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 December 31, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from to
------------ -------------
COMMISSION FILE NUMBER: 0-21279
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ABSOLUTE WASTE SERVICES, INC.
--------------------------------------------
(Name of small business issuer in its charter)
FLORIDA 59-3223708
------------------------------ -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
141 West Jackson Boulevard, Suite 2182, Chicago, Illinois 60604
----------------------------------------------------------
(Address of principal executive offices, including zip code)
(312) 427-5457
-------------------------
(Issuer's Telephone Number)
THERMACELL TECHNOLOGIES, INC.
-----------
(Former name)
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.
YES [ ] NO [X]
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. YES [X] NO [ ]
As of May 20, 2005, the registrant had 60,469,250 shares of common stock,
$0.0001 par value, issued and outstanding.
Documents incorporated by reference: None.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
Index
Three Months Ended December 31, 2003 and 2002
(Unaudited)
Page
------
Part I - Financial Information
Item 1. Financial Statements
Balance Sheet -
December 31, 2003............................................. 2
Statements of Operations -
Three months ended
December 31, 2003 and 2002.................................... 3
Statements of Changes in Stockholders' Deficit
Three months ended December 31, 2003.......................... 4
Statements of Cash Flows -
Three months ended
December 31, 2003 and 2002.................................... 5
Notes to Financial Statements................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 2
Item 3. Controls and Procedures.......................................... 8
Part II - Other Information
Item 1. Legal Proceedings................................................ 13
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds...... 14
Item 3. Defaults Upon Senior Securities.................................. 14
Item 4. Submission of Matters to a Vote of Security Holders.............. 14
Item 5. Other Information................................................ 14
Item 6. Exhibits and Reports on Form 8-K................................. 14
Signatures............................................................... 15
i
PART I
Item 1. Financial Statements
- ----------------------------
Absolute Waste Services, Inc.
(f/k/a Thermacell Technologies, Inc.)
Balance Sheet
December 31, 2003
(Unaudited)
Assets
Cash $ 116
============
116
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 127,254
Accrued payroll taxes 208,312
------------
Total current liabilities 335,566
------------
Long Term Liabilities 142,061
Stockholders' deficit:
Common stock; $.0001 par value; 150,000,000 shares authorized;
13,000,000 shares issued and outstanding 1,300
Preferred stock; $.001 par value; 50,000,000 authorized
No shares issued or outstanding
Additional paid-in capital 16,179,984
Common stock payable 539,983
Accumulated deficit (17,198,778)
------------
Total stockholders' deficit (477,511)
------------
$ 116
============
The accompanying notes are an integral part of the financial statements.
2
Absolute Waste Services, Inc.
(f/k/a Thermacell Technologies, Inc.)
Statements of Operations
(Unaudited)
Three Months Ended December 31,
------------------------------
2003 2002
------------ ------------
Sales $ -- $ --
------------ ------------
Cost of sales -- --
------------ ------------
Gross profit -- --
------------ ------------
Selling, general and administrative
expenses 13,845 67,843
------------ ------------
Net loss from operations (13,845) (67,843)
============ ============
Net loss per share $ (0.00) $ (0.07)
============ ============
Weighted average number of
common shares outstanding 13,000,000 1,000,000
============ ============
The accompanying notes are an integral part of the financial statements.
3
Absolute Waste Services, Inc.
(f/k/a Thermacell Technologies, Inc.)
Statements of Changes in Stockholders' Deficit
(Unaudited)
Three Months Ended December 31, 2003
Common Stock
--------------------------- Additional
Number of Paid-in Common Stock Accumulated
Shares Amount Capital Payable Deficit Total
------------ ------------ ------------ ------------ ------------ ------------
Balance, September 30, 2003 13,000,000 $ 1,300 $ 16,179,984 $ 539,983 $(17,184,933) $ (463,666)
Net loss for the period -- -- -- -- (13,845) (13,845)
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 2003 13,000,000 $ 1,300 $ 16,179,984 $ 539,983 $(17,198,778) $ (477,511)
============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements.
