XOTC:GTSO Green Technology Solutions, Inc. Quarterly Report 10-Q/A Filing - 6/30/2012

Effective Date 6/30/2012

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

FORM 10-Q/A

Amendment No. 1

 

x           Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended June 30, 2012

 

¨           Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ___ to ____

 

Commission File Number 1-11248

 

GREEN TECHNOLOGY SOLUTIONS, INC.

(formerly Sunrise Energy Resources, Inc.)

(Exact name of Registrant as specified in its charter)

 

Delaware   84-0938688
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification Number)

 

2880 Zanker Road, Suite 203    
San Jose, CA   95134
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (408) 432-7285

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      ¨ Accelerated filer ¨
Non-accelerated filer ¨ Smaller reporting company      x
(Do not check if a smaller reporting company)    

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ¨ No x

 

As of July 31, 2012, the Registrant had 31,202,694 shares of common stock issued and outstanding.

  

 
 

EXPLANATORY NOTE

 

The purpose of this Amendment No. 1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012 (“Form 10-Q”) is to submit Exhibit 101 to the Form 10-Q in accordance with Rule 405 of Regulation S-T. Exhibit 101 consists of the Interactive Data Files from the Registrant’s Form 10-Q filed with the Securities and Exchange Commission on August 14, 2012.

 

GREEN TECHNOLOGY SOLUTIONS, INC.

FORM 10-Q

TABLE OF CONTENTS

 

      Page
PART I. FINANCIAL INFORMATION    
       
Item 1. Financial Statements (unaudited)    
       
  Balance Sheets – June 30, 2012 and December 31, 2011     3
       
  Statements of Operations - for the six months and three months ended June 30, 2012 and 2011 and for the period from June 12, 2010 (date of re-entry to development stage) through June 30, 2012     4
       
  Statements of Changes in Stockholder’s Equity (Deficit) – for the period from June 12, 2010 (date of re-entry to development stage) through June 30, 2012     5
       
  Statements of Cash Flows - for the six months ended June 30, 2012 and 2011 and for the period from June 12, 2010 (date of re-entry to development stage) through June 30, 2012     6
       
  Notes to the Unaudited Financial Statements     7
       
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations     9
       
Item 3. Quantitative and Qualitative Disclosures about Market Risk     14
       
Item 4. Controls and Procedures     14
       
PART II.    OTHER INFORMATION    
       
Item 1. Legal Proceedings     14
       
Item 1A. Risk Factors     15
       
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds     15
       
Item 3. Defaults upon Senior Securities     15
       
Item 4. [Removed and Reserved]     15
       
Item 5. Other Information     15
       
Item 6. Exhibits     15
       
SIGNATURES     16

  

2
 

PART I.

 

GREEN TECHNOLOGY SOLUTIONS, INC.

(a development stage company)

BALANCE SHEETS

    

    June 30,
2012
    December 31,
2011
 
    (Unaudited)        
ASSETS                
                 
CURRENT ASSETS                
Cash and cash equivalents   $ 2,047     $ 979  
Total current assets     2,047       979  
                 
TOTAL ASSETS   $ 2,047     $ 979  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                
                 
CURRENT LIABILITIES                
Accounts payable   $ 15,413     $ 29,485  
Advances payable     411,176       251,468  
Total current liabilities     426,589       280,953  
                 
Convertible notes payable, net of discount of $215,458 and $1,106,580, respectively     98,908       123,524  
                 
TOTAL LIABILITIES     525,497       404,477  
                 
STOCKHOLDERS’ EQUITY (DEFICIT)                
Common Stock, $0.001 par value, 75,000,000 authorized, 31,202,694 and 146,594 issued and outstanding as of June 30, 2012 and December 31, 2011, respectively     31,203       146  
Additional Paid-in Capital     9,507,174       8,589,557  
Retained earnings (accumulated deficit)     (7,113,753 )     (7,113,753 )
Deficit accumulated during the development stage     (2,948,074 )     (1,879,448 )
Total stockholders' equity (deficit)     (523,450 )     (403,498 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)   $ 2,047     $ 979  

 

The accompanying notes are an integral part of these financial statements.

  

3
 

GREEN TECHNOLOGY SOLUTIONS, INC.

