Unassociated Document
UNITED
STATES
SECURITIES
AND
EXCHANGE
COMMISSION
Washington,
D.C. 20549
FORM
10-QSB
Quarterly
Report of Small Business Issuers under Section 13 or 15(d) of the Securities
Exchange Act of
1934
for
the quarterly period ended September 30, 2007
Commission
File No. 000-33073
GENESIS
HOLDINGS, INC.
(Exact
name of registrant as specified in its charter)
Nevada
(State
or other jurisdiction of incorporation or
organization)
|
|
20-2775009
(I.R.S.
Employer Identification No.)
|
1525
Clover Hill Rd.
Mansfield,
Texas
(Address
of principal executive offices)
|
|
76063
(Zip
Code)
|
Issuer's
telephone number, including area code: (817)
477-3863
|
Check
whether the issuer has (1) filed all reports required to be filed
by
Section 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.
Yes x
No
o
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
|
Number
of shares outstanding of each of the issuer's classes of common
equity:
|
Class
|
|
Outstanding
as of November 9, 2007
|
Common
stock, $0.001 par value
|
|
21,780,226
|
Transitional
Small Business Disclosure Format : Yes o
No
x
|
GENESIS
HOLDINGS, INC.
Table
of Contents
|
|
|
Page
|
|
PART
I FINANCIAL INFORMATION
|
|
|
1
|
|
|
|
|
|
|
Item
1. Financial Statements
|
|
|
1
|
|
|
|
|
|
|
Condensed
Consolidated Unaudited Balance Sheet
|
|
|
1
|
|
|
|
|
|
|
Condensed
Consolidated Unaudited Statements of Income
|
|
|
2
|
|
|
|
|
|
|
Condensed
Consolidated Unaudited Statements of Comprehensive Income
|
|
|
4
|
|
|
|
|
|
|
Condensed
Consolidated Unaudited Statements of Cash Flows
|
|
|
5
|
|
|
|
|
|
|
Notes
to Condensed Consolidated Unaudited Financial Statements
|
|
|
7
|
|
|
|
|
|
|
Item
2. Management's Discussion and Analysis of Financial
Condition
|
|
|
|
|
and
Results of Operations
|
|
|
12
|
|
|
|
|
|
|
Item
3. Controls and Procedures
|
|
|
20
|
|
|
|
|
|
|
PART
II OTHER INFORMATION
|
|
|
20
|
|
|
|
|
|
|
Item
6. Exhibits and Reports on Form 8-K
|
|
|
20
|
|
|
|
|
|
|
SIGNATURES
|
|
|
21
|
|
PART
I FINANCIAL INFORMATION
Item
1. Financial Statements
GENESIS
HOLDINGS, INC.
CONDENSED
CONSOLIDATED BALANCE SHEET
SEPTEMBER
30, 2007
UNAUDITED
ASSETS
ASSETS
Cash
and cash equivalents
|
|
|
|
|
$
|
28,699
|
|
Investments
|
|
|
|
|
|
926,032
|
|
Investment
in fully developed
|
|
|
|
|
|
|
|
residential
lots held for sale
|
|
|
|
|
|
692,063
|
|
Prepaid
expenses
|
|
|
|
|
|
1,202
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
|
|
|
$
|
1,647,996
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
LIABILITIES
Accounts
payable and accrued expenses
|
|
|
|
|
$
|
123,779
|
|
Corporation
income and Texas franchise taxes payable
|
|
|
|
|
|
|
|
Currently
payable
|
|
|
|
|
|
79,000 |
|
Deferred
|
|
|
|
|
|
15,000
|
|
Deposit
on sale of lots
|
|
|
|
|
|
173,000
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
|
|
|
390,779
|
|
STOCKHOLDERS’
EQUITY
Common
stock, $0.001 par value
|
|
|
|
|
|
|
|
Authorized-25,000,000
shares
|
|
|
|
|
|
|
|
Issued
and outstanding - 21,780,226 shares
|
|
|
|
|
|
21,780 |
|
Additional
paid-in capital
|
|
|
|
|
|
581,051
|
|
Retained
earnings
|
|
|
|
|
|
632,894
|
|
Accumulated
other comprehensive income
|
|
|
|
|
|
21,492
|
|
|
|
|
|
|
|
|
|
TOTAL
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
1,257,217
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’
EQUITY
|
|
|
|
|
$ |
1,647,996 |
|
GENESIS
HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
UNAUDITED
|
|
|
Three
Months Ended September
30,
|
|
|
|
|
2007
|
|
|
2006
|
|
REVENUE
- SALE OF LOTS
|
|
|
|
|
$ |
816,335 |
|
|
|
|
|
|
|
|
|
COST
OF SALES
|
|
|
27,183 |
|
|
548,049
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
|
|
|
268,286
|
|
|
|
|
|
|
|
|
|
GENERAL
AND
ADMINISTRATIVE EXPENSES |
|
|
21,127 |
|
|
32,662 |
|
Accounting
and legal
|
|
|
|
|
|
|
|
Property
taxes
|
|
|
- |
|
|
11,923 |
|
Other
|
|
|
1,847 |
|
|
20,714 |
|
|
|
|
|
|
|
|
|
TOTAL
GENERAL AND
ADMINISTRATIVE
EXPENSES
|
|
|
22,974 |
|
|
65,299 |
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) FROM
OPERATIONS |
|
|
(6,821) |
|
|
202,987 |
|
|
|
|
|
|
|
|
|
OTHER
INCOME
AND EXPENSE |
|
|
|
|
|
|
|
Interest
income
|
|
|
2,042 |
|
|
- |
|
Interest
expense
|
|
|
- |
|
|
(
6,804) |
|
|
|
|
|
|
|
|
|
TOTAL
