Securities registered pursuant to Section 12(g) of the Act: Common
Stock, Par value $0.001
Indicate by a check mark if the registrant is a well-known
seasoned issuer, as defined by Rule 405 of the Securities Act. Yes□ No
☑
Indicate by a check mark whether the registrant is
not required to file reports pursuant to Section 13 or Section 15 (d) of the Securities Exchange Act. Yes □ No
☑
Indicate by check mark whether the registrant has (1) filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for
such shorter period that the registrant was required to file such reports) (2) has been subject to such filing requirement for
the past 90 days. Yes
☑
No□
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
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.
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act): Yes □ No
☑
Aggregate market value of the voting stock held by non-affiliates
of the registrant as of June 30, 2017: $14,595,868.
Indicate the number of Shares of outstanding of each
of the Registrant's classes of common stock, as of the latest practicable date: As of April 2, 2018, the Registrant
had 11,797,231 shares of common stock outstanding.
For purposes of this Annual Report,
the terms “GEX,” “GEX Management,” “the Company,” “we,” “us,” and “our,”
refer to GEX Management, Inc., a Texas Corporation, and its consolidated subsidiaries unless the context clearly indicates otherwise.
Included in this Annual Report are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation
Reform Act of 1995 or by the U.S. Securities and Exchange Commission in its rules, regulations and releases, regarding, among other
things, all statements other than statements of historical facts contained in this report, including statements regarding our future
financial position, business strategy and plans and objectives of management for future operations. The words “believe,”
“may,” “estimate,” “continue,” “anticipate,” “intend,” “should,”
“plan,” “could,” “target,” “potential,” “is likely,” “will,”
“expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have
based these forward-looking statements largely on our current expectations and projections about future events and financial trends
that we believe may affect our financial condition, results of operations, business strategy and financial needs. In
addition, our past results of operations do not necessarily indicate our future results.
From time to time, we also provide
forward-looking statements in other materials we release to the public, as well as oral forward-looking statements. Such statements
relate to our current expectations, projections and assumptions about our business, the economy and future events or conditions.
They do not relate strictly to historical or current facts.
Forward-looking statements are not
guarantees and involve risks, uncertainties and assumptions that are difficult to predict. Actual results may differ materially
from past results and from those indicated by such forward-looking statements if known or unknown risks or uncertainties materialize,
or if underlying assumptions prove inaccurate. These risks and uncertainties include, among other things:
Other sections of this report may include
additional factors which could adversely affect our business and financial performance. New risk factors emerge from time to time
and it is not possible for us to anticipate all the relevant risks to our business, and we cannot assess the impact of all such
risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ materially from
those contained in any forward-looking statements. Those factors include, among others, those matters disclosed in this Annual
Report on Form 10-K.
Except as otherwise required by applicable
laws and regulations, we undertake no obligation to publicly update or revise any forward-looking statements or the risk factors
described in this report, whether as a result of new information, future events, changed circumstances or any other reason after
the date of this report. Neither the Private Securities Litigation Reform Act of 1995 nor Section 27A of the Securities Act of
1933 provides any protection to us for statements made in this report. You should not rely upon forward-looking statements as predictions
of future events or performance. We cannot assure you that the events and circumstances reflected in the forward-looking statements
will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable,
we cannot guarantee future results, levels of activity, performance or achievements.
PART
III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS
AND CORPORATE GOVERNANCE
The Company has a code of business
conduct and ethics that applies to all of its employees, officers and directors. The code of business conduct and ethics is available
on our website at www.gexmanagement.com and we will post any amendments to, or waivers from, the code of ethics on that website.
The following
table lists the names and ages of the executive officers and directors a of the Company as of December 31, 2017. The directors
will continue to serve until the next annual shareholders meeting, or until their successors are elected and qualified. All Directors
have been elected to serve through the 2018 annual meeting. All officers serve at the discretion of the Chairman of the Board of
Directors, and members of the Board of Directors.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Held Since
|
Carl Dorvil
|
|
34
|
|
Chairman of The Board
|
|
October 2004
|
12001 N. Central Expy. Suite 825
|
|
|
|
CEO/President*
|
|
|
Dallas, Texas 75243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clayton Carter
|
|
32
|
|
Director
|
|
April 2016
|
12001 N. Central Expy. Suite 825
|
|
|
|
Chief Financial Officer
|
|
|
Dallas, TX 75243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chelsea Christopherson
|
|
29
|
|
Director
|
|
April 2016
|
12001 N. Central Expy. Suite 825
|
|
|
|
Chief Operating Officer*
|
|
|
Dallas, TX 75243
|
|
|
|
|
|
|
*On March 9, 2018, which is subsequent
to the end of the period covered by this Report, the Board of Directors of the Company voted to amend its Bylaws to separate the
positions of President and Chief Executive Officer and also appointed Chelsea Christopherson as the Company’s President.
Ms. Christopherson continues to serve as the Company’s Chief Operating Officer and on the Company’s Board.
Carl Dorvil
:
Carl Dorvil, age 34, grew up in Garland,
Texas and is the son of Haitian immigrants. Mr. Dorvil graduated from Southern Methodist University (“SMU”) in 2005
with three majors -- Public Policy, Economics, and Psychology, all with Distinction. Mr. Dorvil continued his education post undergraduate
studies at SMU and received his MBA from the Cox School of Business. In 2004, he founded Group Excellence, a mentoring and
tutoring company, out of his dorm room at SMU. The company started with a $20,000 grant from Texas Instrument Foundation. Since
its inception, Group Excellence provided over 800,000 hours of tutoring to students around the country and created over 2,000 jobs.
In 2011, Mr. Dorvil sold the company to a Dallas-based investor group. Two years later, he bought it back for 10% of the original
sale price. After stabilizing the business, Mr. Dorvil converted it into a nonprofit.
