U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X]
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2010
[ ]
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 000-25485
PTS, INC.
(Exact name of registrant as specified in its charter)
|
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Nevada
(State or other jurisdiction of incorporation or organization)
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88-0380544
(I.R.S. Employer Identification No.)
|
3355 Spring Mountain Road, Suite 66
Las Vegas, Nevada
(Address of principal executive offices)
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89102
(Zip Code)
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(702) 997-3347
(Registrants telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
x
No
¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
¨
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
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Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer
|
¨
|
Smaller reporting company
|
x
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
x
No
¨
1
State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: As of November 12, 2010, the issuer had 2,776,969,386 shares of its common stock issued and outstanding.
2
PTS, INC.
Report on Form 10-Q
For the Quarter Ended September 30, 2010
INDEX
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PAGE
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PART I
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Item 1.
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Financial Statements
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4
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Condensed Consolidated Balance Sheets as of September 30, 2010 (Unaudited) and December 31, 2009
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5
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Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2010 and 2009, and for the Period from February 24, 2010 (Inception of Development Stage) to September 30, 2010 (Unaudited)
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7
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Condensed Consolidated Statement of Changes in Stockholders Deficit for the Period from February 24, 2010 (Inception of Development Stage) to September 30, 2010 (Unaudited)
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9
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Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2010 and 2009, and for the Period from February 24, 2010 (Inception of Development Stage) to September 30, 2010 (Unaudited)
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11
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Notes to Unaudited
Condensed Financial Statements as of September 30, 2010
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13
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Item 2.
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Managements Discussion and Analysis of Financial Condition and Results of Operations
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25
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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32
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Item 4T.
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Controls and Procedures
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33
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PART II
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Item 1.
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Legal Proceedings
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.34
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Item 1A.
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Risk Factors
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34
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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34
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Item 3.
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Defaults Upon Senior Securities
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35
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Item 4.
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Submission of Matters to a Vote of Security Holders
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35
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Item 5.
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Other Information
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32
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Item 6.
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Exhibits
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35
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Signatures
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37
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3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
4
PTS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
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September 30,
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December 31,
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2010
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2009
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(Unaudited)
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(Audited)
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ASSETS
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Current assets
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Cash
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$ 19,562
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$ 2,363
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Prepaid expense
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29,166
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-
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Current assets of discontinued operations
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-
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467,010
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Total current assets
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48,728
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469,373
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|
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Property and equipment of discontinued operations, net of accumulated depreciation of $289,973
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-
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300,342
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Goodwill of discontinued operations
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-
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908,712
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Deposits
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875
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875
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Deposits from discontinued operations
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-
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4,385
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TOTAL ASSETS
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$ 49,603
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$ 1,683,687
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LIABILITIES AND STOCKHOLDERS' DEFICIT
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Current liabilities
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Accounts payable
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$
132,212
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$ 151,669
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Accrued expenses
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9,500
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436,431
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Advances payable
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69,139
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21,500
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Convertible notes payable, current portion, net of unamortized
discount of $4,010 and $3,856, respectively
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121,524
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34,809
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Convertible notes payable - related party
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-
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153,117
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Notes payable, related party
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-
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3,000
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Advances payable - related party
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-
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14,500
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Current liabilities of discontinued operations
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-
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597,638
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Total current liabilities
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332,375
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1,412,664
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Convertible notes payable, long term portion, net of unamortized
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discount of $0 and $6,365, respectively
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-
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416,990
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Convertible notes payable - related party
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13,738
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210,816
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Total liabilities
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346,113
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2,040,470
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Stockholders' deficit
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Preferred stock, Series A, $0.001 par value; 20,000,000 shares authorized, no shares and 11,448,933 shares issued and outstanding
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-
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11,449
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Preferred stock, Series B, $0.001 par value; 20,000,000 shares authorized, no shares issued and outstanding
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-
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-
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5
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Preferred stock, Series C, $0.001 par value; 7,500,000 shares authorized, no shares and 3,000,000 shares issued and outstanding
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-
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3,000
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Preferred stock, Series D, $0.001 par value; 20,000,000 shares authorized, 15,000,000 shares issued and outstanding
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15,000
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15,000
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Preferred stock, Series E, $0.001 par value; 5,000,000 shares authorized, no shares and 1,037,350 shares issued and outstanding
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-
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1,037
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Preferred stock, Series F, $0.001 par value; 5,000,000 shares authorized, no shares issued and outstanding
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-
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-
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Preferred stock, Series G, $0.001 par value; 3,000,000 shares authorized, no shares issued and outstanding
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-
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-
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Preferred stock, undesignated, $0.001 par value; 119,500,000 shares authorized, no shares issued and outstanding
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-
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-
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Common stock, $0.00001 par value; 4,800,000,000 shares authorized as of September 30, 2010 and 2,800,000,000 shares authorized as of December 31, 2009, 2,759,112,243 and 1,349,491,276 shares issued and outstanding
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27,591
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13,495
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Additional paid-in capital
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20,281,611
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19,757,911
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Accumulated deficit
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(20,392,287)
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(20,352,700)
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Deficit accumulated during the development stage
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(228,425)
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-
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Total PTS, Inc. stockholders' deficit
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(296,510)
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(550,808)
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Noncontrolling interest
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-
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194,025
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Total stockholders' deficit
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(296,510)
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(356,783)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
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$ 49,603
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$ 1,683,687
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
PTS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 AND FROM FEBRUARY 24, 2010 (INCEPTION OF DEVELOPMENT STAGE) TO SEPTEMBER 30, 2010
(Unaudited)
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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INCEPTION OF DEVELOPMENT STAGE (February 24,
2010) to
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Sales
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$
-
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$ -