OTHER INCOME AND EXPENSE
|
|
|
2,042 |
|
|
(
6,804) |
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) BEFORE CORPORATION
INCOME
AND TEXAS FRANCHISE TAXES
|
|
|
(
4,779) |
|
|
196,183 |
|
|
|
|
|
|
|
|
|
CORPORATION
INCOME AND TEXAS FRANCHISE
TAXES
(BENEFIT, NET OF REFUNDS)
|
|
|
(
27,049) |
|
|
60,000 |
|
|
|
|
|
|
|
|
|
NET
INCOME |
|
$ |
22,270 |
|
$ |
136,183 |
|
|
|
|
|
|
|
|
|
NET
INCOME
PER COMMON SHARE |
|
|
|
|
|
|
|
|
|
$ |
0.00 |
|
$ |
0.01 |
|
Basic
and Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF
COMMON
SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted
|
|
|
21,780,226 |
|
|
21,780,226 |
|
|
|
Nine
Months Ended September
30,
|
|
|
2007
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
$
|
1,134,855
|
|
|
|
|
$
|
2,251,855
|
|
|
|
|
|
|
|
|
|
|
|
719,643
|
|
|
|
|
|
1,509,715
|
|
|
|
|
|
|
|
|
|
|
|
415,212
|
|
|
|
|
|
742,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,912
|
|
|
|
|
|
53,809
|
|
|
28,898
|
|
|
|
|
|
58,932
|
|
|
9,374
|
|
|
|
|
|
22,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,184
|
|
|
|
|
|
135,369
|
|
|
314,028
|
|
|
|
|
|
606,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,737
|
|
|
|
|
|
-
|
|
|
(
54,924
|
)
|
|
|
|
|
(
62,309
|
|
|
|
|
|
|
|
|
|
|
|
(
36,187
|
)
|
|
|
|
|
(
62,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
277,841
|
|
|
|
|
|
544,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,602
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
$
|
196,239
|
|
|
|
|
$
|
484,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.01 |
|
|
|
|
$ |
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,780,226
|
|
|
|
|
|
21,780,226
|
See
Accompanying Notes.
GENESIS
HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR
THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND
2006
UNAUDITED
|
|
|
Three
Months Ended
September
30,
|
|
|
Nine
Months Ended
September
30,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
NET
INCOME
|
|
$
|
22,270
|
|
$
|
136,183
|
|
$
|
196,239
|
|
$
|
484,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNREALIZED
GAIN
(LOSS)
ON MARKETABLE
SECURITIES,
NET
OF TAXES
|
|
|
(
20,933
|
)
|
|
-
|
|
|
21,492
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
COMPREHENSIVE
INCOME
|
|
$
|
1,337
|
|
$
|
136,183
|
|
$
|
217,731
|
|
$
|
484,462
|
|
See
Accompanying Notes
GENESIS
HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
UNAUDITED
|
|
|
2007
|
|
|
2006
|
|
CASH
FLOWS
FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
Net
income
|
|
$
|
196,239
|
|
$
|
484,462
|
|
Adjustments
to reconcile net income
|
|
|
|
|
|
|
|
to
net cash provided by operating activities:
|
|
|
|
|
|
|
|
Unrealized
gain on marketable securities
|
|
|
21,492
|
|
|
-
|
|
Consulting
services paid with common stock
|
|
|
-
|
|
|
15,000
|
|
Expenses
paid by stockholder and donated
|
|
|
|
|
|
|
|
to
the company
|
|
|
-
|
|
|
718
|
|
Deferred
income taxes
|
|
|
15,000
|
|
|
-
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
Investment
in fully developed residential lots
|
|
|
|
|
|
|
|
held
for sale
|
|
|
718,682
|
|
|
1,507,498
|
|
Accounts
receivable
|
|
|
82,603
|
|
|
-
|
|
Prepaid
expenses
|
|
|
4,068
|
|
|
-
|
|
Accounts
payable and accrued expenses
|
|
|
(
29,119
|
)
|
|
1,204
|
|
Corporation
income and Texas franchise
|
|
|
|
|
|
|
|
taxes
payable
|
|
|
28,610
|
|
|
60,000
|
|
Deposit
on sale of lots
|
|
|
173,000
|
|
|
-
|
|
|
|
|
|
|
|
|
|
NET
CASH PROVIDED BY
OPERATING
ACTIVITIES
|
|
|
1,210,575 |
|
|
2,068,882 |
|
|
|
|
|
|
|
|
|
CASH
FLOWS
FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
Investments
in marketable securities
|
|
|
(
926,032 |
) |
|
- |
|
|
|
|
|
|
|
|
|
NET
CASH (USED) BY INVESTING
ACTIVITIES
|
|
|
(
926,032 |
) |
|
- |
|
|
|
|
|
|
|
|
|
CASH
FLOWS
FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
Repayment
of note payable and accrued interest -
Larry
Don Bankston
|
|
|
(
266,622 |
) |
|
- |
|
Proceeds
from notes payable and accrued interest -
Larry
Don Bankston
|
|
|
- |
|
|
14,697 |
|
Repayment
of land development loans payable
|
|
|
- |
|
|
(
2,034,074 |
) |
|
|
|
|
|
|
|
|
NET
CASH (USED) BY
FINANCING
ACTIVITIES
|
|
|
(
266,622 |
) |
|
(
2,019,377 |
) |
See
Accompanying Notes.