(a development stage company)

STATEMENTS OF OPERATIONS

(Unaudited)

 

    Six months ended     Three months ended     For the period from
June 12, 2010 (date re-entered development stage) through
 
    June 30,     June 30,     June 30,  
    2012     2011     2012     2011     2012  
                               
                               
OPERATING EXPENSES                                        
Sales, general and administrative expenses   $ 142,568     $ 470,136     $ 65,337     $ 270,401     $ 1,519,622  
                                         
LOSS FROM OPERATIONS     (142,568 )     (470,136 )     (65,337 )     (270,401 )     (1,519,622 )
                                         
OTHER INCOME (EXPENSE)                                        
Interest expenses, net     (924,058 )     (53,906 )     (27,182 )     (29,807 )     (1,166,452 )
Impairment of joint venture     (2,000 )     -       (2,000 )     -       (262,000 )
Total other income (expense)     (926,058 )     (53,906 )     (29,182 )     (29,807 )     (1,428,452 )
                                         
NET LOSS   $ (1,068,626 )   $ (524,042 )   $ (94,519 )   $ (300,208 )   $ (2,948,074 )
                                         
                                         
NET LOSS PER COMMON SHARE – Basic and fully diluted   $ (0.04 )   $ (44.70 )   $ (0.00 )   $ (2.39 )        
                                         
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING     29,518,601       11,724       31,202,694       125,669          

 

 

The accompanying notes are an integral part of these financial statements.

  

4
 

GREEN TECHNOLOGY SOLUTIONS, INC.

(a development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

 

 

                            Deficit        
                            accumulated        
                Additional           during the        
    Common Stock     Paid-In     Accumulated     development     Equity  
    Shares     Amount     Capital     Deficit     stage     Total  
BALANCE, DECEMBER 31, 2009     395     $ -     $ 6,650,413     $ (7,083,492 )   $ -     $ (433,079 )
                                                 
Correction in number of outstanding shares     1       -       -       -       -       -  
Issuance of shares for conversion of note payable     50       -       30,000       -       -       30,000  
Issuance of shares for conversion of note payable     66,667       67       199,933       -       -       200,000  
Imputed interest expense     -       -       25,808       -       -       25,808  
Net loss for the year     -       -       -       (30,261 )     (685,610 )     (1,193,838 )
                                                 
BALANCE, DECEMBER 31, 2010     67,113     $ 67     $ 6,906,154     $ (7,113,753 )   $ (685,610 )   $ (893,142 )
                                                 
Issuance of shares for conversion of note payable     70,000       70       209,930       -       -       210,000  
Issuance of shares for consulting services     5,000       5       209,995       -       -       210,000  
Share rounding on reverse split     4,481       4       (4 )     -       -       -  
Beneficial conversion feature on convertible note payable     -       -       1,179,356       -       -       1,179,356  
Imputed interest expense     -       -       84,126       -       -       84,126  
Net loss for the year     -       -       -       -       (1,193,838 )     (1,193,838 )
                                                 
BALANCE, DECEMBER 31, 2011     146,594     $ 146     $ 8,589,557     $ (7,113,753 )   $ (1,879,448 )   $ (403,498 )
                                                 
Issuance of shares for conversion of note payable     31,056,100       31,057       900,626       -       -       931,683  
Imputed interest expense     -       -       16,991       -       -       16,991  
Net loss for the year     -       -       -       -       (1,068,626 )     (1,068,626 )
                                                 
BALANCE, JUNE 30, 2012     31,202,694     $ 31,203     $ 9,507,174     $ (7,113,753 )   $ (2,948,074 )   $ (523,450 )

 

On November 19, 2010, the Company effected a one-for-200 reverse stock split. All share and per share numbers have been restated to reflect the reverse split.

 

On January 21, 2012, the Company effected a one-for-300 reverse stock split. All share and per share numbers have been restated to reflect the reverse split.

 

The accompanying notes are an integral part of these financial statements.

 

5
 

GREEN TECHNOLOGY SOLUTIONS, INC.

