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 SEPTEMBER 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
-------
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, 8,643,088 issued and outstanding as of October 31,
2002
i
INDEX
PAGE
----
PART I - FINANCIAL STATEMENTS 1
ITEM 1. - FINANCIAL STATEMENTS 1
Consolidated Balance Sheets as of
September 30, 2002 and as of December 31, 2001 2
Consolidated Statements of Operations
for the Three and Nine Months Ended
September 30, 2002 3
Consolidated Statements of Stockholders' Equity (Deficit) 4-6
Consolidated Statements of Cash Flows (Unaudited) 7-8
Notes to Consolidated Financial Statements 9-14
ITEM 2. - MANAGEMENT'S DISCUSSIONS AND ANALYSIS
OR PLAN OF OPERATION 15-17
ITEM 3. - CONTROLS AND PROCEDRES 17
PART II - OTHER INFORMATION 17
ITEM 2. - CHANGES IN SECURITIES AND USE OF PROCEEDS 18
ITEM 3. - DEFAULTS UPON SENIOR SECURITIES 18
ITEM 4. - SUBMISSION OR MATTERS TO A VOTE OF SECURITY
HOLDERS 18
ITEM 5. - OTHER INFORMATION 18
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K 18
SIGNATURES 19-23
EXHIBITS 24-27
ii
PART 1 - FINANCIAL STATEMENTS
ITEM 1 - FINANCIAL STATEMENTS
GSL HOLDINGS, INC. AND SUBSIDIARY
(FORMERLY BETHURUM LABORATORIES, INC.)
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002 and December 31, 2001
1
GSL HOLDINGS, INC. AND SUBSIDIARY
(FORMERLY BETHURUM LABORATORIES, INC.)
(A Development Stage Company)
Consolidated Balance Sheets
(Unaudited)
ASSETS
------ September 30, December 31,
2002 2001
------------- -------------
CURRENT ASSETS
Cash $ 20,017 $ -
Deposits 9,006 -
------------ ------------
Total Current Assets 29,023 -
------------ ------------
FIXED ASSETS, NET 2,241 -
------------ ------------
TOTAL ASSETS $ 31,264 $ -
============ ============
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
---------------------------------------------
CURRENT LIABILITIES
Accounts payable $ 40,633 $ -
Accrued liabilities 162,667 -
Payable - related party 90,500 -
Deferred revenue 10,000 -
Note payable 50,000 -
Note payable - related party 200,000 -
Other liabilities 64,085 -
------------ ------------
Total Current Liabilities 617,885 -
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock; authorized 1,000,000,000 common
shares, no par value; 8,643,088 and 1 share
issued and outstanding, respectively 1,185,665 1
Additional paid-in capital - -
Deferred consulting fees (127,163) -
Deficit accumulated during development stage (1,645,123) (1)
------------ ------------
Total Stockholders' Equity (Deficit) (586,621) -
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 31,264 $ -
============ ============
The accompanying notes are an integral part
of these consolidated financial statements.
2
GSL HOLDINGS, INC. AND SUBSIDIARY
(FORMERLY BETHURUM LABORATORIES, INC.)
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
From
Inception on
For the Three For the Nine May 17,
Months Ended Months Ended 2001 Through
September 30, September 30, September 30,
2002 2002 2002
------------ ------------ ------------
REVENUES $ - $ - $ -
------------ ------------ ------------
EXPENSES
Depreciation 105 170 170
General and administrative 801,085 1,632,285 1,632,286
------------ ------------ ------------
Total Expenses 801,190 1,632,455 1,632,456
------------ ------------ ------------
LOSS FROM OPERATIONS (801,190) (1,632,455) (1,632,456)
------------ ------------ ------------
OTHER EXPENSE
Interest expense (12,667) (12,667) (12,667)
------------ ------------ ------------
Total Other Expense (12,667) (12,667) (12,667)
------------ ------------ ------------
NET LOSS $ (813,857) $ (1,645,122) $ (1,645,123)
============ ============ ============
BASIC LOSS PER SHARE $ (0.10) $ (0.20)
============ ============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 8,554,036 8,098,610
============ ============
The three and nine months ended September 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.
