ITEM 1. BUSINESS
Introduction
GreenPlex Services, Inc. was organized under the laws of the State of Nevada on September 2, 2009. Our company was organized for the express purpose of providing landscape and exterior property management services to residential, industrial, and commercial customers throughout areas of Eastern Washington State and Northern Idaho. Our services include all aspects of lawn care, tree and shrub installation and maintenance, landscape creation and maintenance, fertilizer and weed control spraying, consumer greenhouse and compost center setup, synthetic grass installation, wildfire risk assessment, and a multiphase pest and insect control program. We are committed to a “Green Philosophy” and where feasible, utilize organic, non-toxic, and socially responsible products, such as fertilizers and pesticides. In the event our business model is successful, we plan to undertake a feasibility study to determine if our business concept can evolve into a business franchise opportunity. Our company is bonded, licensed and carries up to $2,000,000 of general business liability insurance.
We have one fully equipped spray truck that is composed of a one ton flatbed truck, two 350 gallon plastic chemical tanks, one 150 gallon plastic chemical tank, two high-pressure portable pumps and three 300 foot long of high pressure hoses. Multiple tanks and hoses are a requirement to avoid cross contamination of different chemical and pesticides. Our general manager, James Jefferson, is a Certified Commercial Spray Applicator and is registered with the Washington State Department of Agriculture and has passed a comprehensive four part test through the Spokane County Extension which includes; 1) Laws and Safety; 2) Insect and Disease Control; 3) Turf and Ornamental Weed Control; and 4) GPCO ( General Pest Control Operator). Government approval is needed for the service of chemical spray application only and our other services and products do not require government approval. The effect of existing governmental regulations on our business is minor, as we employ a Certified Commercial Spray Applicator and stay within the laws and regulations pertaining to the services we offer
We are mostly a service based company that will be orientated toward commercial, industrial, and residential clients. Additional products that we sell are foliage, such as trees and shrubbery, material landscape beautification products and ornamentation, synthetic grass, fertilizers and pesticides, fire-retardant gels and foams, and items such as consumer greenhouses and compost centers. Currently, we carry no product inventory except certain chemicals used for spraying. We can acquire the aforementioned products through various local vendors or commercial product outlets and sell directly to clients when or as part of our corresponding services when necessary. We plan to carry increased inventory in our various offered products when we
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have cash to do so. The service work is seasonal in nature and much of the work is secured on a bid basis and through service contracts. We may employ seasonal and part-time employees and will not be required to pay certain expenses related to full time and year round employees. We hired an individual as General Manager who brought clients to our company through existing relationships and his reputation in the industry. Because of no snow removal plan fully implemented by the company and no snow removal equipment purchased, the General Manager and out part-time employee were laid off on November 9, 2012 and then re-hired pursuant to the same terms as conditions as their original contracts, effective April 1, 2013. We are not currently dependent upon any suppliers, with the exception of our synthetic grass supplier, and all other equipment to be utilized by us will be off the shelf and manufactured by nationally recognized brand names in the industry. We are in the ongoing process of acquiring equipment and we are researching the business and market, while advertising to attract clients. Our activities up to December 2012 have mainly been organizational and developmental and we have only acquired a limited number of customers. We do not have sufficient capital to enable us to commence and complete our strategic business plan.
Business Strategy
Our activities to date have been limited primarily to organization, initial capitalization, business and product research, developing a website, preparing a comprehensive business and operating plan, evaluating the regulatory requirements of the industry, and securing clients. For the year ended December 31, 2012, we had $53,386 in revenues from operations. Our expenses for the year ended December 31, 2012, consisted primarily of professional fees related to accounting and public reporting, taxes, payroll, and general and administrative expenses such as fuel, insurance, supplies, licenses and waste disposal.
Our company is structured expressly as a service and product re-sale entity and therefore we do not currently engage in the design, development, or manufacture of products. In Phase I of our multiphase business plan, we have entered into a research and marketing plan to determine an advantageous business model and developed an appealing advertising and marketing campaign. Phase II would be to expand and franchise the business in other markets. In September 2009, we entered into a sales representation agreement with Spokane North Idaho Dream Turf, LLC, for the purpose of promoting synthetic turf to potential clients and gaining sales to develop larger scale revenue while helping clients lower water usage and property maintenance needs. In this agreement, we agreed to represent and promote the synthetic turf products and receive a 3% commission on the sale price of orders we coordinate with Dream Turf. In July of 2011, Spokane North Idaho Dream Turf discontinued its business operations. We can still attain synthetic turf product from the supplier, Dream Turf, but have no agreement with them.
Our plan of operations for the next twelve months includes:
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Increase our clientele and hire additional full or part time employees when necessary,
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Realize additional capital investments
GreenPlex Services, Inc.’s Services
We currently offer a wide ranging list of services to our clients which are illustrated by the list below.
Landscaping
• Free Lawn Analysis and Evaluation
• Mowing and Edging
• Pruning and Canopy Lifts
• Organic Based Lawn Care
• Sustainable Lawn Care Services
• Lawn Renovation
• Turf Aeration
• Fertilization Programs
• Soil Science Program
• Weed Control Program
• Necrotic Ring Treatment
• Broadleaf Weed Control
• Flower Installation
• Tree & Shrub Maintenance
• Tree & Shrub Installation
• Ornamental Pruning
• Soil Amendments
• Mulching & Composting
• Thatching
• Pre-emergence Programs
• Tree & Shrub Root Feedings
• Top Dressing
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Clean-Up
• Seasonal Clean-ups
• Curb Care
• Pressure Washing
• Waste and Debris removal
Pest Control
• Tree & Shrub Insect Control
• Home Perimeter Pest Control
• Flea, Tick, Ant and Spider Control
Treatments
• Sulfur and Iron Treatments
• Root Rot Treatments
• Fire Retardant Gel/Foam Treatment
Repairs
• Irrigation Repair
Installation
• Synthetic Turf
• Greenhouse construction
• Compost Center
• Deer Fencing
GreenPlex Services, Inc.’s Products
We utilize organic fertilizers and pest control products and offer these products for sale to our clients if they would like to apply them themselves at any point. As part of our services, we offer products such as seasonal decorative enhancements, trees, shrubs, flowers, vegetable plants, grass sod, organic dirt, synthetic grass, edging, compost centers, consumer greenhouses, deer fencing, gravel, wireless outdoor lighting, and garden hose applicable fire retardant gels and foams. With the exception of our synthetic grass supplier, Dream Turf, all other equipment to be utilized by us will be off the shelf and manufactured by nationally recognized brand names in the industry until such time as we determine prospective suppliers with particular product distribution contracts to enter into. Our products utilized and offered are “green” focused, which means they will be as environmentally friendly as possible, and potentially organic in origin.
Market Analysis and Competition
The greater Spokane and Coeur d’ Alene area which is the territory that we have focused on initially has a population base of 550,000 individuals and several thousand businesses that use the type of services which we provide. As a consequence of the down-turn in the economy, most potential clients will be looking for high quality services at competitive prices. We believe our competitiveness will be based on the quality of services rendered, above average customer service, the competitively priced fees charged for those services, and our use of environmentally friendly products. We will be competing against large established companies that have better funding, but also more general overhead. The competitive situation may adversely affect our sales or capacity to retain or increase clientele or business. There are no assurances we will be able to successfully compete against these other competitors based on these factors.
Our main landscaping competition is from Senske Lawn and Tree Care, TruGreen, Haase Landscape, Diamond Landscape Service, Four Seasons Landscaping, Living Water, and Copper Creek Landscaping, six primary companies that are full service and operating within our territory who are offering, in part, most of the same services and products as us. There are many companies that are offer landscaping and exterior property management services, but few that promote a green method which is designed to attract the more environmentally conscious client to hire us. There are also local competing companies that offer synthetic turf installation sales, such as Diamond Landscape Service and Copper Creek Landscaping. We believe our customer service is superior, our prices more competitive, and we offer various services not offered by the competitors. For example, none of the six primary competitors aforementioned offer consumer greenhouse setup, and none offer wildfire precaution assessment to our knowledge even though there have been wildfires. For example, more than 127 homes have been destroyed by wildfires in one section of the Spokane Valley since 1991 according to the Seattle Times. The March 2009 Washington Department of Natural Resources database reported 554 wildfire ignitions in Spokane County from 2003 through 2007, burning approximately 3,230 acres as a result. There are a few local companies that offer wildfire safely assessment in our territory, such as Chewack Wildfire, but they do not offer any other landscaping or exterior property management services and we believe our potential clients will want one company that offers all of these services, a “one-stop-shop.”
