclosures of Cash Flow Information:               
Cash paid during the period for:               
Interest  $-   $-   $- 
Taxes  $-   $-   $- 
                
Noncash investing and financing transactions:               
Issuance of stock for consulting services  $-   $-   $210,000 
Refinancing of demand notes to convertible notes payable  $-   $-   $1,851,541 
Issuance of stock for conversion of convertible notes payable  $202,934   $931,683   $1,664,617 

 

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

 

6
 

  

GREEN TECHNOLOGY SOLUTIONS, INC.

(a development stage company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

1.INTERIM FINANCIAL STATEMENTS

 

The accompanying unaudited interim financial statements include all adjustments, which in the opinion of management are necessary in order to make the accompanying financial statements not misleading, and are of a normal recurring nature. However, the accompanying consolidated financial statements do not include all of the information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows and stockholders’ deficit 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 our annual financial statements for the period ended December 31, 2012 included in Form 10-K. Operating results for the period ended March 31, 2013 are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2013.

 

2.PRESENTATION OF FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation – The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

 

Going concern - The Company’s consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As shown in the financial statements, the Company incurred a net loss of $195,827 during the three months ended March 31, 2013, while the Company’s current liabilities exceeded its current assets by $415,446.

 

In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to meet its financing requirements on a continuing basis by raising additional funds through debt or equity financing. The Company expects to satisfy its cash requirements by obtaining additional loans; however, there is no assurance that additional capital will be available to the Company when needed and on acceptable terms. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

 

Use of Estimates and Assumptions – The preparation of financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from these estimates.

 

Cash and Cash Equivalents – Cash includes petty cash and cash held on current bank accounts. Cash equivalents include short-term investments with an original maturity of three months or less that are readily convertible to known amounts of cash which are subject to insignificant risk of changes in value. Cash and cash equivalents as of March 31, 2013 and December 31, 2012 consisted mainly of U.S. dollar-denominated current accounts held at major banks.

 

Revenue Recognition – The Company is not currently generating revenue; however, revenue generated in the future will be recognized in accordance with SEC rules. The four criteria that must be met in order to recognize revenue are: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonable assured.

 

7
 

  

Earnings (Loss) per Share – Earnings (loss) per share are computed in accordance with current accounting literature. Basic earnings (loss) per share are calculated by dividing the net income (loss) available to common stockholders by the weighted average number of shares outstanding during the year. Diluted earnings per share reflect the potential dilution of securities that could share in earnings of an entity. In a loss year, dilutive common equivalent shares are excluded from the loss per share calculation as the effect would be anti-dilutive.

 

3.CONVERTIBLE NOTES PAYABLE

 

The holders of the $517,673 Convertible Note Payable elected to convert principal as follows:

 

Date   Principal Converted     Common stock
issued upon
conversion
 
January 14, 2013   $ 84,000       2,800,000  
February 28, 2013     18,000       600,000  
March 11, 2013     57,000       1,900,000  
March 18, 2013     36,303       1,210,088  
Total   $ 195,303       6,510,088  

 

As a result of these conversions, unamortized discount in the total amount of $73,315 was immediately amortized to interest expense. The converted amount of principal and accrued unpaid interest in the total amount of $195,303 was recognized as an increase in stockholders’ equity as a result of these conversions. There was no gain or loss on these conversions, because they were effected in accordance with the terms of the convertible note agreement.

 

On February 28, 2013, the holder of the 10% Subordinated Convertible Note Payable dated May 23, 2010 elected to convert principal in the amount of $7,632 into 763,184 shares of common stock. There was no gain or loss on the conversion, because it was effected in accordance with the terms of the convertible note agreement.

 

4.ADVANCES PAYABLE

 

During three months ended March 31, 2013, the Company has received working capital advances in the amount of $53,600. These advances are non-interest bearing and payable upon demand. The Company has imputed interest on these advances in the amount of $7,168 for the three months ended March 31, 2013. The imputed interest was recorded as an increase in additional paid-in capital.

 

5.SHAREHOLDERS’ EQUITY

 

On January 14, 2013, the Company issued 2,800,000 shares of common stock upon conversion of a portion of the $517,673 Convertible Note Payable in the amount of $84,000.