In 2010, Mr. Dorvil received the Minority
Business Leader Award from the Dallas Business Journal (“DBJ”) and Group Excellence was included in the “Top
100 on SMU's Dallas 100 Fastest-Growing Businesses” list. In 2011, Mr. Dorvil was the youngest-ever honoree on the
DBJ’s 40 Under Forty, and Group Excellence was the fifth on the Inc. 500 list of fastest-growing companies in the United
States. Mr. Dorvil is a regular contributor to
Forbes,
with his most recent article being “Challenges and Opportunities
When Doing Business with the Government”.
Mr. Dorvil has served as the Chief
Executive Officer and Chairman of the Board of GEX from 2004 until present. Mr. Dorvil has also served as a managing partner at
P413 Management, LLC, a strategy and consulting firm that focuses on non-profit entities and consulting related to the expansion
of corporate community outreach programs, from 2011 to present, and serves as Managing Partner at Vicar Capital Partners, LLC,
a licensed capital advisory firm, from 2013 to present.
Clayton Carter
:
Clayton Carter, age 32, received his
Bachelor of Arts in Integrated Marketing and Communications from Pepperdine University. With his extensive knowledge of the public
markets and investment-based finance, Mr. Carter served as Chief Executive Officer and Chairman of the Board at Freestone Resources,
Inc., an oil and gas technology company, from 2010 to 2015. Mr. Carter’s responsibilities as the CEO of Freestone Resources
included the preparation of the quarterly and annual reports, as well as the day-to-day operation of a fully reporting, publicly
traded company. In March 2016, Mr. Carter became the Chief Financial Officer and Director for GEX Management, Inc., and currently
serves in these roles. In November 2017 Mr. Carter became an officer and director of Vicar Financial, Inc.
Chelsea Christopherson
:
Chelsea Christopherson, age 29, received
her Business Management degree from Dallas Baptist University. Ms. Christopherson has several years of experience executing operational
processes for small cap, growing businesses across a variety of industries. Ms. Christopherson joined Group Excellence in 2010,
was appointed Human Resources Director in 2012 and became Vice President of Group Excellence in 2013. While serving as Vice President
of Group Excellence, Ms. Christopherson managed a staff of 600 employees, helped build and implement processes to manage a geographically
diverse workforce in the midst of unpredictable staffing patterns. Ms. Christopherson has served as Chief Operating Officer for
GEX Management, Inc. from 2014 to present where she oversees all operations of the company and its clients.
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), requires our executive officers and directors, and persons who beneficially
own more than ten percent of our common stock, to file initial reports of ownership and reports of changes in ownership with the
SEC. Executive officers, directors and greater than ten percent beneficial owners are required by SEC regulations to furnish us
with copies of all Section 16(a) forms they file. We believe that as of the date of this report they were all current in their
16(a) reports.
Board
of Directors
Our Board of Directors currently consists
of three members. Our directors serve one-year terms. Our Board of Directors has affirmatively determined that there are currently
no independent directors serving on our board.
Committees
of the Board of Directors
Audit Committee
We do not have a standing audit committee
of the Board of Directors. Management has determined not to establish an audit committee at present because of our limited resources
and limited operating activities do not warrant the formation of an audit committee or the expense of doing so. We do not
have a financial expert serving on the Board of Directors or employed as an officer based on management’s belief that the
cost of obtaining the services of a person who meets the criteria for a financial expert under Item 401(e) of Regulation S is beyond
its limited financial resources and the financial skills of such an expert are simply not required or necessary for us to maintain
effective internal controls and procedures for financial reporting in light of the limited scope and simplicity of accounting
issues raised in its financial statements at this stage of its development.
Governance, Compensation and Nominating
Committee
We do not have a standing governance,
compensation and nominating committee of the Board of Directors. Management has determined not to establish governance, compensation
and nominating committee at present because of our limited resources and limited operations do not warrant such a committee or
the expense of doing so.
Code
of Ethics
The Company has adopted the following
code of ethics for officers, directors and employees:
- Show respect towards others in
the workplace
- Conduct all business activities
in a fair and ethical manner
- Work dutifully and responsibly
for the Company’s shareholders and stakeholders
The Company has provided its code of
ethics on its website, of which a copy can be obtained by visiting http://www.gexmanagement.com or by calling the Company at 877.210.4396.
Limitation
of Liability of Directors
Pursuant to the Texas Business Organizations
Code, our Amended and Restated Articles of Incorporation exclude personal liability for our Directors for monetary damages based
upon any violation of their fiduciary duties as Directors, except as to liability for any breach of the duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction from which
a Director receives an improper personal benefit. This exclusion of liability does not limit any right which a Director may have
to be indemnified and does not affect any Director’s liability under federal or applicable state securities laws.
Legal
Proceedings
During the past
ten years, none of our present or former directors, executive officers or persons nominated to become directors or executive officers:
(1) A petition under
the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer
was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or
within two years before the time of such filing, or any corporation or business association of which he was an executive officer
at or within two years before the time of such filing;
(2) Such person
was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and
other minor offenses);
(3) Such person
was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
(i) Acting as a
futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction
merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing,
or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any
investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice
in connection with such activity;
(ii) Engaging in
any type of business practice; or
(iii) Engaging in
any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal
or State securities laws or Federal commodities laws;
(4) Such person
was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority
barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in
paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;
(5) Such person
was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities
law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
(6) Such person
was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated
any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not
been subsequently reversed, suspended or vacated;
(7) Such person
was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated, relating to an alleged violation of:
(i) Any Federal
or State securities or commodities law or regulation; or
(ii) Any law or
regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction,
order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition
order; or
(iii) Any law or
regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
(8) Such person
was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in
Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization
that has disciplinary authority over its members or persons associated with a member.
