United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2008.
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to __________.
Commission file number333-136643
CONTRACTED SERVICES, INC.
(Name of small business issuer in its charter)
Florida
(State or other jurisdiction of Incorporation or organization)
59-3656663
(I.R.S. Employer Identification No.)
5222 110th Avenue North, Clearwater, Florida 33760
(Address of principal executive offices and Zip Code)
Registrant’s telephone number, including area code: (727) 410-0740
Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (x) Yes (__) No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) (__) Yes (x) No
The number of shares of the issuer’s common stock, par value $.01 per share, outstanding as of May 14, 2008 was 101,625,000.
Transitional Small Business Disclosure Format (Check one): (__) Yes (x) No
TABLE OF CONTENTS
Page | |
Part I. Financial Information | 3 |
Item 1. Financial Statements. | 3 |
Balance Sheets for the periods ending March 31, 2008 (unaudited) and March 31, 2007 (unaudited). | 3 |
Statements of Operations for the 3 month periods ending March 31, 2008 and 2007 (unaudited). | 4 |
Statements of Cash Flows for the 3 month periods ending March 31, 2008 and 2007 (unaudited). | 5 |
Notes to Financial Statements (unaudited) | 6 |
Item 2. Management’s Discussion and Analysis or Plan of Operation. | 9 |
Item 3. Controls and Procedures. | 10 |
Part II. Other Information | 11 |
Item 1. Legal Proceedings. | 11 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. | 11 |
Item 3. Defaults Upon Senior Securities. | 11 |
Item 4. Submission of Matters to a Vote of Security Holders. | 11 |
Item 5. Other Information. | 11 |
Item 6. Exhibits | 11 |
Signatures | 12 |
2
Part I. Financial Information, Item 1. Financial Statements.
See accompanying notes and accountant’s report.
3
CONTRACTED SERVICES, INC. Statements of Operations (unaudited) For the Three Months Ended March 31, 2008 and March 31, 2007 | |||||||
2008 | 2007 | ||||||
Revenues | |||||||
Revenues | $29,954 | $34,337 | |||||
29,954 | 34,337 | ||||||
Operating Expenses: | |||||||
Accounting | 5,000 | 1,500 | |||||
Advertising | 3,523 | 5,084 | |||||
Amortization | 208 | 0 | |||||
Automobile Expense | 1,458 | 1,000 | |||||
Bad Debts | 12 | (204) | |||||
Bank Charges | 310 | 467 | |||||
Contract Labor | 0 | 9,690 | |||||
Cost of Goods Sold | 16,498 | 11,844 | |||||
Depreciation | 2,044 | 3,611 | |||||
Dues & Subscriptions | 163 | 800 | |||||
Employee Leasing | 0 | 20,160 | |||||
Business Promotion | 0 | 760 | |||||
Interest Expense | 1,714 | 1,884 | |||||
Licenses and Permits | 100 | 450 | |||||
Legal & Professional Fees | 860 | 10,000 | |||||
Materials | 0 | 21 | |||||
Office Expense | 510 | 746 | |||||
Officers Compensation - Note G | 960 | 960 | |||||
Postage | 888 | 704 | |||||
Software Support | 0 | 499 | |||||
Telephone | 1,373 | 984 | |||||
Travel & Entertainment | 430 | 305 | |||||
Utilities | 0 | 35 | |||||
36,051 | 71,300 | ||||||
(6,097) | (36,963) | ||||||
Other Income | |||||||
Gain on Sale of Assets | 0 | 2,064 | |||||
0 | 2,064 | ||||||
Income (Loss) Before Provision for Income Taxes | (6,097) | (34,899) | |||||
Provision for Income Taxes | |||||||
Current Tax Provision | 0 | 0 | |||||
Deferred Taxes | 0 | 0 | |||||
0 | 0 | ||||||
Net Income (Loss) | ($6,097) | ($34,899) | |||||
Earnings per common share | (0.00) | (0.00) | |||||
Weighted Average Shares Basic and Diluted | 101,625,000 | 101,625,000 | |||||
See accompanying notes and accountant’s report.
