The Law Office of Conrad C. Lysiak, P.S., 601 West First Avenue, Suite 903, Spokane, Washington 99201, telephone (509) 624-1475 has opined on the legality of the shares being offered in this prospectus.
Our fiscal year end is December 31. We will provide audited financial statements to our stockholders on an annual basis; the statements will be audited by a firm of Certified Public Accountants.
NOTES TO FINANCIAL STATEMENTS
September 30, 2016
Unaudited
Note 1 - Summary of Significant Accounting Policies
General Organization and Business
The GNS Group, Inc. ("GNS" or the "Company") is a Washington Corporation. The Company was incorporated under the laws of the State of Washington on July 6, 2006. The Company engages in the selling of quality products that cater to the hospitality industry, such as conference and banquet room furniture. GNS also targets patio and pool furniture markets. The products of the GNS Group are manufactured in Dubai, UAE.
Basis of presentation
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") and reflect all adjustments, consisting of normal recurring adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company as of and for the 3 and 9 months period ending September 30, 2016 and year ended December 31, 2015.
On October 25, 2015, we issued 4:1 stock dividend, shareholders received 3 additional shares for each share held. These stock dividend shares were paid on January 22, 2016. Therefore, some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income or stockholder's equity.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
The Company maintains a cash balance in a non-interest-bearing account that currently does not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of September 30, 2016 and December 31, 2015.
Accounts receivable
Trade receivables are carried at the original invoice amount and no allowance for uncollectible accounts has been deemed necessary. Receivables past due for more than 120 days are considered delinquent. Management determines uncollectible accounts by regularly evaluating individual customer receivables and considering a customer's financial condition, credit history, and current economic conditions and by using historical experience applied to an aging of accounts. The balance over 90 days at September 30, 2016 and December 31, 2015 was $0, respectively.
Revenue Recognition
Revenue from the sale of goods is recognized when the following conditions are satisfied:
·
The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
F-4
THE GNS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2016
Unaudited
·
The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
·
The amount of revenue can be measured reliably;
·
It is probable that the economic benefits associated with the transaction will flow to the entity; and
·
The costs incurred or to be incurred in respect of the transaction can be measured reliably.
Fair value of financial instruments and derivative financial instruments
The Company's financial instruments include cash, accounts receivable, accounts payable, and notes payable. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at year ended December 31, 2015 and quarter ended September 30, 2016. The Company did not engage in any transaction involving derivative instruments.
Federal income taxes
The Company accounts for its income taxes in accordance with Income Taxes Topic of the FASB ASC 740, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit, carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.
Net Loss Per Share of Common Stock
Net loss per share is provided in accordance with FASB ASC 260-10, "Earnings per Share". Basic net loss per common share ("EPS") is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued, unless doing so is anti-dilutive. No dilutive equivalents were outstanding as of September 30, 2016 and December 31, 2015.
Advertising:
The Company expenses all costs of advertising as incurred. The advertising costs included in general and administrative expenses for the quarters ended September 30, 2016 and September 30, 2015 were $1,101 and $0, respectively.
Deposits
During the normal course of business, the Company will require deposits on projects. As of September 30, 2016 and December 31, 2015, the Company had deposits of $20,270 and $20,270, respectively. When a sale is delivered, these amounts are applied against their current accounts receivable.
Recently Issued Accounting Pronouncements
On January 5, 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this update improve the guidance to classify entity presentation, disclosure of financial instruments, recognition and measurements. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The company does not believe the impact of its pending adoption to this ASU on the Company's consolidated financial statements will be material.
F-5
THE GNS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2016
Unaudited
Stock Based Compensation
The Company recognizes stock-based compensation in accordance with ASC Topic 718 "Stock Compensation", which required the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock option purchases related to an Employee Stock Purchase Plan based on the estimated fair values.
For non-employee stock-based compensation, we have adopted ASC Topic 505 "Equity-Based Payments to Non-Employees", which requires stock-based compensation related to non-employee to be accounted for based on the fair market value of the related stock or options or fair value of the services on the grant date, whichever is more readily determinable in accordance with ASC Topic 718.
Note 2 - Uncertainty, going concern:
The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs to allow it to continue as a going concern. As of September 30, 2016, the Company had an accumulated deficit of $2,863,306. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. The Company is contemplating conducting an offering of its debt or equity securities to obtain additional operating capital. The Company is dependent upon its ability, and will continue to attempt, to secure equity and/or debt financing. There are no assurances that the Company will be successful and without sufficient financing it would be unlikely for the Company to continue as a going concern.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
Note 3 - Related Party Transactions
The Company has multiple related party transactions. These related party transactions include accrued rent, accrued compensation and officer and shareholder payable. These balances were provided for working capital purposes, and is unsecured, non-interest bearing, and have no specific terms of prepayment.