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$ -
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$
-
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$
-
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Cost of sales
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-
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-
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-
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-
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-
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Gross profit
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-
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-
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-
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-
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-
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General and administrative expense
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61,426
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-
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217,980
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-
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217,980
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Total operating expense
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61,426
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-
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217,980
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-
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217,980
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Loss from continuing operations before
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Interest and other expense
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(61,426)
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-
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(217,980)
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-
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(217,980)
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Finance cost
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-
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-
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(314)
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-
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(314)
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Interest expense, net
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(1,474)
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-
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(10,131)
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-
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(10,131)
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Income (loss) from continuing operations
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(62,900)
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Income (loss) from discontinued operations
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-
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(7,555)
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(39,587)
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(312,942)
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(39,587)
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Deemed dividend on preferred stock
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-
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(1,143)
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-
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(11,233)
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-
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Net (loss)
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Net income (loss) per basic share:
Continuing operations
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$ (0.00)
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$ (0.00)
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$ (0.00)
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$ (0.00)
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$ (0.00)
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Discontinued operations
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(0.00)
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|
(0.00)
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(0.00)
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(0.00)
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(0.00)
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$ (0.00)
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|
$ (0.00)
|
|
$ (0.00)
|
$ (0.00)
|
$ (0.00)
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7
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Weighted average shares outstanding,
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Basic
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2,580,086,455
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1,333,806,494
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2,463,762,783
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1,257,875,968
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2,580,086,455
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
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PTS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM FEBRUARY 24, 2010 (INCEPTION OF DEVELOPMENT STAGE) TO SEPTEMBER 30, 2010
(Unaudited)
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|
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Equity (Deficit)
|
|
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Accumulated
|
|
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Additional
|
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Common
|
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During The
|
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|
Preferred Stock
|
|
Common Stock
|
|
Paid-In
|
|
Stock
|
|
Accumulated
|
|
Development
|
|
|
|
Shares
|
|
Par Value
|
|
Shares
|
|
Par Value
|
|
Capital
|
|
Subscribed
|
|
Deficit
|
|
Stage
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Total
|
|
|
|
|
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Balance, February 23, 2010
|
16,937,500
|
|
$ 16,938
|
|
2,097,808,278
|
|
$ 20,978
|
|
$19,453,926
|
|
$ -
|
|
$ (20,392,287)
|
|
$ -
|
|
$ (900,445)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Shares sold for cash
|
-
|
|
-
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|
20,000,000
|
|
200
|
|
19,800
|
|
-
|
|
-
|
|
-
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Shares for services
|
-
|
|
-
|
|
40,000,000
|
|
400
|
|
63,600
|
|
-
|
|
-
|
|
-
|
|
64,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares subscribed
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
15,689
|
|
-
|
|
-
|
|
15,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) for the period from February 24, 2010 (Inception of Development Stage) to March 31, 2010
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(80,496)
|
|
(80,496)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2010
|
16,937,500
|
|
16,938
|
|
2,157,808,278
|
|
21,578
|
|
$19,537,326
|
|
15,689
|
|
(20,392,287)
|
|
(80,496)
|
|
(881,252)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares for services
|
-
|
|
-
|
|
15,000,000
|
|
150
|
|
20,850
|
|
-
|
|
-
|
|
-
|
|
21,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares sold for cash
|
-
|
|
-
|
|
15,689,400
|
|
157
|
|
15,533
|
|
(15,689)
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued in conversion of debt
|
-
|
|
-
|
|
98,186,090
|
|
982
|
|
140,112
|
|
-
|
|
-
|
|
-
|
|
141,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued in conversion of debt
|
-
|
|
-
|
|
91,238,800
|
|
912
|
|
160,849
|
|
-
|
|
-
|
|
-
|
|
161,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued in
conversion of debt
|
-
|
|
-
|
|
28,317,520
|
|
283
|
|
27,468
|
|
-
|
|
-
|
|
-
|
|
27,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional gain on disposal of discontinued operations to related party
|
-
|
|
-
|
|
-
|
|
-
|
|
123,789
|
|
-
|
|
-
|
|
-
|
|
123,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares cancelled
|
(1,937,500)
|
|
(1,938)
|
|
-
|
|
-
|
|
1,938
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the three months ended June 30, 2010
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(85,029)
|
|
(85,029)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2010
|
15,000,000
|
|
15,000
|
|
2,406,240,088
|
|
24,062
|
|
20,027,864
|
|
-
|
|
(20,392,287)
|
|
(165,525)
|
|
(490,886)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares for services
|
-
|
|
-
|
|
28,000,000
|
|
280
|
|
61,220
|
|
-
|
|
-
|
|
-
|
|
61,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued in
conversion of debt
|
-
|
|
-
|
|
324,872,155
|
|
3,249
|
|
192,527
|
|
-
|
|
-
|
|
-
|
|
195,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the three months ended September 30, 2010
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(62,900)
|
|
(62,900)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2010
|
15,000,000
|
|
$ 15,000
|
|
2,759,112,243
|
|
$ 27,591
|
|
$20,281,611
|
|
$ -
|
|
$ (20,392,287)
|
|
$ (228,425)
|
|
$ (296,510)
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
|
10
PTS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 AND FROM FEBRUARY 24, 2010
(INCEPTION OF DEVELOPMENT STAGE) TO SEPTEMBER 30, 2010
(Unaudited)
|
|
|
|
|
|
|
SEPTEMBER 30,
2010
|
|
SEPTEMBER 30,
2009
|
|
INCEPTION OF DEVELOPMENT STAGE (FEBRUARY 24, 2010) TO SEPTEMBER 30, 2010
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
Net (loss)
|
$
(228,425)
|
|
$ -
|
|
$ (228,425)
|
Loss from discontinued operations
|
(39,587)
|
|
(312,942)
|
|
(39,587)
|
Adjustments to reconcile net income (loss) to net
|
|
|
|
|
|
Cash provided by (used in) operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
-
|
|
81,602
|
|
-
|
Issuance of shares for services
|
146,500
|
|
27,225
|
|
146,500
|
Amortization of beneficial conversion feature (finance costs)
|
6,211
|
|
21,054
|
|
6,211
|
Loss on extinguishment of debt
|
-
|
|
8,204
|
|
-
|
Loss attributable to minority interest
|
-
|
|
(25,819)
|
|
-
|
Decrease (increase) in assets:
|
|
|
|
|
|
Accounts receivable
|
-
|
|
68,331
|
|
-
|
Other current assets
|
(29,166)
|
|
133,778
|
|
(29,166)
|
Increase (decrease) in liabilities:
|
|
|
|
|
|
Accounts payable and accrued expenses
|
(91,991)
|
|
-
|
|
(91,992)
|
Due to related party
|
-
|
|
-
|
|
-
|
Advances payable
|
69,139
|
|
2,768
|
|
69,139
|
|
|
|
|
|
|
Cash provided by (used in) operating activities
|
(167,319)
|
|
10,411
|
|
(167,319)
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Cash paid for fixed assets
|
-
|
|
(18,743)
|
|
-
|
|
|
|
|
|
|
Cash used in investing activities
|
-
|
|
(18,743)
|
|
-
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Sale of common stock
|
35,689
|
|
-
|
|
35,689
|
Payments on notes and leases
|
-
|
|
(9,020)
|
|
-
|
Payments on related party notes
|
-
|
|
(37,002)
|
|
-
|
Payments on notes payable
|
-
|
|
25,000
|
|
-
|
Advances payable
|
-
|
|
14,000
|
|
-
|
Advances payable - related party
|
-
|
|
15,500
|
|
-
|
|
|
|
|
|
|
Cash provided by financing activities
|
35,689
|
|
8,478
|
|
35,689
|
11
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
(131,630)
|
|
146
|
|
(131,630)
|
Cash, beginning of period
|
1,862
|
|
116,987
|
|
1,862
|
Cash, end of period
|
$ 19,562
|
|
$ 117,133
|
|
$ 19,562
|
|
|
|
|
|
|
Supplemental Schedule of Cash Flow Information:
|
|
|
|
|
|
Cash paid for interest
|
$ 2,030
|
|
$ 9,663
|
|
$ -
|
|
|
|
|
|
|
Non-Cash Financial Activity:
|
|
|
|
|
|
|
|
|
|
|
|
Debt and liabilities settled with common stock
|
$
526,381
|
|
$
-
|
|
$ 536,381
|
Subsidiary debenture assumed
|
141,606
|
|
-
|
|
141,606
|
Accrued interest expense added to principal amount of debt
|
56,274
|
|
35,853
|
|
56,274
|
Increase in conversion of note payable upon extinguishment of debt
|
8,204
|
|
8,204
|
|
8,204
|
Conversion of notes payable and accrued interest to common stock
|
-
|
|
26,404
|
|
-
|
Beneficial conversion feature of convertible note
|
-
|
|
10,714
|
|
-
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
12
PTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(Unaudited)
NOTE 1- ORGANIZATION AND NATURE OF OPERATIONS AND BASIS OF PRESENTATION
PTS, Inc. (our, us, we, PTS or the Company) was incorporated in the state of Nevada on November 5, 1996. Our subsidiaries include Disability Access Consultants, Inc. (DAC), Disability Access Corporation (DBYC), PTS Card Solutions, Inc., Glove Box, Inc., PTS Global Capital, Inc., PTS Technologies, Inc. and PTS Group Limited, an inactive Hong Kong corporation formed on April 17, 2008.
PTS Card Solutions, Inc., Glove Box, Inc., PTS Global Capital, Inc., PTS Technologies, Inc. and PTS Group Limited are all inactive subsidiaries and the Company has discontinued all activities, past and prospective, for the following inactive subsidiaries: PTS Card Solutions, Inc., Glove Box, Inc., PTS Global Capital, Inc., PTS Technologies, Inc. and PTS Group Limited.
DAC is a corporation with an extensive history of accessibility compliance consulting. DAC provides consultation to numerous state and local governmental entities and businesses. DAC has assisted city and county governments, the Federal government, school districts, and other public entities and municipalities. DAC has also assisted retail, commercial, recreational and corporate clients to comply with state and federal accessibility standards. DAC has developed transition/barrier removal plans, provided consultation and expert witness services. DAC offers both pro-active services as well as support and assistance for companies that are facing penalties and litigation for being out of compliance. DAC has assisted in litigation and has performed compliance audits for public entities and other businesses. To help companies and public entities meet the requirements of the Americans with Disabilities Act and other accessibility standards, DAC has developed proprietary software that is a management tool to simplify and streamline the accessibility compliance process. DAC has offices in Nevada, Northern California and Florida.
During 2010 PTS divested itself of its ownership in DBYC and DAC. Effective February 23, 2010, our board of directors determined that the implementation of our business plan was no longer financially feasible. At such time, we discontinued the implementation of our prior business plan and are now pursuing an acquisition strategy, whereby we will seek to either acquire undervalued businesses and/or merge with businesses with a history of operating revenues in markets that provide room for growth (Acquisition Strategy). The assets, liabilities and operations of DBYC and DAC have been presented as discontinued operations in the financial statements.
