(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 ý No o
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
definitions of "large accelerated filer,""accelerated filer," and "smaller
reporting company" in Rule 12b-2 of
the Exchange Act. (Check one):
Large
accelerated filer o
Accelerated
filer o
Non-accelerated
filer o
(Do not check if a smaller
reporting company)
Smaller
reporting company ý
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No x
Consolidated
Statements of Operations for the three and six months ended March 31, 2009
and 2008 (unaudited)
4
Consolidated
Statements of Cash Flows for the six months ended March 31, 2009 and 2008
(unaudited)
5
Notes
to the Unaudited Consolidated Financial Statements
6
Item
2.
Management's
Discussion and Analysis or Plan of Operation
11
Item
3.
Management's
Quantitative and Qualitative Disclosures About Market
Risk
Item
4.
Controls
and Procedures
12
PART
II. OTHER INFORMATION
Item 1A.
Risk
Factors
13
Item
6.
Exhibits
13
Signatures
14
FORWARD-LOOKING
STATEMENTS
Certain
statements made in this Quarterly Report on Form 10-Q are "forward-looking
statements" regarding the plans and objectives of managementfor future
operations and market trends and expectations. Such statements involve known and
unknown risks, uncertainties and other factors that may cause our actual
results, performance or achievements to be materially different from
any future results, performance or achievements expressed or implied by such
forward-looking statements. The forward-looking statements included herein are
based on current expectations that involve numerous risks and uncertainties. Our
plans and objectives are based, in part, on assumptions involving the continued
expansion of our business. Assumptions relating to the foregoing involve
judgments with respect to, among other things, future economic, competitive and
market conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond our control.
Although we believe that our assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove inaccurate and,
therefore, there can be no assurance that the forward-looking statements
included in this report will prove to be accurate. In light of the significant
statements included herein, the inclusion of such information should not be
regarded as a representation by us or any other person that our objectives and
plans
will be achieved. We undertake no obligation to revise or update publicly any
forward-looking statements for any reason. The terms "we", "our", "us", or any
derivative thereof, as used herein refer to Genio Group, Inc., a Delaware
corporation, and its predecessors.
The
accompanying unaudited condensed consolidated financial statements of Genio
Group, Inc. ("Genio" or the "Company") included herein have been prepared in
accordance with generally accepted accounting principles for interim period
reporting in conjunction with the instructions to Form 10-QSB. Accordingly,
these statements do not include all of the information required by generally
accepted accounting principles for annual financial statements, and are subject
to year-end adjustments. In the opinion of management, all known adjustments
(consisting of normal recurring accruals and reserves) necessary to present
fairly the financial position, results of operations and cash flows for the
three and six month periods ended March 31,2009 have been included. The interim
statements should be read in conjunction with the financial statements and
related notes included in the Company's annual report on Form 10-KSB for the
year ended September 30, 2008.
The
financial statements set forth herein represent the operations of Genio Group,
Inc. and its subsidiaries for the three and six month periods ending March 31,2009. The operating results for the three and six months ended March 31, 2009
are not necessarily indicative of the results to be expected for the full
year.
NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Prior
to the year ended September 30, 2005, primarily due to the lack of financing,
Genio Group, Inc. (formerly National Management Consulting, Inc. and referred to
herein as "Genio" or the "Company") has closed all operations and terminated all
of its employees. One of the directors was appointed as the acting CEO and CFO
of the Company in order to orchestrate an orderly liquidation of the Company's
assets and seek settlement agreements with the creditors.
Genio
was a developer and marketer of entertainment and leisure products. Genio holds
a worldwide license with Marvel Enterprises, Inc. to manufacture and sell
specific categories of products built around the globally recognizable Marvel
Super Heroes(TM), including Spider-Man(TM), The Incredible Hulk(TM), X-Men(TM),
Elektra(TM), Daredevil(TM) and the Fantastic Four(TM). The Genio
Card collection was available in select national retailers in the United States.
Genio Cards consist of 360 illustrated cards that take children on a journey
through 30 subject categories: from the history of dinosaurs and attributes of
reptiles to facts about motor Sports and manmade landmarks.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has incurred net
losses of $(152,493) and $(140,802) for the six months ended March 31, 2009 and
2008, respectively. Additionally, the Company had minimal assets, a net working
capital deficiency and a shareholders' deficiency at March 31, 2009 and no cash
flow from operations for the six months ended March 31, 2009 and negative cash
flow from operations for the six months ended March 31, 2008. The Company is in
default under its line of credit. These conditions raise substantial doubt about
the Company's ability to continue as a going concern.