4
Absolute Waste Services, Inc.
(f/k/a Thermacell Technologies, Inc.)
Statements of Cash Flows
(Unaudited)
Three Months Ended
December 31,
--------------------
2003 2002
-------- --------
Operating act
Net loss $(13,845) $(67,843)
-------- --------
Adjustments to reconcile net loss to net cash used by operating
activities:
Increase (decrease) in:
Accounts payable (23,670) 14,529
Accrued payroll expenses 12,500 4,861
-------- --------
Total adjustments (11,170) 19,390
-------- --------
-------- --------
Net cash used by operating activities (25,015) (48,453)
-------- --------
Financing activities
Bank overdraft -- 8,014
Proceeds from shareholder advance 25,000 56,467
-------- --------
Net cash provided by financing activities 25,000 48,453
-------- --------
Net decrease in cash (15) --
Cash at beginning of period 131 --
-------- --------
Cash at end of period $ 116 $ --
======== ========
The accompanying notes are an integral part of the financial statements.
5
Absolute Waste Services, Inc.
(f/k/a Thermacell Technologies, Inc.)
Notes to Financial Statements
Three Months Ended December 31, 2003
(Unaudited)
1. Basis of Presentation
In the opinion of management, all adjustments consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
operations for the three months ended December 31, 2003 and 2002, (b) the
financial position at December 31, 2003, and (c) cash flows for the three months
ended December 31, 2003 and 2002, have been made.
The unaudited financial statements and notes are presented as permitted by Form
10-QSB. Accordingly, certain information and note disclosures normally included
in the financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been omitted. The
accompanying financial statements and notes of Absolute Waste Services, Inc.
(f/k/a Thermacell Technologies, Inc.)(the "Company") should be read in
conjunction with the audited financial statements and notes of the Company for
the fiscal year ended September 30, 2003. The results of operations for the
three-month period ended December 31, 2003 are not necessarily indicative of
those to be expected for the entire year.
Certain minor reclassifications have been made to the 2002 financial statements
to conform to the classifications used in 2003.
2. Bankruptcy Filing and Going Concern Considerations
The Company operated as a debtor-in-possession under a Plan of Reorganization,
under Chapter 11 of the bankruptcy code, dated February 25, 2002 until August
31, 2002. The Company has no current operations.
The accompanying financial statements have been prepared on a going concern
basis that contemplates the realization of assets and liabilities. As of
December 31, 2003, the Company had no current operations, current liabilities in
the amount of $335,566 and an accumulated deficit in the amount of $17,198,778.
Currently, management is seeking a merger and is soliciting additional equity
investors to fund these deficits. However, these conditions raise substantial
doubt about the Company's ability to continue as a going concern. The financial
statements of the Company do not include any adjustments relating to the
recoverability of liabilities that might be necessary should the Company be
unable to continue as a going concern.
6
Absolute Waste Services, Inc.
(f/k/a Thermacell Technologies, Inc.)
Notes to Financial Statements
Three Months Ended December 31, 2003
(Unaudited)
3. Per Share Calculations
Per share data was computed by dividing net loss by the weighted average number
of shares outstanding during the three month periods ended December 31, 2003 and
2002. The weighted average shares outstanding for the three month period ended
December 31, 2003 and 2002 was 13,000,000 and 1,000,000 respectively.
4. Shareholder Advances
During the three-month period ended December 31, 2003, a shareholder. advanced
$25,000 to the Company to cover operating expenses. This advance is unsecured
and has no specific repayment terms.
Subsequent to the balance sheet date, the major shareholders and funding source
for the company, converted its loan to the company to common stock. At the time
of the conversion, May 2005, the loan amount was $189,877. This loan was
converted to $47,469,250 shares of common stock. This conversion was effected at
a value of $0.004 per share. The agreement allows for further conversion of any
additional funds advanced at the same rate on a quarterly basis. Due to the
subsequent conversion to equity, the shareholder loan is shown as a long-term
liability on the balance sheet.
