10-K 1 gses10k08.txt GS ENVIROSERVICES 10-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM 10-K ----------------- ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008 COMMISSION FILE NO.: 0-33513 GS ENVIROSERVICES, INC -------------------------------------------------------------------------------- Exact name of registrant as specified in its charter) Delaware 20-8563731 -------------------------------------------------------------------------------- (State of other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 590 South Street East, Raynham, MA 02767 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (617)413-3639 -------------------------------------------------------------------------------- (Registrant's telephone number including area code Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 406 of the Securities Act. Yes __ No X_ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes __ No X_ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X_ No __ Indicate by check mark disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss. 229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] 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 Small reporting company X --- --- Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes __ No X --- The number of outstanding shares of common stock as of March 31, 2009 was: 15,573,594. Based on the average closing bid and ask price of the Registrant's common stock, the aggregate market value of the voting stock held by non-affiliates of the Registrant as of March 31, 2009 was 187,350. ================================================================================ TABLE OF CONTENTS
Page No Part I Item 1 Business ........................................................................................3 Item 1A Risk Factors ....................................................................................3 Item 1B Unresolved Staff Comments .......................................................................3 Item 2 Properties.......................................................................................3 Item 3 Legal Proceedings................................................................................3 Item 4 Submission of Matters to a Vote of Security Holders .............................................3 Part II Item 5 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ..........................................................4 Item 6 Selected Financial Data .........................................................................4 Item 7 Management's Discussion and Analysis ............................................................5 Item 8 Financial Statements ............................................................................8 Item 9 Changes and Disagreements with Accountants on Accounting and Financial Disclosure ..............24 Item 9A Controls and Procedures ........................................................................24 Item 9B Other Information ..............................................................................24 Part III Item 10 Directors, Executive Officers and Corporate Governance ........................................25 Item 11 Executive Compensation .........................................................................26 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...............................................................27 Item 13 Certain Relationships and Related Transactions, and Director Independence ......................27 Item 14 Principal Accountant Fees and Services .........................................................27 Part IV Item 13 Exhibits .......................................................................................29 Signatures 28
ITEM 1 BUSINESS BUSINESS OVERVIEW 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, accrued expenses, and certain identified executory contracts. As a result of the Purchase, on the financial statements included in this Report the assets and liabilities of Enviro-Safe Corp. and Enviro-Safe Corporation (NE) are presented as assets and liabilities of discontinued operations as of December 31, 2007 and the operations are presented as discontinued operations in the accompanying consolidated statements of operations (see Note 3 to the Consolidated Financial Statements - Discontinued Operations). GS EnviroServices Inc. has retained approximately $200,000 from the proceeds of the sale of Enviro-Safe Corp. and Enviro-Safe Corporation NE to serve as working capital while management develops and implements a new business plan for the Company. The Company intends to pursue business opportunities in the environmental and alternative energy fields. The Company will provide timely announcements on such developments. Following the closing of the Purchase Agreement, we have remained a public company listed on the OTC Bulletin Board. This situation will enable the Company to initiate new business operations without the burden of debt from past operations. ITEM 1A BUSINESS RISK FACTORS You should carefully consider these risks described below before buying our common stock. If any of the risks described below actually occurs, that event could cause the trading price of our common stock to decline, and you could lose all or part of your investment. Our common stock qualifies as a "penny stock" under SEC rules which may make it more difficult for our stockholders to resell their shares of our common stock. Our common stock trades on the "OTCBB". As a result, the holders of our common stock may find it more difficult to obtain accurate quotations concerning the market value of the stock. Stockholders also may experience greater difficulties in attempting to sell the stock than if it were listed on a stock exchange or quoted on the NASDAQ National Market or the NASDAQ Small-Cap Market. Because our common stock does not trade on a stock exchange or on the NASDAQ National Market or the NASDAQ Small-Cap Market, and the market price of the common stock is less than $5.00 per share, the common stock qualifies as a "penny stock." SEC Rule 15g-9 under the Securities Exchange Act of 1934 imposes additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as an "established customer" or an "accredited investor." This includes the requirement that a broker-dealer must make a determination on the appropriateness of investments in penny stocks for the customer and must make special disclosures to the customer concerning the risks of penny stocks. Application of the penny stock rules to our common stock affects the market liquidity of the shares, which in turn may affect the ability of holders of our common stock to resell the stock. ITEM 1B UNRESOLVED STAFF COMMENTS Not Applicable. ITEM 2. PROPERTIES The Company maintains executive offices in Raynham, MA on a month-to-month basis free of charge. ITEM 3. LEGAL PROCEEDINGS None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER REPURCHASE OF EQUITY SECURITIES GS EnviroService's Common Stock trades on the "OTCBB" under the symbol "GSEN." The following table sets forth, for the periods indicated, the range of high and low closing bid prices for GS EnviroServices' Common Stock as reported by the National Association of Securities Dealers composite. The reported bid quotations reflect inter-dealer prices without retail markup, markdown or commissions, and may not necessarily represent actual transactions.
---------------------------------------- -------------------------------------- -------------------- Period High Low ---------------------------------------- -------------------------------------- -------------------- 2008 Fourth Quarter 0.20 0.01 2008 Third Quarter 0.06 0.02 2008 Second Quarter 0.06 0.02 2008 First Quarter 0.10 0.05 2007 Fourth Quarter 0.16 0.05 2007 Third Quarter 0.18 0.07 2007 Second Quarter 0.79 0.08 2007 First Quarter 0.45 0.10 Title of Class Approximate Number of Holders of Record as of March 31, 2009 Common Stock, 0.001 par value 95
The number of holders does not give effect to beneficial ownership of shares held in the street name of stock brokerage houses or clearing agents and does not necessarily reflect the actual ownership of the shares. DIVIDENDS In October 2008 the Company distributed $1,090,150 ($0.07 per share) to our shareholders as a dividend. We have no present intention of paying dividends in the foreseeable future. EQUITY COMPENSATION PLAN INFORMATION The following table provides information with respect to the equity securities that are authorized for issuance under our compensation plan as of December 31, 2008:
Number of securities remaining available for Number of securities to be issuance under equity issued upon exercise of Weighted average exercise compensation plans outstanding options, price of outstanding (excluding securities warrants and rights (a) options, warrants and rights reflected in column (a) ------------------------------------------------------------------------------------------------------------------------- Equity compensation plans -- -- -- approved by security holders Equity compensation plans not 3,270,000 $0.06 1,600,000 approved by security holders Total 3,270,000 $0.06 1,600,000
SALE OF UNREGISTERED SECURITIES The Company did not sell any unregistered securities during the 4th quarter of 2008. REPURCHASE OF EQUITY SECURITES The Company did not repurchase any of its equity securities that were registered under Section 12 of the Securities Act during the 4th quarter of 2008. ITEM 6 SELECTION FINANCIAL DATA Not Applicable ITEM 7. MANAGEMENT'S DISCUSSION ANDANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING STATEMENT 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". 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"), including the Quarterly Reports on Form 10QSB to be filed by us in the fiscal year 2009. The consolidated balance sheet at December 31, 2008 has been derived from the audited financial statements at that date but does not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements. 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 of discontinued operations in prior periods and their operations are presented as discontinued in the accompanying consolidated statements of operations (see Note 3 to the Consolidated Financial Statements - Discontinued Operations). 