ITEM 1. DESCRIPTION OF BUSINESS
We were incorporated on June 25, 1999 as Slopestyle Corporation in the State of Texas and redomiciled to become a Nevada corporation on December 12, 2007 and renamed Remediation Services, Inc. (herein referred to as “Remediation”, “the Company”, “We” or “Us”.) Our executive offices are located at 1111 Hughes Court, Wylie, Texas. We are engaged in the home restoration and mold remediation business.
General
In response to the decline in the housing market and the result of the Company’s Properties Held for Remediation assets not selling within a year, as originally anticipated, the Company has decided to search for a merger candidate and therefore is electing to file as a shell company in all future filings. The Company’s operations have been nominal in the twelve months ending December 31, 2009 with sales of $76,011 versus $159,261 in the twelve months ended December 31, 2008. For the quarter ended December 31, 2009, the Company had $186,873 in assets, of which $185,088 are classified as Properties Held for Investment; and $210,963 in liabilities. The Company’s cash balance at December 31, 2009 was $1,785. Furthermore, the Company has not generated positive cash flow from operations (backing out advances from shareholders). These factors raise substantial doubt about the Registrant's ability to continue as a going concern as discussed in Footnote 9.
The Company filed an 8-K on November 16, 2009 making this election.
The Company’s business is split into the following segments:
Restoration:
·
Hurricanes, tornadoes, hail storms, floods and fires, along with a host of other natural and man-made perils, combine to generate a year-round stream of potential customers without regard for the state of the economy.
·
We generate revenue through a number of strategies. These strategies include referrals by insurance companies, relationships with general contractors, and relationships with local business and municipal leaders.
·
Our restoration business concentrates on the restoration of single and multi-family dwellings that can be restored through the contracting with local contractors and subcontractors. We have made the strategic decision to focus our restoration business on moderately to substantially damaged structures, staying away from “total loss” situations as defined by insurance companies. This strategy allows us to more quickly restore structures. This strategy allows us to either contract with the home owner or purchase of the home.
·
Home restoration typically involves the replacement of structural components, specifically, load bearing beams, walls, roofs, ceilings, floors, and other structural necessities.
Remediation:
·
When mold in a structure has been identified, the basic concepts of cleaning are no longer pertinent and restoration is necessary.
o
Identify and stop the moisture source
o
Dry the area
o
Perform remediation (this may consist of either the removal of or cleaning of water damaged and/or mold damaged materials)
Specialty Rug Cleaning:
·
The Company also provides services for specialty rug cleaning. Rugs are highly susceptible to damage due to water, fire, or general dirty conditions. The first step in the cleaning process is to know what you are cleaning and what damage the object has sustained. We perform a fiber ID test to determine the content of the rug. This is because different fibers and materials require different cleaning solutions
During 2009, the Company had no sales in this service segment.
BUSINESS OPERATIONS:
Restoration and Remediation:
The Company employs a strict four-step remediation process. This includes:
1.
Project sequence planning
2.
Containment and exposure control
3.
Removal and disposal of contaminated material
4.
Hygienic cleaning of surfaces
The importance of constructing proper containments cannot be over-emphasized. These containments control the environment/air flow and eliminate cross-contamination, restricting expansion of the problem and curbing the associated cost. Standards such as the New York City Department of Health Guidelines on Assessment and Remediation of Fungi in an Indoor Environment are valuable and followed by the Company. The standards and testing utilized by the New York City Department of Health include:
Systemic Analysis:
·
Health effects such as runny nose, eye irritation, cough, congestion, asthma aggravation, headache and fatigue
·
Immunological effects such as allergies and lung damage
·
Toxic effects including respiratory and eye irritations and the inability to concentrate
·
Infectious disease such as aspergillosis
·
Medical evaluation
·
Medical relocation
Remediation Analysis:
·
Visual inspection
·
Bulk/Surface sampling
·
Air monitoring
·
Analysis of environmental samples
·
Remediation as needed. This includes small isolated areas, mid-sized isolated areas, large isolated areas, and extensive contamination remediation.
·
Demolition and removal of contaminated materials
The standards set forth by the New York Department of Health were the first in the nation and are acting as a basic guide for all mold remediation. We believe the above standards are comprehensive and provide a solid plan in executing operations. We believe adhering to these standards will ensure a complete and successful remediation process. In each of our jobs, we review these guidelines and determine which ones apply to our particular job and then follow them. We ensure the adherence by subcontractors to standards determined by the company through a specific and detailed Scope of Work and Work Plan designed for each job site. The Scope of Work and Work Plan itemizes and details the specific job functions and duties to be performed and is reviewed on a daily basis by a job foreman responsible to our management. Summary reports are transferred by fax or email to our corporate offices with progress reports and digital pictures identifying work progression. Through this policing activity and specific job requirements we are able to maintain subcontractor compliance with our performance standards.
