UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM
10-K
_________________
☒ ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended: June 30, 2018
or
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from: _____________ to _____________
GENESYS
INDUSTRIES, INC.
_________________
Florida
|
333-213387
|
30-0852686
|
(State
or Other Jurisdiction
|
(Commission
|
(I.R.S.
Employer
|
of
Incorporation or Organization)
|
File
Number)
|
Identification
No.)
|
1914
24
th
Ave E Palmetto, Florida 34221
(Address of Principal Executive Offices) (Zip Code)
941-722-3600
(Registrant’s telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act: None
Title
of each class
Not Applicable
Securities
registered pursuant to Section 12(g) of the Act:
Title
of each class
Not Applicable
_________________
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☐ No ☒
Indicate
by check mark 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.
Yes ☐ No ☒
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company.
Large
accelerated filer ☐
|
Accelerated
filer ☐
|
Non-accelerated
filer ☐
|
Smaller
reporting company ☒
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
State
the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price
at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day
of the registrant’s most recently completed second fiscal quarter.
There has been no trading of the Company’s common
shares.
As
of December 27, 2018, the Company had 17,870,000 shares of its common stock issued and outstanding, par value $0.001 per share.
PART I
|
|
Item 1. Business
|
3
|
Item 1A. Risk Factors
|
5
|
Item 1B. Unresolved Staff Comments
|
14
|
Item 2. Properties
|
14
|
Item 3. Legal Proceedings
|
14
|
Item 4. Mine Safety Disclosures
|
14
|
|
|
PART II
|
|
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
15
|
Item 6. Selected Financial Data
|
16
|
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
16
|
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
|
18
|
Item 8. Financial Statements and Supplementary Data
|
18
|
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
|
18
|
Item 9A. Controls and Procedures
|
19
|
Item 9B. Other Information
|
19
|
|
|
PART III
|
|
Item 10. Directors, Executive Officers and Corporate Governance
|
19
|
Item 11. Executive Compensation
|
21
|
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
21
|
Item 13. Certain Relationships and Related Transactions, and Director Independence
|
22
|
Item 14. Principal Accounting Fees and Services
|
22
|
|
|
PART IV
|
|
Item 15. Exhibits, Financial Statement Schedules
|
23
|
Forward-Looking
Information
Statements
in this report may be “forward-looking statements.” Forward-looking statements include, but are not limited to, statements
that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities
or other future events or conditions. These statements are based on current expectations, estimates and projections about our
business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve
risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely
to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including
those described above and those risks discussed from time to time in this report, including the risks described under “Risk
Factors” and any risks described in any other filings we make with the SEC. Any forward-looking statements speak only as
of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect
events or circumstances after the date of this report.
Management’s
discussion and analysis of financial condition and results of operations are based upon our financial statements, which have been
prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.
On an on-going basis, we evaluate these estimates, including those related to useful lives of real estate assets, cost reimbursement
income, bad debts, impairment, net lease intangibles, contingencies and litigation. We base our estimates on historical experience
and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There
can be no assurance that actual results will not differ from those estimates.
PART
1
ITEM
1. BUSINESS
The
company was incorporated on December 9
th
, 2014 in the state of Florida. Genesys Industries is a diversified multi-industry
advanced manufacturer of complex components and products. The company is a vertically integrated precision cnc manufacturing and
fabrication company with core emphasis on product design, engineering and precision manufacturing of complex components and products.
Some of the industries served include Automotive, Aviation, Firearms, Food Processing, Industrial, Maritime, Medical, Railroad,
Oil and Gas, Packaging, Telecom, Pulp Paper, Transportation and many more.
Products
and Services
The
Company focuses on two aspects of business, the main being the manufacturing of metal and plastic components in medium to high
volumes requiring tolerances as close as one ten-thousandth (.0001) of an inch. These components are manufactured in accordance
with customer specifications using raw materials both purchased by the company as well as being supplied by our customer. Raw
materials may include Stainless Steel, Aluminum, Carbon Steel, Alloy Steels, Tool Steel, Titanium, Plastics, Delrin, Rubber.
The
second portion of our product emphasis is based on product line development and engineered product manufacturing. Engineered to
meet and exceed the rigorous quality standards of diverse industries. The company intends to implement the latest technologies
coupled with CNC and robotic machinery to efficiently produce innovative original equipment products.
The
company has a dynamic engineering focus with capabilities of producing one-piece prototypes to complex product mix orders. We
provide full-service precision CNC machining, fabrication and finishing solutions to produce a high quality end product for our
commercial and industrial customers. The processes involve manufacturing methodologies such as precision milling, turning, grinding,
multi-spindle screw machining, cnc tube bending, pipe bending, heat treating, waterjet cutting, laser cutting, punch stamping,
injection molding, shearing, robotic welding, CMM Inspection, plating, powder coating, finishing, sand blasting and many more
intricate manufacturing processes. We offer engineering services and customer support throughout the manufacturing process to
provide our clients with a finished end product at the highest value.
Sales
& Marketing
We
sell our products globally and rely on direct sales force, manufacturing representatives, distributors, commission sales agents,
magazine advertisements, internet advertising, trade shows, trade directories and catalogue listings to market our products and
services.
The
company aims to achieve diversified growth through the expansion of our customer base for cnc machining and fabrication as well
as value-added services such as plating, surface engineering and finishing. We intend to grow through partnerships and acquisitions.
We are putting a team of direct sales force personnel that will be dedicated to pursuing opportunities to organically grow our
business. Our overall goal is to add core customers that will diversify the industries that we serve and will eventually become
“major” accounts that support the overall organization. Our target markets include Aerospace, Automotive, Firearms,
Food Processing, Industrial, Maritime, Medical, Railroad, Oil and Gas, Packaging, Telecom, Textiles, Pulp Paper, Transportation
and many more industries that outsource portions of their manufacturing operations such as product development, product line engineering,
machining and fabrication. We search out these types of customers via a wide variety of methods including prospecting, trade shows
and networking with the goal of receiving request for quotes that we can provide proposals on and eventually win new business.
The
Company intends to build a reputation as a dependable manufacturer capable of meeting stringent specifications to produce quality
components at high production rates. The Company intends to demonstrate an ability to develop sophisticated manufacturing processes
and controls essential to produce precision and reliability in its products.
Customers
We
currently have 18 customers. Our principal customers would be engaged in Aviation, Automotive, Construction, Commercial, Food
Processing, Industrial, Firearms, Oil and Gas, Packaging, Transportation sectors and many more industries. Our customers are leading
end users, original equipment manufacturers (OEM) and original design manufacturing (ODM) producers in the world.
Competition
There
are a large number of companies engaged in vertically integrated manufacturing including CNC machining and Fabrication. The Company
faces substantial competition in each of its principal markets. Most of its competitors are larger and have greater financial
resources than the Company; several are divisions of multi-national companies. The Company competes on the basis of price, engineering
and technological expertise, know-how and the quality of its products, systems and services. Additionally, the Company’s
management believes that the successful delivery, installation and performance of the Company’s products and systems is
a key factor in gaining business as customers typically prefer to make significant purchases from a company with a solid performance
history.
The
Company will obtain majority of all its contracts through competitive quoting. The Company faces direct competition from companies
with far greater financial, technological, manufacturing and personnel resources. Competition is primarily based on product quality,
service, timely delivery, and price.
Research
and Development; Intellectual Property
The
Company is developing proprietary technologies that will give it an edge in competing with its competitors. Thus, the Company
relies on a combination of trade secrets and know-how to protect its intellectual property.
Suppliers
The
Company is not dependent on, nor expects to become dependent on, any one or a limited number of suppliers. The Company buys raw
materials, parts and components to assemble and manufacture its equipment and products. The Company manages all technical, physical
and commercial aspects of the performance of the Company contracts. To date, the Company has not experienced difficulties either
in obtaining raw materials and other finished spare parts.
Employees
We
have 12 employees including our CEO.
Foreign and Domestic Operations
and Export Sales
The
Company has no operations or any significant sales in any foreign country.
Government
Regulation
The
Company’s operations are subject to certain foreign, federal, state and local regulatory requirements relating to, among
others, environmental, waste management, labor and health and safety matters. Management believes that the Company’s business
is operated in material compliance with all such regulations.
ITEM
1A. RISK FACTORS
Investing
in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below,
together with all of the other information in this report, including the consolidated audited financial statements and the related
notes appearing at the end of this annual report on Form 10-K, with respect to any investment in shares of our common stock. If
any of the following risks occurs, our business, financial condition, results of operations and future prospects would likely
be materially and adversely affected. In that event, the market price of our common stock could decline, and you could lose all
or part of your investment. These statements, like all statements in this report, speak only as of the date of this report (unless
another date is indicated) and we undertake no obligation to update or revise the statements in light of future development.
Risks
Related to our Business.
Our
lack of revenues from operations makes it difficult for us to evaluate our future business prospects and make decisions based
on those estimates of our future performance.
We
have generated minimal revenue since inception. As a consequence, it is difficult, if not impossible, to forecast our future results
based upon our historical data. Because of the related uncertainties, we may be hindered in our ability to anticipate and
timely adapt to increases or decreases in sales, revenues or expenses. If we make poor budgetary decisions as a result of
unreliable data, we may never become profitable or incur losses, which may result in a decline in our stock price.
Our
auditor has indicated in its report that there is substantial doubt about our ability to continue as a going concern as a result
of our lack of revenues and if we are unable to generate significant revenue or secure financing we may be required to cease or
curtail our operations.
Our
auditor has indicated in its report that our lack of revenues raises substantial doubt about our ability to continue as a going
concern. The financial statements do not include adjustments resulting from the outcome of this uncertainty. If we
are unable to generate significant revenue or secure financing, we may be required to cease or curtail our operations.
We
Are Dependent on Our President, To Guide Our Initial Operations and Implement Our Plan Of Operations. If We Lose Such Services
We Will Have to Change Our Business Plan/Direction or Cease Operations.
Our
success will depend on the ability and resources of our President. If we lose the services of our CEO, we will be forced to either
change our business plan and direction or cease operations. We have no written employment agreement with our CEO. We do not maintain
key man life insurance on any of our executive officers and directors. If one or more of our executive officers are unable or
unwilling to continue in their present positions, we may not be able to replace them readily, if at all. Therefore, our business
may be severely disrupted, and we may incur additional expenses to recruit and retain new officers.
We
may be subject to regulatory inquiries, claims, suits prosecutions which may impact our profitability.
Any
failure or perceived failure by us to comply with applicable laws and regulations may subject us to regulatory inquiries, claims,
suits and prosecutions. We can give no assurance that we will prevail in such regulatory inquiries, claims, suits and prosecutions
on commercially reasonable terms or at all. Responding to, defending and/or settling regulatory inquiries, claims, suits and prosecutions
may be time-consuming and divert management and financial resources or have other adverse effects on our business. A negative
outcome in any of these proceedings may result in changes to or discontinuance of some of our services, potential liabilities
or additional costs that could have a material adverse effect on our business, results of operations, financial condition and
future prospects.
Because
we have a limited history of operations we may not be able to successfully implement our business plan.
