UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 JUNE 30, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For The Transition Period From __________ To __________
COMMISSION FILE NUMBER 0-25167
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GSL HOLDINGS, INC.
------------------
(Exact name of small business issuer as specified in its charter)
BRITISH VIRGIN ISLANDS N/A
- ---------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
123 South Los Robles Avenue
Pasadena, California 91101
- ---------------------------------------- -----------------------
(Address of Principal Executive Offices) (Zip Code)
(626) 356-3888
----------------------------
(Issuer's Telephone Number)
APPLICABLE ONLY TO CORPORATE ISSUERS
Common stock, no par value, 8,526,988 issued and outstanding as of July 31, 2002
i
INDEX
PAGE
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PART I - FINANCIAL STATEMENT 2
ITEM 1 - FINANCIAL STATEMENTS 2
Consolidated Balance Sheets as of
June 30, 2002 and as of December 31, 2001 3
Consolidated Statements of Operations
for the Three and Six Months Ended
June 30, 2002 4
Consolidated Statements of Stockholders' Equity (Deficit) 5-6
Consolidated Statements of Cash Flows (Unaudited) 7
Notes to Consolidated Financial Statements 8-12
ITEM 2. - MANAGEMENT'S DISCUSSIONS AND ANALYSIS OR PLAN OF
OPERATION 13-15
PART II - OTHER INFORMATION 15
ITEM 2. CHANGES IN SECURITIES 15
ITEM 5. OTHER INFORMATION 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 16
SIGNATURES 17
EXHIBITS 18-19
1
PART 1 - FINANCIAL STATEMENTS
ITEM 1 - FINANCIAL STATEMENTS
GSL HOLDINGS, INC. AND SUBSIDIARY
(FORMERLY BETHURUM LABORATORIES, INC.)
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002 and December 31, 2001
2
GSL HOLDINGS, INC. AND SUBSIDIARY
(FORMERLY BETHURUM LABORATORIES, INC.)
(A Development Stage Company)
Consolidated Balance Sheets
(Unaudited)
ASSETS
------
June 30, December 31,
2002 2001
------------ ------------
CURRENT ASSETS
Cash $ 16,908 $ -
Deposits 9,006 -
----------- -----------
Total Current Assets 25,914 -
----------- -----------
FIXED ASSETS, NET 2,346 -
----------- -----------
TOTAL ASSETS $ 28,260 $ -
=========== ===========
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
---------------------------------------------
CURRENT LIABILITIES
Accounts payable $ 28,503 $ -
Payable - related party 50,500 -
Deferred revenue 10,000 -
Note payable 50,000 -
Notes payable - related parties 200,000 -
----------- -----------
Total Current Liabilities 339,003 -
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock; authorized 1,000,000,000 common
shares, no par value; 8,516,988 and 1 share
issued and outstanding, respectively 888,415 1
Additional paid-in capital - -
Deferred consulting fees (367,892) -
Deficit accumulated during development stage (831,266) (1)
----------- -----------
Total Stockholders' Equity (Deficit) (310,743) -
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 28,260 $ -
=========== ===========
The accompanying notes are an integral part
of these consolidated financial statements.
3
GSL HOLDINGS, INC. AND SUBSIDIARY
(FORMERLY BETHURUM LABORATORIES, INC.)
(A Development Stage Company)
Consolidated Statements of Operations
From Inception on May 17, 2001 to June 30, 2002
(Unaudited)
From
Inception on
For the Three For the Six May 17,
Months Ended Months Ended 2001 Through
June 30, June 30, June 30,
2002 2002 2002
------------ ------------ ------------
REVENUES $ - $ - $ -
------------ ------------ ------------
EXPENSES
Depreciation 65 65 65
General and administrative 613,494 831,200 831,201
------------ ------------ ------------
Total Expenses 613,559 831,265 831,266
------------ ------------ ------------
LOSS FROM OPERATIONS (613,559) (831,265) (831,266)
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Other income - - -
Interest expense - - -
------------ ------------ ------------
Total Other Income (Expense) - - -
------------ ------------ ------------
NET LOSS $ (613,559) $ (831,265) $ (831,266)
============ ============ ============
BASIC LOSS PER SHARE $ (0.07) $ (0.10)
============ ============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 8,360,979 8,267,540
============ ============
The three and six months ended June 30, 2001 are not presented because the
inception date of the Company is May 17, 2001.