In addition to the foregoing, the Company augments the remediation process with lab testing, consultation, final testing and reconstruction where required.
GOVERNMENT REGULATION:
At the present time there are no federal government regulations for mold remediators. We believe any legislation requiring licensing and certification to be in our favor as we have numerous licenses and certifications as detailed in the section below. On January 1, 2005, the State of Texas Department of Health adopted rules for the testing, licensing and registration of mold remediators. The rules, as they have been adopted, require potential licensees to take a course approved by the Texas Department of Health, take an exam given by them, and then pay a license fee. We believe that as of this date, we are in compliance with all the new rules, having taken the required exam. All licenses are current and all related fees are paid up to current requirements. Additionally, all subcontractors that require licensing to perform mold remediation are confirmed by us through submission of relevant certification and licensing requirements. These documents and licenses are then confirmed by us through state records.
OUR QUALIFICATIONS:
We presently have several certification and licenses pertinent to our industry and anticipate qualifying for the new license without further issues since we already have all the qualifications as outlined in Legislative Update on HB 329, the act that relates to Texas state regulation of mold assessors and remediators, which can be seen at http://www.texasboma.org/legislative_update_4_22_03.htm. The licenses we currently hold are:
Institute of Inspection, Cleaning and Restoration (“IIRC”)
IIRC - Carpet Cleaning
IIRC - Upholstery & Fabric Cleaning
IIRC - Journeyman Textile Cleaner
IIRC - Odor Control
GEBCO Associates:
Mold Remediation Contractor Certificate No. 05077
Texas Department of Health Services:
Mold Remediation Contractor License No. MRC0329
INDUSTRY & COMPETITION:
The mold remediation industry is not highly competitive. Most of the companies have developed their mold remediation business as a progression and add-on to their restoration business or their air quality business, having much experience leading up to their involvement in the mold remediation industry. We believe our major competitors to be specialty remediation and cleaning companies, some of which are national in scope. Most companies, however, are either local or regional in scope. The nature of the restoration and remediation business is labor intensive and therefore is performed more accurately by people in a standardized environment. However, the company has a competitive advantage in standardized processes, training and services and can duplicate this system in any part of the country.
We believe our greatest competition is from nationally franchised operators, the three largest of which are Service Master, Blackmon Mooring, and Serve Pro. However, their success is based not only upon the nationally-known name but upon the franchisee and the reputation he/she is able to establish. Since the industry is relatively new and much of the work is localized, we don’t see having a national franchise name as that much of an advantage. We have been able to concentrate our marketing and sales on companies that have ongoing business, for example, home builders and developers.
Our methods of competing are through establishing relationships with builders and developers where we can solicit business from those who can give us continual referrals.
Future products and services: At the present time, we do not have plans to develop or market additional products or services.
Sources and Availability of Raw Material:
We are a service business and do not use raw materials. We use products in performing our service that are readily available from many sources.
Dependence on One or a Few Major Customers:
We are not dependent on any one or a few major customers.
Costs and Effects of Compliance with Environmental Laws:
We are not aware of nor do we anticipate any environmental laws with which we will have to comply.
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTY
Our corporate and retail facilities are located in a 2,400 square foot warehouse building which was rented from the CEO’s spouse at a percentage of revenue, which approximates fair market rent. The lease during 2009 has been on a month-to-month agreement and from January to September the amount invoiced varied between $500 and $700 per month. For the final three months of 2009, the total amount invoiced was $809 (lowered due to the low sales level). Total rent expense for 2009 was $6,639. There are no future lease obligations.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
As of December 31, 2009, the Company is not involved in any legal proceedings.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 22, 2009, at the annual meeting of shareholders, a majority of our shareholders approved the following actions, all as proposed in our Proxy Statement:
1.
To re-elect Reed Buley as our sole director.
2.
To retain The Hall Group, CPAs, as the Company’s independent auditors for the year-ending December 31, 2009
PART II
ITEM 5.
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDERS’ MATTERS
The common stock is currently quoted on the over-the-counter Bulletin Board under the symbol "RMSI."
The following table sets forth the quarterly high and low bid prices for the common stock since the quarter ended March 31, 2008. The prices set forth below represent inter-dealer quotations, without retail markup, markdown or commission and may not be reflective of actual transactions.
At December 31, 2009, the closing price of the common stock was $.25 and we had approximately 60 exclusive record holders of our common stock. This number excludes any estimate by us of the number of beneficial owners of shares held in street name, the accuracy of which cannot be guaranteed.
