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 February 28, 2006
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission File No. 000-49817
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GENOSYS, INC.
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(Name of Small Business Issuer in its Charter)
UTAH 87-0671592
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(State or Other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5063 N. Riverpark Way
Provo, Utah 84604
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(Address of Principal Executive Offices)
Issuer's Telephone Number: (801) 420-9994
Check whether the Registrant (1) filed all reports required to be filed
by Sections 13 or 15(d) of the Exchange Act during the past 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.
(1) Yes X (2) Yes X
Indicate by check mark whether the Registrant is a shell company (as
defined by Rule 12B-2 of the Exchange Act). No X
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.
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: February 28, 2006
- - 45,668,031 shares of common voting stock.
Documents Incorporated by Reference
See Part II, Item 6.
Transitional Small Business Issuer Format: No X
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]
Consolidated Condensed Financial Statements
February 28, 2006
GENOSYS, INC.
[fka The Autoline Group, Inc.]
[A Development Stage Company]
Consolidated Condensed Balance Sheet
February 28, 2006
(Unaudited)
February 28, November 30,
2006 2005
(unaudited) (Audited)
ASSETS
Current Assets
Cash and cash equivalents $ 1,838,134 $ 2,008,545
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Total Current Assets 1,838,134 2,008,545
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Property, Plant & Equipment (Net of accumulated
depreciation) 21,605 20,475
Other Assets
Intangible asset 297 297
Prepaid expenses 85,452 2,102
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Total Other Assets 85,749 2,399
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Total Assets $ 1,945,488 $ 2,031,419
========= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Current Liabilities
Accounts Payable $ 23,084 $ 8,560
Sales Tax Payable 100 100
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Total Current Liabilities 23,184 8,660
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Total Liabilities $ 23,184 $ 8,660
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Stockholders' Equity
Common stock, $.001 par value; authorized
50,000,000 shares; issued and outstanding
45,668,031 and 45,218,031, respectively 45,668 45,218
Paid-in capital 2,525,413 2,255,864
Accumulated deficit (77,924) (77,924)
Deficit accumulated during development stage (570,853) (200,399)
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Total Stockholders' Equity 1,922,304 2,022,759
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Total Liabilities and Stockholders' Equity $ 1,945,488 $ 2,031,419
========= ============
See accompanying notes to the financial statements
F-1
GENOSYS, INC.
[fka The Autoline Group, Inc.]
[A Development Stage Company]
Consolidated Condensed Statements of Operations
For the three month periods ended February 28, 2006 and 2005
(Unaudited)
From
Beginning of
Development
Stage ( June 30,
For the Three Months Ended 2005) to
February 28, February 28,
2006 2005 2006
Revenues $ - $ - $ -
Cost of Sales - - -
---------- ----------- ---------
Gross Margin - - -
Research and development 33,632 - 33,632
General and Administrative 355,587 - 625,008
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Total Expenses 389,219 - 658,640
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Net Income (Loss) from
operations (389,219) - (658,640)
Interest Income 18,765 - 18,765
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Net Income (Loss) Before
Income Taxes (370,454) - (639,875)
Provision for Income taxes - - 100
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Income (Loss) from Continuing
Operations (370,454) - (639,975)
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Discontinued Operations
Loss from discontinued
Operations, net of tax - (2,397) (2,131)
Gain on Disposal of
Discontinued Operations,
net of tax - - 71,253
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Net Income (Loss) $ (370,454) $ (2,397) $ (570,853)
========== =========== ==========
Gain (Loss) per share from
continuing Operations $ (0.01) $ - $ (0.01)
Gain (Loss) per share from
Discontinued Operations $ - $ (0.01) $ 0.00
Net Income (Loss) per share $ (0.01) $ (0.01) $ (0.01)
Weighted Average Shares
Outstanding 45,358,031 2,556,500 43,341,607
========== ========= ==========
See accompanying notes to the financial statements
F-2
GENOSYS, INC.
[fka The Autoline Group, Inc.]
[A Development Stage Company]
Consolidated Condensed Statements of Cash Flows
For the three month periods ended February 28, 2006 and 2005
(Unaudited)
From
Beginning of
Development
Stage ( June 30,
For the Three Months Ended 2005) to
February 28, February 28,
2006 2005 2006
Cash Flows from Operating
Activities
Net Loss $ (370,454) $ (2,397) $ (570,853)
Adjustments to reconcile net
(loss) to net cash provided
by operating activities:
Depreciation and amortization 1,005 1,420
Gain on the disposal of
discontinued operations - - (71,253)
Stock issued for services 270,000 - 270,000
(Increase)/decrease in
prepaid expenses (83,445) (85,422)
Increase/(decrease) in
accounts payable 17,023 - 23,084
Increase/(decrease) in
accrued liabilities (2,500) - 100
Increase/(decrease) in
cash from discontinued
operations - (19,912) (6,020)
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Net Cash Used In Operating
Activities (168,371) (22,309) (438,944)
Cash Flows from Investing
Activities
Purchase of furniture (2,040) - (22,677)
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Cash Flow Used In Investing
Activities (2,040) - (22,677)
Cash Flows From Financing
Activities
Sale of stock - - 2,271,604
Cash from discontinued
operations - 75,927 (19,777)
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Cash Flows From Financing
Activities - 75,927 2,251,827
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Net Increase (Decrease) in
Cash (170,411) 53,618 1,790,206
Beginning Cash Balance 2,008,545 47,928 47,928
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Ending Cash Balance $ 1,838,134 $ 101,546 $1,838,134
========== =========== ==========
Supplemental Disclosure Information
Cash paid during year for
interest $ 0 $ 0 $ 0
Cash paid during year for
income taxes $ 0 $ 0 $ 0
Stock issued for services $ 270,000 $ 0 $ 270,000
See accompanying notes to the financial statements
F-3
GENOSYS, INC.