2 CRITICAL ACCOUNTING POLICIES AND ESTIMATES PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of GS EnviroServices' operating subsidiaries of Enviro-Safe Corporation and Enviro-Safe Corporation (NE). All significant accounts and transactions have been eliminated in consolidation. REVENUE RECOGNITION The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collection is reasonably assured. The Company provides environmental services that involve transportation and disposal of industrial waste. Revenues for the transportation and disposal of waste using the Company as the transporter that is disposed of at a third party location are recognized when the waste is delivered to the third party for processing and disposal. Revenues for the transportation and disposal of industrial waste using a third party transporter that is disposed of at the third party location are recognized when the waste is delivered to the third party location for processing and disposal. Revenues for the transportation and disposal of industrial waste that is disposed of at the Company's facility is recognized when the Company has received the waste at its facility due to the fact that the customer has no additional recourse and no additional services are provided to the customer after the waste is received. The Company provides environmental services that involves the recycling of oily wastes. Revenues for disposal of the waste is recognized when the waste is received at the location for processing. Revenues for the disposal oily waste is recognized when the Company has received the waste due to the fact that the customer has no additional recourse and no additional services are provided to the customer after the waste is received. Once the oily waste is recycled, revenue is recognized from the sale of the recycled oil at the time of delivery. The Company also provides environmental services and process engineering services on fixed priced contracts. These services are generally provided over a short period of less than three months. Revenue from fixed priced contracts is recognized on a pro rata basis over the life of the contract as they are generally performed evenly over the contract period. PROPERTY AND EQUIPMENT Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the life of the lease or their useful lives. Gains and losses on depreciable assets retired or sold are recognized in the consolidated income statement in the year of disposal, and repair and maintenance expenditures are expensed as incurred. Property, plant and equipment are stated at cost. Expenditures for major renewals and improvements which extend the life or usefulness of the asset are capitalized. GOODWILL AND INTANGIBLE ASSETS The Company accounts for its goodwill and intangible assets pursuant to SFAS No. 142, Goodwill and Other Intangible Assets. Under SFAS 142, intangibles with definite lives continue to be amortized on a straight-line basis over the lesser of their estimated useful lives or contractual terms. Goodwill and intangibles with indefinite lives are evaluated at least annually for impairment by comparing the asset's estimated fair value with its carrying value, based on cash flow methodology. Intangibles with definite lives consist primarily of permits which have useful lives and are subject to impairment testing in the event of certain indicators. Impairment in the carrying value of an asset is recognized whenever anticipated future cash flows (undiscounted) from an asset are estimated to be less than its carrying value. The amount of the impairment recognized is the difference between the carrying value of the asset and its fair value. LONG-LIVED ASSETS The Company assesses the valuation of components of its property and equipment and other long-lived assets whenever events or circumstances dictate that the carrying value might not be recoverable. The Company bases its evaluation on indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present. If such factors indicate that the carrying amount of an asset or asset group may not be recoverable, the Company determines whether impairment has occurred by analyzing an estimate of undiscounted future cash flows at the lowest level for which identifiable cash flows exist. If the estimate of undiscounted cash flows during the estimated useful life of the asset is less than the carrying value of the asset, the Company recognizes a loss for the difference between the carrying value of the asset and its estimated fair value, generally measured by the present value of the estimated cash flows. INCOME TAXES Income taxes are accounted for under the asset and liability method, whereby deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more likely than not that some or the entire deferred tax asset will not be realized. 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. FINANCIAL INSTRUMENTS The carrying values of accounts receivable, other receivables, accounts payable, and accrued expenses approximate their fair values due to their short term maturities. The carrying values of the Company's long-term debt approximate their fair values based upon a comparison of the interest rate and terms of such debt to the rates and terms of debt currently available to the Company. RESULTS OF OPERATIONS YEAR END DECEMBER 31, 2008 VERSUS DECEMBER 31, 2007 GENERAL AND ADMINISTRATIVE General and administrative ("G&A") expenses for continuing operations for the twelve months ended December 31, 2008 was $1,377,140 as compared to $1,182,398 for the corresponding period in 2007. The increase in G&A expenses includes $74,579 in legal fees related to the Purchase Agreement with Triumvirate, $21,458 increase in insurance, $99,500 for bonuses paid to former employees of GS EnviroServices for their years of service, and $122,150 in legal settlements. SG&A expense for the years ending December 31, 2008 and December 31, 2007 of $1,458,709 and $3,005,187, respectively for Enviro-Safe and Enviro-Safe (NE) have been included in income from discontinued operations. OTHER INCOME (EXPENSE) Interest expense has increased $41,420 for the twelve months ended December 31, 2008, as compared to the corresponding periods of 2007.
Twelve Months Ended December 30, ------------------------------------------------------------- 2008 2007 Change ---------------------- ------------------- ------------------ Interest Expense - Related Party $15,994 -- $ 15,994 Line of Credit 20,671 $21,661 (990) Affiliate Interest -- $30,612 (30,612) Interest Expense - convertible debentures $57,028 -- $57,028
The Company recognized $74,158 of miscellaneous income during the twelve months ended December 31, 2008as a result of consulting fees received by the Company from Triumvirate Environmental for assisting with the transition after the close. On February 11, 2008 the Company issued $500,000 in convertible debentures to related parties. Total interest of $15,994 was expensed during the twelve months ended December 31, 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 2008. Interest expense from discontinued operations of $20,037 and $45,847 for the periods ended December 31, 2008 and 2007 respectively have been excluded from these numbers. On March 31, 2007, the Board of Directors of GreenShift Corporation, our former parent voted to make a capital contribution to the Company. As a result, total accrued interest due on the loan in the amount of $62,871 was credited to additional paid in capital. Affiliate interest for the twelve months ended December 30, 2007 was $30,612. On May 31, 2007, the Company closed on a Demand Line of Credit which bears interest that fluctuates based on the prime lending rate. Total interest paid was $20,671 and $21,661 for the twelve months ended December 31, 2008 and 2007 respectively. LIQUIDITY AND CAPITAL RESOURCES The Company's continuing activities used $1,288,857 of cash in 2008 as compared to $686,585 cash used in 2007. This use of cash includes the $1.3 million paid to "YAGI" for the reduction of the guarantee of the Company's assets (see Note 7 - Convertible Debentures) as well as other costs associated with the purchase by Triumvirate Environmental. The Company's capital requirements consist of general working capital needs. The Company had been unable to secure the financing necessary to expand its current operations. Potential sources of financing have been deterred by the large amount of convertible debt that the Company issued to YA Global Investments and others. The proceeds from the sale to Triumvirate were used, in part, to eliminate all of that convertible debt. Following the closing of the Purchase Agreement, we remain a public company listed on the OTC Bulletin Board. This situation will enable the Company to initiate new business operations without the burden of debt from past operations Non-cash adjustments for continuing operations recorded for the twelve months ended December 31, 2008 totaled $921,495 and consisted of $566,000 in stock based compensation, $2,964,484 amortization of debt discount, $31,011 in deferred taxes, $280,000 allowance, and ($2,920,000) change in derivative liabilities. Net cash flows of $965,900 from discontinued operations have been excluded from the above. Accounts payable for continuing operations at December 31, 2008 totaled $0, a decrease of $46,032from the December 31, 2007 balance of $46,032. Accrued expenses at December 31, 2008 totaled $30,643, a decrease of $30,274 from the December 31, 2007 balance of $60,917. Net of discontinued operations, the Company had a positive working capital position of $218,384 as of December 31, 2008 as compared to a negative working capital position of $703,467 as of December 31, 2007. In October 2008, we distributed $1,090,150 to our shareholders as a dividend. STOCKHOLDER MATTERS Stockholders' equity was $0.2 million at December 31, 2008 as compared to $5.8 million at December 31, 2007. ITEM 7. FINANCIAL STATEMENTS
Page No FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm....................................................9 Consolidated Balance Sheets ..............................................................................11 Consolidated Statements of Operations ....................................................................12 Consolidated Statements of Stockholders' Equity...........................................................13 Consolidated Statements of Cash Flows.....................................................................14 Notes to Consolidated Financial Statements ............................................................15-25
ITEM 7. FINANCIAL STATEMENTS (continued) REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of GS EnviroServices, Inc. We have audited the accompanying consolidated balance sheets of GS EnviroServices, Inc. as of December 31, 2008 and 2007, and the related statements of income, stockholders' equity, and cash flows for each of the years in the two-year period then ended. GS EnviroServices Inc.'s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of GS EnviroServices, Inc. as of December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. /s/ Rosenberg Rich Baker Berman & Company Bridgewater, NJ 08807 March 28, 2009 ITEM 7. FINANCIAL STATEMENTS (continued) REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM GS ENVIROSERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2008 and 2007
ASSETS: 12/31/08 12/31/07 -------------------------- Current assets: Cash ........................................................ $ 198,078 $ -- Prepaid expenses ............................................ 2,282 54,332 Other receivables ........................................... 48,667 -- Loan receivable ............................................. -- 351,480 Deferred taxes .............................................. -- 31,011 Assets of discontinued operations ........................... -- 9,110,402 ----------- ----------- Total current assets .................................... 249,027 9,547,225 ----------- ----------- TOTAL ASSETS ................................................... 249,027 9,547,225 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Line of credit .............................................. -- 747,341 Accrued stock based compensation ............................ -- 286,000 Accounts payable ............................................ -- 46,032 Accrued expenses ............................................ 30,643 60,917 Liabilities of discontinued operations ...................... -- 2,667,200 ----------- ----------- Total current liabilities ............................... 30,643 3,807,490 ----------- ----------- Total liabilities: ...................................... 30,643 3,807,490 ----------- ----------- Stockholders' equity: Common stock, $.001 par value, 100,000,000 shares authorized; 15,573,594 shares issued and outstanding as of 12/31/08 and 26,185,000 shares issued and outstanding as of 12/31/07 . 15,574 26,185 Additional paid-in capital .................................. 5,353,072 6,631,611 Retained deficit ............................................ (5,150,262) (918,061) ----------- ----------- Total stockholders' equity .................................. 218,384 5,739,735 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................... $ 249,027 $ 9,547,225 =========== =========== The notes to the Consolidated Financial Statements are an integral part of these statements.
