Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2012
or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to __________
Commission File Number: 000-33491
Green Energy Management Services Holdings, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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75-2873882
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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2251 Drusilla Lane, Suite B
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Baton Rouge, Louisiana
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70809
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(Address of principal executive offices)
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(Zip Code)
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225-364-2813
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
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. x Yes o 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). o 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.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company x
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(Do not check if a 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). o Yes x No
There were 44,416,493 shares of the registrant’s common stock, $0.0001 par value, outstanding as of November 15, 2012.
GREEN ENERGY MANAGEMENT SERVICES HOLDINGS, INC.
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Page
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
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3
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10
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13
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Item 4. Controls and Procedures
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13
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PART II. OTHER INFORMATION
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15
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Item 1. Legal Proceedings
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15
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Item 1A. Risk Factors
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15
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16
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Item 3. Defaults Upon Senior Securities
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16
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Item 4. Mine Safety Disclosures
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16
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Item 5. Other Information
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16
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Item 6. Exhibits
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16
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PART I. FINANCIAL INFORMATION
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Item 1.
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GREEN ENERGY MANAGEMENT SERVICES HOLDINGS, INC.
(Unaudited)
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September 30,
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December 31,
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2012
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2011
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ASSETS
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Current
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Cash
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$ | 13,996 | $ | 55,296 | ||||
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Contract receivables
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32,193 | 31,116 | ||||||
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Prepaid expenses
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68,864 | 85,811 | ||||||
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Deferred project costs - Current
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33,431 | 46,367 | ||||||
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Other current assets
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52,540 | 52,540 | ||||||
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Total Current Assets
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201,024 | 271,130 | ||||||
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Property and equipment-net
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12,321 | 15,379 | ||||||
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Deferred project costs
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609,207 | 646,051 | ||||||
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Licensing agreements
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506,880 | 538,560 | ||||||
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Other assets
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12,091 | 7,092 | ||||||
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Total Assets
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$ | 1,341,523 | $ | 1,478,212 | ||||
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LIABILITIES
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Current
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Line of credit - bridge loan from related party
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$ | 239,400 | $ | 239,400 | ||||
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Notes payable
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57,500 | - | ||||||
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Bridge loan payable - related party
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500,000 | 500,000 | ||||||
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Accounts payable - trade
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943,964 | 908,840 | ||||||
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Other accrued liabilities
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3,090,869 | 2,018,453 | ||||||
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Total Current Liabilities
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4,831,733 | 3,666,693 | ||||||
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STOCKHOLDERS' (DEFICIT)
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Common stock, $0.0001 par value, 500,000,000 shares authorized; 44,416,493 shares issued and outstanding on September 30, 2012 and 44,397,743 December 31, 2011, respectively
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4,442 | 4,440 | ||||||
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Additional paid-in capital
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19,189,399 | 19,183,401 | ||||||
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Retained deficit
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(22,684,050 | ) | (21,376,322 | ) | ||||
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Total Stockholders' (Deficit)
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(3,490,210 | ) | (2,188,481 | ) | ||||
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Total Liabilities & Stockholders' (Deficit)
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$ | 1,341,523 | $ | 1,478,212 | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
GREEN ENERGY MANAGEMENT SERVICES HOLDINGS, INC.
(Unaudited)
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Three Months Ended September 30,
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Nine Months Ended September 30,
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2012
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2011
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2012
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2011
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Revenue
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$ | 55,546 | $ | 1,653 | $ | 212,657 | $ | 10,268 | ||||||||
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Cost of revenue
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24,209 | 1,954 | 58,461 | 5,923 | ||||||||||||
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Selling, general and administrative expenses
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309,694 | 741,073 | 1,379,435 | 14,183,513 | ||||||||||||
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Depreciation and Amortization expense
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11,580 | 15,397 | 34,739 | 56,737 | ||||||||||||
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Loss on sale of assets
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- | - | - | 5,573 | ||||||||||||
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Operating loss
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(289,937 | ) | (756,771 | ) | (1,259,978 | ) | (14,241,478 | ) | ||||||||
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Interest expense, net
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16,586 | 12,911 | 47,750 | 24,557 | ||||||||||||
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Total other expenses
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16,586 | 12,911 | 47,750 | 24,557 | ||||||||||||
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Net loss before income taxes
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(306,523 | ) | (769,682 | ) | (1,307,728 | ) | (14,266,035 | ) | ||||||||
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Income taxes
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- | - | - | - | ||||||||||||
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Net loss
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$ | (306,523 | ) | $ | (769,682 | ) | $ | (1,307,728 | ) | $ | (14,266,035 | ) | ||||
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Net loss per common share - basic and diluted
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$ | (0.01 | ) | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.03 | ) | ||||
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Weighted average number of common shares outstanding
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44,416,493 | 44,396,425 | 44,416,493 | 44,340,836 | ||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
GREEN ENERGY MANAGEMENT SERVICES HOLDINGS, INC.
(Unaudited)
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Nine Months Ended September 30,
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2012
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2011
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Cash flows from operating activities:
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Net loss for the period
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$ | (1,307,728 | ) | $ | (14,266,035 | ) | ||
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Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
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Depreciation and amortization
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34,739 | 56,737 | ||||||
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Stock-based compensation
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6,000 | 224,069 | ||||||
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Warrant-based consulting fees
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- | 11,719,170 | ||||||
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Loss on sale of vehicle
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- | 5,573 | ||||||
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Net change in assets and liabilities:
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(Increase) decrease in contract receivables
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(1,077 | ) | 7,638 | |||||
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(Increase) decrease in prepaid expenses
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16,947 | 32,678 | ||||||
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(Increase) decrease in deferred project costs
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49,780 | (1,079,017 | ) | |||||
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(Increase) decrease in other current assets
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- | (24,638 | ) | |||||
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(Increase) in other assets
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(4,999 | ) | (480 | ) | ||||
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Increase in accounts payable - trade
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35,124 | 258,089 | ||||||
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Increase in accrued liabilities
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1,072,414 | 1,015,588 | ||||||
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Net cash (used in) operating activities
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(98,800 | ) | (2,050,628 | ) | ||||
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Cash flows from investing activities:
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Purchase of property & equipment, net of dispositions
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- | (5,052 | ) | |||||
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Net cash (used in) investing activites
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- | (5,052 | ) | |||||
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Cash flows from financing activities:
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Borrowings under line of credit
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- | 500,000 | ||||||
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Proceeds from bridge loans from affiliates
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40,000 | 239,400 | ||||||
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Proceeds from notes payable
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57,500 | - | ||||||
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Repayments of bridge loans from affiliates
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(40,000 | ) | - | |||||
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Cash received from Nyserda funding
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- | 480,000 | ||||||
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Repayment of debt on installment notes
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- | (7,316 | ) | |||||
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Net cash provided by financing activities
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57,500 | 1,212,084 | ||||||
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Net decrease in cash
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(41,300 | ) | (843,596 | ) | ||||
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Cash - beginning of period
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55,296 | 896,057 | ||||||
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Cash - end of period
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$ | 13,996 | $ | 52,461 | ||||
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Supplemental disclosure of cash flow information:
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Cash payments for interest
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$ | - | $ | 5,101 | ||||
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Deferred project costs included in accounts payable
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$ | - | $ | 360,619 | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
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Note 1.