Material
Changes to the Procedures by which Security Holders May Recommend Nominees
There have been no material changes
to the procedures by which security holders may recommend nominees to the registrants Board of Directors.
ITEM 11. EXECUTIVE
COMPENSATION
Compensation of Executive Officers
The following summary compensation
table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the fiscal years
ended December 31, 2017 and 2016 in all capacities for the accounts of our executives, including the Chief Executive Officer (“CEO”),
Chief Financial Officer (“CFO”), and Chief Operating Officer (“COO”):
The following officers received the
following compensation for the years ended December 31, 2017 and 2016. These officers have employment contracts with the Company.
Name and principal position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
|
Non-equity incentive plan compensation
|
Nonqualified deferred compensation
|
All other compensation
|
Carl Dorvil,
|
2017
|
$102,170
|
None
|
None
|
None
|
None
|
None
|
None
|
CEO/President
|
2016
|
$29,231
|
None
|
None
|
None
|
None
|
None
|
None
|
Clayton Carter,
|
2017
|
$80,739
|
None
|
None
|
None
|
None
|
None
|
None
|
Chief Financial Officer
|
2016
|
$17,370
|
None
|
None
|
None
|
None
|
None
|
None
|
Chelsea Christopherson,
|
2017
|
$80,700
|
None
|
None
|
None
|
None
|
None
|
None
|
Chief Operating Officer
|
2016
|
$30,376
|
None
|
None
|
None
|
None
|
None
|
None
|
|
|
Option Awards
|
|
Stock Awards
|
Name and principal position
|
|
Number of Securities Underlying Unexercised options (#) exercisable
|
Number of Securities Underlying Unexercised options (#) unexercisable
|
Equity incentive plan awards
|
Option exercise price
|
Option expiration date
|
|
Number of share awards that have not vested
|
Carl Dorvil, CEO/President
|
|
None
|
None
|
None
|
N/A
|
N/A
|
|
None
|
Clayton Carter, Chief Financial Officer
|
|
None
|
None
|
None
|
N/A
|
N/A
|
|
None
|
Chelsea Christopherson, Chief Operating Officer
|
|
None
|
None
|
None
|
N/A
|
N/A
|
|
None
|
Employment Agreements
We have employment agreements in place with each of the
above referenced officers of the Company.
Compensation of Directors
Directors do not receive any compensation
for their services as directors. The Board of Directors has the authority to establish the compensation of directors. No amounts
have been paid to, or accrued to, directors in such capacity.
ITEM 12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED SHAREHOLDER MATTERS
As of December 31, 2017, the following persons are known
to own 5% or more of GEX Management's Common Stock, as well as the Company’s officers and directors.
|
|
|
|
|
Name and Address of Beneficial Owner,
Officer or Director
|
|
Amount
Beneficially
Owned
|
|
Percent of Class
|
Carl Dorvil, President, CEO and Director
|
|
6,438,788
|
|
55.88%
|
Clayton Carter, Chief Financial Officer and Director
|
|
1,333,394
|
|
11.57%
|
Chelsea Christopherson, Chief Operating Officer and Director
|
|
1,335,200
|
(1)
|
11.58%
|
Directors and Officers as a Group
|
|
9,107,382
|
|
79.03%
|
Directors and Officers as a Group
12001 N. Central Expy., Suite 825
Dallas, Texas 75243
1
Based
on Form 3 filed on November 11, 2017, and accounts for the 4:3 forward split with the FINRA effective date of December 12, 2017,
this amount includes 1,333,334 shares owned by Ms. Christopherson and 1,866 owned by the spouse of Ms. Christopherson
.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS AND
DIRECTOR INDEPENDENCE
On March 1, 2015, the Company entered
into a Revolving Line of Credit (“LOC”) with its CEO, Carl Dorvil. Mr. Dorvil agreed to loan the Company up to $1,000,000
at a rate of 6%. This LOC has a balance of $0 and $317,187 at December 31, 2017 and 2016, respectively. The outstanding balance
of $318,187 and related accrued interest of $28,557 was converted into 115,248 shares of common stock in the year ended December
31, 2017 and the LOC was cancelled after the conversion.
On March 1, 2015, the Company entered
into a Loan Agreement with P413 Management, LLC (“P413”). P413 agreed to loan the Company up to $500,000 at a rate
of 6%. On November 1, 2017, this line of credit was increased to $1,000,000. Additionally, P413 extended a $500,000 line of credit
to GEX Staffing, Inc. under the same terms. GEX’s CEO, Carl Dorvil, is a majority member interest owner in P413. These lines
of credit have a balance of $352,100 and $46,000 at December 31, 2017 and 2016, respectively. The LOCs are due and payable on March
31, 2019.
The Company had revenues from related
parties of $104,000 and $305,885 for the years ended December 31, 2017 and 2016, respectively.
On March 1, 2015, the Company entered
into an Outsourcing Agreement with P413 Management, LLC (“P413”) to provide back office services to P413. GEX’s
CEO, Carl Dorvil, is a majority member interest owner in P413. The Company reported revenues under this Agreement of $0 and $38,513
for the years ended December 31, 2017 and 2016 respectively.
On September 1, 2015 the Company entered
into an Outsourcing Agreement with Vicar Capital Advisors, LLC (“Vicar”) to provide back office services to Vicar.
GEX’s CEO, Carl Dorvil, is a majority member interest owner in Vicar. The Company reported revenues under this Agreement
of $104,000 and $101,992 for the years ended December 31, 2017 and 2016 respectively. As of December 31, 2017 and 2016, Vicar had
outstanding balances owed to the Company of $30,771 and $23,500, respectively.