GENESIS
HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
UNAUDITED
|
|
|
2007
|
|
|
2006
|
|
NET
INCREASE IN CASHAND
CASH
EQUIVALENTS
|
|
$
|
17,921
|
|
$
|
49,505
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS,
BEGINNING
OF PERIOD
|
|
|
10,778 |
|
|
48,944 |
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS,
END
OF PERIOD
|
|
$ |
28,699 |
|
$ |
98,449 |
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF
CASH
FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
PAID DURING THE PERIOD FOR:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$ |
54,924 |
|
$ |
47,632 |
|
|
|
|
|
|
|
|
|
Taxes
|
|
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
|
SCHEDULE
OF NON-CASH INVESTING
AND
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
services paid with common stock
|
|
$ |
- |
|
$ |
15,000 |
|
|
|
|
|
|
|
|
|
Expenses
paid by stockholder and donated
to
the company
|
|
$ |
- |
|
$ |
718 |
|
|
|
|
|
|
|
|
|
See
Accompanying Notes
GENESIS
HOLDINGS, INC.
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2007 AND 2006
UNAUDITED
NOTE 1 |
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES |
Nature
of Business and History of Company
Genesis
Holdings, Inc. (the “Company”) was incorporated on May 25, 1999 in the State of
Nevada. The Company is a holding company for subsidiary
acquisitions.
Genesis
Land Development, LLC was formed on September 8, 2003 in the State of Texas,
and
has been engaged in the business of developing vacant land into single family
residential lots.
On
July
1, 2006, the Company, which was formerly known as AABB, Inc., acquired all
of
the membership interests of Genesis Land Development, LLC, pursuant to a merger
agreement dated as of July 1, 2006, among AABB, Inc., AABB Acquisitions Sub,
Inc., certain shareholders and Genesis Land Development, LLC. The Company
acquired 100% of the ownership interests of Genesis Land Development, LLC from
the sole member of the LLC for 19,000,000 shares of the Company’s common
stock.
For
accounting purposes, the acquisition was treated as a recapitalization rather
than a business combination.
After
the
merger, AABB, Inc. changed its name to Genesis Holdings, Inc., and Genesis
Land
Development, LLC ceased to exist as it was merged into the Company’s
wholly-owned subsidiary, Genesis Land, Inc.
Basis
of Presentation
The
unaudited condensed consolidated financial statements have been prepared in
accordance with United States generally accepted accounting principles for
interim financial statements and with the instructions to Form 10-QSB and
reflect all adjustments which, in the opinion of management, are necessary
for a
fair presentation. All such adjustments are of a normal recurring nature. The
results of operations for the interim period are not necessarily indicative
of
the results to be expected for the full year. The statements should be read
in
conjunction with the financial statements and footnotes thereto included in
the
Company’s audit for the period ended December 31, 2006.
GENESIS
HOLDINGS, INC.
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2007 AND 2006
UNAUDITED
NOTE 1 |
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED) |
Basis
of Consolidation
The
consolidated financial statements include the accounts of Genesis Holdings,
Inc.
and its 100% ownership interest in Genesis Land, Inc.
All
material inter-company accounts and transactions have been
eliminated.
Accounting
Estimates
Management
uses estimates and assumptions in preparing financial statements in accordance
with generally accepted accounting principles. Those estimates and assumptions
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities, and the reported revenues and expenses.
Actual results could vary from the estimates that were used.
Cash
and Cash Equivalents
For
purposes of the statement of cash flows, the Company considers all highly liquid
debt instruments purchased with an original maturity of three months or less
to
be cash equivalents.
Inventory
of Fully Developed Residential Lots Held For Sale
The
inventory of fully developed residential lots held for sale is carried at the
lower of cost or market. The cost of the lots is approximately $27,000 per
lot
and the market value is estimated at $44,124 per lot as determined by the option
agreement as disclosed in footnote Number 2.
Cost
includes land, construction costs, including hard and soft costs, capitalized
interest, capitalized property taxes and unamortized loan costs.