 

On February 28, 2013, the Company issued 600,000 shares of common stock upon conversion of a portion of the $517,673 Convertible Note Payable in the amount of $18,000.

 

On February 28, 2011, the Company issued 763,184 shares of common stock for the conversion of $7,632 of principal of the 10% Subordinated Convertible Notes Payable

 

On March 11, 2013, the Company issued 1,900,000 shares of common stock upon conversion of a portion of the $517,673 Convertible Note Payable in the amount of $57,000.

 

On March 18, 2013, the Company issued 1,210,088 shares of common stock upon conversion of a portion of the $517,673 Convertible Note Payable in the amount of $36,303.

 

8
 

  

The Company has imputed interest on advances in the amount of $7,618 for the three months ended March 31, 2013. The imputed interest was recorded as an increase in additional paid-in capital.

 

6.COMMITMENTS AND CONTINGENCIES

 

Litigation– The Company has been and continues to be the subject of legal proceedings and adjudications from time to time. Management believes that the resolution of all business matters which will have a material impact on the Company’s financial position or operating results have been recorded.

 

7.RISK MANAGEMENT POLICIES

 

Management of risk is an essential element of the Company’s operations. The main risks inherent to the Company’s operations are those related to credit risk exposures and market movements in interest rates. A description of the Company’s risk management policies in relation to those risks is provided below.

 

Credit risk– The Company is exposed to credit risk which is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss.

 

Interest rate risk – Interest rate risk arises from the possibility that changes in interest rates will affect the value of a financial instrument.

 

Currently, the Company’s approach to the interest risk limitation is borrowing at fixed rates and for short periods.

 

8.SUBSEQUENT EVENTS

 

On April 30, 2013, the holder of the 10% Subordinated Convertible Note Payable dated October 31, 2012 elected to convert principal in the amount of $80,000 into 4,000,000 shares of common stock. There was no gain or loss on the conversion, because it was effected in accordance with the terms of the convertible note agreement.

 

9
 

  

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

 

The following discussion should be read in conjunction with the Company's unaudited financial statements and associated notes appearing elsewhere in this Form 10-Q.

 

As used in this report, the terms "we", "us", "our", the "Company" and "GTSO" mean Green Technology Solutions, Inc., unless otherwise indicated.

 

Caution Regarding Forward-Looking Information

 

All statements contained in this Form 10-Q, other than statements of historical facts, that address future activities, events or developments are forward-looking statements, including, but not limited to, statements containing the words "believe," "expect," "anticipate," "intends," "estimate," "forecast," "project," and similar expressions . All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services, developments or industry rankings; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. These statements are based on certain assumptions and analyses made by us in light of our experience and our assessment of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. However, whether actual results will conform to the expectations and predictions of management is subject to a number of risks and uncertainties described under “Risk Factors” under Part II Item 1A below and in the “Risk Factors” section of our Form 10-K for the year ended December 31, 2012 that may cause actual results to differ materially.

 

Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by management will be realized or, even if substantially realized, that they will have the expected consequences to or effects on our business operations. Readers are cautioned not to place undue reliance on such forward-looking statements as they speak only of the Company's views as of the date the statement was made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Discussion and Analysis of Financial Condition

 

Organization and Basis of Presentation

 

Company History

 

Green Technology Solutions, Inc. (“GTSO”, “we”, “us”, “our” or the “Company”) was incorporated as XCL Sunrise, Inc. in the State of Delaware on April 1, 1991. We changed our name to Sunrise Energy Resources, Inc. on November 1, 2004. On October 26, 2010, we changed our name to Green Technology Solutions, Inc.

 

On September 20, 2012 GTSO formed two subsidiaries which may be used to hold GTSO’s urban and traditional mining operations. The new subsidiaries are GTSO Urban Mining LLC and GTSO Resources LLC.

