UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_________________

FORM 10-Q

_________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: December 31, 2018 

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

_________________

GENESYS INDUSTRIES, INC.

_________________

 

Florida 333-213387 30-0852686
(State or Other Jurisdiction of Incorporation or Organization) (Commission File Number) (I.R.S. Employer 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)

_________________

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☐  No ☒

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

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☒
Emerging growth company ☒  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ☐  No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:  As of February 7, 2019, the issuer had 17,870,000 shares of its common stock issued and outstanding.

  1  

 

TABLE OF CONTENTS

PART I  
Item 1. Condensed Unaudited Consolidated Financial Statements 3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
Item 4. Controls and Procedures 14
PART II  
Item 1. Legal Proceedings 15
Item 1A. Risk Factors 15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Mining Safety Disclosures 15
Item 5. Other Information 15
Item 6. Exhibits 15
Signatures 16

 

  2  

 

 

  PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

GENESYS INDUSTRIES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

December 31, 2018

 

Condensed Consolidated Balance Sheets as of December 31, 2018 and June 30, 2018 (Unaudited) 4
Condensed Consolidated Statements of Operations for the three and six months ended December 31, 2018 and 2017 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2018 and 2017 (Unaudited) 6
Notes to the Condensed Consolidated Financial Statements (Unaudited) 7

 

  3  

 

 

GENESYS INDUSTRIES, INC .

CONSOLIDATED BALANCE SHEETS

(Unaudited)

   

December 31,

2018

 

June 30,

2018

ASSETS        
         
Current assets:                
Cash   $ 111,679     $ 17,866  
Accounts receivable     100,629       114,218  
Inventory     9,696       7,939  
Total current assets     222,004       140,023  
Website development, net     —         —    
Machinery and equipment, net     105,641       118,388  
Real property & plant, net     259,928       267,134  
Total Assets   $ 587,573     $ 525,545  
                 
  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                
                 
Current liabilities:                
Accounts payable and accrued liabilities   $ 26,764     $ 52,319  
Accrued interest, related party     3,399       1,718  
Accrued compensation     3,663       6,500  
Line of credit     161,238       177,353  
Loans payable     217,292       224,681  
Due to related party     65,911       67,299  
Accrual for income taxes     25,962       —    
Total current liabilities     504,229       529,870  
Total liabilities     504,229       529,870  
                 
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 17,870,000 shares issued and outstanding, respectively     17,870       17,870  
Additional paid-in capital     101,130       101,130  
Accumulated deficit     (45,656 )     (133,325 )
Total stockholders' deficit     83,344       (4,325 )
Total Liabilities and Stockholders' Deficit   $ 587,573     $ 525,545  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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GENESYS INDUSTRIES, INC .

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

    For the Three Months Ended
December 31, 		  For the Six Months Ended
December 31,
    2018   2017   2018   2017
Revenue   $ 248,204     $ 1,357     $ 433,445     $ 1,557  
Cost of revenue     54,369       733       103,548       733  
Gross Margin     193,835       624       329,897       824  
Operating Expenses:                                
Professional fees     7,100       3,875       10,600       8,375  
Payroll expense     45,324       —         113,188       —    
General & administrative expenses     45,651       15,002       78,698       22,565  
Total operating expenses     98,075       18,877       202,486       30,940  
                                 
Income (loss) from operations     95,760       (18,253 )     127,411       (30,116 )
                                 
Other expense:                                
Interest expense     (10,746 )     (243 )     (13,780 )     (243 )
Total other expense     (10,746 )     (243 )     (13,780 )     (243 )
                                 
Income (loss) before income taxes     85,014       (18,496 )     113,631       (30,359 )
Provision for income taxes     (19,952 )     —         (25,962 )     —    
Net Income (Loss)   $ 65,062     $ (18,496 )   $ 87,669     $ (30,359 )
                                 
Net Income (Loss) Per Common Share, basic & diluted   $ 0.00     $ 0.00     $ 0.00     $ 0.00  
Weighted Common Shares Outstanding, basic & diluted     17,870,000       17,555,000       17,870,000       17,555,000  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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GENESYS INDUSTRIES, INC .