(a development stage company)

STATEMENTS OF CASH FLOWS

(Unaudited)

 

    For the six months ended
June 30,
    For the
period from
June 12,
2010 (date
re-entered
development
stage)
through
June 30,
 
    2012     2011     2012  
                   
CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES:                        
Net loss   $ (1,068,626 )   $ (524,042 )   $ (2,948,074 )
Adjustments to reconcile net loss to net cash in operating activities:                        
Impairment of investment in joint venture     2,000       -       262,000  
Stock issued for consulting services     -       -       210,000  
Imputed interest expense     16,991       44,057       126,925  
Amortization of discount on convertible notes payable     891,122       -       963,898  
Changes in operating assets and liabilities:                        
Prepaid expenses     -       (13,649 )     -  
Accounts payable and accrued liabilities     (14,072 )     2,751       (27,210 )
Accrued interest payable     15,945       9,849       85,976  
NET CASH (USED IN) OPERATING ACTIVITIES     (156,640 )     (481,034 )     (1,326,485 )
                         
CASH (USED IN) INVESTING ACTIVITIES                        
Cash used in investment in joint venture     (2,000 )     -       (262,000 )
NET CASH (USED IN) INVESTING ACTIVITIES     (2,000 )     -       (262,000 )
                         
CASH PROVIDED BY FINANCING ACTIVITIES:                        
Proceeds from advances     159,708       517,673       1,590,532  
NET CASH PROVIDED BY FINANCING ACTIVITIES     159,708       517,673       1,590,532  
                         
NET INCREASE (DECREASE) IN CASH     1,068       36,639       2,047  
CASH, at the beginning of the period     979       2,613       -  
                         
CASH, at the end of the period   $ 2,047     $ 39,252     $ 2,047  
                         
Supplemental Disclosures of Cash Flow Information:                        
Cash paid during the period for:                        
Interest   $ -     $ -     $ -  
Taxes   $ -     $ -     $ -  
                         
Noncash investing and financing transactions:                        
Issuance of stock for consulting services   $ -     $ -     $ 210,000  
Refinancing of demand notes to convertible notes payable   $ -     $ -     $ 1,600,073  
Issuance of stock for conversion of convertible notes payable   $ 931,683     $ 50,000     $ 1,371,683  
Stock payable for conversion of convertible notes payable   $ -     $ 90,000     $ -  

 

The accompanying notes are an integral part of the financial statements.

 

6
 

GREEN TECHNOLOGY SOLUTIONS, INC.

(a development stage company)

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)

 

1. INTERIM FINANCIAL STATEMENTS

 

The accompanying unaudited interim financial statements include all adjustments, which in the opinion of management are necessary in order to make the accompanying financial statements not misleading, and are of a normal recurring nature. However, the accompanying unaudited financial statements do not include all of the information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows and stockholders’ equity (deficit) in conformity with generally accepted accounting principles. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements included in our annual financial statements for the period ended December 31, 2011 included in Form 10-K. Operating results for the period ended June 30, 2012 are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2012.

 

2. PRESENTATION OF FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation– The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

 

Going concern — The Company’s financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As shown in the financial statements, the Company incurred a net loss of $1,068,626 during the six months ended June 30, 2012, while the Company’s current liabilities exceeded its current assets by $424,542.

 

In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to meet its financing requirements on a continuing basis by raising additional funds through debt or equity financing. The Company expects to satisfy its cash requirements by obtaining additional loans; however, there is no assurance that additional capital will be available to the Company when needed and on acceptable terms. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

 

Use of Estimates and Assumptions– The preparation of financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from these estimates.

 

Cash and Cash Equivalents – Cash includes petty cash and cash held on current bank accounts. Cash equivalents include short-term investments with an original maturity of three months or less that are readily convertible to known amounts of cash which are subject to insignificant risk of changes in value. Cash and cash equivalents as of June 30, 2012 and December 31, 2011 consisted mainly of U.S. dollar-denominated current accounts held at major banks.

 

Revenue Recognition – The Company is not currently generating revenue; however, revenue generated in the future will be recognized in accordance with SEC rules. The four criteria that must be met in order to recognize revenue are: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonable assured.

 

7
 

Earnings (Loss) per Share – Earnings (loss) per share are computed in accordance with current accounting literature. Basic earnings (loss) per share are calculated by dividing the net income (loss) available to common stockholders by the weighted average number of shares outstanding during the year. Diluted earnings per share reflect the potential dilution of securities that could share in earnings of an entity. In a loss year, dilutive common equivalent shares are excluded from the loss per share calculation as the effect would be anti-dilutive.