Sales
and Profit Recognition
In
accordance with the Statement of Financial Accounting Standard No. 66,
“Accounting for Sales of Real Estate,” development land sales will be recognized
at closing when sufficient down payments have been obtained, possession and
other attributes of ownership have been transferred to the buyer and the Company
has no significant continuing involvement.
The
costs
of acquiring and developing land are accumulated and will be charged to cost
of
sales as the related inventories are sold.
GENESIS
HOLDINGS, INC.
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2007 AND 2006
UNAUDITED
NOTE 1 |
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED) |
Long-Lived
Assets
Statement
of Financial Accounting Standards No. 144, “Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of,” requires that
long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the historical cost carrying value of an asset
may
no longer be appropriate. The Company assesses recoverability of the carrying
value of an asset by estimating the future net cash flows expected to result
from the asset, including eventual disposition. If the future net cash flows
are
less than the carrying value of the asset, an impairment loss is recorded equal
to the difference between the asset’s carrying value and fair value. This
standard did not have a material effect on the Company’s results of operations,
cash flows or financial position.
Disclosures
About Fair Value of Financial Instruments
The
Company estimates that the fair value of financial instruments at September
30,
2007 as defined in FASB 107, does not differ materially from the aggregate
carrying values of its financial instruments recorded in the accompanying
balance sheet. The estimated fair value amounts have been determined by the
Company using available market information and appropriate valuation
methodologies. Considerable judgment is required in interpreting market data
to
develop the estimates of fair value, and, accordingly, the estimates are not
necessarily indicative of the amount that the Company could realize in a current
market exchange.
Income
Taxes
Provisions
for income taxes are based on taxes payable or refundable for the current year
and deferred taxes on temporary differences between the amount of taxable income
and pretax financial income and between the tax bases of assets and liabilities
and their reported amounts in the financial statements. Deferred tax assets
and
liabilities are included in the financial statements at currently enacted income
tax rates applicable to the period in which the deferred tax assets and
liabilities are expected to be realized or settled. As changes in tax laws
or
rates are enacted, deferred tax assets and liabilities are adjusted through
the
provision for income taxes.
GENESIS
HOLDINGS, INC.
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2007 AND 2006
UNAUDITED
NOTE 1 |
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED) |
Net
Income Per Share
The
Company adopted Statement of Financial Accounting Standards No. 128 that
requires the reporting of both basic and diluted earnings per share. Basic
earnings per share is computed by dividing net income available to common
stockholders by the weighted average number of common shares outstanding for
the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised
or
converted into common stock. Any anti-dilutive effects on net earnings per
share
are excluded.
Recently
Issued Accounting Standards Not Yet Adopted
There
currently are no recently issued accounting standards with pending adoptions
that have any applicability to the Company.
|
On
June 3, 2005, the Company entered into an option agreement to sell
171
lots to Wall Homes, Inc. under the following terms and
conditions:
|
1. |
Sales
price - 171 lots at $38,500 for a total of $6,583,500. The price
increases
6% each year.
|
1st
closing
- at date of closing - 60 lots at $38,500
2nd
closing
- 6 months from initial closing - 28 lots at $38,500 plus 6%
3rd
final
closing - every 6 months - 28 lots each closing at $38,500
plus
6%
The
agreement was extended until January 2, 2008. As of September 30, 2007, the
Company has received payments for 145 lots.
As
of
September 30, 2007, the Company received a deposit of $173,000 for the future
purchase of lots.
GENESIS
HOLDINGS, INC.
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2007 AND 2006
UNAUDITED
|
Debt
and equity securities not classified as either held-to-maturity securities
or trading securities are classified as available-for-sale, and reported
at fair value based on market quotes. Unrealized gains and losses,
net of
deferred taxes, are recorded as a component of other comprehensive
income. |
|
We
expect that the majority of marketable securities will be sold within
one
year, regardless of maturity date. We primarily invest in
high-credit-quality debt instruments with an active resale market
and
money market funds to ensure liquidity and the ability to readily
convert
these investments into cash to fund current operations, or satisfy
other
cash requirements as needed. Accordingly, we have classified all
marketable securities as current assets in the accompanying balance
sheet.
|
NOTE
4
|
ACCOUNTS
PAYABLE AND ACCRUED
EXPENSES
|
From
January 28, 2005 through April 29, 2005, Larry Don Bankston (the majority
beneficial shareholder of the Company) loaned a predecessor to the Company
approximately $300,000. Mr. Bankston obtained the funds for the loan by “cashing
in” a number of his pension and retirement savings accounts. In connection with
this transaction, Mr. Bankston had to pay early withdrawal tax penalties and
loss of interest penalties due to the early withdrawal of the funds. On March
31, 2007, the Company agreed to reimburse Mr. Bankston $49,978 for the losses
he
incurred. The transaction was recorded as interest expense. All amounts were
reimbursed during the six months ended June 30, 2007.