We
have less than four months of operational history in our industry. Accordingly, our operations are subject to the risks inherent
in the establishment of a new business enterprise, including access to capital, successful implementation of our business plan
and limited revenue from operations. We cannot assure you that our intended activities or plan of operation will be successful
or result in revenue or profit to us and any failure to implement our business plan may have a material adverse effect on the
business of the Company.
The
economic conditions in the United States and around the world could adversely affect our financial results
.
Demand
for our services depends upon worldwide economic conditions, including but not limited to overall economic growth rates, consumer
spending, oil prices, financing availability, employment rates, interest rates, inflation, consumer confidence, and the profits,
capital spending, and liquidity of large OEMs that we serve. A downturn in any of the markets we serve could cause our prospective
OEM customers to reduce ordering levels, resulting in reschedules, program delays or cancelled orders of our services having an
adverse effect on our business and our financial results. In addition, some of our customers could have their own internal manufacturing
capabilities. A downturn in one of their markets could result in them bringing machining and fabrication services back in house
and thus adversely affect our financial results.
If
we fail to effectively manage our growth, our business, brand and reputation, results of operations and financial condition may
be adversely affected.
We
may experience a rapid growth in operations, which may place significant demands on our management team and our operational and
financial infrastructure. As we continue to grow, we must effectively identify, integrate, develop and motivate new skilled employees,
and maintain the beneficial aspects of our corporate culture. To attract top talent, we believe we will have to offer attractive
compensation packages. The risks of over-hiring or over compensating and the challenges of integrating a rapidly growing employee
base may impact profitability.
Additionally,
if we do not effectively manage our growth, the quality of our services could suffer, which could adversely affect our business,
brand and reputation, results of operations and financial condition. If operational, technology and infrastructure improvements
are not implemented successfully, our ability to manage our growth will be impaired and we may have to make significant additional
expenditures to address these issues. To effectively manage our growth, we will need to continue to improve our operational, financial
and management controls and our reporting systems and procedures. This will require that we refine our information technology
systems to maintain effective online services and enhance information and communication systems to ensure that our employees effectively
communicate with each other and our growing base of customers. These system enhancements and improvements will require significant
incremental and ongoing capital expenditures and allocation of valuable management and employee resources. If we fail to implement
these improvements and maintenance programs effectively, our ability to manage our expected growth and comply with the rules and
regulations that are applicable to publicly reporting companies will be impaired and we may incur additional expenses.
We
depend heavily on key personnel, and turnover of key senior management could harm our business.
Our
future business and results of operations depend in significant part upon the continued contributions of our Sole Officer and
Director. If we lose her services or if she fails to perform in her current position, or if we are not able to attract and retain
skilled employees as needed, our business could suffer. Significant turnover in our senior management could significantly deplete
our technical knowledge held by our existing management team. We depend on the skills and abilities of such key employees in managing
the engineering, production, technology, research & development, marketing and sales aspects of our business, any part of
which could be harmed by turnover in the future.
We
may not be able to compete effectively against our competitors.
We
are engaged in highly competitive field. Competition from other companies in the same field is intense and is expected to increase.
Many of our competitors have substantially greater resources, research and development staff, engineering personnel, skilled machinists,
sales and marketing staff, and facilities than we do. In addition, other more adequately capitalized and established firms may
enter our field. There can be no assurance that our competitors will not develop product service offerings that are more effective
than those being developed by us or that would render our product and service offerings obsolete or noncompetitive. Our profitability
as a company depends on effective marketing, diverse capability and competitive pricing. There is no assurance that we will be
able to price our product competitively or have the purchasing power that large companies enjoy. The industry is very capital
intensive due to machinery and plant operations. There is no assurance that we will obtain the funding to acquire the diverse
machinery and plant infrastructure that the larger established companies have acquired.
Our
Business Model may not be sufficient to achieve success in our intended market
Our
survival is dependent upon the market acceptance of initially a narrow group of products and services. Should these
products and service be too narrowly focused or should the target market not be as responsive as we anticipate, we will not have
in place alternate products we can offer to ensure our survival.
The
Industrial Manufacturing industry is highly competitive, and we may not be able to compete effectively.
The
Industrial Manufacturing products and services industry in which we operate includes a large number of participants and is intensely
competitive. We face competition from other multi-national companies, established businesses and financially stronger companies.
This sector requires capital and infrastructure resources to become competitive and remain relevant. In addition, because there
are relatively high barriers to entry, we expect to face tremendous competition from larger more established firms. Many of our
competitors have a greater national presence and are also international in scope, as well as have significantly greater personnel,
financial, technical and marketing resources. In addition, these competitors may generate greater revenues and have greater name
recognition than we do. Our ability to compete also depends in part on the ability of our competitors to hire, retain and motivate
skilled personnel, the price at which others offer comparable services and our competitors’ responsiveness to their clients.
If we are unable to compete successfully with our existing competitors or with any new competitors, our financial results will
be adversely affected.
We
operate in the highly competitive and fragmented industrial manufacturing industry.
We
compete against many OEM manufacturers, contract machining and fabrication companies. We also compete with OEM in-house operations
that are continually evaluating manufacturing products internally against the advantages of outsourcing. We may also be at a competitive
disadvantage with respect to price when compared to manufacturers with excess capacity, lower cost structures and availability
of lower cost labor. The availability of excess manufacturing capacity of our competitors also creates competitive pressure on
price and winning new business. We also face competition from companies that are based in low cost countries. These companies
may have lower cost structures and the availability of lower cost labor. To respond to competitive pressures, we may be required
to reduce our prices to customers or increase discounts to customers, which would result in lower gross profit margins and decreased
revenue. These factors also impact the Company’s ability to obtain additional manufacturing programs and retain our current
programs.
After
we attempt to increase operations, we will face increasing competition from domestic and foreign companies.
Our
ability to compete against other domestic and international enterprises will be, to a significant extent, dependent on our ability
to distinguish our capabilities, products and services from those of our competitors by differentiating our marketing approach
and identifying attractive solutions to market and sell. Some of our competitors have been in business longer than we have and
are more established. Our competitors may provide services comparable or superior to those we provide or adapt more quickly than
we do to evolving industry trends or changing market requirements. Increased competition may result in reduced margins and loss
of market share, any of which could materially adversely affect our profit margins after we commence operations and generate revenues.
Controlling
manufacturing costs is a significant factor in operating results
.
The
Company’s ability to manage its costs on all manufacturing programs and its ability to curtail costs and expenses on potential
new manufacturing programs could have a significant impact on the Company’s operating results. The Company also faces increasing
quality requirements from its customers that could have an impact on the costs to manufacture product.
Our
ability to secure and maintain sufficient credit arrangements is key to our continued operations and there is no assurance we
will be able to obtain sufficient additional equity or debt financing in the future.
There
is no assurance that we will be able to retain or renew our credit agreements and other finance agreements in the future. In the
event the business grows rapidly, the uncertain economic climate continues, or we acquire one or more other companies, additional
financing resources will likely be necessary in the current or future fiscal years. As a small company with a limited ability
to attract and obtain financing, there is no assurance that we will be able to obtain sufficient additional equity or debt financing
in the future on terms that are reasonable in light of current market conditions.
We
Will Require Financing To Achieve Our Current Business Strategy And Our Inability To Obtain Such Financing Could Prohibit Us From
Executing Our Business Plan And Cause Us To Slow Down Our Expansion or Cease Our Operations.
We
will need to raise capital over the next twelve months through public or private debt or sale of equity to execute our business
plan to become a stable revenue generating company. Such financing may not be available as needed. Even if such financing is available,
it may be on terms that are materially adverse to your interests with respect to dilution of book value, dividend preferences,
liquidation preferences, or other terms. If we are unable to obtain this financing on reasonable terms, we would be unable to
hire the additional employees needed to execute our business plan and we would be forced to delay or scale back our plans for
expansion. This would delay our ability to get our operations to profitability and could force us to cease operations. In addition,
such inability to obtain financing on reasonable terms could have a material adverse effect on our business, operating results,
or financial condition. Moreover, in addition to monies needed to continue operations over the next twelve months, we anticipate
requiring additional funds in order to execute any future plans for growth. No assurance can be given that such funds will be
available or, if available, will be on commercially reasonable terms satisfactory to us. There can be no assurance that we will
be able to obtain financing if or when it is needed on terms we deem acceptable.
There
is substantial doubt about our ability to continue, as a going concern, as a result of our lack of revenues and financial resources,
and if we are unable to generate significant revenue or secure financing, we may be required to cease or curtail our operations.
Our
lack of operating history and financial resources raise substantial doubt about our ability to continue as a going concern. The
financial statements do not include adjustments that might result from the outcome of this uncertainty, and if we are unable to
secure financing, we may be required to cease or curtail our operations. If we do not secure financing, and related activities
or if we do not secure funding to implement our business plan, we estimate current available financial resources will sustain
our operations only through the next few months, and then only if continued funding by the management of the company. Because
we will need additional capital to implement our business plan and may not be able to obtain sufficient capital, we may be forced
to limit the scope of our operations, and our revenues may be reduced.
In
connection with implementing our business plans, we will experience increased capital needs and accordingly, we may not have sufficient
capital to fund our future operations without additional capital investments. Our capital needs will depend on numerous factors,
including the following:
•
our profitability;
•
our ability to secure financing and acquire machinery and retain skilled production staff;
•
the ability to generate revenues from the sale of finished product
•
the ability to attract and retain customers.
We
cannot assure you that we will be able to obtain capital in the future to meet our needs. We have no sources of financing identified.
If we cannot obtain additional funding, we may be required to:
•
limit our ability to implement our business plan;
•
limit our marketing efforts; and
•
decrease or eliminate capital expenditures.
Even
if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional
capital that are acceptable to us. Any future capital investments could dilute or otherwise adversely affect the holdings or rights
of our existing shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have
rights, preferences, and privileges senior to our Common Stock. Any additional financing may not be available to us, or if available,
may not be on terms favorable to us.
Risks
of Borrowing
If
the Company incurs indebtedness, a portion of its cash flow will have to be dedicated to the payment of principal and interest
on such indebtedness. Typical loan agreements also might contain restrictive covenants, which may impair the Company’s operating
flexibility. Such loan agreements would also provide for default under certain circumstances, such as failure to meet certain
financial covenants. A default under a loan agreement could result in the loan becoming immediately due and payable and, if unpaid,
a judgment in favor of such lender which would be senior to the rights of shareholders of the Company. A judgment creditor would
have the right to foreclose on any of the Company’s assets resulting in a material adverse effect on the Company’s
business, operating results or financial condition.
Unanticipated
Obstacles to Execution of the Business Plan
The
Company’s business plans may change significantly. Many of the Company’s potential business endeavors are capital
and equipment intensive. Management believes that the Company’s chosen activities and strategies are achievable in light
of current economic and legal conditions with the skills, background, and knowledge of the Company’s principals and advisors.
Management reserves the right to make significant modifications to the Company’s stated strategies depending on future events.
Our
ability to maintain and attract new business depends upon our reputation, technical capabilities and the quality of our products
and services.
