frdm10q9112012.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2012

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT For the transition period from N/A to N/A

Commission File No. 000-453388

FREEDOM ENVRIONMENTAL SERVICES, INC.

(Name of small business issuer as specified in its charter)

Delaware	27-3218629
( State or other jurisdiction of incorporation or organization)	( IRS Employer Identification No.)

11372 United Way, Orlando, Florida 32824

(Address of principal executive offices) (Zip Code)

(407) 905-5000

Registrant’s telephone number, including area code

Indicate by check mark whether the Registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days:

Yes x No o

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 o No x

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

Large accelerated filer	¨	Accelerated filer	¨
Non–Accelerated filer	¨	Small 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 ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at September 11, 2012
Common stock, $0.001 par value		151,368,434

FREEDOM ENVIRONMENTAL SERVICES, INC.

INDEX TO FORM 10-Q FILING

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2012 AND 2011

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		PAGE
PART I - FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements	1
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Income	3
	Condensed Consolidated Statement of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management Discussion & Analysis of Financial Condition and Results of Operations	15
Item 3	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Removed and Reserved	30
Item 5	Other information	30
Item 6.	Exhibits	30


CERTIFICATIONS

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

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PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements

The accompanying reviewed interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three and six months ended June 30, 2012 are not necessarily indicative of the results that can be expected for the year ending December 31, 2012.

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FREEDOM ENVIRONMENTAL SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30,			December 31,
	2012			2011
	(unaudited)
ASSETS:
CURRENT ASSETS
Cash	$	48,079		$	73,664
Accounts receivable - net of allowance of $36,550 and $45,030		242,822			238,460
Prepaid Expenses		22,892			6,247
Deposits		176,875			176,875
Total current assets		490,668			495,246

PROPERTY AND EQUIPMENT
Property and equipment, net of accumulated depreciation of
$862,184 and $627,519		1,748,297			1,725,075
Total property and equipment		1,748,297			1,725,075

OTHER ASSETS
Intangible asset (client list) , net of accumulated amortization
of $80,000 and $60,000		120,000			140,000
Loan costs, net of accumulated amortization of $5,418 and $1,420		2,326			6,324
Total other assets		122,326			146,324

TOTAL ASSETS	$	2,361,291		$	2,366,645

LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft	$	24		$	11,873
Accounts payable		308,146			343,842
Accrued expenses		221,595			124,409
Accrued interest (related parties $16,566 & $33,254)		102,458			47,548
Customer Deposits		36,100			-
Lines of credit		13,177			90,223
Notes payable - short term		548,600			930,646
Notes payable - current portion of long-term debt		89,995			29,057
Notes payable - related parties		75,000			492,755
Total current liabilities		1,395,095			2,070,353

LONG TERM LIABILITIES
Convertible notes payable		770,000			220,000
Notes payable - long term debt less current portion		953,874			59,777
Total long term liabilities		1,723,874			279,777

TOTAL LIABILITIES		3,118,969			2,350,130

STOCKHOLDERS' EQUITY (DEFICIT)
Common stock subscribed, 1,000,000 and 1,000,000 shares as of
June 30, 2012 and December 2011, respectively		50,000			50,000
Preferred stock, $0.001 par value, 75,000,000 shares authorized:
Series A, Convertible - 5,736,333 issued and outstanding
as of June 30, 2012 and December 31, 2011		5,736			5,736
Common stock, $0.001 par value, 200,000,000 shares authorized:
133,568,434 and 133,443,434 issued and outsanding
as of June 30, 2012 and December 31, 2011, respectively		133,568			133,443
Additional paid-in capital		22,162,322			22,157,447
Accumulated deficit		(23,109,304	)		(22,330,111	)
Total stockholders' equity		(757,678	)		16,515

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,361,291		$	2,366,645

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FREEDOM ENVIRONMENTAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	Three Months Ended							Six Months Ended
	June 30,				June 30,			June 30,			June 30,
		2012			2011			2012			2011

Revenues		$	1,339,486		$	1,566,224		$	2,508,311		$	2,956,729
Total			1,339,486			1,566,224			2,508,311			2,956,729

COST OF SALES			1,194,301			953,447			2,171,227			1,894,468

GROSS PROFITS			145,185			612,777			337,084			1,062,261

OPERATING EXPENSES
General and administrative			471,948			671,481			986,952			1,435,156
Depreciation and amortization expense			11,936			10,097			27,444			20,194
Total operating expenses			483,884			681,578			1,014,396			1,455,350
OPERATING LOSS			(338,699	)		(68,801	)		(677,312	)		(393,089	)

OTHER INCOME (EXPENSES)
Other income			38			-			59			-
Interest income			48			-			202
Interest expense			(50,185	)		(75,322	)		(100,197	)		(107,115	)
Gain (loss) on disposal of assets			-			-			-			1,995
Fines and penalties			(251	)		-			(1,945	)		-
Total other expenses			(50,350	)		(75,322	)		(101,881	)		(105,120	)

NET LOSS		$	(389,049	)	$	(144,123	)	$	(779,193	)	$	(498,209	)

NET LOSS PER SHARE:
Basic and diluted		$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.00	)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted		$	133,526,767		$	114,424,927		$	133,526,767		$	111,858,189

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FREEDOM ENVIRONMENTAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Six Months Ended			Six Months Ended
	June 30,			June 30,
	2012			2011

Net loss	$	(779,193	)	$	(498,209	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Bad debt expense		9,316			28,672
Depreciation		234,665			253,306
Amortization		26,862			28,616
Loss (gain) on disposal of assets		-			(1,995	)
Common stock issued for services		5,000			99,350
Changes in operating assets and liabilities:		-
Accounts receivable		(13,678	)		(139,996	)
Prepaid expenses and other assets		(16,645	)		5,230
Inventory		-			7,799
Accounts payable		(68,055	)		(104,607	)
Accrued expenses		97,186			151,690
Accrued interest - related parties		54,910			(3,263	)
Customer deposits		36,100			-
Deferred Liabilitites		-			42,800
Net cash used in operating activities		(413,532	)		(130,607	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Deposit for business acquisition		-			(175,000	)
Purchase of equipment		(257,887	)		(41,701	)
Proceeds from sale of property plant and equipment		-			26,645
Net cash used in investing activities		(257,887	)		(190,056	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft		(11,849	)		4,786
Proceeds from exercise of warrants		-			50,000
Proceeds from convertible notes payable		550,000			-
Proceeds from note payable and line of credit		1,015,162			648,107
Proceeds from note payable - related parties		-			68,700
Repayment of line of credit		(77,046	)		-
Repayment of note payable		(816,933	)		(533,248	)
Repayment of note payable - related parties		(13,500	)		(14,300	)
Net cash provided by financing activities		645,834			224,045

NET INCREASE (DECREASE) IN CASH		(25,585	)		(96,618	)

CASH, BEGINNING OF PERIOD		73,664			175,134
CASH, END OF PERIOD	$	48,079		$	78,516


Interest paid	$	41,827		$	46,667
Taxes paid	$	-		$	-

NONCASH INVESTING AND FINANCING TRANSACTIONS
Issuance of common stock for the conversion of debt	$	-		$	86,000
Common stock issued for payables	$	5,000		$	32,704
Preferred stock issued for accrued compensation payable	$	-		$	17,915
Common stock issued to settle accrued compensation	$	-		$	120,615
Common stock issued for acquisition of equipment	$	-		$	15,240

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FREEDOM ENVIRONMENTAL SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2012 AND 2011

NOTE 1 - DESCRIPTION OF BUSINESS

Freedom Environmental Services, Inc. (the “Company” or “Freedom”) provides wastewater management and recycling services to its customers through its different divisions. On July 16, 2010, the Company acquired the assets and certain liabilities of Brownies Waste Water Solutions, Inc. (“Brownies”). Brownies was originally purchased in a Chapter 7 Bankruptcy proceeding in December of 2008, just 18 months before the Company acquired the assets and certain liabilities of Brownies Waste Water Solutions, Inc. Prior to its Bankruptcy proceeding in December of 2008, the business had been operating by unrelated third parties in the Central Florida market since 1948, providing commercial and residential septic services. These services include drain field installation, maintenance and repair; grease trap cleaning, maintenance, installation and repair; full service commercial and residential plumbing; sewer drain cleaning, backflow testing, repairs and certifications; lift station cleaning, maintenance, repairs, bio-solids transportation and recycling. Prior to the acquisition of Brownies, on July 5, 2010, Brownies purchased the equipment of Vac and Jet Services which was a defunct company with two Vactor trucks.

On December 13, 2010, Freedom purchased the equipment of Clean Fuel, LLC and placed that equipment into its wholly owned subsidiary, Grease Recovery Solutions, LLC (“Grease”). Grease handles all of the Company’s restaurant, resort and theme park services which include grease trap cleaning, sewer drain cleaning and waste cooking oil for recycling.

In February 2011, the Company entered into a letter of intent with David M. Hickman in Pennsylvania to purchase the equipment, inventory and customer list from a company owned by Mr. Hickman. The Company is in the process of due diligence and has escrowed a non-refundable deposit of $175,000 towards the purchase, which is classified in the accompanying balance sheet as a long-term deposit. Mr. Hickman has granted the Company an extension to complete the due diligence by May 31, 2012. Although the deadline has passed, negotiations between the Company and Mr. Hickman are ongoing and active and the Company anticipates entering into a definitive agreement within the next several months. Mr. Hickman provides sanitation services throughout Pennsylvania. Mr. Hickman’s company provides all aspects of commercial and residential services including septic system cleaning, maintenance and installation. The Company plans to expand that business to the current services lines that it provides in the State of Florida.

NOTE 2 - BASIS OF PRESENTATION

Interim Financial Statements

The accompanying interim unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. While management of the Company believes that the disclosures presented herein are adequate and not misleading, these interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the footnotes thereto for the fiscal year ended December 31, 2011 as filed with the Securities and Exchange Commission in our Form 10-K.