The balance of these related party transactions for the quarter ended September 30, 2015 was $1,337,962.
The balance of these related party transactions for the year ended December 31, 2015 was $1,411,541.
The balance of these related party transactions for the quarter ended March 31, 2016 was $1,485,154.
The balance of these related party transactions for the quarter ended June 30, 2016 was $1,552,551.
The balance of these related party transactions for the quarter ended September 30, 2016 was $1,624,392.
F-6
THE GNS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2016
Unaudited
As of September 30, 2016, the officer and loan payable relating to Charles Carafoli is now being reflected in Related Party Payable – Other and amounts to $68,458.
As of September 30, 2016, the Company had wage advances, a related party transaction, in the amount of $7,064. This amount was adjusted to Officer and Shareholder Payable.
GNS Family LLC and Seen On Screen TV Inc., are controlled by the same management, therefore, they are the Related Party. The outstanding balance of these Related Party amounts to $3,000 for GNS Family LLC and $9,054 for Seen On Screen TV Inc., as of September 30, 2016.
Note 4 – Cumulative sale of Common Stock
At inception the Company issued 44,660,000 shares of no par value common stock for a total of $274,622. The average price per share was $0.02.
Since December 31, 2008 through December 31, 2011, the Company has issued an additional 1,888,000 shares for $73,104. The average price per share is $0.15 for additional shares issued.
For the year ended December 31, 2012, the Company has issued an additional 11,373,332 shares for $112,800. The average price per share is $0.04 for additional shares issued.
For the year ended December 31, 2013, the Company has issued an additional 5,648,000 shares for $69,400. The average price per share is $0.05 for additional shares issued.
On January 10, 2014, the Company issued 6,336,000 shares of stock for $79,200 cash.
During the fiscal quarter ended March 31, 2014, the Company issued 14,389,176 shares to reduce related party loans by $164,865. This was a non-cash transaction.
During the fiscal quarter ended March 31, 2014, the Company also issued 38,800,000 shares to key individuals as stock based compensation. The Company recorded an expense of $291,000.
The total number of shares outstanding at December 31, 2014 was 123,094,508.
The Company did not issue any shares during the quarter ending March 31, 2015 and June 30, 2015.
The total number of shares outstanding at December 31, 2015 was 129,216,956.
The Company did not issue any shares during the quarter ending September 30, 2016.
The total number of shares outstanding at September 30, 2016 was 129,216,956.
No dilutive common stock equivalents were outstanding as of December 31, 2015 or September 30, 2016.
Note 5 - Income Taxes
We follow Accounting Standards Codification regarding Accounting for Income Taxes. Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry forwards. No net provision
F-7
THE GNS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2016
Unaudited
for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry forward has been recognized, as it is not deemed likely to be realized.
The provision for refundable Federal income tax consists of the following:
|
|
September 30, 2016
|
|
|
December 31, 2015
|
|
Federal income tax attributable to:
|
|
|
|
|
|
|
Current operations
|
|
$
|
(67,879
|
)
|
|
$
|
(142,665
|
)
|
Less, Nondeductible expenses
|
|
|
0
|
|
|
|
0
|
|
-Less, Change in valuation allowance
|
|
|
67,879
|
|
|
|
142,665
|
|
Net amount
|
|
|
0
|
|
|
|
0
|
|
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
|
|
September 30, 2016
|
|
|
December 31, 2015
|
|
Deferred tax asset attributable to:
|
|
|
|
|
|
|
Net operating loss carryover
|
|
$
|
815,759
|
|
|
$
|
748,473
|
|
Less, Valuation allowance
|
|
|
(815,759
|
)
|
|
|
(748,473
|
)
|
Net deferred tax asset
|
|
|
-
|
|
|
|
-
|
|
At September 30, 2016, an unused net operating loss carryover approximating $2,399,291 is available to offset future taxable income; it expires beginning in 2031.