As
an Industrial Manufacturing Company, our ability to secure new customer orders depends heavily upon our reputation and our capabilities
of services we can offer to manufacture product per the customer requirements. Any factor that diminishes any of these abilities,
including not meeting client expectations or inability to deliver product per the customers’ specifications, could make
it substantially more difficult for us to attract new engagements and clients. Similarly, because we obtain many of our new engagements
from former or current clients or from referrals by those clients or by dedicated sales relationships that we have worked with
in the past, any client that questions the quality of our work or reliability could impair our ability to secure additional new
orders and clients.
Our
clients may terminate sales orders and agreements with little or no notice, which may cause us to experience unexpected declines
in our profitability and utilization.
The
sales order agreements that we will typically enter into with clients do not obligate them to continue to use our products and
services. Typically, our sales orders permit clients to terminate our services at any time. If our clients unexpectedly cancel
orders with us or curtail the scope of our agreement, we may be unable to replace the lost revenues from those engagements, quickly
eliminate costs associated with those engagements, or quickly find other engagements to utilize our production staff. Any decrease
in revenues without a corresponding reduction in our costs will likely harm our profitability.
Our
future sales and reputation may be affected by litigation or other liability claims.
We
have not procured a general liability insurance policy for our business. To the extent that we suffer a loss of a type which would
normally be covered by general liability, we would incur significant expenses in defending any action against us and in paying
any claims that result from a settlement or judgment against us. Adverse publicity could result in a loss of industry confidence
in our products and services.
Although
we have not yet generated any significant revenues, general economic conditions could reduce our revenues after we commence operations
.
We
have not yet generated significant revenues. General economic conditions could have an impact on our business and financial
results after we commence operations. The global economy in general remains uncertain. As a result, original equipment manufacturers
(OEM’s) and companies may delay or reduce expenditures. Weak economic conditions and/or softness in the consumer or business
channels after we commence operations and generate revenues could result in lower demand for industrial products and services,
thereby resulting in lower sales revenues, earnings and cash flows.
Our
revenues, operating income and cash flows are likely to fluctuate
.
We
may experience fluctuating revenues, operating income and cash flows and expect that this will occur from time to time in the
future. We may experience fluctuations in our annual or quarterly revenues and operating income because of the timing of our customer
orders, the types of product and service orders we are working on at different times, hiring trends and decreased productivity
because of vacations taken by our professionals. This means our profitability will likely decline if we experience an unexpected
variation in the number or timing of new customer orders.
Our financial results could suffer if we are unable to achieve or maintain adequate utilization of our skilled staff.
Our
profitability depends to a large extent on the utilization of our skilled staff, which may be adversely impacted by:
•
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the number and size of client orders;
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•
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the timing of the commencement, completion and termination of orders, which in many
cases is unpredictable;
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•
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our ability to transition our skilled staff efficiently from completed production
jobs to new jobs;
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•
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the hiring of additional skilled machinists and fabricators because there is generally
a transition period for new employees that results in a temporary drop in our utilization rate;
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•
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unanticipated changes in the scope of client orders and agreements;
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our ability to forecast demand for our products and services and thereby maintain
an appropriate level of engineering and production staff; and
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•
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Condition’s affecting the industries in which we participate as well as general
economic conditions.
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The shop
rates of our production staff that we are able to charge are also affected by a number of factors, including:
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•
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our clients’ perception of our ability to add value through our products and
services;
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the market
demand for the products and services we provide;
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introduction of new products and services by us or our competitors;
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•
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our competition and the pricing policies of our competitors; and
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General economic conditions.
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If
we are unable to achieve and maintain adequate overall utilization as well as maintain or increase the average production shop
rates for our locations, our financial results could materially suffer.
Sales
of substantial amounts of our common stock in the public market could depress the market price of our common stock.
Our
common stock is quoted on the OTC Markets and or OTCBB. If our stockholders sell substantial amounts of our common stock in the
public market, including the shares of common stock issuable upon the exercise of the any Warrants, shares issued in acquisitions,
and shares issuable upon the exercise of outstanding stock options, or the market perceives that such sales may occur, the market
price of our common stock could fall and we may be unable to sell our common stock in the future.
Our
common stock may experience extreme price and volume fluctuations, which could lead to costly litigation for us and make an investment
in us less appealing.
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The market
price of our common stock may fluctuate substantially due to a variety of factors, including:
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•
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our business
strategy and plans;
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changing
factors related to doing business in various jurisdictions within the United States;
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new regulatory
pronouncements and changes in regulatory guidelines and timing of regulatory approvals;
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general
and industry-specific economic conditions;
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additions
to or departures of our key personnel;
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variations
in our quarterly financial and operating results;
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changes
in market valuations of other companies that operate in our business segments or in our industry;
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lack of
adequate trading liquidity;
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announcements
about our business partners;
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changes
in accounting principles; and
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general
market conditions.
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The
market prices of the securities of early-stage companies, particularly companies like ours without consistent product revenues
and earnings, have been highly volatile and are likely to remain highly volatile in the future. This volatility has often been
unrelated to the operating performance of particular companies. In the past, companies that experience volatility in the market
price of their securities have often faced securities class action litigation and or trading halts. Whether or not meritorious,
litigation brought against us could result in substantial costs, divert our management’s attention and resources and harm
our financial condition and results of operations.
Risks
Related to the Investment in the Common Stock of the Company.
Our
common stock could from time to time become “thinly-traded.”
The
number of persons interested in purchasing our common stock at or near ask prices at any given time may be relatively small or
non-existent. Therefore, stockholders may be unable to sell at or near ask prices or at all if they need to sell shares to raise
money or otherwise desire to liquidate their shares. Our “thinly-traded” stock is attributable to a number of factors,
including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors
and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such
persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend
the purchase of our shares until such time as we become more seasoned and viable. As a consequence, there may be periods of several
days or weeks when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We
cannot give stockholders any assurance that a broader or more active public trading market for our common shares will develop
or be sustained, or that current trading levels will be sustained.
We
do not anticipate paying any dividends
.
No
dividends have been paid on the common stock of the Company. The Company does not intend to pay cash dividends on its common stock
in the foreseeable future, and anticipates that profits, if any, received from operations will be devoted to the Company’s
future operations. Any decision to pay dividends will depend upon the Company’s profitability at the time, cash available
and other relevant factors.
Shareholders
may have difficulty in reselling their shares due to the lack of market or state Blue Sky laws.
Each
state has its own securities laws, often called “blue sky” laws, which (1) limit sales of securities to a state’s
residents unless the securities are registered in that state or qualify for an exemption from registration, and (2) govern the
reporting requirements for broker-dealers doing business directly or indirectly in the state. Before a security is sold in a state,
there must be a registration in place to cover the transaction, or it must be exempt from registration. The applicable broker-dealer
must also be registered in that state. We do not know whether our securities will be registered or exempt from registration under
the laws of any state. A determination regarding registration will be made by those broker-dealers, if any, who agree to serve
as market makers for our common stock. There may be significant state blue sky law restrictions on the ability of investors to
sell, and on purchasers to buy, our securities. The resale market for our common stock could be limited, as the holders of our
common stock may not be able to resell their shares without the significant expense of state registration or qualification.
Shareholders
may have difficulty in depositing their shares due to regulatory burden on Clearing Firms and Broker Dealers.
Existing
and prospective shareholders may have difficulty depositing their shares because very few broker dealers and their Clearing Firms
are currently accepting shares of a newly listed company on the OTC venue. Such broker dealers and their clearing firms are highly
regulated and may not find accepting shares in their best interest because of the regulatory burden from FINRA and or the SEC.
All Shareholders may not be able to deposit their shares at all if their broker dealer does not accept low priced stocks. Even
if you do deposit shares, they may never clear if the clearing firm affiliated with the broker dealer decides not to do so based
on the extreme regulatory burden in clearing low priced stock. The resale market for our common stock could be non-existent because
of the above reasons, as the holders of our common stock shareholders may not be able to resell their shares ever. If we are unable
to trade and access the public markets, we may be required to cease, exit the public markets, or curtail our reporting obligations.
Limited
Public Market of our Securities, and active trading market may not develop.
As
we are in our early stages, an investment in our company will likely require a long-term commitment, with no certainty of return.
The Company was recently approved to start trading its Common Stock on the OTCBB and or OTC Markets. There is currently no trading
and none or limited public market for our Common Stock and there is no guarantee that any sustained trading market will develop
in the near future or at all. In the absence of an active trading market:
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investors
may have difficulty buying and selling or obtaining market quotations;
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market visibility
for shares of our common stock may be limited; and
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a lack of
visibility for shares of our common stock may have a depressive effect on the market price for shares of our common stock.
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The
OTC Markets is a relatively unorganized, inter-dealer, over-the-counter market that provides significantly less liquidity than
NASDAQ or the NYSE MKT (formerly known as the NYSE AMEX). The market for our Common Stock may be illiquid and you may be unable
to dispose of your shares of Common Stock at desirable prices or at all. Moreover, there is a risk that our Common Stock could
be delisted from the OTCBB Marketplace, in which case it might be listed on the so called “Pink Sheets”, which is
even more illiquid than the OTCBB Marketplace. The lack of an active market impairs your ability to sell your shares at the time
you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market
value of your shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling
shares and may impair our ability to acquire additional assets by using our shares as consideration.
Our
common stock is considered a “penny stock,” and thereby is subject to additional sale and trading regulations that
may make it more difficult to sell.
The
SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are
generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges
or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect
to transactions in such securities is provided by the exchange or system). The OTCBB and OTC Markets do not meet such requirements
and since the price of our common stock is less than $5.00, our common stock is deemed penny stocks. The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk
disclosure document containing specified information. In addition, the penny stock rules require that prior to effecting any transaction
in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny
stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of
a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy
of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the
secondary market for our common stock, and therefore stock holders may have difficulty selling their shares.
FINRA
sales practice requirements may also limit your ability to buy and sell our common stock, which could depress the price of our
shares.
FINRA
rules require broker-dealers to have reasonable grounds for believing that an investment is suitable for a customer before recommending
that investment to the customer. Prior to recommending speculative low-priced securities to their non-institutional customers,
broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status and
investment objectives, among other things. Under interpretations of these rules, FINRA believes that there is a high probability
such speculative low-priced securities will not be suitable for at least some customers. Thus, FINRA requirements make it more
difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell
our shares, have an adverse effect on the market for our shares, and thereby depress our share price.
Our
Sole Officer and Director beneficially owns a significant percentage of our outstanding voting securities which could reduce the
ability of minority shareholders to effect certain corporate actions
Our
Sole Officer and Director beneficially owns a substantial majority of our voting securities. As a result, currently, and after
the offering, the company will possess a significant influence and can elect a majority of our board of directors and authorize
or prevent proposed significant corporate transactions. The Company’s ownership and control may also have the effect of
delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business combination or
discourage a potential acquirer from making a tender offer.
There
may be limitations on the effectiveness of our internal controls, and a failure of our control systems to prevent error or fraud
may materially harm our company.