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NOTE 3 - GOING CONCERN ISSUES

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has a net loss for the three and six months ended June 30, 2012 of $389,049 and $779,193 respectively, an accumulated deficit at June 30, 2012 of $23,109,304, cash flows used in operating activities of $413,532 and needs additional cash to maintain its operations.

These factors raise doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company’s continued existence is dependent upon management’s ability to develop profitable operations, continued contributions from the Company’s executive officers to finance its operations and the ability to obtain additional funding sources to explore potential strategic relationships and to provide capital and other resources for the further development and marketing of the Company’s products and business.

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. Significant accounting policies are as follows:

Use of Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net revenues and expenses recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates.

Revenue Recognition

Revenue includes provision of services. The Company recognizes revenue from provision of services at the time evidence of an arrangement exists, fees are contractually fixed or determinable, collection is reasonably assured through historical collection results and regular credit evaluations, and there are no uncertainties regarding customer acceptance.

Accounts Receivable and Allowance for Uncollectible Accounts

Substantially all of the Company’s accounts receivable balance is related to trade receivables. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company will maintain allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments for services. Accounts with known financial issues are first reviewed and specific estimates are recorded. The remaining accounts receivable balances are then grouped in categories by the number of days the balance is past due, and the estimated loss is calculated as a percentage of the total category based upon past history. Account balances are charged off against the allowance when it is probable the receivable will not be recovered. The Company has reserved $36,550 as allowance for doubtful accounts at June 30, 2012 and recorded $9,316 of bad debt expense during the three and six months ended June 30, 2012.

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Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At June 30, 2012, cash and cash equivalents include cash on hand and cash in the bank, and the FDIC insures these deposits up to $250,000.

Inventory

The Company’s inventory is carried at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method. The Company’s inventory is comprised of supplies and parts used in the Company’s operations. The Company evaluates the need to record adjustments for obsolescence for inventory on a regular basis. At June 30, 2012, the Company’s inventory balance was $0 and at December 31, 2011, the Company’s inventory balance was $0.

Property and Equipment

Property and equipment is recorded at cost and depreciated over the estimated useful life, ranging from three to ten years, using the straight-line method. When items are retired or otherwise disposed of, loss or gain is charged or credited for the difference between the net book value and proceeds realized. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized.

Impairment of Long-Lived Assets

Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price and related costs over the value assigned to net tangible and identifiable intangible assets of businesses acquired and accounted for under the purchase method. Goodwill acquired in business combinations is assigned to reporting units that are expected to benefit from the synergies of the combination as of the acquisition date. Under this standard, goodwill and intangibles with indefinite useful lives are no longer amortized. The Company annually assesses goodwill and indefinite-lived intangible assets for impairment during the fourth quarter, or more frequently if events and circumstances indicate impairment may have occurred, in accordance with ASC Topic 350. If the carrying value of a reporting unit's goodwill exceeds its implied fair value, the Company records an impairment loss equal to the difference. ASC Topic 350 also requires that the fair value of indefinite-lived purchased intangible assets be estimated and compared to the carrying value. The Company recognizes an impairment loss when the estimated fair value of the indefinite-lived purchased intangible assets is less than the carrying value. The Company does not have any goodwill recorded at June 30, 2012.

Intangible assets subject to amortization, which consist of customer lists, are amortized over their expected life of five years.

Management has assessed the Company’s intangible assets and has not recognized any impairment of assets for the six months ended June 30, 2012.

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Income Taxes

Deferred income taxes are provided to reflect the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company adopted the provisions of ASC Topic 740, Accounting For Uncertainty In Income Taxes-An Interpretation of ASC Topic 740 ("ASC Topic 740"). ASC Topic 740 contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating the Company's tax positions and tax benefits, which may require periodic adjustments. At June 30, 2012, the Company did not record any liabilities for uncertain tax positions.

Share-Based Compensation

The Company measures the cost of services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. Compensation cost is recognized over the vesting or requisite service period. The Black-Scholes option-pricing model is used to estimate the fair value of options or warrants granted.

Basic and Diluted Net Loss Per Share

Basic income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. The weighted average number of shares is calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. Diluted earnings per share reflects the potential dilution that could occur if stock options, warrants, and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.

Diluted loss per share is the same as basic loss per share during periods where net losses are incurred since the inclusion of the potential common stock equivalents would be anti-dilutive as a result of the net loss.

At June 30, 2012, common stock equivalents consisted of 16,000,000 common stock warrants with an exercise price of $0.01, $0.05 and $0.10 per share. The Company’s price at June 30, 2012 was $0.039, so 7,000,000 of the shares at $0.01 were below the exercise amount, and the remaining 9,000,000 at $0.05 and $0.10 exceeded the Company’s quarter-end closing stock price.

Concentration of Credit Risk

All of the Company’s cash and cash equivalents are maintained in regional and national financial institutions. The Company has exposure to credit risk to the extent that its cash and cash equivalents exceed amounts covered by the U.S. federal deposit insurance; however, the Company has not experienced any losses in such accounts. In management’s opinion, the capitalization and operating history of the financial institutions are such that the likelihood of material loss is remote.

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Fair Value of Financial Instruments

The Company's financial instruments consist primarily of cash, accounts payable and accrued expenses, and debt. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.

The Company adopted ASC Topic 820, Fair Value Measurements (“ASC Topic 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition of fair value which focuses on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.

The three-level hierarchy for fair value measurements is defined as follows:

	Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; liabilities in active markets;
	Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability other than quoted prices, either directly or indirectly, including inputs in markets that are not considered to be active; or directly or indirectly including inputs in markets that are not considered to be active;
	Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement

Reclassifications

Certain prior period amounts have been reclassified to conform to current year presentations.

Recent Accounting Pronouncements

No accounting standards or interpretations issued recently are expected to a have a material impact on the Company’s consolidated financial position, operations or cash flows.

NOTE 5 - PROPERTY AND EQUIPMENT

The Company’s property and equipment as of June 30, 2012 and December 31, 2011 are as follows:

	June 30,			December 31,
	2012				2011
Trucks and Autos	$	512,505			$	512,505
Large Equipment		1,299,446				1,052,996
Machinery and Equipment		546,106				535,269
Office Equipment		27,991				27,391
Electrical Equipment		193,518				193,518
Leasehold Improvements		30,915				30,915
Total property and equipment		2,610,481				2,352,594
Accumulated depreciation		(862,184	)			(627,519	)
Total	$	1,748,297			$	1,725,075

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Depreciation expense for the three and six months ended June 30, 2012 was $117,273 and $234,665 respectively; $115,994 and $227,758 of depreciation expense was included in cost of sales in the accompanying consolidated statements of operations for the three and six months ended June 30, 2012, respectively.

NOTE 6 – NOTES PAYABLE

Notes payable are as follows:

		June 30, 2012		December 31, 2011
Note payable from an unrelated third party bearing interest at 8% and due on September 1, 2013. The loan is convertible to Company stock at any time with a conversion price of $0.06.	$	220,000	$	220,000

Note payable from an unrelated third party bearing interest at 8% and due on December 31, 2014. The loan is convertible to 6,500,000 shares of Company stock at any time at the discretion of the lender. The note is secured by otherwise unencumbered equipment owned by the Company with a value of approximately $1,100,000.		550,000		0

Note payable to an unrelated third party, bearing interest at 10%, with principal and interest due on May 15, 2012. The note is secured by certain property and equipment of the Company		25,000		25,000

Note payable to an unrelated third party, bearing interest at 10%, with principal and interest due on February 29, 2012. The note is secured by certain property and equipment of the Company. The note has not been formally renewed, but installment payments have commenced and the note is expected to be retired soon without any penalty.		7,360		25,000

Note payable to an unrelated third party, bearing interest at 12.99%, and due on demand.		4,685		8,685

Note payable to Reunion Bank bearing interest at prime plus 2% per annum (3.25% at June 30, 2012), due and payable on October 28, 2015, with a monthly principal and interest payment of $6,295, secured by the assets of the Company and recorded liens on certain equipment of the Company, guaranteed by the Company’s CEO.		0		260,090

Note payable to Reunion Bank bearing interest at prime plus 2% per annum (3.25% at December 31, 2011), due and payable on February 15, 2016 with a monthly principal and interest payment of $5,920, secured by the assets of the Company and recorded liens on certain equipment of the Company, guaranteed by the Company’s CEO.		0		518,072

Note payable to Reunion Bank bearing interest at prime plus 2% per annum (3.25% at June 30, 2012), due and payable on March 30, 2014 with a monthly principal and interest payment of $8,932, secured by the assets of the Company and recorded liens on certain equipment of the Company, guaranteed by the Company’s CEO.		821,698		0

Line of credit with an unrelated third party bearing interest at prime (3.25% at June 30, 2012) plus 2% per annum, due on demand with a monthly interest payment and secured by certain accounts receivable.		0		47,046

Line of credit with an unrelated third party bearing interest at prime (3.25% at June 30, 2012) plus 2% per annum, due on demand with a monthly interest payment.		0		30,000

Line of credit with an unrelated third party bearing interest at LIBOR plus 3% and due on demand.		13,177		13,177

Note payable to OCE Copier bearing no interest rate and due on April 13, 2016		8,578		9,909

Promissory note with an unrelated third party, bearing no interest per annum, a monthly payment of $2,500 and maturing in June 2012. The Company disputes this note payable as representation of the fitness of the equipment purchased from Vac & Jet were not fully disclosed.		60,000		60,000

Note with an unrelated third party bearing no interest, a monthly payment of $1,500 and maturing in October 2012. The lawsuit was settled on May 7, 2012 and no further payments are required.		33,800		33,800

2010 note originally with an affiliated company bearing interest at 10% per annum and due on demand. Note was assigned to non-affiliate third party in August 2011 pursuant to default terms acceptable and agreed to by the Company.		417,755		417,755