GS ENVIROSERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
12/31/08 12/31/07 --------------------------------- Revenue ............................................... $ -- $ -- Revenue with affiliates ............................... -- -- -------------- -------------- Total Revenues ................................... -- -- -------------- -------------- Cost of revenues ...................................... -- -- -------------- -------------- Gross profit ..................................... -- -- -------------- -------------- Operating Expenses: Selling Expenses ................................. -- -- Stock Based compensation ......................... 51,699 377,208 General and administrative ....................... 1,325,441 805,190 -------------- -------------- Total operating Expenses .............................. 1,377,140 1,182,398 -------------- -------------- Operating income (loss) ............................... (1,377,140) (1,182,398) -------------- -------------- Other income (expense) Other expense (including stock based comp of $140,000) (260,000) -- Miscellaneous income ............................. 74,158 -- Interest expense - related party ................. (15,994) (30,612) Interest income - affiliate ...................... -- 1,480 Interest expense - convertible debenture ......... (57,028) -- Cost for reduction of guarantee .................. (1,388,667) -- Amortization of debt discount .................... (2,964,484) -- Change in value of derivative instruments ........ 2,920,000 -- Interest expense - line of credit ................ (20,671) (21,661) Interest income .................................. 11,266 -- -------------- -------------- Total other income (expense), net ..................... (1,701,420) (50,793) -------------- -------------- Income/loss before provision for income taxes .... (3,078,560) (1,233,191) Benefit from income taxes, net ................... 10,900 4,940 -------------- -------------- Loss from continuing operations .................. (3,067,660) (1,228,251) -------------- -------------- Discontinued Operations: Income from discontinued operations, net of tax of $0 . 849,466 1,272,849 Loss on disposal of operations ........................ (923,856) 20,245 -------------- -------------- Income (loss) from discontinued operations ....... (74,390) 1,293,094 -------------- -------------- Net income (loss) ................................ $ (3,142,051) $ 64,843 ============== ============== Earnings (loss) per share Basic Income (loss) from continuing operations ......... $ (0.21) $ (0.06) Income (loss) from discontinued operations ....... (0.01) 0.06 -------------- -------------- Net income (loss) per share - basic .............. $ (0.22) $ (0.00) ============== ============== Diluted Income (loss) from continuing operations ......... $ (0.21) $ (0.06) Income (loss) from discontinued operations ....... (0.01) 0.06 -------------- -------------- Net loss per share - diluted ..................... $ (0.22) $ (0.00) ============== ============== Weighted average shares outstanding Basic ............................................ 14,503,356 21,195,959 Diluted .......................................... 14,503,356 22,971,586 The notes to the Consolidated Financial Statements are an integral part of these statements.
GS ENVIROSERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
Treasury Treasury Common Common Additional Accumulated Total Stock Stock Stock Stock Paid In Earnings/ Amount Shares Amount Shares Amount Capital Deficit ------------------------------------------------------------------------------------------------ Balance December 31, 2006 ........ -- $ -- 6,185,000 $ 6,185 $ 1,288,547 $(1,849,950) $ (555,218) ========= =========== ============ ========== =========== =========== ========== Effect of reverse merger of entities under common control. -- -- 19,000, 000 19,000 3,991,303 867,046 4,877,349 Stock options ................... -- -- -- -- 91,208 -- 91,208 Contribution of capital (GSCT)... -- -- -- -- 585,156 -- 585,156 Contribution of capital (GSHF) .. -- -- -- -- 576,397 -- 576,397 Stock based consultant fee ...... -- -- 1,000,000 1,000 99,000 -- 100,000 Net earnings .................... -- -- -- -- -- 64,843 64,843 --------- ----------- ------------ ---------- ----------- ----------- ---------- Balance December 31, 2007 ........ -- -- 26,185,000 $ 26,185 $ 6,631,611 $ (918,061) $5,739,735 ========= =========== ============ ========== =========== =========== ========== Stock options .................. -- -- -- -- 51,699 -- 51,699 Stock based compensation ....... -- -- 2,000,000 2,000 138,000 -- 140,000 Stock issued for compensation .. -- -- 4,400,000 4,400 281,600 -- 286,000 Issuance of warrants ........... -- -- -- -- 44,484 -- 44,484 Purchase of treasury stock .....(17,000,000) 1,811,333 -- -- -- -- -- Retirement of treasury stock ... 17,000,000 (1,811,333) (17,000,000) (17,000) (1,794,333) -- (1,811,333) Cancellation of shares ......... -- -- (11,406) (11) 11 -- -- Dividend ...................... -- -- -- -- -- -- (1,090,150) Net loss .................... -- -- -- -- -- (3,142,051) (3,142,051) --------- ----------- ------------ ---------- ----------- ----------- ---------- Balance December 31, 2008 ...... -- $ -- 15,573,594 $ 15,574 $ 5,353,072 $(5,150,262) $ 218,384 ========= ========== ============ ========== =========== =========== ========== The notes to the Consolidated Financial Statements are an integral part of these statements.
GS ENVIROSERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
12/31/08 12/31/07 ---------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) ........................................ $(3,142,051) $ 64,843 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: (Income) from discontinued operations ................. (849,466) (1,048,979) Loss on disposal of discontinued operations ........... 923,856 -- Loss on reduction of guarantee agreement .............. 1,388,667 -- Allowance ............................................. 280,000 -- Deferred taxes ........................................ 31,011 -- Stock based compensation .............................. 426,000 91,208 Stock based compensation - options .................... 51,700 -- Change in fair value of derivative instruments ........ 2,964,484 -- Amortization of debt discount ......................... (2,920,000) -- Changes in assets and liabilities Other assets .......................................... (97,574) -- Accounts receivable ................................... -- (1,480) Accounts payable ...................................... (44,551) (28,309) Accrued expenses ...................................... (316,274) 342,693 Prepaid expenses ...................................... 52,050 (54,332) Deferred taxes ........................................ -- (31,011) Interest due to affiliate ............................. -- (21,219) Miscellaneous receivable .............................. (36,709) -- ----------- ----------- Net cash flows used in continuing operations ........ (1,288,857) (686,586) Net cash flows provided by discontinued operations .. 965,900 204,226 ----------- ----------- Net cash flows provided by (used in) operations ..... (322,957) (482,360) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Cash acquired from sale of subsidiaries ............... 5,308,527 -- Issuance of note receivable ........................... (100,000) -- Proceeds (issuance) of note receivable ................ 350,000 (350,000) ----------- ----------- Net cash provided by investing activities ........... 5,558,527 (350,000) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from line of credit .......................... 670,000 897,341 Repayments Line of Credit ............................. (1,417,341) (150,000) Proceeds from convertible debenture - related party ... 500,000 -- Proceeds from convertible debenture ................... 100,000 -- Repayment of convertible debenture - related party .... (500,000) -- Repayment of convertible debenture .................... (2,100,000) -- Purchase of treasury stock ............................ (1,200,000) -- Dividends paid ........................................ (1,090,151) -- ----------- ----------- Net cash provided by (used in) financing activities (5,037,492) 747,341 ----------- ----------- Increase (decrease) in cash .............................. 198,078 (85,019) Cash at beginning of period .............................. -- 85,019 ----------- ----------- Cash at end of period .................................... $ 198,078 $ -- =========== =========== The notes to the Consolidated Financial Statements are an integral part of these statements.
