U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended August 31, 2005
---------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
------------- -------------
Commission File No. 000-49817
---------
GENOSYS, INC.
-------------
(Name of Small Business Issuer in its Charter)
UTAH 87-0671592
---- ----------
(State or Other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5063 N. Riverpark Way
Provo, Utah 84604
---------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (801) 319-2324
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)
Not Applicable.
Check whether the Registrant has filed all documents and reports required
to be filed 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:
Not Applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the Registrant's
classes of common equity, as of the latest practicable date:
September 30, 2005 - 41,254,500 shares of common voting stock.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Transitional Small Business Issuer Format: Yes X No
--- ---
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The Condensed Financial Statements of the Company required to be filed with
this 10-QSB Quarterly Report were prepared by management and commence on the
following page, together with related Notes. In the opinion of management,
the Condensed Financial Statements fairly present the financial condition of
the Company.
GENOSYS, INC.
[fka The Autoline Group, Inc.]
[A Development Stage Company]
Condensed Financial Statements
August 31, 2005
GENOSYS, INC.
[fka The Autoline Group, Inc.]
[A Development Stage Company]
Condensed Balance Sheet
August 31, 2005
(Unaudited)
August 31, November 30,
2005 2004
(unaudited) (Audited)
ASSETS
Current Assets
Cash and cash equivalents $ 4,222 $ 47,928
--------- ---------
Total Current Assets 4,222 47,928
--------- ---------
Other Assets
Intangible asset 677 -
--------- ---------
Total Other Assets 677 -
--------- ---------
Total Assets $ 4,899 $ 47,928
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities
Current Liabilities
Accounts Payable $ 3,250 $ 3,786
Sales Tax Payable - 2,235
Due to stockholder 56,166 76,523
--------- ---------
Total Current Liabilities 59,416 82,544
Related Party Note Payable 15,258 14,508
--------- ---------
Total Liabilities $ 74,674 $ 97,052
--------- ---------
Stockholders' Deficit
Common stock, $.001 par value; authorized
50,000,000 shares; issued and outstanding
42,556,500 and 2,556,500, respectively 42,557 2,557
Paid-in capital (9,757) 26,243
Deficit accumulated during development stage (102,575) (77,924)
--------- ---------
Total Stockholders' Deficit (69,775) (49,124)
--------- ---------
Total Liabilities and Stockholders' Deficit $ 4,899 $ 47,928
========= =========
See accompanying notes to the financial statements
F-1
GENOSYS, INC.
[fka The Autoline Group, Inc.]
[A Development Stage Company]
Condensed Statements of Operations
For the three and nine month periods ended August 31, 2005 and 2004
(Unaudited)
For the Three Months Ended For the Nine Months Ended
August 31, August 31,
2005 2004 2005 2004
Revenues $ - $ 99,400 $ 368,888 $ 244,915
Cost of Sales - 103,450 360,011 246,541
--------- ---------- ---------- ----------
Gross Margin - (4,050) 8,877 (1,626)
General and Administrative 22,522 2,583 32,779 13,175
--------- ---------- ---------- ----------
Total Expenses 22,522 2,583 32,779 13,175
--------- ---------- ---------- ----------
Net Income (Loss) from
operations (22,522) (6,633) (23,902) (14,801)
Interest Expense 250 - 750 800
--------- ---------- ---------- ----------
Net Income (Loss) Before
Income Taxes (22,772) (6,633) (24,652) (15,601)
Provision for Income taxes - - - -
--------- ---------- ---------- ----------
Net Loss $ (22,772) $ (6,633) $ (24,652) $ (15,601)
========= ========== ========== ==========
Loss per share $ (0.01) $ (0.01) $ (0.01) $ (0.01)
Weighted Average Shares
Outstanding 10,943,597 2,556,500 4,454,310 2,556,500
========== ========= ========= =========
See accompanying notes to the financial statements
F-2
GENOSYS, INC.
[fka The Autoline Group, Inc.]