ITEM 2. |
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS
|
Caution
Regarding Forward-Looking Information
All
statements contained in this Form 10-QSB, other than statements of historical
facts, that address future activities, events or developments are
forward-looking statements, including, but not limited to, statements containing
the words "believe," "expect," "anticipate," "intends," "estimate," "forecast,"
"project," and similar expressions . All statements other than statements of
historical fact are statements that could be deemed forward-looking statements,
including any statements of the plans, strategies and objectives of management
for future operations; any statements concerning proposed new developments;
any
statements regarding future economic conditions or performance; any statements
of belief; and any statements of assumptions underlying any of the foregoing.
These statements are based on certain assumptions and analyses made by us in
light of our experience and our assessment of historical trends, current
conditions and expected future developments as well as other factors we believe
are appropriate under the circumstances. However, whether actual results will
conform to the expectations and predictions of management is subject to a number
of risks and uncertainties described under “Risk Factors” beginning on page 18
below and in the “Risk Factors” section of our Form 10-KSB for the fiscal year
ended December 31, 2006 that may cause actual results to differ
materially.
Consequently,
all of the forward-looking statements made in this Form 10-QSB are qualified
by
these cautionary statements and there can be no assurance that the actual
results anticipated by management will be realized or, even if substantially
realized, that they will have the expected consequences to or effects on our
business operations. Readers are cautioned not to place undue reliance on such
forward-looking statements as they speak only of the Company's views as of
the
date the statement was made. The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
Results
of Operations
Genesis
Holdings, Inc. was incorporated on May 25, 1999 in the state of Nevada. The
Company is a holding company for subsidiary acquisitions.
Genesis
Land Development, LLC was formed on September 8, 2003 in the state of Texas,
and
has been engaged in the business of developing vacant land into single family
residential lots. On July 1, 2006, the Company, which was formerly known as
AABB, Inc., acquired all of the membership interests of Genesis Land
Development, LLC, pursuant to a merger agreement dated as of July 1, 2006,
among
AABB, Inc., AABB Acquisitions Sub, Inc., certain shareholders and Genesis Land
Development, LLC. The Company acquired 100% of the ownership interests of
Genesis Land Development, LLC from the sole member of the LLC for 19,000,000
shares of the Company’s common stock. Genesis Land Development, LLC merged into
AABB Acquisition Sub, Inc., a Nevada corporation that changed its name
post-merger to Genesis Land, Inc.
For
accounting purposes, the acquisition was treated as a recapitalization rather
than a business combination. After the merger, AABB, Inc. changed its name
to
Genesis Holdings, Inc. The Company was considered a development stage company
prior to its acquisition of Genesis Land Development, LLC.
Critical
Accounting Policies
Our
discussion and analysis of our financial condition and results of operations
are
based upon our financial statements, which have been prepared in accordance
with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues
and
expenses. In consultation with our Board of Directors, we have identified
several accounting principles that we believe are key to an understanding of
our
financial statements. These important accounting policies require management's
most difficult, subjective judgments.
Basis
of Consolidation
The
consolidated financial statements include the accounts of Genesis Holdings,
Inc.
and its 100% ownership interest in Genesis Land, Inc.
All
material inter-company accounts and transactions have been
eliminated.
Inventory
of Fully Developed Residential Lots Held For Sale
The
inventory of fully developed residential lots held for sale is carried at the
lower of cost or market. The cost of the lots is approximately $27,000 per
lot
and the market value is estimated at $44,124 per lot as determined by the Option
Agreement with Wall Homes, Inc.
Cost
includes land, construction costs including hard and soft costs, capitalized
interest, capitalized property taxes and loan costs.
Sales
and Profit Recognition
In
accordance with Statement of Financial Accounting Standard No. 66, “Accounting
for Sales of Real Estate,” development land sales will be recognized at closing
when sufficient down payments have been obtained, possession and other
attributes of ownership have been transferred to the buyer and the Company
has
no significant continuing involvement.
The
costs
of acquiring and developing land are accumulated and will be charged to cost
of
sales as the related inventories are sold.
Long-Lived
Assets
Statement
of Financial Accounting Standards No. 144. “Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of,” requires that
long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the historical cost carrying value of an asset
may
no longer be appropriate. The Company assesses recoverability of the carrying
value of an asset by estimating the future net cash flows expected to result
from the asset, including eventual disposition. If the future net cash flows
are
less than the carrying value of the asset, an impairment loss is recorded equal
to the difference between the asset’s carrying value and fair value. This
standard did not have a material effect on the Company’s results of operations,
cash flows or financial position.
Disclosures
About Fair Value of Financial Instruments
The
Company estimates that the fair value of financial instruments at September
30,
2007 as defined in FASB 107, does not differ materially from the aggregate
carrying values of its financial instruments recorded in the accompanying
balance sheet. The estimated fair value amounts have been determined by the
Company using available market information and appropriate valuation
methodologies.
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 disclosure of contingent assets and liabilities at the date
of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Marketable
Securities
Marketable
securities, all of which are classified as available-for-sale, are stated at
fair value based on market quotes. Unrealized gains and losses, net of deferred
taxes, are recorded as a component of other comprehensive income.