3
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 September 30, 2002
(Unaudited)
Deficit Accumulated
Common Stock Additional Deferred During the
------------------- Paid-in Consulting Development
Shares Amount Capital Fees 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 - - -
--------- --------- ---------- ---------- ----------
Balance Forward 8,049,188 $ 7,946 $ - $ (407,885) $ (1)
--------- --------- ---------- ---------- ----------
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) (Continued)
From Inception on May 17, 2001 to September 30, 2002
(Unaudited)
Deficit Accumulated
Common Stock Additional Deferred During the
------------------- Paid-in Consulting Development
Shares Amount Capital Fees Stage
--------- --------- ---------- ---------- -----------
Balance Forward 8,049,188 $ 7,946 $ - $(407,885) $ (1)
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) -
Common stock issued for
consulting fees at $1.00
per share on April 20, 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 September 26,
2002 8,000 20,000 - - -
Common stock issued for
consulting fees at $2.00
per share on September 30, 2002 800 2,000 - - -
--------- --------- ---------- --------- ----------
Balance Forward 8,516,988 $ 888,415 $ - $(932,885) $ (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 September 30, 2002
(Unaudited)
Deficit Accumulated
Common Stock Additional Deferred During the
-------------------- Paid-in Consulting Development
Shares Amount Capital Fees Stage
--------- ---------- ---------- ---------- -----------
Balance Forward 8,516,988 $ 888,415 $ - $(932,885) $ (1)
Common stock issued for
services at $2.50 per share
on July 1, 2002 3,200 8,000 - - -
Common stock issued for
services at $2.50 per share
on July 22, 2002 500 1,250 - - -
Common stock issued for
exercise of options at $1.00
per share on July 29, 2002 10,000 10,000 - - -
Common stock issued for
services at $2.50 per share
on August 1, 2002 4,800 12,000 - - -
Common stock issued for cash
and services at $2.50 per
share on August 8, 2002 1,000 1,500 - - -
Common stock issued for cash
and services at $2.50 per
share on August 22, 2002 2,000 3,000 - - -
Options to purchase common stock
granted on September 6, 2002 - 200,000 - - -
Common stock issued for services
at $2.50 per share on
August 1, 2002 4,600 11,500 - - -
Common stock issued for exercise
of options at $0.50 per share
on September 11, 2002 100,000 50,000 - - -
Amortization of deferred
consulting fees - - - 805,722 -
Net loss for the nine months
ended September 30, 2002 - - - - (1,645,122)
--------- ---------- ---------- --------- -----------
Balance, September 30, 2002 8,643,088 $1,185,665 $ - $(127,163) $(1,645,123)
========= ========== ========== ========= ===========
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 on
For the Nine May 17,
Months Ended 2001 Through
September 30, September 30,
2002 2002
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,645,122) $(1,645,123)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 170 170
Amortization of deferred consulting fees 805,722 805,722
Common stock issued for services 59,719 59,720
Options issued for services 200,000 200,000
Changes in operating assets and liabilities:
(Increase) in deposits (9,006) (9,006)
Increase in accounts payable 32,693 32,693
Increase in payable-related party 90,500 90,500
Increase in deferred revenue 10,000 10,000
Increase in accrued expenses and other
liabilities 226,752 226,752
----------- -
Net Cash Used by Operating Activities (228,572) (228,572)
----------- -----------
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 500,500 500,500
----------- -----------
Net Cash Provided by Financing Activities 251,000 251,000
----------- -----------
NET INCREASE IN CASH 20,017 20,017
CASH AT BEGINNING OF PERIOD - -
----------- -----------
CASH AT END OF PERIOD $ 20,017 $ 20,017
=========== ===========
The accompanying notes are an integral part
of these consolidated financial statements.
7
GSL HOLDINGS, INC. AND SUBSIDIARY
(FORMERLY BETHURUM LABORATORIES, INC.)
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
From
Inception on
For the Nine May 17,
Months Ended 2001 Through
September 30, September 30,
2002 2002
------------- -------------
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 $ 59,719 $ 59,720
Options issued for services $ 200,000 $ 200,000
The nine months ended September 30, 2001 is 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.
8
GSL HOLDINGS, INC.
(FORMERLY BETHURUM LABORATORIES, INC.)
(A Development Stage Company)
Notes to the Financial Statements
September 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
9
GSL HOLDINGS, INC.