The above transaction is not necessarily indicative of a transaction that would
have been entered into had a comparable transaction been entered into with
independent parties.
7
Item 2. Management's Plan of Operation
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Information included in this Report may contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). This information may involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from future results, performance or
achievements expressed or implied by any forward-looking statements.
Forward-looking statements, which involve assumptions and describe our future
plans, strategies and expectations, are generally identifiable by use of the
words "may," "will," "should," "expect," "anticipate," "estimate," "believe,"
"intend" or "project" or the negative of these words or other variations on
these words or comparable terminology. These forward-looking statements are
based on assumptions that may be incorrect, and there can be no assurance that
these projections included in these forward-looking statements will come to
pass. Our actual results could differ materially from those expressed or implied
by the forward-looking statements as a result of various factors. We undertake
no obligation to update publicly any forward-looking statements for any reason,
even if new information becomes available or other events occur in the future.
See the "Risk Factors" section of our Annual Report on Form 10-KSB filed on May
27, 2005.
Overview
- --------
We were incorporated in Florida in August 1993. In November 2001, we filed a
voluntary petition for reorganization under Chapter 11 of the U. S. Bankruptcy
Code with the U.S. Bankruptcy Court. On August 30, 2002, the United States
Bankruptcy Court for the Middle District of Florida, Tampa Division, Case No.
01-20854-8G1 issued an order confirming our Plan of Reorganization under Chapter
11 of the Bankruptcy Code, dated as of February 25, 2002 (the "Plan"). Although
the Plan became effective on August 30, 2002 and we commenced implementation of
the Plan on that date, distributions of common stock to our pre-bankruptcy
creditors did not occur until July 31, 2003.
In July 2003, we changed our name to Absolute Waste Services, Inc. On August 23,
2003, we entered into an Agreement and Plan of Merger (the "Merger Agreement")
with Absolute Industries, LLC, a Texas limited liability company, pursuant to
which Absolute Industries, LLC merged into our newly formed wholly owned
subsidiary (the "Merger Sub"), with the Merger Sub being the surviving entity
and succeeding to the business operations of Absolute Industries, LLC (the
"Merger"). In June 2004, we and the former members of Absolute Industries, LLC
agreed to rescind the Merger Agreement and terminate the Merger ab initio, for
each party to return the other party the consideration received in connection
with the Merger, and to release each other from all claims relating to the
Merger Agreement and the Merger. In connection with this transaction, all of the
issued and outstanding stock of the Merger Sub was transferred to the former
members of Absolute Industries, LLC.
8
Prior to the Merger, we had no material assets, liabilities or business
operations. In substance, we were a publicly held shell corporation whose sole
business activity was the search for a suitable business opportunity. As a
result of the Merger, we engaged in certain business operations as of September
30, 2003, the end of the fiscal year to which this report relates. Because the
Merger Agreement has been rescinded and the Merger has been terminated ab
initio, and because we no longer have any ownership interest in Merger Sub and
therefore no longer engage in the type of business previously engaged in by the
Merger Sub, this Report on Form 10-QSB will treat us as a publicly held shell.
We are a company that is intended to serve as a vehicle for the acquisition of a
target business which we believe has significant growth potential. We are not
presently engaged in, and we will not engage in, any substantive commercial
business for an indefinite period of time. While we may seek to effect business
combinations with more than one target business, we will probably have the
ability, as a result of our limited resources, to effect only a single business
combination.
Current Trends
- --------------
As a result of the recent declines in the United States equity markets, many
privately held companies have been shut off from the public marketplace.
Additionally, as the economy has slowed, many companies are attempting to divest
non-core assets and divisions. Due to these factors, we believe that there are
substantial opportunities to effect attractive acquisitions and that, as a
public entity, we are well positioned to identify target acquisitions and to
effect a business combination to take advantage of these current trends.