 

3. CONVERTIBLE NOTES PAYABLE

 

On January 9, 2012, the holder of the $661,683 Convertible Note Payable elected to convert the entire principal in the amount of $661,683 into 22,056,100 shares of common stock. On that date, the unamortized discount related to this principal was $618,583. This amount was immediately amortized to interest expense. The principal amount of $661,683 was recognized as an increase in stockholders’ equity as a result of this conversion. There was no gain or loss on the conversion, because it was effected in accordance with the terms of the convertible note agreement.

 

On January 12, 2012, the holder of the $517,673 Convertible Note Payable assigned principal in the amount of $270,000 to six entities ($45,000 each). The new holders of the $517,673 Convertible Note Payable elected to convert principal in the amount of $270,000 into 9,000,000 shares of common stock. On that date, the unamortized discount related to this principal was $253,872. This amount was immediately amortized to interest expense. The converted principal amount of $270,000 was recognized as an increase in stockholders’ equity as a result of this conversion. There was no gain or loss on the conversion, because it was effected in accordance with the terms of the convertible note agreement.

 

4. ADVANCES PAYABLE

 

During the six months ended June 30, 2012, the Company has received working capital advances in the amount of $159,708. These advances are non-interest bearing and payable upon demand. The Company has imputed interest on these advances in the amount of $16,991 for the six months ended June 30, 2012. The imputed interest was recorded as an increase in additional paid-in capital.

 

5. SHAREHOLDERS’ EQUITY

 

On January 9, 2012, the Company issued 22,056,100 shares of common stock upon conversion of the $661,683 Convertible Note Payable. This issuance of common stock resulted in a change in control of the Company.

 

On January 12, 2012, the Company issued 9,000,000 shares of common stock upon conversion of a portion of the $517,673 Convertible Note Payable in the amount of $270,000.

 

The Company has imputed interest on advances in the amount of $16,991 for the six months ended June 30, 2012. The imputed interest was recorded as an increase in additional paid-in capital.

 

6. COMMITMENTS AND CONTINGENCIES

 

Litigation– The Company has been and continues to be the subject of legal proceedings and adjudications from time to time. Management believes that the resolution of all business matters which will have a material impact on the Company’s financial position or operating results have been recorded.

 

7. RISK MANAGEMENT POLICIES

 

Management of risk is an essential element of the Company’s operations. The main risks inherent to the Company’s operations are those related to credit risk exposures and market movements in interest rates. A description of the Company’s risk management policies in relation to those risks is provided below.

 

Credit risk– The Company is exposed to credit risk which is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss.

 

Interest rate risk – Interest rate risk arises from the possibility that changes in interest rates will affect the value of a financial instrument.

 

Currently, the Company’s approach to the interest risk limitation is borrowing at fixed rates and for short periods.

 

8
 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with the Company's unaudited financial statements and associated notes appearing elsewhere in this Form 10-Q.

 

As used in this report, the terms "we", "us", "our", the "Company" and "GTSO" mean Green Technology Solutions, Inc., unless otherwise indicated.

 

Caution Regarding Forward-Looking Information

 

All statements contained in this Form 10-Q, other than statements of historical facts, that address future activities, events or developments are forward-looking statements, including, but not limited to, statements containing the words "believe," "expect," "anticipate," "intends," "estimate," "forecast," "project," and similar expressions . All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services, developments or industry rankings; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. These statements are based on certain assumptions and analyses made by us in light of our experience and our assessment of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. However, whether actual results will conform to the expectations and predictions of management is subject to a number of risks and uncertainties described under “Risk Factors” under Part II Item 1A below and in the “Risk Factors” section of our Form 10-K for the fiscal year ended December 31, 2011 that may cause actual results to differ materially.

 

Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by management will be realized or, even if substantially realized, that they will have the expected consequences to or effects on our business operations. Readers are cautioned not to place undue reliance on such forward-looking statements as they speak only of the Company's views as of the date the statement was made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Discussion and Analysis of Financial Condition

 

Organization and Basis of Presentation

 

 

Company History

 

Green Technology Solutions, Inc. (“GTSO”, “we”, “us”, “our” or the “Company”) was incorporated as XCL Sunrise, Inc. in the State of Delaware on April 1, 1991. We changed our name to Sunrise Energy Resources, Inc. on November 1, 2004. On October 26, 2010, we changed our name to Green Technology Solutions, Inc.