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Basis of Presentation
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The unaudited condensed consolidated financial statements included herein have been prepared by Green Energy Management Services Holdings, Inc. (which, together with Green Energy Management Services, Inc., its consolidated subsidiary, is referred to herein as the “Company”, “we”, “us” or “our”) pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of such information. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to such rules and regulations. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. These interim financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (the “Annual Report”), filed with the SEC on April 16, 2012. The results of operations for the nine months ended September 30, 2012 are not necessarily indicative of the results for any subsequent periods or the entire fiscal year ending December 31, 2012.
Earnings per share
“Net loss per common share — basic and diluted” is calculated by dividing net income available to common stockholders by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted earnings per share reflect the potential dilution that could occur if our share-based awards and convertible securities were exercised or converted into common stock. The dilutive effect of the Company’s share-based awards is computed using the treasury stock method, which assumes all share-based awards are exercised and the hypothetical proceeds from exercise are used to purchase common stock at the average market price during the period. The incremental shares (difference between shares assumed to be issued versus purchased), to the extent they would have been dilutive, are included in the denominator of the diluted EPS calculation.
“Net loss per common share — diluted” for the three and nine months ended September 30, 2012 was the same as “Net loss per common share — basic” as the Company reported a net loss and, therefore, the effect of all potentially dilutive securities on the net loss would have been anti-dilutive. For more information regarding the calculation of “Net loss per common share — basic and diluted”, please see the Company’s Annual Report filed with the SEC on April 16, 2012.
Recently Issued Accounting Pronouncements
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its results of operations, financial position or cash flow.
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Note 2.
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Organization of the Company and Going Concern
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Organization of the Company
Green Energy Management Services, Inc.
Green Energy Management Services, Inc. (“GEM”) was incorporated pursuant to the laws of the State of Delaware in March 2010. GEM is primarily involved in the distribution of energy efficient lighting units and water saving devices to end users who utilize substantial quantities of electricity and water. GEM primarily maintains its business operations in Baton Rouge, LA, distributing products and services to municipal and commercial customers. The participants of the industry in which GEM operates focus on assisting clients to effectively maximize their energy efficiency potential and couples that with maximizing their renewable energy potential.
Green Energy Management Services Holdings, Inc.
Green Energy Management Services Holdings, Inc. (“GEMS Holdings”) was incorporated pursuant to the laws of the State of Delaware in December 1996 and prior to its merger with GEM became a dormant fully reporting shell company in December 2006. On August 20, 2010, GEMS Holdings’ wholly owned acquisition subsidiary merged with and into GEM with GEM being the surviving corporation. As a result, GEM became the Company’s wholly-owned subsidiary and GEM’s business is now the Company’s only business.
Going Concern
The unaudited condensed consolidated financial statements included herein have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying unaudited condensed consolidated financial statements, we have generated minimal revenues in the first nine months of 2012 and we have a working capital deficit of $4,630,709 as of September 30, 2012. These factors raise substantial doubt about our ability to continue as a going concern.
Our ability to continue existence and our business operations is dependent upon our continuing efforts to implement our new business strategy, management’s ability to achieve meaningful profitable operations and/or upon our ability to obtain additional financing to carry out our business plan. We intend to fund our operations through equity and/or debt financing arrangements, any revenues generated in the future and any loan arrangements that may be provided to us by our affiliates. However, there can be no assurance that these arrangements, if any, will be sufficient to fund our ongoing capital expenditures, working capital, and other cash requirements. The outcome of these matters cannot be predicted at this time.
The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should we be unable to continue as a going concern.
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Note 3.
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Commitments and Contingencies
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Legal Matters
From time to time, the Company may become involved in litigation relating to claims arising out of our operations in the normal course of business. Other than as set forth below, no legal proceedings, government actions, administrative actions, investigations or claims are currently pending against us or involve us which, in the opinion of our management, could reasonably be expected to have a material adverse effect on our business or financial condition.
On October 28, 2011, Mr. Robert Weinstein, our former Chief Financial Officer, filed a Demand for Arbitration with the New York office of the American Arbitration Association against GEM seeking unpaid wages and benefits that Mr. Weinstein claimed he was owed under the terms of his employment agreement with GEM. In February 2012, Mr. Weinstein was awarded a judgment totaling $391,914. On October 5, 2012, in connection with such claim, Mr. Weinstein obtained a judgment against GEM for the sum of $414,235 in the Supreme Court of the State of New York, New York Count. In connection with such judgment, Mr. Weinstein served Riverbay (as defined below) with the Restraining Notice to Garnishee, dated as of October 23, 2012 (the “Notice”). The Notice asserts that under New York law, Riverbay is prohibited, among other things, from making any payments to GEM that may be due under any agreement between GEM and Riverbay, pending the resolution and/or satisfaction of the aforementioned judgment. The Company is continuing to contest Mr. Weinstein’s claims and the amount that he may be due under this employment agreement. The Company’s management believes that if Mr. Weinstein’s claim is ultimately resolved against GEM and the Company is forced to make any material payments to Mr. Weinstein under his employment agreement or if GEM is unable to receive at least a material portion of the payments due to it from Riverbay, this will materially adversely affect the Company’s financial position, results of operations or liquidity. This amount has been accrued as of September 30, 2012 and December 31, 2011.
On September 8, 2011, an action entitled Cooper Electric Supply Co. v. Southside Electric, Inc. was filed in the Superior Court of New Jersey. GEM succeeded to the business of Southside Electric, Inc. (“Southside”) pursuant to a share exchange between Southside and the Company in May of 2010. We were served in October 2011. The plaintiff asserts damages in the amount of approximately $23,700 for non-payment for goods supplied by the plaintiff to Southside. The Company’s management believes the resolution of this matter will not materially affect the Company’s financial position, results of operations or liquidity. As of September 30, 2012, this amount is reflected in accounts payable.
On September 26, 2011, the landlord for the Company’s former Teaneck, New Jersey office filed a complaint for unpaid rent and legal fees of $15,179 in Superior Court of New Jersey. A judgment was granted in his favor in such amount. These amounts were accrued at December 31, 2011 and September 30, 2012.