There are several national and local companies that offer pest control, but our prices will be at or below their price points and allow us to be competitive. We believe national pest control companies such as Terminex, Orkin, and Copesan have services that are more expensive than ours, and we believe our potential clients will find it advantageous to have a single company that
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handles all of their exterior property management needs. Terminex, Orkin, and Copesan do not offer landscaping services in conjunction with their pest control programs. Many local pest control companies such as Critter Control, Sprague Pest Solutions, and Prime Pest Control do not offer landscaping services either. These companies may have sufficiently more financial resources, trucks, and personnel than our company.
As of December 31, 2012, we had a customer base consisting of approximately 40 different customers and have one service contract in place. Our competitive position is very low, due to the fact that our company is still at the developmental stage. Much time in the past has been spent on organizing the company and purchasing and preparing the company equipment, such as assembly of the spray truck. Our competitive position is underneath the vast majority of our competitors and we hope to dramatically expand our customer base and increase our revenues over the coming months.
Marketing and Sales
We will develop all the appropriate advertising, presentations, marketing materials, a website, and initiate meetings with potential clients in the territory. We intend to use an integrated plan that includes robust and informative advertising, target marketing, and personal affiliate connections. Three primary targets that will be approached by GreenPlex are: 1) residential, 2) commercial, and 3) industrial. The identification of potential customers will be determined by GreenPlex pursuant to continuing analysis of the existing market. GreenPlex plans to do direct mailings and call on to potential clients as part of its marketing strategy. Relationships with municipalities, commercial and residential developers and contractors, and community neighborhood associations will help in marketing our services and products. Our company website is GreenPlexServices.com.
Patents, Trademarks, and Copyrights
Our business is not dependent on any proprietary patents or technology.
Employees
Our officers, Kyle W. Carlson and Andrew Christman, perform employee-like services for our company on a part time basis. Mr. Carlson works approximately five hours each per week for the benefit of GreenPlex Services. Employee-like services provided by the officers and directors of GreenPlex Services are not compensated at this time and no employee contracts with them have been entered into. These individuals have other employment and responsibilities outside of GreenPlex Services.
We have renewed two employment agreements effective April 1, 2013, that do not expire until November 15, 2013, or earlier if either party terminates the agreement within 14 day notice. These agreements are with our General Manager who has 14 years of experience as the head of an established and well known landscape architect and maintenance company operating in the Western Washington area, and a part-time employee. The terms of the General Manager’s employment agreement include;
-a salary of $36,000 per year for a full-time employee position
-$200 per month given for vehicle allowance
-reimbursement of reasonable expenses
-if employee is unable to work for a period of more than four weeks then compensation during that period is only 50%,
-if employee is absent for over two months then the employment agreement can be terminated
-we shall have the right to terminate the Employee for “cause”, including gross misconduct or duty failure not from illness
-the employee and Greenplex have the right to terminate the agreement without cause after 14 days written notice
We currently have one full time employee and one part-time employee.
The terms of the part-time employment agreement include:
-$12 per hour wages and 20 hours per week.
-if employee is unable to work for a period of more than four weeks then compensation during that period is only 50%,
-if employee is absent for over one month then the employment agreement can be terminated
-we shall have the right to terminate the Employee for “cause”, including gross misconduct or duty failure not from illness
-the employee and we shall have the right to terminate the agreement without cause after 14 days written notice
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ITEM 1A.
ITEM 1A. RISK FACTORS
Investing in our securities involves a high degree of risk. In addition to other information contained in this registration statement, prospective purchasers of the securities offered herby should consider carefully the following factors in evaluating GreenPlex Services and its business.
Our securities are speculative by nature and involve an extremely high degree of risk and should be purchased only by persons who can afford to lose their entire investment. We also caution prospective investors that the following risk factors could cause our actual future operating results to differ materially from those expressed in any forward looking statements, oral, written, made by or on behalf of us. In assessing these risks, we suggest that you also refer to other information contained in this registration statement, including our financial statements and related notes.
RISKS RELATED TO OUR COMPANY AND OUR INDUSTRY
We have earned minimal revenues, and have incurred net loss and accumulated deficit during the development stage. There is no guarantee that we will ever earn a profit.
We have only generated $155,584 of revenues from business operations, through sales of our services, since September 2, 2009 (inception), through December 31, 2012. We incurred a net loss, and have an accumulated deficit of $148,863 from September 2, 2009 (inception), through December 31, 2012. We currently have minimal revenue producing operations. We are not currently operating profitably, and it should be anticipated that we will operate at a loss at least until such time as the full operational stage is reached, if full scale operations are, in fact, ever achieved.
If we are unable to obtain financing in the amounts and on terms and dates acceptable to us, we may not be able to expand or continue our operations and development and so we may be forced to scale back or cease operations or discontinue our business. You could lose your entire investment.
We will need to obtain additional financing in order to complete our business plan. We currently have minimal operations and minimal income. Due to our lack of financial resources, we are still an early stage company and we have only realized $53,386 in revenues for the fiscal year ended December 31, 2012. As of December 31, 2012, we had cash and accounts receivable in the amount of $3,865. Given the recent rate at which we use cash in our operations, we do not have sufficient capital to carry on operations past April 2013, and we will need to raise at least $50,000 in a private placement offering to meet our financial commitments for at least the next twelve months. We will require financing in order to purchase additional equipment and market our business. There is no assurance that we will be successful in raising these funds or generate these funds from the sales of our existing products. In the event were are successful, there is no assurance that the terms and conditions of these funds will be in the best interest of our company or our shareholders. We do not have any arrangements for financing and we may not be able to find such financing if required. We will need to obtain additional financing to operate our business for the next twelve months, and if we do not, our business will fail. We will raise the capital necessary to fund our business through a private offering of our common stock or units consisting of common stock and stock purchase warrants. Obtaining additional financing would be subject to a number of factors, including investor acceptance of our business strategy and investor sentiment. These factors may adversely affect the timing, amount, terms, or conditions of any financing that we may obtain or make any additional financing unavailable to us.
There are many competitors in our market and we may not be able to effectively compete against them.
The business of exterior property management and landscape services is highly competitive. This market segment includes numerous companies and individuals that actively compete for the business in the territory. As a result, our ability to remain competitive depends in part upon our successful introduction to potential customers, our quality of work and products, the promotion and marketing undertaken to gain clients, and the public’s acceptance of a new company with a more comprehensive business model than normal competitors.
We rely on our General Manager and will be harmed if he departs or becomes injured.
Our success is heavily dependent on the expertise and efforts of our current General Manager, James Jefferson. In the event that he is injured, or departs, or is unable to fulfill his role with the company as General Manager, our business would be adversely affected as to its business prospects and earning potential. Although another General Manager could be found as a replacement, this action would require time to find a proper replacement and train that person, and there are no guarantees we could locate and enter into an employment contract with a suitable replacement General Manager.
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Potential clients may not be willing to pay the negotiated price for our services.
Although we believe the negotiated prices determined for our services and products is equal to or less than the existing competition, no assurance can be given that potential clients will enter service contracts for the price that is required to reach a level of breakeven or profitability. There will be substantial costs related to advertising and introducing the services and products to the market territory. Most recently, the economy in the U.S. has experienced a down-turn and the services and products being offered by us may be deemed to be luxury items or items that are generally purchased with disposable income. The general condition of the current economy in the U.S. may be a significant detriment to efforts to sell our services and products.
As a result of our limited operating history, we may not be able to correctly estimate our future operating expenses, which could lead to cash shortfalls.
We have only a limited operating history from which to evaluate our business. We have generated minimal revenue to date. Accordingly, our prospects must be considered in light of the risks, expenses, and difficulties frequently encountered by companies in an early stage of development. We may not be successful in addressing such risks, and the failure to do so could have a material adverse effect on our business, operating results and financial condition.
Because of this limited operating history, our historical financial data is of limited value in estimating future operating expenses. Our budgeted expense levels are based in part on our expectations concerning future revenues. Our ability to generate revenues depends on new client service contracts generated by our company.
