UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 28, 2008
ENVIRONMENTAL SERVICE PROFESSIONALS, INC.
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation)
1-14244 84-1214736
(Commission File Number) (I.R.S. Employer Identification No.)
1111 EAST TAHQUITZ CANYON WAY, SUITE 110, PALM SPRINGS, CALIFORNIA 92262
(Address of principal executive offices) (Zip Code)
(760) 327-5284
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions.
[_] Written communications pursuant to Rule 425 under the Securities Act (17
CFR240.14d-2(b))
[_] Soliciting material pursuant to Rule 14a-12 under Exchange Act (17
CFR240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR240.13e-4(c))
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SECTION 1. REGISTRANT'S BUSINESS AND OPERATIONS
ITEM 1.02. TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT.
Effective July 31, 2007, on April 28, 2008, Environmental Service
Professionals, Inc. (the "Company") terminated that certain stock purchase
agreement with Advanced Roofing Solutions, Inc., a California corporation
("ARS"), Eduardo Guerra, an individual and 50% shareholder of ARS, and Marco
Guerra, an individual and 50% shareholder of ARS (the "SPA"), pursuant to which
the Company was to acquire 100% of the total issued and outstanding stock of ARS
from Eduardo Guerra and Marco Guerra in exchange for a minimum of 1,100,000
shares and a maximum of 1,500,000 shares of the Company's common stock issuable
in installments over time, 1,000,000 warrants entitling Eduardo Guerra and Marco
Guerra to collectively purchase 1,000,000 additional shares of the Company's
common stock at a purchase price of $0.75 per share for a period of three years
from the date of the closing, plus a minimum of $1,000,000 and a maximum of
$1,950,000 in cash, payable in installments over time.
SECTION 4. MATTERS RELATED TO ACCOUNTANTS AND FINANCIAL STATEMENTS
ITEM 4.01. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
On April 28, 2008, the Company engaged Stan J.H. Lee, CPA, CMA ("New
Accountant") to audit and review the Company's financial statements for the
fiscal year ending December 31, 2007. The New Accountant has been engaged for
general audit and review services and not because of any particular transaction
or accounting principle, or because of any disagreement with the Company's
former accountant, Chang G. Park, CPA, Ph. D. (the "Former Accountant").
Prior to engaging the New Accountant, the Company had not consulted the
New Accountant regarding the application of accounting principles to a specified
transaction, completed or proposed, the type of audit opinion that might be
rendered on our financial statements or a reportable event, nor did the Company
consult with the New Accountant regarding any disagreements with our prior
auditor on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of the prior auditor, would have caused it to make reference
to the subject matter of the disagreements in connection with its reports.
The Former Accountant was not re-engaged effective April 28, 2008. The
Former Accountant's reports on the Company's financial statements during its
past two fiscal years did not contain an adverse opinion or disclaimer of
opinion, nor was it modified as to uncertainty, audit scope or accounting
principles, except for a going concern qualification contained in its audit
reports for the fiscal years ending December 31, 2005 and December 31, 2006. The
going concern qualification stated as follows: "The consolidated financial
statements have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 2 to the financial statements, the Company's
losses from operations raise substantial doubt about its ability to continue as
a going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty."
The decision to change accountants, which involved dismissing the
Former Accountant and engaging the New Accountant, was recommended by the
Company's Audit Committee Chairperson and approved by the Company's Board of
Directors on April 28, 2008. During the fiscal years ended December 31, 2005 and
December 31, 2006 through the date hereof, the Company did not have any
disagreements with the Former Accountant on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
which, if not resolved to the Former Accountant's satisfaction, would have
caused it to make reference to the subject matter of the disagreement in
connection with its report, except as described in the next paragraph of this
Report.
2
In the course of preparing the financial statements for the third
quarter ended September 30, 2007 for the Company's Report on Form 10-QSB for
that quarter, management of the Company and the Former Accountant discussed the
reporting of revenue earned by the associations acquired by the Company from
Robert Johnson. The Company's acquisition of those associations closed on July
31, 2007 (the "Closing"). Management believes that the acquisition was
structured as an asset acquisition and therefore intended to report revenue from
the associations only for the period from the Closing through September 30,
2007. Initially, the Former Accountant disagreed with management and asserted
that it believed that the acquisition was a purchase of stock and insisted that
the Company record revenue for the associations for the entire period from
January 1, 2007 through September 30, 2007. Eventually management acquiesced to
the Former Accountant's position and prepared the financial statements
reflecting association revenue from the beginning of the 2007 fiscal year.
