Attached files
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 10-Q/A
(Amendment No. 1)
-------------------------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED JUNE 30, 2009
COMMISSION FILE NO.: 0-33513
GS ENVIROSERVICES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 20-8563731
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(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Penn Plaza, Suite 1612, New York, NY 10119
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(Address of principal executive offices) (Zip Code)
(646)572-6311
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(Registrant's telephone number including area code)
Check mark whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant as 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 (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files.) Yes ___ No ___
Indicate by check mark whether the registrant is a large accelerated 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. (Check One)
Large accelerated filer Accelerated filer
--- ---
Non-accelerated filer Smaller reporting company X
--- ---
Indicate by check mark whether the registrant is a shell company as defined in
rule 12-b-2 of the Exchange Act Yes__No X
The number of outstanding shares of common stock as of August 15, 2009 was
15,574,594
Amendment No. 1 This amendment is being filed in order to change the disclosure
set forth in Item 4.
GS ENVIROSERVICES, INC.
AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10Q/A
FOR THE FISCAL QUARTER ENDED JUNE 30, 2009
TABLE OF CONTENTS
Page No
Part I Financial Information
Item 1. Financial Statements (unaudited)...............................................................3
Consolidated Balance Sheets - June 30, 2009 (unaudited) and December 31, 2008..................4
Consolidated Statements of Operations - for the Three Months and Six
Months Ended June 30, 2009 (unaudited) and 2008 (unaudited)...................................5
Consolidated Statements of Cash Flows - for the Three an d Six Months
Ended June 30, 2009 (unaudited) and 2008 (unaudited)..........................................6
Notes to Consolidated Financial Statements.....................................................7
Item 2. Management's Discussion and Analysis...........................................................9
Item 3 Quantitative and Qualitative Disclosures about Market Risk....................................10
Item 4. Controls and Procedures.......................................................................10
Part II Other Information
Item 1. Legal Proceedings.............................................................................11
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds...................................11
Item 3. Defaults Upon Senior Securities...............................................................11
Item 4. Submission of Matters to a Vote of Security Holders...........................................11
Item 5. Other Information ............................................................................11
Item 6. Exhibits .....................................................................................11
Signatures 12
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) FOR JUNE 30, 2009
3
GS ENVIROSERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008
ASSETS: 6/30/09 12/31/08
--------------------------
Current assets:
Cash ................................................................... $ 30,163 $ 198,078
Prepaid expenses ....................................................... 15,458 2,282
Note receivable ........................................................ -- 48,667
----------- -----------
Total current assets ............................................... 45,621 249,027
----------- -----------
TOTAL ASSETS .............................................................. 45,621 249,027
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts Payable ....................................................... 12,831 --
Convertible Debenture .................................................. 241,011 30,643
----------- -----------
Total current liabilities .......................................... 253,842 30,643
----------- -----------
Total liabilities: ................................................. 253,842 30,643
----------- -----------
Stockholders' equity (deficit):
Common stock, $.001 par value, 100,000,000 shares authorized; 15,573,594
shares issued and outstanding as of 6/30/09
and 15,573,594 shares issued and outstanding as of 12/31/08 ............ 15,574 15,574
Treasury stock, 7,968,540 shares at cost ............................... (240,000) --
Additional paid-in capital ............................................. 5,353,072 5,353,072
Retained deficit ....................................................... (5,336,866) (5,150,262)
----------- -----------
Total stockholders' equity (deficit) ................................... (208,220) 218,384
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................................ $ 45,621 $ 249,027
=========== ===========
The notes to the Consolidated Financial Statements are an
integral part of these statements.