Effecting a Business Combination
- --------------------------------
General
A business combination may involve the acquisition of, or merger with, a company
that does not need substantial additional capital but that desires to establish
a public trading market for its shares, while avoiding what it may deem to be
adverse consequences of undertaking a public offering itself. These include time
delays, significant expense, loss of voting control and compliance with various
federal and state securities laws. In the alternative, a business combination
may involve a company which may be financially unstable or in its early stages
of development or growth.
We have not identified a target business or target industry
Our efforts in identifying a prospective target business will not be limited to
a particular industry and we may ultimately acquire a business in any industry
we deem appropriate. To date, we have not selected any target business on which
to concentrate our search for a business combination. While we intend to focus
on target businesses in the United States, we are not limited to those entities
and may consummate a business combination with a target business outside of the
United States. Accordingly, there is no basis to evaluate the possible merits or
risks of the target business or the particular industry in which we may
ultimately operate. To the extent we effect a business combination with a
financially unstable company or an entity in its early stage of development or
growth, including entities without established records of sales or earnings, we
may be affected by numerous risks inherent in the business and operations of
financially unstable and early stage or potential emerging growth companies. In
addition, to the extent that we effect a business combination with an entity in
an industry characterized by a high level of risk, we may be affected by the
currently unascertainable risks of that industry. An extremely high level of
risk frequently characterizes many industries which experience rapid growth. In
addition, although our management will endeavor to evaluate the risks inherent
in a particular industry or target business, there can be no assurance that we
will properly ascertain or assess all significant risk factors.
Sources of target businesses
We anticipate that target business candidates will be brought to our attention
from various unaffiliated sources, including securities broker-dealers,
investment bankers, venture capitalists, bankers and other members of the
financial community, who may present solicited or unsolicited proposals. Our
sole executive officer and his affiliates may also bring to our attention target
business candidates. While we do not presently anticipate engaging the services
of professional firms that specialize in business acquisitions on any formal
basis, we may engage these firms in the future, in which event we may pay a
finder's fee or other compensation. We do not currently intend to pay our
existing officer or our shareholders or any entity with which they are
affiliated any finder's fee or other compensation for services rendered to us
prior to or in connection with the consummation of a business combination.
Selection of a target business and structuring of a business combination
Subject to the requirement that our initial business combination must be with a
target business with a fair market value that is at least 80% of our net assets
at the time of such acquisition, we will have virtually unrestricted flexibility
in identifying and selecting a prospective target business. In evaluating a
prospective target business, we will consider, among other factors, the
following:
9
o financial condition and results of operation;
o growth potential;
o experience and skill of management and availability of additional
personnel;
o capital requirements;
o competitive position;
o stage of development of the target business's products, processes or
services;
o degree of current or potential market acceptance of the target
business's products, processes or services;
o proprietary features and degree of intellectual property or other
protection of the target business's products, processes or services;
o regulatory environment of the industry; and
o costs associated with effecting the business combination.
These criteria are not intended to be exhaustive. Any evaluation relating to the
merits of a particular business combination will be based, to the extent
relevant, on the above factors as well as other considerations deemed relevant
by our management in effecting a business combination consistent with our
business objective. In evaluating a prospective target business, we plan to
conduct an extensive due diligence review which will encompass, among other
things, meetings with incumbent management and inspection of facilities, as well
as review of financial and other information which will be made available to us.
We will endeavor to structure a business combination so as to achieve the most
favorable tax treatment to us, the target business and both companies'
shareholders. There can be no assurances, however, that the Internal Revenue
Service or appropriate state tax authority will agree with our tax treatment of
the business combination.
The time and costs required to select and evaluate a target business and to
structure and complete the business combination cannot presently be ascertained
with any degree of certainty. Any costs incurred with respect to the
identification and evaluation of a prospective target business with which a
business combination is not ultimately completed will result in a loss to us and
reduce the amount of capital available to otherwise complete a business
combination.