GS ENVIROSERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION On June 20, 2008, GS EnviroServices, Inc. (the "Company") completed an Asset and Stock Purchase Agreement (the "Agreement") with Triumvirate Environmental, Inc. ("Triumvirate"). The Company sold 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, accrued expenses, and certain identified executory contracts. As a result of the Agreement, the assets and liabilities of Enviro-Safe Corp. and Enviro-Safe Corporation (NE) have been presented as assets and liabilities of discontinued operations as of December 31, 2007 and the operations of Enviro-Safe and Enviro-Safe (NE) have been presented as discontinued operations in the accompanying consolidated statements of operations for the years ended December 31, 2008 and 2007. 2 CRITICAL ACCOUNTING POLICIES AND ESTIMATES REVENUE RECOGNITION The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collection is reasonably assured. The Company provides environmental services that involve transportation and disposal of industrial waste. Revenues for the transportation and disposal of waste using the Company as the transporter that is disposed of at a third party location are recognized when the waste is delivered to the third party for processing and disposal. Revenues for the transportation and disposal of industrial waste using a third party transporter that is disposed of at the third party location are recognized when the waste is delivered to the third party location for processing and disposal. Revenues for the transportation and disposal of industrial waste that is disposed of at the Company's facility is recognized when the Company has received the waste at its facility due to the fact that the customer has no additional recourse and no additional services are provided to the customer after the waste is received. The Company provides environmental services that involves the recycling of oily wastes. Revenues for disposal of the waste is recognized when the waste is received at the location for processing. Revenues for the disposal oily waste is recognized when the Company has received the waste due to the fact that the customer has no additional recourse and no additional services are provided to the customer after the waste is received. Once the oily waste is recycled, revenue is recognized from the sale of the recycled oil at the time of delivery. The Company also provides environmental services and process engineering services on fixed priced contracts. These services are generally provided over a short period of less than three months. Revenue from fixed priced contracts is recognized on a pro rata basis over the life of the contract as they are generally performed evenly over the contract period. PROPERTY AND EQUIPMENT Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the life of the lease or their estimated useful lives. Gains and losses on depreciable assets retired or sold are recognized in the consolidated income statement in the year of disposal, and repair and maintenance expenditures are expensed as incurred. Property, plant and equipment are stated at cost. Expenditures for major renewals and improvements which extend the life or usefulness of the asset are capitalized. INCOME TAXES Income taxes are accounted for under the asset and liability method, whereby deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax asset will not be realized. 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. FINANCIAL INSTRUMENTS The carrying values of accounts receivable, other receivables, accounts payable, and accrued expenses approximate their fair values due to their short term maturities. 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 stock options, assuming the exercise of all stock options. Common share equivalents have been excluded where their inclusion would be anti-dilutive. Potentially future dilutive shares at December 2008 are 844,200 shares from the conversions of 844,200 outstanding options and warrants. A reconciliation of the numerators and denominators of basic and diluted (loss) earnings per share for the twelve months ended December 31, 2008 consisted of the following:
Twelve Months Ended December 31, 2008 Basic Dilutive ------------ ------------- Weighted average number of shares outstanding .................... 14,503,356 14,503,356 Common stock equivalent shares (treasury stock method) -- -- ------------ ------------- Total weighted average and equivalent shares ................ 14,503,356 14,503,356 ============ ============= Net loss (income) ............................................. $ (3,142,051) $ (3,142,051) ============ ============= Earnings per share, basic and dilutive .................................. $ (0.22) $ (0.22) ============ =============
CONCENTRATIONS The Company maintains cash balances with financial institutions that at times may exceed the limits insured by the Federal Deposit Insurance Corporation. Cash balances were not in excess of these limits at December 31, 2008. STOCK BASED COMPENSATION The Company accounts for stock and stock options issued for services and compensation to employees under SFAS 123(R). For non-employees, the fair market value of the Company's stock on the date of stock issuance or option/grant is used. The Company determined the fair market value of the options issued under the Black-Scholes Pricing Model. Under the provisions of SFAS 123(R), share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employee's requisite service period (generally the vesting period of the equity grant). NEW ACCOUNTING PRONOUNCEMENTS In March 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 161, Disclosure about Derivative Instruments and Hedging Activities. This Statement is an amendment of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. This Statement requires enhanced disclosures about an entity's derivative and hedging activities and thereby improves the transparency of financial reporting. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. Management does not expect the implementation of this new standard to have a material impact on the Company's financial position, results of operations and cash flows In 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 141 (revised 2007) Business Combinations. This Statement replaces FASB Statement No. 141, Business Combinations. This Statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquired at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the Statement. SFAS No. 141 (revised) is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Management does not expect the implementation of this new standard to have a material impact on the Company's financial position, results of operations and cash flows. In February 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" including an amendment of FASB Statement No. 115 with respect to improvement of financial reporting of certain investments in debt and equity securities. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Board's long-term measurement objectives for accounting for financial instruments. SFAS No. 159 is effective as of the beginning of the Company's first fiscal year that begins after November 15, 2007. Management does not expect the implementation of this new standard to have a material impact on the Company's financial position, results of operations and cash flows. 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). Triumvirate assumed responsibility for certain designated liabilities of Enviro-Safe, including its trade payables, accrued expenses, and certain identified executory contracts. In addition, the Company terminated its Environmental Services and Management Agreement entered into with Olson's Greenhouses in 2007 as Triumvirate Environmental, Inc. is not engaged in the marketing or collection of waste oils in its businesses. As a result of the Agreement, the assets and liabilities Enviro-Safe Corp., Enviro-Safe Corporation (NE), and Olson's are presented as assets and liabilities of discontinued operations in the balance sheet at 12/31/07 and their operations through the date of sale have been presented as discontinued in the accompanying consolidated statements of operations. Principal Terms of the Transaction and Purchase Agreement with Triumvirate Environmental The purchase price for the assets was $5,000,000 paid in cash on the closing date plus an amount equal to the net working capital of Enviro-Safe and Enviro-Safe (NE) as of the closing date to be determined and paid approximately 120 days after the closing. A total of $200,000 was held in escrow pending resolution of contingent liabilities. During the month of September, 2008, Triumvirate paid the Company $308,527 equal to the net working capital of Enviro-Safe and Enviro-Safe Corporation NE per the agreement. A total of $161,937 of accounts receivable was excluded from the working capital calculation per the terms of the agreement. The Company has reclaimed these receivables and realized $65,001 in collections and reserved the remaining $96,936 as of December 31, 2008. An amount of $50,000 remaining from the $200,000 held in escrow was released to the Company after resolution of contingent liabilities. A total of $150,000 was paid to the parties and the Company was fully released of all liabilities. Below is an allocation of the proceeds: Purchase of treasury shares from YAGI $ 1,000,000 YAGI Convertible Debenture 888,889 TD Banknorth line of credit 600,341 Investor convertible debenture 100,000 Related party convertible debentures 500,000 YA Global 2.0 M share redemption 200,000 Contingent Liabilities 150,000 Interest and penalties 125,392 Proceeds retained by the Company 1,743,905 ------------- Total purchase price $ 5,308,527 ============= In connection with the sale of the company's operations, James F. Green, the Company's President, agreed with the Company to rescind the transaction in February 2008 in which the Company sold 4,366,667 shares of its common stock to Mr. Green for $200,000. In addition, the satisfaction of the Company's debt to YA Global Investments resulted in the cancellation of 6,266,666 shares of the Company's common stock. The payment to YA Global Investments of an additional $200,000 resulted in the cancellation of an additional 2,000,000 shares. The results of these transactions reduced the number of outstanding shares to 15,573,594. For a period of three years following the closing date, the Company and Enviro-Safe agree (i) not to solicit any of the officers, directors, executives or employees of either Enviro-Safe or Enviro-Safe (NE) for employment, (ii) not to solicit the customers of Enviro-Safe (NE) or interfere with the business relationship between Triumvirate and Enviro-Safe (NE) and (iii) not to engage in any business which is competitive with Triumvirate and its affiliates in New York or New England. Enviro-Safe also agreed to change its name to a name which does not contain "Enviro-Safe." As a result of the Agreement, the assets and liabilities the Enviro-Safe Corp., Enviro-Safe Corporation (NE), and Olson's are presented as assets and liabilities of discontinued operations in the December 31, 2007 balance sheet and their operations through the date of the sale have been presented as discontinued in the accompanying consolidated statements of operations. The components of discontinued operations are as follows:
2008 2007 --------------- --------------- Net revenues $ 8,014,384 $ 15,286,064 Cost of revenues 5,706,293 10,962,181 --------------- --------------- Gross profit 2,308,091 4,323,883 Selling, general and administrative expense 1,438,589 3,005,187 Other Expenses 20,036 45,847 --------------- --------------- Income from discontinued operations $ 849,466 $ 1,272,849 ============== ============== Write off of Goodwill $ (4,431,320) $ -- Loss on disposal of assets and liabilities (1,736,379) -- Gain on sale of subsidiaries 5,382,875 -- Loss (gain) on equipment disposal (139,032) 20,245 --------------- --------------- Total other income and expense $ (923,856) $ 20,245 =============== ===============
4 LINE OF CREDIT On May 31, 2007, the Company closed on a Demand Line of Credit in the amount of $1,000,000. The principal balance bears interest that fluctuates based on the prime lending rate. As of June 30, 2008, the rate was 5.0%. The line was secured by all assets of the Company. The outstanding line of credit balance of $600,341 and $2,187 was paid in full from the proceeds of the Asset Stock Purchase Agreement with Triumvirate Environmental. In July 2008 the line of credit was closed and the Company received a release from all obligations. 5 NOTE RECEIVABLE In November 2008, the Company received a note receivable of $100,000 in exchange for $100,000 cash. The loan carries a 5% per annum interest rate and is in default. As of December 31, 2008 a full reserve has been taken against this note receivable. 6 NOTE PAYABLE - AFFILIATE On May 11, 2007, the Board of Directors of GS CleanTech Corporation, an affiliate company at that time, elected to make a capital contribution to the Company. As a result the $585,156 inter company loan balance due from the Company to GS CleanTech was reduced to zero. The total balance was credited to additional paid in capital. On September 30, 2007, the Board of Directors of GreenShift Corporation, our parent corporation at that time, elected to make a capital contribution to the Company. As a result the $513,580 inter-company loan balance and accrued interest of $62,817 due from the Company to GreenShift was reduced to zero. The total balance was credited to additional paid in capital. 7 CONVERTIBLE DEBENTURES YA GLOBAL CONVERTIBLE DEBENTURE On January 11, 2008, GS EnviroServices entered into a Stock Purchase Agreement with GreenShift Corporation, and a Securities Purchase Agreement with YA Global Investments, L.P. ("YAGI"). At the date of these agreements GreenShift owned 15 million shares of the common stock of GS EnviroServices, representing 53% of the total outstanding shares. In accordance to a forbearance agreement between GreenShift and YAGI, YAGI took possession of the 15 million shares. On January 11, 2008, the Company issued a $2.0 million dollar convertible debenture to YAGI and in exchange, YAGI limited the Company's liability under the Global Guarantee agreement to $1.5 million (see Guarantees), reduced the principal balance of the debentures due to YAGI from GreenShift by $2.0 million, and released 8,733,333 common shares of GS EnviroServices to the Company. The Company recorded the receipt of the 8,733,333 common shares as treasury stock, based on the cost method in the amount of $611,333. Additionally, the Company allocated $1,388,667 of the $2,000,000 debenture issued to the cost of reducing our guarantee on the GreenShift debt. YAGI was issued 2.0 million shares of GS EnviroService's common stock as incentive to enter into this agreement. The convertible debenture issued provided that YAGI may convert the accrued interest and principal on the debenture into GS EnviroServices common stock at a conversion rate equal to the lesser of $.05 or 80% of the lowest closing bid price for the 30 trading days preceding conversion. The conversion feature on this debenture due to YAGI is variable based on trailing market prices and contained an embedded derivative. $1.0 million of the principal was due on February 11, 2008. The remaining principal was payable in monthly installments of $27,777 with the final principal balance due on February 11, 2008. Due to the embedded derivative a note discount of $2,000,000 and a derivative liability of $2,050,000 were recorded at the assumption date. On February 11, 2008, the Company paid the $1,000,000 principal payment. Interest accrued on the balance at 10% per annum and was due monthly. On June 20, 2008, the Company completed an Asset Stock purchase with Triumvirate Environmental. As of June 20, 2008, the principal balance was $888,883 principal and $3,204 of interest was accrued. The principal and interest was paid in full directly to YAGI from the proceeds of the Triumvirate purchase. As of June 20, 2008, the derivative liability was adjusted to market price. The derivative liability and debt discount were written off as of June 20, 2008 resulting in an accounting gain of $996,527 and loss of $895,593 respectively. GUARANTEES In connection with the Securities Purchase Agreement entered into with YAGI, the Company entered into a Letter Agreement, whereby, the Company was given the option to acquire the final 6,266,667 shares of GS EnviroServices, Inc. common stock held by YAGI for $1.0 million on or before May 10, 2008. In exchange for the redemption of these shares, the Company's liability under the Global Guarantee agreement will be reduced to zero. On April 22, 2008, YAGI signed an amendment to the letter agreement. The amendment provided for an extension of the date for which the Company may acquire the common stock held by YAGI to July 31, 2008. The agreement also provided that YAGI will return the 2,000,000 shares issued to them in January of 2008 in exchange for $200,000. As compensation and consideration for YAGI to enter into this amendment, the Company paid a fee in the amount of five thousand dollars $5,000. On June 20, 2008, the Company completed the Asset Stock purchase with Triumvirate Environmental. YAGI received $1.2 million directly from the proceeds of the transaction releasing the 8,266,667 shares of stock held by YAGI. The Company recorded the receipt of the 8,266,667 common shares as treasury stock, based on the cost method in the amount of $1,200,000. OTHER CONVERTIBLE DEBENTURES On February 11, 2008, the Company accepted $800,000 from key employees and an investor. The proceeds were used to complete the $1,000,000 due to YAGI on February 11, 2008. The remaining $200,000 was drawn from the Company's Line of Credit. On February 11, 2008, GS EnviroServices accepted loans from the following individuals: $400,000 James F. Green, President and CEO $100,000 Doris Christiani, Chief Financial Officer $100,000 Steven Powers, President, Enviro-Safe Corporation (NE) $100,000 Ross Hartman, President, Enviro-Safe Corporation $100,000 Private investor On February 11, 2008, Mr. Green converted $200,000 into 4,366,667 shares of stock at $0.045/share. These shares were issued from the recently acquired treasury shares and resulted in a decrease to Additional Paid in Capital in the amount of $105,667. As part of the Asset Stock Purchase Agreement with Triumvirate Environmental, Mr. Green agreed to rescind the issuance of these shares. On June 20, 2008, Mr. Green returned the shares, and in exchange, the Company returned his original $200,000 investment. The Company recorded the receipt of the 4,366,667 common shares as treasury stock based on the cost method, and increased Additional Paid in Capital in the amount of $105,667. In consideration for the above loans, the Company issued each party a convertible debenture for the face value on February 11, 2008. The conversion price on the debentures is the lesser of $0.06 or eighty percent (80%) of the lowest closing bid price of the common stock during the thirty (30) trading days immediately preceding the conversion date. The debentures bear interest at 10% per annum, payable monthly. The principal balance is due and payable on February 11, 2010. The conversion feature on these debentures is variable based on trailing market prices and contain embedded derivatives. As a result of the embedded derivative a $600,000 note discount and $800,000 derivative liability in aggregate were recorded at the assumption date. On June 20, 2008, the Company completed an Asset Stock Purchase Agreement with Triumvirate Environmental. The note holders were paid an aggregate of $600,000 principal and $120,000 pre-payment penalties directly from the proceeds. As of June 20, 2008, the derivative liability was adjusted to market price. The derivative liability and debt discount were written off as of June 20, 2008 resulting in an aggregate accounting gain of $615,000 and a loss of $558,447 respectively. On February 11, 2008, in consideration of their investment in the Convertible Debentures, the holders of the $600,000 convertible debentures were granted 600,000 warrants, which entitle the holders to purchase 600,000 common shares of the Company at an exercise price of $0.10 per share, and expire on February 11, 2018. In accordance with APB 14, "Accounting for Convertible Debt and Debt issued with Stock Purchase Warrants," $44,484, representing the relative fair value of the warrants at the issuance date, was allocated to additional paid in capital. 