Upon the divestiture of DBYC and DAC, the Company re-entered development stage and has presented inception of development stage to date financial statement information from February 24, 2010 to June 30, 2010.
Our Acquisition Strategy is focused on pursuing a strategy of growth by acquiring both undervalued businesses and/or merging with businesses with a history of operating revenues. We will utilize several criteria to evaluate prospective acquisitions including whether the business to be acquired (1) is an established business with viable services or products, (2) has an experienced and qualified management team, (3) has room for growth and/or expansion into other markets, (4) is accretive to earnings, (5) offers the opportunity to achieve and/or enhance profitability, and (6) increases shareholder value.
Basis of Presentation
The Company has not earned any revenue from operations since inception. Accordingly, the Company's activities have been accounted for as those of a "Development Stage Enterprise" as set forth in ASC 915, "development Stage Entities." . Among the disclosures required by ASC 915, are that the Company's financial statements be identified as those of a development stage company, and that the statements of operations, stockholders' equity and cash flows disclose activity since the date of the Company's inception. The Company has elected a fiscal year ending on December 31.
13
PTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(Unaudited)
NOTE 1- ORGANIZATION AND NATURE OF OPERATIONS AND BASIS OF PRESENTATION (continued)
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for financial information and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for smaller reporting companies. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of operations for the period from February 24, 2010 (Inception of development stage) to June 30, 2010 have been reflected herein. The results of operations for the period from February 24, 2010 (Inception of development stage) to September 30, 2010 are not necessarily indicative of the results to be expected in the future.
Going Concern
The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, we have experienced recurring net operating losses, have no current source of revenue and have a working capital deficiency of $283,647 as of September 30, 2010. These factors raise substantial doubt about our ability to continue as a going concern. Without realization of additional capital, it would be unlikely for us to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
We will need additional capital to continue our operations and will endeavor to raise funds through the sale of equity shares.
We believe that our future is dependent upon the consummation of a merger, acquisition or other business combination between us and a viable operating entity. There can be no assurance that we will be able to complete any merger, acquisition or other business combination between us and a viable operating entity. Additionally, management believes that we may need to raise additional funds through equity or debt financing to complete a merger, acquisition or other business combination between us and a viable operating entity. There can be no assurance that we will be able to successfully complete an equity or debt financing to complete an acquisition, merger or other business combination between us and a viable operating entity.
Furthermore, debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility. Our failure to successfully obtain additional future funding may jeopardize our ability to continue our business and operations.
If we raise additional funds by issuing equity securities, existing stockholders may experience a dilution in their ownership. In addition, as a condition to giving additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of PTS and its subsidiaries. All significant intercompany transactions have been eliminated.
14
PTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(Unaudited)
Use of Estimates
The preparation of consolidated 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 disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Loss Per Share
Basic and diluted loss per common share for all periods presented is computed based on the weighted average number of common shares outstanding during the year as defined by FASB ASC Topic 260,
Earnings Per Share.
The assumed exercise of common stock equivalents was not utilized for the six months ended September 30, 2010 since the effect would be anti-dilutive. There were 236,563,240 and 3,470,229,796 common stock equivalents outstanding at September 30, 2010 and 2009, respectively.
Income Taxes
We utilize ASC 740
Income Taxes
which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.
Stock Based Compensation
We account for our stock based compensation under ASC 718
Compensation Stock Compensation
using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entitys equity instruments or that may be settled by the issuance of those equity instruments.
We use the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.
15
PTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(Unaudited)
Potential Derivative Instruments
We periodically assess our financial and equity instruments to determine if they require derivative accounting. Instruments which may potentially require derivative accounting are conversion features of debt and common stock equivalents in excess of available authorized common shares.
We have determined that the conversion features of our debt instruments are not derivative instruments because they are not readily convertible to cash based on our historical trading volume.
Fair Value of Financial Instruments
Our short-term financial instruments, including cash, accounts payable and other liabilities, consist primarily of instruments without extended maturities, the fair value of which, based on managements estimates, reasonably approximate their book value. The fair value of short term and long term convertible notes is based on management estimates and reasonably approximates their book value after comparison to obligations with similar interest rates and maturities.
Fair Value Measurements
ASC 820 defines fair value as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes the following three levels of inputs that may be used:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data.
Level 3: Unobservable inputs when there is little or no market data available, thereby requiring an entity to develop its own assumptions. The fair value hierarchy gives the lowest priority to Level 3 inputs.
The table below summarizes the fair values of our financial liabilities as of September 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at
|
|
|
Fair Value Measurement Using
|
|
|
|
September 30,
2010
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable
|
|
$
|
135,262
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
135,262
|
|
|
|
$
|
135,262
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
135,262
|
|
Reclassifications
Certain prior period items have been reclassified to conform to the current period presentation. The reclassifications had no impact on net loss. The reclassifications relate to discontinued operations.
Recent Accounting Pronouncements
In January 2010, the FASB issued Accounting Standards Update (ASU) 2010-06 to amend the disclosure requirements related to recurring and nonrecurring fair value measurements found in ASC Topic 820
Fair Value Measurements and Disclosure
. The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. The guidance became effective for the Company beginning January 1, 2010. The adoption of this guidance does not have a material impact on the Companys consolidated financial statements.
16
PTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(Unaudited)
In February 2010, the FASB issued ASU 2010-09 which amends guidance on ASC Topic 855
Subsequent Events.
This guidance alleviates potential conflicts between FASB guidance and SEC requirements. Under this amended guidance, SEC filers are no longer required to disclose the date through which subsequent events have been evaluated in originally issued and revised financial statements. This guidance was effective immediately and we adopted these new requirements for the period ended March 31, 2010. The adoption of this guidance did not have a material impact on our financial statements.
Issued
In October 2009, the FASB issued ASU 2009-13 which changes ASC Topic 506
Revenue Recognition
for revenue recognition for multiple-deliverable arrangements. These changes require separation of consideration received in such arrangements by establishing a selling price hierarchy (not the same as fair value) for determining the selling price of a deliverable, which will be based on available information in the following order: vendor-specific objective evidence, third-party evidence, or estimated selling price; eliminate the residual method of allocation and require that the consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the arrangement to each deliverable on the basis of each deliverables selling price; require that a vendor determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis; and expand the disclosures related to multiple-deliverable revenue arrangements. These changes become effective on January 1, 2011. The Company has determined that the adoption of these changes will not have an impact on the consolidated financial statements, as the Company does not currently have any such arrangements with its customers.
In January 2010, the FASB issued ASU 2010-06 to amend the disclosure requirements related to recurring and nonrecurring fair value measurements found in ASC Topic 820
Fair Value Measurements and Disclosures
. The guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance will become effective for the Company with the reporting period beginning July 1, 2011. The adoption of this guidance will not have a material impact on the Companys consolidated financial statements.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Companys present or future consolidated financial statements.
NOTE 3 SALE OF SUBSIDIARIES AND DISCONTINUED OPERATIONS
During February of 2010 the Company undertook reorganization and restructuring efforts which resulted in the divestiture of the Companys interest in Disability Access Corporation and in Disability Access Consultants Inc. through an exchange agreement with the Companys former CEO Peter Chin. More particularly, on February 23, 2010, PTS, Inc., entered into an Exchange and Settlement Agreement (the Agreement) with Mr. Peter Chin to resolve mutual obligations and liabilities. The effect of the agreement was that Mr. Peter Chin would resign from all positions and appointments in PTS, Inc. as of the close of business on February 23, 2010 and the Board would accept such resignation, and that further Peter Chin would forgive $502,699 of collective accumulated obligations for salary, advances and expenses from PTS, Inc. and would further exchange 4,863,333 PTS, Inc. Series A preferred shares (worth approximately $328,275 based on closing bid price at February 12, 2010) in exchange for 10,000,000 Series A preferred shares in Disability Access Corporation, held by PTS, Inc. plus 1,175,126,879 common shares in Disability Access Corporation held by PTS, Inc. plus all notes receivable and notes payable (including debentures) held by PTS, Inc. or owed by PTS to Disability Access Corporation and/or its subsidiary Disability Access Consultants, Inc. The net exchange eliminated PTS, Inc.s interest in Disability Access Corporation as well as Disability Access Consultants, Inc. This event was not entered into or contemplated by management, nor committed to by management until after December 31, 2009. The assets, liabilities and operations of DBYC and DAC have been presented as discontinued operations in the financial statements.