Reconciliation between the statutory rate and the effective tax rate is as follows at September 30, 2016 and December 30, 2015:
Federal statutory tax rate
|
|
|
(34.0
|
)%
|
Permanent difference and other
|
|
|
34.0
|
%
|
Effective tax rate
|
|
|
0.0
|
%
|
Note 6 – Subsequent Events
The Company has evaluated all events and transactions that occurred after September 30, 2016 up through the date these financial statements were available for issuance. Except as noted below, it has been determined that there is nothing further to report.
Between October 1, 2016 and December 31, 2016, the Company had wage advance in the amount of $14,096. This amount was adjusted to wage expense in fiscal year 2016.
A Related party loan amounting to $113,557 was received between October 1, 2016 and December 31, 2016.
The Company received a loan of $1,700 from other non-related party between October 1, 2016 and December 31, 2016.
There have been no subsequent events for which disclosure is required which are not previously disclosed herein.
F-8
GEORGE STEWART, CPA
316 17TH AVENUE SOUTH
SEATTLE, WASHINGTON 98144
(206) 328-8554 FAX(206) 328-0383
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
The GNS Group, Inc.
I have audited the accompanying balance sheets of The GNS Group, Inc. as of December 31, 2015 and 2014, and the related statements of operations, stockholders' deficit and cash flows for each of the two-year period ended December 31, 2015 and 2014. The GNS Group, Inc.'s management is responsible for these financial statements. My responsibility is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor was I engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, I express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The GNS Group, Inc., as of December 31, 2015 and 2014, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2015 and 2014 in conformity with generally accepted accounting principles in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note #2 to the financial statements, the Company has had limited operations, has limited revenues, a working capital deficiency and its need for new capital raise substantial doubt about its ability to continue as a going concern. Management's plan in regard to these matters is also described in Note #2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/S/
GEORGE STEWART
Seattle, Washington
December 2, 2016
F-9
The GNS Group, Inc.
|
|
|
|
December 31, 2015
|
|
Audited
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
Audited
|
|
|
Audited
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash
|
|
$
|
149
|
|
|
$
|
3
|
|
Accounts receivable
|
|
|
-
|
|
|
|
6,750
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
149
|
|
|
|
6,753
|
|
|
|
|
|
|
|
|
|
|
Other Assets
|
|
|
|
|
|
|
|
|
Prepaid Expenses
|
|
|
-
|
|
|
|
8,987
|
|
Total Other Assets
|
|
|
-
|
|
|
|
8,987
|
|
Total assets
|
|
$
|
149
|
|
|
$
|
15,740
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
45,268
|
|
|
$
|
41,803
|
|
Sales tax payable
|
|
|
-
|
|
|
|
8,431
|
|
Payroll Liabilities ER
|
|
|
1,038
|
|
|
|
-
|
|
Deposits
|
|
|
20,270
|
|
|
|
15,712
|
|
Total current liabilities
|
|
|
66,576
|
|
|
|
65,946
|
|
|
|
|
|
|
|
|
|
|
Long term liabilities:
|
|
|
|
|
|
|
|
|
Related party liabilities:
|
|
|
|
|
|
|
|
|
Accrued rent payable
|
|
|
275,532
|
|
|
|
255,032
|
|
Accrued compensation
|
|
|
69,283
|
|
|
|
69,283
|
|
Related party payable, other
|
|
|
204,424
|
|
|
|
7,696
|
|
Officer and shareholder payable
|
|
|
862,302
|
|
|
|
798,596
|
|
|
|
|
|
|
|
|
|
|
Total long term liabilities
|
|
|
1,411,541
|
|
|
|
1,130,607
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,478,117
|
|
|
|
1,196,553
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
Preferred stock, 5,000,000 shares, no par value per share
as of December 31, 2015 and December 31, 2014 respectively
|
|
|
|
|
|
|
|
|
Common stock, no par value, 750,000,000 authorized shares,
32,304,239 and
30,773,627 shares issued and outstanding
as of December 31, 2015 and December 31, 2014 respectively
|
|
|
32,304
|
|
|
|
30,774
|
|
Additional Paid-in-Capital
|
|
|
1,155,136
|
|
|
|
1,034,217
|
|
Stock subscription receivable
|
|
|
|
|
|
|
-
|
|
Deficit accumulated during the development stage
|
|
|
(2,665,408
|
)
|
|
|
(2,245,804
|
)
|
Total stockholders' equity
|
|
|
(1,477,968
|
)
|
|
|
(1,180,813
|
)
|
Total liabilities and stockholders' deficit
|
|
$
|
149
|
|
|
$
|
15,740
|
|
The accompanying notes are an integral part of these statements.
F-10
The GNS Group, Inc.