8 EMBEDDED DERIVATIVES In accordance with of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" and EITF 00-19 "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock", the conversion features associated with the convertible debentures (see note 7- Convertible Debentures) are variable and contain an embedded derivative that requires bifurcation from their hosts contacts. The company has recognized the embedded derivatives as a liability at the date the debentures were issued. In addition, at the initial date of issuance, the Company recorded a debt discount of $2,600,000. 9 COMMITMENTS AND CONTINGENCIES In connection with the Asset Stock Purchase of Enviro-Safe Corp. and Enviro-Safe Corporation (NE), $200,000 was withheld from the allocation of the purchase price. The $200,000 was held in an escrow account pending the outcome of several contingent liabilities. One liability concerned a third party complaint whereas the Company was one of a number of named defendants for response costs associated with the release from a Third Party Plaintiff facility. The Company has settled this matter for $80,000. The second liability involved the settlement of a closure bond related to the Company's former TSDF facility in Lowell, MA. The company has settled this matter for $70,000. The $50,000 balance was returned to the Company in September 2008. GUARANTEE AGREEMENT On October 31, 2006 GreenShift, the Company's former parent, guaranteed the following obligations: o 14-month Term Note in the principal amount of $6,000,000 issued by NextGen Acquisition, Inc., a subsidiary of GreenShift Corporation, to Stillwater Asset-Backed Fund, LP; o 3-year Secured Convertible Debenture in the principal amount of $13,000,000 issued by GS AgriFuels Corporation, a subsidiary of GreenShift Corporation, to YA Global Investments LP (f/k/a Cornell Capital Partners, LP). GreenShift's guaranty was secured by a pledge of all its assets including the assets of the Company. On March 19, 2007, YA Global Investments LP and Stillwater Asset-Backed Fund, LP consented to subordinate their security interests in the assets of Enviro-Safe Corporation and Enviro-Safe Corporation (NE) to a credit facility with a bank which was executed on May 31, 2007. On January 11, 2008, GreenShift completed new financing which was secured by a pledge of all its assets including the assets of GS EnviroServices. On January 11, 2008, the Company issued a $2.0 million dollar convertible debenture to YAGI and in exchange, YAGI limited the Company's liability under a Global Guarantee agreement to $1,500,000. On June 20, 2008, the Company completed an Asset Stock Purchase Agreement with Triumvirate Environmental. A portion of the purchase price was paid directly to YA Global Investments to fully satisfy the Company's liabilities. The Company has been released from the guarantee agreement upon satisfaction of all liabilities (see Note 3- Discontinued Operations for more details). 10 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION The following is a summary of supplemental disclosures of cash flow information:
2008 2007 -------------------------------- Cash paid during the year for the following: Interest $ 93,693 $ 44,402 Income taxes (10,900) (4,940) ------------ -------------- Total 82,793 39,462 ============ ============== 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 611,333 -- Contribution of capital from debt and accrued interest due to affiliate -- 1,161,553 ------------ -------------- Total $ 2,000,000 $ 1,161,553 =========== =============
11 RETIREMENT PLAN The Company maintained a retirement plan pursuant to Section 401(k) of the Internal Revenue Code for its employees. As of June 20, 2008, the Company has terminated the plan. 12 RELATED PARTY TRANSACTIONS On February 11, 2008, GS EnviroServices accepted loans from the following key employees: $400,000 James F. Green, President and CEO $100,000 Doris Christiani, Chief Financial Officer $100,000 Steven Powers, President, Enviro-Safe Corporation (NE) $100,000 Ross Hartman, President, Enviro-Safe Corporation On February 11, 2008, Mr. Green converted $200,000 into 4,366,667 shares of stock at $0.045/share. These shares were issued from the recently acquired treasury shares and resulted in a decrease to Additional Paid in Capital in the amount of $105,667. As part of the Asset Stock purchase with Triumvirate Environmental, Mr. Green agreed to rescind the issuance of these shares. On June 20, 2008, Mr. Green returned the shares, and in exchange, the Company returned his original $200,000 investment. The Company recorded the receipt of the 4,366,667 common shares as treasury stock, based on the cost method and increased Additional Paid in Capital in the amount of $105,667. In consideration for the above loans, the Company issued each party a convertible debenture for the face value on February 11, 2008. The conversion price on the debentures is the lesser of $0.06 or eighty percent (80%) of the lowest closing bid price of the common stock during the thirty (30) trading days immediately preceding the conversion date. The debentures bear interest at 10% per annum, payable monthly. The principal balance is due and payable on February 11, 2010. The conversion feature on these debentures is variable based on trailing market prices and contain embedded derivatives. As a result of the embedded derivative a $600,000 note discount and $800,000 derivative liability in aggregate were recorded at the assumption date. On June 20, 2008, the Company completed an Asset Stock Purchase Agreement with Triumvirate Environmental. The note holders were paid an aggregate of $600,000 principal and $120,000 pre-payment penalties directly from the proceeds. As of June 20, 2008, the derivative liability was adjusted to market price. The derivative liability and debt discount were written off as of June 20, 2008 resulting in an aggregate accounting gain of $615,000 and a loss of $558,447 respectively. On February 11, 2008, in consideration of their investment in the Convertible Debentures, the holders of the $600,000 convertible debentures were granted 600,000 warrants, which entitle the holders to purchase 600,000 common shares of the Company at an exercise price of $0.10 per share, and expire on February 11, 2018. In accordance with APB 14, "Accounting for Convertible Debt and Debt issued with Stock Purchase Warrants," $44,484, representing the relative fair value of the warrants at the issuance date, was allocated to additional paid in capital. On May 11, 2007, the Board of Directors of GS CleanTech Corporation, an affiliate company at that time, elected to make a capital contribution to the Company. As a result the $585,156 inter company loan balance due from the Company to GS CleanTech was reduced to zero. The total balance was credited to additional paid in capital. On September 30, 2007, the Board of Directors of GreenShift Corporation, our parent corporation at that time, elected to make a capital contribution to the Company. As a result the $513,580 inter-company loan balance and accrued interest of $62,817 due from the Company to GreenShift was reduced to zero. The total balance was credited to additional paid in capital. During the year ended December 31, 2008, the Company paid $4,952 to R. Green Management for services, a company owned and operated by a relative of James F. Green, President and CEO of the Company. 13 INCOME TAXES The Company provides for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The benefit from income taxes as of December 31, 2008 and December 31, 2007 consisted of the following: Current benefit: .... 2008 2007 ------- ------ Federal ............. $ -- $ -- State ............... 10,900 4,940 ------ Total current benefit $10,900 $4,940 ======= ====== In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is not likely that the Company will realize the benefits of these deductible differences. The Company's total deferred tax assets and valuation allowance is as follows: Total deferred tax assets $ 1,030,000 $ 31,011 Less valuation allowance (1,030,000) -- ------------- ----------- Net Deferred tax assets $ -- $ 31,011 ============= =========== As of December 31, 2008, the Company has available approximately $1,030,000 of net operating loss carry-forwards which may be used to reduce both future federal and state taxable income and expire in December 2028 and 2013 respectively. 14 PREFEERED STOCK ISSUANCE INCREASE IN AUTHORIZATION OF STOCK - PREFERRED STOCK On March 7, 2008, GS EnviroServices' Board of Directors approved an amendment to GS EnviroServices' Certificate of Incorporation to increase the authorized capital stock to include, with the 100,000,000 shares of common stock already authorized, 1,000,000 shares of preferred stock, par value $.001per share. The preferred shares will be "blank check" shares, meaning that the Board of Directors will have the authority to determine the rights, preferences and limitations associated with the shares, without having to seek a vote of shareholders. On March 7, 2008, the holder of a majority of the voting power of the outstanding voting stock gave his written consent to the amendment. On April 28, 2008, the Secretary of State of the State of Delaware received the Amendment with an effective date of April 30, 2008. As of December 31, 2008, the Company did not have shares of preferred stock outstanding. 