4
CONTRACTED SERVICES, INC. Statements of Cash Flow (unaudited) For the Three Months Ended March 31, 2008 and March 31, 2007 | ||||||
2008 | 2007 | |||||
OPERATING ACTIVITIES: | ||||||
Net Income (Loss) | ($6,097) | ($34,899) | ||||
Adjustments to reconcile Net Income (Loss) | ||||||
to net cash provided by operations: | ||||||
Depreciation and Amortization | $2,252 | $3,611 | ||||
Gain on Sale of Assets | 0 | (2,064) | ||||
Noncash Officers Compensation | 960 | 960 | ||||
(Increase) Decrease in: | ||||||
Accounts Receivable | 5,303 | 39,560 | ||||
Increase (Decrease) in: | ||||||
Accounts Payable | 3,250 | 5,542 | ||||
Credit Cards Payable | 1,269 | (2,864) | ||||
Sales Tax Payable | 46 | 268 | ||||
Provision for Income Taxes | 0 | (154) | ||||
6,983 | 9,960 | |||||
INVESTING ACTIVITIES: | ||||||
Proceeeds from Sale of Assets | 0 | 11,000 | ||||
Shareholder Loans | (918) | (11,611) | ||||
(918) | (611) | |||||
FINANCING ACTIVITIES: | ||||||
Payments on Notes Payable | (1,858) | (1,699) | ||||
(1,858) | (1,699) | |||||
NET CASH INCREASE (DECREASE) FOR THE PERIOD | 4,207 | 7,650 | ||||
BEGINNING CASH JANUARY 1 | 836 | 10,666 | ||||
ENDING CASH MARCH 31 | $5,043 | $18,316 | ||||
SUPPLEMENTAL DISCLOSURE: | ||||||
Interest Expense | 1,714 | 1,884 | ||||
Income Tax | 0 | 154 | ||||
Noncash Investing & Financing Activities: | ||||||
Noncash Officers Compensation | 960 | 960 | ||||
Note Receivable - Idocubox | (12,500) | 0 | ||||
Intangible Assets | 12,500 | 0 | ||||
See accompanying notes and accountant’s report.
5
CONTRACTED SERVICES, INC.
Notes to Financial Statements (unaudited)
March 31, 2008 and March 31, 2007
NOTE A – ORGANIZATION AND NATURE OF BUSINESS
The Company was incorporated June 30, 2000 in the State of Florida. The Company is a computer consulting company and a commercial lawn maintenance company and is located in St. Petersburg, Florida.
NOTE B – SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all short-term securities with a maturity of three months or less to be cash equivalents.
Fixed Assets
Property and equipment are stated at cost. Depreciation is computed using accelerated methods over the estimated useful lives of the assets, ranging from five to seven years. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires the corporation to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Revenue Recognition
The Company generates revenue by providing services in the field of computer consulting and commercial lawn maintenance. The Company recognizes its revenue when consulting services and commercial lawn maintenance have been completed and its customers are billed.
Income Taxes
The Company had previously elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, the Company does not pay federal income taxes on its taxable income and is not allowed a net operating loss carryover or carryback as a deduction. Instead, the stockholders are liable for individual federal income taxes on their respective shares of the Company's taxable income and include their respective shares of the Company's net operating losses in their individual income tax returns. In 2006, the Company began to be taxed under Subchapter C of the Internal Revenue Code. Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes, if and when applicable, related primarily to differences between the basis of certain assets and liabilities for financial and tax reporting. Any deferred taxes would represent the future tax ret urn consequences of those differences, which will either be taxable when the assets and liabilities are recovered or settled.
NOTE C – INTANGIBLE ASSETS/NOTE RECEIVABLE
The Company had a promissory note receivable from a party related by common ownership, Idocubox, in the amount of $20,000.00 dated September 21, 2005. The principal balance of the note, $12,500.00, was used to acquire the rights to the software, name and website of Idocubox which has been dissolved in 2008. The asset will be amortized over a useful life of 15 years and the Company believes the carrying value of the asset is fully recoverable.
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CONTRACTED SERVICES, INC.
Notes to Financial Statements (unaudited)
March 31, 2008 and March 31, 2007
NOTE D – NOTES PAYABLE
The Company has a note payable to Ford Motor Credit Company. The note is dated June 20, 2006 in the original amount of $40,586.86 and is payable in monthly installments of $845.43 over five (5) years with a fixed interest rate of 8.99%. The note is secured by a 2007 Ford F-350 vehicle.
Scheduled principal maturities of the note over the next five years are as follows:
Year ending December 31,
2008………………………………………………………….$ 7,686.87
2009………………………………………………………….$ 8,407.11
2010………………………………………………………….$ 9,194.86
2011………………………………………………………….$ 3,664.31
NOTE E – EARNINGS PER COMMON SHARE
Earnings (Loss) per common share of ($.00) for the three month period ended March 31, 2008 and ($.00) for the three month period ended March 31, 2007 were calculated based on a net income (loss) numerator of ($6,096.69) and ($34,898.57) divided by a denominator of 101,625,000 shares of outstanding common stock (Weighted average number of shares issued during the periods). There are no share equivalents.
NOTE F – OFFICERS COMPENSATION
The Company recognized contributed non-cash officers’ compensation for one of its officers who provides approximately 16 hours of service per month to the Company.