Management
expects to incur additional losses in the foreseeable future and recognizes the
need to raise capital to remain viable. The accompanying consolidated financial
statements do not include any adjustments that might be necessary should the
Company be unable to continue as a going concern.
STOCK
OPTIONS AND WARRANTS
The
Company adopted Statement of Financial Accounting Standards (SFAS) 123R,
Share-Based Payment. Under this application, the Company is required to record
compensation expense using a fair-value-based measurement method for all awards
granted after the date of adoption and for the unvested portion of previously
granted awards that remain outstanding at the date of adoption. Per the
provisions of SFAS No. 123-R, the Company has adopted the policy to recognize
compensation expense on a straight-line attribution method.
The
Company had no issuances of stock options or warrants in the past two years, nor
have any such prior issued options or warrants vest in the past two
years.
FAIR
VALUE OF FINANCIAL INSTRUMENTS
Due
to the distressed financial position of the Company it is not practical to fair
value the carrying amounts of debt to the estimated approximate fair value at
this time.
USE OF
ESTIMATES
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
which affect the reporting of assets and liabilities as of the dates of the
financial statements and revenues and expenses during the reporting period.
These estimates primarily relate to the deferred tax asset and debt valuations.
Actual results could differ from these estimates.
In
December 2007, the FASB issued FASB Statement No. 141 (revised 2007), Business
Combinations. This Statement replaces FASB Statement No. 141, Business
Combinations. This Statement retains the fundamental requirements in Statement
141 that the acquisition method of accounting (which Statement 141 called the
purchase method) be used for all business combinations and for an acquirer to be
identified for each business combination. This Statement defines the acquirer as
the entity that obtains control of one or more businesses in the business
combination and establishes the acquisition date as the date that the acquirer
achieves control. This Statement's scope is broader than that of Statement 141,
which applied only to business combinations in which control was obtained by
transferring consideration. By applying the same method of accounting—the
acquisition method—to all transactions and other events in which one entity
obtains control over one or more other businesses, this Statement improves the
comparability of the information about business combinations provided in
financial reports.
This
Statement requires an acquirer to recognize the assets acquired, the liabilities
assumed, and any non-controlling interest in the acquiree at the acquisition
date, measured at their fair values as of that date, with limited exceptions
specified in the Statement. That replaces Statement 141's cost-allocation
process, which required the cost of an acquisition to be allocated to the
individual assets acquired and liabilities assumed based on their estimated fair
values.
This
Statement applies to all transactions or other events in which an entity (the
acquirer) obtains control of one or more businesses (the acquirer), including
those sometimes referred to as "true mergers" or "mergers of equals" and
combinations achieved without the transfer of consideration, for example, by
contract alone or through the lapse of minority veto rights. This Statement
applies to all business entities, including mutual entities that previously used
the pooling-of-interests method of accounting for some business combinations. It
does not apply to: (a) The formation of a joint venture, (b) The acquisition of
an asset
or a group of assets that does not constitute a business, (c) A combination
between entities or businesses under common control, (d) A combination between
not-for-profit organizations or the acquisition of a for-profit business by a
not-for-profit organization.
This
Statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. An entity may not apply it
before that date. Management believes this Statement will have no impact on the
financial statements of the Company once adopted.
All other
new accounting pronouncements issued but not yet effective, have been deemed not
to be relevant to the Company and are not expected to have any impact once
adopted.
NOTE 3 -
CONVERTIBLE DEBENTURES AND OTHER - SUBSTANTIALLY ALL SUCH DEBT IS IN DEFAULT AS
OF JANUARY 1, 2006.
The
Company has authorized and sold $2,650,000 of 8% convertible debenture due
December 31, 2006 (debentures). The Company has received $2,400,000. The balance
of $350,000 is to be received at an indeterminate date. Interest is payable
quarterly in arrears, at the Company's option, in cash or shares of Company
common stock. The Company is required to provide the debenture holders with 20
days prior written notice of the Company's election to issue common stock in
lieu of cash. Interest to date has never been paid and the liability has been
accrued. There is a late fee of 18% on the unpaid interest.