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

    For the Six Months Ended
December 31,
    2018   2017
Cash flows from operating activities:                
Net Income (Loss)   $ 87,669     $ (30,359 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Amortization expense     —         308  
Depreciation expense     19,953       166  
Changes in operating assets and liabilities:                
Accounts receivable     13,588       (7,500 )
Inventory     (1,757 )     —    
Accounts payable and accruals     (2,429 )     (177 )
Accrued interest, related party     1,681       10,243  
Net cash provided by (used in) operating activities     118,705       (27,319 )
                 
Cash flows from investing activities:                
Leasehold improvements     —         (15,893 )
Net cash used in investing activities     —         (15,893 )
                 
Cash flows from financing activities:                
Repayments to a related party     (1,388 )     —    
Advances from a related party             31,558  
Payments on line of credit     (16,114 )     —    
Principal payment on mortgage     (4,990 )     —    
Principal payment on loan payable     (2,400 )     —    
Proceeds from the sale of common stock     —         1,000  
Net cash (used in) provided by financing activities     (24,892 )     32,558  
                 
Net increase (decrease) in cash     93,813       (10,654 )
                 
Cash, beginning of period     17,866       20,844  
                 
Cash, end of period   $ 111,679     $ 10,190  
                 
Supplemental disclosure of cash flow information:                
Cash paid for interest   $ 11,237     $ —    
Cash paid for taxes   $ —       $ —    

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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G ENESYS INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2018

(Unaudited)

 

 

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, 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 accompanying condensed consolidated financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at December 31, 2018 and for the related periods presented have been made. The results for the six months ended December 31, 2018 are not necessarily indicative of the results of operations for the full year. These financial statements and related footnotes should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2018, filed with the Securities and Exchange Commission

 

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.

 

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Genesys Industries, LLC, and been prepared in conformity with accounting principles generally accepted in the United States of America. All significant intercompany transactions and balances have been eliminated.

 

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 December 31, 2018, the Company had $9,696 of parts and raw material 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.

 

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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 six months ended December 31 , 2018, the Company recognized $132,022, $98,473 and $129,436 from its three largest customers, representing 30%, 23% and 30% of total sales, respectively.

 

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 December 31, 2018, there have been no claims of defective products made.

 

Recently issued accounting pronouncements

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 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 financial statements, the Company has just recently begun to recognize revenue and has an accumulated deficit of $45,656 as of December 31, 2018. These conditions raise substantial doubt about its ability to continue as a going concern.

 

While the Company is attempting to execute its growth strategy, the Company’s cash position may not be sufficient to support the Company’s daily operations without additional 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 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, PLANT & 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.

 

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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.

 

Property, Plant and equipment stated at cost, less accumulated depreciation consisted of the following:       

         

   

December 31,

2018

 

June 30,

2018

Leasehold Improvements   $ 15,893     $ 15,893  
Machinery and Equipment     124,970       124,970  
Real Property & Plant     256,443       256,443  
Less: accumulated depreciation     (31,737 )     (11,784 )
Fixed assets, net   $ 365,569     $ 385,522  

 

Depreciation expense

 

Depreciation expense for the six months ended December 31, 2018 and 2017 was $19,953 and $166, 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 December 31, 2018, and June 30, 2018, the balance on the loan is $161,238 and $177,353, respectively.

 

Future minimum payments of principal and interest for the fiscal years ended are as follows:

 

Fiscal Year   Amount
2019   $ 20,286  
2020     40,762  
2021     40,762  
2022     40,762  
Thereafter     37,357  
Total   $ 179,929  

 

NOTE 6 – LOAN 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 December 31, 2018, and June 30, 2018 the balance on the loan is $192,583 and $197,571, respectively.