The size of any future revenues depends on the choices and demands of potential clients residing in the territory, which are difficult to forecast accurately. We may be unable to adjust our operations in a timely manner to compensate for any unexpected shortfall in revenues. Accordingly, a significant shortfall in demand for our products could have an immediate and material adverse effect on our business, results of operations, and financial condition.
Our operating results may fluctuate as a result of a number of factors, many of which are outside of our control, primarily because our core business is seasonal in nature and different seasons require different services and products and quantities of quantities thereof. For these reasons, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as any indication of our future performance. Our quarterly and annual expenses are likely to increase substantially over the next several years, and revenues from the sale of the services and product in the market may not meet our expectations. Our operating results in future quarters may fall below expectations. Any of these events could adversely impact our business prospects and make it more difficult to raise additional equity capital at an acceptable price per share. Each of the risk factors listed in this “Risk Factors” section may affect our operating results.
We do not currently have any arrangements for financing and we can provide no assurance to investors we will be able to find such financing when such funding is required. Obtaining additional financing would be subject to a number of factors, including investor acceptance of our services and our business model. Furthermore, there is no assurance that we will not incur further debt in the future, that we will have sufficient funds to repay our future indebtedness, or that we will not default on our future debts, thereby jeopardizing our business viability. Finally, we may not be able to borrow or raise additional capital in the future to meet our needs or to otherwise provide the capital necessary to maintain our operations, which might result in the loss of some or all of your investment in our common stock.
Our company anticipates that the funds that were raised from our previous private placement will not be sufficient to satisfy our cash requirements for the next twelve month period. Also, there is no assurance that actual cash requirements will not exceed our estimates. In particular, additional capital may be required in the event that:
1.
we are unable to create a substantial market for our services;
2.
we incur any significant unanticipated expenses; and
3.
we find that we need to spend additional funds to advertise in the market and promote our services and products.
The occurrence of any of the aforementioned events could prevent us from pursuing our business plan, expanding our business operations and ultimately achieving a profitable level of operations.
We depend almost exclusively on outside capital to pay for the continued development of our business and the marketing of our services and products. Such outside capital may include the sale of additional stock, shareholder and director advances, and/or commercial borrowing. There can be no assurance that capital will continue to be available if necessary to meet these continuing development costs or, if the capital is available, that it will be on terms acceptable to us. The issuance of additional equity securities by us will result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
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If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may not be able to expand to our planned franchising phase and may be forced to scale back or cease operations or discontinue business.
If we do launch planned marketing initiatives, our target client market may not be receptive to the services and products provided, the cost of the services and products may be prohibitive and we may not attract new clients.
No assurance can be given that our services and products will be accepted by potential clients. In the event there is no general market acceptance in the services and products by potential clients in the territories where we are entering, it is unlikely that we will be able to sustain commercial operations. If there is no demand or only a limited demand for our services and products, we could financially fail and our shareholders could potentially lose their entire investment.
We rely on our management and will be harmed if any or all of them leave.
Our success is dependent on the efforts, experience and relationships of Kyle W. Carlson as well as the other officer of the corporation. If Mr. Carlson were unable to continue in his role, the business would be adversely affected as to its business prospects and earning potential. We do not currently carry any insurance to compensate for any such loss.
We may find it very difficult or impossible to find suitable employees in the future or to find independent contractors to assist us.
We currently rely heavily upon the services and expertise of the executive officers and our General Manager, James Jefferson. In order to implement our business plan, we recognize that additional employees and/or independent contractors will be required at some point in the future. The group of two directors, which includes both officers, and the two employees, are the only personnel at the outset of operations. The two officers can manage the office functions until we can generate enough revenues to hire additional employees.
Because our officers and directors currently own a large percentage of our voting stock, and a significant ownership concenntration may persist, you may have minimal influence over shareholder decisions.
Our officers and directors have significant stock ownership in our company and will retain significant control in the future. Our officers and directors currently own approximately 18.9% of the voting power of our outstanding capital stock. 40.4% of the shares held by our officers and directors are registered and may be sold. If they officer's registered shares were all sold, it would bring their voting power down to approximately 11.2%. If a significant ownership concentration persists, this group could have significant influence over the management and affairs of our business. They may also exert considerable, ongoing influence over matters subject to stockholder approval, including the election of directors and significant corporate transactions, such as a merger, sale of assets or other business combination or sale of our business. This concentration of ownership may have the effect of delaying, deferring, or preventing a change in control, impeding a merger, consolidation, takeover or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our business, even if such a transaction would benefit other shareholders.
RISKS RELATED TO OUR FINANCIAL CONDITION AND BUSINESS MODEL
If we are unable to obtain additional capital, we may have to curtail or cease operations.
We expect that we will need to raise funds by April 2013 in order to meet our working capital requirements. At present, we believe that we can continue operations for a period of approximately one month based upon our present monthly use of funds that were raised from shareholders in a private placement or funds that could be provided as loans by the officers, directors and shareholders. We may not be able to obtain additional financing on terms favorable to us, if at all. If adequate funds are not available to us, we may have to curtail or cease operations after the end of the first quarter, which would materially harm our business and financial results. To the extent we raise additional funds through further issuances of equity or convertible debt or equity securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock. Furthermore, any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities.
We have a new and unproven business model, a new business approach, and may not generate sufficient revenues for our business to survive or be successful.
Our business model is based on the viability of our services and products that will be sold in a limited geographic area. We have begun marketing some of our services. In order for our business to be successful, we must not only develop viable marketing channels that directly generate revenues, but also cultivate relationships to maintain clients. Our business model
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assumes that potential clients will see the appeal in the green value of our services and products, as well as the benefits to purchase higher value services and products we offer such as synthetic turf installation sales, wildfire safety assessment and products, and consumer greenhouse and compost center education and setup. Each of these assumptions is unproven, and if any of the assumptions are incorrect, we may be unable to generate sufficient revenues to sustain our business or to obtain profitability. At the present time, we have only 1 service contract in place and have ~40 different regular customers.
Because of our limited resources and the speculative nature of our business, there is substantial doubt as to our ability to operate as a going concern.
Our continued operations are dependent on our ability to obtain financing and upon our ability to achieve future profitable operations from the development of our business model. Our independent registered public accounting firm (our auditors) issued its audit report including an explanatory paragraph as to an uncertainty with respect to our ability to continue as a going concern. If we are not able to continue as a going concern, it is likely investors will lose their investment.
We have a limited operating history and expect to incur losses in the future.
We have a limited operating history and have not generated significant revenues. We have not achieved profitability and expect to incur losses for the foreseeable future. We expect those losses to increase as we continue to incur expenses to develop our services and increase our product sales. We believe that our business depends on our ability to significantly increase revenues and to limit our operating expenses. If our revenues fail to grow at anticipated rates or our operating expenses increase without a commensurate increase in our revenues, or we fail to adjust operating expense levels appropriately, we may never be able to achieve profitability.
Our future operating results are likely to be volatile and may cause our equity value to fluctuate.
Our future revenues and operating results, if any, are likely to vary from quarter to quarter due to a number of factors, many of which are outside of our control. Factors, which may cause our revenues and operating results to fluctuate, include the following:
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the willingness of potential clients to enter into service agreements with us
•
market acceptance of our products;
•
Seasonal and weather related needs of our services and products;
•
the timing and uncertainty of sales cycles or demand for the products;
•
similar services and products offered by current or future competitors; and
•
general economic conditions in the U.S.
If we fail to attract additional clients and purchasers of our products, it will have an adverse impact on our business.
Our success depends upon our ability to attract additional clients to enter into service agreements with us and to sell our products to clients. If we do not continually augment and improve our marketing channels, we will not be able to sustain a sales level that will support our operations without the infusion of additional capital.
Our future plans to offer franchise opportunities of our business may not be viable if our current business model is unsuccessful and does not demonstrate a reasonable level of opportunity to potential franchisees.
In the event that our developing business model in unsuccessful in profiting and creating substantial revenue, it is highly unlikely that we will be able to franchise our business to other territories. Franchising opportunities generally only become available if the original business model is successful and marketable to other territories.
If we do not effectively educate clients on the benefits of well maintained landscaping and exterior property, pest control, wildfire safety precautions, synthetic turf installation sales, and consumer greenhouse and compost center education and setup, we will not have sufficient demand for our services and products.