We
expect
that the majority of marketable securities will be sold within one year,
regardless of maturity date. We primarily invest in high-credit-quality debt
instruments with an active resale market and money market funds to ensure
liquidity and the ability to readily convert these investments into cash to
fund
current operations, or satisfy other cash requirements as needed. Accordingly,
we have classified all marketable securities as current assets in the
accompanying balance sheet.
Stock
Issued for Non-Cash Transactions
It
is the
Company’s policy to value stock issued for non-cash transactions, such as
services, at the fair market value of the goods or services received or the
consideration granted, whichever is more readily determinable, at the date
the
transaction is negotiated.
There
were 1,800,000 shares of common stock issued during 2006 for consulting
services, which were valued at $15,000.
Income
Taxes
Provisions
for income taxes are based on taxes payable or refundable for the current year
and deferred taxes on temporary differences between the amount of taxable income
and pretax financial income and between the tax bases of assets and liabilities
and their reported amounts in the financial statements. Deferred tax assets
and
liabilities are included in the financial statements at currently enacted income
tax rates applicable to the period in which the deferred tax assets and
liabilities are expected to be realized or settled as prescribed in FASB
Statement No. 109, Accounting for Income Taxes. As changes in tax laws or rates
are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.
Net
Income Per Share
The
Company adopted Statement of Financial Accounting Standards No. 128 that
requires the reporting of both basic and diluted earnings per share. Basic
earnings per share is computed by dividing net income available to common
stockholders by the weighted average number of common shares outstanding for
the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised
or
converted into common stock. In accordance with FASB 128, any anti-dilutive
effects on net earnings per share are excluded.
SELECTED
FINANCIAL INFORMATION
|
|
Three
Months Ended
|
|
Nine
Months Ended
|
|
|
|
09/30/2007
|
|
09/30/2006
|
|
09/30/2007
|
|
09/30/2006
|
|
Statement
of
Operations
Data:
|
|
|
|
|
|
|
|
|
|
Total
revenue
|
|
$
|
43,336
|
|
$
|
816,335
|
|
$
|
1,134,855
|
|
$
|
2,251,855
|
|
Income
(loss) from operations
|
|
|
(
6,821
|
)
|
|
202,987
|
|
|
314,028
|
|
|
606,771
|
|
Income
(loss) from operations before corporation income and Texas franchise
taxes
(benefit)
|
|
$
|
(
4,779
|
)
|
$
|
196,183
|
|
$
|
277,841
|
|
$
|
544,462
|
|
Net
income
|
|
$
|
22,270
|
|
$
|
136,183
|
|
$
|
196,239
|
|
$
|
484,462
|
|
Net
income per share - basic and diluted
|
|
$
|
0.00
|
|
$
|
0.01
|
|
$
|
0.01
|
|
$
|
0.02
|
|
Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
|
|
|
|
|
$
|
1,647,996
|
|
$
|
1,579,030
|
|
Total
liabilities
|
|
|
|
|
|
|
|
|
390,779
|
|
|
491,737
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
$
|
1,257,217
|
|
$
|
1,087,293
|
|
Results
of Operations
Nine
months ended September 30, 2007 compared to nine months ended September 30,
2006
Revenues.
Revenues
from operations decreased $1,117,000 for the nine months ended September 30,
2007 as compared to the nine months ended September 30, 2006 as summarized
below:
Nine
months ended September 30, 2007
Sold
27 lots at $42,032 per lot
|
|
$
|
1,134,855
|
|
|
|
|
|
|
Nine
months ended September 30, 2006
Sold
56 lots at $40,212 per lot
|
|
|
2,251,855
|
|
|
|
|
|
|
Decrease
in revenue
|
|
$
|
1,117,000
|
|
Cost
of Sales. The
cost
of sales decreased for the nine months ended September 30, 2007 as compared
to
the nine months ended September 30, 2006 due to the decrease in the number
of
lots sold as follows:
Nine
months ended September 30, 2007
Cost
of lots sold - 27 lots @ $26,653 per lot
|
|
$
|
719,643
|
|
|
|
|
|
|
Nine
months ended September 30, 2006
Cost
of lots sold - 56 lots @ $26,959 per lot
|
|
|
1,509,715
|
|
|
|
|
|
|
Decrease
in revenue
|
|
$
|
790,072
|
|
General
and Administrative Expenses. General
and administrative expenses decreased by $34,185 to $101,184 for the nine months
ended September 30, 2007 as compared to $135,369 for the nine months ended
September 30, 2006, a 25% decrease.
Accounting
and legal expenses increased by $9,103 to $62,912 for the nine months ended
September 30, 2007, as compared to $53,809 for the nine months ended September
30, 2006, a 17% increase. This is due to required filings with the Securities
and Exchange Commission.
Property
taxes decreased by $30,034 to $28,898 for the nine months ended September 30,
2007, as compared to $58,932 for the nine months ended September 30, 2006,
a 51%
decrease. This is due to owning fewer lots in 2007 as compared to
2006.
Other
expenses decreased by $13,254 to $9,374 for the nine months ended September
30,
2007, as compared to $22,628 for the nine months ended September 30, 2006,
a 41%
increase. This is mainly due to landscaping, repairs and maintenance expenses
of
$11,362 incurred during the nine months ended September 30, 2006 but not
incurred during the nine months ended September 30, 2007.