[A Development Stage Company]
Statements of Cash Flows
For the three and nine month periods ended August 31, 2005 and 2004
(Unaudited)
For the Three Months Ended For the Nine Months Ended
August 31, August 31,
2005 2004 2005 2004
Cash Flows from Operating
Activities
Net Loss $ (22,772) $ (6,633) $ (24,652) $ (15,601)
Adjustments to reconcile
net (loss) to net cash
provided by operating
activities:
(Increase)/decrease in
accounts receivable 561 - - -
(Increase)/decrease in
inventory - 63,550 - -
Increase/(decrease) in
accounts payable (917) (61,947) (536) 3,762
Increase/(decrease) in
sales taxes payable (4,587) (2,523) (2,235) -
Increase/(decrease) in
amount due shareholder (850) 6,723 (19,606) 7,123
------- -------- --------- ---------
Net Cash From Operating
Activities (28,565) (830) (47,029) (4,716)
Cash Flows From Financing
Activities
Common stock issued for
cash 3,323 - 3,323 -
------- -------- --------- ---------
Cash Flows From Financing
Activities 3,323 - 3,323 -
------- -------- --------- ---------
Net Increase (Decrease) in
Cash (25,242) (830) (43,706) (4,716)
Beginning Cash Balance 29,464 3,575 47,928 7,461
------- -------- --------- ---------
Ending Cash Balance $ 4,222 $ 2,745 $ 4,222 $ 2,745
======= ======== ========= =========
Supplemental Disclosure Information
Cash paid during year for
interest $ 0 $ 0 $ 0 $ 0
Cash paid during year for
income taxes $ 0 $ 0 $ 0 $ 0
Issued common stock for
Intangible Assets $ 677 $ 0 $ 677 $ 0
Issued common stock for
Services $ 0 $ 0 $ 0 $ 0
See accompanying notes to the financial statements
F-3
GENOSYS, INC.
[fka The Autoline Group, Inc.]
[A Development Stage Company]
Notes to Condensed Financial Statements
August 31, 2005
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared without audit,
pursuant to the rules and regulations of the Security and Exchange Commission.
The interim financial statements reflect all adjustments which, in the opinion
of management, are necessary to present a fair statement of the results for
the period.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-KSB for the year ended November 30, 2004. The results of operation for
period ended August 31, 2005 are not necessarily indicative of the operating
results for the full years.
Effective as of August 18, 2005, The Autoline Group, Inc. ("Autoline")
executed an agreement and plan of merger with GeNOsys, Inc. ("GeNOsys"),
whereby each one share of outstanding GeNOsys common stock was exchanged for
one share of Autoline common stock. 40,000,000 shares were issued as a result
of this agreement.
NOTE 2 - GOING CONCERN
The Company does not have significant assets and has accumulated losses since
inception. These factors raise substantial doubt about the Company's ability
to continue as a going concern. It is the intent of the Company to develop
business opportunities by actively marketing the intangible assets owned by
the Company. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
NOTE 3 - RELATED PARTY PAYABLES
A majority shareholder has paid expenses on behalf of the Company. During the
period, a shareholder paid $20,000 on behalf of the Company. The Company
accrued interest of $250 due to a shareholder and repaid a shareholder $21,300
during the period. Additionally, the Company accrued salaries to management
of $400.
NOTE 4 - STOCK
On June 30, 2005, GeNOsys, Inc. issued 33,231,456 shares in exchange for
$3,323 in cash. GeNOsys issued 200,000 shares of stock in order to obtain
intellectual property rights. In addition, GeNOsys issued 2,768,544 shares as
part of a compromise and settlement agreement to obtain additional
intellectual property rights. Furthermore, GeNOsys issued 3,800,000 shares
for a consulting agreement. Effective August 18, 2005, the Company executed
an agreement and plan of merger with a subsidiary of The Autoline Group, Inc.
("Autoline"), with GeNOsys being the surviving entity. All outstanding
shares of GeNOsys, including the aforementioned issuances, were converted into
and exchanged for one share of Autoline, amounting to 40,000,000 shares being
issued.
NOTE 5- SUBSEQUENT EVENTS
On September 12, 2005, the Company divested the automobile dealership
operations of the The Autoline Group 2, Inc. subsidiary to a former officer
and director of the Company. The Company conveyed all outstanding shares of
Autoline 2 in exchange for an Indemnification Agreement. Some liabilities,
included on the balance sheet, were subsequently indemnified by the former
officer.
F-4
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operation.
- ------------------
Effective as of August 18, 2005, we, Autoline Acquisition Corp., a Nevada
corporation and a wholly-owned subsidiary of ours ("Subsidiary") and GeNOsys,
Inc., a Nevada corporation ("GeNOsys"); executed an Agreement and Plan of
Merger (the "Merger Agreement"), whereby Subsidiary merged with and into
GeNOsys with GeNOsys being the surviving entity and becoming a wholly-owned
subsidiary of ours; and whereby each one (1) share of issued and outstanding
common stock of GeNOsys (the "GeNOsys Shares") was exchanged by the GeNOsys
stockholders (the "GeNOsys Stockholders") for one (1) share of our common
stock, amounting to 40,000,000 shares. For more information on the Merger
Agreement, see our 8-K Current Report, as amended, filed with the Securities
and Exchange Commission on August 25, 2005, and September 28, 2005. This
information should be read in conjunction with that Current Report.