 

GTSO is in the business of identifying and acquiring rights in early stage, breakthrough green technologies, with the plan to develop these technologies into marketable products. To date, we have identified the following market segments: (1) the advancement of cleaner world-wide mining technologies, with an emphasis on rare earth and precious metals mining applications, (2) the development of additional markets for environmentally friendly methods of recovering minerals from electronic waste and (3) smart grid technology.  Our mission is to focus our resources on discovering the best available new innovative technologies and processes in this industry space and we intend to work with young companies and inventors to deliver innovation in the real world.

 

10
 

 

In addition to the foregoing, we plan to focus our resources on successfully identifying new green technologies that have greatest potential to produce near term profits. Due to our limited management and employees, we expect to continue to form strategic joint venture relationships with early stage development technology companies whose goals and objectives are similar to ours. Moreover, we anticipate continued use of and reliance upon industry consultants who have the knowledge and expertise in the areas of our existing and future business ventures. We have located our new offices in the Silicon Valley city of Palo Alto, California, which management believes may increase access to cutting edge technologies. As of March 31, 2013, the Company has one employee.

 

On June 12, 2010, five purchasers acquired control of 82,519 shares (16,503,817 pre-split shares) of our issued and outstanding common stock representing approximately 69.67% of the total number of issued and outstanding shares from Burisma Holdings Limited. The aggregate purchase price for the shares was $270,000. Cambridge Securities of Panama, a Panama corporation, acquired 60,411 shares of common stock, and four other unrelated corporations each acquired control of 5,527 shares of common stock.  As a result of this transaction, there was a change in control of the Company, and Cambridge Securities of Panama became the Company’s majority shareholder.

 

Current Plan of Operations

 

We are currently identifying possible early stage companies and technology across a range of green technologies and environmentally friendly practices for the purpose of acquiring rights to them, joint venture partnerships and developing them into marketable products. We have already identified several potential new technology endeavors and management is studying these endeavors for their potential inclusion into our development process.

 

 

11
 

  

On December 15, 2011, we signed a letter of intent regarding the potential acquisition or joint venture agreement with Diamond V Associates, Inc. The letter of intent provides us with 90 days to perform due diligence and negotiate a final purchase price. Diamond V Associates is in the business of rare earth and precious metals exploration and mineral development with a focus on gold in Alaska and Africa.

 

On June 8, 2012, we signed a joint venture agreement with Diamond V Associates, Inc. to fund the research, planning and development of tungsten and other rare earths and precious metals in North America and Africa. According to the agreement, all profits, losses and other allocations to the joint venture shall be allocated as follows at the conclusion of each fiscal year on a 50:50 basis between GTSO and Diamond V Associates. We will contribute $2,000 per month to the joint venture for working capital for the joint venture’s operations. GTSO reserves the right to reduce or increase this contribution based on performance by Diamond V Associates. If we determine that additional funding is required after projects are identified, we will negotiate the amount of any contribution that we would make with Diamond V Associates. GTSO paid $10,000 during the year as working capital. As od December 31, 2012, Management determined that it was necessary to write off the intangible asset related to this joint venture agreement due to the fact the joint venture will need to raise significant additional capital in order to fully realize the value of our claims in the joint venture.

  

On July 10, 2012, we signed a letter of intent regarding the potential acquisition of Global Cell Buyers, LLC. The letter of intent provides us with 90 days to perform due diligence and negotiate a final purchase price. Global Cell Buyers, LLC is a development stage business which plans to buy, sell and recycle cell phones.

 

On October 30 2012, we entered into a purchase agreement with Global Cell Buyers, LLC regarding the acquisition of existing methods, brand name, and current operating plans. Global Cell Buyers was acquired by GTSO for the purchase price of $10,000 payable in cash and common stock. The purpose of of this acquisition is to expand recycling and urban mining operations from cell phones to other electronic waste for the purpose of mineral and other reusable metal and plastic recovery. GTSO also plans to expand the brand name of Global Cell Buyers leveraging its parent operations Green Technology Solutions, Inc. On November 14, 2012, GTSO rebranded Global Cell Buyers under the name “Global Urban Mining” to build and expand its e-recycling platform within the United States and eventual global expansion plans.