On March 13, 2011, the Company entered into a contract with Dr. Scott Levine, a related party, where Dr. Levine agreed to loan $75,000 in exchange for 1,000,000 restricted shares of common stock and 1,000,000 stock warrants. The relative fair value of the common stock and warrants was $32,704 in total resulting in an initial discount. For the year ended December 31, 2011, $28,616 related to the debt discount was amortized into interest expense. The note was due on July 15, 2011, bore interest at an annualized rate of 18% and was collateralized by 10,000,000 shares of the Company’s common stock. The 10,000,000 shares were issued to Mr. Levine and are considered outstanding. Mr. Levine has verbally agreed to extend the note until the Company secures financing. Mr. Levine exercised the warrants on May 17, 2011 for $50,000 in cash proceeds.		75,000		75,000

Vehicle loan note with Ford Credit bearing interest at 5.5%, secured by a vehicle and due on February 11, 2014.		4,740		8,906

Vehicle loan note with Ford Credit bearing interest at 10.0%, secured by a vehicle and due on April 9, 2014.		22,795		27,503

Equipment loan note with CNH Capital bearing interest at 5.9%, secured by an excavator and due on August 16, 2016.		39,366		42,516

Equipment loan note with Wells Fargo Equipment Finance Inc. bearing interest at 6.95%, secured by Freightliner 4,800 gallon pumping truck and due on March 5, 2017.		146,692		0

Total Notes and Line of Credit Payable		2,450,646		1,822,459
Less: Current Portion		(726,772	)	(1,542,682)
Long-Term Portion	$	1,723,874	$	279,777

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Principal payments for the long-term notes payable for each of the five succeeding years are as follows:

Twelve months ended June 30,	Amount
2013	$	731,228
2014		1,589,920
2015		45,024
2016		45,076
2017		39,396
Total	$	2,450,646

NOTE 7 – COMMITMENT AND CONTINGENCIES

As a result of the business combination with Brownies in 2010 (see Note 10 – Business Combination), the sellers failed to disclose to the Company liabilities which included an outstanding invoice of $21,000 for required cleanup in Orange County, Florida, $18,000 of unpaid personal property taxes from 2008 and 2009, a claim made by Shelly Septic for $57,000, and $99,214 in payroll taxes. The Company settled the $21,000 matter in Orange County. The Company acknowledged that, as a matter of statute, the $18,000 in personal property taxes would attach to the equipment acquired in the Brownies transaction and has made arrangements to pay these unpaid taxes. The Company is in negotiations to settle the matter with Shelley Septic. The Company’s corporate counsel is addressing to determine if the Company is obligated to these debts.

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The Company was a Defendant in litigation with Harvey Blonder, Gary Goldstein, and Robin Bailey v. Freedom Environmental Services, Inc., and Michael Borish, individually. This case was in Circuit Court of the Ninth Judicial Circuit, in and for Orange County, Florida, Case No. 2010-CA-026477-0 related to the acquisition of Brownies Waste Water Solutions in July 17, 2010. The Original Complaint was dismissed on a Motion to Dismiss Failure to State a Claim and the Court allowed the Plaintiffs to file an Amended Complaint. The Amended Complaint was filed on June 3, 2011 which alleges – Declaratory Relief, Fraudulent Inducement to Enter a Contract, Negligent Misrepresentation, Breach of Contract Warranties, Accounting, and Rescission of Purchase Agreement. There are currently issues with that litigation which are being evaluated by counsel for the Company, including the end of that litigation.

On May 2, 2012 Harvey Blonder, Gary Goldstein, and Robyn Bailey filed another law suit now in the United States District Court Middle District of Florida case No. 6:12-cv-665-ORL-22DAB making the same allegations in the prior complaints filed in state court. The Company considered this litigation frivolous and vehemently denies all allegations. The case is pending in District Court and the Company is vigorously litigating this case. The Company has not yet determined the range of any potential loss exposure related to this litigation.

On January 1, 2011, the Company entered into a one-year yellow grease purchase agreement with Delta Integrated Industries LLC (“Delta”). In that agreement the Company agreed to sell fifty thousand gallons of yellow grease per month to Delta. This agreement was voided because Delta submitted a check from an affiliate company for $67,000 that was drawn on an account with insufficient funds. Delta has filed a Complaint related to this voided agreement but has never served the summons on the Company which makes the Complaint invalid and will ultimately be dismissed by the court for lack of service. On May 7, 2012 the court issued a stipulation of dismissal ending the matter.

NOTE 8- EQUITY

Preferred Stock

The Company authorized 75,000,000 shares of preferred stock, at $0.001 par value of which 5,736,333 are Series A Convertible preferred shares issued and outstanding as of June 30, 2012. Each share of the Preferred Stock shall have 300 votes on all matters presented to be voted by the holders of our common stock and is convertible to common stock on a one for one basis as of the origination date on October 31, 2010. From that time forward, as the corporation issues additional shares of common stock the conversion ratio of the preferred stock increases to maintain the shares proportional ownership of the Company. As of June 30, 2012 the conversion rate is one share of preferred stock for 1.5 shares of common stock. For the six months ended June 30, 2012, all shares of preferred stock that have been issued were issued as compensation to the CEO & COO with 0 and 2,559,222 valued at $0 and $17,914, respectively.

Common Stock

As of June 30, 2012 the Company had authorized 200,000,000 shares of common stock, at $0.001 par value and 133,568,434 shares are issued and outstanding.

During the three and six months ended June 30, 2012 the Company issued 0 and 125,000 common shares respectively for $0 and $5,000 of services and expenses rendered by consultants.

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Shares subscribed not issued

During the year ended December 31, 2011, the Company subscribed 1,000,000 shares of common stock for the exercise of warrants. The shares had not been issued as of June 30, 2012. Common subscribed shares consisted of the following:

Common Stock Subscribed, Not Issued

	Exercise of Warrants

December 31, 2011		1,000,000
Shares subscribed		-
Issuance of subscribed shares		-
Balance June 30, 2012		1,000,000

Warrants

The Company values all warrants using the Black-Scholes option-pricing model. Critical assumptions for the Black-Scholes option-pricing model include the market value of the stock price at the time of issuance, the risk-free interest rate corresponding to the term of the warrant, the volatility of the Company’s stock price, dividend yield on the common stock, as well as the exercise price and term of the warrant. The warrants are not subject to any form of vesting schedule and, therefore, are exercisable by the holders anytime at their discretion during the life of the warrant. No discounts were applied to the valuation determined by the Black Scholes option-pricing model.

In March 2011, in connection with the $75,000 Levine note discussed above in Note 6, the Company issued 1,000,000 warrants to purchase common stock of the Company at a $0.05 exercise price which are fully vested, have a three year expected life (expire March 1, 2014) and were valued at $28,991 using the Black-Scholes option-pricing model, which was treated as a discount to the related note. The following inputs and assumptions were used in the option-pricing model:

Expected Dividend yield	None
Volatility		419.40	%
Weighted average risk free interest rate		0.75	%
Weighted average expected life(in years)	3.00

The warrants issued in March 2011 were fully exercised in May 2011 for $50,000 of cash proceeds to the Company.

In December, 2010 the Company issued 5,000,000 warrants. These outstanding warrants have a $0.10 exercise price, are fully vested, have a three year expected life, expire December 13, 2013 and were valued at $95,308 using the Black-Scholes option-pricing model. The following inputs and assumptions were used in the option-pricing model

Expected Dividend yield	None
Volatility		287.81	%
Weighted average risk free interest rate		5.53	%
Weighted average expected life(in years)	3.00

On September 1, 2011 an investor provided a $220,000 convertible note with a conversion price of $0.06 per share, and received 7,000,000 warrants with a strike price of $0.01 per share and an expiration date of 2 years (September 1, 2013) for the original $100,000 loan that originated in December 2010. The lender was also issued 4,000,000 warrants with a strike price of $0.05 and an expiration of 3 years (September 1, 2014). The note carries interest at 8% and is due September 1, 2013.

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Pursuant to ASC 470-20 Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, the Company determined that a beneficial conversion feature is present for the convertible notes issued during the year ended December 31, 2011 using the intrinsic value in the convertible notes adjusted for amounts allocated to the warrant valuation. The intrinsic value of the convertible notes amounted to $164,339 based on the fair market value of common stock on the respective dates of issuance.

Since the combined value of the warrants ($164,939) plus the intrinsic value of the convertible notes ($164,939) exceeds the fair value of the face value of the debt ($220,000), the Company is limited to the amount of the proceeds when recording the beneficial conversion feature as debt discount. Using a pro rata contribution (relative fair value), the Company allocated the proceeds first to the warrant valuation in the amount of approximately $164,939 and the remainder to the beneficial conversion feature in the amount of $55,061. The Company immediately amortized the debt discount of $220,000 for the year ended December 31, 2011 since the debt was convertible upon issuance.

Warrant Amount	7,000,000			4,000,000
Expected Dividend yield	None			None
Volatility		399.84	%	381.24%
Weighted average risk free interest rate		0.54	%	0.61%
Weighted average expected life(in years)	2.00			3.00

The Company has 16,000,000 warrants but no options outstanding as of June 30, 2012.

NOTE 9– SUBSEQUENT EVENTS

In February 2011, the Company entered into a letter of intent with David M. Hickman in Pennsylvania to purchase the equipment, inventory and customer list from a company owned by Mr. Hickman. The Company is in the process of due diligence and has escrowed a non-refundable deposit of $ 176,875 toward the purchase, which is classified in the accompanying balance sheet as a current deposit. Mr. Hickman has granted the Company an extension to complete the due diligence until May 31, 2012 and by mutual verbal consent the deadline will be extended again beyond May 31, 2012 prior to that time. Mr. Hickman provides sanitation services throughout Pennsylvania. Mr. Hickman’s company provides all aspects of commercial and residential services including septic system cleaning, maintenance and installation. We plan to expand that business to the current services lines that we provide in the State of Florida.

* * * * * * * * * * * *

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In this Quarterly Report on Form 10-Q, “Company,” “our company,” “us,” and “our” refer to Freedom Environmental Services, Inc. and its subsidiaries, unless the context requires otherwise.