Dividends:
We have not paid cash dividends on any class of common equity since formation and we do not anticipate paying any dividends on our outstanding common stock in the foreseeable future.
Warrants:
The Company has no warrants outstanding.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable for smaller reporting companies.
ITEM 7.
ITEM 7. MANAGEMENT DISCUSSIONS AND ANALYSIS OR PLAN OF OPERATION
SUMMARY OF 2009
EXECUTIVE OVERVIEW:
In response to the decline in the housing market and the result of the Company’s Properties Held for Remediation assets not turning in over a year, the Company has decided to search for a merger candidate and therefore is electing to file as a shell company in all future filings. The Company’s operations have been nominal in the year ending December 31, 2009 with sales of about $76,000 versus $159,300 in the year ended December31, 2008. For the period ended December 31, 2009, the Company had about $186,900 in assets, of which $185,100 are classified as Properties Held for Investment; and $131,600 in liabilities. The Company’s cash balance at December 31, 2009 was $1,785. Furthermore, the Company has not generated positive cash flow from operations. These factors raise substantial doubt the Registrant's ability to continue as a going concern as discussed in Footnote 9.
The Company filed an 8-K on November 16, 2009 making this election.
Our fourth fiscal quarter and fiscal year ended on December 31, 2009.
REVENUE: Revenue for the year ended December 31, 2009, was $76,011 compared with revenues for the twelve months ended December 31, 2008 of $159,261. The decrease in revenue for the year was due to the sale of a Property Held for Remediation in 2008 for $104,000 whereas in 2009 there have been no such sales. Backing out this sale, revenue increased by $24,200 due to rental income of the properties under contract of $15,000 and increased carpet cleaning / remediation work of $9,000.
DIRECT COSTS: Direct costs were $32,197 for the year ended December 31, 2009 compared to $131,177 for the same period in 2008. The decrease in cost of sales is related to reduction of properties held for remediation that were sold in 2009 (none) versus 2008 (one), impacting costs approximately $80,000.
EXPENSES. Total expenses without depreciation (and without direct costs) for the year ended December 31, 2009 were $36,259 compared with expenses for the year ended December 31, 2008 of $114,261. The expense decrease was mainly due to three significant components: first, a dispute with an advertising company in 2008 was settled and $33,000 was charged to expense; two, decreased professional fees of $10,000 for business consulting; and three, reduced accounting & audit fees of about $10,000 versus 2008. This is exclusive of depreciation expense, which was $14,389 and $7,332 for the twelve months ended December 31, 2009 and 2008 respectively.
NET INCOME (LOSS). Net loss for the year ended December 31, 2009 was $17,743 compared to a net loss of $97,314 for the year ended December 31, 2008. The loss reduced year-over-year is due to the reduced costs as discussed above and non-cost of sale revenue (rental income).
LIQUIDITY AND CAPITAL RESOURCES. Remediation filed a Form SB-1, a registration statement with the U.S. Securities & Exchange Commission in order to raise funds to develop their business. The registration statement became effective on September 14, 2006 and Remediation has raised funds under that registration statement at $0.50 per share, all after September 30, 2006. As of December 31, 2009, Remediation has raised $188,475 by selling 376,950 shares.
In addition to the preceding, the Company plans for liquidity needs on a short term and long term basis as follows:
Short Term Liquidity:
The company relies on funding operations through operating cash flows and supplemented by shareholder advances when necessary. At December 31, 2009 the Company had positive Net Cash from Operating Activities of $26,336 that was subsidized by shareholders to the amount of $33,775. Therefore, from operations, cash flows were negative $7,439. No interest is paid on the shareholder advances.
Long Term Liquidity:
In response to the decline in the housing market and the result of the Company’s Properties Held for Remediation assets not turning in over a year, the Company has decided to search for a merger candidate and therefore is electing to file as a shell company in all future filings. On November 16, 2009 the Company filed an 8-K noting that it has elected to be classified as a Shell Company in all future filings pursuant to the Securities and Exchange Commission's definition of a shell company, as defined in Rule 12b-2 of the Exchange Act.
Critical Accounting Policies
The Company’s critical accounting policies and estimates are depreciation expense, reserve for doubtful accounts and interest expense accruals on related party mortgages. Please reference footnotes one, two and four.
Capital Resources
During 2008 the Company entered into three separate notes with two different debt holders.
The first note has an original principal balance of $26,000. The note bears interest at 12% per annum and is due and payable when the property at 3108 Mimosa, Rowlett, Texas, sells. There are no payments required under the note until the maturity date. This note is classified as current as the Company is attempting to sell the property within one year of the balance sheet date.