 

The purchase price was allocated entirely to intangible assets related to the Global Cell Buyers’ infrastructure plans related to mineral recovery from cell phone waste. Global Cell Buyers had no other tangible assets or liabilities. As of December 31, 2012, Management determined that it was necessary to write off the intangible asset related to this acquisition due to the fact that Global Cell Buyers was in the early development stages and did not have adequate operating history to support retaining the intangible asset on the consolidated balance sheet.

 

Through GTSO’s newest initiatives in traditional and urban mining, rare earth and precious metals sector, the Company plans to create the necessary processes, logistics and distribution channels to mine, recover, distribute and sell precious and other metals to the global marketplace. The Company intends to be a driving force behind a more competitive minerals and metals mining and recovery market. The Company’s alliances in Latin America, Asia and Africa provide a strategic advantage and access to one of the most plentiful rare earth and minerals deposits in the world. GTSO has also identified additional joint venture and acquisition targets in China, Africa and Latin America. The mission is to meet the growing demand for gold, silver, tungsten and precious and rare elements, along with in-demand and recoverable metals, while introducing sustainable and environmentally friendly practices. The strategic plan is to recover and sell products such as metals and minerals that utilize existing feedstock to supplement traditional mining initiatives.

 

GTSO will continue traditional mining operations through joint ventures such as Diamond V Associates, but the current acquisition and joint venture focus for 2013 will be building sustainable recovery methods of precious, rare and other metals and minerals through utilizing existing electronic waste. The first two quarters of 2013 will be building its US operations through the purchase of Global Cell Buyers and branding strategy under the name “Green Urban Mining”. In addition, GTSO has identified several target companies in emerging market such as Latin America to leverage current collection and distribution of e-waste for the use of valuable metals they contain. GTSO plans to continue support of traditional mining operations such as placer mining through Diamond V Associates and other innovative prospectors and operators on a case by case scenario.

 

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Results of Operations and Going Concern

 

We incurred a net loss of $195,827 for the three months ended March 31, 2013, and had a working capital deficit of $415,446 as of March 31, 2013. We do not anticipate having positive net income in the immediate future. Net cash used in operations for the three months ended March 31, 2013 was $43,502. These conditions create an uncertainty as to our ability to continue as a going concern.

 

We continue to rely on advances to fund operating shortfalls and do not foresee a change in this situation in the immediate future. There can be no assurance that we will continue to have such advances available. We will not be able to continue operations without them. We are pursuing alternate sources of financing, but there is no assurance that additional capital will be available to the Company when needed or on acceptable terms.

 

Results of Operations for the three months ended March 31, 2013 compared to the three months ended March 31, 2013.

 

General and Administrative Expenses

 

General and administrative expenses decreased in the three months ended March 31, 2013 as compared to the three months ended March 31, 2012 from $77,231 to $76,517 due to the Company’s focus on controlling overhead costs.

 

Loss from Operations

 

The decrease in our operating loss for the three months ended March 31, 2013 as compared to the comparable period of 2012 from $77,231 to $76,517 is due to the decrease in general and administrative expenses described above.

 

Other Expense

 

Interest expense decreased during the three months ended March 31, 2013 compared to the same period of 2012 from $896,876 to $119,310. The decrease was primarily the result of amortization of discounts on convertible notes payable during the three months ended March 31, 2012. The amortization during the comparable period of 2013 was not as large.

 

Net Loss

 

We recognized a net loss of $119,310 for the three months ended March 31, 2013 as compared to a net loss of $974,107 for the same period of 2012. Changes in net loss are primarily attributable to the increase in interest expense partially offset by the decrease in general and administrative expenses as described above.

 

Liquidity and Capital Resources

 

Net cash used by operating activities was $43,502 and $73,140 for the three months ended March 31, 2013 and 2012, respectively. The decrease is mainly attributable to the decreased net loss as a result of lower general and administrative expenses as well as a decrease in amortization of discount on convertible note payables.

 

Cash provided by financing activities was $53,600 and $96,463 for the three months ended March 31, 2013 and 2012, respectively. The decrease is mainly attributable to decreased advances received which were required to fund the Company’s operations.

 

We had negative working capital of $415,446 as of March 31, 2013 compared to $338,929 as of December 31, 2012. Our cash position increased to $10,970 at March 31, 2013 compared to $872 at December 31, 2012.