NOTE G – RELATED PARTY TRANSACTIONS
The corporation has the following related party transactions with Medical Check In Systems, Inc., a corporation owned 100% by the majority shareholder.
Contracted Services, Inc. has a manufacturing agreement with Medical Check In Systems, Inc. whereby all systems sold by Medical Check In Systems, Inc. are manufactured by Contracted Services at a flat rate per unit. This agreement was implemented in January 2008. Total revenue received by Contracted Services, Inc. from Medical Check In Systems, Inc. for the periods ended March 31, 2008 and 2007 were $20,000.00 and $0.00. Accounts receivable due from Medical Check In Systems, Inc. as of March 31, 2008 were $35,020.00.
NOTE H - ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board and other entities issued new or modifications to, or interpretations of, existing accounting guidance during 2008. The corporation has carefully considered the new pronouncements that altered generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term.
NOTE I– FORWARD STOCK SPLIT
On September 26, 2007 the Company’s Board filed amended and restated articles changing the total authorized capital stock of the corporation to 750,000,000 shares. On that same date the Company further ratified and authorized a 75:1 forward stock split that will result in 101,625,000 issued and outstanding shares. All references in these financial statements to amounts per share and number of shares outstanding have been restated to give effect to this stock split.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Contracted Services, Inc.:
We have reviewed the accompanying balance sheets of Contracted Services, Inc. as of March 31, 2008 and 2007 and the related statements of operations and cash flows for the three months periods then ended. These financial statements are the responsibility of the company’s management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
Randall N. Drake, CPA, PA | |
Randall N. Drake, CPA, PA | |
Clearwater, Florida | |
May 10, 2008 | |
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Item 2. Management’s Discussion and Analysis or Plan of Operation.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
We are an operation company that is seeking to expand its operations. We have an operating history and have generated revenues from our activities that have produced both net incomes and losses. We have yet to undertake any expansion activity. As our company is considered to be in the early stages of business and there is no reasonable likelihood that increased revenues can be derived from our expansion in the foreseeable future, we consider that our operations will require us to retain management personnel that can lead the company in its expansion.
Our Board believes there is substantial doubt that we can expand our business during the next twelve months unless we obtain additional capital to pay for our expansion. This is because we have not generated sufficient profits to cover our expansion. Accordingly, we must raise cash from sources other than our operations. Our only other source for cash at this time is investment by others in the Company. We must raise cash to implement our planned expansion.
Since our business activity is related to many different services that we offer, it is the opinion of management that the most meaningful financial information relates primarily to current liquidity and solvency. As of December 31, 2007, we had working capital of $3,412.90. Despite the commitment of our officers and directors to advance us up to $25,000 during the next twelve months, unless we raise additional funds, we will be faced with a further working capital deficiency by no later than the end of the next twelve months. Our future financial success will be dependent on the success of our expansion. Such expansion may take years to complete and future cash flows, if any, are impossible to predict at this time. The realization value from any expansion which may be done by us is largely dependent on factors beyond our control such as the market for our services, the number of available new customers and sufficient personnel available to perform work that we obtain.
We recognize that additional capital will be required during the next twelve months. Should we be unable to raise additional capital from other sources, our directors and officers have committed to advance the company up to $25,000 to enable the Company to meet its cash needs over the coming year.
We have equipment to sell, Company owned and not held for resale, however such sale of our capital assets would hurt our ability to perform operations. We are going to buy equipment during the next twelve months. We do not know the extent of the equipment need until we have located additional customers for any of our services.
Operating History; Need for Additional Capital
There is limited historical financial information about us upon which to base an evaluation of our performance as an operating corporation. We have generated both profits and losses and it is this inconsistency that makes an evaluation of our performance difficult. Further, we offer services in so many different areas that we may not be able to manage all of the various services profitably. We cannot guarantee we will be successful in our expansion activities. Our business is subject to risks inherent in the establishment of an expanding business enterprise, including limited capital resources, possible delays in the generation of revenues from expending additional capital, and possible cost overruns due to price and cost increases in services.
To become profitable and competitive, we must invest into the expansion of our business before we start hiring a management team. We must obtain equity or debt financing to provide the capital required to fully implement our expansion program. We have no assurance that financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to commence, continue, develop or expand. Even if available, equity financing could result in dilution to existing shareholders.
Liquidity and Capital Resources
Our cash and cash equivalents were $5,043 as of March 31, 2008 compared to $18,316 as of March 31, 2007. This decrease is due mostly to a decline in revenues.