(FORMERLY BETHURUM LABORATORIES, INC.)
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2002 and December 31, 2001
NOTE 2 - BASIS OF FINANCIAL STATEMENT PRESENTATION (Continued)
financial statements and notes thereto included in the December
31, 2001 Annual Report on Form 10-KSB. Operating results for the
three and nine months ended September 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 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
September 1, 2002. The notes were non-interest bearing unless
default on payment occurred. At September 30, 2002, all scheduled
payments had been made with these notes 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
September 30, 2002. Interest is imputed at 8% per annum and is due
upon demand. Interest expense for the nine months ended September
30, 2002 is $12,000.
NOTE 5- NOTES PAYABLE
On May 29, 2002, the Company entered into a note payable for
$50,000. This note bears an interest rate of 4% per annum and is
due upon demand. Interest expense for the nine months ended
September 30, 2002 is $667. On October 6, 2002, the Company paid
$10,000 on this note payable and entered into a new promissory
note that established a due date of January 31, 2003.
10
GSL HOLDINGS, INC.
(FORMERLY BETHURUM LABORATORIES, INC.)
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2002 and December 31, 2001
NOTE 6 - 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 September
30, 2002. These options were exercised on May 23, 2002, and
resulted in $25,000 cash proceeds to the Company.
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 $208,740 through September 30,
2002, with the remaining $79,179 reflected as deferred consulting
fees at September 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 nine months ended September 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 September 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 September 30, 2002. These options were exercised
subsequent to September 30, 2002.
11
GSL HOLDINGS, INC.
(FORMERLY BETHURUM LABORATORIES, INC.)
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2002 and December 31, 2001
NOTE 6 - MATERIAL EVENTS (Continued)
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 have 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 $27,016 through September 30, 2002, with the remaining $47,984
reflected as deferred consulting fees at September 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
agreements is $900,000. At September 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 $600,000 through
September 30, 2002. The $150,000 reflected in deferred consulting
fees at June 30, 2002 has been fully expenses as of September 30,
2002. The Company has recorded a liability due of $150,000 for
services rendered and not paid as of September 30, 2002.
On September 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 in advance 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 September
30, 2002 have been valued at $2.50 per share consistent with
similar transactions as discussed elsewhere.
During the period ended September 30, 2002, the Company entered
into a Membership Agreement with an entity desiring to participate
in the GSL Business Partnership Network. As of September 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
12
GSL HOLDINGS, INC.
(FORMERLY BETHURUM LABORATORIES, INC.)
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2002 and December 31, 2001
NOTE 6 - MATERIAL EVENTS (Continued)
consolidated financial statements at September 30, 2002. The
Company anticipates entering into similar Membership Agreements
with other individuals and entities.
In July 2002, the Company entered into two additional consulting
agreements 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 with
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 Global
Partnership Network (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. The Strategic Alliance representative deposited $64,085
with the Company to help fund this development. If the Strategic
Alliance representative fulfills the requirements per the
agreement, the $64,085 will be refunded to the Strategic Alliance
representative. Other similar Strategic Alliance Agreements may be
entered into by the Company.
On September 20, 2002 the Company entered into an agreement to
acquire all the issued and outstanding shares of a British Virgin
Island Corporation in exchange for shares of the Company's common
stock based on certain valuation criteria. All of the terms and
conditions incident to the closing of this acquisition transaction
have not been completed. Accordingly, the effects of this
transaction have not been included in the accompanying
consolidated financial statements at September 30, 2002. In
connection with this transaction, the Company entered into an
agreement to issue to an unrelated entity options to acquire
100,000 shares of the Company's common stock at $0.50 per share.
The intrinsic value of these options have been determined to be
$200,000 and has been recognized as consulting expense in the
accompanying consolidated financial statements. During September
2002, these options were exercised and resulted in $50,000 cash
proceeds to the Company.
13
GSL HOLDINGS, INC.
(FORMERLY BETHURUM LABORATORIES, INC.)