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
Audited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
16,884
|
|
|
$
|
164,976
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales
|
|
|
11,516
|
|
|
|
130,096
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
5,368
|
|
|
|
34,880
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses:
|
|
|
|
|
|
|
|
|
Wages and salaries
|
|
|
180,000
|
|
|
|
180,000
|
|
Commitment Fee
|
|
|
122,449
|
|
|
|
-
|
|
Stock based compensation
|
|
|
-
|
|
|
|
291,000
|
|
Advertising and marketing
|
|
|
450
|
|
|
|
12,030
|
|
Legal and professional
|
|
|
71,138
|
|
|
|
59,485
|
|
Payroll Taxes Expense EE
|
|
|
1,038
|
|
|
|
-
|
|
Travel and entertainment
|
|
|
11,029
|
|
|
|
12,624
|
|
Warehouse Rent
|
|
|
840
|
|
|
|
-
|
|
Rent
|
|
|
24,000
|
|
|
|
24,000
|
|
Facilities
|
|
|
2,541
|
|
|
|
7,014
|
|
Other office and miscellaneous
|
|
|
4,172
|
|
|
|
12,029
|
|
Total operating expenses
|
|
|
417,657
|
|
|
|
598,182
|
|
(Loss) from operations
|
|
|
(412,289
|
)
|
|
|
(563,302
|
)
|
Provision/(credit) for taxes on income
|
|
|
|
|
|
|
|
|
Other Income/(Expenses)
|
|
|
(310
|
)
|
|
|
40,990
|
|
Bad Debt Expenses
|
|
|
(7,005
|
)
|
|
|
(2,252
|
)
|
Total Other Income/(Expenses)
|
|
|
(7,315
|
)
|
|
|
38,738
|
|
Net Income/(loss)
|
|
$
|
(419,604
|
)
|
|
$
|
(524,564
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings/(loss) per common share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding
|
|
|
30,790,620
|
|
|
|
27,797,368
|
|
The accompanying notes are an integral part of these statements.
F-11
The GNS Group, Inc.
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
Audited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(419,604
|
)
|
|
$
|
(524,564
|
)
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net (loss) to cash provided
(used) by operating activities:
|
|
|
|
|
|
|
|
|
Stock based compensation
|
|
|
-
|
|
|
|
291,000
|
|
|
|
|
|
|
|
|
|
|
Change in current assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
6,750
|
|
|
|
7,000
|
|
Prepaid Expense
|
|
|
8,987
|
|
|
|
(8,987
|
)
|
Payroll Liabilities ER
|
|
|
1,038
|
|
|
|
-
|
|
Deposits
|
|
|
4,558
|
|
|
|
(50,591
|
)
|
Accounts Payable and Accrued Expenses
|
|
|
3,465
|
|
|
|
(15,369
|
)
|
Notes Payable
|
|
|
-
|
|
|
|
|
|
Accrued Rent
|
|
|
20,500
|
|
|
|
|
|
Loans – Non Related Party
|
|
|
6,897
|
|
|
|
|
|
Officer's Payable
|
|
|
155,802
|
|
|
|
|
|
Sales Tax Payable
|
|
|
(8,431
|
)
|
|
|
8,431
|
|
Net cash flows from operating activities
|
|
|
(220,038
|
)
|
|
|
(293,080
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from investing activities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Checks in excess of deposits
|
|
|
|
|
|
|
|
|
Proceeds from sale of common stock
|
|
|
122,449
|
|
|
|
79,200
|
|
Stock subscription receivable
|
|
|
-
|
|
|
|
-
|
|
Related party transaction
|
|
|
97,735
|
|
|
|
190,023
|
|
Net cash flows from financing activities
|
|
|
220,184
|
|
|
|
269,223
|
|
Net cash flows
|
|
|
146
|
|
|
|
(23,857
|
)
|
|
|
|
|
|
|
|
|
|
Cash and equivalents, beginning of period
|
|
|
3
|
|
|
|
23,860
|
|
Cash and equivalents, end of period
|
|
$
|
149
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS FOR:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Stock based compensation
|
|
$
|
-
|
|
|
$
|
291,000
|
|
Stock issued for reduction of related party loans
|
|
$
|
-
|
|
|
$
|
164,865
|
|
The accompanying notes are an integral part of these statements.