Operating Leases
In 2011, the Company leased office space in Teaneck, New Jersey and in Sunshine and Midtown, Miami, Florida. As of December 31, 2011, all office space leases were terminated. In October 2011, the Company moved its corporate office to Baton Rouge, Louisiana. The Company is utilizing office space, at no charge, from its Chief Financial Officer. Rent expense for the nine months ended September 30, 2012 and for the fiscal year ended December 31, 2011 was $0 and $77,062, respectively. Of the amount incurred for 2011, $12,900 is included in accrued expenses at September 30, 2012 and December 31, 2011.
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Note 4.
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Issuance of the Option and Stock-Based Compensation
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Issuance of the Option to Financial Partners Funding, LLC
On March 3, 2011 (the “Effective Date”), GEM entered into a Commitment Letter (the “Commitment Letter”) with Financial Partners Funding, LLC, a Florida limited liability company (“FPF”). Pursuant to the Commitment Letter, FPF agreed to commit up to $200,000,000 in equipment leases to finance third-party purchases of GEM’s lighting and Airlock products, subject to certain funding conditions, including FPF’s due diligence and approval of the third party lessees. FPF has an exclusive right to finance such third-party purchases of GEM’s products, however, GEM has the right to hold discussions with third-party financing entities. In the event that GEM is offered financing on better terms than those offered by FPF, FPF has the right of first refusal to offer financing on similar terms. FPF has no obligation to finance any particular transaction or proposed lease. GEM also agreed to reimburse FPF $50,000 in costs and expenses incurred by FPF in connection with its due diligence review of GEM’s products, which amount will be paid from the proceeds of the first lease financed by FPF. The Commitment Letter will remain in effect for 48 months from the Effective Date, unless terminated earlier pursuant to its terms.
As required under the Commitment Letter, on June 27, 2011, the Company issued to FPF an option, dated as of March 3, 2011, which upon exercise, entitles FPF to purchase up to 15% of the then outstanding common stock of the Company (the “Option”) at an aggregate exercise price of $10,949,490 (the “Option Price”). The Option Price of $0.165 per share was equal to 110% of the closing price of our common stock on the OTCBB on March 2, 2011 (notwithstanding the language of the Agreement, the parties agreed to use the closing price on such date). The Option may be exercised in part or in full at any time during the 48-month period commencing on the Effective Date and the Option Price will be adjusted proportionately for any partial exercise of the Option. The Option may also be exercised on a cashless basis. Pursuant to the terms of the Commitment Letter, in the event that the Commitment Letter is terminated or GEM meets the funding threshold described in the Commitment Letter and FPF does not fund the qualified projects, FPF agreed to return all or a portion of the Option that FPF would not be entitled to exercise as a result of such termination or failure to fund. The Option does not grant FPF any voting rights or other rights as a stockholder of the Company until the Option is exercised, and upon exercise, only for such exercised portion of the Option. The Option vested immediately as of the Effective Date.
As of September 30, 2012, FPF had the right to exercise the Option to purchase 7,834,895 shares of the Company’s common stock, assuming 100% of the Option was exercised. We reported $0 and $11,719,170 in Option-based compensation expenses for consultants for the nine months ended September 30, 2012 and for the fiscal year ended December 31, 2011, respectively. Although we determined that the Company did not have a sufficient number of authorized shares to issue to FPF, assuming it had exercised the Option in full on September 30, 2012, under derivative accounting principles the Option was not considered a derivative security since we have the authority to complete the reverse stock split previously approved by our stockholders, which would provide a sufficient number of authorized shares to exercise the Option.
Because the Option was fully vested and non-forfeitable at the time of grant, the fair value of the Option was measured and expensed on the date of grant pursuant to ASC Topic 505, subtopic 50, Equity-Based Payments to Non-Employees (formerly Emerging Issues Task Force No. 96-18, Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services).
All charges for the Option have been determined under the fair value method using the Black-Scholes option-pricing model with the assumptions set forth below. The Company believes that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of the Option. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by the holder of the Option.
The following information is for the nine months ended September 30, 2012.
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Number of
Shares
Underlying
Option
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Weighted
Average
Exercise price
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Balance at January 1, 2012
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7,834,895
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0.14
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Deemed Granted
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0
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$
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NA
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Balance at September 30, 2012
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7,834,895
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$
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0.14
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Issuance of Shares to Directors
In February 2012 the Company’s Board of Directors adopted a resolution that it would issue $2,000 worth of shares of the Company’s common stock to each board member in order to compensate such board members for attending board meetings, which issuance will be accrued. The Company held one board meeting in February 2012. Accordingly, 18,750 shares of the Company’s common stock, valued at $6,000, were accrued and recorded as stock compensation expense for the nine-months ended September 30, 2012 and will be issued by the end of November 2012.
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Note 5.
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Related Party Transactions
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On March 31, 2011, GEM entered into a $500,000 Line of Credit Agreement (the “LOC Agreement”) with a related-party lender, pursuant to which the lender initially agreed to loan to GEM $100,000, evidenced by a promissory note of the same amount dated as of equal date. During the second quarter ended June 30, 2011, GEM borrowed the additional $400,000 available under the LOC Agreement on the same terms evidenced by a similar promissory note. The notes bear interest at a rate of 12% per year, with interest on the note paid monthly in arrears. The repayment of the notes was due on March 31, 2012 and June 30, 2012, respectively, and was extended to August 16, 2012. The notes are currently in default for non-payment by GEM. The notes constitute an unsecured obligation of GEM. We used the proceeds from the loan for project financing and general corporate purposes. The related-party lender is controlled by Ronald P. Ulfers, Jr., the Chairman, President and Chief Executive Officer and a director of the Company.
On April 26, 2011, we entered into a one-year consulting agreement Watz Enterprises LLC (“Watz”) (the “Watz Agreement”). Watz is a greater than 5% stockholder of the Company. Under the Watz Agreement, Watz agreed to advise us on business development and marketing matters in exchange for (i) a one-time payment of $65,000 and (ii) a monthly management fee of $25,000 payable from June 16, 2011 to May 15, 2012. Included in accrued expenses for the nine months ended September 30, 2012 are 5 payments of $25,000 each, totaling $125,000. In April 2012 the Company gave notice of termination of the Watz Agreement effective as of May 15, 2012. The managing member of Watz is the brother-in-law of Michael Samuel, our former Chairman, President, CEO and director.