The accompanying notes are an integral part
of these consolidated financial statements.
4
GSL HOLDINGS, INC. AND SUBSIDIARY
(FORMERLY BETHURUM LABORATORIES, INC.)
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
From Inception on May 17, 2001 to June 30, 2002
(Unaudited)
Deficit
Common Stock Additional Deferred Accumulated
------------------------- Paid-in Consulting During the
Shares Amount Capital Fees Development Stage
------------ ------------ ------------ ------------ ------------
Balance at inception - $ - $ - $ - $ -
Issuance of common stock for
services at inception $0.00 per share 7,600,000 1 - - -
Net loss from inception on May 17, 2001
through December 31, 2001 - - - - (1)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2001 7,600,000 1 - - (1)
Recapitalization (Note 1) 400,188 (507,440) - - -
Options to purchase common stock
granted on January 8, 2002 as
payment for consulting services - 407,885 - (407,885) -
Common stock issued for cash at $1.00
per share on January 10, 2002 10,000 10,000 - - -
Common stock issued for cash at $2.50
per share on January 10, 2002 2,000 5,000 - - -
Common stock issued for cash at $2.50
per share on January 17, 2002 2,000 5,000 - - -
Common stock issued for cash at $2.50
per share on January 20, 2002 5,000 12,500 - - -
Common stock issued for cash at $2.50
per share on January 25, 2002 30,000 75,000 - - -
Common stock issued for cash at $2.00
per share on February 21, 2002 100,000 200,000 - - -
Options to purchase common stock granted
on April 11, 2002 as payment for consulting fees - 23,469 - - -
Common stock issued for consulting
fees at $3.00 per share on April 20, 2002 83,000 250,000 - (250,000) -
----------- ----------- ----------- ----------- -----------
Balance Forward 8,232,188 $ 481,415 $ - $ (657,885) $ (1)
----------- ----------- ----------- ----------- -----------
The accompanying notes are an integral part
of these consolidated financial statements.
5
GSL HOLDINGS, INC. AND SUBSIDIARY
(FORMERLY BETHURUM LABORATORIES, INC.)
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
From Inception on May 17, 2001 to June 30, 2002
(Unaudited)
Deficit
Common Stock Additional Deferred Accumulated
------------------------- Paid-in Consulting During the
Shares Amount Capital Fees Development Stage
------------ ------------ ------------ ------------ ------------
Balance Forward 8,232,188 $ 481,415 $ - $ (657,885) $ (1)
Common stock issued for consulting
fees at $3.00 per share on April 10,
2002 66,000 200,000 - (200,000) -
Common stock issued for cash at $2.50
per share on April 22, 2002 10,000 25,000 - - -
Common stock issued for consulting fees
at $2.50 per share on May 20, 2002 30,000 75,000 - (75,000) -
Common stock issued for exercise of
options at $0.50 per share on May 21,
2002 120,000 60,000 - - -
Common stock issued for exercise of
options at $0.50 per share on May 23,
2002 50,000 25,000 - - -
Common stock issued for cash at $2.50
per share on June 26, 2002 8,000 20,000 - - -
Common stock issued for consulting fees
at $2.50 per share on June 30, 2002 800 2,000 - - -
Amortization of deferred consulting fees - - - 564,993 -
Net loss for the six months ended June 30,
2002 - - - - (831,265)
----------- ----------- ----------- ----------- -----------
Balance, June 30, 2002 8,516,988 $ 888,415 $ - $ (367,892) $ (831,266)
=========== =========== =========== =========== ===========
The accompanying notes are an integral part
of these consolidated financial statements.
6
GSL HOLDINGS, INC. AND SUBSIDIARY
(FORMERLY BETHURUM LABORATORIES, INC.)