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2002 and December 31, 2001
NOTE 7 - SUBSEQUENT EVENTS
Effective October 1, 2002, the Company entered into an employment
agreement with it's President and Chief Executive Officer to
provide compensation arrangements for his performance of those
duties and services. This agreement runs through December 31, 2006
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 September 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 September 30, 2002. Also, in connection
with these arrangements, the Company entered into a lease
agreement for the President 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 October 1, 2002, the Company entered into an employment
agreement with its principal financial officer to provide
compensation arrangements for his performance of duties and
services. This individual was formally appointed as Chief
Financial Officer and V.P. of Finance on October 9, 2002. This
agreement runs through December 31, 2006. The starting salary is
$96,000 per year with an annual increase of no less than 10% of
the prior year's compensation. This agreement also provides for
annual bonuses and for 100,000 stock options with an exercise
price of $1.00 per share. The options vest over four years and
expire on the ten-year anniversary of the grant.
On October 16, 2002, the Company entered into a real estate lease
for approximately 200,000 square feet of warehouse space. This is
a five-year lease with monthly payments of $80,000. The lease will
commence in February 2003. A security deposit of $80,000 will be
made in conjunction with this lease. Also on October 16, 2002, the
Company entered into an agreement to purchase this real estate.
The purchase price is set at $20,000,000 and is scheduled to close
on April 1, 2004.
14
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 "Company") is a premier Trade Management
Organization that offers diverse services to our customers in their efforts to
more efficiently manage global trade relations. More specifically, GSL creates
services focused on US / China relations. GSL 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 (GPN) 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 will 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
to their products and samples. 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. In October 2002, the Company
entered into an agreement to lease and purchase an estimated 400,000 square feet
facility on 23 acres of land in Pomona, California. The property is the
projected location for the CTC that is anticipated to open in September 2003.
The lease and purchase agreement contain contingencies, which may prevent the
final closing of the transaction. During the next 12 months, the Company intends
to execute its plans to make the CTC into a state of the art facility. The
Company is in the process of contracting with architects, construction
companies, logistical consultants and engineers to assist with the development
of the CTC.
During the next 12 months, GSL plans to recruit businesses and manufacturers in
China as members of the GPN. In doing so, GSL will create and adopt standardized
15
processes and uniform product information catalogs on its Chinese Members and
their products. Through these means, GSL enables a more efficient mechanism for
US firms trying to identify potential trading partners within the labyrinth of
companies in China. 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 July 2002, the Company
entered into a strategic alliance agreement with Pattern Logistics to enroll at
least 2000 participants in China each year into the GPN for the next two years.
This agreement is the first step to the aggregation of partners necessary to
complete the supply side of the Company's business model. The Company cannot
assure that participants will enroll in the GPN.
In the continued process to fulfill the Company's mission, GSL entered into a
definitive agreement to acquire Pacific Garment Manufacturing Group, Ltd., a
supply chain management company specializing in the apparel/textile industry.
The definitive agreement contains contingencies, which may prevent the final
closing of the transaction. This acquisition is not only a revenue producing
source for the Company, but provides expertise in the vertical market of
apparel/textile sourcing which is a major export for China. In the next 12
months, the Company plans to identify a series of vertical markets and plans to
acquire additional companies to fill those verticals.
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
$355,500 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 of that fact.
Results of Operations
The three and nine month periods ended September 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 ($813,857) for the three months
ended September 30, 2002. This is an increase of $200,298 in additional losses
from the three months ended June 30, 2002. The increase in losses is a result of
options exercised at below deemed value. The difference of the exercise value
and deemed value was expensed. As of September 30, 2002 GSL has not generated
any revenue. Consulting fees represent approximately 60% ($475,000) of the total
expenses of the Company. This decrease of approximately $115,000 from the prior
quarter ended is primarily due to the Company's efforts to retain full time
employees, keeping the expertise in the company, instead of outsourcing.
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 3%
($26,000) of the total expenses of GSL, a decrease of $15,000 from the prior
quarter ended, and are a result of a decrease in the Company's business
transactions. Professional fees generally relate to attorney's fees, accounting
16
fees and filing fees to maintain the Company in good standing. The remaining 37%
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 increased
since the prior quarter mainly due to the one time expense for options exercised
under the deemed value.
Liquidity and Sources of Capital
At September 30, 2002, the Company had total current assets of $29,023 and total
current liabilities of $617,885, resulting in a working capital deficit of
$588,862. In addition, to date the Company has incurred operating losses
totaling $1,645,123. These circumstances have prompted the Company to include a
"going concern" explanation in the consolidated financial statements for the
quarter ended September 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 its 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.