Proper
systems of internal controls over financial accounting and disclosure are critical to the operation of a public company. As we
are a start-up company, we are at the very early stages of establishing, and we may be unable to effectively establish such systems,
especially in light of the fact that we expect to operate as a publicly reporting company. This would leave us without the ability
to reliably assimilate and compile financial information about our company and significantly impair our ability to prevent error
and detect fraud, all of which would have a negative impact on our company from many perspectives.
Moreover,
we do not expect that disclosure controls or internal control over financial reporting, even if established, will prevent all
error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance
that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there
are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations
in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud,
if any, have been detected. Failure of our control systems to prevent error or fraud could materially adversely impact us.
We
may, in the future, issue additional shares of common stock, which would reduce investors’ percent of ownership and may
dilute our share value.
Our
Articles of Incorporation, as amended, authorize the issuance of 100,000,000 shares of common stock. As of the
date of this annual report the Company had 17,870,000 shares of common stock outstanding. Accordingly, we may issue up to an additional
82,130,000 shares of common stock. The future issuance of common stock may result in substantial dilution in the percentage of
our common stock held by our than existing shareholders. We may value any common stock issued in the future on an arbitrary basis.
The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the
value of the shares held by our investors and might have an adverse effect on any trading market for our common stock.
If
securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business,
our share price and trading volume could decline.
The
trading market for our common stock will, to some extent, depend on the research and reports that securities or industry analysts
publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us
downgrade our shares or change their opinion of our shares, our share price would likely decline. If one or more of these analysts
cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could
cause our share price or trading volume to decline.
Opt-in
right for emerging growth company
We
have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2)
of the Jobs Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates
for public and private companies until those standards apply to private companies. As a result of this election, our financial
statements may not be comparable to companies that comply with public company effective dates.
Our
Articles of Incorporation provide for the issuance of up to 25,000,000 shares of Preferred Stock. Should we hereinafter issue
Preferred Stock the rights of our common stockholders to receive dividends may be impaired.
Our
Preferred Stock constitutes a convertible stock in which (1) one preferred Share is convertible into (5) five Common Shares. The
preferred Stock holders would be entitled to vote on any matters on which common stock holders are entitled to vote. This would
include electing the Board of Directors, increasing the number of shares authorized and other corporate governance matters. Our
Sole Officer and Director beneficially owns a substantial majority of the issued and outstanding shares of such preferred stock
of the Company and will continue to own sufficient shares after this offering irrespective of its outcome. As a result they will
continue to be able to exercise substantial control over the operations of the Company.
Stockholders
of our Preferred Stock will be able to exert substantial influence and control over the operations of the Company.
Our
Preferred Stock provides the shareholders thereof with particular rights which may enable them to exert substantial control over
the affairs of the Company. To wit:
a.
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Voting Rights:
a holder of Class-B Preferred will have all the voting rights.
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b.
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Convertible:
Our Preferred Stock constitutes a convertible stock in which (1) one preferred Share is convertible into (5) five Common Shares.
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c.
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Our Sole
Officer and Director beneficially owns a substantial majority of the issued and outstanding shares of such preferred stock of
the Company and will continue to own sufficient shares after this offering irrespective of its outcome. As a result, they will
continue to be able to exercise substantial control over the operations of the Company.
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d.
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Agree to
a merger, sale or consolidation of the Company with another entity or the effectuation of any transaction or series of related
transactions in which more than 51% of the voting power of the Company is disposed.
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1B.
UNRESOLVED STAFF COMMENTS
None
ITEM
2. PROPERTIES
Our
current corporate mailing address is 1914 24th Ave E, Palmetto, FL 34221. Our telephone number is 941-722-3600. An affiliate makes
this space available to the company at zero cost for lease on a month to month basis. There is no written agreement documenting
this arrangement. We believe this space is adequate for our current needs. We also own a factory in Missouri that sits on 2 acres.
ITEM
3. LEGAL PROCEEDINGS
None
ITEM
4. MINE SAFETY DISCLOSURES
Not
Applicable
PART
II
ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
MARKET
INFORMATION
We received
approval from FINRA and are currently quoted on OTC Markets for our common stock under the ticker symbol of “GEIN”
as of June 19, 2017 and there has be no trading ever since. There is currently no market or trading volume for our common stock
and there is no guarantee that any sustained trading market will develop in the future. Shareholders may not be able to deposit
their shares at all if their broker dealer does not accept low priced stocks. Even if you do deposit shares, they may never clear
if the clearing firm affiliated with the broker dealer decides not to do so based on the extreme regulatory burden from FINRA
and SEC in clearing low priced stock. Future sales of substantial amounts of our shares in the public market could adversely affect
market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities.
HOLDERS
The
approximate number of stockholders of record as of June 30, 2018 is 38. The number of stockholders of record does not
include beneficial owners of our common stock, whose shares are held in the names of various dealers, clearing agencies, banks,
brokers and other fiduciaries.
DIVIDEND
POLICY
We
have never paid any cash dividends on our common stock. We anticipate that we will retain funds and future earnings to support
operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the
foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will depend
on our financial condition, results of operations, capital requirements and other factors that our board of directors deems relevant.
In addition, the terms of any future debt or credit financings may preclude us from paying dividends.
RECENT
SALES OF UNREGISTERED SECURITIES
None.
PENNY
STOCK REGULATION
Shares
of our common stock is subject to rules adopted the SEC that regulate broker-dealer practices in connection with transactions
in “penny stocks.” Penny stocks are generally equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price
and volume information with respect to transactions in those securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, deliver
a standardized risk disclosure document prepared by the SEC, which contains the following:
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a description
of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;
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a description
of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect
to violation to such duties or other requirements of securities’ laws;
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•
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a brief,
clear, narrative description of a dealer market, including “bid” and “ask” prices for penny stocks and
the significance of the spread between the “bid” and “ask” price;
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a toll-free
telephone number for inquiries on disciplinary actions;
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definitions
of significant terms in the disclosure document or in the conduct of trading in penny stocks; and
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such other
information and is in such form (including language, type, size and format), as the SEC shall require by rule or regulation.
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Prior
to effecting any transaction in penny stock, the broker-dealer also must provide the customer the following:
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the bid
and offer quotations for the penny stock;
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the compensation
of the broker-dealer and its salesperson in the transaction;
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the number
of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market
for such stock; and
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monthly
account statements showing the market value of each penny stock held in the customer’s account.
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In
addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the
broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive
the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions
involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements
may have the effect of reducing the trading activity in the secondary market for a stock that becomes subject to the penny stock
rules. Holders of shares of our common stock may have difficulty selling those shares because our common stock will
probably be subject to the penny stock rules.
ITEM
6. SELECTED FINANCIAL DATA
Not
applicable.
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The
following discussion and analysis of our financial condition and results of operations should be read together with our financial
statements and the related notes and the other financial information included elsewhere in this report. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this report,
particularly those under "Risk Factors." Dollars in tabular format are presented in thousands, except per share data,
or otherwise indicated.
Overview
The
company was incorporated on December 9
th
, 2014 in the state of Florida. Genesys Industries is a diversified multi-industry
advanced manufacturer of complex components and products. The company is a vertically integrated precision cnc manufacturing and
fabrication company with core emphasis on product design, engineering and precision manufacturing of complex components and products.
Some of the industries served include Automotive, Aviation, Firearms, Food Processing, Industrial, Maritime, Medical, Railroad,
Oil and Gas, Packaging, Telecom, Textiles, Pulp Paper, Transportation and many more.
Results
of Operations - For the fiscal years ending June 30, 2018 and 2017.
Revenues
For
the year ended June 30, 2018, we earned revenue of $236,858, compared to $1,357 for the year ended June 30, 2017; an increase
of $235,501. Revenue was all from products shipped since March 5
th
to June 30
th
as a result of the commencement
of our business plan and operations.
Cost
of Revenue
For
the year ended June 30, 2018, cost of revenue was $84,398, compared to $698 for the year ended June 30, 2017; an increase of $83,700.
Cost of revenue has increased in conjunction with increased sales and consists of raw materials used in our manufacturing process.
Professional
fees
Professional
fees were $16,225 for the year ended June 30, 2018 compared to $18,110 for the year ended June 30, 2017; a decrease of $1,885
or 10%. Professional fees consist of accounting, audit and legal fees. The decrease can be attributed to a decrease in legal fees.
Payroll
expense
Payroll
expense was $106,608 for the year ended June 30, 2018 compared to $0 for the year ended June 30, 2017. Payroll expense has increase
with the hiring of twelve new employees.
General
& administrative expenses
General
& administrative expenses were $98,022 for the year ended June 30, 2018, compared to $29,963 for the year ended June 30, 2017;
an increase of $68,059. Expenses have increase in conjunction with the increase in operations.
Other
expense
Interest
expense for the year ended June 30, 2018 was $7,897 compared to $0 for the year ended June 30, 2017. Interest expense has increased
due to the addition of our related party loan, line of credit, mortgage and equipment loans.
Net
Loss
Net
loss for the year ended June 30, 2018 was $76,292 compared to $47,414 for the year ended June 30, 2017; an increase of $28,878.
The increase in net loss can be attributed to the increase in general and administrative expenses and to payroll expense now being
incurred for newly hired employees.
Effects
of Inflation
The
Company’s business and operations have not been materially affected by inflation during the periods for which financial
information is presented.
Liquidity
and Capital Resources
As
reflected in the accompanying financial statements, the Company has an accumulated deficit of $133,325 at June 30, 2018, had a
net loss of $76,292 and net cash used in operating activities of $101,314 for the year ended June 30, 2018.
Net
cash used in investing activities for the year ended June 30, 2018 was $397,306 for the purchase of property and equipment.
Net
cash received from financing activities for the year ended June 30, 2018 was $495,642.
The
Company has established a line of credit with a commercial bank in the amount of $50,000. This is a revolving business line of
credit (BLOC) and bears a fixed interest rate of 7%. The company has also established a corporate business credit card for use
in travel related purposes. That line of credit is established at $20,000. The company has also established a renewable Bank Term
Loan Facility in the approximate amount of $200,000 with a fixed interest rate of 5%.
Total
consolidated revolving credit available under all credit arrangements is approximately $270,000. On March 9, 2018, the Company
obtained a $180,000 loan against the bank term loan. The loan has a term of five years and requires interest only payments of
$600 until May 26, 2018, thereafter payments of principal and interest of $3,396.82. As of June 30, 2018, the balance on the loan
is $177,353.
On
February 28, 2018, the Company purchased certain real property. The total acquisition cost including all closing costs and fees
was $256,443. The purchase price was partially financed with a $200,000 loan from the company’s primary bank. The loan has
a term of 5-years, at an interest rate of 4.09% and requires monthly payments of interest and principal of $1,494.59 with a final
payment of approximately $148,063 due March 1, 2023. As of June 30, 2018, the balance on the loan is $197,571.
In
April 2018 the Company purchased equipment to be used in their operations for a total acquisition price of $51,792. The equipment
was purchased with a combination of cash, $19,000 of equipment traded in and loan financing. The Company obtained a loan for $27,500
from their primary bank. The loan, dated May 7, 2018, matures on May 7, 2023, bears interest at 6% per annum and requires monthly
payments of interest and principal of $532.84. As of June 30, 2018, the balance on the loan is $27,109.
