UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 2008
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period from __________ To _________
Commission file number: 000-27831
GENESIS CAPITAL CORPORATION OF NEVADA
(Exact name of registrant business issuer as specified in its charter)
| | Nevada | | 91-1947658 | |
| | (State or other jurisdiction of incorporation or organization) | | (IRS Employer Identification No.) | |
| | | | | |
| | One N.E. First Avenue, Suite 306, Ocala, Florida | | 34470 | |
| | (Address of principal executive offices) | | (zip code) | |
(Registrant’s telephone number, including area code)
(Former Name, former address and former fiscal year, if changed since last report)
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 [ X ] 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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [ ] | Accelerated filer [ ] |
| | |
| Non-accelerated filer [ ] | Smaller reporting company [ X ] |
| (Do not check if a smaller reporting company) | |
Indicate by check mark whether the issuer is a shell company (as defined in rule 12b-2 of the Exchange Act) Yes [ X ] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of May 15, 2008, there were 4,879,692 shares of the Registrant's Common Stock, $0.001 par value per share, outstanding.
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GENESIS CAPITAL CORPORATION OF NEVADA
For The Quarterly Period Ended March 31, 2008
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
| Item 1. Financial Statements | 1 |
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| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 |
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| Item 3. Quantitative and Qualitative Disclosures About Market Risk | N/A |
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| Item 4. Controls and Procedures | 23 |
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| PART II - OTHER INFORMATION |
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| Item 1. Legal Proceedings | 24 |
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| Item 1A. Risk Factors | N/A |
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| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 24 |
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| Item 3. Defaults upon Senior Securities | 24 |
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| Item 4. Submission of Matters to a Vote of Security Holders | 25 |
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| Item 5. Other Information | 25 |
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| Item 6. Exhibits | 25 |
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH STATEMENTS ARE BASED ON CURRENT EXPECTATIONS, ASSUMPTIONS, ESTIMATES AND PROJECTIONS ABOUT THE COMPANY AND ITS INDUSTRY. FORWARD-LOOKING STATEMENTS ARE SUBJECT TO KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE, ACHIEVEMENTS AND PROSPECTS TO BE MATERIALLY DIFFERENT FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS FOR ANY REASON EVEN IF NEW INFORMATION BECOMES AVAILABLE OR OTHER EVENTS OCCUR IN THE FUTURE.
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
GENESIS CAPITAL CORPORATION
OF NEVADA
CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2008 AND 2007
GENESIS CAPITAL CORPORATION OF NEVADA
INDEX TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
| | PAGE(S) |
| | |
| Financial Statements: | |
| | |
Balance Sheets as of March 31, 2008 (Unaudited) and September 30, 2007 (Audited) | 3 |
| | |
Statements of Operation for the six and three months ended March 31, 2008 and 2007 (Unaudited) | 4 |
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Statements of Cash Flows for the six months March 31, 2008 and 2007 (Unaudited) | 5 |
| | |
| Notes to Financial Statements (Unaudited) | 6-15 |
| GENESIS CAPITAL CORPORATION OF NEVADA |
| CONDENSED BALANCE SHEET |
| |
| | | | | | | |
| | | | | | | |
| ASSETS | | | | | | |
| | | (Unaudited) | | | (Audited) | |
| | | March 31, | | | September 30, | |
| | | 2008 | | | 2007 | |
| CURRENT ASSETS | | | | | | |
| Cash and cash equivalents | | $ | 11,993 | | | $ | 12,187 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 11,993 | | | $ | 12,187 | |
| | | | | | | | | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' (DEFICIT) | | | | | | | | |
| | | | | | | | | |
| CURRENT LIABILITIES | | | | | | | | |
| Officers Loan | | $ | 127,284 | | | $ | 2,284 | |
| Total Current Liabilities | | | 127,284 | | | | 2,284 | |
| | | | | | | | | |
| | | | | | | | | |
| STOCKHOLDERS' (DEFICIT) | | | | | | | | |
| Preferred stock A, $.001 par value; 5,000,000 shares | | | | | | | | |
| authorized and 5,000,000 shares issued and outstanding | | | 5,000 | | | | 5,000 | |
| Preferred stock B, $.001 par value; 5,000,000 shares | | | | | | | | |
| authorized and 5,000,000 shares issued and outstanding | | | 5,000 | | | | 5,000 | |
| Common stock, $.001 par value; 500,000,000 | | | | | | | | |
| shares authorized and 4,879,692 shares issued | | | | | | | | |
| and outstanding | | | 4,880 | | | | 4,880 | |
| Additional paid-in capital | | | 331,415 | | | | 331,415 | |
| Accumulated deficit | | | (461,586 | ) | | | (336,392 | ) |
| | | | | | | | | |
| Total Stockholders' (Deficit) | | | (115,291 | ) | | | 9,903 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND | | | | | | | | |
| STOCKHOLDERS' (DEFICIT) | | $ | 11,993 | | | $ | 12,187 | |
The accompanying notes are an integral part of the condensed financial statements.