4
GS ENVIROSERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2009 AND 2008 (UNAUDITED)
For the three months ending: For the six months ending:
6/30/09 6/30/08 6/30/09 6/30/08
-------------------------------- -------------------------------
Revenues ........................................ $ -- $ -- $ -- $ --
Cost of revenues ............................. -- -- -- --
-------------- -------------- -------------- --------------
Gross profit .................................... -- -- -- --
-------------- -------------- -------------- --------------
Operating expenses:
Stock based compensation ..................... -- 25,056 -- 50,426
General and administrative expenses .......... 60,000 532,718 162,829 884,417
-------------- -------------- -------------- --------------
Total operating expenses ........................ 60,000 557,774 162,829 934,843
-------------- -------------- -------------- --------------
Operating loss .................................. (60,000) (557,774) (162,829) (934,843)
-------------- -------------- -------------- --------------
Other income (expense):
Change in fair value of derivative instruments -- 1,611,528 -- 2,920,000
Amortization of debt discount ................ (184) (1,454,032) (184) (2,964,484)
Miscellaneous income ......................... 574 -- 4,188 --
Interest expense - related party ............. -- (11,250) -- (15,995)
Cost of reduction for guarantee .............. -- -- -- (1,388,667)
Cost of conversion feature ................... (24,827) -- (24,827) --
Interest expense ............................. -- (29,500) -- (77,698)
-------------- -------------- -------------- --------------
Total other income (expense), net .......... (24,437) 116,746 (20,823) (1,526,844)
-------------- -------------- -------------- --------------
Loss before provision for income taxes .......... (84,437) (441,028) (183,652) (2,461,687)
Provision for income taxes ...................... 250 55,219 2,952 6,126
-------------- -------------- -------------- --------------
Net loss from continuing operations ............. $ (84,687) $ (385,809) $ (186,604) $ (2,455,561)
============== ============== ============== ==============
Discontinued Operations:
Income from discontinued operations, ............ $ -- $ 571,416 $ -- $ 823,709
net of tax of $0
Loss on disposal of operations .................. -- (1,313,944) -- (1,313,944)
-------------- -------------- -------------- --------------
Total discontinued operations .......... -- (742,528) -- (490,235)
============== ============== ============== ==============
Net loss ........................................ $ (84,687) $ (1,128,337) $ (186,604) $ (2,945,796)
============== ============== ============== ==============
Basic loss per share
Loss from continuing operations ................. $ (0.00) $ (0.02) $ (0.01) $ (0.12)
Loss from discontinued operations ............... -- (0.02) -- (0.02)
-------------- -------------- -------------- --------------
Net loss per share .............................. $ (0.00) $ (0.04) $ (0.01) $ (0.14)
============== ============== ============== ==============
Weighted average shares of common 15,573,594 19,470,296 15,573,594 20,791,028
stock outstanding
The notes to the Consolidated Financial Statements are an
integral part of these statements.
5
GS ENVIROSERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2009 (UNAUDITED)
AND JUNE 30, 2008 (UNAUDITED)
6/30/09 6/30/08
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss .................................................................... $ (186,604) $(2,945,796)
Income from discontinued operations ......................................... -- (823,709)
Loss on disposal of discontinued operations ................................. -- 1,313,944
Adjustments to reconcile net loss to net cash used in (provided by) operating
activities:
Fair value of convertible debenture........................................ 25,011 --
Stock based consulting fee ............................................... -- 140,000
Cost of reduction for guarantee .......................................... -- 1,388,667
Deferred taxes ........................................................... -- 31,011
Stock based compensation ................................................. -- 50,426
Change in fair value of derivative instruments ........................... -- (2,920,000)
Amortization of debt discount ............................................ -- 2,964,484
Changes in assets and liabilities
Accounts payable ......................................................... 10,863 36,276
Accrued expenses ......................................................... (28,675) 93,226
Prepaid expenses ......................................................... (13,177) 49,840
Miscellaneous receivable ................................................. 23,758 (36,383)
Change in allowance ...................................................... 24,909 --
Interest payable - affiliate ............................................. -- --
----------- -----------
Net cash flows used in continuing operations ........................... (143,915) (658,014)
Net cash flows provided by discontinued operations ..................... -- 962,795
----------- -----------
Net cash flows provided by (used in) operations ........................ (143,915) 304,781
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash acquired from sale of subsidiaries .................................. -- 5,000,000
Proceeds from note receivable - affiliate ................................ -- 350,000
----------- -----------
Net cash provided by investing activities ............................ -- 5,350,000
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock ............................................... -- (1,200,000)
Restricted cash .......................................................... -- (200,000)
Proceeds from line of credit ............................................. -- 670,000
Repayment of line of credit .............................................. -- (1,417,341)
Proceeds from convertible debenture ...................................... -- 100,000
Proceeds from convertible debentures - related party ..................... -- 500,000
Repayment of convertible debentures ...................................... (24,000) (2,100,000)
Repayment of convertible debentures - related party ...................... -- (500,000)
----------- -----------
Net cash used in financing activities ................................ (24,000) (4,147,341)
----------- -----------
Increase (decrease) in cash ................................................. (167,915) 1,507,440
Cash at beginning of period ................................................. 198,078 --
----------- -----------
Cash at end of period ....................................................... $ 30,163 $ 1,507,440
=========== ===========
The notes to the Consolidated Financial Statements are an
integral part of these statements.