During the nine months ended September 30, 2012, certain of our affiliates and a consultant of the Company (the “Lenders”) provided us with short-term bridge loans totaling $40,000 which were subsequently repaid in April, 2012. During the fiscal year ended December 31, 2011 there were loans made which have an outstanding principal amount of $239,400 (the “Loans”) and are still outstanding as of September 30, 2012. The Loans were not evidenced by promissory notes and do not bear interest. We intend to repay a portion of the Loans from the proceeds of a third-party financing. There can be no assurance as to the amount of any such financing or that any such financing will be available to us, on satisfactory terms and conditions or at all. If we do not receive such financing proceeds, we intend to proceed to negotiate terms of repayment of the Loans with the Lenders and to execute formal Loan documentation. We used the proceeds of the Loans for project financing and general corporate purposes.
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Note 6.
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Notes Payable
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In April 2012 the Company borrowed $39,500 from Water Tech World Wide, LLC (“Water Tech”), one of the entities that the Company issued a “Master Distributorship” agreement which entitles the entity to purchase, engineer and install GEM water valve technology to GEM’s customers. In addition, in the third quarter of 2012 the Company borrowed an additional $18,000 bringing the total obligation to $57,500. The notes evidencing the loan bears 7% simple interest and the notes are callable on demand. The balance on the notes totaling $57,500 and accrued interest of $1,559 is included in the Company’s accompanying unaudited condensed consolidated balance sheet at September 30, 2012.
In addition during the third quarter of 2012, the Company financed its Board of Directors insurance premium. The amount financed is $48,730, comprised of five payments of $9,746. One payment was made in September 2012 leaving an outstanding balance of $38,984 as of September 30, 2012.
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Note 7.
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Subsequent Events
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In October 2012 the Company borrowed an additional $45,000 from Water Tech. Formal loan documents have not been entered into as of the date of this Quarterly Report and are expected to be signed in the fourth quarter of 2012.
In October 2012, the Company effected a 1-for-10 reverse stock split of all of its issued and outstanding shares of common stock (the “Reverse Stock Split”). The effective date for the Reverse Stock Split under the corporate law of the State of Delaware was October 15, 2012 (the “Effective Date”). The Reverse Stock Split took effect in the market at the open of business on October 16, 2012. After the Reverse Stock Split became effective, every 10 shares of the pre-split issued and outstanding shares of the Company’s common stock automatically converted into 1 post-split share of the Company’s common stock, without any change in the par value of the shares, and without a corresponding reduction of the number of shares of common stock the Company is authorized to issue. All fractional shares were rounded up. All basic and diluted loss per share, number of shares outstanding and other share information has been adjusted to reflect the Reverse Stock Split.
Please see Note 3. Commitments and Contingencies — Legal Matters for a discussion of material developments relating to a Demand for Arbitration filed against GEM by one of its former employees in October 2011.
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Quarterly Report”) may contain certain “forward-looking statements” as such term is defined by the U.S. Securities and Exchange Commission (the “SEC”) in its rules, regulations and releases, which represent our expectations or beliefs, including, but not limited to, statements concerning our operations, economic performance, financial condition, growth and acquisition strategies, investments and future operational plans, such as those disclosed under the caption “Risk Factors” appearing in the section captioned “Risk Factors” of Green Energy Management Services Holdings, Inc.’s (which, together with Green Energy Management Services, Inc. (“GEM”), its consolidated subsidiary, is referred to herein as the “Company”, “we”, “us” or “our”) Annual Report on Form 10-K filed with the SEC on April 16, 2012 (the “Annual Report”). For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” “might,” or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements, by their nature, involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors, including uncertainty related to acquisitions, governmental regulation and any other factors discussed in our filings with the SEC. Except as required by law, we undertake no responsibility or obligation to update publicly these forward-looking statements, but may do so in the future in written or oral statements. Investors should take note of any future statements made by us or on our behalf. This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section should be read in conjunction with our unaudited condensed consolidated financial statements, related notes, and other financial information appearing elsewhere in this Quarterly Report and our other filings with the SEC.
Company Overview
We are a full service energy management company based in Baton Rouge. In late 2010 and early 2011 we underwent a significant shift in our business strategy to a strategy of Energy Efficiency and energy management (as defined and discussed below). As a result, all of our resources have been devoted to procuring new contracts pursuant to the new strategy. As we proceed with our new business strategy, we hope to continue to enter into new Energy Efficiency agreements during the remainder of the 2012 fiscal year and secure additional business opportunities in the Energy Efficiency solutions market from new and existing partners, as well as progress with our existing projects, subject to the availability of sufficient financial resources. However, there can be no assurance that we will be able to enter into any such new agreements or arrangements or that any such agreements will be on terms commercially favorable to us.
We currently use a network of commissioned sales representatives to market our products and services. Our two functional businesses are energy saving lighting products utilizing LED’s (Light Emitting Diodes) and the GEM Water Management System which utilizes water reduction techniques (collectively, “Energy Efficiency”). We have successfully deployed these savings measures at Co-op City in the Bronx, New York, one of the world’s largest cooperative housing developments spread out among 15,000 residential units and 35 high rise buildings. See “Item 1. Business — Key Customers and Contracts” contained in our Annual Report.
We provide our clients all forms of solutions to maximize the level of Energy Efficiency which can be achieved given the current technologies available to GEM mainly based in two functional areas: (i) energy efficient lighting upgrades; and (ii) water valve solutions. We are primarily engaged in the distribution of energy efficient lighting units to end users who utilize substantial quantities of electricity. We maintain our business operations on a nationwide basis, distributing products and services to municipal and commercial customers. We purchase products from outside suppliers and utilize outside contractors to complete customer projects. Industry participants focus on assisting clients to effectively maximize Energy Efficiency. We also provide our clients with water conservation solutions, primarily under long-term, fixed-price contracts, offering them a patented water valve technology, which has the ability to reduce residential and commercial water usage.
Our technology reduces electricity usage by as much as 50% - 70% depending on the lighting replacement product, while the water management system can effectively reduce consumption and sewerage by as much as 20%. The lighting products were successfully installed in Co-op City’s eight parking garages in the summer of 2011 and are meeting or exceeding savings objectives. With the exception of one structure, the water management system was installed simultaneously and is being monitored for its effectiveness. We generally install all of our clean technology at our cost and share the savings with the owner of the project. The savings revenues vary from product to product but we generally receive at least 50% of the savings.
In the Energy Efficiency arena, we concentrate our marketing efforts within geographic regions exhibiting higher than average per kilowatt hour utility rates and water utilization rates and having energy customers who consume higher than average quantities of energy and water. We develop an Energy Efficiency/energy management program which, potentially, provides end-users alternatives to decrease their energy consumption. Additionally, in many instances, we assume the management and maintenance of our clients’ lighting needs which affords our clients greater labor efficiencies. Our water conservation solutions typically do not require further maintenance during the life of the contract.