F-12
The GNS Group, Inc.
|
|
Statement of Stockholders Deficit
|
|
December 31, 2015
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
Retained
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Deficit
|
|
|
Total
|
|
Balances - December 31, 2007 -
unaudited
|
|
|
11,165,000
|
|
|
|
274,622
|
|
|
|
(460,222
|
)
|
|
|
(185,600
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Issued
|
|
|
472,000
|
|
|
|
73,104
|
|
|
|
|
|
|
|
73,104
|
|
Net (loss)
|
|
|
|
|
|
|
|
|
|
|
(235,755
|
)
|
|
|
(235,755
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2008 -
unaudited
|
|
|
11,637,000
|
|
|
|
347,726
|
|
|
|
(695,977
|
)
|
|
|
(348,251
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
|
|
|
|
|
|
|
|
|
|
|
(168,477
|
)
|
|
|
(168,477
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2009 -
unaudited
|
|
|
11,637,000
|
|
|
|
347,726
|
|
|
|
(864,454
|
)
|
|
|
(516,728
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
|
|
|
|
|
|
|
|
|
|
|
(166,528
|
)
|
|
|
(166,528
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2010 -
unaudited
|
|
|
11,637,000
|
|
|
|
347,726
|
|
|
|
(1,030,982
|
)
|
|
|
(683,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
|
|
|
|
|
|
|
|
|
|
|
(148,760
|
)
|
|
|
(148,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2011 -
unaudited
|
|
|
11,637,000
|
|
|
|
347,726
|
|
|
|
(1,179,742
|
)
|
|
|
(832,016
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Issued
|
|
|
2,843,333
|
|
|
|
112,800
|
|
|
|
|
|
|
|
112,800
|
|
Net (loss)
|
|
|
|
|
|
|
|
|
|
|
(133,924
|
)
|
|
|
(133,924
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2012 -
audited
|
|
|
14,480,333
|
|
|
|
460,526
|
|
|
|
(1,313,667
|
)
|
|
|
(853,141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued
|
|
|
1,412,000
|
|
|
|
69,400
|
|
|
|
|
|
|
|
69,400
|
|
Net (loss)
|
|
|
|
|
|
|
|
|
|
|
(407,573
|
)
|
|
|
(407,573
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2013 -
audited
|
|
|
15,892,333
|
|
|
|
529,926
|
|
|
|
(1,721,240
|
)
|
|
|
(1,191,314
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for Services
|
|
|
9,700,000
|
|
|
|
291,000
|
|
|
|
|
|
|
|
291,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued to reduced notes payable
|
|
|
3,597,294
|
|
|
|
164,865
|
|
|
|
|
|
|
|
164,865
|
|
Shares issued for cash
|
|
|
1,584,000
|
|
|
|
79,200
|
|
|
|
|
|
|
|
79,200
|
|
Net (loss)
|
|
|
|
|
|
|
|
|
|
|
(524,564
|
)
|
|
|
(524,564
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2014 -
audited
|
|
|
30,773,627
|
|
|
$
|
1,064,991
|
|
|
$
|
(2,245,804
|
)
|
|
$
|
(1,180,813
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued
|
|
|
1,530,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock subscription receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
122,449
|
|
Net (loss)
|
|
|
|
|
|
|
|
|
|
|
(419,604
|
)
|
|
|
(419,604
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2015 -
Audited
|
|
|
32,304,239
|
|
|
|
1,064,991
|
|
|
|
(2,665,408
|
)
|
|
|
(1,477,968
|
)
|
The accompanying notes are an integral part of these statements.
F-13
THE GNS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2015 and December 31, 2014
Audited
Note 1 - Summary of Significant Accounting Policies
General Organization and Business
The GNS Group, Inc. ("GNS" or the "Company") is a Washington Corporation. The Company was incorporated under the laws of the State of Washington on July 6, 2006. The Company engages in the selling of quality products that cater to the hospitality industry, such as conference and banquet room furniture. GNS also targets patio and pool furniture markets. The products of the GNS Group are manufactured in Dubai, UAE.
Basis of presentation
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") and reflect all adjustments, consisting of normal recurring adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company as of and for the years ended December 31, 2015 and 2014.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
The Company maintains a cash balance in a non-interest-bearing account that currently does not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. There were no cash equivalents for the years ended December 31, 2015 and 2014.