On August 1, 2014 the Company entered
into an Outsourcing Agreement with Renaissance Global Marketing, LLC (“Renaissance”) to provide back office services
to Renaissance. GEX’s CEO, Carl Dorvil was formerly a minority member interest owner in Renaissance. The Company reported
revenues under this Agreement of $0 and $165,380 for the years ended December 31, 2017 and 2016. As of December 31, 2017 and 2016
Renaissance had an outstanding balance owed to the Company of $0 and $0, respectively.
The Company entered into a Consulting
Agreement with Capital Financial Consultants, Inc. for $45,000 for the year ended December 31, 2016. A GEX officer’s family
member owns Capital Financial Consultants, Inc. As of December 31, 2017 and 2016 the balance payable under the two agreements to
CFC was $0 and $45,000, respectively.
The Company had revenue from related parties
of $104,000 and $305,885 for the years ended December 31, 2017 and 2016, respectively.
The Company does not have any independent
directors serving on the Board of Directors.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The aggregate fees billed for professional
services rendered by our auditors, for the audit of our annual financial statements and review of the financial statements included
in our Form S-1, Form 10-K and Form 10-Q or services that are normally provided by the accountant in connection with statutory
and regulatory filings or engagements for the year ended December 31, 2017 and 2016 was $17,000 and $21,000.
Audit Related Fees
None.
Tax Fees
None.
All Other Fees
None.
Notes to the Consolidated Financial
Statements
December 31, 2017
NOTE 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING
POLICIES
Organization and Description of Business
GEX Management, Inc. (“GEX”,
the “Company”, “we”, “our”, “us”) is a professional services company that was originally
formed in 2004 as Group Excellence Management, LLC d/b/a MyEasyHQ. The Company converted from a limited liability company to a
C corporation in March of 2016, and changed its name to GEX Management, Inc. in April of 2016.
On January 25, 2017, GEX obtained its
license to operate as a Professional Employer Organization (“PEO”), and we began offering PEO services in April 2017. The
Company formed GEX Staffing, LLC (“GEX Staffing”) in March 2017. The initial funding and first transactions occurred
in GEX Staffing in September 2017. The consolidated financials include the accounts of GEX Staffing, LLC. Staffing and PEO services
make up a majority of our revenue.
On December 29, 2017 GEX purchased
100% of the membership interest in AMAST Consulting, LLC (“AMAST”), which owned a multi-use office building in Lowell,
Arkansas, which had an occupancy rate of 100% at the time of the acquisition. The terms of the Agreement to purchase AMAST include
the fulfillment of the lease obligations of the current tenants, as well as the assumption of the debt that is collateralized by
the building and associated property. The consolidated financials include the asset and debt of AMAST.
Basis of Presentation
Our financial statements have been
prepared in conformity with accounting principles generally accepted in the United States (“GAAP”), as well as the
applicable regulations and rules of the Securities and Exchange Commission. This requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and their accompanying notes. The actual results could differ from
those estimates.
Principles of Consolidation
The consolidated financial statements
include the accounts of GEX Management, Inc. and its wholly owned subsidiaries. Intercompany accounts and transactions have been
eliminated in consolidation.
There have been no significant changes
to our accounting policies that have a material impact on our financial statements and accompanying notes.
Use of Estimates
The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Revenue Recognition
PEO Services
Professional Employment Organization
(“PEO”) service revenues represent the fees charged to clients for administering payroll and payroll tax transactions
for our clients’ Co-Employed Employees (“CEEs”), access to our HR and benefits administration services, consulting
related to employment and benefit law compliance and general employment consulting related fees. PEO service revenues are recognized
in the period the PEO services are performed as stipulated in the Client Service Agreement (“CSA”), where these fees
are fixed or determinable, when the PEO client is invoiced and collectability is reasonably assured.
GEX is not considered the primary
obligor with respect to CEE’s payroll and payroll tax payments and therefore, these payments are not reflected as either
revenue or expense in our statements of operations.
PEO-related revenues also include
revenues generated from insurance administration for our PEO clients. These insurance-related revenues include insurance-related
billings, as well as administrative fees that GEX collects from PEO clients and withholds from CEEs for health benefit insurance
plans provided by third-party insurance carriers. Insurance-related revenues are recognized over the period the insurance coverage
is provided and where collectability is reasonably assured.
Staffing Services and Professional Services
Staffing services revenue is derived
from supplying temporary staff to clients. Temporary staff generally consists of temporary workers working under a contract for
a fixed period of time, or on a specific client project. The temporary staff includes both GEX employees and third-parties contracted
by GEX.
Temporary staff are provided to clients
through a Staffing Service Agreement (‘SSA’) involving a specified service that the temporary staff will provide to
the client. When GEX is the principal or primary obligor for the temporary staff, GEX records the gross amount of the revenue and
expense from the SSA.
GEX is generally the primary
obligor when GEX is responsible for the fulfillment of services under the SSA, even if the temporary staff are not employees of
GEX. This typically occurs when GEX contracts third-parties to fulfill all or part of the SSA with the client, but GEX remains
the holder of the credit risk associated with the SSA, and GEX has total discretion in establishing the pricing under the SSA.
All
other Professional Services revenues are recognized in the period the services are performed as stipulated in the client’s
Outsourcing Agreement, when the client is invoiced, and collectability is reasonably assured. Revenue recognition for arrangements
with multiple deliverables constituting a single unit of accounting is recognized generally over the greater of the term of the
arrangement or the expected period of performance.
Income Taxes
The Company has adopted ASC 740-10, which
requires the use of the liability method in the computation of income tax expense and the current and deferred income taxes payable.
A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to
be realized.
Fair Value Measurements
ASC Topic 820, defines fair value,
establishes a framework for measuring fair value in generally accepted accounting principles, and requires certain disclosures
about fair value measurements. In general, fair value of financial instruments is based upon quoted market prices, where
available. If such quoted market prices are not available, fair value is based upon internally developed models that
primarily use, as inputs, observable market based parameters. Valuation adjustments may be made to ensure that financial
instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality
and the Company’s credit worthiness, among other things, as well as unobservable parameters.