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

Forward-Looking Statements

Management’s Discussion and Analysis contains various “forward looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding future events or the future financial performance of the Company that involve risks and uncertainties. Certain statements included in this Form 10-Q, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to “anticipates”, “believes”, “plans”, “expects”, “future” and similar statements or expressions, identify forward looking statements. Any forward-looking statements herein are subject to certain risks and uncertainties in the Company’s business, including but not limited to, reliance on key customers and competition in its markets, market demand, delayed payments of accounts receivables, technological developments, maintenance of relationships with key suppliers, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which may be beyond the control of the Company. Management will elect additional changes to revenue recognition to comply with the most conservative SEC recognition on a forward going accrual basis as the model is replicated with other similar markets (i.e. SBDC). The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth therein.

Some of these forward-looking statements include statements of:

·	management's plans, objectives and budgets for its future operations and future economic performance;

·	capital budget and future capital requirements;

·	meeting future capital needs;

·	realization of any deferred tax assets;

·	the level of future expenditures;

·	impact of recent accounting pronouncements;

·	the outcome of regulatory and litigation matters;

·	the assumptions described in this report underlying such forward-looking statements; and

Actual results and developments may materially differ from those expressed in or implied by such statements due to a number of factors, including:

·	those described in the context of such forward-looking statements;

·	future service costs;

·	changes in our incentive plans;

·	the markets of our domestic operations;

·	the impact of competitive products and pricing;

·	the political, social and economic climate in which we conduct operations; and

·	the risk factors described in other documents and reports filed with the Securities and Exchange Commission.

Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.

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In addition, the foregoing factors may affect generally our business, results of operations and financial position. Forward-looking statements speak only as of the date the statement was made. We do not undertake and specifically decline any obligation to update any forward-looking statements

Our Company

Freedom Environmental Services, Inc. provides wastewater management and recycling services to its customers through its different divisions.

Our principal executive offices are located at 11372 United Way, Orlando, Florida, 32824. The main phone number is: 407-841-4321 and the Company’s website is http://brownieswws.com.

On July 16, 2010, the Company acquired the assets and certain liabilities of Brownies Waste Water Solutions, Inc. (“Brownies”). Brownies was originally purchased in a Chapter 7 Bankruptcy proceeding in December of 2008, just 18 months before the Company acquired the assets and certain liabilities of Brownies Waste Water Solutions, Inc. Prior to its Bankruptcy proceeding in December of 2008, the business had been operating by unrelated third parties in the Central Florida market since 1948, providing commercial and residential septic services. These services include drain field installation, maintenance and repair; grease trap cleaning, maintenance, installation and repair; full service commercial and residential plumbing; sewer drain cleaning, backflow testing, repairs and certifications; lift station cleaning, maintenance, repairs, bio-solids transportation and recycling. On July 5, 2010 prior to the acquisition of Brownies, Brownies purchased the equipment of Vac and Jet Services which was a defunct company with two Vactor trucks.

In February 2011, the Company entered into a letter of intent with David M. Hickman in Pennsylvania to purchase the equipment, inventory and customer list from a company owned by Mr. Hickman. The Company is in the process of due diligence and has escrowed a non-refundable deposit of $176,875 toward the purchase, which is classified in the accompanying balance sheet as a current deposit. Mr. Hickman has granted the Company an extension to complete the due diligence until May 31, 2012 and by mutual verbal consent the deadline will be extended again beyond May 31, 2012 prior to that time. Mr. Hickman provides sanitation services throughout Pennsylvania. Mr. Hickman’s company provides all aspects of commercial and residential services including septic system cleaning, maintenance and installation. We plan to expand that business to the current services lines that we provide in the State of Florida.

Corporate History

We were incorporated under the laws of the State of Delaware on October 6, 1978 as United States Aircraft Corp. and we have undergone numerous name changes, the most recent being on June 11, 2008 when we amended our certificate of incorporation in order to change our name from BMXP Holdings, Inc. to Freedom Environmental Services, Inc.

On June 24, 2008 we acquired 100% of the membership interests in Freedom Environmental Services, LLC (“FELC”), a Florida Limited Liability Company, for consideration consisting of 20,704,427 shares of our common stock.

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As a result of this transaction, the former members of FELC held approximately 59% of our voting capital stock immediately after the transaction and the composition of our senior management became the senior management of FELC. For financial accounting purposes, this acquisition was a reverse acquisition of the Issuer by FELC under the purchase method of accounting, and was accounted for as a recapitalization, with FELC as the accounting acquirer.

Principal products or services and their markets

We provide wastewater, storm-water system management, grease and organics collection and disposition, commercial plumbing and water system management to the commercial, industrial, and municipal markets, as well as septic system maintenance and repair to the residential market throughout Central Florida.

Wastewater and storm-water system management includes providing services to the commercial and municipal sector such as the installation and repair of the components of waste collection and disposition, potable water and exterior drainage systems.

Grease and organics collection and disposition include the collection and disposal of grease waste from commercial restaurants and hotels as well as raw sewerage from septic tanks, both residential and commercial.

Commercial plumbing services include pump systems installation, repairs, maintenance and general activities related to the plumbing profession.

New product or service

The Company has been processing grease waste by collecting, transporting and distributing them to dumping sites. As a cost reduction measure Freedom entered into a letter of intent with a company in Pennsylvania. The Pennsylvania company compliments our company as a processing center that will result in reduced cost of processing the Biofuel with third parties.

It’s the Company’s intention to develop and produce fuels and natural bio-organic products (such as fertilizer) derived from waste and byproducts.

Our plans in this area consist of attempting to develop a series of Vertical Organic Collection System platforms within regional and super-regional metropolitan areas by acquiring market leading operators as platforms and utilizing this business model in building regional facilities to produce high grade fuel and bio-organic nutrient products converted from commercial, industrial and residential waste products in the southeast and nationwide (“Biofuel”).

A Vertical Organic Collection System platform would be defined by us as a business enterprise which would control each step in the production of Biofuel.

It is anticipated that this enterprise would:

(a)	Collect raw waste (grease and septage) from customers which would constitute the raw material of Biofuel
(b)	Transport the raw materials to a processing facility controlled by the enterprise where waste convertible into Biofuel (“Feedstock”) would be separated from unusable waste which would be disposed of in an appropriate manner.
(c)	Convert the feedstock into Biofuel

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It is our management’s belief that, by controlling each step of the Biofuel production process, we will be able to compete effectively due to economies of scale.

Competitive business conditions, the issuer’s competitive position in the industry, and methods of competition

The industries in which we compete and intend to compete are highly competitive and, especially in the area of biofuel production, characterized by rapid technological advancement. Many of our competitors have greater resources than we do.

We compete in our current areas of operation by offering what we believe to be superior service at competitive prices. We also intend to be competitive by acquiring operating companies in the wastewater services sector and developing commercial applications to convert the collected waste into fuel and organic nutrients (fertilizer).

Sources and availability of labor raw materials and the names of principal suppliers

Labor required to provide these services are made available either through existing employees or by subcontractors depending on the demands of the project and availability of resources.

The supplies and materials required to conduct our operations are available through a wide variety of sources and are currently obtained through, a wide variety of sources.

Results of Operations for the Three Months and Six Months Ended June 30, 2012

Revenues for the three and six months ended June 30, 2012 were $1,339,486 and $2,508,311 respectively, as compared to $1,566,224 and $2,956,729 for the three and six months ended June 30, 2011. This decrease was primarily attributable to several major projects that occurred in 2011 and similar projects did not reoccur along with dryer weather conditions which reduces the demand for services.

Cost of goods sold for the three and six months ended June 30, 2012 was $1,194,301 and $2,171,227 respectively, as compared to $953,447 and $1,894,468 for the three and six months ended June 30, 2011. This increase was due primarily to increased disposal costs.

General and administrative expense for the three and six months ended June 30, 2012 was $471,948 and $986,952 respectively, as compared to $671,481 and $1,435,156 for the three and six months ended June 30, 2011. The primary reason the expenses decreased was that in 2011 we had a substantial amount of non-cash, non-recurring expenses related to the issuance of common stock for marketing and consulting expense.

Interest expense for the three and six months ended June 30, 2012 was $50,185 and $100,197 respectively, as compared to $75,322 and $107,115 for the three and six months ended June 30, 2011. The decrease in interest expense corresponds to payments of notes the company made in 2012.

Net loss for the three and six months ended June 30, 2012 was $389,049 and $779,193 respectively, as compared to $144,124 and $498,209 for the three months and six months ended June 30, 2011. The primary reason the losses increased was due to lower sales revenues in 2012 compared to 2011.

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Liquidity and Capital Resources

The Company has two material notes, one from an unrelated third party for approximately $418,000 and one from a traditional banking relationship, Reunion Bank for approximately $822,000. The Company is presently not in compliance with the debt coverage ratio loan covenant on the Reunion Bank debt. The Company is presently making timely monthly payments and is current with all payment requirements and Reunion has not demanded that the loan be repaid as a result of non-compliance with the debt covenant.

Our cash (used in) provided by operating activities was ($413,532) and $(130,607) for the six months ended June 30, 2012 and 2011, respectively. The increase is mainly attributable to lower sales revenue.

Cash used in investing activities was $257,887 and $190,056 for the six months ended June 30, 2012 and 2011, respectively. We acquired new equipment for our company in 2012.

Cash provided by financing activities was $645,834 and $224,045 for the six months ended June 30, 2012 and 2011, respectively. During the six months ended June 30, 2012, we received proceeds from notes payables of $1,565,162, repaid note payables and lines of credit in the amount of $907,479.

The Company has a net loss for the six months ended June 30, 2012 of $779,193, an accumulated deficit at June 30, 2012 of $23,109,304, cash flows used in operating activities of $413,532 and needs additional cash flows to maintain its operations.

The Company currently has negative working capital and will need additional funds through equity financing and borrowing. We anticipate that we will need $500,000 over the next 12 months to maintain the operations of the Company.

We plan to attempt to acquire operating companies in the waste water services sector and develop commercial applications to convert our vertically collected waste to energy and organic nutrients (fertilizer) and build and operate a significant waste collection and treatment plant in Central Florida.

We are currently investigating opportunities regarding the acquisition or leasing of companies in the waste water services sector.