Accounts receivable
Trade receivables are carried at the original invoice amount and no allowance for uncollectible accounts has been deemed necessary. Receivables past due for more than 120 days are considered delinquent. Management determines uncollectible accounts by regularly evaluating individual customer receivables and considering a customer's financial condition, credit history, and current economic conditions and by using historical experience applied to an aging of accounts. The balance over 90 days at December 31, 2015 and 2014 was $0 and $6,750, respectively. The management decided to write it off since the balance remained unpaid. The company was certain to collect it but with new information we are not going to receive any money.
Revenue Recognition
Revenue from the sale of goods is recognized when the following conditions are satisfied:
·
|
The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
|
·
|
The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
|
·
|
The amount of revenue can be measured reliably;
|
·
|
It is probable that the economic benefits associated with the transaction will flow to the entity; and
|
·
|
The costs incurred or to be incurred in respect of the transaction can be measured reliably.
|
Fair value of financial instruments and derivative financial instruments
The Company's financial instruments include cash, accounts receivable, accounts payable, and notes payable. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at year ended December 31, 2015 and 2014. The Company did not engage in any transaction involving derivative instruments.
Federal income taxes
The Company accounts for its income taxes in accordance with Income Taxes Topic of the FASB ASC 740, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards.
F-14
THE GNS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2015 and December 31, 2014
Audited
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.
Net Loss Per Share of Common Stock
Net loss per share is provided in accordance with FASB ASC 260-10, "Earnings per Share".
Basic net loss per common share ("EPS") is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued, unless doing so is anti-dilutive.
Advertising
The Company expenses all costs of advertising as incurred. The advertising costs included in general and administrative expenses for the years ended December 31, 2015 and 2014 were $450 and $12,030, respectively.
Deposits
During the normal course of business, the Company will require deposits on projects. For the year ended December 31, 2015 and 2014, the Company had deposits of $20,270 and $15,712, respectively. When a sale is delivered, these amounts are applied against their current accounts receivable.
Recently Issued Accounting Pronouncements
For the years ended December 31, 2015 and 2014, the Company does not expect any of the recently issued accounting pronouncements to have a material impact on its financial condition or results of operations.
Stock Based Compensation
The Company recognizes stock-based compensation in accordance with ASC Topic 718 "Stock Compensation", which required the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock option purchases related to an Employee Stock Purchase Plan based on the estimated fair values.
For non-employee stock-based compensation, we have adopted ASC Topic 505 "Equity-Based Payments to Non-Employees", which requires stock-based compensation related to non-employee to be accounted for based on the fair market value of the related stock or options or fair value of the services on the grant date, whichever is more readily determinable in accordance with ASC Topic 718.
Development Stage Company;
The Company has elected to adopt application of Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements; it no longer presents or discloses inception-to-date information and other disclosure requirements of Topic 915.
Note 2 - Uncertainty, going concern:
The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs to allow it to continue as a going concern. As of December 31, 2015, the Company had an accumulated deficit of $2,487,126. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. The Company is contemplating conducting an offering of its debt or equity securities to obtain additional operating capital. The Company is dependent upon its ability, and will continue to attempt, to secure equity and/or debt financing. There are no assurances that the Company will be successful and without sufficient financing it would be unlikely for the Company to continue as a going concern.
F-15
THE GNS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2015 and December 31, 2014
Audited
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
Note 3 - Related Party Transactions
The Company has multiple related party transactions. These related party transactions include accrued rent, accrued compensation and officer and shareholder payable. These balances were provided for working capital purposes, and is unsecured, non-interest bearing, and have no specific terms of prepayment.
The balance of these related party transactions for the year ended December 31, 2014 was $1,130,607.
The balance of these related party transactions for the year ended December 31, 2015 was $1,395,853.
For the year ended December 31, 2015, the Company has increased the balance of accrued rent by $20,500, decreased accrued compensation by $16,198, and increased officer and shareholder payable by $260,944.
Note 4 – Cumulative sale of Common Stock
At inception the Company issued 11,165,000 shares of no par value common stock for a total of $274,622. The average price per share was $0.02.
Since December 31, 2008 through December 31, 2011, the Company has issued an additional 472,000 shares for $73,104. The average price per share is $0.15 for additional shares issued.
For the year ended December 31, 2012, the Company has issued an additional 2,843,333 shares for $112,800. The average price per share is $0.04 for additional shares issued.
For the year ended December 31, 2013, the Company has issued an additional 1,412,000 shares for $69,400. The average price per share is $0.05 for additional shares issued.
On January 10, 2014, the Company issued 1,584,000 shares of stock for $79,200 cash.
During the fiscal quarter ended March 30, 2014, the Company issued 3,597,294 shares to reduce related party loans by $164,865. This was a non-cash transaction.