Cash, accounts receivable, accounts
payable and other accrued expenses and other current assets and liabilities are carried at amounts which reasonably approximate
their fair values because of the relatively short maturity of those instruments.
Earnings Per Share
Earnings per share are calculated in
accordance with ASC 260 “
Earnings per Share
”. Basic Income (Loss) per share is computed by dividing the
period Income (Loss) available to common shareholders by the weighted average number of common shares outstanding. Diluted Profit
(Loss) per share is computed by dividing the Income (Loss) available to common shareholders by the weighted average number of common
shares outstanding plus additional common shares that would have been outstanding if dilutive potential common shares had been
issued. For purposes of this calculation, common stock dividends, warrants and options to acquire common stock, would be considered
common stock equivalents in periods in which they have a dilutive effect and are excluded from this calculation in periods in which
these are anti-dilutive to the net loss per share.
Earnings per share information has
been retroactively adjusted to reflect the stock split and the incremental par value of the newly issued shares were recorded with
the offset to additional paid-in capital.
Diluted earnings per share are computed using the weighted
average number of shares and potentially dilutive common shares outstanding. The Company has no potentially dilutive
common shares.
Cash and Cash Equivalents
Cash and cash equivalents include cash
in banks and short-term investments with original maturities of three months or less. The Company maintains deposits in multiple
financial institutions which provide Federal Deposit Insurance Corporation (“FDIC”) coverage for interest bearing and
non-interest bearing transaction accounts of up to $250,000. GEX has multiple accounts at these financial institutions. The FDIC
coverage of up to $250,000 applies to the Company’s accounts as a whole at each financial institution and not to each of
the Company’s accounts individually. At December 31, 2017 and 2016, none of the Company’s cash was in excess
of federally insured limits, as it was in multiple institutions with balances under the FDIC coverage limits.
Accounts
Receivable
Accounts Receivable consists of accrued
services and consulting receivables due from customers and are unsecured. The receivables are generally unsecured and such amounts
are generally due within 30 to 45 days after the date of the invoice. Accounts Receivable is carried at their face
amount, less an allowance for doubtful accounts. GEX’s policy is generally not to charge interest on receivables
after the invoice becomes past due. A receivable is considered past due if payments have not been received within agreed
upon invoice terms. Write offs are recorded at a time when a customer receivable is deemed uncollectible. The Company did not write
of any accounts receivables in the years ended January 31, 2017 and 2016.
Property and Equipment
Property and Equipment, net is carried
at the cost of purchase, acquisition or construction, and is depreciated over the estimated useful lives of the assets. Assets
acquired in a business combination are stated at estimated fair value. Costs associated with repair and maintenance are expensed
as they are incurred. Costs associated with improvements which extend the life, increase the capacity or improve the efficiency
of our property and equipment are capitalized and depreciated over the remaining life of the related asset. Depreciation and amortization
are provided using the straight-line methods over the estimated useful lives of the assets as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful Life
|
Buildings
|
|
|
|
|
|
|
30 Years
|
Office Furniture & Equipment
|
|
|
|
|
|
|
5 Years
|
Impairment of Long-lived
Assets
The Company records an impairment
of long-lived assets used in operations, other than goodwill, when events or circumstances indicate that the asset might be impaired
and the estimated undiscounted cash flows to be generated by those assets over their remaining lives are less than the carrying
amount of those items. The net carrying value of assets not recoverable is reduced to fair value, which is typically calculated
using the discounted cash flow method.
Recently Issued Accounting Pronouncements
FASB issued ASU No. 2014-09,
Revenue
from Contracts with Customers (Topic 606)
in May 2014. ASU No. 2014-09 outlines a single, comprehensive revenue recognition
model for revenue derived from contracts with customers and it supersedes the most current revenue recognition guidance. This includes
current guidance that is industry-specific. Under ASU No. 2014-09, an entity recognizes revenue for the transfer of promised goods
or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for
those goods or services. ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2017. Earlier adoption
is permitted as of annual reporting periods beginning after December 15, 2016. Companies may use either a full retrospective or
a modified retrospective approach to adopt ASU No. 2014-09. GEX plans to adopt ASU 2014-09 effective January 1, 2018. We intend
to use the modified retrospective method. Since we intend to use the modified retrospective method, the guidance will be applied
to only our most current period presented in the financial statements. We will continue to analyze this model, but we expect our
revenue recognition policies to remain substantially unchanged as a result of adopting ASU 2014-09. Furthermore, we do not anticipate
significant changes to our financial statements relating to the adoption of ASU 2014-09.
FASB issued ASU No. 2016-02, Leases
(Topic 842) in February 2016. ASU 2016-02 will require most lessees to recognize a majority of the company’s leases on the
balance sheet, which will increase reported assets and liabilities. ASU 2016-02 is effective for annual reporting periods beginning
after December 15, 2018 including interim periods within such annual reporting periods with early adoption permitted. The Company
has not early adopted this guidance and is currently evaluating the impact on the Company’s consolidated financial statements
of adopting this guidance. The Company does not expect this guidance to have a material impact to the Company’s results of
operations.
FASB issued ASU No. 2017-04, Goodwill
and Other (Topic 350): Simplifying the Test for Goodwill Impairment in January 2017. This amendment simplifies the manner in which
an entity is required to test for goodwill impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures
goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that
goodwill. The amendment simplifies this approach by having the entity (1) perform its annual or interim goodwill impairment test
by comparing the fair value of a reporting unit with its carrying amount, and (2) recognize an impairment charge for the amount
by which the carrying amount exceeds the reporting unit’s fair value, with the understanding that the loss recognized should
not exceed the total amount of goodwill allocated to that reporting unit. The amendment is effective in fiscal years beginning
after December 15, 2019. Early adoption is permitted for all entities for interim or annual goodwill impairment tests performed
on testing dates after January 1, 2017. The Company does not expect this guidance to have a material impact to the Company’s
financial position or results of operations.