The cash provided by operating activities during the period ended March 31, 2008 was $6,983 as compared to the cash provided during the period ended March 31, 2007 which was $9,960. Operating expenses decreased by $35,249 during the same period in large part due to decreased employee leasing expenses and labor, and the legal, accounting and other fees related to the costs of filing the registration statement and periodic reporting to the Securities and Exchange Commission.
9
Results of Operations – March 31, 2008 Compared to 2007
Our financial statements contained herein have been prepared on a Generally Accepted Accounting Principles basis. We incurred a net loss for the period ended March 31, 2008, of ($6,097) compared to ($34,899) for the same period in 2007. This decrease in the net loss was due substantially to the decreases in expenses.
Our cash flow for the period ended March 31, 2008 showed a net increase in cash of $4,207. Our revenues for the period ended March 31, 2008 were $29,954, as compared to revenues of 34,337 for the same period ended March 31, 2007. We attribute this decrease to the loss of our mowing contracts and our effort to develop our computer consulting business.
Trends
We are in the pre-expansion stage, we have not generated any additional revenue we can attribute to our plans for expansion. We are unaware of any known trends, events or uncertainties that have had, or are reasonably likely to have, a material impact on our business or income, either in the long term of short term.
Critical Accounting Policies
Our discussion and analysis of its financial condition and results of operations, including the discussion on liquidity and capital resources, are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management re-evaluates its estimates and judgments. We have presented our financials to give retroactive effect to changes in our capital structure.
The going concern basis of presentation assumes we will continue in operation throughout the next fiscal year and into the foreseeable future and will be able to realize our assets and discharge our liabilities and commitments in the normal course of business. The financial statements do not include any adjustments that might result from the outcome of the uncertainty.
Our intended expansion activities are dependent upon our ability to obtain financing in the form of debt and/or equity and ultimately to generate future profitable operational activity or income from its investments. We may look to secure additional funds through future debt or equity financings. Such financings may not be available or may not be available on reasonable terms.
Item 3. Controls and Procedures.
Item 3A(T). Controls and Procedures.
(a) Evaluation of disclosure controls and procedures
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
As of March 31, 2007, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934 and based on the criteria for effective internal control described inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our financial disclosure controls and procedures were not effective so as to timely identify, correct and disclose information required to be included in our Securities and Exchange Commission (“SEC”) reports due to the Company’s limited internal resources and lack of ability to have multiple levels of transaction review. Through the use of external consultants and the review process, management believes that the financial statements and other information presented herewith are materially correct.
10
The Company’s management, including its Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures, or its internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this Annual Report.
This report shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
(b) Changes in Internal Controls
After evaluation by the Company’s management, the Company’s management has determined there were no significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s internal controls subsequent to the Evaluation Date.
Part II. Other Information
Item 1. Legal Proceedings.
NONE
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders.
NONE
Item 5. Other Information.
NONE
Item 6. Exhibits
Exhibit Number
Location
and Description
Reference
(a)
Reports of Independent Certified Accountants
Filed Herewith
(b)
Financial Statements
Filed Herewith
(c)
Exhibits required by Item 601, Regulation SB;
(3.0)
Articles of Incorporation
11
(3.1)
Initial Articles of Incorporation filed
See Exhibit Key
with SB-2 Registration Statement
on August 15, 2006
(3.2)
Amendment to Articles of Incorporation
See Exhibit Key
filed with SB-2 Registration Statement
on August 15, 2006
(3.3)
Amendment to Articles of Incorporation
Filed Herewith
filed with the Florida Secretary of State on
September 26, 2007 and reported on
Form 8-K filed on October 1, 2007
(3.4)
Bylaws filed with SB-2 Registration
See Exhibit Key
Statement on August 15, 2006
(11.0)
Statement re: computation of per share
Note E to
earnings
Financial Stmts.
(14.0)
Code of Ethics
See Exhibit Key
(31.0)
Certificate of Chief Executive Officer
Filed herewith
and Chief Financial Officer
(32.0)
Certification pursuant to 18 U.S.C. § 1350,
Filed herewith
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Exhibit Key
3.1
Incorporated by reference herein to the Company’s Form SB-2
Registration Statement filed with the Securities and Exchange
Commission on August 15, 2006.
3.2
Incorporated by reference herein to the Company’s Form SB-2
Registration Statement filed with the Securities and Exchange
Commission on August 15, 2006.
3.4
Incorporated by reference herein to the Company’s Form SB-2
Registration Statement filed with the Securities and Exchange
Commission on August 15, 2006.
14.0
Incorporated by reference herein to the Company’s Form SB-2
Registration Statement filed with the Securities and Exchange
Commission on August 15, 2006.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CONTRACTED SERVICES, INC.
Date: May 13, 2008
By: /s/ John L. Corn
John L. Corn,
Chief Executive Officer
Chief Financial Officer
12