| GENESIS CAPITAL CORPORATION OF NEVADA | |
| CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) | |
| FOR THE SIX MONTHS ENDED MARCH 31, 2008 AND 2007 | |
| | |
| | |
| | |
| | | SIX MONTHS ENDED | | | THREE MONTHS ENDED | |
| | | 2008 | | | 2007 | | | 2007 | | | 2006 | |
| | | | | | | | | | | | | |
| CONSULTING REVENUE | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | | | | | |
| Professional fees and compensation expenses | | | 79,382 | | | | 27,397 | | | | 49,241 | | | | 26,841 | |
| Administrative expenses | | | 45,812 | | | | 111,610 | | | | 19,709 | | | | 25,451 | |
| Bad Debt Expense | | | - | | | | - | | | | - | | | | - | |
| Interest expense | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | |
| Total operating expenses | | | 125,194 | | | | 139,007 | | | | 68,950 | | | | 52,292 | |
| | | | | | | | | | | | | | | | | |
| LOSS BEFORE OTHER INCOME (EXPENSE) | | | (125,194 | ) | | | (139,007 | ) | | | (68,950 | ) | | | (52,292 | ) |
| | | | | | | | | | | | | | | | | |
| OTHER INCOME (EXPENSE) | | | | | | | | | | | | | | | | |
| Other income | | | - | | | | 627,134 | | | | - | | | | - | |
| Total Other Income (Expense) | | | - | | | | 627,134 | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | |
| NET PROFIT (LOSS) BEFORE PROVISION FOR INCOME TAXES | | | (125,194 | ) | | | 488,127 | | | | (68,950 | ) | | | (52,292 | ) |
| Provision for income taxes | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | |
| NET INCOME (LOSS) APPLICABLE TO COMMON SHARES | | | (125,194 | ) | | | 488,127 | | | | (68,950 | ) | | | (52,292 | ) |
| | | | | | | | | | | | | | | | | |
| NET INCOME (LOSS) PER BASIC SHARES | | $ | (0.03 | ) | | $ | 0.58 | | | $ | (0.01 | ) | | $ | (0.06 | ) |
| NET INCOME (LOSS) PER DILUTED SHARES | | $ | - | | | $ | 0.00 | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | | | | | |
| WEIGHTED AVERAGE SHARES OUTSTANDING | | | | | | | | | | | | | | | | |
| BASIC | | | 4,879,692 | | | | 843,552 | | | | 4,879,692 | | | | 843,552 | |
| DILUTED | | | - | | | | 125,843,552 | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of the condensed financial statements.
| GENESIS CAPITAL CORPORATION OF NEVADA | |
| CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) | |
| FOR THE SIX MONTHS ENDED MARCH 31,2008 AND 2007 | |
| | |
| | |
| | | Six Months ended | |
| | | March 31, | | | | |
| | | 2008 | | | 2007 | |
| | | | | | | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
| Net income (loss) | | $ | (125,194 | ) | | $ | 488,127 | |
| Adjustments to reconcile net income (loss) to net cash | | | | | | | | |
| provided by (used in) operating activities: | | | | | | | | |
| | | | | | | | | |
| Changes in assets and liabilities: | | | | | | | | |
| | | | | | | | | |
| Decrease in Loans receivables related party | | | | | | | 50,434 | |
| Decrease in management fee receivable | | | | | | | 143,482 | |
| (Decrease) increase in accounts payable and accrued expenses | | | - | | | | (234,438 | ) |
| Increase in officers loan | | | 125,000 | | | | 15,084 | |
| Total adjustments | | | 125,000 | | | | (25,438 | ) |
| Net cash provided by(used in) operating activities | | | (194 | ) | | | 462,689 | |
| | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | |
| Net proceeds from loans payable | | | - | | | | | |
| (Decrease) in debenture payable | | | - | | | | (453,720 | ) |
| Net cash (used in) financing activities | | | - | | | | (453,720 | ) |
| | | | | | | | | |
| NET INCREASE (DECREASE) IN CASH AND | | | | | | | | |
| CASH EQUIVALENTS | | $ | (194 | ) | | $ | 8,969 | |
| | | | | | | | | |
| CASH AND CASH EQUIVALENTS | | | | | | | | |
| BEGINNING OF PERIOD | | | 12,187 | | | | 4,908 | |
| | | | | | | | | |
| CASH AND CASH EQUIVALENTS | | | | | | | | |
| END OF PERIOD | | $ | 11,993 | | | $ | 13,877 | |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW | | | | | | | | |
| INFORMATION: | | | | | | | | |
| | | | | | | | | |
| CASH PAID DURING THE PERIOD FOR: | | | | | | | | |
| Interest expense | | $ | - | | | $ | - | |
| | | | | | | | | |
| Income taxes paid | | $ | - | | | $ | - | |
The accompanying notes are an integral part of the condensed financial statements.
GENESIS CAPITAL CORPORATION OF NEVADA
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
The condensed unaudited interim financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The condensed financial statements and notes are presented as permitted on Form 10-QSB and do not contain information included in the Company’s annual condensed unaudited statements and notes. Certain information and footnote disclosures normally included in condensed unaudited financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed unaudited financial statements be read in conjunction with the September 30, 2007audited financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these condensed unaudited financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year.
These condensed unaudited financial statements reflect all adjustments, including normal recurring adjustments which, in the opinion of management, are necessary to present fairly the condensed operations, changes in permanent stockholders equity (deficit), changes in temporary equity and cash flows for the periods presented.
Genesis Capital Corporation of Nevada (the “Company”) was incorporated in the State of Colorado in 1983. The Company has a total of 500,000,000 authorized common shares at December 31, 2007 and 2006, respectively, (par value $.001) with 4,879,692 shares issued and outstanding at December 31, 2007 and 2006, respectively, and 10,000,000 shares authorized preferred stock (par value of $.001) with 10,000,000 shares issued and outstanding as of December 31, 2007 and September 30, 2007, respectively.
The Company entered into a Stock Acquisition Agreement with Christopher Astrom, Hudson Consulting Group, Inc. and Global Universal, Inc. of Delaware dated August 30, 2001, which closed on October 30, 2001. This Stock Acquisition Agreement enabled Senior Lifestyle Communities, Inc. to acquire 95% of the issued and outstanding shares of common and preferred stock of the Company for $315,000. For accounting purposes, the transaction has been accounted for as a reverse acquisition, under the purchase method of accounting.