Results
of Operations
Three
months ended September 30, 2007 compared to three months ended September 30,
2006
Revenues.
Revenues
from operations decreased by $772,999 for the three months ended September
30,
2007 as compared to the three months ended September 30, 2006 and is summarized
below:
Three
months ended September 30, 2007
Sold
1 lot at $43,336 per lot
|
|
$
|
43,336
|
|
|
|
|
|
|
Three
months ended September 30, 2006
Sold
20 lots at $40,817 per lot
|
|
|
816,335
|
|
|
|
|
|
|
Decrease
in revenue
|
|
$
|
772,999
|
|
Cost
of Sales. The
cost
of sales decreased by $520,866 for the three months ended September 30, 2007
as
compared to the three months ended September 30, 2006 and is summarized below:
Three
months ended September 30, 2007
Sold
1 lot at $27,183 per lot
|
|
$
|
27,183
|
|
|
|
|
|
|
Three
months ended September 30, 2006
Sold
20 lots at $27,402 per lot
|
|
|
548,049
|
|
|
|
|
|
|
Decrease
in revenue
|
|
$
|
520,866
|
|
General
and Administrative Expenses. General
and administrative expenses decreased by $42,325 to $22,974 for the three months
ended September 30, 2007 as compared to $65,299 for the three months ended
September 30, 2006, a 65% decrease.
Accounting
and legal expenses decreased by $11,535 to $21,127 for the three months ended
September 30, 2007, as compared to $32,662 for the three months ended September
30, 2006, a 35% decrease. This is due to filings with the Securities and
Exchange Commission in the prior year.
Property
taxes decreased by $11,923 to $0 for the three months ended September 30, 2007,
as compared to $11,923 for the three months ended September 30, 2006, a 100%
decrease. This is due to owning fewer lots in 2007 as compared to
2006.
Other
expenses decreased by $18,867 to $1,847 for the three months ended September
30,
2007, as compared to $20,714 for the three months ended September 30, 2006.
This
is mainly due to landscaping, repairs and maintenance expenses of $8,472 for
the
three months ended September 30, 2006 but not incurred during the three months
ended September 30, 2007.
Liquidity
and Capital Resources. We
currently have no material commitments for capital expenditures and have no
fixed expenses.
To
date
we have financed our operations with cash from our operating activities and
the
following loans:
On
October 1, 2005, the Company received a land development loan for $3,625,000
from Texas Bank. The loan bore interest at 8.25%, and was paid off during
2006.
On
October 13, 2004, the Company received a $417,000 note from Texas Bank. The
loan
bore interest at 8.25% and was paid off during 2006.
During
2005, the Company entered into seven notes payable dated from January 28, 2005
through April 29, 2005 payable to Larry Don Bankston. The loans bore interest
at
7%, and were paid off during April 2007.
Working
capital is summarized and compared as follows:
|
|
|
|
September
30,
|
|
|
|
|
|
|
|
2006
|
|
Current
assets
|
|
|
|
|
$
|
1,647,996
|
|
$
|
3,037,023
|
|
Current
liabilities
|
|
|
|
|
|
390,779
|
|
|
2,449,910
|
|
Working
capital
|
|
|
|
|
$
|
1,257,217
|
|
$
|
587,113
|
|
Our
net
cash provided by operations was $1,210,575 for the nine months ended September
30, 2007. Net income for the nine months ended September 30, 2007 was $196,239,
and included an unrealized gain on marketable securities of $21,492 and deferred
income taxes of $15,000. We also had cash provided to us by a decrease in an
investment in fully developed residential lots held for sale of $718,682,
prepaid expenses of $4,018, corporation and Texas franchise taxes payable of
$28,610, collection of accounts receivable in the amount of $82,603, and 173,000
deposits received for future sales of lots. These were offset by a decrease
in
accounts payable and accrued expenses of $29,119.
Our
net
cash provided by operations for the nine months ended September 30, 2006
consisted of net income of $484,462, and included consulting services paid
with
common stock of $15,000 and expenses paid by a stockholder in the amount of
$718
donated to the Company. We also had cash provided by a decrease in an investment
in fully developed residential lots held for sale of $1,507,498, an increase
in
accounts payable and accrued expenses of $1,204, and an increase in corporation
and Texas franchise taxes payable of $60,000.
Our
net
cash used by investing activities was $926,032 for the nine months ended
September 30, 2007. It was for investments in marketable
securities.
There
was
no net cash used or provided from investing activities for the nine months
ended
September 30, 2006.
Our
net
cash used by financing activities was $266,622 for the nine months ended
September 30, 2007. It was for the repayment of notes payable and accrued
interest to Larry Don Bankston.
Our
net
cash used by financing activities was $2,019,377 for the nine months ended
September 30, 2006, which was for the repayment of land development loans
payable, net of proceeds from notes payable and accrual interest to Larry Don
Bankston.