The second note has an original principal balance of $15,000. The note bears interest at 12% per annum and is due and payable on July 30, 2010. There are no payments required under the note until the maturity date. This note is classified as current due to the maturity date occurring within one year of the balance sheet date.
In December 2008, the Company executed a mortgage payable secured by one of the properties held for investment. The original principal balance was $87,200. The mortgage bears an interest rate of 6.75% and has a fifteen year term which matures in November 2023. The mortgage requires monthly principal and interest payment of $772. The current portion of the mortgage is $3,764.
Material Changes in Financial Condition
WORKING CAPITAL: Working Capital decreased by $42,337 to ($129,825). This reduction is due, in a large part, to the increase in related party liabilities of $33,775 and the line-of-credit of $6,000. As noted in the Liquidity section, a merger candidate is being sought due to decline in the housing market which is impacting cash flow and the ability to pay liabilities.
STOCKHOLDER’S EQUITY (DEFICIT): Stockholder’s Equity (Deficit) decreased by $17,743 due to the net loss in the twelve months ended December 31, 2009.
Future Financial Condition
As discussed above in the Executive Overview the Company is seeking merger candidates due to sales being nominal, the recession and its negative working capital. One of the Company’s properties held for investment is under contract and is scheduled to close on February 25, 2010.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable for smaller reporting companies.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company, together with the independent auditors' report thereon of The Hall Group, CPAs appear on pages through of this report.
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
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2009. This evaluation was accomplished under the supervision and with the participation of our chief executive officer / principal executive officer, and chief financial officer / principal financial officer who concluded that our disclosure controls and procedures are not effective to ensure that all material information required to be filed in the annual Form 10-K has been made known to them.
For purposes of this section, the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seg.) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure, controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by in our reports filed under the Securities Exchange Act of 1934, as amended (the "Act") is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Based upon an evaluation conducted for the period ended December 31, 2009, our Chief Executive and Chief Financial Officer as of December 31, 2009 and as of the date of this Report, has concluded that as of the end of the periods covered by this report, we have identified the following material weaknesses in our internal controls:
●
Reliance upon independent financial reporting consultants for review of critical accounting areas and disclosures and material non-standard transaction.
●
Lack of sufficient accounting staff which results in a lack of segregation of duties necessary for a good system of internal control.
In order to remedy our existing internal control deficiencies, as our finances allow, we will hire additional accounting staff.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed 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 in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management of the Company; and (iii) 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.
Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework at December 31, 2009. Based on its evaluation, our management concluded that, as of December 31, 2009, our internal control over financial reporting was not effective because of limited staff and a need for a full-time chief financial officer. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
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 the attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.
Changes in Internal Controls over Financial Reporting
We have not yet made any changes in our internal controls over financial reporting that occurred during the period covered by this report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Name
Age
Position
Reed T, Buley
Chief Executive Officer, Chief Financial Officer, President, Secretary and Director
Background of the Director and Executive Officer:
Mr. Buley graduated from Trinity Valley Community College in 1992, Since graduation he has held various management and operations positions before moving into the restoration business. In the course of the restoration business, he added the remediation and other specialty services. He was the manager of a water and fire restoration company serving the Dallas/Fort Worth metroplex from 2000 until 2002 when he became President of Slopestyle Corporation (now Remediation Services, Inc.). He has been the President of Slopestyle Corporation (now Remediation Services, Inc.) since December 2002.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Following is what our officers received in 2009 and 2008 as cash and non-cash compensation.
Name
Capacity Served
Aggregate Remuneration
Reed T. Buley
Chief Executive Officer, Chief Financial Officer, President, Secretary and Director
2009: $0
2008: $30,863
As of the date of this filing, our sole officer is our only employee. We have no employment agreements with any officer, director or employee.
ITEM 12.
ITEM 12.
SECURITY OWNERSHIP OF MANANGEMENT AND BENEFICIAL OWNERS
As of December 31, 2009 the following person is known to the Company to own 5% or more of the Company's Voting Stock:
Title / Relationship to Issuer
Name of Owner
Number of Shares Owned
Percent of Total
Director, President, Secretary and Director
Reed T. Buley
5,000,000
84.65%
.
ITEM 13.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTION
As of the date of this filing, the following are agreements or proposed transactions, whether direct or indirect, with related parties:
·
Warehouse space and a truck are rented from the CEO’s wife, who is also a shareholder of the Company at a percentage of revenues, which is intended to approximate fair market value.
·
The Company owes the Company’s CEO $23,847 as of December 31, 2009 for operating expenses paid on the Company’s behalf.
·
The Company owes $27,560 as of December 31, 2009, to a consultant, who is also a shareholder, for professional fees paid on the Company’s behalf.