During the fiscal quarter ended March 31, 2014, the Company also issued 9,700,000 shares to key individuals as stock based compensation. The Company recorded an expense of $291,000.
The total number of shares outstanding at December 31, 2014 was 30,773,627.
Premier Venture Partners, LLC desired to invest up to three million dollars to purchase GNS Group Company common stock. Based on the equity purchase agreement, GNS management previously booked a stockholder's subscription receivable amounting to $122,449. Subsequently, management decided to waive its stockholders subscription receivable amounting to $122,449. Consequently, a commitment fee of $122,449 was expensed this quarter.
The total number of shares outstanding at December 31, 2015 was 32,304,239.
On October 9, 2015, the Company declared 4:1 stock dividend which has not been paid as of October 4, 2016.
F-15
THE GNS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2015 and December 31, 2014
Audited
Note 5 - Income Taxes
We follow Accounting Standards Codification regarding Accounting for Income Taxes. Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carryforwards. No net provision for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carryforward has been recognized, as it is not deemed likely to be realized.
The provision for refundable Federal income tax consists of the following:
|
|
2015
|
|
|
2014
|
|
Federal income tax attributable to:
|
|
|
|
|
|
|
Current operations
|
|
$
|
(142,665
|
)
|
|
$
|
(178,352
|
)
|
Less, Nondeductible expenses
|
|
|
-0-
|
|
|
|
-0-
|
|
-Less, Change in valuation allowance
|
|
|
142,665
|
|
|
|
178,352
|
|
Net amount
|
|
|
-0-
|
|
|
|
-0-
|
|
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
|
|
2015
|
|
|
2014
|
|
Deferred tax asset attributable to:
|
|
|
|
|
|
|
Net operating loss carryover
|
|
$
|
748,473
|
|
|
$
|
666,424
|
|
Less, Valuation allowance
|
|
|
(748,473
|
)
|
|
|
(666,424
|
)
|
Net deferred tax asset
|
|
|
-
|
|
|
|
-
|
|
At December 31, 2015, an unused net operating loss carryover approximating $2,201,392 is available to offset future taxable income; it expires beginning in 2031.
Reconciliation between the statutory rate and the effective tax rate is as follows at December 31, 2015 and 2014:
Federal statutory tax rate
|
|
|
(34.0
|
)%
|
Permanent difference and other
|
|
|
34.0
|
%
|
Effective tax rate
|
|
|
0.0
|
%
|
Note 6 – Subsequent Events
The Company has evaluated all events and transactions that occurred after December 31, 2015 up through the date these financial statements were available for issuance. Except as noted below, it has been determined that there is nothing further to report.
Between January 1, 2016 and August 31, 2016, the Company had wage advance in the amount of $4,514. This amount was adjusted to wage expense in fiscal year 2016.
Order totaling $14,000 have been received during 2016 and hope to process them during the year.
A Related party loan amounting to $82,735 was received during 2016.
The Company received a loan of $2,700 in 2016 from other non-related party.
On October 9, 2015, the Company declared a 4:1 stock dividend which has not been paid as of October 14, 2016.
There have been no subsequent events for which disclosure is required which are not previously disclosed herein.
F-16
Until __________ 2017, ninety days after the date of this prospectus, all dealers effecting transactions in our registered securities, whether or not participating in this distribution, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering (assuming all shares are sold), all of which are to be paid by the registrant, are as follows:
SEC Registration Fee
|
$
|
614.48
|
Printing Expenses
|
|
4,385.52
|
Accounting Fees and Expenses
|
|
10,000.00
|
Legal Fees and Expenses
|
|
20,000.00
|
Blue Sky Fees/Expenses
|
|
10,000.00
|
Transfer Agent Fees
|
|
5,000.00
|
TOTAL
|
$
|
50,000.00
|
ITEM 14.
|
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
|
The only statute, charter provision, bylaw, contract, or other arrangement under which any controlling person, director or officer of the Registrant is insured or indemnified in any manner against any liability which he may incur in his capacity as such, is as follows:
1.
Article X of the Bylaws of the company, filed as Exhibit 3.2 to the Registration Statement.
2.
Revised Code of Washington 23B.08.500-23B.08.590.
The general effect of the foregoing is to indemnify a control person, officer or director from liability, thereby making the company responsible for any expenses or damages incurred by such control person, officer or director in any action brought against them based on their conduct in such capacity, provided they did not engage in fraud or criminal activity.