Fair market value of target business
We anticipate that the initial target business that we acquire will have a fair
market value equal to at least 80% of our net assets at the time of such
acquisition. The fair market value of such business will be determined by our
Board of Directors based upon standards generally accepted by the financial
community, such as actual and potential sales, earnings and cash flow and book
value. If our board is not able to independently determine that the target
business has a sufficient fair market value, we may obtain an opinion from an
unaffiliated, independent investment banking firm which is a member of the
National Association of Securities Dealers, Inc. with respect to the
satisfaction of such criteria. Since any opinion, if obtained, would merely
state that fair market value meets the 80% of net assets threshold, it is not
anticipated that copies of such opinion would be distributed to our
shareholders, although copies will be provided to shareholders who request it.
Rights of dissenting shareholders
A business combination may require the approval of the holders of the
outstanding shares of both participating companies. Shareholders who vote
against a business combination in certain instances may be entitled to dissent
and to obtain payment for their shares. The requirement of approval of our
shareholders in any business combination may be limited to those transactions
identified as a merger or a consolidation. We may enter into a business
combination that would not require the approval of our shareholders, in which
case our shareholders may not be entitled to dissent and obtain payment for
their shares. Accordingly, unless the acquisition requires shareholder approval,
we will not provide shareholders with a disclosure document containing audited
or unaudited financial statements prior to such acquisition.
Prior to any business combination for which shareholder approval is required, we
intend to provide our shareholders disclosure documentation concerning the
business opportunity or target company and its business. Such disclosure will in
all likelihood be in the form of a proxy statement which will be distributed to
shareholders at least 20 days prior to any shareholder's meeting.
Competition
In identifying, evaluating and selecting a target business, we expect to
encounter intense competition from other entities having a business objective
similar to ours. Many of these entities are well established and have extensive
experience identifying and effecting business combinations directly or through
affiliates. Many of these competitors possess greater technical, human and other
resources than us and our financial resources will be relatively limited when
contrasted with those of many of these competitors. While we believe there are
10
numerous potential target businesses that we could acquire, our ability to
compete in acquiring certain sizable target businesses will be limited by our
available financial resources. This inherent competitive limitation gives others
an advantage in pursuing the acquisition of a target business. Further, if we
need to seek shareholder approval of a business combination, that may delay the
completion of a transaction.
Any of these obligations may place us at a competitive disadvantage in
successfully negotiating a business combination. Our management believes,
however, that our status as a public entity and potential access to the United
States public equity markets may give us a competitive advantage over
privately-held entities having a similar business objective as us in acquiring a
target business with significant growth potential on favorable terms.
Significant Transactions
- ------------------------
In June 2004, we and the former members of Absolute Industries, LLC agreed to
rescind the Merger Agreement and terminate the Merger ab initio, for each party
to return the other party the consideration received in connection with the
Merger, and to release each other from all claims relating to the Merger
Agreement and the Merger. In connection with this transaction, all of the issued
and outstanding stock of the Merger Sub was transferred to the former members of
Absolute Industries, LLC.
Employees
- ---------
Thomas F. Duszynski is our sole employee, director and officer. Mr. Duszynski is
not obligated to contribute any specific number of hours per week and intends to
devote only as much time as he deems necessary to our affairs. The amount of
time he will devote in any time period will vary based on the availability of
suitable target businesses to investigate. We do not intend to have any full
time employees prior to the consummation of a business combination. We have no
salaried employees and we anticipate that none of our officers, directors or
principal shareholders will receive any compensation for any assistance they may
provide us. Our management expects to use consultants, attorneys and accountants
as necessary, and does not anticipate a need to engage any full-time employees
so long as we are seeking and evaluating business opportunities. The need for
employees and their availability will be addressed in connection with the
decision whether or not to acquire or participate in a specific business
opportunity.