6
GS ENVIROSERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1 DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The consolidated interim financial statements included herein have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission with regard to Regulation S-X and, in the opinion of
management, include all adjustments which, except as described elsewhere herein,
are of a normal recurring nature, necessary for a fair presentation of the
financial position, results of operations, and cash flows for the periods
presented. The results for interim periods are not necessarily indicative of
results for the entire year. The financial statements presented herein should be
read in connection with the financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2008.
Effective on June 3, 2009, James Green resigned from his position as Chief
Executive Officer and sole member of the Company's Board of Directors. Effective
on the same date, Doris Christiani resigned from her position as the Company's
Chief Financial Officer. At the same time, the Board of Directors elected Kevin
Kreisler to serve as sole member of the Board of Directors and as Chief
Executive Officer.
EXCHANGE AGREEMENT
Pursuant to an Exchange Agreement dated June 3, 2009 James Green delivered to
the Company 7,968,540 shares of GS EnviroServices common stock (the "Exchange
Shares"). In exchange for the Exchange Shares, GS EnviroServices issued to Mr.
Green a Convertible Debenture (see note 5 Convertible Debentures). Upon the
amendment to the Company's Certificate of Incorporation authorizing the issuance
of series A preferred stock, the exchange shares will be converted into
1,000,000 shares of Series A preferred stock. The Series A Preferred Stock when
issued is to remain equal to fifty-one (51%) percent of the fully-diluted issued
and outstanding capital stock of Company. The shares of Series A Preferred Stock
will not be convertible into Company common stock. The Company will hold the
Exchange Shares and Preferred Shares in escrow until the convertible debenture
is paid in full. The Company will insert a special legend on the exchange shares
stating that the shares must remain in escrow until the debenture is paid in
full. Effective with the exchange agreement, control of the company transferred
to Kevin Kreisler, the Company's newly elected Chairman of the Board and Chief
Executive Officer.
On June 20, 2008, the Company completed an Asset and Stock Purchase Agreement
with Triumvirate Environmental, Inc. ("Triumvirate"). The assets sold were
substantially all of the assets of Enviro-Safe and 100% of the capital stock of
Enviro-Safe (NE). Triumvirate assumed responsibility for certain designated
liabilities of Enviro-Safe, including its trade payables, its accrued expenses,
and certain identified executory contracts. As a result of the sale, the assets
and liabilities of Enviro-Safe Corp. and Enviro-Safe Corporation (NE) are
presented as assets and liabilities to be disposed of in prior periods and their
operations are presented as discontinued in the accompanying consolidated
statements of operations.
GOING CONCERN
The accompanying financial statements referred to above have been prepared
assuming that the Company will continue as a going concern. The Company has a
negative working capital of $208,221 and has no established source of revenue
and is dependent on its ability to raise capital from shareholders or other
sources to sustain operations. These factors raise substantial doubt that the
Company will be able to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty. Management plans include raising additional proceeds from debt and
equity transactions and completing strategic acquisitions.