·
As of December 31, 2009, the Company has two notes payable totaling $41,000 due to the CEO’s father.
There are no other agreements or proposed transactions with related parties.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(1) AUDIT FEES
The aggregate fees billed for professional services rendered by our auditors, for the audit of the registrant's annual financial statements and review of the financial statements included in the registrant's Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for fiscal year 2009 was $20,637 and in 2008 was $14,500.
(2) AUDIT-RELATED FEES
The aggregate audit fees billed for professional services rendered by our auditors, which are included in the Audit fees above, for the review of the quarterly unaudited financial statements included in the registrant’s Form 10-Q were approximately $2,750 per quarter and $2,500 per quarter for 2009 and 2008 respectively.
(3) TAX FEES
NONE
(4) ALL OTHER FEES
NONE
(5) AUDIT COMMITTEE POLICIES AND PROCEDURES
Audit Committee Financial Expert
The Securities and Exchange Commission has adopted rules implementing Section 407 of the Sarbanes-Oxley Act of 2002 requiring public companies to disclose information about “audit committee financial experts.” As of the date of this Annual report, we do not have a standing Audit Committee. The functions of the Audit Committee are currently assumed by our Board of Directors. Additionally, we do not have a member of our Board of Directors that qualifies as an “audit committee financial expert.” For that reason, we do not have an audit committee financial expert.
Policies and Procedures:
The Board of Directors policies and procedures for hiring Independent Principal Accountants are summarized as follows:
·
The Board ensures that the accountants are qualified by reviewing their valid license information as filed with the Texas State Board of Public Accountancy.
·
The Board ensures that the firm is registered with the PCAOB.
·
The Board ensures that the accountants are independent by reviewing Regulation S-X, section 210.2-01(b).
(6) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.
Not applicable.
PART IV
ITEM 15.
ITEM 15.
EXHIBITS, FINANICAL STATEMENTS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report: Included in Part II, Item 7 of this report:
Report of Independent Registered Accounting Firm
Consolidated Balance Sheets as of December 31, 2009 and 2008
Consolidated Statements of Operations for the Years Ended December 31, 2009 and
Consolidated Statement of Changes in Stockholders’ Equity for the Years Ended December 31, 2009 and 2008
Consolidated Statements of Cash Flows for the Years Ended December 31, 2009 and
Notes to the Consolidated Financial Statements
(b) The Company did file one Form 8-K in 2009.
On November 16, 2009 - Selection to be a Shell Reporting Company
(c) Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned hereunto duly authorized.
REMEDIATION SERVICES, INC.
By: /s/ Reed T. Buley
Reed T. Buley
Chief Executive Officer & Chief Financial Officer
Dated: February 22, 2010
REMEDIATION SERVICES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009
CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Management of
Remediation Services, Inc.
Wylie, Texas
We have audited the accompanying consolidated balance sheets of Remediation Services, Inc. (formerly Slopestyle Corporation) as of December 31, 2009 and 2008 and the related consolidated statements of operations, cash flows and changes in stockholders’ equity 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 of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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.
We were not engaged to examine management’s assertion about the effectiveness of Remediation Services, Inc.’s internal control over financial reporting as of December 31, 2009 and 2008 and, accordingly, we do not express an opinion thereon.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Remediation Services, Inc. as of December 31, 2009 and 2008, 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 10 to the consolidated financial statements, the Company has suffered significant losses and will require additional capital to develop its business until the Company either (1) achieves a level of revenues adequate to generate sufficient cash flows from operations; or (2) obtains additional financing necessary to support its working capital requirements. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 10. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ The Hall Group, CPAs
The Hall Group, CPAs
Dallas, Texas
February 19, 2010
REMEDIATION SERVICES, INC.
(FORMERLY SLOPESTYLE CORPORATION)
Consolidated Balance Sheets
December 31, 2009 and 2008
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements.
REMEDIATION SERVICES, INC.
(FORMERLY SLOPESTYLE CORPORATION)
Consolidated Statements of Operations
For the Years Ended December 31, 2009 and 2008
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements.
REMEDIATION SERVICES, INC.
(FORMERLY SLOPESTYLE CORPORATION)
Consolidated Statement of Changes in Stockholder’s Equity
For the Years Ended December 31, 2009 and 2008
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements.
REMEDIATION SERVICES, INC.
(FORMERLY SLOPESTYLE CORPORATION)
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2009 and 2008
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements.
REMEDIATION SERVICES, INC.