 

GTSO is in the business of identifying and acquiring rights in early stage, breakthrough green technologies, with the plan to develop these technologies into marketable products. To date, we have identified the following market segments: (1) the advancement of cleaner world-wide mining technologies, with an emphasis on rare earth and precious metals mining applications, (2) the development of additional markets for environmentally friendly methods of recovering minerals from electronic waste and (3) smart grid technology.  Our mission is to focus our resources on discovering the best available new innovative technologies in this industry space and we intend to work with young companies and inventors to deliver innovation in the real world.

 

9
 

In addition to the foregoing, we plan to focus our resources on successfully identifying new green technologies that have greatest potential to produce near term profits. Due to our limited management and employees, we expect to continue to form strategic joint venture relationships with early stage development technology companies whose goals and objectives are similar to ours. Moreover, we anticipate continued use of and reliance upon industry consultants who have the knowledge and expertise in the areas of our existing and future business ventures. We have located our new offices in the Silicon Valley city of Palo Alto, California, which management believes may increase access to cutting edge technologies. As of June 30, 2012, the Company has one employee.

 

On June 12, 2010, five purchasers acquired control of 82,519 shares (16,503,817 pre-split shares) of our issued and outstanding common stock representing approximately 69.67% of the total number of issued and outstanding shares from Burisma Holdings Limited. The aggregate purchase price for the shares was $270,000. Cambridge Securities of Panama, a Panama corporation, acquired 60,411 shares of common stock, and four other unrelated corporations each acquired control of 5,527 shares of common stock.  As a result of this transaction, there was a change in control of the Company, and Cambridge Securities of Panama became the Company’s majority shareholder.

 

On October 13, 2011, the Company’s majority shareholder approved a one-for-300 reverse stock split and an increase in the authorized capital to 100 million post-split shares. These changes became effective upon approval by FINRA on January 10, 2012.

 

On November 2, 2011, John Shearer, Director and Chief Executive Officer (“CEO”) of the Company, resigned from all positions held with the Company, including resigning from Board service.  There was no disagreement between the Company and Mr. Shearer at the time of his resignation from the Company.

 

Also on November 2, 2011, the Company appointed Paul Watson as Director, CEO and President to replace Mr. Shearer.  A seasoned executive, Mr. Watson, age 36, brings a wealth of experience in finance, corporate strategy and management to GTSO. From 2005 through 2009, Mr. Watson served as a mergers and acquisitions advisor and private equity group manager for KPMG Financial Advisory Services in Shanghai, China.  From 2009 until 2011, he was Managing Director of Hermes Investment Group, a merchant bank focused on clean technology and environmental science established in Shanghai China, and headquartered in the United States. Mr. Watson also currently serves as a Director and CEO of Obscene Jeans Corporation.  He is a graduate of the University of Houston, Bauer College of Business with a bachelor’s degree in finance.  He speaks English, Chinese and Spanish.

 

Current Plan of Operations

 

We are currently identifying possible early stage companies and technology across a range of green technologies and environmentally friendly practices for the purpose of acquiring rights to them and developing them into marketable products. We have already identified several potential new technology endeavors and management is studying these endeavors for their potential inclusion into our development process.

 

On January 29, 2011, we entered into a Profit Participation Agreement with Integrated Smart Solutions, Inc. (“ISS”), a California corporation that develops smart grid technologies. Smart grid technology is an electric network which uses two-way digital communication to control appliances at consumers' homes to achieve energy savings, reduced costs and increased reliability.  Pursuant to the agreement, we will receive up to five percent of the net profits realized by ISS, if any, in exchange for six monthly payments of $10,000.  We have no guarantee that ISS will achieve profitable operations.

 

On January 30, 2011, we entered into a Joint Venture Agreement with Rare Earth Exporters of Mongolia Pte. Ltd. (“REEM”), whose mission is to supply worldwide industrial and manufacturing economies with necessary rare earth minerals. Under the terms of our agreement, we will have a 50% interest in REEM’s profits in exchange for our agreement to provide operating capital. REEM is contributing its knowledge and product development skills in the market. Our initial task is to determine whether certain properties we have identified have mining claims with commercial viability. We will need to raise significant additional capital in order to fully realize the value of our claims in the joint venture if our claims reveal that they contain the rare earth minerals we are seeking to mine. We currently do not have any plan or efforts underway to raise such a significant amount of capital and are not sure when, if ever, we will be able to do so to pursue the exploitation of these mining claims if they prove to exist.