 

Future minimum payments of principal and interest for the fiscal years ended are as follows:

 

Fiscal Year   Amount
2019   $ 8,968  
2020     17,935  
2021     17,935  
2022     17,935  
Thereafter     158,931  
Total   $ 221,704  

 

  9  

 

 

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 December 31, 2018, and June 30, 2018, the balance on the loan is $24,709 and $27,109, respectively.

 

Future minimum payments of principal and interest for the fiscal years ended are as follows:

 

Fiscal Year   Amount
2019   $ 3,197  
2020     6,394  
2021     6,394  
2022     6,394  
Thereafter     2,664  
Total   $ 25,043  

 

NOTE 7 - STOCKHOLDERS’ EQUITY

 

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, 2018, and June 30, 2018, the Company owed $65,911 and $67,299 of principal and $3,399 and $1,718 of accrued interest, respectively on the LOC.

  

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 – 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 11 - 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 and has determined that it does not have any material subsequent events to disclose in these financial statements.

 

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

 

The following discussion and analysis should be read in conjunction with our unaudited financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

 

Forward Looking Statements

 

Certain matters discussed herein are forward-looking statements. Such forward-looking statements contained in this Form 10-Q involve risks and uncertainties, including statements as to:

 

• our future operating results;
• our business prospects;
• our contractual arrangements and relationships with third parties;
• the dependence of our future success on the general economy;
• our possible future financings; and
• the adequacy of our cash resources and working capital.

 

These forward-looking statements can generally be identified as such because the context of the statement will include words such as we “believe,” “anticipate,” “expect,” “estimate” or words of similar meaning. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this Form 10-Q, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

 

Cautionary Statement:

 

Statements included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, in future filings by the Company with the Securities and Exchange Commission, in the Company’s press releases and in oral statements made with the approval of an authorized executive officer that are not historical or current facts are “forward-looking statements.” These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. These risks and uncertainties are described in the Company’s Annual Report on Form 10-K for the year ended June 30, 2017, as well as other filings the Company makes with the Securities and Exchange Commission. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made and are not predictions of actual future results. The Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

 

Plan of Operations

 

Genesys Industries is a diversified multi-industry manufacturer of complex metal components and products. We serve all general industrial markets such as Aerospace, Automotive, Construction, Commercial, Food Processing, Industrial, Maritime, Medical, Railroad, Oil and Gas, Packaging, Telecom, Textiles, Pulp Paper, 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.

 

Results of Operation for the Three Months Ended December 31, 2018 and 2017

 

Revenues

For the three months ended December 31, 2018, we earned revenue of $248,204, compared to $1,357 for the three months ended December 31, 2017. We have had a significant increase in revenue as a result of the commencement of our business plan and operations. We continue to add new customers each month.

 

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Cost of Revenue

For the three months ended December 31, 2018, we incurred cost of revenue of $54,369, compared to $733 for the three months ended December 31, 2017. Cost of revenue has increased in conjunction with increased sales and consists of raw materials, tooling and other processes used in our manufacturing process.

 

Professional fees

Professional fees were $7,100 for the three months ended December 31, 2018 compared to $3,875 for the three months ended December 31, 2017, an increase of $3,225 or 83.2%. Professional fees consist of accounting, audit and legal fees. The increase in fees in the current period is due to increased audit fees.

 

Payroll expense

Payroll expense was $45,324 for the three months ended December 31, 2018 compared to $0 for the three months ended December 31, 2017. Payroll expense has increased with the hiring of new employees.

 

General & administrative expenses

General & administrative expenses were $45,651 for the three months ended December 31, 2018, compared to $15,002 for the three months ended December 31, 2017, an increase of $30,649. Expenses have increased in conjunction with the increase in operations.

 

Other expense

Interest expense for the three months ended December 31, 2018 was $10,746 compared to $243 for the three months ended December 31, 2017. Interest expense has increased due to the addition of our related party loan, line of credit and mortgage loan.