On
November 5, 2017, to fund its working capital requirements the Company obtained a Special Line of Credit (“LOC”)
also recognized as a Blanket Secured Promissory Note for the total draw down amount of up to $500,000, from Twiga Capital Partners,
LLC (“TCP”), an entity controlled by the Company’s sole officer and largest stockholder, Shefali Vibhakar. This
Note is secured by all of the assets of the Company in accordance with the Security Agreement by and between the Company and the
Holder dated as of November 5, 2017. The LOC bears interest at 5% per annum and is due on demand. As of December 31, 2017, the
Company owed $37,748 of principal and $243 of accrued interest on the LOC. During the year ended June 30, 2018, the Company borrowed
another $37,051 for operating expenses. As of June 30, 2018, the Company owed $67,299 of principal and $1,718 of accrued interest
on the LOC.
We
believe that our principal difficulty in our inability to successfully implement our plan in full force and attain profits has
been the lack of available capital to operate and expand our business. We believe that because our shareholders can’t deposit
their shares and clear shares with certain broker dealers and clearing firms due to extreme FINRA and SEC regulatory burden, it
has caused us to not be able to raise capital since we do not have an active trading market for our common stock. As
of the date of this filing we have no other commitment from any investor or investment-banking firm to provide us with the necessary
funding and there can be no assurances we will obtain such funding in the future. Failure to obtain this additional
financing will have a material negative impact on our ability to generate profits in the future. To such end, our auditor
has indicated in its report on our financial statements for the year ended June 30, 2018.
Critical
Accounting Estimates and Policies
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities of the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Note 2 to the Financial Statements describes the significant accounting policies and methods
used in the preparation of the Financial Statements. Estimates are used for, but not limited to, contingencies and taxes. Actual
results could differ materially from those estimates. The following critical accounting policies are impacted significantly by
judgments, assumptions, and estimates used in the preparation of the Financial Statements.
We
are subject to various loss contingencies arising in the ordinary course of business. We consider the likelihood of loss
or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in
determining loss contingencies. An estimated loss contingency is accrued when management concludes that it is probable that
an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. We regularly
evaluate current information available to us to determine whether such accruals should be adjusted.
We
recognize deferred tax assets (future tax benefits) and liabilities for the expected future tax consequences of temporary differences
between the book carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities represent
the expected future tax return consequences of those differences, which are expected to be either deductible or taxable when the
assets and liabilities are recovered or settled. Future tax benefits have been fully offset by a 100% valuation allowance
as management is unable to determine that it is more likely than not that this deferred tax asset will be realized.
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements (as that term is defined in Item 303 of Regulation S-K) that are reasonably likely
to have a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity,
capital expenditures or capital resources.
Recently
Issued Accounting Standards
The
Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact
on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting
pronouncements that have been issued that might have a material impact on our financial position or results of operations.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not
applicable.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The
financial statements required to be included in this report appear as indexed in the appendix to this report beginning on page
24.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM
9A. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information
required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management
to allow timely decisions regarding required disclosure.
In
designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also,
the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or
mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events
and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation
of management, including our chief executive officer and principal financial officer, of the effectiveness of the design and operation
of our disclosure controls and procedures. Based upon that evaluation, management concluded that our disclosure controls and procedures
were effective as of June 30, 2018 to cause the information required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within the time periods prescribed by SEC, and that such
information is accumulated and communicated to management, including our chief executive officer and principal financial officer,
as appropriate, to allow timely decisions regarding required disclosure.
Management's
Report on Internal Control Over Financial Reporting
This
annual report does not include a report of management’s assessment regarding internal control over financial reporting or
an attestation report of the Company’s registered public accounting firm due to a transition period established by rules
of the Securities and Exchange Commission for newly public companies.
Changes
in Internal Control Over Financial Reporting
There
were no significant changes in our internal control over financial reporting during the year ended June 30, 2018, that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item
9B. Other Information.
On December 28, 2018, the Company filed
an 8-K for non-reliance on previously issued financial statements. During the quarter ended March 31, 2018, the Company utilized
$310,000 of its LOC with Twiga Capital Partners (“TCP”), an entity controlled by the Company’s sole officer and
largest stockholder, Shefali Vibhakar in exchange for certain machinery and equipment. As a result of the purchase the March 31,
2018 balance sheet included $304,833 (net of $5,167 of depreciation) of machinery equipment and a loan of $310,000 due to a related
party. The Company was subsequently unable to establish the book value of the equipment per GAAP requirements. As a result, an
adjustment was made to carry the equipment over at no cost and the loan was debited to additional paid in capital. TCP then forgave
the loan resulting in a credit to additional paid in capital.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
All
directors and officers are appointed by our board of directors and serve at the discretion of the board, subject to applicable
employment agreements. The following table sets forth information regarding our executive officers and the members of our board
of directors.
Name
|
|
Age
|
|
Position
|
Shefali Vibhakar
|
|
|
42
|
|
|
CEO, President, CFO and Director
|
Shefali
is responsible for guiding the company’s business model to be implemented at Genesys Industries. She has served as our President
& CFO since inception. Shefali is responsible for the strategic direction at Genesys. She is an aspiring business executive
with a broad range of financial management experience. She has successfully been employed with leading manufacturing, software,
telecom, technology and financial based companies, including: Brooks Semiconductor (BRKS), ADC, VF Corp (VFC) & BB&T (BBT)
and other leading Private Companies. Shefali holds a BS degree in Computer Science and Engineering from University of Mass, Boston,
MA. She is also a Certified Risk and Compliance Management Professional (CRCMP) and a Member of the International Association
of Risk and Compliance Professionals (IARCP). She is currently undertaking courses to be a Certified Sarbanes Oxley Expert (CSOE)
which is administered by Sarbanes Oxley Professionals Association (SOXCPA).
Involvement
in Certain Legal Proceedings
To
our knowledge, during the past ten years, none of our directors, executive officers, promoters, control persons, or nominees has:
•
|
|
been convicted
in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
|
•
|
|
had any
bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business
association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two
years prior to that time;
|
•
|
|
been subject
to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or
federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in
any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to
be associated with persons engaged in any such activity;
|
•
|
|
been found
by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated
a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
|
•
|
|
been 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 (not including any settlement of a civil proceeding among private litigants), relating to an alleged
violation of any federal or state securities or commodities law or regulation, 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 any law or regulation
prohibiting mail or wire fraud or fraud in connection with any business entity; or
|
•
|
|
been 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), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange
Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons
associated with a member.
|
Board
Committees
The
Company does not currently maintain a board of directors that is composed of a majority of “independent” directors.
The Company does not expect to initially appoint an audit committee, nominating committee and/or compensation committee, or to
adopt charters relative to each such committees.
Code
of Business Conduct and Ethics
We
have not adopted a Code of Business Conduct and Ethics.
Limitation
of Directors Liability and Indemnification
We
do not have director and officer liability insurance to cover liabilities our directors and officers may incur in connection with
their services to us, including matters arising under the Securities Act, although we intend to acquire such insurance. Florida
law and our bylaws provide that we will indemnify our directors and officers who, by reason of the fact that he or she is one
of our officers or directors, is involved in a legal proceeding of any nature.
There
is no pending litigation or proceeding involving any of our directors, officers, employees or agents in which indemnification
will be required or permitted. We are not aware of any threatened litigation or proceeding that may result in a claim for such
indemnification.
ITEM
11. EXECUTIVE COMPENSATION
Summary
Compensation Table
The
following table presents information regarding the total compensation awarded to, earned by, or paid to our chief executive officer
and the most highly-compensated executive officers (other than the chief executive officer) who were serving as executive officers
as of June 30, 2018 for services rendered in all capacities to us for the years ended June 30, 2018, 2017 and 2016.
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Option Awards
($)
|
|
Non-equity
incentive plan compensation
($)
|
|
Change in pension value and nonqualified deferred compensation earnings
($)
|
|
All Other Compensation
($)
|
|
Total
($)
|
Shefali Vibhakar
|
|
|
2018
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
CEO, CFO, Director
|
|
|
2017
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
2016
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Employment
and Consulting Agreements
None
Outstanding
Equity Awards at Fiscal Year-End Table
The
following table summarizes, for each of the named executive officers, the number of shares of common stock underlying outstanding
stock options held as of June 30, 2018.
|
|
Option Awards
|
|
|
|
Name
|
|
Number of
securities
underlying
unexercised
options (#)
exercisable
|
|
|
Number of
securities
underlying
unexercised
options (#)
unexercisable
|
|
|
|
Option
exercise
price ($)
1
|
|
|
Option
expiration
date
|
Shefali Vibhakar
|
|
0
|
|
|
0
|
|
|
$
|
0
|
|
|
None
|
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table sets forth the number of shares of common stock beneficially owned as of June 30, 2018 by:
|
•
|
each
of our stockholders who is known by us to beneficially own 5% or more of our common stock;
|
|
|
|
|
•
|
each
of our executive officers;
|
|
|
|
|
•
|
each
of our directors; and
|
|
|
|
|
•
|
all
of our directors and current executive officers as a group.
|
Beneficial
ownership is determined based on the rules and regulations of the Commission. A person has beneficial ownership of shares if such
individual has the power to vote and/or dispose of shares. This power may be sole or shared and direct or indirect. Applicable
percentage ownership in the following table is based on the total of 17,870,000 shares of common stock outstanding as of June
30, 2018. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares
of common stock that are subject to options or warrants held by that person and exercisable as of, or within 60 days of, June
30, 2018. These shares, however, are not counted as outstanding for the purposes of computing the percentage ownership of any
other person(s). Except as may be indicated in the footnotes to this table and pursuant to applicable community property laws,
each person named in the table has sole voting and dispositive power with respect to the shares of common stock set forth opposite
that person’s name. Unless indicated below, the address of each individual listed below is c/o Genesys Industries, Inc.
1914 24
th
Ave E, Palmetto, FL 34221.
Name of Beneficial Owner
|
|
Number of Shares Beneficially Owned
|
|
Percentage of Shares Beneficially Owned
|
Shefali Vibhakar and or Assigns
|
|
|
17,000,000
|
|
|
|
95.13
|
%
|
All Officers and Directors (1)
|
|
|
17,000,000
|
|
|
|
95.13
|
%
|
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
On
November 1, 2017, the Company entered into a lease agreement with TCP to lease certain premises located in Florida to be effective
from November 1, 2017 to November 1, 2027. The 8,000 square feet premises was to be used by the Company for plant and offices. Monthly
rent of $7,500 was to be paid on the first of each month. No payment was due for the first four months of the lease. A $7,500
deposit was required and was loaned to the Company by TCP. The $7,500 was added to the balance due under the line of credit with
TCP but has since been returned. As of June 30, 2018, the Company has incurred $25,000 of rent expense. TCP determined that it
is in the best interest of the Company to contribute the $25,000 of rented space to the Company; which has been credited to paid
in capital, and to cancel the lease agreement.