After the filing deadline for the Company's Report on Form 10-QSB for
the third quarter ended September 30, 2007, the Former Accountant informed the
Company that it had changed its position and now agreed with management's
initial position that the Company should report association revenue commencing
from July 31, 2007, the Closing date for the acquisition. The Former
Accountant's change of position was communicated to management after the Former
Accountant had already approved the Company's policy of recording the full nine
months of revenue from the associations, and too tardy for the Company to change
its Report on Form 10-QSB for the third quarter ended September 30, 2007.
Furthermore, at that time management was still uncertain as to which reporting
policy was correct, especially in light of the Former Accountant's inconsistent
advice. As a result, the Former Accountant did not issue an approval letter for
the Company's financial statements for the third quarter ended September 30,
2007.
In the course of preparing the Company's financial statements for the
full year ended December 31, 2007, management determined that the Company's
financial statements for the third quarter ended September 30, 2007 should be
restated to report association revenue only from the date of the Closing of the
acquisition and not from the beginning of the 2007 fiscal year. See Item 4.02 of
this Report. The Former Accountant agreed with the Company's management and was
prepared to work on the restatement for the third quarter ended September 30,
2007 and the audit report for the fiscal year ended December 31, 2007.
Nevertheless, the Company's Board of Directors decided to authorize and direct
the Company on April 28, 2008 to dismiss the Former Accountant and
simultaneously to engage the New Accountant, primarily because the Former
Accountant's fee quote for the work was excessive. Accordingly, the Company does
not currently have a disagreement with the Former Accountant with respect to the
Company's financial statements on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure. The
confusion surrounding the Former Accountant's inconsistent advice relating to
the Company's financial statements for the third quarter ended September 30,
2007 may, however, have resulted in a disagreement with the Former Accountant at
the time in light of management's recent determination that the associated
revenue should be reported only from the acquisition Closing date and not from
January 1, 2007.
ITEM 4.02. NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A
RELATED AUDIT REPORT OR COMPLETED INTERIM REVIEW.
In connection with its preparation of the Annual Report on Form 10-KSB,
the management of Environmental Service Professionals, Inc. (the "Company") and
the Board of Directors concluded that the Company's financial statements as of
and for the quarter ended September 30, 2007 included in the Company's
previously filed Quarterly Report on Form 10-QSB should no longer be relied upon
and should be restated. As discussed in Item 4.01 of this Report, those
financial statements were not reviewed by an independent registered public
accountant.
3
The Company is now working with its independent registered public
accountant to review its previously filed financial statements as of and for the
quarter ended September 30, 2007 included in the Company's previously filed
Quarterly Report on Form 10-QSB for the quarter ended September 30, 2007. After
the completion of those audit reviews, the Company anticipates restating the
affected financial statements. Management expects that the restatement will
result in the reporting of less revenue for the nine and three months ended
September 30, 2007 than the amount reported in the financial statements included
in its Quarterly Report on Form 10-QSB for the quarter ended September 30, 2007.
The Company has discussed the disclosures contained in this filing with
Stan J. H. Lee, CPA, its new independent registered public accountants.
SECTION 5. CORPORATE GOVERANCE AND MANAGEMENT
ITEM 5.02. DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF
DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS; COMPENSATORY ARRANGEMENTS OF
CERTAIN OFFICERS.
In consideration for his continued services to the Company, on or about
April 28, 2008, the Company authorized the issuance of 17,000,000 shares of the
Company's common stock to Mr. Edward Torres, the Chairman, Chief Executive
Officer, and President of the Company.
In consideration for his continued services to the Company, on or about
April 28, 2008, the Company authorized the issuance of 8,000,000 shares of the
Company's common stock to Mr. Lyle Watkins, a Director, Chief Operating Officer,
and Corporate Secretary of the Company.
SECTION 9. FINANCIAL STATEMENTS, PRO FORMA FINANCIALS & EXHIBITS
(a) Financial Statements of Business Acquired
Not Applicable.
(b) Pro Forma Financial Information
Not Applicable.
(c) Exhibits
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ENVIRONMENTAL SERVICE PROFESSIONALS, INC.
(Registrant)
Date: April 28, 2008
/s/ Edward Torres, Chief Executive Officer
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Edward Torres, Chief Executive Officer
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