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited) From Inception
For the Six on May 17,
Months Ended 2001 Through
June 30, 2002 June 30, 2002
CASH FLOWS FROM OPERATING ACTIVITIES ------------- -------------
Net loss $ (831,265) $ (831,266)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 65 65
Amortization of deferred consulting fees 564,993 564,993
Common stock issued for services 2,000 2,001
Options issued for services 23,469 23,469
Changes in operating assets and liabilities:
(Increase) in deposits (9,006) (9,006)
Increase in accounts payable 20,563 20,563
Increase in payable-related party 50,500 50,500
Increase in deferred revenue 10,000 10,000
----------- -----------
Net Cash Used by Operating Activities (168,681) (168,681)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (2,411) (2,411)
----------- -----------
Net Cash Used by Investing Activities (2,411) (2,411)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of notes payable (300,000) (300,000)
Proceeds from notes payable 50,000 50,000
Proceeds from reorganization 500 500
Issuance of common stock for cash 437,500 437,500
----------- -----------
Net Cash Provided by Financing Activities 188,000 188,000
----------- -----------
NET INCREASE IN CASH 16,908 16,908
CASH AT BEGINNING OF PERIOD - -
----------- -----------
CASH AT END OF PERIOD $ 16,908 $ 16,908
=========== ===========
CASH PAID FOR:
Interest $ - $ -
Income taxes $ - $ -
SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Common stock options issued for deferred
consulting fees $ 932,885 $ 932,885
Common stock issued for services $ 2,000 $ 2,001
Options issued for services $ 23,469 $ 23,469
The three and six months ended June 30, 2001 are not presented because the
inception date of the Company is May 17, 2001.
The accompanying notes are an integral part
of these consolidated financial statements.
7
GSL HOLDINGS, INC. AND SUBSIDIARY
(FORMERLY BETHURUM LABORATORIES, INC.)
Notes to Consolidated Financial Statements
June 30, 2002 and December 31, 2001
NOTE 1 - ORGANIZATION
Effective January 8, 2002, Bethurum Laboritories, Inc. (Bethurum), and
Global Starlink Group, Inc. (Global), completed a Plan and Agreement
of Reorganization whereby Bethurum issued 7,600,000 shares of its
common stock in exchange for all of the outstanding common stock of
Global. Immediately prior to the Plan and Agreement of Reorganization,
Bethurum had 400,188 shares of common stock issued and outstanding.
The acquisition was accounted for as a recapitalization of Global
because the shareholders of Global controlled Bethurum after the
acquisition was completed. Global was treated as the acquiring entity
for accounting purposes and Bethurum was the surviving entity for
legal purposes. There was no adjustment to the carrying value of the
assets or liabilities of Global Starlink Group, Inc. (Global) and its
wholly owned subsidiaries, nor was there any adjustment to the
carrying value of the net assets of Bethurum. All references to shares
of common stock have been retroactively restated.
On January 18, 2002, Bethurum changed its name to GSL Holdings, Inc.
Also effective January 18, 2002, a 1 for 4 reverse split of the
Company's common stock was effected. All references to shares of
common stock in the accompanying condensed consolidated financial
statements have been retroactively restated to reflect this reverse
stock split.
The accompanying unaudited condensed consolidated financial statements
include the accounts of GSL Holdings, inc. and its wholly owned
subsidiary, Global Starlink Group, Inc. All of the entities are
collectively referred to as "the Company".
NOTE 2 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted in accordance with such rules and regulations.
The information furnished in the interim condensed consolidated
financial statements include normal recurring adjustments and reflects
all adjustments, which, in the opinion of management, are necessary
for a fair presentation of such financial statements. Although
management believes the disclosures and information presented are
adequate to make the information not misleading, it is suggested that
these interim condensed consolidated financial statements be read in
conjunction with the Company's most recent audited financial
statements and notes thereto included in the December 31, 2001 Annual
8
GSL HOLDINGS, INC. AND SUBSIDIARY
(FORMERLY BETHURUM LABORATORIES, INC.)
Notes to Consolidated Financial Statements
June 30, 2002 and December 31, 2001
NOTE 2 - BASIS OF FINANCIAL STATEMENT PRESENTATION (Continued)
Report on Form 10-KSB. Operating results for the three and six months
ended June 30, 2002 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2002.