Our business plan is predicated on our company attracting active and loyal support from potential clients. Our target market will be commercial, industrial, and residential consumers that have a specific interest in keeping their exterior property looking clean and well maintained while utilizing green services and products, and also customers that want to reduce water use and yard maintenance by installing synthetic turf instead of grass, or protect structures and property by minimizing wildfire risk, or utilize green methods of consumer greenhouses and composting centers. There can be no assurance that there will be significant appeal from our efforts to attract clients and educate them on the benefits of our services and products. Failure to achieve recognition and acceptance of the services and products we offer will have a material adverse effect on our sales and may require us to incur unexpected incremental marketing expenses to educate and inform the market place.
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RISKS RELATED TO OUR STOCK
There is not now, and there may not ever be, an active market for our common stock.
There currently is no market for our common stock. Our common stock is listed on the OTC Bulletin Board. We cannot assure you that our common stock will be quoted on the OTC Bulletin Board, or that it will be able to maintain that quotation. Further, although the common stock of GreenPlex Services is quoted on the OTC Bulletin Board, no trading of its common stock has taken place and future trading, if it occurs, may be extremely sporadic. For example, weeks or months may pass before any shares are traded. There can be no assurance that following the quoatation of our stock on the OTC Bulletin Board, a more active market for such common stock will develop. Accordingly, investors must therefore bear the economic risk of an investment in our shares for an indefinite period of time.
The price at which our securities are sold to private investors may not be indicative of future market prices.
The public market may not agree with or accept our determination of stock price, in which case investors may not be able to sell their shares at or above the common stock sale prices, thereby resulting in losses on sale. The market price of the common stock will likely fluctuate significantly in response to factors, some of which are beyond our control, such as: the announcement of new products or product enhancements by us or our competitors; developments concerning intellectual property rights and regulatory approvals; quarterly variations in results of operations; changes in earnings estimates or recommendations by securities analysts; developments in our industry; and general market conditions and other factors, including factors unrelated to our own operating performance.
Further, the stock market in general, and securities of small-cap companies in particular, has recently experienced extreme price and volume fluctuations. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in the value of our common stock. You should also be aware that price volatility might be worse if the trading volume of our common shares is low.
We are a reporting company and we are subject to periodic reporting requirements of federal securities laws, which costs are expensive.
We are subject to limited periodic reporting obligations under the Securities Exchange Act of 1934 and other federal securities laws. We are obligated to file annual reports on Form 10-K containing audited financial statements certified by independent public accountants following the end of each fiscal year, quarterly reports on Form 10-Q containing unaudited financial information for the first three quarters of each fiscal year following the end of such fiscal quarter, and current reports on Form 8-K shortly after the occurance of certain material events. The costs of preparing and filing annual, quarterly and current reports, with the SEC would cause our expenses to be higher than they would be if we remained a privately-held company. We will have to incur considerable legal and accounting fees in order to comply with our reporting obligations. In addition, we will incur substantial expenses in connection with the preparation of this registration statement.
If the selling shareholders all elect to sell their shares of our common stock at the same time, the market price of our shares will decrease.
It is possible that the selling shareholders will offer all of the shares for sale at the same time. Further, because it is possible that a significant number of shares could be sold at the same time, the sales are likely to have a depressive effect on the future market price of our common stock. Even the perception that there is a possibility of such heavy selling pressure could depress the price at which our shares trade.
If our stock trades at a relatively small volume, shareholders may not be able to sell their shares without depressing the market price of the shares.
If a market for our common stock is established, it may be possible that a relatively small volume of shares will trade on a daily basis. A small volume is indicative of an illiquid market. In the event there is a relatively small volume of shares being traded on a daily basis, shareholders may be unable to sell their shares without causing a depressive effect on the price of our common stock.
Our common stock is be subject to “penny stock” rules which may be detrimental to investors.
Our shares of common stock are currently listed on a registered national securities exchange, the OTC Bulletin Board, but they are not quoted as of this time. If our company should become quoted on the OTC Bulletin Board, of which there is no assurance, our common stock may become subject to the regulations promulgated by the Securities and Exchange Commission for “penny stock.”, the level of trading activity in our stock may be reduced which may make it difficult for investors to sell their
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shares. Our common stock is penny stock as defined by the Exchange Act. Broker-dealer practices in connection with transactions in "penny stocks" are regulated by certain penny stock rules adopted by the Securities and Exchange Commission. Penny stocks, like shares of our common stock, generally are equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on NASDAQ. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, broker-dealers who sell these securities to persons other than established customers and "accredited investors" must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. The reluctance of institutional investors to trade penny stocks and the additional burdens imposed upon stockbrokers by these requirements discourages stockbrokers from effecting transactions in our common stock, which may limit the market liquidity and the ability of investors to trade our common stock. The lack of volume and transactions, if and when it becomes listed on an exchange, in our stock may reduce the overall market value of the common stock.
If you purchase shares you may experience substantial dilution in the future.
If GreenPlex Services sells additional shares of common stock or issues warrants in the future and the holders of outstanding options and warrants exercise those options and warrants, you will incur dilution. In the event we obtain any additional funding, such financings are likely to have a dilutive effect on the holders of our securities. In addition, we have adopted an employee stock option plan under which officers, directors, consultants, and employees will be eligible to receive stock options exercisable for our securities at exercise prices that may be lower than the market price. Such stock option grants, if any, may dilute the value of the securities.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2.
ITEM 2. PROPERTIES
We have no owned or leased property and pay no rent for office space.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest. Michael R. Espey, Esq. will pass upon certain matters relating to the legality of the common stock offered hereby for us.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock has been listed on the OTC Bulletin Board since December 30, 2010, but has never had a price quoted. Since its listing on the OTCBB, there has been no quoted price and no trading activity of any kind and consequently there are no historical share prices to report and currently no market for it.
As of December 31, 2012, we had no outstanding stock options, stock purchase warrants, or other derivative securities. 2,017,500 of the 2,624,777 shares outstanding could currently be sold pursuant to Rule 144.
As of December 31, 2012, there were approximately 53 holders of record of the 2,624,777 shares of common stock issued and outstanding. Our transfer agent is Nevada Agency & Transfer Company, 50 West Liberty Street, Ste. 880, Reno, Nevada 89501. Phone: (775) 332-0626.
Dividend Policy
We have not declared or paid any cash dividends since inception. We intend to retain future earnings, if any, for use in the operation and expansion of our business and do not intend to pay any cash dividends in the foreseeable future. Although there are no restrictions that limit our ability to pay dividends on our common stock, we intend to retain future earnings for use in our operations and the expansion of our business.
Recent Sales of Unregistered Securities; Use of Proceeds from Unregistered Securities
On April 4, 2012, we sold 200,000 shares of restricted common stock to one non-affiliated investor at $0.05 per share for $10,000. In conjunction with the private placement, there were no fees, commissions, or professional fees for services payable. The placement was undertaken by the officers of GreenPlex. The private placement of these securities was exempt from registration under pursuant to Section 4(2) of the Securities Act o0f 1933, as amended.
On December 31, 2012, we issued 607,277 unregistered shares of its common stock, par value $0.001, at $0.04 per share from our treasury to four creditors of Greenplex Services, Inc., including Officer and Director Kyle Carlson, in exchange for outstanding loans in aggregate of $23,452 and aggregate interest accrued of $839. The issuance of these securities was exempt from registration under pursuant to Section 4(2) of the Securities Act of 1933, as amended.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS
This Report on Form 10-K and the documents incorporated by reference include “forward-looking statements”. To the extent that the information presented in this Report on Form 10-K discusses financial projections, information or expectations about our business plans, results of operations, products or markets, or otherwise makes statements about future events, such statements are forward-looking. Such forward-looking statements can be identified by the use of words such as “intends”, “anticipates”, “believes”, “estimates”, “projects”, “forecasts”, “expects”, “plans” and “proposes”. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These include, among others, the cautionary statements in the “Risk Factors” and “Management’s Discussion and Analysis or Plan of Operation” sections of this Report on Form 10-K. These cautionary statements identify important factors that could cause actual results to differ materially from those described in the forward-looking statements. When considering forward-looking statements in this prospectus, you should keep in mind the cautionary statements in the “Risk Factors” and “Management’s Discussion and Analysis or Plan of Operation” sections below, and other sections of this Report on Form 10-K.