NOTE 2. FAIR VALUE MEASUREMENTS
ASC Topic 820 defines fair value, establishes
a framework for measuring fair value in generally accepted accounting principles, and requires certain disclosures about fair value
measurements. In general, fair value of financial instruments is based upon quoted market prices where available. If such quoted
market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable
market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These
adjustments may include amounts to reflect counterparty credit quality and the Company’s credit worthiness, among other things,
as well as unobservable parameters.
Cash, accounts receivable, accounts
payable and other accrued expenses and other current assets and liabilities are carried at amounts which reasonably approximate
their fair values because of the relatively short maturity of those instruments.
Fair Value of Financial Instruments
The ASC guidance for fair value
measurements and disclosure establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure
fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the
fair value hierarchy are described below:
Level 1 Inputs
–
Quoted prices for identical instruments in active markets.
Level 2 Inputs
–
Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are
not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs
–
Instruments with primarily unobservable value drivers.
As of December 31, 2017 and 2016, the
Company had no Level 3 inputs.
NOTE 3. INCOME TAXES
The Company
has adopted ASC 740-10, “
Income Taxes”
, which requires the use of the liability method in the computation of
income tax expense and the current and deferred income taxes payable (deferred tax liability) or benefit (deferred tax asset). Valuation
allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
On December
22, 2017, the 2017 Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law including a one-time mandatory transition
tax on accumulated foreign earnings and a reduction of the corporate income tax rate to 21% effective January 1, 2018, among others.
We are required to recognize the effect of the tax law changes in the period of enactment, such as determining the transition tax,
remeasuring our U.S. deferred tax assets and liabilities as well as reassessing the net realizability of our deferred tax assets
and liabilities. The Company does not have any foreign earnings and therefore, we do not anticipate the impact of a transition
tax. We have remeasured our U.S. deferred tax assets at a statutory income tax rate of 21%. Since the Tax Act was passed late in
the fourth quarter of 2017, and ongoing guidance and accounting interpretation are expected over the next 12 months, we consider
the accounting of any transition tax, deferred tax re-measurements, and other items to be incomplete due to the forthcoming guidance
and our ongoing analysis of final year-end data and tax positions. We expect to complete our analysis within the measurement period
in accordance with SAB 118, and no later than fiscal year end December 31, 2018.
GEX Management,
Inc. has incurred losses since 2014. Therefore, GEX has no federal tax liability. The net deferred tax asset generated
by the loss carryforward has been fully reserved. The cumulative net operating loss carryforward is $1,313,226 and $377,121
at December 31, 2017 and 2016, respectively, all of which is available for carryforward for federal income tax purposes and will
expire in fiscal years 2034 to 2037. At December 31, 2017 and December 31, 2016, the deferred tax asset consisted of the
following:
|
|
|
|
|
|
|
2017
|
|
2016
|
Net Operating (Income) Loss
|
|
$
|
275,781
|
|
|
$
|
128,221
|
|
Less: Valuation Allowance
|
|
|
(275,781
|
)
|
|
|
(128,221
|
)
|
Deferred Tax Asset, net
|
|
$
|
—
|
|
|
$
|
—
|
|
The change in the valuation allowance
of $147,560 is due to the Company’s net loss of $867,035 during the year ended December 31, 2017 and a reduction in the maximum
tax rate from 34% to 21% at December 31, 2017.
The Company has no tax positions at December
31, 2017 and 2016 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of
such deductibility.
The Company’s tax returns for the
years ended December 31, 2017, 2016, and 2015 are open for examination under Federal statute of limitations.
The Company
had no accruals for interest and penalties since inception.
NOTE 4. SHAREHOLDERS’ EQUITY
Transactions
The Company filed Form S-1 with the
Securities & Exchange Commission and it was declared effective on November 14, 2016 under which the Company sold 188,059 shares
for $282,089 in the first quarter under this registration statement. The Company effected a 4 for 3 stock split in December 2017.
All transaction have been adjusted to reflect this split.
The Company issued 47,781 shares for
services for a total of $74,750 during 2017.
On May 15, 2017, GEX entered into a
Conversion Agreement with two consultants that had a $45,000 balance with the Company. In accordance with the terms and conditions
of the Conversion Agreement, GEX issued a total of 40,000 shares of the Company's common stock, at a cost basis of $1.125 per share.
The two consultants were issued 20,000 shares each of the total 40,000 shares issued by the Company.
On June 7, 2017, GEX entered into
a Debt Conversion Agreement with the Company that purchased the Line of Credit Promissory Note from the Company’s Chief
Executive Officer. Under the terms and conditions of the Debt Conversion Agreement GEX issued 153,664 shares of its common stock,
for the extinguishment of $345,745 in debt and accrued interest owed by GEX under the Line of Credit as of the date of the Debt
Conversion Agreement. The shares were valued at $1.125 per share. GEX recorded a gain on extinguishment of debt in the amount
of $172,872.
On June 20, 2017, GEX entered into
a Stock Purchase Agreement (“SPA”) with a third-party investor. Under the terms and conditions of the SPA, GEX issued
19,003 shares of its common stock, for a total of $120,000.
On June 20, 2017, GEX entered into
an Advisory Agreement with a third-party advisory firm. Under the terms and conditions of the Advisory Agreement, GEX paid a non-refundable
retainer in the amount of $24,750 through the issuance of 3,334 shares of the Company’s common stock.
On July 20, 2017, GEX entered into
a Stock Purchase Agreement with a third-party investor. Under the terms and conditions of the SPA, GEX issued 12,668 shares of
its common stock restricted pursuant to Rule 144 of the Securities Act of 1933 for a total of $80,000.