GENESIS CAPITAL CORPORATION OF NEVADA
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
In addition to the Stock Acquisition Agreement, the Company and Senior Lifestyle Communities, Inc. entered into a Share Exchange Agreement and Plan of Reorganization.
Upon these agreements with Senior Lifestyle Communities, Inc., the Company on November 1, 2001 assumed by assignment, the obligation of certain 8% Series SPA Senior Subordinated Convertible Debentures in the face amount of $1,000,000 received by assignment from Senior Lifestyle Communities, Inc. and Sea Lion Investors, LLC, Equity Planners LLC, and Myrtle Holdings, LLC (collectively “Purchasers”), each a Colorado limited liability company, issue the Company’s debentures of Senior Lifestyle Communities, Inc.
Senior Lifestyle Communities, Inc. is a Nevada Corporation engaged in the development of senior adult residences, incorporated in August, 2001. In addition to Senior Lifestyle Communities, Inc., the Company has Senior Adult Lifestyles, Inc. a wholly-owned subsidiary effective October 30, 2001. Additionally, the Company has not renewed the corporate charters for Senior Lifestyle Communities, Inc. and Senior Adult Lifestyles, Inc. The Company has transferred all assets and liabilities associated with these companies into the parent Genesis Capital Corporation of Nevada as the subsidiaries were dissolved.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
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 disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue and Cost Recognition
The Company’s financial statements are prepared using the accrual method of accounting. Under this method, revenue is recognized when earned and expenses are recognized when incurred. The Company did not earn any revenue from consulting services in 2008 and 2007.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments and other short-term investments with an initial maturity of three months or less to be cash equivalents.
The Company maintains cash and cash equivalent balances at a financial institution that is insured by the Federal Deposit Insurance Corporation up to $100,000.
GENESIS CAPITAL CORPORATION OF NEVADA
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
Income Taxes
The Company has adopted the provisions of Financial Accounting Standards Board Statement No. 109, Accounting for Income Taxes. The Company accounts for income taxes pursuant to the provisions of the Financial Accounting Standards Board Statement No. 109, Accounting for Income Taxes, which requires an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities.
Fair Value of Financial Instruments
The carrying amount reported in the balance sheets for cash and cash equivalents, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments.
Earnings (Loss) Per Share of Common Stock
Historical net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (EPS) includes additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants. Common stock equivalents were not included in the computation of diluted earnings per share when the Company reported a loss because to do so would be antidilutive for periods presented.
The Company has used the issued and weighted average shares as reported in the permanent stockholders’ schedule.
GENESIS CAPITAL CORPORATION OF NEVADA
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings (Loss) Per Share of Common Stock (Continued)
The following is a reconciliation of the computation for basic and diluted EPS:
| | | March 31, | | | March 31, | |
| | | 2008 | | | 2007 | |
| | | | | | | |
| Net income (loss) | | $ | (125,194 | ) | | $ | 488,127 | |
| | | | | | | | | |
| Weighted-average common shares | | | | | | | | |
| outstanding (Basic) | | | 4,879,692 | | | | 843,552 | |
| | | | | | | | | |
| Weighted-average common stock | | | | | | | | |
| equivalents: | | | | | | | | |
| Stock options | | | - | | | | - | |
| Warrants | | | | | | | | |
| Preferred Stock Conversions | | | - | | | | 125,000,000 | |
| Weighted-average common shares | | | | | | | | |
| outstanding (Diluted) | | | 4,879,692 | | | | 125,843,552 | |
There were no outstanding options and warrants at March 31, 2008 and 2007.
Recent Accounting Pronouncements
In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.” SFAS No. 154 replaces Accounting Principles Board (“APB”) Opinion No. 20, “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements.” SFAS No. 154 requires retrospective application to prior periods’ financial statements of a voluntary change in accounting principle unless it is impracticable. APB No. 20 previously required that most voluntary changes in accounting principle be recognized by including the cumulative effect of changing to the new accounting principle in net income in the period of the change. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 did not have a material impact on the Company’s financial position or results of operations.
GENESIS CAPITAL CORPORATION OF NEVADA
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements (Continued)
In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140.” SFAS No. 155 resolves issues addressed in SFAS No. 133 Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets,” and permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives and amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of the first fiscal year that begins after September 15, 2006. The adoption of SFAS No. 155 did not have a material impact on the Company’s financial position or results of operations.
In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140.” SFAS No. 156 requires an entity to recognize a servicing asset or liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract under a transfer of the servicer’s financial assets that meets the requirements for sale accounting, a transfer of the servicer’s financial assets to a qualified special-purpose entity in a guaranteed mortgage securitization in which the transferor retains all of the resulting securities and classifies them as either available-for-sale or trading securities in accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities” and an acquisition or assumption of an obligation to service a financial asset that does not relate to financial assets of the servicer or its
GENESIS CAPITAL CORPORATION OF NEVADA
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements (Continued)
affiliates. Additionally, SFAS No. 156 requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, permits an entity to choose either the use of an amortization or fair value method for subsequent measurements, permits at initial adoption a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights and requires separate presentation of servicing assets and liabilities subsequently measured at fair value and additional disclosures for all separately recognized servicing assets and liabilities. SFAS No. 156 is effective for transactions entered into after the beginning of the first fiscal year that begins after September 15, 2006. The adoption of SFAS No. 156 did not have a material impact on the Company’s financial position or results of operations.