2 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of GS
EnviroService's discontinued operations of Enviro-Safe Corporation and
Enviro-Safe Corporation (NE). All significant accounts and transactions have
been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
7
BASIC AND DILUTED EARNINGS PER SHARE ("EPS")
Basic (loss) earnings per share is computed by dividing net income by the
weighted average common shares outstanding during a period. Diluted (loss)
earnings per share is based on the treasury stock method and includes the effect
from potential issuance of common stock such as shares issuable pursuant to the
exercise of all stock options, warrants and conversion of debentures. Common
share equivalents have been excluded where their inclusion would be
anti-dilutive. A reconciliation of the numerators and denominators of basic and
diluted (loss) earnings per share for continuing operations for the three months
ended June 30, 2009 consisted of the following:
6 Months Ended 6 Months Ended
June 30, 2009 June 30, 2008
------------- --------------
Weighted average number of shares outstanding 15,573,594 20,791,028
Common stock equivalent shares -- --
-------------- --------------
Total weighted average and equivalent shares 15,573,594 20,791,028
============== ==============
Potential future dilutive securities include 12,000,000 common shares issuable
under the Company's outstanding convertible debenture at June 30, 2009.
3 DISCONTINUED OPERATIONS
On June 20, 2008, the Company completed an Asset and Stock Purchase with
Triumvirate Environmental, Inc. (the "Agreement"). Pursuant to the Agreement,
the Company sold substantially all of the assets of Enviro-Safe and 100% of the
capital stock of Enviro-Safe (NE). As a result of the Agreement, their
operations through the date of sale have been presented as discontinued in the
accompanying consolidated statements of operations.
4 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The following is a summary of supplemental disclosures of cash flow information:
2009 2008
--------------------------------
Cash paid during the period for the following:
Interest $ -- $ 93,693
Income taxes 2,952 (6,126
------------ --------------
Total 2,952 87,567
============ ==============
Supplemental Schedule of Non-Cash Investing and Financing Activities:
Issuance of convertible debenture for reduction of guarantee $ -- $ 1,388,667
Purchase of treasury stock by issuance of convertible debenture 240,000 611,333
------------ --------------
Total $ 240,000 $ 2,000,000
=========== =============
5 CONVERTIBLE DEBENTURE
Effective on June 3, 2009, James Green resigned from his position as Chief
Executive Officer and sole member of GS EnviroServices Board of Directors.
Pursuant to an Exchange Agreement dated June 3, 2009 James Green delivered to GS
EnviroServices 7,968,540 shares of GS EnviroServices common stock (the "Exchange
Shares"). In exchange for the Exchange Shares, GS EnviroServices issued to Mr.
Green a Convertible Debenture and agreed to issue one million shares of Series A
preferred Stock, when authorized.
The Convertible Debenture is in the principal amount of $240,000, although
payment of $24,000 against that principal obligation was made by GS
EnviroServices immediately. The remaining principal is payable with 12% per
annum interest in monthly payments of $38,561.58 commencing in October 2009,
with the final payment due on February 26, 2010. Interest is payable in cash or
in shares of GS EnviroServices common stock, at GS EnviroServices' option. The
holder may convert the principal amount and accrued interest into common stock
of GS EnviroServices at a conversion price equal to 90% of the lowest closing
market price during the 20 trading days preceding conversion, but may not
convert into shares that would cause it to own more than 4.99% of the
outstanding shares of GS EnviroServices. The company recorded the debenture at
fair value equal to 90% of the conversion price. Treasury stock was debited
$240,000 using the cost method method in exchange for the shares of common
stock. The Company determined that the conversion feature of the Green
Debentures met the criteria of FAS150, "Accounting for Certain Financial
8
Instruments with Characteristics of Both Liabilities and Equity", as it could
result in the note being converted into a variable number of shares. At the
commitment dates, the Company determined the value of the Green Convertible
Debentures to be an aggregate $264,827, which represented their face values of
$240,000 plus the present values of the liability for the conversion features of
$24,827. The Company recorded the $24,827 to interest expense at the commitment
dates of the debentures. The difference between the fair value of the conversion
feature and the present value is being accreted through interest expense. As of
June 30, 2009, an expense of $184 was recorded as interest expense for the
accretion of the discount from the liability of the conversion feature.
In the Exchange Agreement, GS EnviroServices undertook to amend its certificate
of Incorporation to authorize the Series A Preferred Stock. The Series A
Preferred Stock, when authorized and issued, will provide the holder with the
right to cast votes at meetings of the shareholders or by written consent equal
to 51% of the voting power of the outstanding shares.
GS EnviroServices is holding the Exchange Shares in escrow. The Exchange Shares
will not be cancelled until the Series A Preferred Stock is issued.