(FORMERLY SLOPESTYLE CORPORATION)
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Activities, History and Organization:
Remediation Services, Inc. (herein referred to as “the Company” or “RMI”) operated during 2007 under the names Slopestyle Corporation, Carpet Star of Texas and Absolute Remediation as a carpet cleaning, home restoration, and mold remediation business for residential and commercial real estate. The company is located in Wylie, Texas and was incorporated on June 25, 1999, under the laws of the State of Texas.
On December 12, 2007, the Company changed its name from Slopestyle Corporation to Remediation Services, Inc. and re-domiciled from Texas to Nevada.
During 2008, the Company purchased three residential properties which were remediated and now are being held for investment. Two of the properties are being leased and the third is currently marketed to be sold. The Company is making the necessary improvements for the properties to be leased and/or sold. One property was purchased and sold during the year.
On November 16, 2009 the Company filed an 8-K noting that it has elected to be classified as a Shell Company in all future filings pursuant to the Securities and Exchange Commission's (“SEC”) definition of a shell company, as defined in Rule 12b-2 of the Exchange Act.
Significant Accounting Policies:
The Company’s management selects accounting principles generally accepted in the United States of America and adopts methods for their application. The application of accounting principles requires the estimating, matching and timing of revenue and expense. The accounting policies used conform to generally accepted accounting principles which have been consistently applied in the preparation of these financial statements.
The financial statements and notes are representations of the Company’s management which is responsible for their integrity and objectivity. Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company's system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.
FASB Accounting Standards Codification:
In June 2009, the Financial Accounting Standards Board (“FASB”) issued new guidance concerning the organization of authoritative guidance under U.S. Generally Accepted Accounting Principles (“GAAP”). This new guidance created the FASB Accounting Standards Codification (“Codification”). The Codification has become the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The Codification became effective for the Company in its quarter ended September 30, 2009. As the Codification is not intended to change or alter existing U.S. GAAP, it did not have any impact on the Company’s consolidated financial statements. On its effective date, the Codification superseded all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative.
Basis of Presentation:
The Company prepares its financial statements on the accrual basis of accounting. All intercompany balances and transactions are eliminated. The Company’s subsidiaries are consolidated with the parent company.
Cash and Cash Equivalents:
Cash and cash equivalents includes cash in banks with original maturities of three months or less and are stated at cost which approximates market value, which in the opinion of management, are subject to an insignificant risk of loss in value.
Fair Value of Financial Instruments:
The carrying amounts of cash, cash equivalents, accounts receivable, accounts payable and notes payable approximate their fair values due to the short-term maturities of these instruments. The carrying amount of the Company’s marketable securities and accounts payable approximate fair value due to the stated interest rates approximating market rates.
Accounts Receivable:
Accounts Receivable are carried at their face amount, less an allowance for doubtful accounts. On a periodic basis, the Company evaluates accounts receivable and establishes the allowance for doubtful accounts based on a combination of specific customer circumstances and credit conditions, based on a history of write offs and collections. The Company’s policy is generally not to charge interest on trade receivables after the invoice becomes past due. A receivable is considered past due if payments have not been received within agreed upon invoice terms. Write-offs are recorded at a time when a customer receivable is deemed uncollectible. The Company incurred bad debt expense of $1,454 and $6,825 in 2009 and 2008, respectively.
Fixed Assets:
Fixed Assets are depreciated over their useful lives. Depreciation is calculated on a straight-line basis over five to seven years. Repairs and maintenance is charged to expense as incurred. At December 31, 2009, all fixed assets have been fully depreciated.
Property Held for Remediation:
Property held for remediation is carried at historical cost. Additional expenditures for the purpose of preparing the property for sale are capitalized. Properties held for remediation are not depreciated. Depreciation begins once remediation is complete and the property is either available to be leased or marketed for sale. The Company evaluates the total basis of each property for impairment on an annual basis.
Revenue Recognition:
The Company recognizes revenue in accordance with ASC 605-10, "Revenue Recognition in Financial Statements," (formerly Statement of Financial Accounting Standards (“SFAS”) No. 48). Revenue will be recognized only when all of the following criteria have been met:
·
Persuasive evidence of an arrangement exists;
·
Ownership and all risks of loss have been transferred to buyer, which is generally upon shipment or at the time the service is provided;
·
The price is fixed and determinable; and
·
Collectability is reasonably assured.
Direct Costs:
Types of costs included in Direct Costs are:
·
Carrying value of real estate sold
·
Equipment expense
·
Vehicle expense
Advertising Costs
The Company incurred $479 and $3,019 advertising costs for the years ended December 31, 2009 and 2008, respectively.
Income Taxes:
Income from the corporation is taxed at regular corporate rates per the Internal Revenue Code. There are no provisions for current taxes due to net available operating losses.