ITEM 15.
|
RECENT SALES OF UNREGISTERED SECURITIES.
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Between January and July 2007, we issued 9,252,000 shares of common stock to seven persons in consideration of $82,845. The shares of common stock were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended, which exempts transactions by an issuer not involving a public offering. Each purchaser was a sophisticated investor and was furnished the same information that could have been found in a Form S-1 registration statement. Each person was familiar with our business and was capable of reading and understanding the information furnished to him.
Between May 2007 and May 2008, we completed a private placement of 2,385,000 restricted shares of common stock to fifty persons in consideration of $225,847. The shares were issued pursuant to the exemption from registration contained in Regulation 504 of the Securities Act of 1933, as amended.
For the year ended December 31, 2012, we issued 2,843,333 restricted shares of common stock in consideration of $112,800. The shares of common stock were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended, which exempts transactions by an issuer not involving a public offering. Each purchaser was a sophisticated investor and was furnished the same information that could have been found in a Form S-1 Registration Statement.
For the year ended December 31, 2013, we issued 1,412,000 restricted shares of common stock in consideration of $69,400. The shares of common stock were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended, which exempts transactions by an issuer not involving a public offering. Each purchaser was a sophisticated investor and was furnished the same information that could have been found in a Form S-1 Registration Statement.
On January 10, 2014, we issued 9,700,000 shares for services rendered valued at $291,000. The Company also issued 4,765,294 shares to pay off accrued debt in the amount of $238,265. The shares of common stock were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended, which exempts transactions by an issuer not involving a public offering. Each purchaser was a sophisticated investor and was furnished the same information that could have been found in a Form S-1 Registration Statement.
For the three months period ended March 31, 2014, we issued 416,000 shares of common stock in consideration of $20,800. 76,000 of these shares were issued to Antoine and Roula Jarjour, and 340,000 of these shares were issued to Charles Carafoli. The shares of common stock were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended, which exempts transactions by an issuer not involving a public offering. Each purchaser was a sophisticated investor and was furnished the same information that could have been found in a Form S-1 Registration Statement.
In July 2015, we issued 1,530,612 shares of common stock to Premier Venture Partners in consideration of $10,000. The shares of common stock were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended, which exempts transactions by an issuer not involving a public offering. The purchaser was a sophisticated investor and was furnished the same information that could have been found in a Form S-1 Registration Statement.
For the year ended December 31, 2015, we issued 29,927,239 restricted shares of common stock in consideration of $74,818. The average price per share of the shares issued was $0.0025 per share. The shares of common stock were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended, which exempts transactions by an issuer not involving a public offering. Each purchaser was a sophisticated investor and was furnished the same information that could have been found in a Form S-1 Registration Statement.
On January 22, 2016, we paid a common stock dividend of 3 additional shares of common stock for each 1 share of common stock outstanding .
ITEM 16.
EXHIBITS
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The following documents are filed with this Form S-1 Registration Statement:
Exhibit No.
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Document Description
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3.1*
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Articles of Incorporation dated July 6, 2006.
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3.2*
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Bylaws.
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3.3*
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Amended to Articles of Incorporation dated December 13, 2007.
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3.4*
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Articles of Amendment dated March 10, 2014.
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3.5*
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Amended Bylaws.
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4.1*
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Specimen Stock Certificate.
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5.1
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Opinion of Conrad C. Lysiak, Attorney at Law.
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10.1*
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Office lease with GNS Family Partnership, LLC.
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23.1
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Consent of George Stewart, CPA.
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23.2
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Consent of The Law Office of Conrad C. Lysiak, P.S.
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*
Previously filed.
ITEM 17.
UNDERTAKINGS.
A.
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The undersigned Registrant hereby undertakes:
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(1)
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To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement to:
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(a)
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include any prospectus required by Section 10(a)(3) of the Securities Act;
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(b)
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reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and
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(c)
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include any additional or changed material information with respect to the plan of distribution.
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(2)
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That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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(3)
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To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
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(4)
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To provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
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(5)
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For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the registration statement as of the time it was declared effective.
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(6)
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For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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(7)
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For the purpose of determining liability under the Securities Act to any purchaser:
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Each prospectus filed pursuant to Rule 424(b) under the Securities Act as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§§230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness.
Provided however,
that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
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(8)
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For the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of securities:
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The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
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(a)
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Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 of this chapter;
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(b)
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Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
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(c)
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The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
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(d)
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Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
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B.
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Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
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