On
November 5, 2017, to fund its working capital requirements the Company obtained a Special Line of Credit (“LOC”)
also recognized as a Blanket Secured Promissory Note for the total draw down amount of up to $500,000, from Twiga Capital Partners,
LLC (“TCP”), an entity controlled by the Company’s sole officer and largest stockholder, Shefali Vibhakar. This
Note is secured by all of the assets of the Company in accordance with the Security Agreement by and between the Company and the
Holder dated as of November 5, 2017. The LOC bears interest at 5% per annum and is due on demand. As of December 31, 2017, the
Company owed $37,748 of principal and $243 of accrued interest on the LOC. During the year ended June 30, 2018, the Company borrowed
another $37,051 for operating expenses. As of June 30, 2018, the Company owed $67,299 of principal and $1,718 of accrued interest
on the LOC.
As
of June 30, 2018, and 2017, the Company owed $0 and $6,190, respectively in loans payable to its President & CEO. The loans
were received to pay for certain operating expenses. They were unsecured, non-interest bearing and due on demand. On November
15, 2017, this note was assigned to TCP. The note has become part of the outstanding balance due under the newly established line
of credit.
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Michael
Gillespie & Associates, PLLC served as our independent registered public accounting firm for 2018 and 2017. The
following table shows the fees that were billed for the audit and other services provided by this firm for 2018 and 2017.
|
|
2018
|
|
2017
|
Audit Fees
|
|
$
|
9,900
|
|
|
$
|
5,450
|
|
Audit-Related Fees
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
Tax Fees
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
All Other Fees
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
Total
|
|
$
|
9,900
|
|
|
$
|
5,450
|
|
Audit
Fees
— This category includes the audit of our annual financial statements, review of financial statements included
in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting
firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters
that arose during, or as a result of, the audit or the review of interim financial statements.
Audit-Related
Fees
— This category consists of assurance and related services by the independent registered public accounting firm
that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under
“Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence
with the Securities and Exchange Commission and other accounting consulting.
Tax
Fees
— This category consists of professional services rendered by our independent registered public accounting firm
for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and
technical tax advice.
All
Other Fees
— This category consists of fees for other miscellaneous items.
Our
Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting
firm. Under the procedure, the Board approves the engagement letter with respect to audit, tax and review services. Other
fees are subject to pre-approval by the Board, or, in the period between meetings, by a designated member of Board. Any
such approval by the designated member is disclosed to the entire Board at the next meeting.
PART
IV
ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibit No.
|
Description
|
3.1
|
Articles of Incorporation of the Registrant (1)
|
3.2
|
Articles of Amendment (1)
|
3.3
|
Bylaws of the Registrant (1)
|
10.1
|
Form of Share Lock Up Period (1)
|
10.2
|
Term Loan Agreement between Genesys Industries & Hancock Bank
|
10.3
|
Loan Agreement between Genesys Industries & Hancock Bank for Real Estate Purchase
|
10.4
|
Loan Agreement between Genesys Industries & Hancock Bank for Equipment Purchase
|
10.5
|
Special Line of Credit Agreement between Genesys Industries and TCP (3)
|
10.6
|
Blanket Promissory Agreement between Genesys Industries and TCP (3)
|
10.7
|
Assignment of Promissory Note (2)
|
10.8
|
Attorney Legal Letter
|
99.4
|
Form of Subscription Agreement (1)
|
101.INS*
|
XBRL Instance Document
|
101.SCH*
|
XBRL Taxonomy Extension Schema
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase
|
*
Filed herewith
(1)
Incorporated by reference from Form S-1 filed on August 31, 2016 and as amended until December 23, 2016.
(2)
Incorporated by reference from Form 8-K filed on November 20, 2016.
(3)
Incorporated by reference from Form 8-K filed on November 22, 2016.
GENESYS
INDUSTRIES, INC.
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018
Report of Independent Registered Public Accounting Firm
|
25
|
Consolidated Balance Sheets as of June 30, 2018 and 2017
|
26
|
Consolidated Statements of Operations for the Years Ended June 30, 2018 and 2017
|
27
|
Consolidated Statement of Stockholders’ Equity (Deficit) for the Year Ended June 30, 2018
|
28
|
Consolidated Statements of Cash Flows for the Years Ended June 30, 2018 and 2017
|
29
|
Notes to the Consolidated Financial Statements
|
30
|
MICHAEL
GILLESPIE & ASSOCIATES, PLLC
CERTIFIED
PUBLIC ACCOUNTANTS
10544
ALTON AVE NE
SEATTLE,
WA 98125
206.353.5736
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors
Genesys
Industries, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of Genesys Industries, Inc. as of June 30, 2018 and 2017 and the related statements
of operations, changes in stockholder’s deficit, cash flows, and the related notes (collectively referred to as “financial
statements”) for the periods then ended. In our opinion, the financial statements present fairly, in all material respects,
the financial position of the Company as of June 30, 2018 and 2017 and the results of its operations and its cash flows for the
periods then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but
not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audit provides a reasonable basis for our opinion.
The
accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note
#3 to the financial statements, although the Company has limited operations it has yet to attain profitability. This raises substantial
doubt about its ability to continue as a going concern. Management’s plan in regard to these matters is also described in
Note #3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/S/
MICHAEL GILLESPIE & ASSOCIATES, PLLC
We
have served as the Company’s auditor since 2016.
Seattle,
Washington
December
26, 2018
GENESYS INDUSTRIES, INC
.
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
June 30,
2018
|
|
June 30,
2017
|
ASSETS
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
17,866
|
|
|
$
|
20,844
|
|
Accounts receivable
|
|
|
114,218
|
|
|
|
—
|
|
Inventory
|
|
|
7,939
|
|
|
|
—
|
|
Total current assets
|
|
|
140,023
|
|
|
|
20,844
|
|
Website development, net
|
|
|
—
|
|
|
|
514
|
|
Machinery and equipment, net
|
|
|
118,388
|
|
|
|
—
|
|
Real property & plant, net
|
|
|
267,134
|
|
|
|
—
|
|
Total Assets
|
|
$
|
525,545
|
|
|
$
|
21,358
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
52,319
|
|
|
$
|
701
|
|
Accrued interest, related party
|
|
|
1,718
|
|
|
|
—
|
|
Accrued compensation
|
|
|
6,500
|
|
|
|
—
|
|
Line of credit
|
|
|
177,353
|
|
|
|
—
|
|
Loans payable
|
|
|
224,681
|
|
|
|
—
|
|
Due to related party
|
|
|
67,299
|
|
|
|
6,190
|
|
Total current liabilities
|
|
|
529,870
|
|
|
|
6,891
|
|
Total liabilities
|
|
|
529,870
|
|
|
|
6,891
|
|
Commitments and contingencies
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit):
|
|
|
|
|
|
|
|
|
Class B Preferred stock, $0.001 par value, 25,000,000 shares authorized; 10,000,000 and 10,000,000 issued and outstanding, respectively
|
|
|
10,000
|
|
|
|
10,000
|
|
Common stock, $0.001 par value, 100,000,000 shares authorized; 17,870,000 and 17,545,000 shares issued and outstanding, respectively
|
|
|
17,870
|
|
|
|
17,545
|
|
Additional paid-in capital
|
|
|
101,130
|
|
|
|
43,955
|
|
Accumulated deficit
|
|
|
(133,325
|
)
|
|
|
(57,033
|
)
|
Total stockholders' equity (deficit)
|
|
|
(4,325
|
)
|
|
|
14,467
|
|
Total Liabilities and Stockholders' Deficit
|
|
$
|
525,545
|
|
|
$
|
21,358
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
GENESYS INDUSTRIES, INC
.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
For the Years Ended
June 30,
|
|
|
2018
|
|
2017
|
Revenue
|
|
$
|
236,858
|
|
|
$
|
1,357
|
|
Cost of revenue
|
|
|
84,398
|
|
|
|
698
|
|
Gross Margin
|
|
|
152,460
|
|
|
|
659
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
Professional fees
|
|
|
16,225
|
|
|
|
18,110
|
|
Payroll expense
|
|
|
106,608
|
|
|
|
—
|
|
General & administrative expenses
|
|
|
98,022
|
|
|
|
29,963
|
|
Total operating expenses
|
|
|
220,855
|
|
|
|
48,073
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(68,395
|
)
|
|
|
(47,414
|
)
|
|
|
|
|
|
|
|
|
|
Other expense:
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(7,897
|
)
|
|
|
—
|
|
Total other expense
|
|
|
(7,897
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(76,292
|
)
|
|
|
(47,414
|
)
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(76,292
|
)
|
|
$
|
(47,414
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per common share, basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
Weighted common shares outstanding, basic and diluted
|
|
|
17,663,589
|
|
|
|
17,176,493
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
GENESYS INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Common Shares
|
|
Common Stock
|
|
Preferred
Shares
|
|
Preferred
|
|
Stock Subscription Receivable
|
|
Paid in Capital
|
|
Accumulated Deficit
|
|
Total
|
Balance, June 30, 2016
|
|
|
17,000,000
|
|
|
$
|
17,000
|
|
|
|
10,000,000
|
|
|
$
|
10,000
|
|
|
$
|
(16,900
|
)
|
|
$
|
(10,000
|
)
|
|
$
|
(9,619
|
)
|
|
$
|
(9,519
|
)
|
Common stock issued for cash
|
|
|
545,000
|
|
|
|
545
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,900
|
|
|
|
53,955
|
|
|
|
—
|
|
|
|
71,400
|
|
Net loss for the year ended June 30, 2017
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(47,414
|
)
|
|
|
(47,414
|
)
|
Balance, June 30, 2017
|
|
|
17,545,000
|
|
|
|
17,545
|
|
|
|
10,000,000
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
43,955
|
|
|
|
(57,033
|
)
|
|
|
14,467
|
|
Common stock issued for cash
|
|
|
325,000
|
|
|
|
325
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
32,175
|
|
|
|
—
|
|
|
|
32,500
|
|
Contributed capital for rent expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25,000
|
|
|
|
—
|
|
|
|
25,000
|
|
Net loss for the year ended June 30, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(76,292
|
)
|
|
|
(76,292
|
)
|
Balance, June 30, 2018
|
|
|
17,870,000
|
|
|
$
|
17,870
|
|
|
|
10,000,000
|
|
|
$
|
10,000
|
|
|
$
|
—
|
|
|
$
|
101,130
|
|
|
$
|
(133,325
|
)
|
|
$
|
(4,325
|
)
|
The
accompanying notes are an integral part of these consolidated financial statements.