In the event that we enter into a binding agreement to either (a) acquire a company or companies in the waste water services sector or (b) lease or acquire companies in the waste water services sector we believe we will be required to undertake significant capital expenditures. Historically, our sources of liquidity have been (a) Revenues from operations (b) Loans from senior officers and (c) Bank loans.

There is a strong possibility that, in attempting to accomplish the above, we may not be able to satisfy our cash requirements over the next twelve months and may be required to raise additional cash from outside sources.

In the event that we are required to raise additional cash from outside source, we may issue equity securities or incur additional debt. There is no assurance that such funding, if required will be available to us or, if available, will be available upon terms favorable to us.

Off-Balance sheet arrangements

We have no off-balance sheet arrangements including arrangements that would affect the liquidity, capital resources, market risk support and credit risk support or other benefits.

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WHERE YOU CAN FIND MORE INFORMATION

You are advised to read this Quarterly Report on Form 10-Q in conjunction with other reports and documents that we file from time to time with the SEC. In particular, please read our Quarterly Reports on Form 10-Q, Annual Report on Form 10-K, and Current Reports on Form 8-K that we file from time to time. You may obtain copies of these reports directly from us or from the SEC at the SEC’s Public Reference Room at 100 F. Street, N.E. Washington, D.C. 20549, andyou may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its website http://www.sec.gov.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not hold any derivative instruments and do not engage in any hedging activities.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures were designed to provide reasonable assurance that the controls and procedures would meet their objectives. As required by SEC Rule 13a-15(b), our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level.

Management’s Annual Report on Internal Control over Financial Reporting

Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining adequate internal control over our financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management has used the framework set forth in the report entitled Internal Control-Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission, known as COSO, to evaluate the effectiveness of our internal control over financial reporting. Based on this assessment, our Chief Executive Officer and Chief Financial Officer have concluded that our internal control over financial reporting was not effective as of June 30, 2012.

An internal control material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements would not be prevented or detected on a timely basis by employees in the normal course of their work. Our management’s assessment is that the Company did not maintain effective internal control over financial reporting as of June 30, 2012

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within the context of the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our internal control over financial reporting as designed, documented and tested, we identified multiple material weaknesses primarily related to maintaining an adequate control environment.

The material weaknesses in our internal controls related to inadequate staffing within our accounting department and upper management, lack of controls regarding the assignment of authority and responsibility, lack of consistent policies and procedures, inadequate monitoring of controls and inadequate disclosure controls.

Management noted that there were no material weaknesses related to the policies and procedures that:

·	Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets;

·	Provide reasonable assurance that the receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

·	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Changes in Internal Controls

There were no changes in our internal control over financial reporting that occurred during the six months of 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitation of Internal Controls

It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our company’s or our company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect except noted below.

In September 2010, the Company became aware that one of the shareholders of Brownies Waste Water Solutions, Inc., Gary Goldstein, prior to the acquisition, allegedly misappropriated $15,000 of the Company’s funds (the “Funds”) by attempting to transfer or pass through funds of an unrelated bankrupt company through the Company’s bank accounts to disguise them as services Brownies was to perform when in fact it was an attempt to disguise

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it as legal services for the shareholder. The Company contacted Bank of America who was the single largest creditor in the unrelated bankrupt company and returned the funds to the bankruptcy court. The Company contacted the Bankruptcy Trustees Office as to the action of the shareholder and they are investigating the shareholder to determine the next course of action. The Company is investigating the accounting records to determine if there are additional improprieties prior to the purchase of Brownies and have reported this to the appropriate authorities.

The Company become aware the sellers of Brownies failed to disclose in the Asset Purchase Agreement additional liabilities of $195,000; which included an outstanding invoice of $21,000 for required cleanup in Orange County, Florida, $18,000 of unpaid personal property taxes, payroll taxes of $99,144 and $57,000 owed to Shelley Septic, Inc. The Company is investigating if there are any additional undisclosed liabilities in the acquisition of Brownies.

On May 2, 2012 Harvey Blonder, Gary Goldstein, and Robyn Bailey filed another law suit now in the United States District Court Middle District of Florida case No. 6:12-cv-665-ORL-22DAB making the same allegations in the prior complaints filed in state court. The Company vehemently denies all allegations and considers this litigation frivolous. This suit has subsequently been dismissed.

ITEM 1A - RISK FACTORS

As a smaller reporting company we are not required to provide a statement of risk factors. However, we believe this information may be valuable to our shareholders for this filing. We reserve the right to not provide risk factors in our future filings. Our primary risk factors and other considerations include:

We will incur increased costs and demands upon management as a result of complying with the laws and regulations that affect public companies, which could materially adversely affect our results of operations, financial condition, business and prospects.

As a public company and particularly after we cease to be an “emerging growth company,” we will incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting and corporate governance requirements. These requirements include compliance with Section 404 and other provisions of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as rules implemented by the SEC.

The increased costs associated with operating as a public company will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business. Additionally, if these requirements divert our management’s attention from other business concerns, they could have a material adverse effect on our results of operations, financial condition, business and prospects.

However, for as long as we remain an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012, or JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including not being required to comply with the auditor attestation requirements of Section 404 of the

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Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.”

If the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30, we would cease to be an “emerging growth company” as of the following June 30, or if we issue more than $1 billion in non-convertible debt in a three-year period, we would cease to be an “emerging growth company” immediately.

We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including not being required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. An “emerging growth company” can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

The Report Of Our Independent Registered Public Accounting Firm Contains Explanatory Language That Substantial Doubt Exists About Our Ability To Continue As A Going Concern

The independent auditor’s report on our financial statements contains explanatory language that substantial doubt exists about our ability to continue as a going concern. We have a net loss for the year ended December 31, 2011 of $1,850,507, an accumulated deficit at December 31, 2011 of $22,330,111, cash flows used in operating activities of $176,759 and need additional cash flows to maintain our operations. We depend on the continued contributions of our executive officers to finance our operations and need to obtain additional funding sources to explore potential strategic relationships and to provide capital and other resources for the further development and marketing of our products and business. If we are unable to obtain sufficient financing in the near term or achieve profitability, then we would, in all likelihood, experience severe liquidity problems and may have to curtail or cease our operations altogether. If we curtail our operations or cease our operations, we may be placed into bankruptcy or undergo liquidation, the result of which will adversely affect the value of our common shares.

Our business strategy, in part, depends upon our ability to complete and manage acquisitions of assets and/or of other companies.

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Our business strategy, in part, is to grow through acquisition of assets and/or other businesses, which depend on our ability to identify, negotiate, complete and integrate suitable acquisitions. (See Item 1 Business.) Even if we complete an acquisition we may experience:

·	Difficulties in integrating any assets and/or acquired companies, personnel and products into our existing business;

·	Delays in realizing the benefits of the acquired company or products;

·	Significant demands on the Company’s management, technical, financial and other resources; diversion of our management’s time and attention to unexpected problems;

·	Higher costs of integration than we anticipated;

·	Difficulties in retaining key employees of the acquired businesses who are necessary to manage these acquisitions; and/or

·	Anticipated benefits of acquisitions may not materialize as planned.

We depend significantly upon the continued involvement of our present management.

The Company’s success depends significantly upon the involvement of our present management, who is in charge of our strategic planning and operations. We may need to attract and retain additional talented individuals in order to carry out our business objectives. The competition for individuals with expertise in this industry could be intense and there are no assurances that these individuals will be available to us.

Our Common Stock Is Subject To Penny Stock Regulation

Our shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act. The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule

3a51-1 provides that any equity security is considered to be penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on the NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the registrant's net tangible assets; or exempted from the definition by the Commission. Since our shares are deemed to be "penny stock", trading in the shares will be subject to additional sales practice requirements on broker/dealers who sell penny stock to persons other than established customers and accredited investors.

Current economic recession and political turmoil could materially adversely affect the Company.

The Company’s future operations and performance depend significantly on worldwide economic and political conditions. Uncertainty about current global economic conditions poses a risk as consumers and businesses have postponed spending in response to tighter credit, negative financial news and/or declines in income or asset values, which could have a material negative effect on the demand for our potential energy resources, of which there are no assurances such exist in economically feasible quantities or qualities, and a resulting drop in the prices of such items, actual demand for energy and natural resources could also differ materially from the Company’s expectations. Other factors that could influence demand include continuing increases in fuel and other energy costs, conditions in the residential real estate and mortgage markets, the financial crisis, labor and healthcare costs, access to credit, consumer confidence, and other macroeconomic factors. These and geopolitical events such as war and terrorist actions could have a material adverse effect on demand for the Company’s products and services and on the Company’s financial condition, operating results, and cash flows.

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Climate change and related regulatory responses may impact our business.

Climate change as a result of emissions of greenhouse gases is a significant topic of discussion and may generate U.S. federal and other regulatory responses in the near future. It is impracticable to predict with any certainty the impact of climate change on our business or the regulatory responses to it, although we recognize that they could be significant. However, it is too soon for us to predict with any certainty the ultimate impact, either directionally or quantitatively, of climate change and related regulatory responses.

To the extent that climate change increases the risk of natural disasters or other disruptive events in the areas in which we operate, we could be harmed. While we maintain business recovery plans that are intended to allow us to recover from natural disasters or other events that can be disruptive to our business, our plans may not fully protect us from all such disasters or events.\

Compliance with changing regulation of corporate governance and public disclosure will result in additional expenses and pose challenges for our management.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated there under, the Sarbanes-Oxley Act and SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the U.S. public markets. Our management team will need to devote significant time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.

If we are unable to hire, retain or motivate qualified personnel, consultants and advisors, we may not be able to grow effectively.

Our performance will be largely dependent on the talents and efforts of highly skilled individuals. Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly qualified personnel for all areas of our organization. Competition for such qualified employees is intense. If we do not succeed in attracting excellent personnel or in retaining or motivating them, we may be unable to grow effectively. In addition, our future success will depend in large part on our ability to retain key consultants and advisors. Our inability to retain their services could negatively affect our business and our ability to execute our business strategy.