 

10
 

On April 12, 2011, we entered into a letter of intent to acquire REEM.  Since February, we have worked together with REEM to procure and develop rare earth mining claims and operations inside the nation of Mongolia. According to the letter of intent, the final purchase price for REEM was to be agreed upon pending independent evaluations of these sites’ mineral deposits currently underway.  The independent evaluation of the mineral deposits was not been completed and the final purchase price has not been determined.  As a result of performing additional due diligence, the Company has determined that it will not finalize the acquisition of REEM.

 

On June 8, 2011, the Company signed a profit participation agreement with AR Ehkes, a Mongolian company.  The purpose of the profit participation agreement is to facilitate the mining of rare earths at three sites in Mongolia.  Under the terms of the agreement, the Company will receive 15% of the net profits generated by AR Ehkes from production at the three defined sites in Mongolia.  In exchange for this, the Company will be required to pay AR Ehkes $10,000 per month for a period of six months.  In addition, the Company will pay the costs of excavating, moving and exporting a 20 ton rail car of ore from the site. The Company made the required monthly payments of $10,000 each in June, July and August. The Company can cancel this agreement at any time by not making additional payments. There would be no continuing obligation of the Company. The next payment of $10,000 would have been due in September. As of September 30, 2011, the Company canceled this contract by not making the required payment. No additional payments will be made after September 30, 2011.

 

On June 27, 2011, the Company (through its joint venture with Beijing Bullion Transfer Group) signed a profit participation agreement with AR Ehkes to facilitate the mining of rare earth at a fourth site in Mongolia.  Under the terms of the agreement, the Company will receive 15% of the net profits generated by AR Ehkes from production at this site.  In exchange, the Company will be required to pay AR Ehkes $10,000 per month for a period of six months.  In addition, the Company will pay the costs of excavating and evaluating 20 core samples from the site to determine the content of precious metals. The Company made the required monthly payments of $10,000 each in June, July and August. The Company can cancel this agreement at any time by not making additional payments. There would be no continuing obligation of the Company. The next payment of $10,000 would have been due in September. As of September 30, 2011, the Company canceled this contract by not making the required payment. No additional payments will be made after September 30, 2011.

 

On October 20, 2011, we signed an option agreement regarding the potential acquisition of Chery Minerals, LLC. The option agreement provides us with 45 days to perform due diligence and negotiate a final purchase price. We paid $5,000 for this option. Chery Minerals, LLC is in the business of rare earth metals exploration and mineral development with a focus on gold in Africa. We have not completed our due diligence as of the filing of this report.

 

On November 2, 2011, we entered into an agreement with New World Energy Ltd. to form a joint venture (“NEWCO”) for the purpose of exploring potential mineral claims in Indonesia. Each party will own 50% of the joint venture. NEWCO will acquire the mineral rights, make any and all necessary disbursements on behalf of NEWCO, and collect and distribute profits in accordance with the ownership percentages of the joint venture. We have committed to fund the portions of the cash flow requirements of NEWCO. New World Energy Ltd. will manage and operate NEWCO as its contribution to the joint venture.

 

On December 15, 2011, we signed an letter of intent regarding the potential acquisition or joint venture agreement with Diamond V Associates, Inc. The letter of intent provides us with 90 days to perform due diligence and negotiate a final purchase price. Diamond V Associates is in the business of rare earth and precious metals exploration and mineral development with a focus on gold in Alaska and Africa. We have not completed our due diligence as of the filing of this report and the letter of intent was extended for another 90 days on March 27, 2012 due to delays in the due diligence process.

 

On June 8, 2012, we signed a joint venture agreement with Diamond V Associates, Inc. to fund the research, planning and development of tungsten and other rare earths and precious metals in North America and Africa. According to the agreement, all profits, losses and other allocations to the joint venture shall be allocated as follows at the conclusion of each fiscal year on a 50:50 basis between GTSO and Diamond V Associates. We will contribute $2,000 per month to the joint venture for working capital for the joint venture’s operations. If we determine that additional funding is required after projects are identified, we will negotiate the amount of any contribution that we would make with Diamond V Associates.