The
debentures are convertible into shares of Company common stock at a fixed
conversion price of $0.0075 per share except for $100,000, which is convertible
into shares of the Company's common stock at $0.25 per share. The terms of the
debentures prohibit conversion if it would result in the holder, together with
its affiliates, beneficially owning in excess of 9.99% of outstanding shares of
the Company's common stock. A holder may waive the 9.99%
limitation
upon 61 days prior written notice to the Company.
The
debentures provide for a prepayment penalty in the amount of 120% of
principal.
One
debenture holder has the right to appoint such number of directors of the
Company as will constitute a majority of the Board of Directors. This right
expires when the outstanding debentures have been fully converted or paid in
full.
In
conjunction with the sale of the debentures, 2,850,000 warrants (warrants) were
issued to purchase shares of common stock of the Company. The warrants are
exercisable through July 14, 2009. The exercise prices of the warrant are as
follows: 750,000 at $0.0125 per share; 1,980,000 at $0.025 per share; 60,000 at
$0.80 per share; and 60,000 at $1.00 per share. The term of the warrants
prohibits the exercise of the warrants to the extent that exercise of the
warrants would result in the holder, together with its affiliates, beneficially
owning in excess of 9.99% of outstanding shares of the Company's
common
stock. A holder may waive the 9.99% limitation upon 61 days prior written notice
to the Company.
The
Company has granted registration rights to the debenture holders which require
the Company to file a registration statement with the Securities and Exchange
Commission covering the shares of common stock issuable upon conversion of the
debentures and exercise of the warrants. The registration of the securities is
to coincide with the date of the conversion of the debentures and the exercise
of the warrants.
Conversion
of the debentures and/or exercise of the warrants is at the option of the
holders. Accordingly, any beneficial conversion features will be accounted for
upon valuation of such equity rights, but will be limited to the principal
amount of such debentures.
The
conversion of all of the debentures and exercise of all of the warrants would
result in the issuance of approximately an additional 300,000,000 shares of
common stock which would represent 85% of the Company's then issued and
outstanding shares. The number of authorized shares of the Company common stock
would have to be increased by approximately 160,000,000 shares to accommodate
the conversion of the debentures and the exercise of the warrants
in
full.
LINE OF
CREDIT
On
May 4, 2004the Company entered into a loan and security agreement with IIG
Capital, LLC, as agent for IIG Trade Opportunities Fund N.V., as lender. The
negotiated outstanding balance under the line of credit at March 31, 2008 was
$150,000.
The
Company is in default under this agreement. In December 2005, the Company agreed
to settled its debt to IIG by the immediate payment of $50,000 in cash, the
issuance of a $25,000 note due on March 31, 2006 and the conversion of
approximately $125,000 of past due fees and interest into a convertible
debenture on terms similar to those of the Company's other convertible
debentures. As of December 31, 2008, the note and the debentures have not been
issued.
SUBSEQUENT
EVENT
In
April 2009, the Company commenced the start up enterprise Entmark Partners,
LLC, a company engaged in SMS text message advertising and marketing.
The Company reached a tentative agreement to acquire the business and
operations of Millenium Prime Inc. a company engaged in the lifestyle branding
and marketing of spirits.
10
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The
following contains forward-looking statements based on current expectations,
estimates and projections about our industry, management's beliefs, and
assumptions made by management. All statements, trends, analyses and other
information contained in this report relative to trends in our financial
condition and liquidity, as well as other statements, including, but not limited
to, words such as "anticipate,""believe,""plan,""intend,""expect,""predict," and other similar expressions constitute those statements. These
statements are not guarantees of future performance and are subject to risks and
uncertainties that are difficult to predict. Accordingly, actual results may
differ materially from those anticipated or expressed in the
statements.
OVERVIEW
We
were a start-up developer and marketer of entertainment and leisure products.
Since our inception, most of our revenues have been derived from our card
business. During the month of January 2005 our Board of Directors determined to
wind down the company's operations as conducted to date due to the lack of
sufficient funding. At that time, we released all of our employees other than
our Chief Executive Officer. We are currently evaluating several options
regarding our future financing of the registrant and its future operations.