Recent Accounting Pronouncements:
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
NOTE 2 - FIXED ASSETS
Fixed assets at December 31, 2009 and 2008 are as follows:
Depreciation expense on fixed assets was $8,857 and $7,332 for the years ended December 31, 2009 and 2008, respectively.
NOTE 3 - PROPERTY HELD FOR INVESTMENT
As of December 31, 2009, remediation was complete on all three properties. Two properties have been leased and the third is currently listed for sale.
During 2008, the Company purchased three residential properties. The properties are recorded at historical cost. At December 31, 2009 and 2008, the Property Held for Investment included the following (as of December 31, 2008, the account was titled Property Held for Remediation, as the remediation work was not complete):
The properties are not depreciated during the time they are held for remediation. Depreciation expense on Properties Held for Investment was $5,492 and $0 for the years ended December 31, 2009 and 2008.
The Company had a one year lease agreement and an Option Contract for Sale and Purchase on one of the properties. The lease expired on August 4, 2009, and is now on a month-to-month basis. Pursuant to the Option Contract, the Buyer paid a $3,500 option fee to the Company. The Option expires on August 1, 2010.
NOTE 4 - NOTES AND MORTGAGE PAYABLE
During 2008, the Company purchased two properties with two promissory notes, payable to the CEO’s father, who is considered a related party. The notes are not secured by the properties; however, the notes will become due and payable in the event the properties are sold.
The first note has an original principal balance of $26,000. The note bears interest at 12% per annum and is due and payable when the property at 3108 Mimosa, Rowlett, Texas, sells. There are no payments required under the note until the maturity date. This note is classified as current as the Company is attempting to sell the property within one year of the balance sheet date.
The second note has an original principal balance of $15,000. The note bears interest at 12% per annum and is due and payable on July 30, 2010. There are no payments required under the note until the maturity date. This note is classified as current due to the maturity date occurring within one year of the balance sheet date.
During 2008, the Company executed a mortgage payable secured by one of the properties held for investment. The original principal balance was $87,200. The mortgage bears an interest rate of 6.75% and has a fifteen year term which matures in November 2023. The mortgage requires monthly principal and interest payment of $772. The current portion of the mortgage is $3,764.
Interest expense was $10,952 and $3,924 for the years ended December 31, 2009 and 2008, respectively.
NOTE 5 - LINE OF CREDIT - REALTED PARTY
During 2009, the Company entered into a line of credit with an entity controlled by a shareholder of the Company. The line of credit has a credit limit of $6,000 is payable on demand, and bears interest of 5% per annum.
NOTE 6 - EQUITY
On December 12, 2007, the Company authorized 25,000,000 shares of preferred stock with a par value of $.001, with the terms to be attached by the Board of Directors at the time of issuance. As of December 31, 2009 and 2008, 0 and 0 shares were outstanding, respectively.
The Company is authorized to issue 50,000,000 common shares at a par value of $0.001 per share. These shares have full voting rights. At December 31, 2009 and 2008, there were 5,906,950 and 5,906,950 shares outstanding, respectively.
There were no stock warrants or options outstanding as of December 31, 2009 and 2008, respectively.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company leases warehouse space under a lease which expires in December 2010. The terms of the lease are to pay anywhere from $0 to $700 depending on the activity in the warehouse. Due to the variable nature of the lease there are no derterminable future lease payments as of December 31, 2009.
Rent expense was $6,639 and $8,400 for the years ended December 31, 2009 and 2008, respectively. The Company leases the warehouse from the spouse of the Company’s CEO, who is also a shareholder.
During 2008, the Company executed an Option Contract for Sale and Purchase for one of the properties held for investment. The buyer paid a $3,500 deposit for the right to purchase the property for $107,500. The option expires on August 1, 2010.
Pursuant to a Settlement Agreement between Southwestern Bell Yellow Pages (“SWBYP”) and the Company’s CEO, a payment of $1,250 is required to be paid each month to satisfy amounts due to SWBYP. The Board of Directors of the Company has agreed to assume the liability for the payment of these amounts. During 2008, $13,750 had been paid and is included in General and Administrative Expenses and the expense in 2009 was $15,000. At December 31, 2009 the balance remaining on the settlement was $4,583. This amount is included in accrued expenses at December 31, 2009.
NOTE 8 - INCOME TAXES
The Company has adopted ASC 740-10 “Income Taxes”, (formerly FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), which supplemented SFAS No. 109, “Accounting for Income Taxes” (“SFAS No. 109”)), which requires the use of the liability method in the computation of income tax expense and the current and deferred income taxes payable (deferred tax liability) or benefit (deferred tax asset). Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized be recorded directly to retained earnings and reported as a change in accounting principle.