 

11
 

Through GTSO’s newest initiative in the mining, rare earth and precious metals sector, the Company plans to create the necessary logistics and distribution channels to mine, ship, and deliver precious metals to the global marketplace. The Company intends to be a driving force behind a more competitive rare earth metals market. The Company’s alliances in Asia and Africa provide a strategic advantage and access to one of the most plentiful rare earth deposits in the world. GTSO has also identified additional joint venture and acquisition targets in China and South America. The mission is to meet the growing demand for gold, silver, tungsten and other precious and rare metals, while introducing sustainable and environmentally friendly practices that also create new products and reduce greenhouse gas pollutants through the use of biomass and organic carbon sequestration.

 

Results of Operations and Going Concern

 

We incurred a net loss of $1,068,626 for the six months ended June 30, 2012, and had a working capital deficit of $424,542 as of June 30, 2012. We do not anticipate having positive net income in the immediate future. Net cash used in operations for the six months ended June 30, 2012 was $156,640. These conditions create an uncertainty as to our ability to continue as a going concern.

 

We continue to rely on advances to fund operating shortfalls and do not foresee a change in this situation in the immediate future. There can be no assurance that we will continue to have such advances available. We will not be able to continue operations without them. We are pursuing alternate sources of financing, but there is no assurance that additional capital will be available to the Company when needed or on acceptable terms.

 

Results of Operations for the six months ended June 30, 2012 compared to the six months ended June 30, 2011

 

General and Administrative Expenses

 

General and administrative expenses decreased in the six months ended June 30, 2012 as compared to the six months ended June 30, 2011 from $470,136 to $142,568 due to the Company’s focus on controlling overhead costs.

 

Loss from Operations

 

The decrease in our operating loss for the six months ended June 30, 2012 as compared to the comparable period of 2011 from $470,136 to $142,568 is due to the decrease in general and administrative expenses described above.

 

Other Income (Expense)

 

Interest expense increased during the six months ended June 30, 2012 compared to the same period of 2011 from $53,906 to $924,058. The increase was primarily the result of amortization of discounts on convertible notes payable in the amount of $891,122 during the six months ended June 30, 2012. There was no such amortization during the comparable period of 2011.

 

Net Income (Loss)

 

We recognized a net loss of $1,068,626 for the six months ended June 30, 2012 as compared to a net loss of $524,042 for the same period of 2011. Changes in net loss are primarily attributable to the increase in interest expense partially offset by the decrease in general and administrative expenses as described above.

 

Results of Operations for the three months ended June 30, 2012 compared to the three months ended June 30, 2011

 

General and Administrative Expenses

 

General and administrative expenses decreased in the three months ended June 30, 2012 as compared to the three months ended June 30, 2011 from $270,401 to $65,337 due to the Company’s focus on controlling overhead costs.

 

12
 

Loss from Operations

 

The decrease in our operating loss for the three months ended June 30, 2012 as compared to the comparable period of 2011 from $270,401 to $65,337 is due to the decrease in general and administrative expenses described above.

 

Other Income (Expense)

 

Interest expense remained relatively unchanged decreasing from $29,807 for the three months ended June 30, 2011 to $27,182 for the three months ended June 30, 2012.

 

Net Income (Loss)

 

We recognized a net loss of $94,519 for the three months ended June 30, 2012 as compared to a net loss of $300,208 for the same period of 2011. Changes in net loss are primarily attributable to the increase in interest expense partially offset by the decrease in general and administrative expenses as described above.

 

Liquidity and Capital Resources

 

Net cash used by operating activities was $156,640 and $481,034 for the six months ended June 30, 2012 and 2011, respectively. The decrease is mainly attributable to the decreased net loss as a result of lower general and administrative expenses.

 

Cash provided by financing activities was $159,708 and $517,673 for the six months ended June 30, 2012 and 2011, respectively. The decrease is mainly attributable to decreased advances received which were required to fund the Company’s operations.

 

We had negative working capital of $424,542 as of June 30, 2012 compared to $279,974 as of December 31, 2011. Our cash position increased to $2,047 at June 30, 2012 compared to $979 at December 31, 2011.

 

Our monthly cash requirement amount is approximately $25,000, and as of June 30, 2012, cash on hand would fund operations for less than one month.