 

Our monthly cash requirement amount is approximately $25,000, and as of March 31, 2013, cash on hand would fund operations for less than one month.

 

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The Company anticipates it will require around $800,000 to sustain operations and effectively evaluate new business opportunities over the next twelve months. However, if our mining claims show significant deposits, then we may require several million dollars of additional financing. The Company intends to seek to raise these funds through equity and debt financing; however, there is no guarantee that funds will be raised and the Company has no agreements in place as of the date of this filing for any financing.

 

We do not have any material commitments for capital expenditures. However, should we execute our business plan as anticipated, we would incur substantial capital expenditures and require financings in addition to what is required to fund our present operations.

 

Additional Financing

 

Additional financing is required to continue operations. Although actively searching for available capital, the Company does not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.

 

Off Balance Sheet Arrangements

 

None

 

Cash requirements

 

The Company anticipates it will require around $800,000 to sustain operations and effectively evaluate new business opportunities over the next twelve months. The Company intends to seek to raise these funds through equity and debt financing; however, there is no guarantee that funds will be raised and the Company has no agreements in place as of the date of this filing for any financing.

 

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2013. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2013, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

1.As of March 31, 2013, we did not maintain effective controls over the control environment. Specifically we have not developed and effectively communicated to our employees its accounting policies and procedures. This has resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

 

2.As of March 31, 2013, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.

 

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Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

 

Changes in Internal Control over Financial Reporting

 

During the quarterly period ended March 31, 2013, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

There are no outstanding legal proceedings material to the Company to which the Company or any of its assets are subject, nor are there any such proceedings known to be contemplated. Management believes that the resolution of all business matters which would have a material impact on the Company’s financial position or operating results have been recorded.

 

Item 1A. Risk Factors

 

In addition to the other information set forth in this quarterly report, you should carefully consider the risks discussed in our 2012 Annual Report on Form 10-K including the Risk Factors set forth in Part I of our Annual Report, which risks could materially affect our business, financial condition or future results. There have been no material changes to the risk factors disclosed in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2012. These risks are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. [Removed and Reserved]

 

N/A

 

Item 5. Other Information

 

None

 

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Item 6. EXHIBITS

 

Exhibit No.   Description of Exhibit
     
3.1   Amended and Restated Certificate of Incorporation of the Company (1)
3.2   Bylaws of the Company (1)
10.1   10% Subordinated Note Due March 30, 2009 (4)
10.2   10% Subordinated Note Due June 6, 2009 (4)
10.3   10% Subordinated Note Due March 30, 2009 (5)
10.4   10% Subordinated Note Due June 6, 2009 (5)
10.5   Joint Venture Agreement (6)
10.6   Sale and Assignment of Rights Under Joint Venture Agreement (6)
10.7   Profit Participation Agreement dated January 29, 2011 with Integrated Smart Solutions, Inc. (3)
10.8   Joint Venture Agreement dated January 30, 2011 with Rare Earth Exporters of Mongolia Pte. Ltd. (3)
10.9   Sale and Assignment of Rights Under Joint Venture Agreement dated November 8, 2010 (3)
14   Code of Ethics (2)
31.1   Section 302 Certification (7)
32.1   Section 906 Certification (7)
101   XBRL Interactive Data (7)

 

  (1) Incorporated by reference from the Form SB-2 filed on September 15, 2006.
  (2) Incorporated by reference from the Form 10-K for the Annual Period Ended December 31, 2009.
  (3) Incorporated by reference from the Form 10-K for the Annual Period Ended December 31, 2010.
  (4) Incorporated by reference from the 10-QSB for the Six Month Period Ended June 30, 2006.
  (5) Incorporated by reference from the 10-KSB for the Fiscal Year Ended December 31, 2006.
  (6) Incorporated by reference from the 8-K filed on December 13, 2010.
  (7) Filed or furnished herewith.

 

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.
 

  Green Technology Solutions, Inc.
   
  /s/ Paul Watson  
Date: May 15, 2013 Paul Watson
  Chief Executive Officer
 

(Principal Executive, Financial and Accounting

Officer)

  

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