15 RETIREMENT OF TREASURY STOCK On August 14, 2008, the Board of Directors of GS EnviroServices resolved to retire 17 million shares of treasury stock. This resulted in an increase to Additional Paid in Capital in the amount of $1,794,333 and a reduction of 17 million shares of common stock. This reduced the outstanding shares of common stock from 32,573,594 shares to 15,573,594 shares. RESIGNATION AND APPOINTMENT - CHAIRMAN OF THE BOARD On January 31, 2008 Kevin Kreisler resigned from his position as a member of the Board of Directors of GS EnviroServices, Inc. and from his position as Chairman of the Board. On the same day, James F. Green accepted appointment to serve as Chairman of the Board. 16 STOCKHOLDERS EQUITY STOCK OPTIONS The Company accounts for stock and stock options issued for services and compensation by employees under SFAS 123 (R). For non-employees, the fair market value of the Company's stock on the date of stock issuance or option/grant is used. The Company determined the fair market value of the options issued under the Black-Scholes Pricing Model. Under the provisions of SFAS 123(R), share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employee's requisite service period (generally the vesting period of the equity grant). On March 12, 2007, the Company issued 3,070,000 stock options to employees. On May 17, 2007 and October 31, 2007 an additional 200,000 and 200,000 stock options were issued respectively. A total of 200,000 options were forfeited in 2007. In 2008, an additional 3,025,800 options were forfeited. 2,611,400 of the shares were forfeited in exchange for $116,500 with the remaining shares forfeited due to termination of employment. The options have a three year vesting term and are forfeitable by the employee if employment is terminated prior to vesting. The options granted have a 5 year contractual life and will vest 33.3% on each anniversary date of the grant until fully vested. The fair value of the stock options granted was $301,502. Each stock option award is estimated as of the date of grant using a Black-Scholes option valuation model that uses the assumptions noted in the table below. To address the lack of historical volatility data for the Company, expected volatility has been estimated based on volatilities of peer companies. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The following weighted average assumptions were used in the fair market value calculation: Expected volatility 143% Expected dividends -- Expected term 5 years Risk-Free interest rate 4.51% A summary of option activity as of December 31, 2008 is presented below:
Weighted Average Weighted Average Remaining Contractual Options Shares Exercise Price Term (in years) ---------------------------------------- -------------- ---------------------- -------------------- Outstanding at January 1, 2008 3,270,000 0.06 3.67 Granted -- -- -- Exercised -- -- -- Forfeited or expired (3,025,800) 0.06 3.25 Outstanding at December 31, 2008 244,200 0.06 3.19 ------------- ---------------------- --------------------- Exercisable at December 31, 2008 244,200 0.06 3.19 ============= ====================== =====================
A summary of the status of the Company's nonvested shares as of December 31, 2008 and changes during the period then ended is presented below:
Nonvested Shares Shares Weighted Average Exercise Price --------------------------------------------- -------------------- -------------------- Nonvested at January 1, 2008 3,270,000 0.06 Granted -- -- Vested 244,200 0.06 Forfeited (3,025,800) 0.06 -------------------- -------------------- Nonvested at December 31, 2008 -- 0.06 ==================== ====================
As a result of stock option forfeitures, there is no unrecognized compensation related to stock options granted as of December 31, 2008. Total compensation expense recognized during the period ended December 31, 2008 was $51,699. WARRANTS On February 11, 2008, in consideration of their investment in the Convertible Debentures, the holders of the $600,000 convertible debentures were granted 600,000 warrants, which entitle the holders to purchase 600,000 common shares of the Company at an exercise price of $0.10 per share, and expire on February 11, 2018. A summary of warrant activity as of December 31, 2008 is presented below:
Weighted Average Weighted Average Remaining Contractual Warrants Shares Exercise Price Term (in years) ---------------------------------------- -------------- --------------------- --------------------- Outstanding at January 1, 2008 -- -- -- Granted 600,000 0.10 9.91 Exercised -- -- -- Forfeited or expired --- -- -- Outstanding at December 31, 2008 600,000 0.10 9.91 ============== --------------------- --------------------- Exercisable at December 31, 2008 600,000 0.10 9.91 ============== ===================== =====================
COMMON STOCK ISSUED FOR SERVICES In December 2007, the Company accrued $286,000 for stock based compensation for key employees and consulting services performed in 2007. The $286,000 was listed as a current liability on the balance sheet as of December 31, 2007. On February 1, 2008, the Company issued 4,400,000 shares of common stock. These shares were registered on Form S-8 in February of 2008 in accordance with the Securities Act of 1933 of securities to be offered to employees pursuant to employee benefit plans. COMMON STOCK ISSUED FOR MANAGEMENT AGREEMENT On December 5, 2007, the Company entered into an environmental services and management agreement with Olson's Greenhouses, Inc. located in Raynham, MA. In consideration for this agreement, the Company has issued to MC Green, LLC 1,000,000 shares of GS EnviroServices, Inc. stock with a fair value of $100,000. These shares are restricted and subject to the requirements of SEC Rule 144. MC Green, LLC is a holding Company for land owned by Olson's Greenhouses. As a result of the sale of the subsidiaries, the operations were discontinued and the assets were written off in December 2008. 17 RECLASSIFICATION Certain items in the 2007 financial statements have been reclassified to conform with the 2008 presentation. These reclassifications have no effect on the equity or net loss as originally presented. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES 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 December 31, 2008. 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 are 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. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of December 31, 2008 in alerting management on a timely basis to information required to be included in the Company's submissions and filings under the Act. There was no change in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the quarter ended December 31, 2008 that has materially affected or is reasonably likely to materially affect the Company's internal control over financial reporting. MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as is defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f). The Company's internal control system was designed to provide reasonable assurance to the Company's management, Board of Directors and shareholders regarding the preparation and fair presentation of the Company's published financial statements in accordance with generally accepted accounting principles. A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects the Company's ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of the Company's annual or interim financial statements that is more than inconsequential will not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified a material weakness in our internal control over financial reporting. 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 duties within our internal control system. 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. Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2008, using the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") Internal Control - Integrated Framework as a basis for our assessment. Based on the results of this assessment, our Chief Executive Officer and our Chief Financial Officer have concluded that because of the above condition, our internal controls over financial reporting were not effective as of December 31, 2008. This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report. ITEM 9B. OTHER INFORMATION None. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Name Age Position ------------------------------------------------------------------------------- James Green 55 Chief Executive Officer, Member of Board of Directors Doris Christiani 49 Chief Financial Officer James Green has been President of Enviro-Safe Corporation since 2003. Mr. Green also was GS CleanTech's President and Chief Executive Officer from February 2005 until September 2005. From 2003 until February 2005 Mr. Green was the Chief Operations Officer for GS CleanTech. Until it was acquired by GS CleanTech Corporation in 2003, Mr. Green was the vice president and an owner of the environmental services division of R.M. Jones & Co., Inc. ("Jones"). Mr. Green was formerly employed as the Chief Operations Officer for Heritage Environmental Services, and as Vice President for Laidlaw, Inc., where he was responsible for what is now the chemical services division of Clean Harbors, with 24 operations in North America, over 1500 employees and $200 million in revenue. He has also served as president of North East Solvents, where he grew a $40 million company from sales of $4 million within four years before being acquired by Laidlaw, Inc. Mr. Green holds undergraduate and advanced degrees in biochemistry and medicinal chemistry and has participated in executive MBA programs. On January 31, 2008, Mr. Green accepted the position to serve as the Company's Chairman of the Board. Doris Christiani, GS EnviroServices's Chief Financial Officer, has worked in the environmental industry for 15 years. From 1992 to 2003, Ms. Christiani was the Controller of Enviro-Safe Corporation, a subsidiary of GS EnviroServices. From December 2003 until March 2007, Ms. Christiani was employed as Controller of GS CleanTech Corporation. On March 19, 2007, GS CleanTech Corporation sold GS EnviroServices Inc. to TDS (Telemedicine) Inc. and Subsidiary. On that day, Kevin Kreisler resigned from his position as the Company's Chief Financial Officer and Doris Christiani was appointed to serve as Chief Financial Officer. Ms. Christiani has a bachelor's degree, an undergraduate degree in accounting, and is currently attending the Executive MBA program at Suffolk University. