10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2008

OR

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

FOR THE TRANSITION FROM _______ TO ________.

COMMISSION FILE NUMBER 333-139991

GEN2MEDIA CORPORATION  

(Exact Name of Registrant as Specified in its Charter)

Nevada	26-1358844
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
7658 Municipal Dr., Orlando, FL	32819
(Address of principal executive offices)	(Zip code)

Issuer's telephone number: (310) 770-1693

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨  No x

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS

DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant 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 ¨

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:  As of February 17, 2009, there were 56,969,945 outstanding shares of the Registrant's Common Stock, $.001 par value.

1

GEN2MEDIA CORPORATION

DECEMBER 31, 2008 QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	Page
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition	14
Item 4T. Controls and Procedures	16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	17
Item 1A. Risk Factors	17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3. Defaults Upon Senior Securities	17
Item 4T. Submission of Matters to a Vote of Security Holders	17
Item 5. Other Information	17
Item 6. Exhibits	18
SIGNATURES	19

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PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GEN2MEDIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	December 31, 2008			June 30,2008
Assets
Current:
Cash and cash equivalents	$	42,208		$	3,079
Accounts Receivable		69,710			5,000
Other Current Assets		5,928			-
Total Current Assets		117,846			8,079
Furniture and Equipment:
Computer equipment		91,309			66,305
Office furniture and fixtures		10,405			7,302
		101,714			73,607
Less:  Accumulated depreciation		(24,948	)		(15,854	)
Net Furniture and Equipment		76,766			57,753
Intangibles, net:
Intangible Asset - Customer list		67,471			-
Website platform		203,151			270,868
Patent Pending		8,754			8,754
Net Intangible Assets, net of accumulated amortization		279,376			279,622
Other Assets – Deposits		13,652			-
Total Assets	$	487,640		$	345,454
Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts Payable	$	200,745		$	93,092
Accrued Salaries		154,146			43,966
Due to related parties		3,033			487,485
Convertible Secured Promissory Notes		7,110			-
Notes Payable - current portion		68,312			-
Total Current Liabilities		433,346			624,543
Note Payable - noncurrrent portion		13,473			-
Total liabilities		446,819			624,543
Minority Interest		312,475			324,176
Stockholders' Deficit:
Common stock, $.001 par value; 100,000,000 shares authorized;
55,544,007 at December 31, 2008 and 45,195,000 at June 30, 2008 issued and outstanding		55,544			45,195
Additional paid in capital		3,060,807			1,769,649
Accumulated Deficit		(3,388,005	)		(2,418,109	)
Total Stockholders' Deficit		(271,654	)		(603,265	)
		-
Total Liabilities and Stockholders' Deficit	$	487,640		$	345,454

See accompanying notes to consolidated financial statements.

3

GEN2MEDIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Quarter			Quarter			Six months			Six months
	ended			ended			ended			ended
	12/31/2008			12/31/2007			12/31/2008			12/31/2007
REVENUES	$	383,738		$	7,058		$	897,873		$	27,559
Cost of Sales		283,071			4,583			384,182			4,583
Gross Margin		100,667			2,475			513,691			22,976
Selling General and Adminsitrative		517,391			656,222			923,473			946,750
Depreciation and Amortization		45,788			37,435			89,209			74,117
Stock based compensation		377			-			482,606			-
Total expenses		563,556			693,657			1,495,288			1,020,867
MINORITY INTEREST IN LOSS OF SUBSIDIARY		(8,135	)		(34,560	)		(11,701	)		(49,895	)
NET LOSS		(454,754	)		(656,622	)		(969,896	)		(947,996	)
NET LOSS TO COMMON SHAREHOLDERS	$	(454,182	)	$	(656,622	)	$	(969,896	)	$	(947,996	)
BASIC AND DILUTED NET LOSS PER COMMON SHARE	$	(0.01	)	$	(0.02	)	$	(0.02	)	$	(0.02	)
WEIGHTED AVERAGE SHARES OUTSTANDING		55,182,451			43,250,556			49,142,501			42,472,778

See accompanying notes to consolidated financial statements.

4

GEN2MEDIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT/EQUITY

(UNAUDITED)

	Class A				Additional
	Common Stock				Paid-In		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance at June 30, 2008		45,195,000	$	45,195	$	1,769,649	$	(2,418,109	)	$	(603,265	)
Common stock issued for forgiveness of debt		3,624,007		3,624		333,777		-			337,401
Common stock issued for Options exercised		6,700,000		6,700		273,300		-			280,000
Common stock option compensation cost		-		-		482,606		-			482,606
Common stock allocation for convertible secured promissory notes' warrants and beneficial converstion features		-		-		195,000		-			195,000
Common stock issued for cash		25,000		25		6,475		-			6,500
Net loss		-		-		-		(969,896	)		(969,896	)
Balance at December 31, 2008		55,544,007	$	55,544	$	3,060,807	$	(3,388,005	)	$	(271,654	)

See accompanying notes to consolidated financial statements.