Results of Operations
Three months and nine months ended September 30, 2012 and 2011
Contract revenue earned for the three and nine months ended September 30, 2012 was $55,546 and $212,657, respectively, as compared to contract revenue earned of $1,653 and $10,268 for the three and nine months ended September 30, 2011. All of the contract revenue earned during the first nine months of 2012 was derived from our new Energy Efficiency and energy management business. Contract revenue earned increased $53,893 and $202,389, for the three and nine months ended September 30, 2012, respectively, as compared to the same periods in 2011. The substantial increase in contract revenue earned during the first nine months of 2012 was entirely due to sales of our Energy Efficiency lighting products. During the three and nine months ended September 30, 2011, we were still in the process of winding down our legacy commercial and residential electrical contractor business.
Cost of revenue earned was $24,209 and $58,461 or 43.58% and 27.49%, respectively, of our contract revenue earned for the three and nine months ended September 30, 2012, respectively, as compared to $1,954 and $5,923, or 118% and 57.68%, respectively, of our contract revenue earned for the three and nine months ended September 30, 2011. Cost of revenues earned in the nine months of 2012 related entirely to our Energy Efficiency and energy management businesses compared to our legacy commercial and residential electrical contractor business for the three and nine months ended September 30, 2011. The substantial increase in cost of revenue during the nine months of 2012 was entirely due to the expenses we incurred in relation to the work we performed for our Energy Efficiency and energy management projects. Cost of revenue earned for 2012 includes amortization of project costs and installation.
Selling, general and administrative expenses for the three and nine months ended September 30, 2012 were $309,694 and $1,379,435, respectively, as compared to the selling, general and administrative expenses of $741,073 and $14,183,513, respectively, for the same periods in 2011. The decrease of $431,379 for the three months ended September 30, 2012, as compared to the same period in 2011 is primarily attributable to a decrease in salaries and compensation of $304,848, insurance expense of $37,441, a decrease of $29,057 in travel and entertainment expense, a decrease of $22,114 in rent expense, a decrease of $75,200 in professional legal and accounting fees and an increase of $48,871 in investor relations expense.
The decrease of $12,804,078 for the nine months ended September 30, 2012, as compared to the same period in 2011 is primarily attributable to the Option issued to Financial Partners Funding, LLC, a Florida limited liability company (“FPF”) (as more fully discussed in “Note 4. Issuance of the Option and Stock-Based Compensation” to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report), valued at $11,713,876 and deemed as non-cash consulting fees, decrease of $449,381 in salaries and compensation expense, decrease of $94,231 in travel and entertainment expense, decrease of $65,926 in rent expense and a decrease of $229,110 in professional legal and accounting fees.
Our operating loss for the three and nine months ended September 30, 2012 was $289,937 and $1,259,978, respectively, as compared to an operating loss of $756,771 and $14,241,478 for the three and nine months ended September 30, 2011, respectively. The smaller operating loss for the three months ended September 30, 2012 is primarily attributable to the items described above. The substantially smaller operating loss for the nine months ended September 30, 2012 is primarily attributable to the value of the Option issued to FPF in March 2011 and the other items described above, which resulted in the incurrence of selling, general and administrative expenses of $14,183,513, for the nine months ended September 30, 2011.
Interest expense, net, for the three and nine months ended September 30, 2012 was $16,586 and $47,750, respectively, as compared to $12,911 and $24,557, respectively, for the same periods in 2011. Interest expense, net, increased as a result of an increase in the principal amount borrowed under the related party loan payable, which was used partially to fund our overhead expenses.
We incurred a net loss of $306,523 and $1,307,728 for the three and nine months ended September 30, 2012, respectively, as compared to a net loss of $769,682 and $14,266,035 for the three and nine months ended September 30, 2011, respectively. The substantial decrease in our net loss for the three months ended September 30, 2012 was primarily attributable to a substantial decrease in our selling, general and administrative expenses for the reasons set forth above, and the substantial decrease in our net loss for the nine months ended September 30, 2012 was primarily attributable to a substantial decrease in our selling, general and administrative expenses for the reasons set forth above and the non-cash consulting fees attributed to the issuance of the Option to FPF incurred in March 2011. The net loss per share, basic and diluted, was $0.00 for each of the three and nine months ended September 30, 2012, as compared to $0.00 and $(0.03) for the three and nine months ended September 30, 2011, respectively.
Liquidity and Capital Resources
As of September 30, 2012, we had a negative working capital of $4,630,709, as compared to a negative working capital of $3,395,563 at December 31, 2011. We had cash of $13,996 at September 30, 2012, as compared to $55,296 at December 31, 2011. The decrease in cash is attributable to increased cash payments for overhead expenses. The $1,235,146, increase in our working capital deficit is primarily due to an increase in accrued expenses of $1,009,108, increase of borrowed funds of $95,768.
Although we will not receive any proceeds or cash under the Commitment Letter entered into with FPF, we hope that it will provide us with increased liquidity resulting from increases in contract revenue earned due to our products being sold to customers through third-party leads financed by FPF.
As of September 30, 2012, we had cash of $13,996 and contract receivables of $32,193. With the funds that we currently have on hand and the potential third party financing to monetize the revenues projected from our agreement with Co-op City, pursuant to which we have received approximately $21,000 per month to date, we believe that we will be able to sustain our current level of operations for approximately the next 12 months. Please also see below under (i) “Going Concern” for the factors on which our ability to continue our existence and our continuing efforts to implement our new business strategy will depend on and (ii) Item 1A. Risk Factors for the matters for which a negative outcome could result in payments by us of substantial monetary damages, or changes to our products or our business, which may have a material and adverse impact on our business, financial condition or results of operations or force us to file for bankruptcy and/or cease our operations. The accompanying unaudited condensed consolidated financial statements have been prepared on the basis of a going concern and do not reflect any adjustments due to these conditions.
Going Concern
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying condensed consolidated financial statements, we have generated minimal revenues in the first nine months of 2012 and we have a working capital deficit of $4,630,709 as of September 30, 2012. These factors raise substantial doubt about our ability to continue as a going concern.
Our ability to continue existence is dependent upon our continuing efforts to implement our new business strategy, management’s ability to achieve profitable operations and/or upon our ability to obtain additional financing to carry out our business plan. We intend to fund our operations through equity and/or debt financing arrangements and any revenues generated in the future. However, there can be no assurance that these arrangements, if any, will be sufficient to fund our ongoing capital expenditures, working capital, and other cash requirements. The outcome of these matters cannot be predicted at this time.
The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should we be unable to continue as a going concern.
Recent Accounting Pronouncements
For the nine months ended September 30, 2012, there were no accounting standards, pronouncements or interpretations issued by the FASB or the SEC that are expected to have a material impact on our financial position, operations or cash flows or present or future consolidated financial statements.