NOTE 3 - GOING CONCERN
The Company's consolidated financial statements are prepared using
generally accepted accounting principles applicable to a going concern
which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. However, the Company
does not have significant cash or other material assets, nor does it
have an established source of revenues sufficient to cover its
operating costs to allow it to continue as a going concern. It is the
intent of the Company to begin formal operations pursuing various
business opportunities along with seeking transactions with existing
operating companies. The accompanying consolidated financial
statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
NOTE 4 - NOTES PAYABLE - RELATED PARTIES
On December 1, 2001 two notes payable were entered into by former
officers of the Company, for $175,000 per note for a total of
$350,000. These notes were to be paid as follows: $50,000 on or before
December 31, 2001, $150,000 on or before March 1, 2002 and $150,000 on
or before June 1, 2002. The notes are non-interest bearing unless
default on payment occurs. At June 30, 2002, all scheduled payments
had been made with these notes payable paid in full.
During October, November and December 2001, a total of $200,000 was
advanced to the Company by the shareholder of Global Starlink Group,
Inc. This amount remains payable to the shareholder at June 30, 2002,
is non-interest bearing, and is due upon demand.
NOTE 5 - MATERIAL EVENTS
On January 8, 2002, the Company entered into two agreements for
general consulting services with two separate individuals. The first
agreement provides for services to be rendered through May 31, 2002,
in exchange for compensation in the form of options to purchase 50,000
shares of the Company's common stock at $0.50 per share. At the time
the options were granted, the Company was involved in a private
placement to sell shares of its common stock at $2.50 per share. These
options have been valued at $119,996 using the Black Scholes method as
prescribed by FAS 123 and has been included as part of common stock
value in the accompanying unaudited condensed consolidated financial
statements. A related expense has been accounted for the full amount
through June 30, 2002. These options were exercised on May 23, 2002,
and resulted in $25,000 cash proceeds to the Company.
9
GSL HOLDINGS, INC. AND SUBSIDIARY
(FORMERLY BETHURUM LABORATORIES, INC.)
Notes to Consolidated Financial Statements
June 30, 2002 and December 31, 2001
NOTE 5 - MATERIAL EVENTS (Continued)
The second agreement provides for services to be rendered through
January 8, 2003 in exchange for compensation in the form of options to
purchase 120,000 shares of the Company's common stock at $0.50 per
share. At the time the options were granted, the Company was involved
in a private placement to sell shares of its common stock at $2.50 per
share.
These options have been valued at $287,919 using the Black Scholes
method as prescribed by FAS 123 and has been included as part of
common stock value in the accompanying unaudited condensed
consolidated financial statements. A related expense has been
accounted for in the amount of $136,761 through June 30, 2002, with
the remaining $151,158 reflected as deferred consulting fees at June
30, 2002 to be expensed over the remaining term of the consulting
agreement. These options were exercised on May 21, 2002, and resulted
in $60,000 cash proceeds to the Company.
During the six months ended June 30, 2002, the Company entered into
various other consulting agreements with individuals to provide a
variety of services to the Company. One of the new consulting
agreements was for a term expiring on June 30, 2002, in exchange for
compensation in the form of options to purchase 10,000 shares of the
Company's common stock at $1.00 per share. At the time the options
were granted, the Company continued to be involved in a private
placement to sell shares of its common stock at $2.50 per share. These
options have been valued at $23,469 using the Black Scholes method as
prescribed by FAS 123 and has been included as part of common stock
value in the accompanying unaudited condensed consolidated financial
statements. A related expense has been accounted for the full amount
through June 30, 2002. These options were exercised subsequent to June
30, 2002.
An additional agreement provides for services to be rendered for a
twelve month period beginning May 20, 2002, in exchange for
compensation in the form of 30,000 shares of the Company's common
stock. At the time the shares were issued, the Company was involved in
a private placement to sell shares of its common stock at $2.50 per
share. These shares of common stock have been valued at $75,000 and
has been included as part of common stock value in the accompanying
unaudited condensed consolidated financial statements. A related
expense has been accounted for in the amount of $8,266 through June
30, 2002, with the remaining $66,734 reflected as deferred consulting
fees at June 30, 2002 to be expensed over the remaining term of the
consulting agreement.