Our Office
- ----------
Our office is located at 141 West Jackson Boulevard, Suite 2182, Chicago,
Illinois 60604, and the telephone number is (312) 427-5457. Our office is
located in the office of Augustine Fund, L.P.; Thomas Duszynski, our sole
employee, director and officer, is a principal of Augustine Fund, L.P. We
anticipates that our office will remain at the offices of Augustine Fund, L.P.
until an acquisition has been concluded. All corporate records will be
maintained at this office, and it is anticipated that all shareholders' meetings
will take place in Chicago, Illinois. In the event that a merger or acquisition
takes place, no assurance can be given that the corporate records or
headquarters will continue to be maintained at 141 West Jackson Boulevard, Suite
2182, Chicago, Illinois 60604, or that shareholders' meetings will be held in
Chicago, Illinois. We are not responsible for reimbursement for out-of-pocket
office expenses, such as telephone, postage or supplies. There are no written
documents memorializing the foregoing. We consider our current office space
adequate for our current operations.
There are no agreements or understandings with respect to our offices subsequent
to the completion of an acquisition. Upon a merger or acquisition, we will
likely relocate our office to that of the acquisition candidate.
Reports to Security Holders
- ---------------------------
We are subject to reporting obligations under the Exchange Act. These
obligations include an annual report under cover of Form 10-KSB, with audited
financial statements, unaudited quarterly reports and the requisite proxy
statements with regard to annual shareholder meetings. The public may read and
copy any materials we file with the Commission at the Commission's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may
obtain information of the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0030. The Commission maintains an Internet site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the
Commission.
11
We will not acquire a target business if audited financial statements cannot be
obtained for the target business. Additionally, our management will provide
shareholders with audited financial statements, prepared in accordance with
generally accepted accounting principles, of the prospective target business as
part of the proxy solicitation materials sent to shareholders to assist them in
assessing the target business. Our management believes that the requirement of
having available audited financial statements for the target business will not
materially limit the pool of potential target businesses available for
acquisition.
Liquidity and Capital Resources
- -------------------------------
We do not have sufficient funds to engage in significant operating activities.
Our future operating activities are expected to be funded by loans from a major
shareholder. However, none of our shareholders has any obligation to provide
such loans to us.
As of March 31, 2005, we have accounts payable of $115,269, and a payroll tax
obligation of $273,812. We do not have sufficient cash reserves to satisfy these
amounts. We anticipate that we will need to borrow funds from a major
shareholder in order to satisfy these obligations. However, none of our
shareholders has any obligation to provide such loans to us.
Critical Accounting Policies
- ----------------------------
Management's Plan of Operation discusses our audited consolidated financial
statements, which have been prepared in accordance with accounting policies
generally accepted in the United States. The preparation of these audited
consolidated financial statements requires us to make estimates and assumptions
that affect the assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
We believe the following critical accounting policies require significant
judgments, estimates and assumptions used in the preparation of the audited
consolidated financial statements.
Basic loss per common share (EPS) is computed by dividing loss available to our
common stockholders by the weighted average number of shares of common stock
outstanding for the year. Diluted EPS reflect the potential dilution from the
exercise or conversion of securities into common stock. Diluted EPS is not
presented because it is anti-dilutive.
We issue stock in lieu of cash for certain transactions. The fair value of our
common stock, which is based on comparable cash purchases or the value of
services, whichever is more readily determinable, is used to value the
transaction.
We record the receipt of payment for common stock that has not been issued to
the stockholder as a common stock payable in the financial statements.
We follow Financial Accounting Standards Board Statement No. 121 (FASB No. 121),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." FASB No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of these assets may not be recoverable. In performing the review
of recoverability, we estimate the future cash flows that are expected to result
from the use of the assets and their eventual disposition. Because events and
circumstances frequently do not occur as expected, there will usually be
differences between the estimated and actual future cash flows, and these
differences may be material.
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statements
carrying amounts of existing assets and liabilities and their respective income
tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized as income in the
period that included the enactment date.
Material Off-Balance Sheet Arrangements
- ---------------------------------------
We have no material off-balance sheet arrangements.
12
Item 3. Controls and Procedures
- -------------------------------
(a) Evaluation of Disclosure Controls and Procedures.