17
PTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(Unaudited)
During February of 2010 we recorded a gain on disposition of the subsidiaries in the amount of $893,191. Due to the related party nature of the disposition, the gain was booked as a credit to Additional Paid-in Capital (see Note 7 Restated Financial Statements). The gain has been calculated as follows:
|
|
Fair value of consideration:
|
|
|
|
Series E shares
|
$ 1,000,000
|
Series A Shares
|
328,275
|
Accrued Payroll
|
273,500
|
Convertible Debenture
|
210,816
|
Accrued Interest
|
18,973
|
Advances
|
2,000
|
DBYC Payable
|
188,193
|
DAC Receivable
|
(608,417)
|
Non-Controlling interest at deconsolidation
|
148,342
|
|
|
|
1,561,682
|
Net assets of DBYC/DAC
|
(668,491)
|
|
|
Gain
|
$ 893,191
|
During the three month period ending June 30, 2010, we found additional amounts included on the Companys books that related to the disposition of the subsidiaries in February of 2010. These amounts were calculated and during the three month period ending June 30, 2010 we recorded an additional gain on disposition of the subsidiaries in the amount of $123,789 as a credit to Additional Paid-in Capital. The aggregate amount of the gain on disposition of the subsidiaries for the
nine month period ending September 30, 2010 is $1,016,980.
|
|
|
|
Accounts Payable
|
$ 55,759
|
Accrued Payroll
|
45,462
|
Accrued Payroll Taxes
|
22,568
|
|
|
Gain
|
$ 123,789
|
18
PTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(Unaudited)
The following is a summary of discontinued operations for the three and
nine months ended September 30, 2010 and 2009:
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
Sales
|
$ -
|
|
$ 441,306
|
|
$
-
|
$ 890,397
|
Cost of sales
|
|
|
|
|
|
|
Gross profit
|
-
|
|
287,928
|
|
-
|
483,393
|
|
|
|
|
|
|
|
Selling expense
|
-
|
|
19,802
|
|
-
|
59,302
|
General and administrative expense
|
-
|
|
231,794
|
|
10,028
|
678,841
|
Total operating expense
|
|
|
|
|
|
|
Loss from continuing operations before
|
|
|
|
|
|
|
Interest and other expense
|
-
|
|
36,322
|
|
(10,028)
|
(254,750)
|
Finance cost
|
-
|
|
(3,510)
|
|
(4,327)
|
(21,054)
|
Interest expense, net
|
-
|
|
(17,897)
|
|
(2,022)
|
(54,753)
|
Gain (loss) on extinguishment of debt
|
-
|
|
-
|
|
66,430
|
(8,204)
|
Gain (loss) from continuing operations
|
-
|
|
14,925
|
|
50,053
|
(338,761)
|
Gain (loss)
from discontinued operations
|
-
|
|
-
|
|
(89,640)
|
-
|
Income attributable to the noncontrolling interest
|
-
|
|
(22,480)
|
|
-
|
25,819
|
Income (loss)
|
|
|
|
|
|
|
Deemed dividend on preferred stock
|
|
|
|
|
|
|
Net (loss)
|
|
|
|
|
|
|
NOTE 4 RELATED PARTY TRANSACTIONS
Due to Related Parties
On January 1, 2010, a note and related accrued interest payable to Peter Chin were combined into a single convertible note in the principal amount of $84,276. The note bears interest at 8%, is due on December 31, 2010 and is convertible into our common stock, at the option of the holder, at a 30% discount to the current market price of our stock at the date of conversion.
On January 1, 2010, a note, advances payable and related accrued interest payable to Sandy Chin were combined into a single convertible note in the principal amount of $13,043. The note bears interest at 8%, is due on December 31, 2011 and is convertible into our common stock, at the option of the holder, at a 30% discount to the current market price of our stock at the date of conversion.
19
PTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(Unaudited)
In February 2010 a convertible debenture and related accrued interest payable to Peter Chin aggregating $229,789 was cancelled in connection with his purchase of DBYC and DAC described in Note 3.
In February 2010 accrued salary payable to Peter Chin aggregating $273,500 was cancelled in connection with his purchase of DBYC and DAC described in Note 3.
At June 30, 2010, the amount of $9,500 was recorded as Due to related party. This amount consisted of the compensation due our Chief Executive Officer, Marc Pintar, pursuant to his agreement with the Company for the period from April 1, 2010 to June 30, 2010. The compensation, consisting of $1,000 in cash to be paid and 5,000,000 shares of common stock valued at $8,500 to be issued to Mr. Pintar, was paid and issued to Mr. Pintar during July 2010.
NOTE 5 STOCK TRANSACTIONS
The Company amended its Articles of Incorporation on May 19, 2010 (with Board approval February 25, 2010) to authorize Five Billion (5,000,000,000) shares of capital stock, of which Four Billion Eight Hundred Million (4,800,000,000) shares with a par value of $0.00001 par share, is designated, Common Stock, and of which Two Hundred Million (200,000,000) shares with a par value of $0.001 per share, is designated Preferred Stock.
During the three months ended March 31, 2010:
We issued 442,277,141 shares of common stock pursuant to the conversion of 4,585,600 shares of Series A preferred stock, 3,000,000 shares of Series C preferred stock and 37,350 shares of Series E preferred stock. The Company cancelled 62,500 Series A preferred stock in agreement with the shareholder as the shareholder could not locate the physical certificate to convert. All converted Series E preferred stock were converted at a negotiated conversion rate and not the rate stated in the Companys designation for the series.
We issued 306,039,861 shares for payment of debt and accrued interest reduction aggregating $184,187. The shares were valued at $131,457 and we recorded a gain of $52,730 upon extinguishment of debt.
We issued Peter Chin 40,000,000 S-8 shares of common stock for consulting services after his resignation as Chief Executive Officer. These shares were valued at $0.0016 per share, or $64,000.
We sold 35,689,400 shares of restricted common shares for proceeds aggregating $35,689. Of this amount, 15,689,400 shares sold for proceeds of $15,689 were not issued at March 31, 2010 and this amount is classified in equity as common stock subscribed at March 31, 2010.
During the three months ended June 30, 2010:
The 15,689,400 shares sold for proceeds of $15,689 in March of 2010 were issued and this amount was reclassified in equity from common stock subscribed to common stock.
We issued 15,000,000 restricted shares of common stock valued at $21,000 for consulting services to a non-affiliated party.
The Company cancelled 1,937,500 shares of Series A preferred stock in agreement with the shareholder.
During the three months ended September 30, 2010:
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PTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(Unaudited)
In July 2010, the Company issued 5,000,000 common stock shares to its Chief Executive Officer pursuant to the compensation agreement relating to the three month period ending June 30, 2010. The shares were valued at $8,500.
In July 2010, the Company issued an aggregate of 20,000,000 common stock shares to two non-affiliated parties for consulting services. Each consultant received 10,000,000 common stock shares valued at $25,000.
In August 2010, the Company issued 3,000,000 common stock shares to its Chief Executive Officer pursuant to a compensation agreement. The shares were valued at $3,000.
NOTE 6 CONVERTIBLE DEBENTURES, NOTES PAYABLE AND OTHER PAYABLES
During the three months ended March 31, 2010:
We issued 241,754,147 shares of common stock in settlement of $148,187 of debentures, notes and accrued interest. The shares were valued at $104,457 and we recorded a gain of $43,730 upon extinguishment of debt.
We amended all remaining notes from December 31, 2009 that were not converted into common stock during the first quarter. These notes aggregate to approximately $288,000, of which, $84,276 matures on December 31, 2010 and $203,533 mature in 2011. These notes bear an 8% interest rate per annum and are convertible into common stock at a 50% discount to the current market price of our stock at the date of conversion.
We settled $14,000 of advances payable with payments aggregating $300 and we recorded a gain of $13,700 upon extinguishment of debt.
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PTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(Unaudited)
We issued 13,392,857 shares of common stock in settlement of $7,500 of advances payable. The shares were valued at $5,625 and we recorded a gain of $1,875 upon extinguishment of debt.
We issued 50,892,857 shares of common stock in settlement of $28,500 of accrued compensation. The shares were valued at $21,375 and we recorded a gain of $7,125 upon extinguishment of debt.
We assumed a debenture payable by DBYC in the amount of $141,606. The debenture matures on December 31, 2011, bears an 8% interest rate per annum and is convertible into common stock at a 30% discount to the current market price of our stock at the date of conversion.