ITEM 3. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. Based on their evaluation, as
of a date within 90 days prior to the date of the filing of this Form 10-QSB, of
the effectiveness of the Company's disclosure controls and procedures, as
defined in Rules 13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934,
the principal executive officer and the principal financial officer of the
Company have each concluded that such disclosure controls and procedures are
effective and sufficient to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
by the SEC's rules and forms.
Changes in Internal Controls. Subsequent to the date of their evaluation, there
have not been any significant changes in the Company's internal controls or in
other factors that could significantly affect these controls, including any
corrective action with regard to significant deficiencies and material
weaknesses.
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.
17
Item 2. Changes in Sercurities and Use of Proceeds
During the third quarter, 1,200 shares were sold in private placements under
Regulation S. These shares were sold at $2.50 per share. Additionally in the
third quarter, 100,000 shares were issued pursuant to options exercised at $0.50
per share with an additional 10,000 shares issued pursuant to options exercised
at $1.00 per share. In the third quarter, 14,900 shares were issued to
consultants for services rendered.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
(a) Exhibits
Exhibit 1 - Definitive Agreement and plan of acquisition of Pacific Garment
Manufacturing Group, Ltd.
Exhibit 2 - Purchase Agreement for 1875 W. Mission Blvd, Pomona California.
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
18
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: November 19, 2002 GSL HOLDINGS, INC.
By: /s/ Luis Chang
--------------------------------------
Luis Chang, President and CEO
By: /s/ Henry Fan
--------------------------------------
Henry Fan, Principal Financial Officer
19
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I Luis Chang, Chief Executive Officer of GSL Holdings, Inc., certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of GSL Holdings,
Inc.;
2. Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this Quarterly Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Quarterly Report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this quarterly Report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this Quarterly Report is being
prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's Board of Directors (or persons performing the
equivalent function);
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have identified
for the Registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
20
6. The Registrant's other certifying officer and I have indicated in this
Quarterly Report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Dated: November 19, 2002 Signature: /s/ Luis Chang
------------------
Luis Chang
Chief Executive Officer
21
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Henry Fan, Chief Financial Officer of GSL Holdings, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of GSL Holdings,
Inc.;
2. Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this Quarterly Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Quarterly Report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this Quarterly Report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this Quarterly Report is being
prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's Board of Directors (or persons performing the
equivalent function);
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have identified
for the Registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
22
6. The Registrant's other certifying officer and I have indicated in this
Quarterly Report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Dated: November 19, 2002 Signature: /s/ Henry Fan
-----------------------
Henry Fan
Chief Financial Officer
23
Exhibit 1
Definitive Agreement and plan of acquisition
of Pacific Garment Manufacturing Group, Ltd.
Definitive Agreement and plan of acquisition of Pacific Garment Manufacturing
- --------------------------------------------------------------------------------
Group, Ltd.
- -----------
Effective September 22, 2002, the Company and Pacific Garment Manufacturing
Group, Ltd. (Pacific), a corporation organized under the laws of the British
Virgin Islands, executed a Definitive Agreement whereby the Company will acquire
100% of the outstanding securities of Pacific. Although the effective date of
the Definitive Agreement is September 22, 2002, contingencies exist within the
agreement that should delay the closing of the transaction until such
contingencies are satisfied. These contingencies include, but are not limited
to, Audited Financial Statement of Pacific for the previous three years restated
to meet US GAAP requirements. Pacific at the close of this transaction will
become a wholly owned subsidiary of the Company.
The principal terms of the Definitive Agreement are:
The Company shall, on the Closing Date, have received all of the issued and
outstanding shares of Pacific in exchange for shares of GSL (the "GSL Shares"),
valued at $2.50 per share, in an amount equal to eight times Pacific's earnings
before interest, taxes, depreciation, and amortization ("EBITDA") for the fiscal
year ended March 30, 2002. The GSL Shares will be restricted against resale
pursuant to the provisions of Federal and state securities laws. The PACIFIC
shares to be tendered, 50,000 common, will represent all of the issued and
outstanding capital interests of PACIFIC.