Two additional consulting agreements were entered into effective April
1, 2002 both having terms expiring December 31, 2002. Total
compensation for services to be rendered in accordance with the
10
GSL HOLDINGS, INC. AND SUBSIDIARY
(FORMERLY BETHURUM LABORATORIES, INC.)
Notes to Consolidated Financial Statements
June 30, 2002 and December 31, 2001
NOTE 5 - MATERIAL EVENTS (Continued)
agreements is $900,000. At June 30,2002, a total of 149,000 shares of
the Company's common stock had been issued as partial payment for
these services. By agreement, these shares have been valued at $3.00
per share or a total of $450,000, which exceeds the per share price at
which the Company has been selling it's common stock in private
placement transactions. This amount has been included as part of
common stock value in the accompanying unaudited condensed
consolidated financial statements. A related expense has been
accounted for in the amount of $300,000 through June 30, 2002, with
the remaining $150,000 reflected as deferred consulting fees at June
30, 2002 to be expensed over the remaining term of the consulting
agreement along with the balance of any additional consideration paid
to satisfy the obligations on these agreements.
Effective April 1, 2002, the Company entered into a formal consulting
agreement with it's President and Chief Executive Officer to provide
compensations arrangements for his performance of those duties and
services. The agreement is for an undetermined period of time and
provides for the Company to pay compensation equal to $20,000 per
month plus a reasonable housing allowance up to $5,000 per month. As
of June 30, 2002, the Company had partially compensated its President
and Chief Executive Officer in accordance with this agreement with a
remaining unpaid balance outstanding of $50,500 at June 30, 2002.
Also, in connection with these arrangements, the Company entered into
a lease agreement for the President and CEO's housing, consisting of
an initial security deposit of $3,756 and monthly payments of $2,500.
The lease expires in February 2003.
On June 15, 2002, the Company entered into a consulting agreement with
an individual serving as its principal financial officer. The
agreement is for an unspecified period of time and provides for
compensation for related services in the form of $2,000 cash per month
plus 1,600 shares of the Company's common stock per month. The shares
of common stock earned as compensation pursuant to the agreement
through June 30, 2002 have been valued at $2.50 per share consistent
with similar transactions as discussed elsewhere.
During the period ended June 30, 2002, the Company entered into a
Membership Agreement with an entity desiring to participate in the
GSL's Global Partnership Network (GPN). As of June 30, 2002, the
activities anticipated by this Membership Agreement and the Network
have not formally commenced. Accordingly, the $10,000 membership fee
received by the Company from the participant has been recognized as
deferred revenue in the unaudited condensed consolidated financial
statements at June 30, 2002. The Company anticipates entering into
similar Membership Agreements with other individuals and entities.
11
GSL HOLDINGS, INC. AND SUBSIDIARY
(FORMERLY BETHURUM LABORATORIES, INC.)
Notes to Consolidated Financial Statements
June 30, 2002 and December 31, 2001
NOTE 6 SUBSEQUENT EVENTS
In July 2002, the Company entered into two additional consulting
agreement with individuals to provide various services. The terms of
the agreement are for unspecified periods with the compensation
arrangements for one agreement providing for monthly payment of $2,000
cash and 1,600 shares of the Company's common stock and the other
agreement providing for payment of 2,000 shares of the Company's
common stock and no cash payment.
In July 2002, the Company entered into a Strategic Alliance Agreement.
This agreement provides for the Strategic Alliance representative to
market and promote the Company's GPN in China on an exclusive basis.
The Strategic Alliance representative may participate in revenue
generated by the GPN through the enrollment of participants, provided
certain terms and conditions are met. The formal activities and
operations of the Alliance and the GPN have not yet commenced. Other
similar Strategic Alliance Agreements may be entered into by the
Company.