Deferred tax assets at December 31, 2009 and 2008 consisted of the following:
The net deferred tax asset generated primarily by the Company’s net operating loss carryforward has been fully reserved. The cumulative net operating loss carry-forward is approximately $283,700 at December 31, 2009, and will expire in the years 2025 through 2029.
The difference in the income tax benefit not shown in the consolidated statements of operations and the amount that would result if the U.S. Federal statutory rate of 25% were applied to pre-tax loss for 2009 and 2008 is attributable to the valuation allowance.
The realization of deferred tax benefits is contingent upon future earnings , therefore, is fully reserved at December 31, 2009.
Upon adoption of ASC 740-10, the Company had no gross unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. The Company has not accrued any additional interest or penalties as a result of the adoption of ASC 740-10.
NOTE 9 - RELATED PARTY TRANSACTIONS
Warehouse space and a truck are rented at fair market value from the CEO’s spouse, who is also a shareholder of the Company.
The Company owes the Company’s CEO $23,847 at December 31, 2009 for operating expenses paid on the Company’s behalf. This is classified as Due to Related Parties.
As of December 31, 2009, the Company owes $27,560 to a Consultant, who is also a shareholder, for professional fees paid on the Company’s behalf. This is classified as Due to Related Parties.
As discussed in Note 4, as of December 31, 2009, the Company has two notes payable totaling $41,000 due to the CEO’s father.
The Company’s line-of-credit, discussed in Note is extended from a entity controlled by a shareholder.
NOTE 10 - FINANCIAL CONDITION AND GOING CONCERN
The Company has an accumulated deficit through December 31, 2009 totaling $292,215 and had negative working capital of $129,825. Because of this accumulated deficit, the Company will require additional working capital to develop its business operations.
The Company has experienced no loan defaults, labor stoppages, legal proceedings or any other operating interruption in 2009 or so far in 2010. Therefore, these items will not factor into whether the business continues as a going concern, and accordingly, Management has not made any plans to dispose of assets or factor receivables to assist in generating working capital.
The Company intends to raise additional working capital either through private placements, public offerings and/or bank financing, or additional loans from Management if there is need for liquidity. Management may also consider reducing administrative costs and suspending all bonus and incentive programs. There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings and/or bank financing necessary to support the Company’s working capital requirements. To the extent that funds generated from private placements, public offerings and/or bank financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not generated from operations, financing is not available, or Management cannot loan sufficient funds, the Company may not be able to continue its operations.
Management believes that the efforts it has made to promote its operation will continue for the foreseeable future. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
In response to the decline in the housing market and the result of the Company’s Properties Held for Remediation assets not turning in over a year, the Company has decided to search for a merger candidate and therefore has elected to file as a shell company in all filings. The Company’s operations have been nominal in the twelve months ending December 31, 2009 with sales of $76,011 versus $159,261 in the twelve months ended December 31, 2008. For the quarter ended December 31, 2009, the Company had $186,873 in assets, of which $185,088 are classified as Properties Held for Remediation; and $210,963 in liabilities. The Company’s cash balance at December 31, 2009 was $1,785. Furthermore, the Company has not generated positive cash flow from operations. These factors raise substantial doubt the Registrant's ability to continue as a going concern.
NOTE 11 - RECENT ACCOUNTING PRONOUNCEMENTS
In 2009, the FASB issued the following guidance;
SFAS No. 166: "Accounting for Transfers of Financial Assets-an amendment of FASB Statement No. 140", which was codified into ASC 860, which be effective for the Company as of January 1, 2010.
SFAS No. 167: "Accounting for Transfers of Financial Assets", which was codified into ASC 810-10, which will be effective for the Company as of January 1, 2010.
FSP No. FAS 107-1 and APB 28-1: “Interim Disclosures about Fair Value of Financial Instruments”, which was codified into ASC 825.
FSP No. FAS 115-2 and FAS 124-2: “Recognition and Presentation of Other-Than-Temporary Impairments”, which was codified into ASC 320-10-65-4.
FSP No. FAS 157-4: “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”, which was codified into ASC 820-10-65-4.
Management has reviewed these new standards and believes they will have no material impact on the financial statements of the Company.
NOTE 12 - SUBSEQUENT EVENTS
During 2009, the FASB issued ASC 855-10 “Subsequent Events”, (formerly SFAS No. 165, “Subsequent Events,”) which establishes general standards for accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. The pronouncement requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, whether that date represents the date the financial statements were issued or were available to be issued. In conjunction with the preparation of these financial statements, an evaluation of subsequent events was performed through February 19, 2010, which is the date the financial statements were issued.
The Company has entered into a sales contract on their property that was being marketed for sale. The sales price is $111,200 and the sale is scheduled to close on February 25, 2010.