During the three months ended June 30, 2010:
We issued 217,742,410 shares of common stock upon conversion and in settlement of convertible notes and accrued interest aggregating $330,606. The shares were valued at $190,031 and we recorded a gain of $140,575 upon extinguishment of debt.
During the three months ended September 30, 2010:
In July 2010, the Company issued 113,151,351 shares of common stock upon conversion and in settlement of convertible notes and accrued interest aggregating $144, 035.
In August 2010, the Company issued 89,208,706 shares of common stock upon conversion and in settlement of convertible notes and accrued interest aggregating $51,741.
In September 2010, the Company issued 122,512,098 shares of common stock as a result of issuing prior shares upon conversion of convertible notes at an incorrect conversion rate. Three notes in May 2010 and one note in August 2010 were converted at a rate of 70% of average market price, when 50% was the correct conversion rate. The shares were recorded at their par value.
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PTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(Unaudited)
NOTE 7 - CONTINGENT LIABILITY
During March of 2005, PTS, Inc. adopted an Employee Stock Incentive Plan for the Year 2005, which was filed with the Commission on Form S-8. Per the terms of the Plan, PTS, Inc. granted common stock awards to employees. The purchase price of the shares of common stock was 85% of the fair market value of the common stock on the date of exercise. During the period from March 2005 until February of 2008, PTS, Inc. realized $1,182,630 in proceeds from the exercise of these stock awards. These proceeds were immediately reinvested into PTS to sustain the operating activities of the Company in its business pursuits and no one was ungainly enriched by the administration of the plan. After being made aware of a potential violation of the federal securities laws in the administration of this Plan, management of PTS, Inc. has come to the conclusion that there indeed was potentially a violation of federal securities laws in the administration of the plan. Further, this potential violation of federal securities laws creates a contingent liability for PTS, Inc., which might equal the amount of money realized by PTS, Inc. in the administration of the plan. Upon further analysis management is unable to estimate if any additional amounts would be due. Additionally, as of this date, no enforcement action has been threatened or instituted by the Securities and Exchange Commission, or any other state or federal regulatory body regarding this potential violation of the federal securities laws. Due to these uncertainties and that Management has determined this contingent liability to be remote; we have not recorded a liability in our financial statements and are providing this disclosure due to the material nature of this event.
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PTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(Unaudited)
NOTE
8 - SUBSEQUENT EVENTS
The Company has performed an evaluation of subsequent events in accordance with ASC Topic 855. Other than the events noted below, the Company is not aware of any subsequent events which would require recognition or disclosure in the financial statements.
In October 2010, the Company issued 17,857,143 common stock shares to an entity for consulting services. The shares were valued at $26,000.
On October 29, 2010, the Company entered into a Share Exchange Agreement in order to acquire 70% of the member interests of ThinLine IT Services of Georgia, LLC (ThinLine), in exchange for 56,000,000 shares of PTS, Inc. common stock. Thinline manages, markets and maintains the IT and VOIP infrastructure for small and medium businesses. The closing of this transaction is subject to the due diligence by the parties and is estimated to occur on or before December 31, 2010. A copy of the Share Exchange Agreement was filed as Exhibit 10.1 with Form 8-K on November 3, 2010 by the Company.
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Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Forward - Looking Statement
The following discussion should be read in conjunction with our financial statements and related notes.
Certain matters discussed herein may contain forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties include, but are not limited to, the following:
·
the volatile and competitive nature of our industry,
·
the uncertainties surrounding the rapidly evolving markets in which we compete,
·
the uncertainties surrounding technological change of the industry,
·
our dependence on its intellectual property rights,
·
the success of marketing efforts by third parties,
·
the changing demands of customers and
·
the arrangements with present and future customers and third parties.
Should one or more of these risks or uncertainties materialize or should any of the underlying assumptions prove incorrect, actual results of current and future operations may vary materially from those anticipated.
Company Overview
RECENT DEVELOPMENTS:
ELIMINATE PTS, INCS INTEREST IN DISABILITY ACCESS CORPORATION AND DISABILITY ACCESS CONSULTANTS, INC.
During February of 2010 the Company undertook reorganization and restructuring efforts which resulted in the divestiture of the Companys interest in Disability Access Corporation and in Disability Access Consultants Inc. through an exchange agreement with the Companys former CEO Peter Chin. More particularly, on February 23, 2010, PTS, Inc., entered into an Exchange and Settlement Agreement (the Agreement) with Mr. Peter Chin to resolve mutual obligations and liabilities. The effect of the agreement was that Mr. Peter Chin would resign from all positions and appointments in PTS, Inc. as of the close of business on February 23, 2010 and the Board would accept such resignation, and that further Peter Chin would forgive $502,699 of collective accumulated obligations for salary, advances and expenses from PTS, Inc. and would further exchange 4,863,333 PTS, Inc. Series A preferred shares (worth approximately $328,275 based on closing bid price at February 12, 2010) in exchange for 10,000,000 Series A preferred shares in Disability Access Corporation, held by PTS, Inc. plus 1,175,126,879 common shares in Disability Access Corporation held by PTS, Inc. plus all notes receivable and notes payable (including debentures) held by PTS, Inc. or owed by PTS to Disability Access Corporation and/or its subsidiary Disability Access Consultants, Inc. The net exchange eliminated PTS, Inc.s interest in Disability Access Corporation as well as Disability Access Consultants, Inc. This event was not entered into or contemplated by management, nor committed to by management until after December 31, 2009. The assets, liabilities and operations of DBYC and DAC have been presented as discontinued operations in the financial statements (see Note 7 Restated Financial Statements).
A copy of the Exchange and Settlement Agreement was filed as Exhibit 10.2 to the Companys Form 10-Q for the period March 31, 2010 and on Form 8-K filed on March 1, 2010.
ELIMINATE ONE MILLION DOLLAR PREFERRED SERIES E SHARES OBLIGATION TO BARBARA THORPE.
On February 1, 2010, Barbara Thorpe entered into an employment agreement with DAC, as a part of the agreement Ms. Thorpe was required to exchange her one million dollars worth of preferred series E shares in PTS for one million dollars worth of DBYC preferred series B shares. DBYC subsequently in settlement of its obligations to PTS, Inc for past management services, allocable fees, federal tax benefits and any other and all past present and/or future obligations of DBYC and DAC to PTS, Inc. exchanged the PTS, Inc preferred series E shares for such obligations.
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PTS, Inc. (our, us, we, PTS or the Company) was a company in the development stage since its formation on June 12, 1996 until the second quarter of 2004. At that time, the Company commenced planned operations and began generating revenue. We were originally incorporated in the State of Nevada under the name Med Mark, Inc on November 5, 1996. On June 29, 1998, we filed articles of amendment changing our name to Elast Technologies, Inc. Pursuant to a merger agreement entered into on June 11, 2001, PTS, Inc. (PTS), a Nevada corporation, merged with Elast Technologies, Inc. PTS was the surviving company and changed its name to PTS, Inc.
On November 15, 2005, we acquired 100% of the outstanding common stock of Disability Access Consultants, Inc., (DAC) a California corporation pursuant to a securities exchange agreement.
DAC is a corporation with an extensive history of accessibility compliance consulting. DAC provides consultation to numerous state and local governmental entities and businesses. DAC has assisted city and county governments, the Federal government, school districts, and other public entities and municipalities. DAC has also assisted retail, commercial, recreational and corporate clients to comply with state and federal accessibility standards. DAC has developed transition/barrier removal plans, provided consultation and expert witness services. DAC offers both pro-active services as well as support and assistance for companies that are facing penalties and litigation for being out of compliance. DAC has assisted in litigation and has performed compliance audits for public entities and other businesses. To help companies and public entities meet the requirements of the Americans with Disabilities Act and other accessibility standards, DAC has developed proprietary software that is a management tool to simplify and streamline the accessibility compliance process. DAC has offices in Nevada, Northern California and Florida
MATERIAL EVENT
During the quarter ended March 31, 2010 the Company undertook reorganization and restructuring efforts which resulted in the divestiture of the Companys interest in Disability Access Corporation and in Disability Access Consultants Inc. through an exchange agreement with the Companys former CEO Peter Chin. Please see the Recent Development above for additional details.
On February 23, 2010, the Registrant accepted the resignations of Peter Chin as the Registrants chief executive officer, chief financial officer and chairman of the board of directors. Mr. Chins resignations were in connection with the consummation of the Exchange and Settlement Agreement as set forth above and do not arise from any disagreement on any matter relating to the Registrants operations, policies or practices, nor regarding the general direction of the Registrant. Effective as of the same date the Registrant elected and appointed Marc Pintar as interim chief executive officer, interim chief financial officer and interim chairman of the board of directors of the Registrant.