 

The Company anticipates it will require around $800,000 to sustain operations and effectively evaluate new business opportunities over the next twelve months. However, if our mining claims show significant deposits, then we may require several million dollars of additional financing. The Company intends to seek to raise these funds through equity and debt financing; however, there is no guarantee that funds will be raised and the Company has no agreements in place as of the date of this filing for any financing.

 

We do not have any material commitments for capital expenditures. However, should we execute our business plan as anticipated, we would incur substantial capital expenditures and require financings in addition to what is required to fund our present operations.

 

Additional Financing

 

Additional financing is required to continue operations. Although actively searching for available capital, the Company does not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.

 

Off Balance Sheet Arrangements

 

None

 

13
 

Cash requirements

 

The Company anticipates it will require around $800,000 to sustain operations and effectively evaluate new business opportunities over the next twelve months. The Company intends to seek to raise these funds through equity and debt financing; however, there is no guarantee that funds will be raised and the Company has no agreements in place as of the date of this filing for any financing.

 

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2012. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2012, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

  1. As of June 30, 2012, we did not maintain effective controls over the control environment. Specifically we have not developed and effectively communicated to our employees its accounting policies and procedures. This has resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

 

  2. As of June 30, 2012, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.

 

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to 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, have been detected.

 

Changes in Internal Control over Financial Reporting

 

During the quarterly period ended June 30, 2012, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

There are no outstanding legal proceedings material to the Company to which the Company or any of its assets are subject, nor are there any such proceedings known to be contemplated. Management believes that the resolution of all business matters which would have a material impact on the Company’s financial position or operating results have been recorded.

 

14
 

Item 1A. Risk Factors

 

In addition to the other information set forth in this quarterly report, you should carefully consider the risks discussed in our 2011 Annual Report on Form 10-K including the Risk Factors set forth in Part I of our Annual Report, which risks could materially affect our business, financial condition or future results. There have been no material changes to the risk factors disclosed in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2011. These risks are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. [Removed and Reserved]

 

N/A

 

Item 5. Other Information

 

None

 

Item 6. EXHIBITS

 

Exhibit No.   Description of Exhibit
     
3.1   Amended and Restated Certificate of Incorporation of the Company (1)
3.2   Bylaws of the Company (1)
10.1   10% Subordinated Note Due March 30, 2009 (4)
10.2   10% Subordinated Note Due June 6, 2009 (4)
10.3   10% Subordinated Note Due March 30, 2009 (5)
10.4   10% Subordinated Note Due June 6, 2009 (5)
10.5   Joint Venture Agreement (6)
10.6   Sale and Assignment of Rights Under Joint Venture Agreement (6)
10.7   Profit Participation Agreement dated January 29, 2011 with Integrated Smart Solutions, Inc. (3)
10.8   Joint Venture Agreement dated January 30, 2011 with Rare Earth Exporters of Mongolia Pte. Ltd. (3)
10.9   Sale and Assignment of Rights Under Joint Venture Agreement dated November 8, 2010 (3)
14   Code of Ethics (2)
31.1   Section 302 Certification (7)
32.1   Section 906 Certification (7)
101   XBRL Interactive Data (7) (8)

 

  (1) Incorporated by reference from the Form SB-2 filed on September 15, 2006.
  (2) Incorporated by reference from the Form 10-K for the Annual Period Ended December 31, 2009.
  (3) Incorporated by reference from the Form 10-K for the Annual Period Ended December 31, 2010.
  (4) Incorporated by reference from the 10-QSB for the Six Month Period Ended June 30, 2006.
  (5) Incorporated by reference from the 10-KSB for the Fiscal Year Ended December 31, 2006.
  (6) Incorporated by reference from the 8-K filed on December 13, 2010.
  (7) Filed or furnished herewith.
  (8) In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed”.

 

15
 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 

  Green Technology Solutions, Inc.
   
  /s/ Paul Watson  
Date: September 13, 2012 Paul Watson
  Chief Executive Officer
 

(Principal Executive, Financial and Accounting

Officer)

  

16

XOTC:GTSO Green Technology Solutions, Inc. Quarterly Report 10-Q/A Filling

Green Technology Solutions, Inc. XOTC:GTSO Stock - Get Quarterly Report SEC Filing of Green Technology Solutions, Inc. XOTC:GTSO stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

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XOTC:GTSO Green Technology Solutions, Inc. Quarterly Report 10-Q/A Filing - 6/30/2012
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