On June 3, 2009 James Green transferred to Viridis Capital, LLC his beneficial
interest in the Exchange Shares, including his right to receive the Series A
Preferred Stock in exchange for the Exchange Shares. Kevin Kreisler, the newly
appointed CEO of GS EnviroServices, is the sole member of Viridis Capital, LLC.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
FORWARD LOOKING STATEMENTS
In addition to historical information, this Report contains forward-looking
statements, which are generally identifiable by use of the words "believes,"
"expects," "intends," "anticipates," "plans to," "estimates," "projects," or
similar expressions. These forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those reflected in these forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed in the
section entitled "Description of Business - Business Risk Factors" in our Annual
Report on Form 10-K for the year ended December 31, 2008. Readers are cautioned
not to place undue reliance on these forward-looking statements, which reflect
management's opinions only as of the date hereof. We undertake no obligation to
revise or publicly release the results of any revision to these forward-looking
statements. Readers should carefully review the risk factors described in other
documents GS EnviroServices, Inc. files from time to time with the Securities
and Exchange Commission (the "SEC").
Our development activities and operations during the quarter ended June 30, 2009
primarily involved evaluation of a number of different technologies designed to
facilitate the production of renewable energy. The Company's plan for the
balance of 2009 is to acquire additional senior management, to complete at least
one strategic acquisition, and to obtain equity financing sufficient to
capitalize these efforts.
Effective on June 3, 2009, James Green resigned from his position as Chief
Executive Officer and sole member of the Company's Board of Directors. Effective
on the same date, Doris Christiani resigned from her position as the Company's
Chief Financial Officer. At the same time, the Board of Directors elected Kevin
Kreisler to serve as sole member of the Board of Directors and as Chief
Executive Officer.
On June 20, 2008, the Company completed an Asset and Stock Purchase Agreement
with Triumvirate Environmental, Inc. ("Triumvirate"). The assets sold were
substantially all of the assets of Enviro-Safe and 100% of the capital stock of
Enviro-Safe (NE). Triumvirate assumed responsibility for certain designated
liabilities of Enviro-Safe, including its trade payables, its accrued expenses,
and certain identified executory contracts. As a result of the sale, the assets
and liabilities of Enviro-Safe Corp. and Enviro-Safe Corporation (NE) are
presented as assets and liabilities to be disposed of in prior periods and their
operations are presented as discontinued in the accompanying consolidated
statements of operations.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2009 VERSUS THE THREE MONTHS ENDED JUNE 30, 2008
GENERAL AND ADMINISTRATIVE
General and administrative ("G&A") expenses for the three months ended June 30,
2009 were $60,000 as compared to $557,774 for the corresponding period in 2008.
G&A expense for the period ended June 30, 2008 included a $140,000 expense
related to the issuance of 2.0 million shares of stock issued to YAGI as
inducement to enter into the stock purchase agreement. G&A expense for the
period ending June 30, 2008 of $757,164 for operations to be disposed have been
excluded.
INTEREST EXPENSE
Interest expense decreased to $25,011 in the quarter ended June 30, 2009, as
compared to the $40,750 expense incurred in the corresponding period of 2008.
On June 3, 2009, the Company issued a convertible debenture and recorded
interest expense of $24,827 resulting from the present value of the conversion
feature. The difference in the fair value and present value of the beneficial
conversion feature was $1,840. A total of 184 was expensed in the six months
ended June 30, 2009. On February 11, 2008 the Company issued $500,000 in
convertible debentures to related parties. A total of $11,250 of interest was
expensed for the three months ended June 30, 2008. In addition, in the first
quarter of 2008, the Company issued a $100,000 convertible debenture to an
investor and a 2.0 million convertible debenture to YAGI. Interest in the amount
of $20,238 for these debentures was expensed in the three months ended June 30,
2008. Interest expense from discontinued operations of $10,023 for the period
ended June 30, 2008 has been excluded from these numbers.
10
SIX MONTHS ENDED JUNE 30, 2009 VERSUS THE SIX MONTHS ENDED JUNE 30, 2008
GENERAL AND ADMINISTRATIVE
General and administrative ("G&A") expenses for the six months ended June 30,
2009 were $162,829 as compared to $934,843 for the corresponding period in 2008.