The Company retained Mr. Chin as a consultant to ensure an easy transition. Mr. Chin received compensation of 40,000,000 shares of S-8 shares of the Companys common stock to prepare and facilitate transition.
On February 28, 2010, the Registrant accepted the resignation from Connie Kim as the secretary and a member of the board of directors of the Registrant. Effective as of the same date, to fill the vacancy created by Ms. Kims resignation, Marc Pintar was appointed interim secretary.
It should also be noted that the Company has discontinued all activities, past and prospective, for the following inactive subsidiaries: PTS Card Solutions, Inc., Glove Box, Inc., PTS Global Capital, Inc., PTS Technologies, Inc. and PTS Group Limited.
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CONTINGENT LIABILITY
During March of 2005, PTS, Inc. adopted an Employee Stock Incentive Plan for the Year 2005, which was filed with the Commission on Form S-8. Per the terms of the Plan, PTS, Inc. granted common stock awards to employees. The purchase price of the shares of common stock was 85% of the fair market value of the common stock on the date of exercise. During the period from March 2005 until February of 2008, PTS, Inc. realized $1,182,630 in proceeds from the exercise of these stock awards. These proceeds were immediately reinvested into PTS to sustain the operating activities of the Company in its business pursuits and no one was ungainly enriched by the administration of the plan. After being made aware of a potential violation of the federal securities laws in the administration of this Plan, management of PTS, Inc. has come to the conclusion that there indeed was potentially a violation of federal securities laws in the administration of the plan. Further, this potential violation of federal securities laws creates a contingent liability for PTS, Inc., which might equal the amount of money realized by PTS, Inc. in the administration of the plan. Upon further analysis management is unable to estimate if any additional amounts would be due. Additionally, as of this date, no enforcement action has been threatened or instituted by the Securities and Exchange Commission, or any other state or federal regulatory body regarding this potential violation of the federal securities laws. Due to these uncertainties and that Management has determined this contingent liability to be remote; we have not recorded a liability in our financial statements and are providing this disclosure due to the material nature of this event.
Post the divestiture, Managements focus is to identify and enter into a business combination for the best interest of the Company and its shareholders. During the initial post divestiture period the company will become a development stage company and seek, amongst its business opportunities an agreement with the best possible acquisition and/or candidate, in the opinion of Management and the Board of Directors, for the company and its shareholders.
Business Plan and Acquisition Strategy
The following discussion and analysis provides information which our management believes to be relevant to an assessment and understanding of our results of operations and financial condition. This discussion should be read together with our financial statements and the notes to financial statements, which are included in this report.
THE FOLLOWING SHOULD BE READ WITH CAUTION. THE COMPANY EFFECTED THE DIVESTITURE OF DISABILITY ACCESS CORPORATON (DBYC) AND ITS WHOLLY OWNED SUBSIDIARY DISABILITY ACCESS CONSULTANTS, INC. (DAC) AS DETAILED UNDER "RECENT DEVELOPMENTS-ELIMINATE PTS INTEREST IN DISABILITY ACCESS CORPORATION AND DISABILITY ACCESS CONSULTANTS, INC. CONSEQUENTLY, WE CURRENTLY HAVE NO OWNERSHIP INTEREST IN DBYC AND DAC. WE HAVE NO OPERATING BUSINESS AND ARE A "DEVELOPMENT" COMPANY WITH NO MATERIAL ASSETS.
Effective February 2010, our board of directors determined that the implementation of our business plan was no longer financially feasible. At such time, we discontinued the implementation of our prior business plan and are now pursuing an acquisition strategy, whereby we will seek to either acquire undervalued businesses and/or merge with businesses with a history of operating revenues in markets that provide room for growth ("Acquisition Strategy"). While we are currently in a development stage, since the divestiture of our prior business activity on February 23, 2010, with no revenue or operations other than our acquisition activities, we have identified a number of attractive companies that we believe could qualify for strategic and viable business combinations with PTS. Therefore, we expect that we will emerge from the development stage through a business combination within a relatively short time frame.
Our Acquisition Strategy is focused on pursuing a strategy of growth by acquiring both undervalued businesses and/or merging with businesses with a history of operating revenues. We will utilize several criteria to evaluate prospective acquisitions including whether the business to be acquired (1) is an established business with viable services or products, (2) has an experienced and qualified management team, (3) has room for growth and/or expansion into other markets, (4) is accretive to earnings, (5) offers the opportunity to achieve and/or enhance profitability, and (6) increases shareholder value.
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In connection with our Acquisition Strategy, we expect to encounter intense competition from other entities having business objectives similar to ours, including: venture capital firms, blind pool companies, large industrial and financial institutions, small business investment companies and wealthy individuals. Many of these entities are well-established and have greater experience, financial resources and technical knowledge than us. Our limited financial resources may compel us to select certain less attractive acquisition prospects than those of our competitors.
We believe that our future is dependent upon the consummation of a merger, acquisition or other business combination between us and a viable operating entity. There can be no assurance that we will be able to complete any merger, acquisition or other business combination between us and a viable operating entity. Additionally, management believes that we may need to raise additional funds through equity or debt financing to complete a merger, acquisition or other business combination between us and a viable operating entity. There can be no assurance that we will be able to successfully complete an equity or debt financing to complete an acquisition, merger or other business combination between us and a viable operating entity.
Business Plan Prior to February 23, 2010 Transaction
Disability Access Consultants, Inc. (DAC), out of an effort to create a system to facilitate and expedite the processes related to inspections based on the regulatory standards for the American with Disabilities Act (ADA), has developed a proprietary web-centric process which can be used for such purpose. In addition to its original purpose, the process can also be adapted for other areas of regulatory inspection and requirements. Though DACs original business is founded on performing ADA inspections, its efforts to automate the inspection process have resulted in an interactive system which can be readily adapted to a wide range of other regulatory required inspection areas such as but not limited to: Building Inspections, Health Inspections, Mine Safety, OSHA, Fire Inspections, etc.
DAC offers a full continuum of accessibility compliance services, software and automated solutions to comply with the requirements for mandated and recommended services for individuals with disabilities in accordance with federal, state and local laws and regulations. Services are provided to a broad spectrum and growing number of clients as the concept of ADA is Everyones Business integrates into a large network of businesses and public entities.
Included in DACs automated solution for data collection, processing and reporting is compliance with state and federal accessibility regulations and codes. DAC currently uses DACTrak by our staff to inspect sites and process a compliance report. DACTrak provides a web based solution for the client to view, interact and manage their compliance data. AcTrak was originally intended to be the intake portion of the software that utilized the labtop tablet. DACTrak was the automatically generated report and the report management features that utilized the web. Over time, AcTrak has blended into DACTrak and the terms are being used in a similar capacity and reference. The use of AcTrak was originally designed as a term for using the software on the pc tablet for the actual inspection process. DACTrak was designed as the data management portion of the software for the clients to update and manage their report. To avoid confusion, the terms AcTrak and DACTrak were blended or combined to refer to the same software, regardless of their use. The software is now named DACTrak. The term DACTrak will be utilized in this document, as applicable.
Business Strategy Prior to February 23, 2010 Transaction
Long range business opportunities include potential expansion of current DAC accessibility and ADA compliance products and services into a large market arena that includes other regulatory areas in addition to the ADA. The business strategy includes regulatory products in addition to the ADA. Our software expansion will be targeted for specific industry standards that may include, but are not limited to: building officials, code enforcement, insurance industry, risk managers, OSHA, insurance carriers, nuclear industry, FEMA, federal government, title insurance, banking and accounting. The list of potential clients and markets represents a large market potential. Revenue generation from the various areas of our current and new products will come from: Software licensing, Software training, Online and Telephone support, Data Storage and Client device utilization. DAC currently has insurance carriers, building officials, code enforcement, risk managers, city and county governments, federal government as clients for ADA and state accessibility regulations, the software expansion will target content areas and other needs beyond accessibility for each industry. We have placed on hold development plans for products related to Fair Housing, which are for similar product services and systems comparable in nature and method to our existing ADA software and services. Pending resource availability, business viability and market demand the Fair Housing project will be re-evaluated and reactivated as conditions warrant.