In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements,” which provides a definition of fair value, establishes a framework for measuring fair value and requires expanded disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The provisions of SFAS No. 157 should be applied prospectively. Management is assessing the potential impact on Genesis’s financial condition and results of operations.
In February 2008, FASB Staff Position ("FSP") FAS No. 157-2, "Effective Date of FASB Statement No. 157" ("FSP No. 157-2") was issued. FSP No. 157-2 defers the effective date of SFAS No. 157 to fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, for all nonfinancial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Examples of items within the scope of FSP No. 157-2 are nonfinancial assets and nonfinancial liabilities initially measured at fair value in a business combination (but not measured at fair value in subsequent periods), and long-lived assets, such as property, plant and equipment and intangible assets measured at fair value for an impairment assessment under SFAS No. 144.
The partial adoption of SFAS No. 157 on January 1, 2008 with respect to financial assets and financial liabilities recognized or disclosed at fair value in the financial statements on a recurring basis did not have a material impact on the Company's financial statements. See Note 12 for the fair value measurement disclosures for these assets and liabilities. The Company is in the process of analyzing the potential impact of SFAS No. 157 relating to its planned January 1, 2009 adoption of the remainder of the standard.
GENESIS CAPITAL CORPORATION OF NEVADA
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements (Continued)
In September 2006, the FASB issued SFAS No. 158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans”, which amends SFAS No. 87 “Employers’ Accounting for Pensions” (SFAS No. 87), SFAS No. 88 “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits” (SFAS No. 88), SFAS No. 106 “Employers’ Accounting for Postretirement Benefits Other Than Pensions” (SFAS No. 106), and SFAS No. 132R “Employers’ Disclosures about Pensions and Other Postretirement Benefits (revised 2003)” (SFAS No. 132R). This Statement requires companies to recognize an asset or liability for the overfunded or underfunded status of their benefit plans in their financial statements. SFAS No. 158 also requires the measurement date for plan assets and liabilities to coincide with the sponsor’s year end. The standard provides two transition alternatives related to the change in measurement date provisions. The recognition of an asset and liability related to the funded status provision is effective for fiscal year ending after December 15, 2006 and the change in measurement date provisions is effective for fiscal years ending after December 15, 2008. This pronouncement has no effect on Genesis Capital at this time.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Liabilities, including an amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 permits entities to choose, at specified election dates, to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Unrealized gains and losses shall be reported on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157 “Fair Value Measurements” (“SFAS No. 157”). The Company is currently assessing the impact that SFAS No. 159 will have on its financial statements.
Reclassifications
Certain amounts for the six months ended March 31, 2007 have been reclassified to conform to the presentation of the March 31, 2008 amounts. The reclassifications have no effect on the net income for the six months ended March 31, 2008.
NOTE 3 - DEBENTURES PAYABLE
The Company had outstanding convertible debentures at December 31, 2006 in the amount of $453,720. The debentures were convertible at the investors’ discretion pursuant to the convertible debenture agreement. These debentures were to mature along with the related interest on November 1, 2003 and were in default. The debentures were released by the debenture holders, the company recorded income on the relief of debt and reported it as other income.
GENESIS CAPITAL CORPORATION OF NEVADA
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007
NOTE 4 - OFFICERS LOANS
This represents amounts advanced to companies under common ownership, and officers of the Company. These amounts have no specific payment terms and are due on demand. No interest has been recorded on these amounts, due to the relative short-term repayments on them.
NOTE 5 - STOCKHOLDERS’ (DEFICIT)
Common and Preferred Stock
In October 2001, the Company completed a recapitalization whereby, the Company had authorized two classes of stock; preferred stock with a par value of $.001 and 10,000,000 shares authorized, and common stock with a par value of $.001, and 500,000,000 shares authorized.
As of December 31, 2007, the Company had issued 10,000,000 of its preferred stock; 5,000,000 Series A and 5,000,000 Series B shares.
On February 22, 2007, the Company filed an Amended and Restated Certificate of Designation of Series A Convertible Preferred Stock with the state of Nevada, which certificate of designation decreased the designated Series A Convertible Preferred Stock from 10,000,000 shares to 5,000,000 shares. Each share of series A convertible preferred stock entitles the holder thereof to 25 votes on all matters, the right to convert each share into 25 shares of common stock and a liquidation preference of $1.00 per share. On February 22, 2007, the Company filed a Certificate of Designation of Series B Convertible Preferred Stock with the state of Nevada, which certificate of designation designated 5,000,000 shares of Series B Convertible Preferred Stock. Each share of series B convertible preferred stock entitles the holder thereof to 250 votes on all matters, the right to convert each share into 250 shares of common stock and a liquidation preference of $1.00 per share.
Options and Warrants
The Company had no options or warrants outstanding at March 31, 2008 and 2007, respectively.
GENESIS CAPITAL CORPORATION OF NEVADA
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007
NOTE 6 - INCOME TAXES
The net deferred tax assets in the accompanying balance sheets include the following components at March 31, 2008 and 2007:
| | | 2008 | | | 2007 | |
| | | | | | | |
| Deferred tax assets | | $ | 138,476 | | | $ | 116,551 | |
| Deferred tax valuation allowance | | | (138,476 | ) | | | (116,551 | ) |
| | | | | | | | | |
| Net deferred tax assets | | $ | - | | | $ | - | |
Due to the uncertainty of utilizing the approximate $461,586 and $388,502 in net operating losses, for the six months ended March 31, 2008 and 2007 respectively, and recognizing the deferred tax assets, an offsetting valuation allowance has been established.
NOTE 7 - GOING CONCERN
The Company incurred a loss for the current six-month period ended March 31, 2008 and has had recurring losses for years including and prior to September 30, 2007 and has an accumulated deficit account of $461,586.