The statements contained in this Report on Form 10-K that are not purely historical are forward-looking statements, including, without limitation, statements regarding our expectations, objectives, anticipations, plans, hopes, beliefs, intentions or strategies regarding the future. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. It is important to note that our actual results could differ materially from those included in such forward-looking statements. There are many
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factors that could cause actual results to differ materially from the forward looking statements. For a detailed explanation of such risks, please see the section entitled “Risk Factors” of this Report on Form 10-K. Such risks, as well as such other risks and uncertainties as are detailed in our SEC reports and filings for a discussion of the factors that could cause actual results to differ materially from the forward- looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on the forward-looking statements.
The following discussion should be read in conjunction with the audited consolidated financial statements and the notes included in this Report on Form 10-K and the section entitled “Management’s Discussion and Analysis or Plan of Operation” included in this Report on Form 10-K.
General
GreenPlex Services, Inc. was organized under the laws of the State of Nevada on September 2, 2009. Greenplex was organized for the express purpose of providing landscape and exterior property management services and product sales to residential, industrial, and commercial customers throughout areas of Western Washington State and Northern Idaho. Our services include all aspects of lawn care, tree and shrub installation and maintenance, landscape creation and maintenance, consumer greenhouse and compost center setup, synthetic grass installation, wildfire risk assessment, and a multiphase pest and insect control program. We are committed to a “Green Philosophy” and where feasible we utilize organic, non-toxic, and socially responsible products, such as fertilizers and pesticides. In the event our business model is successful, we plan to undertake in the future a franchise opportunity program after a feasibility evaluation, according to our business plan, is completed and found to be reasonable.
Results of Operations
Since GreenPlex Services, Inc. was formed on September 2, 2009, we have earned minimal revenues of $155,584 from sales of services since inception. Revenues of $53,386 were earned in the year ended December 31, 2012 as compared to $47,384 for the year ended December 31, 2011. We saw this small increase in revenue due to more clients serviced than the previous year. We expect the revenue to increase though the period ending December 31, 2013. We expect that revenues for the first quarter of 2013 will depend upon weather due to seasonality. We have not been able to offer services for snow and ice removal in the years ended December 31, 2012 or 2011 because of lack of funds to purchase equipment.
For the year ended December 31, 2012, we incurred $13,607 in general and administrative expenses, $12,676 in professional fees, and $35,664 in payroll expenses, compared to December 31, 2011 where we incurred $9,597 in general and administrative expenses, $39,029 in professional fees, and $31,294 in payroll expenses. The decrease in professional fees was due to less professional work provided to us and a $10,000 payment in 2011 for our Depository Trust Company application to become eligible for electronic trading. The increase in general and administrative fees was due to more material costs, more permit fees, and equipment repairs. The increase in payroll was due to using part-time employees in the year ended December 31, 2012. We expect the 2012 year end payroll to remain constant in future periods, except for possible additional full or part-time employees being added. We expect our general and administrative expenses to remain constant at their 2012 in future periods. Increases are possible if more clients are serviced because of higher fuel, supply, and waste dumping costs. We expect the 2012 year end professional fees to remain constant in future periods
Our general and administrative expenses for the year ended December 31, 2012 included the following major expenses:
1. Business licenses and permits at as cost of $1,189.
2. Fuel at a cost of $4,177.
3. Repairs and maintenance at a cost of $752.
4. Tools and equipment of $681
5. Work supplies at a cost of $2,579
6. Materials costs at $1,447
7. Yard waste disposal at $922
8. Other office and administrative expenses of $1,860
We have spent no time or financial resources on product research and development during the first two fiscal years of operation. GreenPlex was formed primarily as a service related company to prove a business concept that can possibly be franchised in the future.
Liquidity and Capital Resources
We have financed our operations primarily from the proceeds from private placements of our common stock, the issuance of promissory notes, and revenue from our operations.
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As of December 31, 2012, we had $1,973 in cash and cash equivalents. We do not have any available lines of credit. Since inception we have financed our operations from private placements of equity securities. Our recent cash burn rate in our operations over the year ended 2012 has been approximately $1,200 per month. We expect that that cash burn rate will stay somewhat constant until revenues increase. Given this recent rate of use of cash in our operations, we do not have sufficient capital to carry on operations past April 2013. Our long term capital requirements and the adequacy of our available funds will depend on many factors, including the reporting company costs, public relations fees, and operating expenses, among others. If we are unable to raise additional capital, generate sufficient revenue, or receive loans from the officers on an as needed basis, we will have to curtail or cease our operations.
Net cash used in operating activities for the year ended December 31, 2012 was $19,880. Ongoing monthly financial commitments of the company include salary to the General Manager of $3,000, and $200 to the General Manager for use of his truck for company business.
Net cash provided from financing activities for the year ended December 31, 2012, was $20,500. $10,500 came from proceeds from short term notes, and one investor purchased 200,000 shares for $10,000.
We plan to finance our needs principally from the following:
·
Revenue from operations.
·
Issuance of convertible promissory notes and warrants.
·
A private placement stock offering for shares in the Company.
We do not have sufficient capital to carry on operations past April 2013, but we plan to raise at least $50,000 in additional capital in a private placement offering to secure the funds needed to finance our plan of operation for at least the next twelve months. However, this is a forward-looking statement, and there may be changes that could consume available resources before such time.
We are pursuing potential equity financing and also other collaborative arrangements that may generate additional capital for us. We cannot assure you that we will generate sufficient additional capital or revenues, if any, to fund our operations beyond April 2013, that any future equity financings will be successful, or that other potential financings through bank borrowings, debt or equity offerings, or otherwise, will be available on acceptable terms or at all.
Our continued operations are dependent on our ability to obtain financing and upon our ability to achieve future profitable operations from the development of our business model. Our independent registered public accounting firm (our auditors) issued its audit report for the fiscal years ended December 31, 2012 and 2011 including an explanatory paragraph as to an uncertainty with respect to our ability to continue as a going concern. If we are not able to continue as a going concern, it is likely investors will lose their investment.
Critical Accounting Policies and Estimates
See Notes to the Financial Statements.
Recently Issued Accounting Pronouncements
Refer to Note 2 in the accompanying financial statements.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required
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ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
GreenPlex Services, Inc.
December 31, 2012 and 2011
Index to the Financial Statements
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
GreenPlex Services, Inc.
Hayden, Idaho
We have audited the accompanying balance sheets of GreenPlex Services, Inc. (the “Company”) as of December 31, 2012 and 2011, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company had an accumulated deficit at December 31, 2012 and had a net loss and net cash used in operating activities for the year then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/Li & Company, PC
Li & Company, PC
Skillman, New Jersey
April 1, 2013
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Note 1 - Organization and Operations
GreenPlex Services, Inc. (“GreenPlex” or the “Company”) was incorporated on September 2, 2009 under the laws of the State of Nevada for the purpose of serving both residential and commercial customers in the greater Spokane and Coeur d’Alene area. Its services include (i) all aspects of lawn care, tree and shrub maintenance, landscape maintenance and a multiphase pest and insect control program and (ii) sales representation of certain synthetic turf products and installation services in the geographic area of Eastern Washington and Northern Idaho. The Company is committed to a “Green Philosophy” and where feasible, utilizing organic and socially responsible products, such as fertilizer and pesticides.
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”)
Use of Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
The Company’s significant estimates include the fair value of financial instruments; the carrying value and recoverability of long-lived assets, including the values assigned to and estimated useful lives of landscaping equipment; income taxes provision and valuation allowance of deferred tax assets; and the assumption that the Company will continue as a going concern. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Management regularly reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
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The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amount of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses, accounts payable, accrued expenses, sales tax payable, and accrued payroll liabilities approximate their fair value because of the short maturity of those instruments.
Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.
It is not however, practical to determine the fair value of advances from stockholders, if any, due to their related party nature.
Carrying Value, Recoverability and Impairment of Long-Lived Assets
The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, which include landscaping equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.
The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.
The impairment charges, if any, are included in operating expenses in the accompanying statements of operations.