G&A expense for the six months ended June 30, 2008 included a $140,000 expense
related to the issuance of 2.0 million shares of stock issued to YAGI as
inducement to enter into the stock purchase agreement. G&A expense for the
period ending June 30, 2008 of $1,458,663 for operations to be disposed have
been excluded.
INTEREST EXPENSE
Interest expense decreased to $25,011 in the six months ended June 30, 2009, as
compared to the $70,277 expense incurred in the corresponding period of 2008.
On June 3, 2009, the Company issued a convertible debenture and recorded
interest expense of $24,827 resulting from the present value of beneficial
conversion feature. The difference in the fair value and present value of the
beneficial conversion feature was $1,840. A total of $184 was expensed in the
six months ended June 30, 2009. On February 11, 2008 the Company issued $500,000
in convertible debentures to related parties. A total of $15,994 of interest was
expensed for the quarter ended June 30, 2008. In addition, in the first quarter
of 2008, the Company issued a $100,000 convertible debenture to an investor and
a 2.0 million convertible debenture to YAGI. Interest in the amount of $57,028
for these debentures was expensed in the first quarter of 2008. On May 31, 2007,
the Company closed on a Demand Line of Credit. Total interest paid was $20,671
for the six months ended June 30, 2008.
Interest expense from discontinued operations of $20,037 for the six months
ended June 30, 2008 has been excluded from these numbers.
LIQUIDITY AND CAPITAL RESOURCES
The Company's activities from continuing operations used $143,915 cash in 2009
as compared to $658,014 cash used in 2008.
Non-cash adjustments for continuing operations recorded for the three months
ended June 30, 2009 consisted of an adjustment to allowance for bad debt
totaling $24,909 and a $25,011 addition to record the fair value of the
convertible debenture.
Accounts payable at June 30, 2009 totaled $12,831 as compared to the December
31, 2008 balance of $30,643.
The Company had a negative working capital position of ($208,220) as of June 30,
2009 as compared to a positive working capital position of $218,384 as of
December 31, 2008.
11
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
The Company conducted an evaluation of the design and operation of our
disclosure controls and procedures, as defined under Rule 13a-15(e) and
15d-15(e) under the Exchange Act of 1934, as amended (the `Exchange Act"), as of
the end of the period covered by this report. The Company's disclosure controls
and procedures are designed (i) to ensure that information required to be
disclosed by it in the reports that it files or submits under the Exchange Act
is recorded, processed and summarized and reported within the time periods
specified in the SEC's rules and forms and (ii) to ensure that information
required to be disclosed in the reports the Company files or submits under the
Exchange Act is accumulated and communicated to its management, including its
Chief Executive Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure.
In the course of making our assessment of the effectiveness of our disclosure
controls and procedures, we identified a material weakness. This material
weakness consisted of inadequate staffing and supervision within the bookkeeping
and accounting operations of our company. The lack of employees prevents us from
segregating disclosure duties. The inadequate segregation of duties is a
weakness because it could lead to the untimely identification and resolution of
accounting and disclosure matters or could lead to a failure to perform timely
and effective reviews. Based on the results of this assessment, our Chief
Executive Officer and our Chief Financial Officer concluded that because of the
above condition, our disclosure controls and procedures were not effective as of
the end of the period covered by this report.
(b) Changes in internal controls.
The term "internal control over financial reporting" (defined in SEC Rule
13a-15(f)) refers to the process of a company that is designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. The Company's management, with the
participation of the Chief Executive Officer and Chief Financial Officer, has
evaluated the Company's internal control over financial reporting to determine
whether any change occurred during the period covered by this report, and they
have concluded that there was no change to the Company's internal control over
financial reporting that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.
12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following are exhibits filed as part of the Company's Form 10-Q/A for the
period ended June 30, 2009:
Exhibit Number Description
31.1 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Exchange Act Rules13a-15(e) and 15d-15(e).
32.1 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on the date indicated.
GS EnviroServices, Inc.
By: /S/ KEVIN KREISLER
------------------------
KEVIN KREISLER
President, Chief Executive Officer
By: /S/ KEVIN KREISLER
------------------------
KEVIN KREISLER
Chief Financial Officer
Date: August 19, 2009
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