12
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OR PLAN OF OPERATION
Caution about forward-looking statements
This Form 10-QSB includes "forward-looking" statements about future financial
results, future business changes and other events that have not yet occurred.
For example, statements like we "expect," we "anticipate" or we "believe" are
forward-looking statements. Investors should be aware that actual results might
differ materially from our expressed expectations because of risks and
uncertainties about the future. We do not undertake to update the information in
this Form 10-QSB if any forward-looking statement later turns out to be
inaccurate. Details about risks affecting various aspects of the Company's
business are discussed throughout this Form 10-QSB and should be considered
carefully.
Plan of Operation for the Next Twelve Months
GSL Holdings, Inc (GSL or the "Company") has been created to assure, streamline,
facilitate, and promote trade between China and the rest of the world. GSL's
mission is to create a Global Partnership Network in which trade between China
and the Western economies can flow freely with integrity and security for all
parties involved. Within the GPN community, GSL expects to foster trade under
the World Trade Organization (WTO) rules and regulations, execute on the
commitments made by China to open trade, integrate with the Western economy, and
offer a more predictable environment for trade and foreign investment.
Businesses worldwide are rushing to enjoy the economic benefits of trading with
China. Concurrently, thousands of Chinese manufacturers previously focused only
on the country's domestic sector are now beginning to pursue customers
internationally. To assist both Chinese and international enterprises in this
rapidly unfolding evolution in trade, GSL plans to create a network of China
Trade Centers (CTC) or marketplaces, where Chinese businesses can showcase their
state of the art manufacturing capabilities and products to the international
business community.
The key services and functions of the CTC are to provide a venue or showroom
where U.S. businesses can have direct trade access to Chinese manufacturers and
products. All the competitive pricing advantages are recognized by the U.S
businesses directly without any dilution from agents, promoters and middlemen.
Using GSL as the facilitator for trade also ensures trust, integrity and
security in every transaction.
GSL plans to recruit businesses and manufacturers in China as members of the
GPN. In doing so, GSL will create and adopt standardized processes and uniform
information catalogs on its Chinese Members. Through these means, GSL enables a
more efficient mechanism for US firms trying to identify potential trading
partners within the labyrinth of companies within China. And through the
utilization of available mature technologies, coupled with the presence of the
CTC carrying inventories of sample products, GSL provides a local US conduit to
these companies.
In the next 12 months, GSL expects member enrollment into the GPN and to lease a
physical location for the CTC. The CTC is anticipated to become operational by
the end of the third quarter of 2003. GSL intends to assess an annual membership
13
fee of $25,000 as enrollment into the GPN for all Chinese businesses. Each
member is expected to initially pay $5,000 (or 20% of the annual membership fee)
upon initial enrollment, with the remaining $20,000 (or 80% of the annual
membership fee) due upon the completion of a transaction facilitated by GSL.
Membership revenues generated can be used to fund the Company's operations and
the development of the CTC. GSL, however, cannot assure any members will enroll
or revenue will be generated.
GSL has entered into a strategic alliance with Pattern Logistic, LTD (PL) to
promote and market the GPN and services of the CTC. With respect to the
strategic alliance, PL shall establish offices and hire dedicated staff in at
least three major metropolitan areas throughout the People's Republic of China
(PRC). PL will have the exclusive right to market and promote the GPN in the
PRC, however PL must obtain enrollment of at least 2000 members in each of the
two subsequent 12-month periods. PL will also be paid a commission from GSL
equal to three percent of the aggregate amounts actually received from members
under the strategic alliance agreements. PL shall also invest at least
HK$5,000,000.00 for the operation of these offices. PL shall also pay to GSL, an
amount equal to HK$500,000.00 for GSL to use for any purpose related to the
establishment and promotion of the GPN; provided, however, if (i) PL establishes
offices in three major metropolitan areas in the Territory within six months and
(ii) each such office is operational to GSL's satisfaction, then GSL shall
refund the HK$500,000.00 payment made by PL. GSL cannot assure that PL will
enroll any members into the GPN.
During the next 12 months, the Company's foreseeable cash requirements will
relate to maintaining the company in good standing, the provision of daily
operational expenses in the US and China, the engagement of various employees in
the US and China, and the development of the CTC and the GPN. The Company
currently does not have the cash requirement to fulfill its plan of operation.