Fiscal Year End
On December 21, 2012, the Board of Directors of the Company passed a resolution to change the Company's fiscal year end date from December 31 to November 30 in the corporate Bylaws effective upon approval of the majority stockholders, which was ratified by the majority of the stockholders of the Company as part of the proxy vote related to the Company's 2012 Annual meeting held on December 21, 2012. The Company will file a transitional quarterly report for the two (2) months ending February 28, 2013, and then file periodic reports to be based on the November 30 fiscal year end date schedule.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on historical write-off experience, customer specific facts and economic conditions. Bad debt expense is included in general and administrative expenses, if any.
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Outstanding account balances are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. There was no allowance for doubtful accounts at December 31, 2012 or December 31, 2011.
The Company does not have any off-balance-sheet credit exposure to its customers.
Landscaping Equipment
Landscaping equipment is recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation of landscaping equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets estimated useful life of either three (3) or five (5) years. Upon sale or retirement of landscaping equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations.
Related Parties
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20 the Related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Commitments and Contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
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Revenue Recognition
The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. In addition to the aforementioned general policy, the following are the specific revenue recognition policies for each major category of revenues:
(i)
Lawn care, tree and shrub maintenance, landscape maintenance and a multiphase pest and insect control program: The Company derives its revenues from sales contracts with customers with revenues being generated when services are rendered. Persuasive evidence of an arrangement is demonstrated via invoice and service agreement, service rendering is evidenced by a signed service application form by the service technician; the sales price to the customer is fixed upon signing of the service agreement and there is no separate sales rebate, discount, or volume incentive.
(ii)
Commission income: Commission income is recognized upon signing of sales order and delivery of product which the Company represents by the manufacturer. On September 21, 2009, the Company entered into a sales representative agreement (“Sales Representative Agreement”). Pursuant to the Sales Representative Agreement the Company is compensated on sales leads provided by the Company at 3% percent of all prepaid and credit sales for all standard sales without volume discounts except product sample sales. The Company needs to negotiate in advance of the sales commission percentage to be paid on all orders that the manufacturer allows a quantity discount or other trade concession. Commission on refunds to customers or merchandise returned by the customer which commission has already been paid to the Company will be deducted from future commissions to be paid to the Company by the manufacturer.
Advertising Costs
Advertising costs are expensed as incurred.
Stock-Based Compensation for Obtaining Employee Services
The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum ("PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.
The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows:
·
Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments. Pursuant to paragraph 718-50-S99-1, it may be appropriate to use the simplified method, if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
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·
Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.
·
Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.
·
Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.
The Company’s policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.
Income Tax Provision
The Company accounts for income taxes under paragraph 710-10-30-2 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. 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 in the statements of operations in the period that includes the enactment date.
The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.
Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
Uncertain Tax Positions
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the year ended December 31, 2012 or 2011.
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Net Income (Loss) per Common Share
Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through stock options and warrants.
There were no potentially dilutive shares outstanding for the year ended December 31, 2012 or 2011.
Cash Flows Reporting
The Company has adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-24 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.
Subsequent Events
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.
Recently Issued Accounting Pronouncements
FASB Accounting Standards Update No. 2011-08
In September 2011, the FASB issued the FASB Accounting Standards Update No. 2011-08 “Intangibles-Goodwill and Other: Testing Goodwill for Impairment” (“ASU 20112012-08”). This Update is to simplify how public and nonpublic entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.
The guidance is effective for interim and annual periods beginning on or after December 15, 2011. Early adoption is permitted.
FASB Accounting Standards Update No. 2011-11
In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-11 “Balance Sheet: Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS.
The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.
FASB Accounting Standards Update No. 2012-02
In July 2012, the FASB issued the FASB Accounting Standards Update No. 2012-02 “Intangibles-Goodwill and Other (Topic 350) Testing Indefinite-Lived Intangible Assets for Impairment” (“ASU 2012-02”).
This Update is intended to reduce the cost and complexity of testing indefinite-lived intangible assets other than goodwill for impairment. This guidance builds upon the guidance in ASU 2011-08, entitled Testing Goodwill for Impairment. ASU 2011-08 was issued on September 15, 2011, and feedback from stakeholders during the exposure period related to the goodwill impairment testing guidance was that the guidance also would be helpful in impairment testing for intangible assets other than goodwill.
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The revised standard allows an entity the option to first assess qualitatively whether it is more likely than not (that is, a likelihood of more than 50 percent) that an indefinite-lived intangible asset is impaired, thus necessitating that it perform the quantitative impairment test. An entity is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not that the asset is impaired.
This Update is effective for annual and interim impairment tests performed in fiscal years beginning after September 15, 2012. Earlier implementation is permitted.
Other Recently Issued, but Not Yet Effective Accounting Pronouncements
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.
Note 3 - Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As reflected in the accompanying financial statements, the Company had an accumulated deficit at December 31, 2012 and had a net loss and net cash used in operating activities for the interim period then ended, respectively. These factors raise substantial doubt about the Company's ability to continue as a going concern.
While the Company is attempting to generate sufficient revenues, the Company’s cash position may not be sufficient enough to support the Company’s daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate sufficient revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.
The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Note 4 - Landscaping Equipment
Landscaping equipment stated at cost, less accumulated depreciation consisted of the following:
Depreciation Expense
Depreciation expense is included in the statements of operations. Depreciation expense was $5,727 and $5,727 for year ended December 31, 2012 and 2011, respectively.
Note 5 - Notes Payable
On January 28, 2011 a non-interest bearing note payable was signed with an independent third-party for the principal amount of $1,652 maturing 180 days from the date of signing and subsequently extended to December 31, 2012.
On April 7, 2011 a note payable was signed with an independent third-party for the principal amount of $2,500 maturing 180 days from the date of signing, with interest at 6% per annum. This maturity date on this note was subsequently extended to December 31, 2012. There was $261 of interest accrued at December 31, 2012.
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On August 18, 2011 a note payable was signed with an independent third-party for the principal amount of $5,000 maturing 180 days from the date of signing, with interest at 6% per annum. This maturity date on this note was subsequently extended to due December 31, 2012. There was $412 of interest accrued at December 31, 2012.
On January 17, 2012 a note payable was signed with an independent third-party for the principal amount of $500 maturing September 30, 2012, with interest at 6% per annum. This maturity date on this note was subsequently extended to due December 31, 2012. There was $29 of interest accrued at December 31, 2012.
On January 30, 2012 a note payable was signed with an independent third-party for the principal amount of $2,000 maturing September 30, 2012, with interest at 6% per annum. This maturity date on this note was subsequently extended to due December 31, 2012. There was $110 of interest accrued at December 31, 2012.
On April 27, 2012 a non-interest bearing note payable was signed with an independent third-party for the principal amount of $2,000 maturing September 30, 2012. The maturity date on this note was subsequently extended to December 31, 2012.
On May 17, 2012 a non-interest bearing note payable was signed with an independent third-party for the principal amount of $2,500 maturing September 30, 2012. The maturity date on this note was subsequently extended to December 31, 2012.
On July 16, 2012 a note payable was signed with an independent third-party for the principal amount of $1,000 maturing December 31, 2012. There was $28 of interest accrued at December 31, 2012.
On December 12, 2012 a note payable was signed with a third-party for the principal amount of $1,000 with no interest thereon and an maturity date of March 31, 2013.
On December 28, 2012 a note payable was signed with a third-party for the principal amount of $2,500 with no interest thereon and an maturity date of March 31, 2013.
On December 31, 2012, the above note holders converted the principal outstanding on the above notes of $19,652 and accrued interest of $840, totaling $20,491 into common shares of the Company at $0.04 per share for an aggregate of 512,277 shares.
Note 6 - Related Party Transactions
Due to Related Party - Chief Executive Officer
On May 18, 2011 a short term related party note payable was signed with the Chief Executive Officer, for the principal sum of $800 with no interest thereon and an original maturity date of November 14, 2011. This note has subsequently been extended to December 31, 2012.
On September 8, 2011 a short term related party note payable was signed with the Chief Executive Officer, for the principal sum of $1,000 with no interest thereon and an original maturity date of December 5, 2011. This note has subsequently been extended to December 31, 2012.
On September 10, 2011 a short term related party note payable was signed with the Chief Executive Officer, for the principal sum of $2,000 with no interest thereon and an original maturity date of December 7, 2011. This note has subsequently been extended to December 31, 2012.