There is no guarantee whether the Company will be able to generate enough revenue and/or raise capital to support those operations. This raises substantial doubt about the Company’s ability to continue as a going concern.
Management states that they are confident that they can initiate new operations and raise the appropriate funds to continue in its pursuit of a reverse merger or similar transaction.
The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
GENESIS CAPITAL CORPORATION OF NEVADA
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007
NOTE 8 - Fair Value Measurements
On January 1, 2008, the Company adopted SFAS No. 157 “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, provides a consistent framework for measuring fair value under Generally Accepted Accounting Principles and expands fair value financial statement disclosure requirements. SFAS 157’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. SFAS 157 classifies these inputs into the following hierarchy:
Level 1 Inputs– Quoted prices for identical instruments in active markets.
Level 2 Inputs– Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs– Instruments with primarily unobservable value drivers.
The following table represents the fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2008.
Fair Value Measurements on a Recurring Basis as of March 31, 2008
| Assets | | Level I | | | Level II | | | Level III | | | Total | |
| | | | | | | | | | | | | |
| Investment securities | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | |
| Cash equivalents | | | 11,992 | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | |
| Total Assets | | | 11,992 | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | |
| Liabilities | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | |
| Total Liabilities | | | - | | | | - | | | | - | | | | - | |
NOTE 9 - SUBSEQUENT EVENT
The Company’s Board Members at the close of business on April 24, 2008 (the “Record Date”), voted to have a reverse split of the Company's common stock in a ratio of one (1) new share for every five hundred (500) existing shares of common stock. There will be no change to the par value or the authorized shares of common stock of the Company.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S FINANCIAL STATEMENTS AND THE NOTES TO THOSE STATEMENTS AND OTHER FINANCIAL INFORMATION APPEARING ELSEWHERE IN THIS REPORT.
History
The Company was formed as a Colorado corporation on September 19, 1983, under the name Bugs, Inc., for the purpose of using microbial and other agents, including metallurgy, to enhance oil and natural gas production and to facilitate the recovery of certain metals. In July 1989, the Company approved Articles of Amendment changing its name to Genesis Services, Inc. In September 1990, the Company approved additional Articles of Amendment changing its name to Genesis Capital Corporation (sometimes referred to as the "Colorado Corporation").
Since 1994, the activities of the Company have been limited because it sold its wholly owned subsidiary, U.S. Staffing, Inc., during the 1994-95 fiscal year. In 1999, the Company merged with Lincoln Health Fund, Inc. which owned land in Tarrant County, Texas, which it planned to use in building a retirement center. Since 1999, the Company has had minimal activity. The Company is a shell corporation seeking a business to acquire.
On December 22, 1998, Genesis Capital Corporation of Nevada (sometimes referred to as the "Nevada Corporation") was incorporated in Nevada for the purpose of merging with the Colorado Corporation so as to effect a re-domicile to Nevada and a reverse split of the Company's common stock.
On March 9, 1999, both the Colorado Corporation and the Nevada Corporation executed Articles of Merger by which the Colorado Corporation's shareholders received one share of new (Nevada) common stock for every 2,000 shares of old (Colorado) common stock they owned. The shareholders of both corporations had previously approved this proposal on due notice, and all outstanding shares of the Colorado Corporation's common stock were purchased by the new Nevada Corporation, effectively merging the Colorado Corporation into the Nevada Corporation, reverse splitting the Company's stock, and making the Nevada Corporation the surviving entity. Holders of preferred stock in the old Colorado Corporation received preferred stock in the new Nevada Corporation on a 1:1 basis.
On August 30, 2001, the Company entered into a Stock Acquisition Agreement ("Acquisition Agreement") with Christopher Astrom (Purchaser); Hudson Consulting Group, Inc. (Seller); and Global Universal, Inc (Seller), pursuant to which Mr. Astrom was granted the right to purchase 54,110,309 shares of common stock and 1,477,345 shares of preferred stock. Under the Acquisition Agreement, Mr. Astrom was to pay $315,000 to the Company for the common and preferred stock and tender to the Company all of the issued and outstanding common stock of Senior Lifestyle Communities, Inc. The Acquisition Agreement closed October 30, 2001. At the time of Closing, the purchased shares represented 95% of the issued and outstanding common and preferred stock of the Company.
On October 30, 2001, the Company entered into a Share Exchange Agreement and Plan of Reorganization with Mr. Astrom and Senior Lifestyle Communities, the purpose of which was to accommodate the financing by Mr. Astrom of his $315,000 obligation. Senior Lifestyle Communities issued 8% Series SPA Senior Subordinated Convertible Debentures in the initial amount of $360,000 to a nonaffiliated private source of financing. At the close of the Acquisition Agreement and the Exchange Agreement, Communities became a wholly owned subsidiary of the Company. Communities owns all of the issued and outstanding common stock of Senior Adult Lifestyle, Inc.
Pursuant to an Agreement executed on December 26, 2001, made effective as of October 31, 2001 and a Statutory Warranty Deed dated October 30, 2001, the Company, through Senior, acquired from National Residential Properties, Inc. k/n/a National Realty & Mortgage, Inc. all of the right, title and interest of National in (i) a certain parcel of real property in Hebron, Connecticut; and (ii) four contracts to purchase certain parcels of real property in Watertown, New Milford, Granby and East Windsor, Connecticut. In March, 2002, the Company sold its interest in the Connecticut Properties to Nathan Kahn and CT Adult Condominiums, LLC. At the time National and the Company had the same officers and directors and, accordingly, may have been deemed “affiliates".