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PTS, Inc. currently has one employee and will seek additional employees if and when necessary and the Company has utilized and will continue to utilize independent consultants on an as needed basis
Current Acquisition Objectives
We continue to seek, investigate and, if such investigation warrants, acquire an interest in business opportunities presented to us by persons or firms who or which desire to seek the perceived advantages of a corporation which is registered under the Securities Exchange Act of 1934, as amended. We do not restrict our search to any specific business, industry or geographical location and we may participate in a business venture of virtually any kind or nature.
We may seek a business opportunity with entities which have recently commenced operations, or which wish to utilize the public marketplace in order to raise additional capital in order to expand into new products or markets, to develop a new product or service or for other corporate purposes. We may acquire assets and establish wholly owned subsidiaries in various businesses or acquire existing businesses as subsidiaries.
As part of our investigation of potential merger candidates, our officers and directors will meet personally with management and key personnel, may visit and inspect material facilities, obtain independent analysis or verification of certain information provided, check references of management and key personnel and take other reasonable investigative measures, to the extent of our financial resources and management expertise. The manner in which we participate in an opportunity will depend on the nature of the opportunity, the respective needs and desires of us and other parties, the management of the opportunity, our relative negotiation strength and that of the other management.
We intend to concentrate on identifying preliminary prospective business opportunities that may be brought to our attention through present associations of our officers and directors, or by our shareholders. In analyzing prospective business opportunities, we will consider such matters as the available technical, financial and managerial resources; Sarbanes-Oxley Act of 2002 compliance; working capital and other financial requirements; history of operations, if any; prospects for the future; nature of present and expected competition; the quality and experience of management services which may be available and the depth of that management; the potential for further research, development or exploration; specific risk factors not now foreseeable but which then may be anticipated to impact our proposed activities; the potential for growth or expansion; the potential for profit; the perceived public recognition or acceptance of products, services or trades; name identification; and other relevant factors.
Our officer and director will meet personally with management and key personnel of the business opportunity as part of our investigation. We will not acquire or merge with any company for which audited financial statements cannot be obtained within a reasonable period of time after closing of the proposed transaction, as required by the Exchange Act.
We will not restrict our search to any specific kind of firms, but may acquire a venture which is in its preliminary or development stage, which is already in operation, or which is in essentially any stage of its corporate life. It is impossible to predict at this time the status of any business in which we may become engaged, in that such business may need to seek additional capital, may desire to have its shares publicly traded or may seek other perceived advantages which we may offer.
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At the Special Meeting of Stockholders of PTS, Inc. held on February 25, 2010, a majority of the Companys stockholders approved the proposal to increase the authorized number of shares of the Companys Common Stock from Two Billion Eight Hundred Million (2,800,000,000) to Four Billion Eight Hundred Million (4,800,000,000).
On May 19, 2010 the Company filed a Certificate of Amendment to the Articles of Incorporation with the state of Nevada to increase the authorized Common Stock from Two Billion Eight Hundred Million (2,800,000,000) to Four Billion Eight Hundred Million (4,800,000,000). A copy of the Amendment to the Articles of Incorporation was filed as Exhibit 3.18 to the Companys Current Report on Form 8-K filed on May 21, 2010.
Other Business Developments
Our Financial Results May Be Affected by Factors Outside of Our Control
Our future operating results may vary significantly from quarter to quarter due to a variety of factors, many of which are outside our control. Our anticipated expense levels are based, in part, on our estimates of future revenues and may vary from our projections. We may be unable to adjust spending rapidly enough to compensate for any unexpected revenues shortfall. Accordingly, any significant shortfall in revenues in relation to our planned expenditures would materially adversely affect our business, operating results, and financial condition.
We cannot predict with certainty our revenues and operating results. Further, we believe that period-to-period comparisons of our operating results are not necessarily a meaningful indication of future performance.
Corporate Offices
Our executive office is located at 3355 Spring Mountain Road, Suite 66, Las Vegas, Nevada 89102. For corporate information via email: mpintar@cox.net
Critical Accounting Policies
The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our consolidated financial statements, we believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments.
Stock-Based Compensation
We account for our stock based compensation under ASC 718 Compensation Stock Compensation which was adopted in 2006, using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entitys equity instruments or that may be settled by the issuance of those equity instruments.
Potential Derivative Instruments
We periodically assess our financial and equity instruments to determine if they require derivative accounting. Instruments which may potentially require derivative accounting are conversion features of debt and common stock equivalents in excess of available authorized common shares.
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We have determined that the conversion features of our debt instruments are not derivative instruments because they are not readily convertible to cash based on our historical trading volume.
Results of Operations
Comparison of the Three-Month Periods Ended September 30, 2010 and 2009
Revenue
We had no revenue from operations for the three months ended September 30, 2010 due to the disposition of our operating subsidiary described elsewhere in this quarterly report and there was no revenue for the three months ended September 30, 2009 related to the disposition of the operating subsidiary.
Cost of Revenue
We had no cost of revenue from continuing operations for the three months ended September 30, 2010 due to the disposition of our operating subsidiary described elsewhere in this quarterly report and there was no cost of revenue for the three months ended September 30, 2009 related to the disposition of the operating subsidiary.
Operating Expenses
Total operating expenses were $61,426 for the three months ended September 30, 2010. The primary components of our operating expenses are general and administrative expenses, consisting of consulting costs and professional fees.
Interest Expense
Other income and expense for the three months ended September 30, 2010 was $1,474 and consisted of interest expense on our outstanding convertible notes
Comparison of the Nine-Month Periods Ended September 30, 2010 and 2009
Revenue
We had no revenue from operations for the nine months ended September 30, 2010 due to the disposition of our operating subsidiary described elsewhere in this quarterly report and there was no revenue for the nine months ended September 30, 2009 related to the disposition of the operating subsidiary.
Cost of Revenue
We had no cost of revenue from continuing operations for the nine months ended September 30, 2010 due to the disposition of our operating subsidiary described elsewhere in this quarterly report and there was no cost of revenue for the nine months ended September 30, 2009 related to the disposition of the operating subsidiary.
Operating Expenses
Total operating expenses were $217,980 for the nine months ended September 30, 2010. The primary components of our operating expenses are general and administrative expenses, consisting of consulting costs and professional fees.
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Interest Expense and Finance Costs
Other income and expense for the nine months ended September 30, 2010 was $10,445 and consisted of interest expense of $10,131 and finance cost of $314.
Discontinued Operations and Non-Controlling Interest
As presented in Note 3 to the financial statements, the loss from discontinued operations was $39,587 for the nine months ended September 30, 2010.
Liquidity and Capital Resources
As of September 30, 2010, we had a deficiency in working capital of $283,647. Cash used in operations was $167,320 during the nine months ended September 30, 2010, comprised primarily of the issuance of shares for services. There was no cash used in investing activities for the nine months ended September 30, 2010. Cash provided by financing activities for the nine months ended September 30, 2010 was $35,689, resulting from proceeds from the sale of common stock.
As of September 30, 2009, we had a deficiency in working capital of $903,933. During the nine months ended September 30, 2009, cash provided by operations was $10,411, cash used in investing activities was $18,743 and cash provided by financing activities was $8,478.
Our independent certified public accountants have stated in their report, included in our Form 10-K, that due to our net losses and negative cash flows from operations that there is a substantial doubt about our ability to continue as a going concern. In the absence of significant revenue and profits, we will be completely dependent on additional debt and equity financing arrangements. There is no assurance that any financing will be sufficient to fund our capital expenditures, working capital and other cash requirements for the fiscal year ending December 31, 2010. No assurance can be given that any such additional funding will be available or that, if available, can be obtained on terms favorable to us. If we are unable to raise needed funds on acceptable terms, we will not be able to execute our business plan, develop or enhance existing services, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements. A material shortage of capital will require us to take drastic steps such as further reducing our level of operations, disposing of selected assets or seeking an acquisition partner. If cash is insufficient, we will not be able to continue operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We believe that we do not have any material exposure to interest or commodity risks. Our financial results are quantified in U.S. dollars and our obligations and expenditures with respect to our operations are incurred in U.S. dollars. Although we do not believe we currently have any materially significant market risks relating to our operations resulting from foreign exchange rates, if we enter into financing or other business arrangements denominated in currency other than the U.S. dollars, variations in the exchange rate may give rise to foreign exchange gains or losses that may be significant.
We do not use financial instruments for trading purposes and we are not a party to any leveraged derivatives.
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Item 4T. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (Exchange Act) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (SEC), and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.