In December, 2003, our founders were successful in producing a portable,
medical gas generator. We were able to produce oxygen, carbon dioxide and
nitric oxide gas. The following year, 2004, improvements and simplifications
were made in order to produce nitric oxide. Preliminary safety tests on
animals were conducted and the results were eminently successful. The thrust
to produce nitric oxide will be the main focus for the generator in the
following phases. Each phase coincides with a specific milestone, cost and
development process.
Phase I: In the first 12 months, we intend to contract with a pharmaceutical
formulation development laboratory, (IriSys, Inc. is presently anticipated to
be that laboratory) to improve the formulation and deliver the first nitric
oxide generating tablets that will be produced under the FDA, Good Laboratory
Practices, guidelines. Generators capable of using these tablets will also be
manufactured by contractors, (Paradigm Group is presently anticipated to be
that contractor) under the FDA, Good Manufacturing Practices, guidelines in
preparation for entry into the commercial laboratory market as well as use for
feasibility studies and preliminary animal safety and efficacy trials. These
trials will also be contracted (Cato Venture Group ["Cato"]) is presently
anticipated to be that company) and will be conducted within FDA and overseas
requirement guidelines, in order to determine acceptable dose ranges for
treatment of TB. This will be done in preparation for application to the FDA
for an Investigational New Drug Number ("IND No."). Protection of proprietary,
intellectual property, with molecular patent applications, will also be filed.
Estimated time and cost for Phase I is not to exceed one year and $2,270,000.
Phase II: In the following 12 months, we will prepare and submit IND No.
application to the FDA. We will then begin human clinical trials for TB with
our newly designed generators and formulated tablets. Coinciding with the
clinical trials, the initial production improvements and Canadian Electrical
Safety Association and Underwriters Laboratories Electrical Safety USA
approvals for the generator will also be completed in order to facilitate
multiple unit production. We will then contract an FDA approved, manufacturer
to build the first production runs of commercial laboratory generators. These
will be used for laboratory sales as well as for clinical trials. It is of
strategic importance that the same generators be used for the clinical trials
as will be commercially available for the medical market in order to have the
device approved at the same time as the therapy. We will initiate and train a
limited number of sales and service personnel in order to facilitate
transition to a distributor. At this time, we will hire a CEO and the
associated staff and lease appropriate office space. Estimated time and cost
for Phase II is also one year and $2,500,000.
Phase III: Complete contracted clinical trials for TB and submit to FDA for
approval. Estimated time and cost for clinical trials is three to five years
and between $6,000,000 to $7,000,000. We will continue laboratory generator
sales and examine non-human spin-off opportunities for use of our product.
Phase IV: Obtain FDA approval of generators for attenuation of TB. Overall
time and cost to FDA approval is estimated to be six to eight years and
$12,000,000. At this time, we will expand staff and facilities consistent with
an orderly transition; train clinicians and distributors; manufacture and sell
tablets and generators for TB; minimize costs of manufacturing and increase
profits; and examine off-label uses for generators.
These cost estimates were made by John W. R. Miller, our President, who has
approximately 25 years of experience in the medical gas industry.
Our plan of operation for the next 12 months is to complete the preparation
and submission of the U.S. FDA Investigational New Drug Application ("IND") to
support the generation of Nitric Oxide for use in treatment of human diseases.
A Gap Analysis for the U.S. IND, meaning a Non-clinical Assessment, a Clinical
Assessment and Chemistry, Manufacturing and Controls Assessment ("CMC"),
preparation for attendance at a Pre-IND meeting with the FDA, and the U.S.
IND, with the aid and assistance of Cato and IriSys.
A Clinical Program and Study Design (s), meaning clinical experts will be
utilized for assessment as well as attendance at a Pre-IND meeting, (if
requested, with the aid and assistance of Cato).
Our ability to carry out our plan depends entirely upon our ability to obtain
additional substantial equity, debt financing or royalties. We can not assure
you that we will receive this financing. If we do not receive such funding, we
will not be able to proceed with our intended business plans.
Funding.