In June 2002, the Company issued 3,522,655 shares of Series A Convertible Preferred Stock to Christopher Astrom and designated the entire 5,000,000 shares of Preferred Stock then owned by Mr. Astrom as Series A Convertible Preferred Stock.
On July 1, 2004, the Company entered into a two (2) year agreement with Wahoo Funding LLC, an affiliated Florida limited liability company, whereby the Company rendered to Wahoo certain financial and business consulting services in exchange for a total of $700,000. Except for the foregoing contract with Wahoo, the Company has not engaged in any operations and has been virtually dormant for several years.
Additionally, the Company has not renewed the corporate charters for Senior Lifestyle Communities, Inc. and Senior Adult Lifestyles, Inc. The Company has transferred all assets and liabilities associated with these companies into the parent Genesis Capital Corporation of Nevada.
On or about February 19, 2006, the Company's registration statement filed with the SEC on Form 10-SB became effective. Accordingly, the Company resumed the filing of reporting documentation in an effort to maximize shareholder value. The best use and primary attraction of the Company as a merger partner or acquisition vehicle will be its status as a reporting public company. Any business combination or transaction may potentially result in a significant issuance of shares and substantial dilution to present stockholders of the Company.
In February, 2007, the Company filed an Amended and Restated Certificate of Designation of Series A Convertible Preferred Stock with the state of Nevada, and a Certificate of Designation of Series B Convertible Preferred Stock. The Certificate of Designation of Series B Preferred Stock, designated 5,000,000 shares. On February 22, 2007, the Board of Directors approved the issuance of 5,000,000 shares of its Series B Convertible Preferred Stock to Christopher Astrom, in exchange for services rendered.
Each share of Series A convertible preferred stock entitles the holder thereof to twenty-five (25) votes on all matters, the right to convert each share into twenty-five(25) shares of common stock and a liquidation preference of $1.00 per share. Each share of series B convertible preferred stock entitles the holder thereof to two hundred fifty (250) votes on all matters, the right to convert each share into two hundred fifty (250) shares of common stock and a liquidation preference of $1.00 per share.
On March 12, 2007 the Company effected a 1 for 100 reverse split of its common stock.
Current Business Plan
The Company is a shell company in that it has no or nominal operations and either no or nominal assets. At this time, the Company's purpose is to seek, investigate and, if such investigation warrants, acquire an interest in business opportunities presented to it by persons or firms who or which desire to seek the perceived advantages of an Exchange Act registered corporation. The Company will not restrict its search to any specific business, industry, or geographical location and the Company may participate in a business venture of virtually any kind or nature. This discussion of the proposed business is purposefully general and is not meant to be restrictive of the Company's virtually unlimited discretion to search for and enter into potential business opportunities. Management anticipates that it may be able to participate in only one potential business venture because the Company has nominal assets and limited financial resources. This lack of diversification should be considered a substantial risk to shareholders of the Company because it will not permit the Company to offset potential losses from one venture against gains from another.
The Company may seek a business opportunity with entities which have recently commenced operations, or which wish to utilize the public marketplace in order to raise additional capital in order to expand into new products or markets, to develop a new product or service, or for other corporate purposes. The Company may acquire assets and establish wholly owned subsidiaries in various businesses or acquire existing businesses as subsidiaries.
The Company intends to advertise and promote the Company privately. The Company has not yet prepared any notices or advertisement. The Company anticipates that the selection of a business opportunity in which to participate will be complex and extremely risky. Due to general economic conditions, rapid technological advances being made in some industries and shortages of available capital, management believes that there are numerous firms seeking the perceived benefits of a publicly registered corporation. Such perceived benefits may include facilitating or improving the terms on which additional equity financing may be sought, providing liquidity for incentive stock options or similar benefits to key employees, providing liquidity (subject to restrictions of applicable statutes), for all shareholders and other factors. Potentially, available business opportunities may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex.
The Company has, and will continue to have, little or no capital with which to provide the owners of business opportunities with any significant cash or other assets. However, management believes the Company will be able to offer owners of acquisition candidates the opportunity to acquire a controlling ownership interest in a publicly registered company without incurring the cost and time required to conduct an initial public offering. The owners of the business opportunities will, however, incur significant legal and accounting costs in connection with acquisition of a business opportunity, including the costs of preparing Form 8K's, 10K's or 10KSB's, agreements and related reports and documents. The Securities Exchange Act of 1934 (the "34 Act"), specifically requires that any merger or acquisition candidate comply with all applicable reporting requirements, which include providing audited financial statements to be included within the numerous filings relevant to complying with the `34 Act. Nevertheless, the officers and directors of the Company have not conducted market research and are not aware of statistical data which would support the perceived benefits of a merger or acquisition transaction for the owners of a business opportunity.
The analysis of new business opportunities will be undertaken by, or under the supervision of, the officers and directors of the Company. Management intends to concentrate on identifying preliminary prospective business opportunities, which may be brought to its attention through present associations of the Company's officers and directors. In analyzing prospective business opportunities, management will consider such matters as the available technical, financial and managerial resources; working capital and other financial requirements; history of operations, if any; prospects for the future; nature of present and expected competition; the quality and experience of management services which may be available and the depth of that management; the potential for further research, development, or exploration; specific risk factors not now foreseeable but which then may be anticipated to impact the proposed activities of the Company; the potential for growth or expansion; the potential for profit; the perceived public recognition of acceptance of products, services, or trades; name identification; and other relevant factors. Officers and directors of the Company expect to meet personally with management and key personnel of the business opportunity as part of their investigation. To the extent possible, the Company intends to utilize written reports and investigation to evaluate the above factors. The Company will not acquire or merge with any company for which audited financial statements cannot be obtained within a reasonable period of time after closing of the proposed transaction.