GENESYS INDUSTRIES, INC
.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
For the Years Ended
June 30,
|
|
|
2018
|
|
2017
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(76,292
|
)
|
|
$
|
(47,414
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Amortization expense
|
|
|
514
|
|
|
|
617
|
|
Depreciation expense
|
|
|
11,784
|
|
|
|
—
|
|
Contributed rent expense
|
|
|
25,000
|
|
|
|
—
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(114,217
|
)
|
|
|
—
|
|
Inventory
|
|
|
(7,939
|
)
|
|
|
—
|
|
Accounts payable and accruals
|
|
|
51,618
|
|
|
|
(6,549
|
)
|
Accrued interest, related party
|
|
|
1,718
|
|
|
|
—
|
|
Accrued compensation
|
|
|
6,500
|
|
|
|
—
|
|
Net cash used in operating activities
|
|
|
(101,314
|
)
|
|
|
(53,346
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(197,306
|
)
|
|
|
—
|
|
Purchase of real property
|
|
|
(200,000
|
)
|
|
|
|
|
Net cash used in investing activities
|
|
|
(397,306
|
)
|
|
|
—
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Advances from a related party
|
|
|
61,109
|
|
|
|
2,690
|
|
Proceeds from line of credit
|
|
|
180,000
|
|
|
|
—
|
|
Repayments on line of credit
|
|
|
(2,647
|
)
|
|
|
—
|
|
Proceeds from loan
|
|
|
200,000
|
|
|
|
—
|
|
Proceeds from equipment loan
|
|
|
27,500
|
|
|
|
—
|
|
Principal payment on loans payable
|
|
|
(2,820
|
)
|
|
|
—
|
|
Proceeds from the sale of common stock
|
|
|
32,500
|
|
|
|
71,400
|
|
Net cash provided by financing activities
|
|
|
495,642
|
|
|
|
74,090
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(2,978
|
)
|
|
|
20,744
|
|
Cash, beginning of year
|
|
|
20,844
|
|
|
|
100
|
|
Cash, end of year
|
|
$
|
17,866
|
|
|
$
|
20,844
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
3,430
|
|
|
$
|
—
|
|
Cash paid for taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
Supplemental disclosure of noncash activities:
|
|
|
|
|
|
|
|
|
Contributed rent expense
|
|
$
|
25,000
|
|
|
$
|
—
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
G
ENESYS
INDUSTRIES, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2018
NOTE
1 - NATURE OF OPERATIONS
Genesys
Industries, Inc. (the “Company”), was incorporated on December 9, 2014 under the laws of the State of Florida.
Genesys Industries is a diversified multi-industry manufacturer of complex metal components and products. We serve all general
industrial markets such as Aerospace, Automotive, Commercial, Food Processing, Firearms, Industrial, Maritime, Medical, Railroad,
Oil and Gas, Packaging, Telecom, Textiles, Robotics, Space Travel, Transportation and many more. We are a vertically integrated
precision CNC manufacturing and fabrication company with core emphasis on product design, engineering and precision manufacturing
of complex components and products.
On
February 5, 2018, the Company formed Genesys Industries, LLC as a wholly owned subsidiary in the state of Missouri.
The
Company’s headquarters are in Palmetto, Florida. The Company has adopted its fiscal year end to be June 30.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”).
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 amounts of revenues and expenses during the reporting period. Significant
estimates include the estimated useful lives of property and equipment. Actual results could differ from those estimates.
Concentrations
of Credit Risk
We
maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. We continually
monitor our banking relationships and consequently have not experienced any losses in our accounts. We believe we are not exposed
to any significant credit risk on cash.
Inventories
Inventories
are valued at the lower of cost or market. Management compares the cost of inventories with the market value and allowance is
made for writing down their inventories to market value, if lower. As of June 30, 2018, the Company had $7,939 of finished goods
inventory to be used in its manufacturing process.
Property,
Plant and Equipment
Property
and equipment are carried at the lower of cost or net realizable value. Major betterments that extend the useful lives of assets
are also capitalized. Normal maintenance and repairs are charged to expense as incurred. When assets are sold or otherwise disposed
of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in operations.
Accounts
Receivable
Revenues
that have been recognized but not yet received are recorded as accounts receivable. Losses on receivables will be recognized when
it is more likely than not that a receivable will not be collected. An allowance for estimated uncollectible amounts will be recognized
to reduce the amount of receivables to its net realizable value. The allowance for uncollectible amounts is evaluated quarterly.
Revenue
Recognition
Revenue
is recognized goods are shipped or services performed and is recognized in an amount that reflects the consideration
that an entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the
nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue
that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies
the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract;
(ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context
of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation
of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each
performance obligation.
The Company only applies the five-step model to contracts
when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it
transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company
reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations
are distinct.
The
company recognizes revenue when all performance obligations are completed and the risk of loss is transferred to the customer upon
shipment.
During the year ended June 30, 2018,
the Company recognized $142,377 and $51,788 of sales from two of its customers. This represents 60.1% and 21.8%, respectively,
of total sales.
Right of Return
The Company’s only obligation
is to replace product proven to be defective. Claims must be made within ten days of receipt of such product. As of June 30, 2018
and December 27, 2018, there have been no claims of defective products made.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Genesys Industries,
LLC, and have been prepared in conformity with accounting principles generally accepted in the United States of America. All significant
intercompany transactions and balances have been eliminated.
Fair
value of financial instruments
The
Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial
instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to
measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in
accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37
establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three
(3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for
identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined
by Paragraph 820-10-35-37 are described below:
Level
1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level
2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable
as of the reporting date.
Level
3: Pricing inputs that are generally observable inputs and not corroborated by market data.
The
carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate
their fair value because of the short maturity of those instruments. The Company’s notes payable approximates the
fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company
for similar financial arrangements at June 30, 2018.
The
Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis as of June 30,
2018 or 2017.
Fixed
Assets
Fixed
assets are carried at the lower of cost or net realizable value. All fixed assets with a cost of $2,000 or greater are capitalized.
Major betterments that extend the useful lives of assets are also capitalized. Normal maintenance and repairs are charged to expense
as incurred. When assets are sold or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts
and any resulting gain or loss is recognized in operations.
Website
development
Website
development is carried at cost. Major betterments that would extend the useful life are capitalized. Normal maintenance and repairs
are charged to expense as incurred. When assets are sold or otherwise disposed of, the cost and accumulated amortization are removed
from the accounts and any resulting gain or loss is recognized in operations. Website development costs are being amortized on
a straight-line basis over three years.
Income
taxes
The
Company follow ASC 740-10-30, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences
of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities
are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in
effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance
to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the fiscal 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 the Statements of Income in the period that includes the enactment date.
On
December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was signed into law by the President of the United States. TCJA is a tax reform
act that among other things, reduced corporate tax rates to 21 percent effective January 1, 2018. FASB ASC 740, Income Taxes,
requires deferred tax assets and liabilities to be adjusted for the effect of a change in tax laws or rates in the year of enactment,
which is the year in which the change was signed into law. Accordingly, the Company adjusted its deferred tax assets and liabilities
at December 31,2017, using the new corporate tax rate of 21 percent.
The
Company adopted ASC 740-10-25 (“ASC 740-10-25”) with regard to uncertainty income taxes. ASC 740-10-25 addresses
the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial
statements. Under ASC 740-10-25, we may recognize the tax benefit from an uncertain tax position only if it is more likely
than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the
position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest
benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740-10-25 also provides guidance
on derecognition, classification, interest and penalties on income taxes, and accounting in interim periods and requires increased
disclosures. We had no material adjustments to our liabilities for unrecognized income tax benefits according to the provisions
of ASC 740-10-25.
Stock-based
Compensation
The
Company accounts for non-employee stock-based awards in accordance with the Accounting Standards Update (ASU) 2018-07,
Compensation—Stock
Compensation (Topic 718):
Under the new standard, the Company will value all equity classified awards at their grant-date
under ASC718 and forgo revaluing the award after this date.
We
account for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718,
Compensation—Stock
Compensation,
which requires all share-based payments to employees, including grants of employee stock options, to be recognized
in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation
expense and credited to additional paid-in capital over the period during which services are rendered.
Net
income (loss) per common share
Net
income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic
net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common
stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss)
by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period.
The weighted average number of common shares outstanding and potentially outstanding common shares assumes that the Company
incorporated as of the beginning of the first period presented.
The
Company’s diluted loss per share is the same as the basic loss per share for the years ended June 30, 2018 and 2017, as
the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.
Recently
issued accounting pronouncements
In
January 2017, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”)
2017-01,
Business Combinations (Topic 805) Clarifying the Definition of a Business
. The amendments in this update
clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions
should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas
of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual
periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The Company
is in the process of evaluating the impact of this accounting standard update.
In
November 2016, the FASB issued ASU 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash,
which requires restricted
cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash
flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet.
ASU 2016-18 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The
Company is in the process of evaluating the impact of this accounting standard update on its financial statements.
In
October 2016, the FASB issued ASU 2016-16,
Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory
,
which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when
the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early
adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial
statements.
In
August 2016, the FASB issued ASU 2016-15
, Statement of Cash Flows (Topic 230), Classification of Certain Cash
Receipts and Cash Payments
. ASU 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash
payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU 2016-15 is
effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is
in the process of evaluating the impact of this accounting standard update on its statements of cash flows.
In
March 2016, the FASB issued ASU 2016-09,
Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting
.
ASU 2016-09, which amends several aspects of accounting for employee share-based payment transactions including the accounting
for income taxes, forfeitures, and statutory tax withholding requirements, and classification in the statement of cash flows.
ASU 2016-09 is effective for fiscal years beginning after December 15, 2016 and interim periods within annual periods beginning
after December 15, 2016, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting
standard update on its financial statements.
In
February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
. ASU 2016-02 requires lessees to recognize lease assets
and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective
for fiscal years beginning after December 15, 2018 and interim periods in fiscal years beginning after December 15, 2018,
with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its
financial statements.
In
May 2014, August 2015, April 2016 and May 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09
(ASC Topic 606), Revenue from Contracts with Customers, ASU 2015-14 (ASC Topic 606) Revenue from Contracts with Customers, Deferral
of the Effective Date, ASU 2016- from Contracts with Customers, ASU 2015-14 (ASC Topic 606) Revenue from Contracts with Customers,
Deferral of the Effective Date, ASU 2016-10 (ASC Topic 10 (ASC Topic 606) Revenue from Contracts with Customers, Identifying Performance
Obligations and Licensing, and ASU 2016-12 (ASC Topic 606) Revenue from Contracts with 606) Revenue from Contracts with Customers,
Identifying Performance Obligations and Licensing, and ASU 2016-12 (ASC Topic 606) Revenue from Contracts with accounting for
revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific
guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statements
users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
The amendments in these ASUs are effective for fiscal years, and interim periods within those years, beginning after December
15, 2017. Early adoption is permitted for annual periods beginning after December 15, 2016. This standard may be applied process
of assessing the impact, if any, on its consolidated financial statements.
The
Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact
on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting
pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE
3 - GOING CONCERN
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern,
which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As
reflected in the accompanying consolidated financial statements, the Company has had minimal revenue, has an accumulated deficit
of $133,325 and net cash used in operations of $101,314. These conditions raise substantial doubt about its ability to continue
as a going concern.
While
the Company is attempting to execute its development strategy, the Company’s cash position may not be sufficient to support
the Company’s daily operations without significant financing. While the Company believes in the viability of its strategy
to produce sales volume and in its ability to raise additional funds, there can be no assurances to that effect. The ability of
the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan
and generate sufficient revenues. The consolidated financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern. Management believes that the actions presently being taken to further
implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern.