 

Net Loss

We had net income of $65,065, after a $19,952 provision for income taxes, for the three months ended December 31, 2018 compared to a net loss of $18,496 for the three months ended December 31, 2017. The increase from a net loss to net income is due to our increased revenue and operations.

 

Results of Operation for the Six Months Ended December 31, 2018 and 2017

 

Revenues

For the six months ended December 31, 2018, we earned revenue of $433,445, compared to $1,557 for the six months ended December 31, 2017. We have had a significant increase in revenue as a result of the commencement of our business plan and operations. We continue to add new customers each month.

 

Cost of Revenue

For the six months ended December 31, 2018, we incurred cost of revenue of $103,548, compared to $733 for the six months ended December 31, 2017. Cost of revenue has increased in conjunction with increased sales and consists of raw materials, tooling and other processes used in our manufacturing process.

 

Professional fees

Professional fees were $10,600 for the six months ended December 31, 2018 compared to $8,375 for the six months ended December 31, 2017, an increase of $2,225 or 26.5%. Professional fees consist of accounting, audit and legal fees. The increase in fees in the current period is due to increased audit and accounting fees.

 

Payroll expense

Payroll expense was $113,188 for the six months ended December 31, 2018 compared to $0 for the six months ended December 31, 2017. Payroll expense has increased with the hiring of new employees.

 

General & administrative expenses

General & administrative expenses were $78,698 for the six months ended December 31, 2018, compared to $22,565 for the six months ended December 31, 2017, an increase of $56,133. Expenses have increased in conjunction with the increase in operations.

 

Other expense

Interest expense for the six months ended December 31, 2018 was $13,780 compared to $243 for the six months ended December 31, 2017. Interest expense has increased due to the addition of our related party loan, line of credit and mortgage loan.

 

Net Loss

We had net income of $87,669, after a $25,962 provision for income taxes, for the six months ended December 31, 2018 compared to a net loss of $30,359 for the six months ended December 31, 2017. The increase from a net loss to net income is due to our increased revenue and operations.

 

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Liquidity and Capital Resources

 

Net cash provided by operating activities was $118,705 for the six months ended December 31, 2018. 

 

We had no cash used in investing activities for the six months ended December 31, 2018. 

 

We made payments totaling $24,892 on our various loans for the six months ended December 31, 2018.

 

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 December 31, 2018, the balance on the loan is $161,238.

 

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 December 31, 2018, the balance on the loan is $192,583.

 

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 December 31, 2018, the balance on the loan is $24,709.

 

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, 2018, the Company owed $65,911 of principal and $3,399 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 1 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.

 

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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 have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.

 

Recent Accounting Pronouncements

 

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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable to smaller reporting companies.

 

ITEM 4. 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 Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, they concluded that our disclosure controls and procedures were effective for the quarterly period ended December 31, 2018.

 

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.

 

Changes in Internal Controls

 

Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that no change occurred in the Company's internal controls over financial reporting during the quarter ended December 31, 2018 that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.

 

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PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

There are not presently any material pending legal proceedings to which the Company is a party or as to which any of our property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.

 

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

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

ITEM 4. MINING SAFETY DISCLOSURES

 

Not applicable.

ITEM 5. OTHER INFORMATION.

 

None.

 

ITEM 6. EXHIBITS

 

Part I Exhibits

 

No. Description
31.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
32.1 Certifications pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.

 

Part II Exhibits

 

No. Description
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Label Linkbase Document
101.PRE XBRL Taxonomy Presentation Linkbase Document

 

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SIGNATURES

 

In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    Genesys Industries, Inc.
     
  By: /s/ Shefali Vibhakar
  Name: Ms. Shefali Vibhakar
  Title: Chief Financial Officer, President and Treasurer
    (Principal Executive, Financial and Accounting Officer)
     
    February 08, 2019

 

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