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than 10 percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission ("SEC"). Officers, directors, and greater than 10 percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on the Company's review of copies of such forms received by the Company, the Company believes that during the year ended December 31, 2007, all filing requirements applicable to all officers, directors, and greater than 10% beneficial stockholders were complied with. INDEMNIFICATION OF DIRECTORS AND OFFICERS. We shall indemnify to the fullest extent permitted by, and in the manner permissible under the laws of the State of Delaware, any person made, or threatened to be made, a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he is or was a director or officer, or served any other enterprise as director, officer or employee at our request. The board of directors, in its discretion, has the power on behalf of our behalf to indemnify any person, other than a director or officer, made a party to any action, suit or proceeding by reason of the fact that he/she is or was one of our employees. Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act, and is therefore, unenforceable. AUDIT COMMITTEE; COMPENSATION COMMITTEE; NOMINATING COMMITTEE The Board of Directors does not have an audit committee, a compensation committee or a nominating committee, due to the fact that there is only one director. The Board of Directors also does not have an audit committee financial expert, for the same reason. CODE OF CONDUCT AND ETHICS The Company has adopted a written code of conduct and ethics that applies to all directors, and employees, including the Company's principal executive officer, principal financial officer, principal accounting officer or controller and any persons performing similar functions. The Company will provide a copy of its code of ethics to any person without charge upon written request addressed to GS EnviroServices, Inc., 590 South Street East, Raynham, MA 02767. ITEM 11. EXECUTIVE COMPENSATION The following table sets forth all compensation, whether from GS EnviroServices or its subsidiaries, awarded to, earned by, or paid to James Green, who was Chief Executive Officer of GS EnviroServices from March 19, 2007 to date and Chief Executive Officer of Enviro-Safe throughout the past three years, Kevin Kreisler, who was Chief Executive Officer of GS EnviroServices until March 19, 2007, and Doris Christiani, our Chief Financial Officer. There were no other executive officers whose total salary and bonus for the fiscal year ended December 31, 2008 exceeded $100,000.
Stock Option Other James Green Year Salary Bonus Awards Awards Compensation -------------------- ------- -------------- -------- -------------- ------------- -------------------- 2008 $131,250 -- -- -- -- 2007 $175,000 -- $130,000 -- -- 2006 $151,375 -- -- -- -- Stock Option Other Doris Christiani Year Salary Bonus Awards Awards Compensation -------------------- ------- ----------- ------------ ------------ --------------- ------------------- 2008 $100,000 -- -- -- -- 2007 $100,000 -- $65,000 $22,484 -- 2006 -- -- -- -- --
EMPLOYMENT AGREEMENTS The Company is party to an employment agreement with James Green, which agreement calls for an annual base salary of $175,000, and reimbursement of expenses, use of a Company automobile, periodic bonuses, three weeks vacation and participation in any employee benefits provided to all employees of the Company. Mr. Green is the President and CEO of GS EnviroServices. The Company is party to an employment agreement with Doris Christiani, which agreement calls for an annual base salary of $100,000, and reimbursement of expenses, periodic bonuses, three weeks vacation and participation in any employee benefits provided to all employees of the Company. Ms. Christiani is the Chief Financial Officer of GS EnviroServices, Inc. EQUITY AWARDS The following tables set forth certain information regarding the stock options acquired by the executive officer named in the table above during the year ended December 31, 2008 and those options held by the officers on December 31, 2008. Option Grants in the Last Fiscal Year
Number of Percent of total Potential realizable securities options granted Exercise value at assumed annual underlying to employees in Price rates of appreciation option granted fiscal year ($/share) Expiration for option term ------------------------ ------------------ ------------------- ------------ ------------ ----------- --------------- None -- -- -- -- 5% 10%
The following tables set forth certain information regarding the stock grants received by the executive officer named in the table above during the year ended December 31, 2008 and held by the officers unvested at December 31, 2008.
Unvested Stock Awards in the Last Fiscal Year Number of Shares That Market Value of Shares That Have Not Vested Have Not Vested ---------------------- ---------------------------------------- ---------------------------------------- None -- --
COMPENSATION OF DIRECTORS James F. Green, the sole member of the Board of Directors, is compensated for his services as noted above. EQUITY COMPENSATION PLAN INFORMATION The following table provides information with respect to the equity securities that are authorized for issuance under our compensation plan as of December 31, 2008:
Number of securities remaining available for Number of securities to Weighted average exercise issuance under equity be issued upon exercise price of outstanding compensation plans of outstanding options, options, warrants and (excluding securities warrants and rights (a) rights reflected in column (a) --------------------------------------------------------------------------------------------------------------------- Equity compensation plans -- -- -- approved by security holders Equity compensation plans not 3,270,000 $0.06 1,600,000 approved by security holders Total 3,270,000 $0.06 1,600,000
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth the number of shares of common stock owned by each person who, as of the Record Date, owned beneficially more than 5% of the outstanding common stock, as well as the ownership of such shares by the sole member of GS EnviroServices' Board of Directors and the shares beneficially owned by its officers and directors as a group. Name and Address Amount and Nature of Percentage of Beneficial Owner Beneficial Ownership(1) of Class ------------------- ----------------------- --------- James F. Green 7,968,540 51.2% 14B Jan Sebastian Drive Sandwich, MA 02563 All officers and directors as 8,968,540 57.6% a group (2 persons) MC Green, LLC 1,000,000 6.4% 590 South Street East Raynham, MA 02767 ------------------------------ (1) Ownership is of record and beneficial unless otherwise noted. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES INDEPENDENT AUDITOR FEES Fees for professional services provided by GS EnviroServices's independent auditors, Rosenburg, Rich, Baker Berman and Company for the years ended December 31, 2008 and 2007 are as follows: 2008 2007 ------------------------------- Audit fees $ 70,000 $ 55,000 Audit-related fees 15,000 15,000 Tax fees 5,000 5,000 Other fees -- -- -------------- ------------- Total fees $ 90,000 $ 75,000 ============== ============= Audit fees consist of fees related to GS EnviroServices's year end financial statements and review of GS EnviroServices quarterly reports on Form 10QSB. Tax fees consist of fees related to analysis of GS EnviroServices and preparation of GS EnviroServices' United States federal, state, and local tax returns in 2008. It is the policy of GS EnviroServices's board of directors to approve all engagements of GS EnviroServices's independent auditors to render audit or non-audit services prior to the initiation of such services. PART IV ITEM 15. EXHIBITS The following are exhibits filed as part of the Company's Form 10-K for the period ended December 31, 2008: Exhibit Number Description 3.1 Certificate of Incorporation - filed as an Appendix to the Definitive Information Statement on Schedule 14C filed on May 9, 2007, and incorporated herein by reference. 3.2 Bylaws - filed as an exhibit to the Current Report on Form 8-K filed on June 13, 2007, and incorporated herein by reference. 10-a 31.1 Certification of Chief Executive Officer pursuant to Exchange Act Rules13a-15(e) and 15d-15(e). 31.2 Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-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. 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/ JAMES F. GREEN ------------------------ JAMES F. GREEN President, Chief Executive Officer By: /S/ DORIS CHRISTIANI -------------------------- DORIS CHRISTIANI Chief Financial Officer Date: March 31, 2009 In accordance with the Exchange Act, this report has been signed below on March 31, 2009 by the following persons on behalf of the Registrant and in the capacities indicated. /S/ JAMES F. GREEN ---------------------------- JAMES F. GREEN Chief Executive Officer, Director /S/ DORIS CHRISTIANI ----------------------------- DORIS CHRISTIANI Chief Financial Officer, Chief Accounting Officer