This Agreement and plan of acquisition as contemplated is subject to the
occurrence of the following, within 12 months of Closing:
(a)GSL shall have the option to rescind the exchange of stock for Pacific as set
forth above and void any agreements entered into incident to the acquisition,
either written or oral, if Pacific's EBITDA, on the anniversary date of the
first full fiscal year is negative or, for any reason deemed necessary by GSL.
If GSL exercises this option to cancel the exchange, then GSL will not be
responsible for any expenses incurred by Pacific.
(b)If GSL exercises the option to rescind the exchange, all money invested by
both parties shall be returned in full to the party investing the money. All
investments during the course of the 12 months following Closing must be
separately documented and auditable for purposes of being returned upon exercise
of this cancellation provision. If funds are insufficient for a full return of
invested capital, the funds on hand will be returned to the parties on a basis
pro-rata to their respective investments. Any funds remaining after all original
investments have been repaid shall be divided equally (50/50) between GSL and
Pacific.
24
Upon the first anniversary of the Closing, if the market price of GSL trading
common stock, as quoted on its primary trading exchange or system in the United
States, and measured by the "closing" price reported on each day, falls below an
average of US $2.50 per share for the 30 trading days prior to the anniversary
date, then Pacific has the option to either:
(a)Cancel this Agreement and return all of the GSL shares received to nullify
this Agreement, if and only if, Pacific has not sold any of the shares prior to
that date; or (b)Receive an additional amount of GSL shares so that the total
amount of shares received, including the amounts received with the execution of
the Definitive Agreement, is equal to eight (8) times Pacific's March 31, 2002,
EBITDA divided by $1.50. Beyond Expectation Production Company, Ltd. ("Beyond"),
the sole current shareholder of Pacific shall assume all liability and
responsibility for any legal or financial transactions entered into by Pacific.
Beyond will indemnify GSL for all liability during any period of time that
Beyond is in management control of Pacific.
The Closing shall take place at the time or place as may be agreed upon by the
parties after all pre-conditions have been met.
25
Exhibit 2
Purchase Agreement
for 1875 W. Mission Blvd, Pomona California.
Purchase Agreement for 1875 W. Mission Blvd, Pomona California.
- ---------------------------------------------------------------
On October 16, 2002, the Company and Meruelo Living Trust entered into a
Purchase Agreement to purchase an approximately 400,000 square feet facility
situated on approximately 23 acres of land, located in Pomona, California.
Although the agreement date is October 16, 2002, escrow will close on April 1,
2004 . The Company has agreed to a lease agreement with Meruelo Living Trust to
occupy the facility prior to the close of escrow.
The principal terms of the Purchase Agreement are:
The purchase price is valued at $20 million and entails the following:
(1) The Company shall, at its discretion, (i) pay to the Seller $10 million in
cash, or (ii) assume the debt and/or liability of the Property not exceeding $10
million, and
(2) The Company shall issue to Meruelo Living Trust one million shares of the
Company's common stock; and
(3) The Company shall give Meruelo Living Trust and option to purchase an
additional 500,000 shares of Company's common stock at $5.00 per share.
Upon the second anniversary following closing, if the price of the Company's
stock falls below $5.00 per share on an average of 30 days prior to that date,
Meruelo Living Trust shall receive $5 million in cash and return all the
Company's stock received.
Meruelo Living Trust will not be obligated to complete the sale of this property
if the Company's common stock is not actively listed on NASDAQ or the NYSE.
26
Exhibit 99.1
Certifications in Accordance with Section 906 of the
Sarbanes-Oxley Act of 2002
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of GSL Holdings, Inc. (the "Company") on
Form 10-QSB for the period ending September 30, 2002, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Luis
Chang, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of my knowledge and belief:
(1) The Report fully complies with the requirements of section 13(a)or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations
of the Company.
/s/ Luis Chang
- -----------------------------
Chief Executive Officer
Date November 19, 2002
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of GSL Holdings, Inc. (the "Company") on
Form 10-QSB for the period ending September 30, 2002, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Henry
Fan, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C.
ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of my knowledge and belief:
(1) The Report fully complies with the requirements of section 13(a)or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations
of the Company.
/s/ Henry Fan
- ----------------------------
Principal Financial Officer
Date November 19, 2002
27