On September 20, 2017, GEX entered
into Stock Purchase Agreements with two advisory board members. Under the terms and conditions of the SPA’s, GEX issued 6,564
shares of its common stock, for a total of $32,000.
On October 18, 2017, GEX entered into
a Stock Purchase Agreements with one advisory board member. Under the terms and conditions of the SPA, GEX issued 2,667 shares
of its common stock restricted pursuant to Rule 144 of the Securities Act of 1933, as amended, for a total of $13,000.
On October 31, 2017 GEX entered into
a Lease Agreement for office space in Fayetteville, Arkansas for 1,067 shares of its common stock, restricted pursuant to Rule
144 of the Securities Act of 1933, as amended.
On December 29, 2017 GEX entered into
a SPA with a shareholder. Under the terms of the SPA, GEX issued 75,000 shares of its common stock for a total of $300,000.
On December 29, 2017 the Company acquired
a 12,223 square foot, multi-use office building in Lowell, Arkansas through the purchase of 100% of the member interest in AMAST
Consulting, LLC for 200,000 shares of the Company’s common stock and assumption of the outstanding mortgage.
General
The Company is authorized to issue
200,000,000 common shares at a par value of $0.001 per share. These shares have full voting rights. On December 1, 2017,
the Company effected a 4 for 3 stock split which resulted in the 8,661,632 shares outstanding being split to 11,522,231. At December
31, 2017 and 2016 there were 11,797,231 and 8,241,015 common shares outstanding, respectively.
The Company is authorized to issue
20,000,000 preferred shares at a par value of $0.001 per share. These shares have full voting rights. At December 31,
2017 and December 31, 2016 there were no preferred shares outstanding. The preferred shares rank senior to the common shares of
the Company in each case with respect to dividend distributions and distributions of assets upon the liquidation, dissolution or
winding up of the Company whether voluntary or involuntary.
NOTE 5. ACCOUNTS RECEIVABLE
The Company has the following accounts
receivable, net as of December 31, 2017 and 2016:
|
|
2017
|
|
2016
|
Accounts receivable
|
|
91,532
|
|
100,820
|
Allowance
|
|
-
|
|
-
|
Accounts receivable, net
|
|
91,532
|
|
100,820
|
Accounts receivables are considered
past due if payments have not been received within agreed upon invoice terms. Write offs are recorded at a time when a customer
receivable is deemed uncollectible. The Company had $0 and $29,918 bad debt write offs during the year ended December 31, 2017
and 2016, respectively. The allowance for doubtful accounts as of December 31, 2017 and 2016 was $0.
NOTE 6. PROPERTY & EQUIPMENT
The Company has the following property
and equipment as of December 31, 2017 and 2016:
|
|
2017
|
|
2016
|
Buildings
|
|
$
|
2,459,420
|
|
|
$
|
—
|
|
Office Equipment
|
|
|
5,844
|
|
|
|
1,731
|
|
Total Fixed Assets
|
|
$
|
2,465,264
|
|
|
$
|
1,731
|
|
Accumulated Depreciation
|
|
|
(1,887
|
)
|
|
|
(625
|
)
|
Property and Equipment, net
|
|
$
|
2,463,377
|
|
|
$
|
1,106
|
|
Depreciation expense for the years
ended December 31, 2017 and 2016 was $1,262 and $577, respectively.
NOTE 7. OTHER CURRENT ASSETS
The Company has the following other
current assets, net as of December 31, 2017 and 2016:
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
Prepaids
|
|
$
|
116,623
|
|
|
$
|
—
|
|
Other Current Assets
|
|
|
2,709
|
|
|
|
|
|
Acquired Customer Contracts
|
|
|
37,500
|
|
|
|
|
|
Accumulated Amortization
|
|
|
(68,083
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net Other Current Assets
|
|
$
|
88,749
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for the years
ended December 31, 2017 and 2016 was $56,740 and $0, respectively. Additionally, $11,343 of a prepaid contract was written off
to consulting expense when the contract became worthless.
NOTE 8. LINES OF
CREDIT–RELATED PARTY
As of December 31, 2017 and 2016, the
Company’s Lines of Credit – Related Party were as follows:
|
|
|
|
|
|
|
2017
|
|
2016
|
|
|
|
|
|
Lines of Credit - Related Party, 6% interest rate, $1,000,000
|
|
|
|
Due March 31, 2019 - Cancelled on June 7, 2017 Upon Conversion
|
$ -
|
|
$ 317,187
|
|
|
|
|
|
Lines of Credit - Related Party, 6% interest rate, $1,500,000
|
|
|
|
Due March 31, 2019
|
|
352,100
|
|
46,000
|
|
|
|
|
|
Total
|
|
$ 352,100
|
|
$ 363,187
|
The $1,000,000 Line of Credit was
cancelled when it was repaid in June 2017. Two other lines of credit, totaling $1,500,000 were subsequently extended. See
NOTE 12 for additional information regarding the Company’s Lines of Credit – Related Party.
The Company recorded interest expense
of $14,039 and $39,809 for the years ended December 31, 2017 and 2016 respectively.
NOTE 9. ACCOUNTS RECEIVABLE AND
CONCENTRATION OF CREDIT RISK
For the years ended December 31, 2017
and 2016, three customers made up 86% and four customers made up 92% of the Company’s outstanding accounts receivable balance,
of which 25% and 19% were related party receivables for the years ended December 31, 2017 and 2016, respectively.
For the years ended December 31, 2017
and 2016 two customers accounted for 83% and four customers accounted for 80% of the Company’s net revenue, respectively
of which 0% and 60% were related party revenues. Management believes the credit risk is minimal.
NOTE 10.