The Officers of the Company have limited experience in managing companies similar to the Company and shall rely upon their own efforts, in accomplishing the business purposes of the Company. The Company may from time to time utilize outside consultants or advisors to effectuate its business purposes described herein. No policies have been adopted regarding use of such consultants or advisors, the criteria to be used in selecting such consultants or advisors, the services to be provided, the term of service, or regarding the total amount of fees that may be paid. However, because of the limited resources of the Company, it is likely that any such fee the Company agrees to pay would be paid in stock and not in cash.
The Company will not restrict its search for any specific kind of firms, but may acquire a venture which is in its preliminary or development stage, which is already in operation, or in essentially any stage of its corporate life. It is impossible to predict at this time the status of any business in which the Company may become engaged, in that such business may need to seek additional capital, may desire to have its shares publicly traded, or may seek other perceived advantages which the Company may offer. However, the Company does not intend to obtain funds in one or more private placements to finance the operation of any acquired business opportunity until such time as the Company has successfully consummated such a merger or acquisition.
It is anticipated that the Company will incur nominal expenses in the implementation of its business plan described herein. The Company has limited capital with which to pay these anticipated expenses.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, the Company may become a party to a merger, consolidation, reorganization, joint venture, or licensing agreement with another corporation or entity. It may also acquire stock or assets of an existing business. On the consummation of a transaction, it is probable that the present management and shareholders of the Company will no longer be in control of the Company. In addition, the Company's directors may, as part of the terms of the acquisition transaction, resign and be replaced by new directors without a vote of the Company's shareholders or may sell their stock in the Company. Any and all such sales will only be made in compliance with the securities laws of the United States and any applicable state.
It is anticipated that any securities issued in any such reorganization would be issued in reliance upon exemption from registration under applicable federal and state securities laws. In some circumstances, however, as a negotiated element of its transaction, the Company may agree to register all or a part of such securities immediately after the transaction is consummated or at specified times thereafter. If such registration occurs, of which there can be no assurance, it will be undertaken by the surviving entity after the Company has successfully consummated a merger or acquisition.
As part of the Company's investigation, officers and directors of the Company may personally meet with management and key personnel, may visit and inspect material facilities, obtain analysis and verification of certain information provided, check references of management and key personnel, and take other reasonable investigative measures, to the extent of the Company's limited financial resources and management expertise. The manner in which the Company participates in an opportunity will depend on the nature of the opportunity, the respective needs and desires of the Company and other parties, the management of the opportunity and the relative negotiation strength of the Company and such other management.
With respect to any merger or acquisition, negotiations with target company management are expected to focus on the percentage of the Company which the target company shareholders would acquire in exchange for all of their shareholdings in the target company. Depending upon, among other things, the target company's assets and liabilities, the Company's shareholders will in all likelihood hold a substantially lesser percentage ownership interest in the Company following any merger or acquisition. The percentage ownership may be subject to significant reduction in the event the Company acquires a target company with substantial assets. Any merger or acquisition effected by the Company can be expected to have a significant dilutive effect on the percentage of shares held by the Company's then shareholders.
The Company will participate in a business opportunity only after the negotiation and execution of appropriate written agreements. Although the terms of such agreements cannot be predicted, generally such agreements will require some specific representations and warranties by all of the parties thereto, will specify certain events of default, will detail the terms of closing and the conditions which must be satisfied by each of the parties prior to and after such closing, will outline the manner of bearing costs, including costs associated with the Company's attorneys and accountants, will set forth remedies on default and will include miscellaneous other terms.
The Company does not intend to provide its security holders with any complete disclosure documents, including audited financial statements, concerning an acquisition or merger candidate and its business prior to the consummation of any acquisition or merger transaction.
Competition
The Company will remain an insignificant participant among the firms which engage in the acquisition of business opportunities. There are many established venture capital and financial concerns which have significantly greater financial and personnel resources and technical expertise than the Company. In view of the Company's combined extremely limited financial resources and limited management availability, the Company will continue to be at a significant competitive disadvantage compared to the Company's competitors
Employees
The Company currently has no employees. The business of the Company will be managed by its officer and directors, who may become employees of the Company. The Company does not anticipate a need to engage any fulltime employees at this time. The need for employees and their availability will be addressed in connection with the proposed development of the Company's real property.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2008 (Q2 2008)
COMPARED TO THREE MONTHS ENDED MARCH 31, 2007 (Q2 2007)
Revenues
Revenues were $0 for the three months ended March 31, 2008, as compared to $0 for the three months ended March 31, 2007.
Operating Expenses
Operating expenses for the three months ended March 31, 2008 were $68,950 compared to $52,292 for the three months ended March 31, 2007. This increase was primarily attributed to an increase in professional fees and compensation.
Loss From Operations
Loss from operations for the three months ended March 31, 2008 was $68,950 compared to $52,292 for the three months ended March 31, 2007.
Net Loss Applicable To Common Stock
Net loss applicable to Common Stock was $68,950 for the three months ended March 31, 2008 compared to $52,292 for the three months ended March 31, 2007. Net loss per common share was $.01 for the three months ended March 31, 2008 and $.06 for the three months ended March 31, 2007.
SIX MONTHS ENDED MARCH 31, 2008 (Q2 2008)
COMPARED TO SIX MONTHS ENDED MARCH 31, 2007 (Q2 2007)
Revenues
Revenues were $0 for the six months ended March 31, 2008, as compared to $0 for the six months ended March 31, 2007.
Operating Expenses
Operating expenses for the six months ended March 31, 2008 were $125,194 compared to $139,007 for the six months ended March 31, 2007. This decrease was primarily attributed to a decrease in general and administrative expenses.