[fka The Autoline Group, Inc.]
[A Development Stage Company]
Notes to Consolidated Condensed Financial Statements
February 28, 2006
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, 2005. The results of operation for
period ended February 28, 2006 are not necessarily indicative of the operating
results for the full years.
NOTE 2 - GOING CONCERN
The Company has accumulated losses since inception and has not yet been able
to generate profits from operations. Operating capital has been raised
through the sale of common stock. 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 and developing
portable, medical gas generators. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
NOTE 3 - PREPAID EXPENSES
On January 25, 2006, the Company entered into a Research and Advisory Service
Agreement with IriSys, Inc. IriSys, is to provide contract services in the
development of nitric oxide tablets that will be used in conjunction with the
Company's generators. In accordance with this agreement, the Company made
advanced payments of $95,850. The Company expenses these payments as services
are provided in accordance with the agreement terms. For the period ended
February 28, 2006, the Company expensed $15,795 for these services. The
Agreement requires that the Company pay an additional $273,550 during the
year, in accordance with progress billings, as work progresses.
NOTE 4 - RELATED PARTY PAYABLES
As of February 28, 2006, the company owed a Shareholder $5,171 for services
provided in acting as a director of the Company.
NOTE 5 - STOCK ISSUANCE
On January 31, 2006, the Board of Directors consented to the issuance of
450,000 shares of restricted common stock in exchange for services provided to
the Company. The transaction was valued at $270,000 ($0.60 per share).
F-4
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operation.
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Effective August 18, 2005, we acquired GeNOsys, Inc., a Nevada corporation and
now a wholly-owned subsidiary of ours and succeeded to its then planned
business operations and intellectual property. See our 8-K Current Report
dated August 18, 2005, and our 8-KA Current Report dated August 18, 2005,
respectively filed with the Securities and Exchange Commission on August 25,
2005, and September 28, 2005, and which are incorporated herein by reference,
in Part II, Item 6.
In December, 2003, our founders were successful in producing a portable,
medical gas generator which is able to produce oxygen, carbon dioxide and
nitric oxide gas. The following year, during 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 is the main focus for the generator in the
following phases. Each phase coincides with a specific milestone, cost and
development process.
Phase I: We are currently in Phase I, which is expected to last for
approximately 12 months. In January of 2006, we contracted with IriSys, Inc.,
a pharmaceutical formulation development laboratory, to improve the
formulation and deliver nitric oxide generating tablets that will be produced
under FDA, Good Laboratory Practices, guidelines. We will also contract
with a local manufacturer to produce production models of our generators
capable of using these tablets under 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 and will be conducted within FDA
and overseas requirement guidelines, in order to determine acceptable dose
ranges for treatment of tuberculosis (TB). This will be done in preparation
and submission of 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. It is also anticipated
that during this period, we will lease appropriate office space and hire a
and CEO. Estimated time and cost for Phase I is not to exceed 12 months and
$2,270,000.
Phase II: During the following period, we will 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. We will
initiate and train a limited number of sales and service personnel in order to
facilitate transition to a distributor.
We will continue laboratory generator sales and examine non-human spin-off
opportunities for use of our product. During this phase, we will conduct and
complete contracted clinical trials for TB and submit to FDA for approval.
Concurrently, we will prepare the testing protocol and application for FDA
approval for submission and processing. It is estimated that the total time
involved from the initiation of Phase I to the receipt of the FDA approval for
the tablets and the device will be approximately four to five years.
Phase III: In anticipation of receipt of approval, 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. Following receipt of FDA approval of the generator and tablet for
attenuation of TB, we will begin actively manufacturing, marketing and
distributing the products. It is currently not possible to accurately predict
the time and costs of this phase.
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 cannot 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.
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During the fourth quarter of 2005, we conducted a private offering of
approximately 3,964,031 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 $2,378,382, 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.
We currently have no arrangements or understandings that will assure that we
can successfully complete future offerings, and no assurance can be given that
we will be able to do so. Without additional funding, we may not commence our
planned business operations.
Assumptions.
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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.
On January 31, 2006, we issued 450,000 shares to Smith Consulting Services,
Inc., a Utah corporation and financial consulting firm to us ("SCS"), in
replacement of 450,000 shares that SCS had conveyed to two of our consultants
and one attorney for services that were rendered for our benefit from the
shares that SCS received under our merger with GeNOsys Nevada. These
consultants and the one attorney provided services to SCS under its Consulting
Agreement with GeNOsys Nevada.
SCS is an "accredited investor"; and it had prior access to all material
information about us. We believe that the offer and sale of these securities
was exempt from the registration requirements of the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to Sections 4(2) and 4(6) thereof,
and Rule 506 of Regulation D of the Securities and Exchange Commission, and
as such, this offer and sale was exempt from state regulation as sales to
"accredited investors" are exempt from state regulation by Section 14 of the
Securities Act.
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.
None; not applicable.
Item 6. Exhibits.
31.1 302 Certification of John W. R. Miller
31.2 302 Certification of Christie Melanie Woodruff Jones
32 Section 906 Certification.
10-KSB Annual Report for the fiscal year ended November
30, 2005*
*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: 4/12/2006 By /s/John W. R. Miller
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John W. R. Miller, Director
and President
Date: 4/12/2006
--------- By /s/Christie Melanie Woodruff Jones
--------------------------------
Christie Melanie Woodruff Jones
Secretary/Treasurer and director