Disclosure controls and procedures are designed to ensure that information
required to be disclosed in the reports filed or submitted under the Exchange
Act is recorded, processed, summarized and reported, within the time period
specified in the Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in the reports filed under the
Exchange Act is accumulated and communicated to management, as appropriate, to
allow timely decisions regarding required disclosure. Our current principal
executive officer, who is also our principal financial officer, evaluated the
effectiveness of our disclosure controls and procedures as of the end of the
quarterly period covered by this report pursuant to Rule 15d-15(b) promulgated
under the Exchange Act. Based upon that evaluation, our principal executive and
financial officer has concluded that our disclosure controls and procedures were
not effective in alerting management in a timely fashion to all material
information required to be included in our periodic filings with the Commission,
which has contributed to significant delays in filing our periodic reports.
Based on this evaluation, our principal executive officer and principal
financial officer will accelerate plans to implement additional financial
reporting controls and procedures to ensure that information in reports that we
file or submit under the Exchange Act are recorded, processed, summarized and
reported within the time periods specified in Commission rules and forms.
Furthermore, when and if we acquire an operating business, management will
implement operating controls and procedures to ensure timely disclosure.
A control system, no matter how well designed and operated, can provide only
reasonable, not absolute, assurance that the control system's objectives will be
met. Further, the design of a control system must reflect the fact that there
are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, with the company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, that breakdowns can occur because of simple
errors or mistakes, and that controls can be circumvented by the acts of
individuals or groups. Because of the inherent limitations in a cost-effective
control system, misstatements due to error or fraud may occur and not be
detected.
(b) Changes in Internal Controls.
There were no significant changes in our internal control over financial
reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred
during the period covered by this report that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.
PART II
Item 1. Legal Proceedings
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The Commission has notified us that it is considering initiating administrative
proceedings to have our common stock deregistered. We have submitted a written
response to the Commission's notice and are engaged in discussions with the
Commission regarding this notice. We cannot predict whether such administrative
proceedings will go forward, and, if so, what the outcome of those proceedings
will be.
In the ordinary course of our business, we may at times be subject to various
legal proceedings. However, except as set forth above, we are not party to, and
are not aware of, pending or threatened litigation that we currently anticipate
would have a material adverse effect on our business or operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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In connection with the Merger in August 2003, we issued 27,000,000 shares of
Class A convertible preferred stock to the former members of Absolute Services,
LLC, and we also issued 10,000,000 shares of common stock to certain other
parties that provided services in connection with the Merger. The issuance of
our preferred stock has been rescinded in connection with the Merger. In
addition, 7,000,000 shares of common stock issued in connection with the Merger
have been returned to us.
In May 2005, Augustine Fund, L.P., one of our shareholders, converted $189,877
in advances previously made to us into 47,469,250 shares of our common stock.
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Item 3. Defaults Upon Senior Securities
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None.
Item 4. Submission of Matters to a Vote of Security Holders
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In June, 2004, pursuant to a written consent in lieu of a special meeting, the
holders of a majority of our common stock and all of our Series A preferred
stock approved the rescission of the Merger and all agreements entered into in
connection with the Merger.
Item 5. Other Information
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None.
Item 6. Exhibits and Reports on Form 8-K
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The following are being filed as part of this Report on Form 10-QSB:
1. Financial Statements
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See the Index to Financial Statements which appears on Page i hereof.
2. Financial Statement Schedules
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None.
3. Exhibits
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Exhibit 31.1 - Certification of CEO/CFO pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 32.1 - Certification of CEO/CFO pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, we have duly caused this report to be signed on our
behalf by the undersigned, thereunto duly authorized.
ABSOLUTE WASTE SERVICES, INC.
(Registrant)
By: /s/ Thomas F. Duszynski Date: May 27, 2005
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Thomas F. Duszynski
Chief Executive Officer,
Chief Financial Officer and
Director
(Principal Executive Officer and
Principal Financial and Accounting Officer)
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