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
|
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.
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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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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.
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.
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.
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.
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
|
|
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.
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.
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.
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.
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.