Risks Related to our Securities

The market price for our common stock may be volatile, and you may not be able to sell our stock at a favorable price or at all.

Many factors could cause the market price of our common stock to rise and fall, including:

·	actual or anticipated variations in our quarterly results of operations;

·	changes in market valuations of companies in our industry;

·	changes in expectations of future financial performance;

·	fluctuations in stock market prices and volumes;

·	issuances of dilutive common stock or other securities in the future;

·	the addition or departure of key personnel;

announcements by us or our competitors of acquisitions, investments or strategic alliances; and

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It is possible that the proceeds from sales of our common stock may not equal or exceed the prices you paid for the shares after including the costs and fees of making the sales

Substantial sales of our common stock, or the perception that such sales might occur, could depress the market price of our common stock.

We cannot predict whether future issuances of our common stock or resale in the open market will decrease the market price of our common stock. The consequence of any such issuances or resale of our common stock on our market price may be increased as a result of the fact that our common stock is thinly, or infrequently, traded. The exercise of any options, or the vesting of any restricted stock that we may grant to directors, executive officers and other employees in the future, the issuance of common stock in connection with acquisitions and other issuances of our common stock may decrease the market price of our common stock.

Holders of our common stock have a risk of potential dilution if we issue additional shares of common stock in the future.

Although our Board of Directors intends to utilize its reasonable business judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our common stock, the future issuance of additional shares of our common stock would cause immediate, and potentially substantial, dilution to the net tangible book value of those shares of common stock that are issued and outstanding immediately prior to such transaction. Any future decrease in the net tangible book value of our issued and outstanding shares could have a material adverse effect on the market value of our shares.

We do not intend to pay cash dividends to our stockholders, so you will not receive any return on your investment in our Company prior to selling your interest in the Company.

The Company has never paid any cash dividends to our stockholders. We currently intend to retain any future earnings for funding growth and, therefore, do not expect to pay any cash dividends in the foreseeable future. As a result, you will not receive any return on your investment prior to selling your shares in our Company and, for the other reasons discussed in this “Risk Factors” section, you may not receive any return on your investment even when you sell your shares in our Company.

Certain shares of our common stock are restricted from immediate resale. The lapse of those restrictions, coupled with the sale of the related shares in the market, or the market’s expectation of such sales, could result in an immediate and substantial decline in the market price of our common stock.

Most of our shares of common stock are restricted from immediate resale in the public market. The restricted shares are restricted in accordance with Rule 144, which states that if unregistered, restricted securities are to be sold, a minimum of one year must elapse between the later of the date of acquisition of the securities from the issuer or from an affiliate of the issuer, and any resale of those securities in reliance on Rule 144. The Rule 144 restrictive legend remains on the stock until the holder of the stock holds the stock for longer than six months (unless an affiliate) and meets the other requirements of Rule 144 to have the restriction removed. The sale or resale of those shares in the public market, or the market’s expectation of such sales, may result in an immediate and substantial decline in the market price of our shares. Such a decline will adversely affect our investors, and make it more difficult for us to raise additional funds through equity offerings in the future.

Our common stock is subject to restrictions on sales by broker-dealers and penny stock rules, which may be detrimental to investors.

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Our common stock is subject to Rules 15g-1 through 15g-9 under the Exchange Act, which imposes certain sales practice requirements on broker-dealers who sell our common stock to persons other than established customers and “accredited investors” (as defined in Rule 501(a) of the Securities Act). For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to the sale. This rule adversely affects the ability of broker-dealers to sell our common stock and purchasers of our common stock to sell their shares of our common stock.

Additionally, our common stock is subject to SEC regulations applicable to “penny stocks.” Penny stocks include any non-Nasdaq equity security that has a market price of less than $5.00 per share, subject to certain exceptions. The regulations require that prior to any non-exempt buy/sell transaction in a penny stock; a disclosure schedule proscribed by the SEC relating to the penny stock market must be delivered by a broker-dealer to the purchaser of such penny stock. This disclosure must include the amount of commissions payable to both the broker-dealer and the registered representative and current price quotations for our common stock. The regulations also require that monthly statements be sent to holders of a penny stock that disclose recent price information for the penny stock and information of the limited market for penny stocks. These requirements adversely affect the market liquidity of our common stock.

Anti-Takeover, Limited Liability and Indemnification Provisions

Certificate of Incorporation and By-laws.

Under our certificate of incorporation, our Board of Directors may issue additional shares of common or preferred stock. Any additional issuance of common or preferred stock could have the effect of impeding or discouraging the acquisition of control of us by means of a merger, tender offer, proxy contest or otherwise, including a transaction in which our stockholders would receive a premium over the market price for their shares, and thereby protects the continuity of our management. Specifically, if in the due exercise of its fiduciary obligations, the Board of Directors were to determine that a takeover proposal was not in our best interest, shares could be issued by our Board of Directors without stockholder approval in one or more transactions that might prevent or render more difficult or costly the completion of the takeover by:

·	diluting the voting or other rights of the proposed acquirer or insurgent stockholder group,

·	putting a substantial voting bloc in institutional or other hands that might undertake to support the incumbent Board of Directors, or

·	effecting an acquisition that might complicate or preclude the takeover.

Our certificate of incorporation also allows our Board of Directors to fix the number of directors in the bylaws. Cumulative voting in the election of directors is specifically denied in our certificate of incorporation. The effect of these provisions may be to delay or prevent a tender offer or takeover attempt that a stockholder may determine to be in his or its best interest, including attempts that might result in a premium over the market price for the shares held by the stockholders

Delaware Anti- Takeover Law.

We are subject to the provisions of Section 203 of the Delaware General Corporation Law concerning corporate takeovers. This section prevents many Delaware corporations from engaging in a business combination with any interested stockholder, under specified circumstances. For these purposes, a business combination includes a merger or sale of more than 10% of our assets, and an interested stockholder includes a stockholder who owns 15% or more of our outstanding voting stock, as well as affiliates and associates of these persons. Under these provisions, this type of business combination is prohibited for three years following the date that the stockholder became an interested stockholder unless:

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·	the transaction in which the stockholder became an interested stockholder is approved by the Board of Directors prior to the date the interested stockholder attained that status;

on consummation of the transaction that resulted in the stockholders becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding those shares owned by persons who are directors and also officers; or

·	on or subsequent to that date, the business combination is approved by the Board of Directors and authorized at an annual or special meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder.

This statute could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire us.

Limited Liability and Indemnification.

Our certificate of incorporation eliminates the personal liability of our directors for monetary damages arising from a breach of their fiduciary duty as directors to the fullest extent permitted by Delaware law. This limitation does not affect the availability of equitable remedies, such as injunctive relief or rescission. Our certificate of incorporation requires us to indemnify our directors and officers to the fullest extent permitted by Delaware law, including in circumstances in which indemnification is otherwise discretionary under Delaware law.

Under Delaware law, we may indemnify our directors or officers or other persons who were, are or are threatened to be made a named defendant or respondent in a proceeding because the person is or was our director, officer, employee or agent, if we determine that the person:

·	conducted himself or herself in good faith, reasonably believed, in the case of conduct in his or her official capacity as our director or officer, that his or her conduct was in our best interests, and, in all other cases, that his or her conduct was at least not opposed to our best interests; and

·	in the case of any criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful.

These persons may be indemnified against expenses, including attorneys fees, judgments, fines, including excise taxes, and amounts paid in settlement, actually and reasonably incurred, by the person in connection with the proceeding. If the person is found liable to the corporation, no indemnification will be made unless the court in which the action was brought determines that the person is fairly and reasonably entitled to indemnity in an amount that the court will establish. Insofar as indemnification for liabilities under the Securities Act may be permitted to directors, officers or persons controlling us under the above provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable

If we experience delays and/or defaults in customer payments, we could be unable to recover all expenditures.

Because of the nature of our contracts, at times we commit resources to projects prior to receiving payments from the customer in amounts sufficient to cover expenditures on projects as they are incurred. Delays in customer payments may require us to make a working capital investment. If a customer defaults in making their payments on a project in which we have devoted resources, it could have a material negative effect on our results of operations.

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Our recent and future acquisitions may not be successful.

We expect to continue pursuing selective acquisitions of businesses. We cannot assure you that we will be able to locate acquisitions or that we will be able to consummate transactions on terms and conditions acceptable to us, or that acquired businesses will be profitable. Acquisitions may expose us to additional business risks different than those we have traditionally experienced. We also may encounter difficulties integrating acquired businesses and successfully managing the growth we expect to experience from these acquisitions.

We may choose to finance future acquisitions with debt, equity, cash or a combination of the three. We can give no assurances that any future acquisitions will not dilute earnings or disrupt the payment of a stockholder dividend. To the extent we succeed in making acquisitions, a number of risks will result, including:

•	The possible assumption of material liabilities (including for environmental-related costs);

•	Failure of due diligence to uncover situations that could result in legal exposure or to quantify the true liability exposure from known risks;

•	The diversion of management's attention from the management of daily operations to the integration of operations;

•	Difficulties in the assimilation and retention of employees and difficulties in the assimilation of different cultures and practices, as well as in the assimilation of broad and geographically dispersed personnel and operations, as well as the retention of employees generally;

•	The risk of additional financial and accounting challenges and complexities in areas such as tax planning, treasury management, financial reporting and internal controls; and

•	We may not be able to realize the cost savings or other financial benefits we anticipated prior to the acquisition.

The failure to successfully integrate acquisitions could have an adverse effect on our business, financial condition and results of operations.

If we do not effectively manage our growth, our existing infrastructure may become strained, and we may be unable to increase revenue growth.

Our past growth that we have experienced, and in the future may experience, may provide challenges to our organization, requiring us to expand our personnel and our operations. Future growth may strain our infrastructure, operations and other managerial and operating resources. If our business resources become strained, our earnings may be adversely affected and we may be unable to increase revenue growth. Further, we may undertake contractual commitments that exceed our labor resources, which could also adversely affect our earnings and our ability to increase revenue growth.