If the cash requirements necessary are not available from operations or from
private sales of equity, then management or principal stockholders may make
advances as loans to the Company. Any such sums would be subordinated to other
debts outstanding at the time. To date, the Company has raised approximately
$352,500 in private placements, both from US investors and Chinese citizens. GSL
believes sufficient operating capital will be available for the remainder of
2002, however GSL cannot give assurances to that fact.
Results of operations
The three and six months ended June 30, 2001 are not discussed and compared with
the current results because the inception date of the Company is May 17, 2001.
The Company incurred losses of ($613,559) for the three months ended June 30,
2002. This is an increase of $395,853 in additional losses from the three months
ended March 31, 2002. The increase in losses is a result of additional
consultants hired to expand the China and US infrastructure and operations. As
of June 30, 2002 GSL has not generated any revenue. Consulting fees represent
approximately 90% ($553,000) of the total expenses of the Company. This increase
of approximately $400,000 from the prior quarter ended is primarily due to two
consultants hired in China for business development and the creation of an
online web presence. Consulting fees generally relate to consultants hired for
the maintenance of all SEC filings, the performance of general financial and
accounting duties, the development of business opportunities and strategic
alliance partnerships, and the development of a website. Professional fees
represent approximately 6% ($40,000) of the total expenses of GSL, an increase
14
of $20,000 from the prior quarter ended, and are a result of an increase in the
Company's business transactions. Professional fees generally relate to
attorney's fees, accounting fees and filing fees to maintain the Company in good
standing. The remaining 4% of expenses represents operational and G&A cost of
the Company. G&A costs generally relate to salary, rent expense, travel, office
expense and any other cost associated with daily business operations. The G&A
expenses have decreased since the prior quarter mainly due to the hiring of
consultants rather than employees and therefore less strain on the G&A cost for
the Company.
Liquidity and Sources of Capital
At June 30, 2002, the Company had total current assets of $25,914 and total
current liabilities of $313,089, resulting in a working capital deficit of
($313,114). In addition, to date the Company has incurred operating losses
totaling ($831,266). These circumstances have prompted the Company to include a
"going concern" explanation in the consolidated financial statements for the
quarter ended June 30, 2002. The Company anticipates further losses and does not
know when it can reach a cash flow positive position.
To date, the Company has primarily funded its operations from the sale of its
common stock. The Company anticipates entering into business arrangements that
it hopes will generate revenues and income to meet their operating requirements.
In the meantime, the Company is dependent on the further sale of its common
stock and loans from principal stockholders to provide funds to cover its
operating expenses. The Company may find it necessary to secure operating funds
from other sources until it can fully implement and realize success from its
Plan of Operations. There are no assurances that GSL will be successful in any
of these efforts.
Other
Part II. Other Information
Item 1. Legal Proceedings
To the best knowledge of the officers and directors of the Company, neither the
Company nor any of its officers or directors is a party to any material legal
proceeding or litigation and such persons know of no other material legal
proceeding or litigation contemplated or threatened.
Item 2. Changes in Securities and Use of Proceeds
During the second quarter, 18,000 shares were sold in private placements under
Rule 506 and Regulation S. These shares were sold at $2.50 per share.
Additionally in the second quarter, 170,000 shares were issued pursuant to
options exercised at $0.50 per share. Subsequent to June 30, 2002, an additional
10,000 shares were issued pursuant to options exercised at $1.00 per share. In
the second quarter, 179,800 shares were issued to consultants for services
rendered. As of August 15, 2002, an additional 6,300 shares were issued
subsequent to June 30, 2002 to consultants for services rendered.
Item 3. Defaults upon Senior Securities
None
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Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 99.1 - Certification in Accordance with Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
None
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
small business issuer has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: August 13, 2002 GSL HOLDINGS, INC.
By: /s/ Luis Chang
--------------------------------------------
Luis Chang, President and CEO
By: /s/ Henry Fan
--------------------------------------------
Henry Fan, Principal Financial Officer
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