In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, management concluded that our disclosure controls and procedures are effective as of December 31, 2009, and September 30, 2010, to cause the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods prescribed by SEC, and that such information is accumulated and communicated to management, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Evaluation of and Report on Internal Control over Financial Reporting
The management of PTS, Inc. 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 a process designed by, or under the supervision of, the companys principal executive and principal financial officers and effected by the companys 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 accounting principles generally accepted in the United States of America and includes those policies and procedures that:
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Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
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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 and directors of the company; and
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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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
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Management assessed the effectiveness of the Companys internal control over financial reporting as of December 31, 2009, and again on September 30, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework.
Based on its assessment, management concluded that, as of December 31, 2009, and September 30, 2010, the Companys internal control over financial reporting is effective based on those criteria.
This quarterly report does not include an attestation report of the Companys registered accounting firm regarding internal control over financial reporting. Managements report is not subject to attestation by the Companys registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission.
Changes in Internal Control over Financial Reporting
There was no change in our internal controls over financial reporting identified in connection with the requisite evaluation that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1.
Legal Proceedings.
None.
Item 1A. Risk Factors
Not applicable.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
During the nine months ended September 30, 2010:
We issued 442,277,141 shares of common stock pursuant to the conversion of 4,585,600 shares of Series A preferred stock, 3,000,000 shares of Series C preferred stock and 37,350 shares of Series E preferred stock. The Company cancelled 62,500 Series A preferred stock in agreement with the shareholder as the shareholder could not locate the physical certificate to convert. All converted Series E preferred stock were converted at a negotiated conversion rate and not the rate stated in the Companys designation for the series.
We issued 306,039,861 shares for payment of debt and accrued interest reduction aggregating $184,187. The shares were valued at $131,457 and we recorded a gain of $52,730 upon extinguishment of debt.
We sold 35,689,400 shares of restricted common shares for proceeds aggregating $35,689.
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We issued 15,000,000 restricted shares of common stock valued at $21,000 for consulting services to non-affiliated party.
We issued 217,742,410 shares of common stock upon conversion and in settlement of convertible notes and accrued interest aggregating $330,606. The shares were valued at $190,031 and we recorded a gain of $140,575 upon extinguishment of debt.
During July 2010, the Company issued an aggregate of 138,151,351 common stock shares to various entities and individuals as a result of the conversion and settlement of convertible notes and accrued interest, as compensation and for consulting services.
Except for the above shares issued under the Form S-8 registration statement, the other shares were issued in transactions exempt from registration pursuant to section 4(2) of the Securities Act of 1933, as amended.
Item 3.
Defaults Upon Senior Securities
None.
Item 4.
[Removed and Reserved]
Item 5.
Other Information.
None.
Item 6.
Exhibits.
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Exhibit No.
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Identification of Exhibit
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Location
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3.1
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Articles of Incorporation, dated November 5, 1996.
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Incorporated by reference from PTS, Inc.s Registration Statement on Form 10-SB filed on March 3, 1999.
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3.2
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Certificate of Amendment to Articles of Incorporation, dated June 29, 1998.
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Incorporated by reference from PTS, Inc.s Registration Statement on Form 10-SB filed on March 3, 1999.
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3.3
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Articles of Exchange between the Company and Elast Technologies, Inc. dated June 11, 2001.
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Incorporated by reference from PTS, Inc.s Current Report on Form 8-K filed on June 26, 2001.
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3.4
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Certificate of Amendment to Articles of Incorporation, dated June 26, 2001.
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Incorporated by reference from PTS, Inc.s Current Report on Form 8-K filed on June 26, 2001.
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3.5
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Certificate of Amendment to Articles of Incorporation, dated March 16, 2004.
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Incorporated by reference from PTS, Inc.s Definitive Information Statement filed on March 16, 2004.
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3.6
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Certificate of Designation establishing our Series A Preferred Stock, filed effective July 15, 2004.
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Incorporated by reference from PTS, Inc.s Annual Report on Form 10-KSB for the year ending December 31, 2004 filed on May 20, 2005.
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3.7
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Certificate of Designation establishing our Series B Preferred Stock, filed effective September 13, 2004.
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Incorporated by reference from PTS, Inc.s Annual Report on Form 10-KSB for the year ending December 31, 2004 filed on May 20, 2005.
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35
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3.8
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Certificate of Designation establishing our Series C Preferred Stock, filed effective November 8, 2004.
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Incorporated by reference from PTS, Inc.s Annual Report on Form 10-KSB for the year ending December 31, 2004 filed on May 20, 2005.
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3.9
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Certificate of Designation establishing our Series D Preferred Stock, filed effective January 6, 2005.
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Incorporated by reference from PTS, Inc.s Annual Report on Form 10-KSB for the year ending December 31, 2004 filed on May 20, 2005.
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3.10
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Certificate of Amendment to the Certificate of Designation establishing our Series C preferred stock, filed effective April 5, 2005.
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Incorporated by reference from PTS, Inc.s Annual Report on Form 10-KSB for the year ending December 31, 2004 filed on May 20, 2005.
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3.11
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Certificate of Amendment to the Certificate of Designation establishing our Series D preferred stock, filed effective April 5, 2005
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Incorporated by reference from PTS, Inc.s Annual Report on Form 10-KSB for the year ending December 31, 2004 filed on May 20, 2005.
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3.13
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Certificate of Amendment to the Certificate of Designation establishing our Series C preferred stock, filed effective November 10, 2005.
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Incorporated by reference from PTS, Inc.s Annual Report on Form 10-KSB for the year ending December 31, 2005 filed on April 20, 2006.
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3.14
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Certificate of Designation establishing our Series E Preferred Stock, filed effective November 15, 2005.
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Incorporated by reference from PTS, Inc.s Annual Report on Form 10-KSB for the year ending December 31, 2005 filed on April 20, 2006.
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3.15
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Certificate of Designation establishing our Series F Preferred Stock, filed effective November 15, 2005.
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Incorporated by reference from PTS, Inc.s Annual Report on Form 10-KSB for the year ending December 31, 2005 filed on April 20, 2006.
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3.16
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Certificate of Amendment to the Certificate of Designation of the Companys Series A, Series B and Series C preferred stock, filed effective December 29, 2006.
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Incorporated by reference from PTS, Inc.s Annual Report on Form 10-KSB for the year ending December 31, 2006 filed on April 2, 2007.
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3.17
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Certificate of Amendment to Articles of Incorporation, dated October 9, 2007.
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Incorporated by reference from PTS, Inc.s Annual Report on Form 10-KSB for the year ending December 31, 2007 filed on March 31, 2008.
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3.18
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Certificate of Amendment to Articles of Incorporation, dated May 19, 2010
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Incorporated by reference from PTS, Inc.s Current Report on Form 8-K filed on May 21, 2010.
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3.12
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Bylaws.
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Incorporated by reference from PTS, Inc.s Registration Statement on Form 10-SB filed on March 3, 1999.
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10.1
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Stock exchange agreement with American Fire Retardant Corp., a Nevada corporation, dated November 29, 2004.
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Incorporated by reference from PTS, Inc.s Annual Report on Form 10-KSB for the year ending December 31, 2004 filed on May 20, 2005.
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10.2
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Stock exchange agreement with Stephen F. Owens, dated November 29, 2004.
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Incorporated by reference from PTS, Inc.s Annual Report on Form 10-KSB for the year ending December 31, 2004 filed on May 20, 2005.
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10.3
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Stock purchase agreement with Global Links Corp., a Nevada corporation, dated December 24, 2004.
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Incorporated by reference from PTS, Inc.s Annual Report on Form 10-KSB for the year ending December 31, 2004 filed on May 20, 2005.
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10.4
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Stock exchange agreement with Disability Access Consultants, Inc., a California corporation, dated November 15, 2005.
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Incorporated by reference from PTS, Inc.s Current Report on Form 8-K filed on November 22, 2005.
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10.5
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Stock purchase agreement and convertible note with James Brewer and PTS Card Solutions, Inc. dated October 10, 2006
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Incorporated by reference from PTS, Inc.s Current Report on Form 8-K filed October 19, 2006.
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31.1
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Filed herewith.
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32.1
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Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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Filed herewith.
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36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PTS, INC.
Date: November 12, 2010
/s/Marc Pintar
Marc Pintar
Interim President, Chief Executive Officer
and Chief Financial Officer
(Principal Accounting, Executive and Financial Officer)
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