SHOULD ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR PLANNED

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS SECURITIES

The Company issued 11,073,817 shares of common stock to its debt holders for the conversion of their debt and accrued interest, and issued 5,900,000 shares of common stock to consultants. The Company issued 600,000 common shares related to the acquisition of its assets (See Note 9 to the Financial Statements). The offer and sale of such shares of our common stock were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Rule 506 promulgated under the Securities Act of 1933 and in Section 4(2) of the Securities Act of 1933. A legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequent registered under the Securities Act of 1933 or transferred in a transaction exempt from registration under the Securities Act of 1933.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There were no defaults upon senior securities during the period ended June 30, 2012.

ITEM 4. REMOVED AND RESERVED

ITEM 5. OTHER INFORMATION

There is no information with respect to which information is not otherwise called for by this form.

ITEM 6. EXHIBITS

Exhibits filed herein for June 30, 2012

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

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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.

Registrant Date: September 13, 2012		Freedom Environmental Services, Inc. By: /s/ Michael Borish
		Michael Borish
		Chief Executive Officer (Principal Executive Officer)

Registrant Date: September 13, 2012		Freedom Environmental Services, Inc. By: /s/ Michael Borish
		Michael Borish
		Chief Financial Officer (Principal Financial Officer)

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	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Equity: Warrant option pricing model previous year (Details) (USD $)	1 Months Ended		3 Months Ended
	Mar. 31, 2011	Dec. 31, 2010	Jun. 30, 2012
Warrants and Rights Outstanding			$ 4,000,000
Investment Warrants, Exercise Price			$ 0.05
Investment Warrants Expiration Date			Sep. 01, 2014
Fair Value Assumptions, Expected Volatility Rate	419.40%	287.81%
Fair Value Assumptions, Risk Free Interest Rate		5.53%
Fair Value Assumptions, Expected Term	3 years	3 years
Warrant Issued In December, 2011
Warrants and Rights Outstanding			5,000,000
Investment Warrants, Exercise Price			$ 0.10
Investment Warrants Expiration Date			Dec. 13, 2013
Stock and Warrants Issued During Period, Value, Preferred Stock and Warrants			$ 95,308

Commitment and Contingencies (Details) (USD $)	3 Months Ended
Commitment and Contingencies (Details) (USD $)	Jun. 30, 2012
Business Acquisition, Cost of Acquired Entity, Liabilities Incurred	$ 21,000
Business Acuisition Undisclosed Unpaid Personal Property Taxes	18,000
Business Acuisition Undisclosed Claim Made By Shelly Septic	57,000
Business Acuisition Undisclosed Payroll Taxes	$ 99,214
Business Acquisition, Preacquisition Contingency, Description	The Company settled the $21,000 matter in Orange County. The Company acknowledged that, as a matter of statute, the $18,000 in personal property taxes would attach to the equipment acquired in the Brownies transaction and has made arrangements to pay these unpaid taxes. The Company is in negotiations to settle the matter with Shelley Septic. The Company’s corporate counsel is addressing to determine if the Company is obligated to these debts.
Repurchase Agreements, Collateral, Policy	On January 1, 2011, the Company entered into a one-year yellow grease purchase agreement with Delta Integrated Industries LLC (“Delta”). In that agreement the Company agreed to sell fifty thousand gallons of yellow grease per month to Delta. This agreement was voided because Delta submitted a check from an affiliate company for $67,000 that was drawn on an account with insufficient funds. Delta has filed a Complaint related to this voided agreement but has never served the summons on the Company which makes the Complaint invalid and will ultimately be dismissed by the court for lack of service. On May 7, 2012 the court issued a stipulation of dismissal ending the matter.

Notes Payable: Principal Payments (Details) (USD $)	3 Months Ended
Notes Payable: Principal Payments (Details) (USD $)	Jun. 30, 2012	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2013
Debt Instrument, Annual Principal Payment		$ 39,396	$ 45,076	$ 45,024	$ 1,589,920	$ 731,228
Total Principal Payments	$ 2,450,646

Equity (Details) (USD $)	3 Months Ended	6 Months Ended	12 Months Ended
Equity (Details) (USD $)	Jun. 30, 2012	Jun. 30, 2012	Dec. 31, 2011	Mar. 31, 2011
Preferred Stock, shares authorized	75,000,000	75,000,000	75,000,000
Preferred Stock, par or stated value	$ 0.001	$ 0.001	$ 0.001
Preferred Stock, Shares Outstanding	5,736,333	5,736,333
Preferred Stock, Voting Rights	Each share of the Preferred Stock shall have 300 votes on all matters presented
Convertible Preferred Stock, Terms of Conversion	As of June 30, 2012 the conversion rate is one share of preferred stock for 1.5 shares of common stock
Preferred Stock, Shares Issued	0	0		2,559,222
Preferred Stock, Additional Series, Value	$ 0	$ 0
Preferred stock, $0.001 par value, 75,000,000 shares authorized: Series A, Convertible - 5,736,333 issued and outstanding as of June 30, 2012 and December 31, 2011	5,736	5,736	5,736	17,914
Common Stock, shares authorized	200,000,000	200,000,000	200,000,000
Common Stock, par or stated value	$ 0.001	$ 0.001	$ 0.001
Common Stock, shares issued	133,568,434	133,568,434	133,443,434
Common Stock, shares outstanding	133,568,434	133,568,434	133,443,434
Preferred stock issued for accrued compensation payable	0	125,000
Professional Fees	0	5,000
Warrants and Rights Outstanding	4,000,000	4,000,000
Investment Warrants, Exercise Price	$ 0.05
Investment Warrants Expiration Date	Sep. 01, 2014
Convertible notes adjusted for amounts allocated to warrant valuation			164,339
Debt Instrument, Convertible, Beneficial Conversion Feature	55,061
Note Payable From An Unrelated Third Party
Warrants and Rights Outstanding	7,000,000	7,000,000
Investment Warrants, Exercise Price	$ 0.01
Investment Warrants Expiration Date	Sep. 01, 2013
Debt Conversion, Original Debt, Amount	$ 100,000

Property and Equipment: Property, Plant and Equipment (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Public Utilities, Property, Plant and Equipment, Vehicles	$ 512,505	$ 512,505
Public Utilities, Property, Plant and Equipment, Other Property, Plant and Equipment	1,299,446	1,052,996
Machinery and Equipment, Gross	546,106	535,269
Furniture and Fixtures, Gross	27,991	27,391
Property, Plant and Equipment, Other, Gross	193,518	193,518
Leasehold Improvements, Gross	30,915	30,915
Property, Plant, and Equipment, Owned, Gross	2,610,481	2,352,594
Property and Equipment, depreciation	(862,184)	(627,519)
Total property and equipment	$ 1,748,297	$ 1,725,075

Equity: Warrant option pricing model table (Details)	1 Months Ended
Equity: Warrant option pricing model table (Details)	Mar. 31, 2011	Dec. 31, 2010
Fair Value Assumptions, Expected Volatility Rate	419.40%	287.81%
Fair Value Assumptions, Expected Dividend Rate	0.75%
Fair Value Assumptions, Expected Term	3 years	3 years

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Jun. 30, 2012	Dec. 31, 2011
CURRENT ASSETS
Cash	$ 48,079	$ 73,664
Accounts receivable - net of allowance of $36,550 and $45,030	242,822	238,460
Prepaid Expenses	22,892	6,247
Deposits	176,875	176,875
Total current assets	490,668	495,246
PROPERTY AND EQUIPMENT
Property and equipment, net of accumulated depreciation of $862,184 and $627,519	1,748,297	1,725,075
Total property and equipment	1,748,297	1,725,075
OTHER ASSETS
Intangible asset (client list) , net of accumulated amortization of $80,000 and $60,000	120,000	140,000
Loan costs, net of accumulated amortization of $5,418 and $1,420	2,326	6,324
Total other assets	122,326	146,324
TOTAL ASSETS	2,361,291	2,366,645
CURRENT LIABILITIES
Bank overdraft	24	11,873
Accounts payable	308,146	343,842
Accrued expenses	221,595	124,409
Accrued interest (related parties $16,566 & $33,254)	102,458	47,548
Customer Deposits	36,100
Lines of credit	13,177	90,223
Notes payable - short term	548,600	930,646
Notes payable - current portion of long-term debt	89,995	29,057
Notes payable - related parties	75,000	492,755
Total current liabilities	1,395,095	2,070,353
LONG TERM LIABILITIES
Total long term liabilities	1,723,874	279,777
TOTAL LIABILITIES	3,118,969	2,350,130
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock subscribed, 1,000,000 and 1,000,000 shares as of June 30, 2012 and December 2011, respectively	50,000	50,000
Preferred stock, $0.001 par value, 75,000,000 shares authorized: Series A, Convertible - 5,736,333 issued and outstanding as of June 30, 2012 and December 31, 2011	5,736	5,736
Common stock, $0.001 par value, 200,000,000 shares authorized:133,568,434 and 133,443,434 issued and outsanding as of June 30, 2012 and December 31, 2011, respectively	133,568	133,443
Additional paid-in capital	22,162,322	22,157,447
Accumulated deficit	(23,109,304)	(22,330,111)
Total stockholders' equity	(757,678)	16,515
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 2,361,291	$ 2,366,645

Summary of Significant Accounting Policies: Basic and Diluted Net Loss Per Share (Details) (USD $)	Sep. 11, 2012	Jun. 30, 2012 Common Stock Equivalents Below Exercise Amount	Jun. 30, 2012 Common Stock Equivalents Equal to Exercise Amount	Jun. 30, 2012 Minimum	Jun. 30, 2012 Maximum
Entity Common Stock, Shares Outstanding	151,368,434
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Exercise Price		$ 0.01	$ 0.05	$ 0.01	$ 0.10
Share Based Compensation Arrangement By Share Based Payment Award Fair Value Assumptions Exercise Price			$ 0.10