On December 31, 2012, the Chief Executive Officer converted his advances of $3,800 to common shares of the Company at $0.04 per share for a total of 95,000 shares.
Note 7 - Commitment and Contingencies
Employment Agreement
Effective April 1, 2013 the Company enters into an employment contract with Mr. Jefferson expiring November 15, 2013 and agreed to pay him $36,000 per year, payable as specified in his previous contract. Without cause, the Company may terminate this agreement at any time upon 14 days written notice to the Employee.
Effective April 1, 2013, the Company enters into an employment contract with a part time employee expiring November 15, 2013 and agreed to pay him $12 per hour for 20 hours a week. Without cause, the Company may terminate this agreement at any time upon 14 days written notice to the Employee.
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Note 8 - Stockholders’ Equity (Deficit)
Issuance of Common Stock
In February 2011, the Company sold 125,000 shares of its common stock to one investor at $0.08 per share for $10,000 cash.
In March 2011, the Company sold 62,500 share of its common stock to one investor at $0.08 per share for $5,000 cash.
On April 5, 2012, the Company sold 200,000 shares of its restricted common stock to one non-affiliated investor at $0.05 per share for $10,000 in cash.
On December 31, 2012, four (4) note holders converted all of the principal balance of their outstanding notes and related accrued interest, totaling $20,491.10, into common shares of the Company at $0.04 per share for an aggregate of 512,277 shares.
On December 31, 2012, the Chief Executive Officer converted the entire balances of his advances to the Company of $3,800 into common shares of the Company at $0.04 per share for an aggregate of 95,000 shares.
Stock Options
The Company’s board of directors approved the adoption of the “Non-Qualified Stock Option and Stock Appreciation Rights Plan” by unanimous consent on September 4, 2009 (“2009 Stock Option Plan”). This plan was initiated to encourage and enable officers, directors, consultants, advisors and other key employees of the Company to acquire and retain a proprietary interest in the Company by ownership of its common stock. 1,000,000 shares of the Company’s common stock were authorized under the 2009 Stock Option Plan.
The Board of Directors did not grant the issuance of any non-statutory stock options from the Company’s Non-Qualified Stock Option Plan for the period from September 2, 2009 (inception) through December 31, 2012.
Note 9 - Income Tax Provision
Deferred Tax Assets
At December 31, 2012, the Company had net operating loss (“NOL”) carry-forwards for Federal income tax purposes of approximately $148,863 that may be offset against future taxable income through 2032. No tax benefit has been reported with respect to these net operating loss carry-forwards in the accompanying financial statements because the Company believes that the realization of the Company’s net deferred tax assets of approximately $50,613 was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance.
Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability. The valuation allowance increased approximately $5,416 and $13,219 for the years ended December 31, 2012 and December 31, 2011, respectively.
Components of deferred tax assets at December 31, 2012 and 2011 are as follows:
Income Tax Provision in the Statements of Operations
A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows:
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Note 10 - Concentrations
Customer and Credit Concentrations
Customer concentrations for the year ended December 31, 2011 and 2010 are as follows:
A reduction in sales from or loss of such customers would have a material adverse effect on the Company’s results of operations and financial condition.
Note 11 - Subsequent Events
The Company has evaluated all events that occur after the balance sheet date through the date when the financial statements were issued to determine if they must be reported.
On February 26, 2013, a non-interest bearing note payable was signed with an independent third-party for the principal amount of $3,000 maturing on December 31, 2013.
On March 22, 2013, a non-interest bearing note payable was signed with an independent third-party for the principal amount of $3,000 maturing on December 31, 2013.
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ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
·
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
·
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2012.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
We identified a material weakness in our internal control over financial reporting as of December 31, 2012 because fundamental elements of an effective control environment were not present as of December 31, 2012, including independent oversight and review of financial reporting, the financial reporting processes and procedures, and internal control procedures by our board of directors as we have not established an audit committee and our full board has not been adequately performing those functions. There exists a complete overlap between management and our board of directors, with three directors being members of management. Specifically, we do not currently have the ability to objectively monitor the processes and procedures of financial reporting as the individuals responsible for financial reporting also comprise all but one of the members of our board of directors. Additionally, due to insufficient staffing and lack of full-time personnel, it has not been possible to ensure appropriate segregation of duties between incompatible functions and formalized monitoring procedures have not, to date, been established or implemented. In the course of our assessment, we also identified that there were control deficiencies which were the result of our not maintaining a sufficient complement of personnel to ensure that financial information (both routine and non-routine) is adequately analyzed and reviewed on a timely basis to detect misstatements. Essentially, the material weaknesses we have identified in our assessment are the same as those identified in our assessment as of December 31, 2011. Due to a lack of sufficient capital resources and our lack of independent outside directors, we have been unable to remedy the material weaknesses which existed last year.
Based on this assessment and the material weaknesses described above, management has concluded that internal control over financial reporting was not effective as of December 31, 2012.
This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.
We intend to take the following steps once the company has raised sufficient capital resources to remediate the material weakness we identified as follows:
-
We will segregate incompatible functions using existing personnel where possible or, given sufficient capital resources, we will hire additional personnel to perform those functions.
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-
To the extent we can attract outside directors, we will increase the oversight and review procedures of our board of directors with regard to financial reporting, financial reporting processes and procedures and internal control procedures.
-
To the extent we can attract outside directors, we will nominate an audit committee to review and assist the board with its oversight responsibilities.
Changes In Internal Control Over Financial Reporting
As of the end of the period covered by this report, there have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the year ended December 31, 2012, that materially affected, or are reasonably likely to materially affect, our company’s internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
A. Directors, Executive Officers, Promoters and Control Persons
The current executive officers, directors, and significant employees of GreenPlex Services are as follows:
Name
Position Held with
The Company
Age
Date First Elected
or Appointed
Kyle W. Carlson
President, Treasurer, Secretary, Chief Executive Officer, Chief Financial Officer, & Chairman
September 4, 2009
Andrew Christman
Vice President and Director
September 4, 2009
All directors of our company hold office until the next annual meeting of the stockholders or until their successors have been elected and qualified. The officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office.
Family Relationships
There are no family relationships among our directors or officers
Business Experience
The following is a brief account of the education and business experience of each director and executive officer during at least the past five years, indicating each person’s business experience, principal occupation during the period, and the name and principal business of the organization by which they were employed.
Kyle W. Carlson - President, Treasurer, Secretary, Chief Executive Officer, Chief Financial Officer, and Chairman. Mr. Carlson is 34 years old and of good health. Mr. Carlson attended Winona State University where he earned his business degree. He worked in winter snow removal for Grant Township in Minnesota from 1996-2003, he co-owned Carlson Construction Services, a construction company, from 1997-2004, worked for Mr. Handyman home improvement company from 2003 to 2004, and has worked on several home and landscape improvement reality TV shows for various television networks as project manager and construction coordinator from 2005 to 2010, Employment included “mobile home Disaster” seasons 2005 and 2008, “Deserve and Design” seasons 2007-2008, and “The Outdoor Room” seasons 2009-2010. He is currently the Owner of Carlson Construction Corp., a home improvement company which he started in 2008, he has been a licensed contractor since 2008, and he is also certified in synthetic turf installation. Mr. Carlson currently has his residential real estate agent license which he received in 2007. With his vast knowledge and personal experience in snow removal, home and landscape improvement, turf installation, home construction, and residential real estate, combined with his business education and experience operating various businesses, he is well qualified to serve as Chairman of the Board of Directors.
Andrew Christman - Vice President and Director. Mr. Christman is 33 years old and of good health. Mr. Christman graduated from the University of Washington in 2002 with a B.A. from the Jackson School of International Studies and a minor in Spanish. He owned and operated a successful landscaping business named Christman Landscaping from 1994 through 1998. He also founded an exterior painting company named A&T Painting which was in business from 1998 to 2002. From May 2005
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to March 2007, he worked for by Plavan Petroleum, a San Diego biofuel distributor, and quickly became the specialist for San Diego County in charge of the purchasing, marketing, and sales for all alternative fuels. In March 2007, he joined national fuel and lubricant distributor Maxum Petroleum with primary responsibilities in expanding domestic biodiesel consumption along the West Coast, purchasing, inspecting supplier facilities, and general sales and marketing. He continues to work for Maxum Petroleum today. Mr. Christman has years of working experience in the landscaping and exterior home improvement industry, as well as operating his own successful small businesses, which makes him ideally qualified to serve on the Board of Directors for GreenPlex Services, Inc.