- --------
During the fourth quarter of 2005, we will conduct a private offering of
approximately 3,833,334 shares of our common stock that are "restricted
securities" as defined in Rule 144 to "accredited investors" only pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"),
at an offering price of $0.60 per share to raise approximately $2,300,000, to
fund the commencement of our Plan of Operation. Substantial additional funds
will still be required if we are to reach our goals that are outlined above,
even if this planned offering is a success. We currently have no arrangements
or understandings that will assure that we can successfully complete this
offering, and no assurance can be given that we will be able to do so. Without
this funding, we cannot commence our planned business operations.
Assumptions.
- ------------
Our projections are based upon the following assumptions, among others:
* a slow-growth economy, without a major world recession;
* that there are no unforeseen changes in technology that make our products
obsolete;
* access to substantial equity capital and financing sufficient;
* FDA approval of our TB generator;
* that WHO will remain positive in its support for eradication of TB; and
* that our FDA approved device for TB will be sold and prescribed off-label
for numerous diseases.
Forward-looking Statement.
- --------------------------
Statements made in this Quarterly Report which are not purely historical
are forward-looking statements with respect to our goals, plan objectives,
intentions, expectations, financial condition, results of operations, future
performance and business, including, without limitation, (i) our ability to
raise capital, and (ii) statements preceded by, followed by or that include
the words "may", "would", "could", "should", "expects", "projects",
"anticipates", "believes", "estimates", "plans", "intends", "targets" or
similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and
important factors (many of which are beyond our Company's control) that could
cause actual results to differ materially from those set forth in the forward-
looking statements, including the following, general economic or industry
conditions, nationally and/or in the communities in which we conduct business,
changes in the interest rate environment, legislation or regulatory
requirements, conditions of the securities markets, our ability to raise
capital, changes in accounting principles, policies or guidelines, financial
or political instability, acts of war or terrorism, other economic,
competitive, governmental, regulatory and technical factors affecting our
operations, products, services and prices.
Accordingly, results actually achieved may differ materially from expected
results in these statements. Forward-looking statements speak only as of the
date they are made. We do not undertake, and specifically disclaims, any
obligation to update any forward-looking statements to reflect events or
circumstances occurring after the date of such statements.
Item 3. Controls and Procedures.
As of the end of the period covered by this Quarterly Report, we carried out
an evaluation, under the supervision and with the participation of our
President and Secretary/Treasurer, of the effectiveness of the design and
operation of our disclosure controls and procedures. Based on this
evaluation, our President and Chief Financial Officer concluded that our
disclosure controls and procedures are effectively designed to ensure that
information required to be disclosed or filed by us is recorded, processed or
summarized, within the time periods specified in the rules and regulations of
the Securities and Exchange Commission. It should be noted that the design of
any system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote. In addition, we reviewed our internal
controls, and there have been no significant changes in our internal controls
or in other factors that could significantly affect those controls subsequent
to the date of their last evaluation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None; not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Effective as of August 18, 2005, we, Subsidiary and GeNOsys executed the
Merger Agreement whereby Subsidiary merged with and into GeNOsys with GeNOsys
being the surviving entity and becoming a wholly-owned subsidiary of ours; and
whereby each one (1) share the GeNOsys Shares was exchanged by the GeNOsys
Stockholders for one (1) share of our common stock, amounting to 40,000,000
shares. For more information on the Merger Agreement, see our 8-K Current
Report, as amended, filed with the Securities and Exchange Commission on
August 25, 2005, and September 28, 2005. This information should be read in
conjunction with that Current Report.
Item 3. Defaults Upon Senior Securities.
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None; not applicable.
Item 5. Other Information.
On September 12, 2005, we divested the automobile dealership operations of our
subsidiary, The Autoline Group 2, Inc., to a former officer and director
(James P. Doolin) of our Company. We conveyed all outstanding shares of this
wholly-owned subsidiary to him in exchange for payment of our required fee
under an Indemnification Agreement related to the Merger Agreement. Some
liabilities included on the balance sheet were subsequently indemnified by
this former officer.
Effective October 10, 2005, our name was change to "GeNOsys, Inc.
Item 6. Exhibits.
31.1 302 Certification of John W. R. Miller
31.2 302 Certification of Christine Melanie Woodruff Jones
32 Section 906 Certification.
*Incorporated herein by reference.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GENOSYS, INC.
Date: 10/17/2005 By /s/John W. R. Miller
---------- ------------------------
John W. R. Miller, Director
and President
Date: 10/17/2005 By /s/Christine Melanie Woodruff
---------- Jones
------------------------
Christine Melanie Woodruff Jones,
Director, Secretary/Treasurer