Document and Entity Information	3 Months Ended
Document and Entity Information	Jun. 30, 2012	Sep. 11, 2012
Document and Entity Information:
Entity Registrant Name	Freedom Environmental Services, Inc.
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Entity Central Index Key	0001443818
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		151,368,434
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS {Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Revenues	$ 1,339,486	$ 1,566,224	$ 2,508,311	$ 2,956,729
Total	1,339,486	1,566,224	2,508,311	2,956,729
COST OF SALES	1,194,301	953,447	2,171,227	1,894,468
GROSS PROFITS	145,185	612,777	337,084	1,062,261
OPERATING EXPENSES
General and administrative	471,948	671,481	986,952	1,435,156
Depreciation and amortization expense	11,936	10,097	27,444	20,194
Total operating expenses	483,884	681,578	1,014,396	1,455,350
OPERATING LOSS	(338,699)	(68,801)	(677,312)	(393,089)
OTHER INCOME (EXPENSES)
Other income	38		59
Interest income	48		202
Interest expense	(50,185)	(75,322)	(100,197)	(107,115)
Gain (loss) on disposal of assets				1,995
Fines and penalties	(251)		(1,945)
Total other expenses	(50,350)	(75,322)	(101,881)	(105,120)
NET LOSS	$ (389,049)	$ (144,123)	$ (779,193)	$ (498,209)
NET LOSS PER SHARE:
Basic and diluted	$ 0.00	$ 0.00	$ (0.01)	$ 0.00
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted	133,526,767	114,424,927	133,526,767	111,858,189

Property and Equipment (Details) (USD $)	3 Months Ended	6 Months Ended
Property and Equipment (Details) (USD $)	Jun. 30, 2012	Jun. 30, 2012
Accumulated Depreciation, Depletion and Amortization Expense, Property, Plant and Equipment, Current Charge	$ 117,273	$ 234,665
Cost of Goods and Services Sold, Depreciation	$ 115,994	$ 227,758

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (779,193)	$ (498,209)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt expense	9,316	28,672
Depreciation	234,665	253,306
Amortization	26,862	28,616
Loss (gain) on disposal of assets		(1,995)
Common stock issued for services	5,000	99,350
Changes in operating assets and liabilities:
Accounts receivable	(13,678)	(139,996)
Prepaid expenses and other assets	(16,645)	5,230
Inventory		7,799
Accounts payable	(68,055)	(104,607)
Accrued expenses	97,186	151,690
Accrued interest - related parties	54,910	(3,263)
Customer deposits	36,100
Deferred Liabilitites		42,800
Net cash used in operating activities	(413,532)	(130,607)
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposit for business acquisition		(175,000)
Purchase of equipment	(257,887)	(41,701)
Proceeds from sale of property plant and equipment		26,645
Net cash used in investing activities	(257,887)	(190,056)
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft	(11,849)	4,786
Proceeds from exercise of warrants		50,000
Proceeds from convertible notes payable	550,000
Proceeds from note payable and line of credit	1,015,162	648,107
Proceeds from note payable - related parties		68,700
Repayment of line of credit	(77,046)
Repayment of note payable	(816,933)	(533,248)
Repayment of note payable - related parties	(13,500)	(14,300)
Net cash provided by financing activities	645,834	224,045
NET INCREASE (DECREASE) IN CASH	(25,585)	(96,618)
CASH, BEGINNING OF PERIOD	73,664	175,134
CASH, END OF PERIOD	48,079	78,516
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid	41,827	46,667
NONCASH INVESTING AND FINANCING TRANSACTIONS
Issuance of common stock for the conversion of debt		86,000
Common stock issued for payables	5,000	32,704
Preferred stock issued for accrued compensation payable		17,915
Common stock issued to settle accrued compensation		120,615
Common stock issued for acquisition of equipment		$ 15,240

Notes Payable: Notes Payable (Details) (USD $)	3 Months Ended
Notes Payable: Notes Payable (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Note Payable From An Unrelated Third Party
Debt Instrument, Interest Rate, Stated Percentage	8.00%
Debt Instrument, Maturity Date	Sep. 01, 2013
Debt Instrument, Convertible, Conversion Price	$ 0.06
Convertible notes payable	$ 220,000	$ 220,000
Note Payable From An Unrelated Third Party Two
Debt Instrument, Interest Rate, Stated Percentage	8.00%
Debt Instrument, Maturity Date	Dec. 31, 2014
Convertible notes payable	550,000	0
Debt Conversion, Converted Instrument, Shares Issued	6,500,000
Debt Instrument, Collateral	The note is secured by otherwise unencumbered equipment owned by the Company with a value of approximately $1,100,000
Note Payable To An Unrelated Third Party
Debt Instrument, Interest Rate, Stated Percentage	10.00%
Debt Instrument, Maturity Date	May 15, 2012
Convertible notes payable	25,000	25,000
Debt Instrument, Collateral	The note is secured by certain property and equipment of the Company
Note Payable To An Unrelated Third Party Two
Debt Instrument, Interest Rate, Stated Percentage	10.00%
Debt Instrument, Maturity Date	Feb. 29, 2012
Convertible notes payable	7,360	25,000
Debt Instrument, Collateral	The note is secured by certain property and equipment of the Company
Note Payable To An Unrelated Third Party Three
Debt Instrument, Interest Rate, Stated Percentage	12.99%
Convertible notes payable	4,685	8,685
Debt Instrument, Maturity Date, Description	due on demand
Note Payable To Reunion Bank
Debt Instrument, Interest Rate, Stated Percentage	3.25%
Debt Instrument, Maturity Date	Oct. 28, 2015
Convertible notes payable	0	260,090
Debt Instrument, Collateral	secured by the assets of the Company and recorded liens on certain equipment of the Company, guaranteed by the Company’s CEO
Debt Instrument, Periodic Payment	6,295
Note Payable To Reunion Bank Two
Debt Instrument, Interest Rate, Stated Percentage	3.25%
Debt Instrument, Maturity Date	Feb. 15, 2016
Convertible notes payable	0	518,072
Debt Instrument, Collateral	secured by the assets of the Company and recorded liens on certain equipment of the Company, guaranteed by the Company’s CEO
Debt Instrument, Periodic Payment	5,920
Note Payable To Reunion Bank Three
Debt Instrument, Interest Rate, Stated Percentage	3.25%
Debt Instrument, Maturity Date	Mar. 30, 2014
Convertible notes payable	821,698	0
Debt Instrument, Collateral	secured by the assets of the Company and recorded liens on certain equipment of the Company, guaranteed by the Company’s CEO
Debt Instrument, Periodic Payment	8,932
Line of Credit With An Unrelated Third Party
Debt Instrument, Interest Rate, Stated Percentage	3.25%
Convertible notes payable	0	47,046
Debt Instrument, Collateral	secured by certain accounts receivable
Debt Instrument, Maturity Date, Description	due on demand
Line of Credit With An Unrelated Third Party Two
Debt Instrument, Interest Rate, Stated Percentage	3.25%
Convertible notes payable	0	30,000
Debt Instrument, Maturity Date, Description	due on demand
Line of Credit With An Unrelated Third Party Three
Convertible notes payable	13,177	13,177
Debt Instrument, Maturity Date, Description	due on demand
Debt Instrument, Interest Rate Terms	LIBOR plus 3%
Note Payable to OCE Copier
Debt Instrument, Maturity Date	Apr. 13, 2016
Convertible notes payable	8,578	9,909
Debt Instrument, Interest Rate Terms	no interest rate
Promissory Note With An Unrelated Third Party
Debt Instrument, Maturity Date	Jun. 01, 2012
Convertible notes payable	60,000	60,000
Debt Instrument, Periodic Payment	2,500
Debt Instrument, Interest Rate Terms	no interest per annum
Debt Instrument, Description	The Company disputes this note payable as representation of the fitness of the equipment purchased from Vac & Jet were not fully disclosed.
Note With An Unrelated Third Party
Debt Instrument, Maturity Date	Oct. 01, 2012
Convertible notes payable	33,800	33,800
Debt Instrument, Periodic Payment	1,500
Debt Instrument, Interest Rate Terms	bearing no interest
Debt Instrument, Description	The lawsuit was settled on May 7, 2012 and no further payments are required
Note With An Affiliated Company
Debt Instrument, Interest Rate, Stated Percentage	10.00%
Convertible notes payable	417,755	417,755
Debt Instrument, Maturity Date, Description	due on demand
Debt Instrument, Description	Note was assigned to non-affiliate third party in August 2011 to default terms acceptable and agreed by the company
Dr. Levine Loan
Debt Instrument, Maturity Date	Jul. 15, 2011
Convertible notes payable	75,000	75,000
Debt Conversion, Converted Instrument, Shares Issued	1,000,000
Debt Instrument, Collateral	collateralized by 10,000,000 shares of the Company’s common stock
Debt Instrument, Issuance Date	Mar. 13, 2011
Debt Instrument, Face Amount	75,000
Debt Conversion, Converted Instrument, Warrants or Options Issued	1,000,000
Debt Instrument, Fair Value Disclosure	32,704
Amortization of Debt Discount (Premium)	28,616
Debt Instrument, Interest Rate, Effective Percentage	18.00%
Debt Instrument, Covenant Description	Mr. Levine has verbally agreed to extend the note until the Company secures financing
Debt Conversion, Converted Instrument, Amount	50,000
Ford Credit Vehicle Loan
Debt Instrument, Interest Rate, Stated Percentage	5.50%
Convertible notes payable	4,740	8,906
Ford Credit Vehicle Loan Two
Convertible notes payable	22,795	27,503
CNH Capital Equipment Loan
Convertible notes payable	39,366	42,516
Wells Fargo Equipment Finance Inc. Loan
Convertible notes payable	146,692	0
Total Notes Payable
Total Notes and Line of Credit Payable	2,450,646	1,822,459
Less Current Portion	(726,772)	(1,542,682)
Long-Term Portion	$ 1,723,874	$ 279,777

Going Concern Issues (Details) (USD $)	6 Months Ended
Going Concern Issues (Details) (USD $)	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Net loss	$ 779,193	$ 498,209
Accumulated deficit	23,109,304		22,330,111
Net cash used in operating activities	$ 413,532	$ 130,607