Other Income
Other Income for the six months ended March 31, 2007 was $627,134 compared to $0 for the six months ended March 31, 2008. Other Income in 2007 was comprised of a one time income charge for the write off of debenture debt.
Income (Loss) From Operations
Loss from operations for the six months ended March 31, 2008 was ($125,194) compared to income from operations of $488,127 for the six months ended March 31, 2007.
Net Income (Loss) Applicable To Common Stock
Net loss applicable to Common Stock was ($125,194) for the six months ended March 31, 2008 compared to net income of $488,127 for the six months ended March 31, 2007. Net loss per common share was ($.03) for the six months ended March 31, 2008 and net income per common share was $.58 for the six months ended March 31, 2007.
LIQUIDITY AND CAPITAL RESOURCES
The Company currently plans to satisfy its cash requirements for the next 12 months by borrowing from affiliated companies with common ownership or control or directly from its officers and directors and believes it can satisfy its cash requirements so long as it is able to obtain financing from these affiliated companies. The Company currently expects that money borrowed will be used during the next 12 months to satisfy the Company's operating costs, professional fees and for general corporate purposes. The Company has also been exploring alternative financing sources. The Company currently has no plans to conduct any research and development, to purchase or sell any significant equipment or to make any significant changes in its number of employees.
The Company will use its limited personnel and financial resources in connection with seeking new business opportunities, including seeking an acquisition or merger with an operating company. It may be expected that entering into a new business opportunity or business combination will involve the issuance of a substantial number of restricted shares of common stock. If such additional restricted shares of common stock are issued, the shareholders will experience a dilution in their ownership interest in the Company. If a substantial number of restricted shares are issued in connection with a business combination, a change in control may be expected to occur.
As of March 31, 2008, the Company had current assets consisting of cash and cash equivalents in the amount of $11,993. As of March 31, 2008, the Company had current liabilities consisting of an officers loan in the amount of $127,284.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company continues to assess the effects of recently issued accounting standards. The impact of all recently adopted and issued accounting standards has been disclosed in the Notes.
CRITICAL ACCOUNTING ESTIMATES
The Company is a shell company and, as such, the Company does not employ critical accounting estimates. Should the Company resume operations it will employ critical accounting estimates and will make any and all disclosures that are necessary and appropriate.
OFF BALANCE SHEET TRANSACTIONS
The Company has no off balance sheet arrangements and has not entered into any transactions involving unconsolidated, limited purpose entities
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide information under this item.
Item 4. Controls and Procedures
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in the reports filed under the Securities Exchange Act, is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to the Company’s management, including the Company’s chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Based upon their evaluation as of the end of the period covered by this report, the Company’s chief executive officer and chief financial officer concluded that, the Company’s disclosure controls and procedures are not effective to ensure that information required to be included in the Company’s periodic SEC filings is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms.
The Company’s board of directors was advised by Bagell, Josephs, Levine & Company, L.L.C., the Company’s independent registered public accounting firm, that during their performance of audit procedures for 2007 Bagell, Josephs, Levine & Company, L.L.C. identified a material weakness as defined in Public Company Accounting Oversight Board Standard No. 2 in the Company’s internal control over financial reporting.
This deficiency consisted primarily of inadequate staffing and supervision that could lead to the untimely identification and resolution of accounting and disclosure matters and failure to perform timely and effective reviews. However, the size of the Company prevents us from being able to employ sufficient resources to enable us to have adequate segregation of duties within our internal control system. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
No changes in the Company's internal control over financial reporting have come to management's attention during the Company's last fiscal quarter that have materially affected, or are likely to materially affect, the Company's internal control over financial reporting.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
We are not a party to any pending legal proceedings nor is any of our property the subject of any pending legal proceedings.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide 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. Submission of Matters to a Vote of Security Holders
Subsequent Event – see Item 5, below.
Item 5. Other Information
Subsequent Event - On April 21, 2008, the Company filed a Definitive Information Statement on Schedule 14A notifying its stockholders that action has been approved by the holders of at least a majority of the voting power of stockholders, by written consents without holding a meeting of stockholders. By such written consents, such stockholders approved the following action:
1. To effect a reverse split of the Company's common stock in a ratio of one (1) new share for every five hundred (500) existing shares of common stock. There will be no change to the par value or the authorized shares of common stock of the Company and any fractional shares will be rounded up, and
2. To amend our Articles of Incorporation to effect the 1-for-500 reverse stock split with respect to our common stock.
The Board of Directors unanimously adopted and approved the proposals, and on April 9, 2008 the Company received the written consent, in lieu of a meeting of stockholders, from the holders of 99.7% of the shares of our voting stock approving these actions. No other votes were required to adopt the Amendments and none are being solicited hereunder.
The Information Statement was first mailed or furnished to stockholders on or about April 24, 2008.
Item 6. Exhibits
EXHIBIT NUMBER | DESCRIPTION |
| | |
| 31.1 | Certification of Principal Executive Officer pursuant to Sarbanes-Oxley Section 302 |
| | |
| 31.2 | Certification of Principal Financial Officer pursuant to Sarbanes-Oxley Section 302 |
| | |
| 32.1 | Certification of Chief Executive Officer pursuant to Sarbanes-Oxley Section 906 |
| | |
| 32.2 | Certification of Chief Financial Officer pursuant to Sarbanes-Oxley Section 906 |
SIGNATURES
Date: May 15, 2008
By: /s/ RICHARD ASTROM
Richard Astrom
Chief Executive Officer, Director
By: /s/ CHRISTOPHER ASTROM
Chief Financial Officer, Secretary, Director
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