Summary of Significant Accounting Policies and Estimates
Recognition of Income on Electrical Contracting Contracts
We are on the percentage of completion method for recognizing profits on fixed price contracts for financial reporting purposes and on the cash basis method for income tax purposes. Estimates of percentage of completion are based on direct costs incurred to date as a percentage of the latest estimate of total costs anticipated. This method is used because management considers costs incurred to be the best available measure of progress on these contracts. Because of the inherent uncertainties in estimating costs, it is at least reasonably possible that our estimates of costs and revenues will change in the near future. Provisions for anticipated losses on contracts are made when such losses become apparent. Profits on cost-plus contracts are recognized as costs are incurred for both financial reporting purposes and income tax purposes.
Recognition of Income on Energy Efficiency Contracts
We will recognize income on energy efficiency contracts once the contract is completed. Once the contract is completed, we will recognize income over the life of the contract on a periodic basis relating to either amounts dictated by the contract or computed, based upon our share of the savings associated with the contract. We will recognize income for tax purposes on a cash basis for energy efficiency contracts.
Estimates
Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. Costs to complete or estimated profits on uncompleted lump-sum contracts are management’s best estimate based on facts and circumstances at that time.
Deferred Costs
We capitalize costs associated with contracts that will generate future revenues from energy savings. These contracts will span between five and ten years. These deferred costs will be amortized over the life of the contract once we begin to recognize revenues from the applicable contract(s).
Impairment of long-lived assets
We account for impairment of plant and equipment and amortizable intangible assets in accordance with the standard of “Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of”, which requires us to evaluate a long-lived asset for recoverability when there is event or circumstances that indicate the carrying value of the asset may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset or asset group is not recoverable (when carrying amount exceeds the gross, undiscounted cash flows from use and disposition) and is measured as the excess of the carrying amount over the asset’s (or asset group’s) fair value.
Concentration of Customers
For the nine months ended September 30, 2012, we earned 100% of our contract revenue from one customer. For the nine months ended September 30, 2011, we had 4 customers that in total represented 100% of our contract revenue.
Share-Based Compensation
We account for share-based compensation by using the number of shares issued times the price of our common stock on either the date of issuance or date of approval by our board of directors (the “Board”). Share-based compensation is recognized upon vesting.
Off-Balance Sheet Arrangements
None.
Not required for smaller reporting companies.
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Item 4.
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Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision of our management, including our Chief Executive Officer and Chief Financial Officer (principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that, as of September 30, 2012, our disclosure controls and procedures were ineffective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of legal and outsourced accounting professionals.
As discussed in our Quarterly Report on Form 10-Q for the three months ended March 31, 2012, in the first quarter of 2012 we implemented certain measures to address the material weaknesses in our internal control over financial reporting and weaknesses related to our documentation and a lack of segregation of duties due to our limited size. If and when our financial position improves, we intend to hire additional personnel to further remedy former deficiencies. As we grow, we expect to increase our number of employees, which, we believe, will enable us to implement adequate segregation of duties within the internal control framework.
Limitations on Effectiveness of Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all 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. Our control systems are designed to provide such reasonable assurance of achieving their objectives. 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. Because of 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, within our Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control Over Financial Reporting
An evaluation was performed under the supervision of our management, including our Chief Executive Officer and Chief Financial Officer, of whether any change in our internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) occurred during the quarter ended September 30, 2012. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that there were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
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Item 1.
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The information set forth under “Note 3. Commitments and Contingencies — Legal Matters” contained in the “Notes to Unaudited Condensed Consolidated Financial Statements” of this Quarterly Report is incorporated by reference in response to this Item.
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Item 1A.
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In addition to other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I. Item 1A, “Risk Factors,” in our Annual Report, which could materially affect our business, financial condition or results of operations. Except as set forth below, there have been no material changes to our risk factors from those described in the Annual Report.
Risks Relating to Our Business
Because we have a limited operating history, have yet to attain profitable operations and will need additional financing to fund our businesses, there is substantial doubt about our ability to continue as a going concern, and our ultimate success may depend upon our ability to raise additional capital.
Our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2012 have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As of September 30, 2012, we had a working capital deficit of $4,567,401, and for the nine months ended September 30, 2012, we incurred an operating loss of $1,196,670 and a net loss of $1,244,420. As of September 30, 2012, we had cash of $13,996. Despite borrowing $500,000 under a Line of Credit Agreement dated March 31, 2011 with a related party lender, borrowing approximately $239,400 from certain affiliates and employees and borrowing $57,500 from additional sources, we may not be able to execute our current business plan and fund business operations long enough to achieve profitability. Our future is dependent upon our ability to achieve meaningful revenues and profitability, ability to obtain additional financing and upon the future success of our business. The financial statements included in this Quarterly Report do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event we cannot continue in existence. In addition, the report of our independent registered public accounting firm on our consolidated financial statements for the fiscal year ended December 31, 2011 includes an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern due to recurring losses.
Our ability to continue as a going concern will be determined by our ability to achieve meaningful revenues and profitability and/or ability to obtain additional funding to cover our operating expenses. We may be required to pursue sources of additional capital through various means, including joint venture projects and debt or equity financings. Future financings through equity investments are likely to be dilutive to existing stockholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for our new investors. Newly issued securities may include preferences, superior voting rights, the issuance of warrants or other derivative securities, and the issuances of incentive awards under equity employee incentive plans, which may have additional dilutive effects. Further, we may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition and results of operations. There can be no assurance that any additional financings will be available to us on satisfactory terms and conditions, if at all. In addition, our ability to obtain needed financing may be impaired by such factors as the condition of the economy and capital markets, both generally and specifically in our industry, and the fact that we are not profitable, which could impact the availability or cost of future financings.
As a consequence, our ability to continue as a going concern is dependent on a number of factors. The outcome of these matters is dependent on factors outside of our control and cannot be predicted at this time. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to cease operations.
We are defendants in pending litigation which may have a material and adverse impact on our business, financial condition or results of operations.