NOTE PAYABLE
In December 2017, the Company purchased
a 12,223 square foot, multi-use office building in Lowell, Arkansas and assumed the underlying first lien note which is secured
by the property. Pursuant to the terms and conditions of the purchase of the property, the Company agreed to remove the guarantors
of the loan within six months from the date of purchase.
As of December 31, 2017, the note had
a balance of $1,310,920, carries an interest rate of 4.5%, a monthly payment of $9,540 and has a maturity date of March 22, 2022
when the remaining balance will become due and payable.
The following is a schedule of minimum principal
payments required under the loan as of December 31, 2017:
Period Ended December 31:
|
|
Amount
|
|
2018
|
|
|
|
56,649
|
|
|
2019
|
|
|
|
59,252
|
|
|
2020
|
|
|
|
61,973
|
|
|
2021
|
|
|
|
64,821
|
|
|
2022
|
|
|
|
1,068,225
|
|
|
|
|
|
$
|
1,310,920
|
|
The Company’s outstanding balance related
to the note payable was $1,310,920 and $0 for the years ended December 31, 2017 and 2016, respectively.
NOTE 11. COMMITMENTS AND CONTINGENCIES
In September 2016, the Company
entered into a 38-month lease agreement starting October 2016 for its 2,920 square foot corporate office, for which the first two
months’ rent was abated. The Company paid rent expense of $62,780 and $38,258 related to this lease for the years ended
December 31, 2017 and 2016, respectively.
The following are the minimum lease
obligations under the lease:
|
|
|
|
|
Year
|
|
Amount
|
|
2018
|
|
64,362
|
|
2019
|
|
60,225
|
|
Total
|
|
$ 124,587
|
NOTE 12. RELATED PARTY TRANSACTIONS
Policy on
Related Party Transactions
The Company has a formal, written policy
that includes procedures intended to ensure compliance with the related party provisions in common practice for public companies.
For purposes of the policy, a “related party transaction” is a transaction in which the Company participates and in
which a related party (including all of GEX’s directors and executive officers) has a direct or indirect material interest.
Any transaction exceeding the 5% threshold, and any transaction involving consulting, financial advisory, legal or accounting services
that could impair a director’s independence, must be approved by the Board of Directors. Any related party transaction in
which an executive officer or a Director has a personal interest, must be approved by the Board of Directors, following appropriate
disclosure of all material aspects of the transaction.
Related
Party Transactions
Debt Agreements
On March 1, 2015, the Company entered
into a Revolving Line of Credit (“LOC”) with its CEO, Carl Dorvil. Mr. Dorvil agreed to loan the Company up to $1,000,000
at a rate of 6%. This LOC has a balance of $0 and $317,187 at December 31, 2017 and December 31, 2016, respectively. The outstanding
balance of $318,187 and related accrued interest of $28,557 was converted into 115,248 shares of common stock in the year ended
December 31, 2017 and the LOC was cancelled after the conversion.
On March 1, 2015, the Company entered
into a Loan Agreement with P413 Management, LLC (“P413”). P413 agreed to loan the Company up to $500,000 at a rate
of 6%. On November 1, 2017, this line of credit was increased to $1,000,000. Additionally, P413 extended a $500,000 line of credit
to GEX Staffing, Inc. under the same terms. GEX’s CEO, Carl Dorvil, is a majority member interest owner in P413. These lines
of credit have a balance of $352,100 and $46,000 at December 31, 2017 and 2016, respectively. The LOCs are due and payable on March
31, 2019.
Professional Service Agreements
On March 1, 2015, the Company entered
into an Outsourcing Agreement with P413 Management, LLC (“P413”) to provide back office services to P413. GEX’s
CEO, Carl Dorvil, is a majority member interest owner in P413. The Company reported revenues under this Agreement of $0 and $ 38,513
for the years ended December 31, 2017 and 2016 respectively.
On September 1, 2015 the Company entered
into an Outsourcing Agreement with Vicar Capital Advisors, LLC (“Vicar”) to provide back office services to Vicar.
GEX’s CEO, Carl Dorvil, is a majority member interest owner in Vicar. The Company reported revenues under this Agreement
of $104,000 and $101,992 for the years ended December 31, 2017 and 2016 respectively. As of December 31, 2017 and 2016 Vicar had
an outstanding balance owed to the Company of $30,771 and $23,500, respectively.
On August 1, 2014 the Company entered
into an Outsourcing Agreement with Renaissance Global Marketing, LLC (“Renaissance”) to provide back office services
to Renaissance. GEX’s CEO, Carl Dorvil was formally a minority member interest owner in Renaissance. The Company reported
revenues under this Agreement of $0 and $165,380 for the years ended December 31, 2017 and 2016. As of December 31, 2017 and 2016
Renaissance had an outstanding balance owed to the Company of $0 and $0, respectively.
The Company entered into a Consulting
Agreement with Capital Financial Consultants, Inc. for $45,000 for the year ended December 31, 2016. A GEX officer’s family
member owns Capital Financial Consultants, Inc. As of December 31, 2017 and 2016 the balance payable under the two agreements to
CFC was $0 and $45,000, respectively.
Revenue
The Company had revenue from related
parties of $104,000 and $305,885 for the years ended December 31, 2017 and 2016, respectively.
NOTE 13. SUBSEQUENT EVENTS
On March 9, 2018, the Board
of Directors of the Company voted to amend its Bylaws to separate the positions of President and Chief Executive Officer and appointed
Chelsea Christopherson as the Company’s President. Ms. Christopherson continues to serve as the Company’s Chief Operating
Officer and on the Company’s Board.
On March 6, 2018 the Company
entered into an Agreement to sell $1,066,050 of the Company’s future revenue for $772,500 to provide liquidity for the Company’s
expansion opportunities, and this Agreement is personally guaranteed by Carl Dorvil, the Company’s Chief Executive Officer
and Chairman.