Our
auditors
as part of their review continue to raise substantial doubt about our ability to
continue as a going concern.
RESULTS
OF OPERATIONS
Because
we have not had any business operations since the quarter ended December 31,2004, we did not have any revenues during the three and six month periods ended
March 31, 2009 and 2008.
Total
expenses for the three months ended March 31, 2009 and 2008 were $71,647 and
$70,016, respectively, consisting of interest expense related to the convertible
debentures.
Total
expenses for the six months ended March 31, 2009 and 2008 were $152,493 and
$140,802, respectively, consisting of general and administrative expense and
interest expense. Interest expense for the six months ended March 31, 2009 and
2008 was $140,093 and $140,802, respectively, related to the convertible
debentures.
LIQUIDITY
AND CAPITAL RESOURCES
All
of our convertible debt is in default as of January 1, 2006. As of
March 31, 2009, we had $0 in cash and cash equivalents. Net cash used in
operations for the six months ended March 31, 2009 was $0 consisting of a net
loss of $(152,493) offset by an increase in accounts payable and accrued
expenses of $152,493. There was no activity from investing activities or from
financing activities for the period ended March 31, 2009.
11
At
March 31, 2009 we had total assets of $0 and an accumulated deficit of
$19,968,926 and the report from our independent registered public accounting
firm on our audited financial statements at September 30, 2008 contains an
explanatory paragraph regarding doubt as to our ability to continue as a going
concern as a result of our significant recurring losses from operations since
inception. As discussed earlier in this report, in the beginning of
fiscal year 2005 we terminated our business operations and are now seeking to
acquire assets or shares of an entity actively engaged in a business which
generates revenues, or has the potential to generate revenues, in exchange for
our securities. We cannot predict when, if ever, we will be successful in
implementing this plan and, accordingly, we may be required to cease operations
at any time. We do not have sufficient working capital to pay our operating
costs for the next 12 months. We will require additional funds to pay our legal,
accounting and other fees associated with the company and our filing obligations
under federal securities laws, as well as to pay our other accounts payable
generated in the ordinary course of our business. We will also need funds to
satisfy the approximate $4.7 million of obligations on our balance sheet at
March 31, 2009. We have no commitments from any party to provide such funds to
us except for the convertible debentures. If we are unable to obtain additional
capital as necessary, until such time as we are able to conclude a business
combination, we will be unable to satisfy our obligations and otherwise continue
to meet our reporting obligations under federal securities laws. In that event,
our stock would no longer be quoted on the OTC Bulletin Board and our ability to
consummate a business combination upon terms and conditions which would be
beneficial to our existing stockholders would be adversely
affected.
OFF-BALANCE
SHEET ARRANGEMENTS
We
had no off-balance sheet arrangements as of March 31, 2009.
ITEM
4. CONTROLS AND PROCEDURES.
(a)
Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer
who also serves as our Chief Financial Officer and is the sole director of the
Company, carried out an evaluation of the effectiveness of our "disclosure
controls and procedures" (as defined in the Exchange Act, Rules 13a-15(e) and
15-d-15(e)) as of the end of the period covered by this report(the "Evaluation
Date"). Based upon that evaluation, he concluded that, as of the Evaluation
Date, our disclosure controls and procedures are effective to ensure that
information required to be disclosed by us in the reports that we file or
submit under the Exchange Act (i) is recorded, processed, summarized and
reported, within the time periods specified in the SEC's rules and forms and
(ii) is accumulated and communicated to our management, including our chief
executive officer and our chief financial officer, as appropriate to allow
timely decisions regarding required disclosure.
(b)
There have not been any changes in our internal controls over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during our most recent fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
12
PART II -
OTHER INFORMATION
ITEM
1A. RISK FACTORS
In
addition to the other information set forth in this report, you should carefully
consider the factors discussed under the caption “Risk Factors” in Part I, "Item
1. Description of Business" in our Annual Report on Form 10-KSB for the year
ended September 30, 2008 which could materially affect our business prospectd,
financial condition or future results. There have been no other material changes
during the quarter ended March 31, 2009 to the risk factors discussed in the
periodic report noted above.
ITEM
6. EXHIBITS
Exhibits:
Exhibit
No.
Description
31.1 Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the Chief Executive and Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
13
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.