As noted in Note 3. Commitments and Contingencies — Legal Matters to our condensed consolidated financial statements, we are currently party to several disputes which involve or may involve litigation. For example, in October 2011, Mr. Robert Weinstein, our former Chief Financial Officer, filed a Demand for Arbitration with the New York office of the American Arbitration Association against GEM seeking unpaid wages and benefits that Mr. Weinstein claimed he was owed under the terms of his employment agreement with GEM. In February 2012, Mr. Weinstein was awarded a judgment totaling $391,914 and on October 5, 2012, Mr. Weinstein obtained a judgment against GEM for the sum of $414,235 in the Supreme Court of the State of New York, New York Count. We are not able to predict the ultimate outcome of this or any other dispute or the actual impact of these matters on our Company. Any litigation to which we are a party, including Mr. Weinstein’s claim, may result in an onerous or unfavorable judgment that may not be reversed upon appeal, or we may decide to settle lawsuits on similarly unfavorable terms. Any such negative outcome could result in payments of substantial monetary damages or fines, or changes to our products or our business, which may have a material and adverse impact on our business, financial condition or results of operations. Defending these claims is costly and can impose a significant burden on our management and we may receive unfavorable preliminary or interim rulings in the course of litigation, which could adversely affect the market price of our common stock. There can be no assurances that a favorable final outcome will be obtained in any of these cases.
Issuance of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
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Item 3.
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GEM is in default under the terms of the unsecured promissory notes issued under the $500,000 Line of Credit Agreement entered into with a related-party lender. The repayment of the notes was due on March 31, 2012 and June 30, 2012, respectively, and was extended to August 16, 2012. The default was effective as of August 17, 2012 due to GEM’s inability to make principal and interest payments under the notes. The principal amount of the notes is $500,000 as of September 30, 2010 and accrued interest on this amount totaled approximately $82,677 as of September 30, 2010. Upon an event of default, the holder of the notes may require GEM to redeem all or a portion of the notes. We intend to pay off the notes, including all accrued interest due thereon, as and when funding or revenues permit.
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Item 4.
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Not applicable.
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Item 5.
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On October 28, 2011, Mr. Robert Weinstein, our former Chief Financial Officer, filed a Demand for Arbitration with the New York office of the American Arbitration Association against GEM seeking unpaid wages and benefits that Mr. Weinstein claimed he was owed under the terms of his employment agreement with GEM. In February 2012, Mr. Weinstein was awarded a judgment totaling $391,914. On October 5, 2012, in connection with such claim, Mr. Weinstein obtained a judgment against GEM for the sum of $414,235 in the Supreme Court of the State of New York, New York Count. In connection with such judgment, Mr. Weinstein served Riverbay (as defined below) with the Restraining Notice to Garnishee, dated as of October 23, 2012 (the “Notice”). The Notice asserts that under New York law, Riverbay is prohibited, among other things, from making any payments to GEM that may be due under any agreement between GEM and Riverbay, pending the resolution and/or satisfaction of the aforementioned judgment. The Company is continuing to contest Mr. Weinstein’s claims and the amount that he may be due under this employment agreement. The Company’s management believes that if Mr. Weinstein’s claim is ultimately resolved against GEM and the Company is forced to make any material payments to Mr. Weinstein under his employment agreement or if GEM is unable to receive at least a material portion of the payments due to it from Riverbay, this will materially adversely affect the Company’s financial position, results of operations or liquidity. This amount has been accrued as of September 30, 2012 and December 31, 2011.
On November 15, 2011, GEM entered into an Assignment, Assumption and Indemnity Agreement (the “Assignment Agreement”) with a certain unaffiliated third party (the “Assignee”), pursuant to which GEM sold to the Assignee for the purchase price of approximately $990,000 the energy conservation measures, together with the receivables, equipment and related assets, under GEM’s Sales and User Agreement, dated as of November 2, 2010 (the “Sales and User Agreement”), between The Riverbay Fund, Inc. and GEM, related to the Co-op City project. The purpose of the agreement was for GEM to monetize total projected revenues of approximately $1,900,000 under the Sales and User Agreement in order to provide GEM with cash liquidity. GEM will continue to be responsible for all work, obligations, liabilities, claims and expenses required by the Sales and User Agreement. Per the agreement with the Assignee, as of September 30, 2012, GEM has received approximately $220,000 of the purchase price. Subject to and upon the satisfaction of the terms and conditions of the Assignment Agreement, including Assignee’s lender approval and funding conditions which have not been satisfied to date, GEM expects to receive the balance of the purchase price. The Company and GEM can provide no assurances that these conditions will be satisfied. Management cautions investors against making investment decisions based on any expectation that the balance of the purchase price will be paid to GEM.
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Item 6.
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Exhibit
Number
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Description of Exhibits
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Incorporated by Reference to the Following
Documents
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2.1
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Merger Agreement, dated as of April 29, 2010, by and among CDSS Wind Down, Inc., CDSS Merger Corporation and Green Energy Management Services, Inc.
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Current Report on Form 8-K (File No. 000-33491), filed March 31, 2010, Exhibit 10.1
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2.2
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Amendment No. 1 to the Merger Agreement, dated as of April 30, 2010, by and among CDSS Wind Down, Inc., CDSS Merger Corporation and Green Energy Management Services, Inc.
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Current Report on Form 8-K (File No. 000-33491), filed April 30, 2010, Exhibit 10.1
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2.3
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Amendment No. 2 to the Merger Agreement, dated as of June 16, 2010, by and among CDSS Wind Down, Inc., CDSS Merger Corporation and Green Energy Management Services, Inc.
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Current Report on Form 8-K (File No. 000-33491), filed June 18, 2010, Exhibit 10.1
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2.4
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Amendment No. 3 to the Merger Agreement, effective as of July 22, 2010, by and among CDSS Wind Down, Inc., CDSS Merger Corporation and Green Energy Management Services, Inc.
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Supplement to Definitive Information Statement on Schedule 14C (No. 000-33491), filed July 26, 2010, Annex 1
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3.1
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Amended and Restated Certificate of Incorporation of CDSS Wind Down, Inc.
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Registration Statement on Form 10-SB (File No. 000-33491), filed January 11, 2002, Exhibit 3.1
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3.2
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Certificate of Amendment to the Certificate of Incorporation of CDSS Wind Down, Inc., filed with the Secretary of State of the State of Delaware on August 18, 2010
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Current Report on Form 8-K (File No. 000-33491), filed August 28, 2010 Exhibit 3.2
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3.3
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Certificate of Amendment to the Certificate of Incorporation of CDSS Wind Down, Inc., filed with the Secretary of State of the State of Delaware on August 18, 2010
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Current Report on Form 8-K (File No. 000-33491), filed August 28, 2010 Exhibit 3.3
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3.4
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Amended and Restated Bylaws of CDSS Wind Down, Inc.
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Registration Statement on Form 10-SB (File No. 000-33491), filed January 11, 2002, Exhibit 3.2
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3.5
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Certificate of Amendment to the Certificate of Incorporation of CDSS Wind Down, Inc. filed with the Secretary of State of the State of Delaware on September 20, 2010
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Registration Statement on Form S-1 (File No. 333-169496) filed September 20, 2010, Exhibit 10.9
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3.6
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Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Green Energy Management Services Holdings, Inc., filed with the Secretary of State of the State of Delaware on October 2, 2012.