NOTE
4 - PROPERTY & EQUIPMENT
Long
lived assets, including property and equipment and certain intangible assets to be held and used by the Company are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable.
Impairment losses are recognized if expected future cash flows of the related assets are less than their carrying values. Measurement
of an impairment loss is based on the fair value of the asset. Long-lived assets and certain identifiable intangibles to be disposed
of are reported at the lower of carrying amount or fair value less cost to sell.
Property
and Equipment and intangible assets are first recorded at cost. Depreciation and/or amortization is computed using the straight-line
method over the estimated useful lives of the various classes of assets between three and five years. Leasehold improvements are
being depreciated over ten years, and the building over twenty years.
Maintenance
and repair expenses, as incurred, are charged to expense. Betterments and renewals are capitalized in plant and equipment accounts.
Cost and accumulated depreciation applicable to items replaced or retired are eliminated from the related accounts with any gain
or loss on the disposition included as income.
Intangible
assets stated at cost, less accumulated amortization consisted of the following:
|
|
June 30, 2018
|
|
June 30, 2017
|
Website development
|
|
$
|
1,850
|
|
|
$
|
1,850
|
|
Less: accumulated amortization
|
|
|
(1,850
|
)
|
|
|
(1,336
|
)
|
Website development, net
|
|
$
|
—
|
|
|
$
|
514
|
|
Amortization
expense
Amortization
expense for the years ended June 30, 2018 and 2017 was $514 and $617, respectively.
Property,
Plant and equipment stated at cost, less accumulated depreciation consisted of the following:
|
|
June 30, 2018
|
|
June 30, 2017
|
Leasehold Improvements
|
|
$
|
15,893
|
|
|
$
|
—
|
|
Machinery and Equipment
|
|
|
124,970
|
|
|
|
—
|
|
Real Property & Plant
|
|
|
256,443
|
|
|
|
—
|
|
Less: accumulated depreciation
|
|
|
(11,784
|
)
|
|
|
—
|
|
Fixed assets, net
|
|
$
|
385,522
|
|
|
$
|
—
|
|
Depreciation
expense
Depreciation
expense for the years ended June 30, 2018 and 2017 was $11,784 and $0, respectively.
NOTE
5 – LINES OF CREDIT
The
Company has established a line of credit with a commercial bank in the amount of $50,000. This is a revolving business line of
credit (BLOC) and bears a fixed interest rate of 7%. The company has also established a corporate business credit card for use
in travel related purposes. That line of credit is established at $20,000. The company has also established a renewable Bank Term
Loan Facility in the approximate amount of $200,000 with a fixed interest rate of 5%.
Total
consolidated revolving credit available under all credit arrangements is approximately $270,000. On March 9, 2018, the Company
obtained a $180,000 loan against the bank term loan. The loan has a term of five years and requires interest only payments of
$600 until May 26, 2018, thereafter payments of principal and interest of $3,396.82. As of June 30, 2018, the balance on the loan
is $177,353.
Future
minimum payments of principal and interest for the fiscal years ended are as follows:
Fiscal Year
|
|
Amount
|
2019
|
|
|
$
|
40,762
|
|
2020
|
|
|
|
40,762
|
|
2021
|
|
|
|
40,762
|
|
2022
|
|
|
|
40,762
|
|
Thereafter
|
|
|
|
37,357
|
|
Total
|
|
|
$
|
200,405
|
|
NOTE
6 – LOANS PAYABLE
On
February 28, 2018, the Company purchased certain real property and approximately 2 acres of land in Missouri. The total acquisition
cost including all closing costs and fees was $256,443. The purchase price was partially financed with a $200,000 loan from the
company’s primary bank. The loan has a term of 5-years, at an interest rate of 4.09% and requires monthly payments of interest
and principal of $1,494.59 with a final payment of approximately $148,063 due March 1, 2023. As of June 30, 2018, the balance
on the loan is $197,571.
Future
minimum payments of principal and interest for the fiscal years ended are as follows:
Fiscal Year
|
|
Amount
|
2019
|
|
|
$
|
17,935
|
|
2020
|
|
|
|
17,935
|
|
2021
|
|
|
|
17,935
|
|
2022
|
|
|
|
17,935
|
|
Thereafter
|
|
|
|
158,931
|
|
Total
|
|
|
$
|
230,671
|
|
In
April 2018 the Company purchased equipment to be used in their operations for a total acquisition price of $32,792. The equipment
was purchased with a combination of cash and loan financing. The Company obtained a loan for $27,500
from their primary bank. The loan, dated May 7, 2018, matures on May 7, 2023, bears interest at 6% per annum and requires monthly
payments of interest and principal of $532.84. As of June 30, 2018, the balance on the loan is $27,109.
Future
minimum payments of principal and interest for the fiscal years ended are as follows:
Fiscal Year
|
|
Amount
|
2019
|
|
|
$
|
6,394
|
|
2020
|
|
|
|
6,394
|
|
2021
|
|
|
|
6,394
|
|
2022
|
|
|
|
6,394
|
|
2023
|
|
|
|
2,664
|
|
Total
|
|
|
$
|
28,240
|
|
NOTE
7 - STOCKHOLDERS’ EQUITY
Common
stock
Common
stock includes 100,000,000 shares authorized at a par value of $0.001.
Between
January 24, 2017 and March 31, 2017, the Company sold 545,000 shares of common stock at $0.10 a share under the terms of its most
recent effective registered stock offering.
During
the year ended June 30, 2018, the Company sold 325,000 shares of common stock from its effective registered stock offering for
total cash proceeds of $32,500.
Preferred
stock
Preferred
stock includes 25,000,000 shares of authorized at a par value of $0.001. Preferred stock includes 25,000,000 shares of Class B
authorized at a par value of $0.001. The Preferred Stock constitutes a convertible stock in which (1) one Preferred Share is convertible
into (5) five Common Shares. The Preferred Stock holders are entitled to vote on any matters on which the common stock holders
are entitled to vote.
NOTE
8 - RELATED PARTY TRANSACTIONS
On
November 5, 2017, to fund its working capital requirements the Company obtained a Special Line of Credit (“LOC”)
also recognized as a Blanket Secured Promissory Note for the total draw down amount of up to $500,000, from Twiga Capital Partners,
LLC (“TCP”), an entity controlled by the Company’s sole officer and largest stockholder, Shefali Vibhakar. This
Note is secured by all of the assets of the Company in accordance with the Security Agreement by and between the Company and the
Holder dated as of November 5, 2017. The LOC bears interest at 5% per annum and is due on demand. As of December 31, 2017, the
Company owed $37,748 of principal and $243 of accrued interest on the LOC. During the year ended June 30, 2018, the Company borrowed
another $37,051 for operating expenses. As of June 30, 2018, the Company owed $67,299 of principal and $1,718 of accrued interest
on the LOC.
During the year ended June 30, 2018,
the Company utilized $310,000 of its LOC with TCP in exchange for certain equipment. The Company was unable to establish the book
value of the equipment per GAAP requirements, so it was carried over at no cost and the loan was debited to additional paid in
capital. TCP then forgave the loan resulting in a credit to additional paid in capital. The company currently utilizes all $ 310,000
valuable machinery and equipment in its Missouri Plant.
As
of June 30, 2018, and 2017, the Company owed $0 and $6,190, respectively in loans payable to its President & CEO. The loans
were received to pay for certain operating expenses. They were unsecured, non-interest bearing and due on demand. On November
15, 2017, this note was assigned to TCP. The note has become part of the outstanding balance due under the newly established line
of credit.
NOTE
9 – COMMITMENTS – RELATED PARTY
On
November 1, 2017, the Company entered into a lease agreement with TCP to lease certain premises located in Florida to be effective
from November 1, 2017 to November 1, 2027. The 8,000 square feet premises was to be used by the Company for plant and offices. Monthly
rent of $7,500 was to be paid on the first of each month. No payment was due for the first four months of the lease. A $7,500
deposit was required and was loaned to the Company by TCP. The $7,500 was added to the balance due under the line of credit with
TCP but has since been returned. As of June 30, 2018, the Company has incurred $25,000 of rent expense. TCP determined that it
is in the best interest of the Company to contribute the $25,000 of rented space to the Company; which has been credited to paid
in capital, and to cancel the lease agreement.
NOTE
10 – INCOME TAXES
Deferred
taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating
loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences
are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The Company has evaluated Staff Accounting Bulletin No. 118 regarding the impact of the decreased
tax rates of the Tax Cuts & Jobs Act. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment. The U.S. federal income tax rate of 21% is being used for the fiscal year ended June 30, 2018 due to the new
tax law recently enacted. The U.S. federal income tax rate of 34% is being used for the fiscal year ended June 30, 2017.
Net
deferred tax assets consist of the following components as of June 30:
|
|
2018
|
|
2017
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
NOL Carryover
|
|
$
|
28,000
|
|
|
$
|
19,391
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Less valuation allowance
|
|
|
(28,000
|
)
|
|
$
|
(19,391
|
)
|
Net deferred tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
The
income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income
from continuing operations for the period ended June 30, due to the following:
|
|
2018
|
|
2017
|
Federal income tax benefit attributable to:
|
|
|
|
|
|
|
|
|
Current operations
|
|
$
|
16,021
|
|
|
$
|
16,121
|
|
Less: Valuation allowance
|
|
|
(16,021
|
)
|
|
|
(16,121
|
)
|
Net provision for Federal income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
At
June 30, 2018, the Company had net operating loss carry forwards of approximately $133,000 that may be offset against future taxable
income from the year 2018 to 2036. No tax benefit has been reported in the June 30, 2018 financial statements since the potential
tax benefit is offset by a valuation allowance of the same amount.
Due
to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal Income tax
reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may
be limited as to use in future years.
NOTE 11 – CORRECTION OF AN ERROR
During the quarter ended March 31, 2018, the
Company utilized $310,000 of its LOC with TCP in exchange for certain machinery and equipment. As a result of the purchase the
March 31, 2018 balance sheet included $304,833 (net of $5,167 of depreciation) of machinery equipment and a loan of $310,000 due
to a related party. The Company was subsequently unable to establish the book value of the equipment per GAAP requirements. As
a result, an adjustment was made to carry the equipment over at no cost and the loan was debited to additional paid in capital.
TCP then forgave the loan resulting in a credit to additional paid in capital. On December 28, 2018, the Company filed an 8-K
for non-reliance on previously issued financial statements.
NOTE
12 - SUBSEQUENT EVENTS
In
accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the financial
statements were available to be issued on December 26, 2018 and has determined that it does not have any material subsequent events
to disclose in these financial statements.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
|
Genesys
Industries, Inc.
|
|
|
Date: December 28, 2018
|
By:
|
/s/
Shefali Vibhakar
|
|
Shefali
Vibhakar
|
|
Chief Financial Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
Signature
|
Title
|
Date
|
|
|
|
/s/
Shefali Vibhakar
|
Chief
Financial Officer
|
December
28, 2018
|