Risk
Factors
You
should consider the following discussion of risks as well as other information
regarding our operations. The risks and uncertainties described below are not
the only ones. Additional risks and uncertainties not presently known to us
or
that we currently deem immaterial also may impair our business operations.
For a
more detailed discussion of the risks facing us, you should review the "Risk
Factors" section contained in our Form 10-KSB for the fiscal year ended December
31, 2006.
Risks
Related to Our Business
· |
We
plan to sell the remaining lots in Bankston Meadows in the near future
and
upon sale of the final lots we will have no source of additional
revenue
to pay our ongoing expenses.
|
· |
Management
may not run the company in a profitable
manner.
|
· |
We
may not be able to locate and acquire suitable companies for our
future
acquisitions and any failure to acquire suitable companies may result
in
losses to us and our investors.
|
· |
We
have a limited operating history in real estate development and therefore,
predicting our future performance is
difficult.
|
· |
We
may not have access to sufficient capital to pursue our acquisition
strategies and therefore may be unable to achieve our planned future
growth.
|
· |
We
depend on key management personnel and the loss of any of them would
seriously disrupt our operations.
|
· |
We
have not yet identified any specific target businesses to acquire
through
a purchase or merger or any specific areas of real estate development
that
we intend to pursue and we may acquire businesses that our shareholders
do
not approve of.
|
· |
We
have not conducted research to determine whether there is demand
in the
market for a business combination with us and, if not, we may not
be able
to acquire suitable businesses.
|
· |
Our
lack of diversification subjects our investors to a greater risk
of
losses.
|
· |
Control
of the Company may change and any new management may not successfully
run
our business.
|
· |
We
currently have only one officer and two directors each of whom have
other
employment obligations.
|
· |
Investors
may not be able to review the terms of potential business combinations
and
any combination could result in
losses.
|
· |
We
are subject to currently unforeseeable risks associated with our
potential
business combinations, any of which could result in
losses.
|
· |
Leveraged
transactions may encumber our assets and reduce any returns to
investors.
|
· |
Our
business will be negatively affected if we do not keep pace with
the
latest real estate development trends and consumer
preferences.
|
· |
Management
has limited experience with real
estate development
and may not manage current or future projects
successfully.
|
· |
We
may not be able to manage rapid growth and acquisition of substantial
new
opportunities effectively.
|
· |
Our
ownership of real estate may result in losses if demand for property
declines.
|
· |
Our
real estate activities will be subject to vigorous competition from
other
properties and other real estate investors, which may reduce our
earnings.
|
· |
Development
costs are difficult to estimate and if costs exceed our budget we
may lose
money on the sale of a property.
|
· |
The
U.S. real estate market is cyclical, and is experiencing a downturn,
which
may increase the difficulty of selling our future
property.
|
· |
Many
real estate costs are fixed
and must be paid even if the property is not generating
revenue.
|
· |
There
is no assured market for properties and we may be unable to sell
a
property in a timely manner, which would reduce our
earnings.
|
· |
We
are subject to zoning and environmental controls
that may restrict the use of our property.
|
· |
We
are subject to potential uninsured losses
that may require substantial payments that would reduce our cash
reserves
or result in losses.
|
· |
As
a developer of residential property, we are subject to risks affecting
the
homebuilding industry, any of which may reduce the sales price of
our
property.
|
· |
Our
inability to make secured debt payments could result in the loss
of any
mortgaged property.
|
· |
Rising
interest rates could adversely affect our cash flow.
|
Risks
Related to Our Shares
· |
There
is no market for our common stock and shareholders may be unable
to sell
their shares.
|
· |
If
publicly traded, our stock price could be very
volatile.
|
· |
Our
controlling shareholder may exert considerable influence over elections
and other decisions.
|
ITEM
3.
|
CONTROLS
AND PROCEDURES
|
(a) Under
the supervision and with the participation of our management, including our
principal executive and principal financial officer, we conducted an evaluation
of the design and operation of our disclosure controls and procedures, as such
term is defined under Rules 13a-14(c) and 15d-14(c) promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of
September 30, 2007. Based on that evaluation, our principal executive and
principal financial officer concluded that the design and operation of our
disclosure controls and procedures were effective in timely alerting him to
material information required to be included in the Company's periodic reports
filed with the SEC under the Exchange Act. 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.
However, management believes that our system of disclosure controls and
procedure is designed to provide a reasonable level of assurance that the
objectives of the system will be met.
(b) There
were no changes in our internal control over financial reporting during the
third quarter of 2007 that have materially affected, or are reasonably likely
to
materially affect, our internal control over financial reporting.
PART
II - OTHER INFORMATION
ITEM
6. EXHIBITS AND REPORTS ON FORM 8-K
(a)
Exhibits:
31
Rule
13a-14(a)/15d-14(a) Certification of Principal Executive and Principal
Financial
Officer
32
Section
1350 Certification
(b) Reports
on Form 8-K:
None.
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.
|
|
|
|
GENESIS
HOLDINGS, INC., a Nevada corporation
|
|
|
|
|
By: |
/s/ Jason
Pratte |
|
Jason
Pratte, Chief Executive and Chief Financial Officer
|
|
|