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Current Report on Form 8-K (File No. 000-33491), filed October 25, 2012 Exhibit 3(i)(1)
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4.1
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Option, dated as of March 3, 2011, issued to Financial Partners Funding, LLC
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Current Report on Form 8-K/A, Amendment No. 1 (File No. 000-33491), filed July 8, 2011, Exhibit 4.1
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10.1
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Form of Subscription Agreement for shares of common stock, between CDSS Wind Down, Inc. and a certain investor party thereto.
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Current Report on Form 8-K (File No. 000-33491), filed August 4, 2009, Exhibit 10.1
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10.2
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Form of Subscription Agreement for convertible notes, among CDSS Wind Down, Inc. and certain investors party thereto
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Current Report on Form 8-K (File No. 000-33491), filed August 4, 2009, Exhibit 10.2
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10.3
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Form of convertible Promissory Note
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Current Report on Form 8-K (File No. 000-33491), filed August 4, 2009, Exhibit 10.3
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10.4†
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Employment Agreement, dated as of April 15, 2010, between Robert Weinstein and Green Energy Management Services, Inc.
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Current Report on Form 8-K (File No. 000-33491), filed August 26, 2010, Exhibit 10.5
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10.5
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Promissory Note, dated as of July 29, 2010, issued by Green Energy Management Services, Inc. to CDSS Wind Down Inc.
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Current Report on Form 8-K (File No. 000-33491), filed August 4, 2009, Exhibit 10.6
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10.6
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Stockholders’ Agreement, dated as of August 20, 2010, by and among by and among CDSS Wind Down, Inc., Green Energy Management Services, Inc., Michael Samuel, Ice Nine, L.L.C. and the persons identified on Exhibit A thereto
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Current Report on Form 8-K (File No. 000-33491), filed August 26, 2010, Exhibit 10.7
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10.7
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Promissory Note, dated as of August 20, 2010, issued by Green Energy Management Services, Inc. to CDSS Wind Down Inc.
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Current Report on Form 8-K (File No. 000-33491), filed August 26, 2010, Exhibit 10.8
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10.8
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Southside Electric Inc. Promissory Note- PNC Bank
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Registration Statement on Form S-1 (File No. 333-169496) filed November 24, 2010, Exhibit 10.11
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10.9
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Southside Electric Inc. Security Agreement – PNC Bank
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Registration Statement on Form S-1 (File No. 333-169496) filed November 24, 2010, Exhibit 10.12
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10.10
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Southside Electric Inc. Guaranty – PNC Bank
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Registration Statement on Form S-1 (File No. 333-169496) filed November 24, 2010, Exhibit 10.13
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10.11
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Sales Commission Agreement, dated October 26, 2010, by and between Claudio Castella and Green Energy Management Services, Inc.
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Registration Statement on Form S-1 (File No. 333-169496) filed November 24, 2010, Exhibit 10.14
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10.12
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Sales and User Agreement, dated as of November 2, 2010, by and between The Riverbay Fund, Inc. and Green Energy Management Services, Inc.
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Registration Statement on Form S-1 (File No. 333-169496) filed November 24, 2010, Exhibit 10.15
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10.13
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License and Marketing Agreement, dated as of September 30, 2010, by and between GEM RG, Inc., Green RG, Inc., Alfred Meyer and Horn illegible, Inc.
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Registration Statement on Form S-1 (File No. 333-169496) filed November 24, 2010, Exhibit 10.16
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10.14
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Form of Stock Transfer Agreement
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Registration Statement on Form S-1 (File No. 333-169496) filed November 24, 2010, Exhibit 10.17
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||||
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10.15
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Consulting Services Agreement, dated as of February 1, 2011, by and between Titan Management and Consulting LLC and Green Energy Management Services Holdings, Inc.
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Annual Report on Form 10-K (File No. 000-33491), filed March 31, 2011, Exhibit 10.18
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10.16
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Sales Agency Agreement, dated as of February 1, 2011, by and between Titan Management and Consulting LLC and Green Energy Management Services Holdings, Inc.
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Annual Report on Form 10-K (File No.000-33491), filed March 31, 2011, Exhibit 10.19
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10.17
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Commitment Letter, dated as of March 3, 2011, by and between Financial Partners Funding, LLC and Green Energy Management Services, Inc.
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Annual Report on Form 10-K (File No. 000-33491), filed March 31, 2011, Exhibit 10.20
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10.18
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Consulting Services Agreement, effective as of March 3, 2011, by and between SE Management Consultants, Inc. and Green Energy Management Services, Inc.
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Annual Report on Form 10-K (File No. 000-33491), filed March 31, 2011, Exhibit 10.21
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10.19
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Sales Agency Agreement, effective as of March 3, 2011, by and between Energy Sales Solutions, LLC and Green Energy Management Services, Inc.
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Annual Report on Form 10-K (File No. 000-33491), filed March 31, 2011, Exhibit 10.22
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10.20
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Settlement Agreement, dated as of March 26, 2011, by and among Titan Management and Consulting, L.L.C., Anthony Corso and Green Energy Management Services, Inc.
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Annual Report on Form 10-K (File No. 000-33491), filed March 31, 2011, Exhibit 10.23
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10.21
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Line of Credit Agreement, dated as of March 31, 2012, by and between Clearwater Financial Advisors, L.L.C. and Green Energy Management Services, Inc.
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Annual Report on Form 10-K (File No. 000-33491), filed April 16, 2012, Exhibit 10.20
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10.22
|
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Water Management Agreement, dated as of May 3, 2011, by and between Green Energy Management Services, Inc. and Riverbay Corporation
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Quarterly Report on Form 10-Q (File No. 000-33491) file August 15, 2011, Exhibit 10.24
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Certification of CEO Pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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*
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Certification of CFO Pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
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*
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Certification of CEO 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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**
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Certification of CFO 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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|
**
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101.INS
|
|
XBRL Instance Document.
|
|
**
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101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
**
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101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
**
|
|
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101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
**
|
|
|
|
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101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
**
|
|
|
|
|
|
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101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
**
|
|
|
†
|
Management contract or compensatory plan or arrangement.
|
|
|
*
|
Indicates a document being filed with this Quarterly Report.
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|
**
|
Information in this Quarterly Report furnished herewith shall not be deemed to be “filed” for the purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.
|
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 ENERGY MANAGEMENT SERVICES HOLDINGS, INC.
|
|||
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|||
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Dated: November 14, 2012
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By:
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/s/ Peter P. Barrios
|
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Name:
|
Peter P. Barrios
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Title:
|
Chief Financial Officer
|
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|
|
(Principal Financial Officer and Principal Accounting Officer)
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20