Our directors, executive officers and control persons have not been involved in any of the following events during the past ten years:
1.
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
2.
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
3.
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
4.
being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Audit Committee and Financial Expert
We do not have an Audit Committee, our directors perform some of the same functions of an Audit Committee, such as: recommending a firm of independent certified public accountants to audit the annual financial statements; reviewing the independent auditors independence, the financial statements and their audit report; and reviewing management’s administration of the system of internal accounting controls. GreenPlex does currently have a written audit committee charter.
We have no financial expert. We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of our start-up operations and financial experience of our officers, we believe the services of a financial expert are not warranted.
Code of Business Conduct and Ethics
A code of ethics relates to written standards that are reasonably designed to deter wrongdoing and to promote:
(1)
Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
(2)
Full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the Commission and in other public communications made by an issuer;
(3)
Compliance with applicable governmental laws, rules and regulations;
(4)
The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and
(5)
Accountability for adherence to the code.
We have adopted a corporate code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
Nominating Committee
We do not have a Nominating Committee or Nominating Committee Charter. Our board of directors perform some of the functions associated with a Nominating Committee. We have elected not to have a Nominating Committee in that we have only one current director and have never received a stockholder nomination for additional directors.
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Identification of Certain Significant Employees
James Jefferson, 47 years in age, is our General Manager and full-time employee. His duties include managing the day-to-day service call scheduling of the company, performing services, and soliciting new customers. Mr. Jefferson was employed by Haase Landscaping, LLC from 1994 to 2009 as a commercial and residential landscaping specialist. He is skilled in arborist techniques, He is a Certified Commercial Spray Applicator and is registered with the Washington State Department of Agriculture and has passed a comprehensive four part test through the Spokane County Extension which includes; 1) Laws and Safety; 2) Insect and Disease Control; 3) Turf and Ornamental Weed Control; and 4) GPCO ( General Pest Control Operator).
Section 16(a) Beneficial Ownership Reporting Compliance.
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own more than ten percent of our common stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes of ownership of our common stock. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. We have no knowledge that, as of the date of this filing, our directors, executive officers, and persons who own more than ten percent of our common stock, have not filed an initial Form 3. Upon the issuance of 95,000 shares to our CEO, Kyle W. Carlson, on December 31, 2012, a Form 4 filing was accidentally overlooked and a late Form 5 was filed on March 13, 2013, to disclose the issuance of these shares.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The table below sets forth the aggregate annual and long-term compensation paid by us for the last two fiscal years to our Chief Executive Officer who is also our Chief Financial Officer (the “Named Executive Officer”). Other than as set forth below, no executive officer’s salary and bonus exceeded $100,000 for the fiscal years 2011 or 2010. The disclosure covers all compensation awarded to, earned by, or paid to the named executive officer.
Name and
Principal
Position
(a)
Year
(b)
Salary
($)
(c)
Bonus
($)
(d)
Stock
Awards
($)
(e)
Option Awards
($)
(f)
Non-Equity
Incentive Plan
Compensation ($)
(g)
Change in Pension
Value and Nonqualified
Deferred Compensation
Earnings
($)
(h)
All other Compensation
($)
(i)
Total
($)
(j)
Kyle W. Carlson
Pres, Treas, Sec, CEO, CFO, & Chairman
-
-
Narrative Disclosure to Summary Compensation Table
Kyle W. Carlson has not entered into formal written employment agreement with GreenPlex Services.
Outstanding Equity Awards at Fiscal Year End
Our named executive officer has not been granted any equity compensation, including option grants as of December 31, 2012.
Compensation of Directors
No compensation was paid to our directors for director services during the fiscal years ending December 31, 2012 or 2011.
Compensation Committee Interlocks and Insider Participation
We do not currently have a compensation committee and there has been no executive officer compensation during the fiscal years ended December 31, 2012 or 2011.
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ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth, as of April 10, 2013, certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of our common stock and by each of our current directors and executive officers. The percentage of shares beneficially owned is based on 2,624,777 shares of common stock outstanding as of April 10, 2013. Shares of common stock subject to stock options and warrants that are currently exercisable or exercisable within 60 days of April 10, 2013, are deemed to be outstanding for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated. Except as otherwise listed below, the address of each person is: 2525 E. 29th Ave. Ste. 10-B Spokane, WA 99223.
Change in Control
We are unaware of any contract, or other arrangement or provision of our Articles or By-laws, the operation of which may at a subsequent date result in a change of control of our company.
Equity Compensation Plan Information
The following table sets forth information about the common stock available for issuance under compensatory plans and arrangements as of December 31, 2012.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
On May 18, 2011 a short term related party note payable was signed with the Chief Executive Officer, for the principal sum of $800 with no interest thereon and an original maturity date of November 14, 2011. This note has subsequently been extended to December 31, 2012.
On September 8, 2011 a short term related party note payable was signed with the Chief Executive Officer, for the principal sum of $1,000 with no interest thereon and an original maturity date of December 5, 2011. This note has subsequently been extended to December 31, 2012.
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On September 10, 2011 a short term related party note payable was signed with the Chief Executive Officer, for the principal sum of $2,000 with no interest thereon and an original maturity date of December 7, 2011. This note has subsequently been extended to December 31, 2012.
On December 31, 2012, the Chief Executive Officer converted the entire balances of $3,800 of the advances to the Company to common shares of the Company at $0.04 per share for an aggregate of 95,000 shares.
Director Independence
Our Board of Directors has determined that none of our two directors are currently “independent directors” as that term is defined in Rule 4200(a)(15 ) of the Marketplace Rules of the National Association of Securities Dealers. We are not presently required to have independent directors. If we ever become a listed issuer whose securities are listed on a national securities exchange or on an automated inter-dealer quotation system of a national securities association, which has independent director requirements, we intend to comply with all applicable requirements relating to director independence.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The aggregate fees billed by our principal accountant, Li and Company, PC, for audit services rendered during the fiscal years ended December 31, 2012 and 2011, are set forth in the row described as "Audit Fees" in the table below:
(1)
“Audit fees” consists of fees incurred for professional services rendered for the audit of annual financial statements, for reviews of interim financial statements included in our quarterly reports on Form 10-Q, and for services that are normally provided in connection with statutory and regulatory filings or engagements.
(2)
“Audit-related fees” consists of fees billed for professional services that are reasonably related to the performance of the audit or review of our financial statements, but are not reported under “Audit fees.”
(3)
“Tax fees” consists of fees billed for professional services relating to tax compliance, tax advice and tax planning.
(4)
“All other fees” consists of fees billed for all other services, such as review of our registration statement on Form S-1 and EDGAR filing expenses.
Audit Committee’s Pre-Approval Policies and Procedures
We do not at this time have an audit committee. Our Board of Directors (in lieu of an audit committee) pre-approves the engagement of our principal independent accountants to provide audit and non-audit services Section 10A(i) of the Securities Exchange Act of 1934 prohibits our auditors from performing audit services for us as well as any services not considered to be “audit services” unless such services are pre-approved by the Board of Directors (in lieu of an audit committee) or unless the services meet certain de minimum standards.
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PART IV
ITEM 15.
ITEM 15. EXHIBITS
(1)
Previously filed with the SEC in Form S-1 on April 8, 2010, file number 333-165951, which exhibit is incorporated herein by reference.
(2)
Previously filed with the SEC in Form 8-K on July 23, 2010, file number 000-54046, which exhibit is incorporated herein by reference.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GREENPLEX SERVICES, INC.
April 10, 2013
By:
/s/ Kyle W. Carlson
Kyle W. Carlson
Chief Executive Officer, Chief Financial Officer, President, and Treasurer
(Principal Executive and
Principal Financial and Accounting Officer)
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant in the capacities indicated below on this 10th day of April, 2013.
Signature
Title
/s/ Kyle W. Carlson
Chief Executive Officer, Chief Financial Officer, President, Treasurer, Secretary, Chairman, and Director
Kyle W. Carlson
(Principal Executive Officer)
(Principal Financial and Accounting Officer)
/s/ Andrew Christman
Vice President and Director
Andrew Christman
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