5

GEN2MEDIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six months ended			Six months ended
	12/31/08			12/31/07
Cash Flows from Operating Activities:
Net loss	$	(969,896	)	$	(947,996	)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation		9,094			6,400
Amortization		80,116			67,717
Common stock issued for services		-			70,000
Accretion of interest expense		7,110			-
Stock based compensation		482,606			204,315
Minority interest in loss of subsidiary		(11,701	)		(49,895	)
Net changes in:
Due to related parties		6,631			1,260
Other current assets		(5,928	)		-
Deposits		(13,652	)		-
Accrued Salaries		40,464			-
Accounts receivable		(64,710	)		-
Accounts payable and accrued expenses		107,653			2,815
Net Cash Used By Operating Activities		(332,213	)		(645,384	)
Cash Flows from Investing Activities:
Investment in website platform		-			(9,144	)
Purchase of furniture and equipment		(28,107	)		(29,541	)
Net Cash Used By Investing Activities		(28,107	)		(38,685	)
Cash Flows from Financing Activities:
Proceeds from common stock issuance		211,500			380,000
Repayments on notes payable		(7,051	)		-
Proceeds from issuance of Convertible Secured Promissionary Notes		195,000			-
Net Cash Provided By Financing Activities		399,449			380,000
Net Increase (Decrease) in Cash and Cash Equivalents		39,129			(304,069	)
Cash and Cash Equivalents, Beginning		3,079			321,497
Cash and Cash Equivalents, Ending	$	42,208		$	17,428
Supplemental cash flow information:
Non-cash operating activities:
Forgiveness of accounts payable in exchange for the exercise of options	$	75,000		$	-
Forgiveness of payroll obligation in connection with revised officer contracts		96,097			-
Non-cash investing activities:
Issuance of notes payable for website development		-			200,000
Debt assumed in connection with purchase accounting related to Media Evolutions		88,836			-
Intangible assets acquired in connection with the purchase accounting related to Media Evloutions		79,870			-
Issuance of common stock in exchange for forgiveness of employee and related party indebtedness		337,401			-

See accompanying notes to consolidated financial statements.

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NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

Gen2Media Corporation (“Gen2” or the “Company”) and its consolidated subsidiaries (E360 and Media Evolutions) is a full service digital media company.  Gen2 engages audiences on digital platforms through provision of media content either directly or through collaboration with channel partners.  Through a combination of original and acquired programming and other entertainment content, Gen2 is focused on providing content that appeals to key demographics attractive to advertisers and distributors on radio, printed news, cable television, satellite, mobile and digital media platforms, and consumer products.

Basis of Presentation

Unaudited Interim Financial Statements

The accompanying unaudited consolidated quarterly financial statements have been prepared on a basis consistent with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and pursuant to the rules of the Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying unaudited financial statements reflect all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results expected for the full year or any future period. These statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2008, as filed with the SEC on September 29, 2008 (the “2008 Annual Report”).

Use of Estimates

Preparing financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the dates presented and the reported amounts of revenues and expenses during the reporting periods presented. Significant estimates inherent in the preparation of the accompanying consolidated financial statements include estimates of revenues and related receivables expected to be collected, valuations of intangible assets and stock-based compensation. Estimates are based on past experience and other considerations reasonable under the circumstances. Actual results may differ from these estimates.

Basis of Consolidation

The accompanying consolidated financial statements include the accounts and transactions of Gen2 and its subsidiary E360 as well as Media Evolutions, Inc. (MEV).  Gen2 has a 95% interest in E360, which was acquired by Gen2 in a stock exchange.  MEV is controlled by Gen2 pursuant to a management agreement between the two companies effective July 14, 2008.  The consolidation of MEV was treated as a purchase in the quarter ended September 30, 2008.  All significant intercompany accounts and transactions are eliminated in consolidation.

Development stage enterprise

During the year ended June 30, 2008, Gen2 was considered a development enterprise.  During the quarter ended September 30, 2008, Gen2 began to realize revenues from its intended business activities.  Accordingly the company now reports as an operational organization and no longer presents the disclosures necessary for a development stage enterprise.

Reclassifications

Certain reclassifications have been made to the prior year balances to conform to the current year presentation.

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NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

Revenue is generated from advertising on E360live.com, fees and revenue sharing associated with the use of our digital media player by our channel partners, the development of micro sites for clients, production and distribution of original content, and services rendered in connection with the production of video content.  Revenue is recognized when services are rendered in accordance with the terms of the agreement provided that the collection of the associated receivable is reasonably assured and there are no remaining significant obligations.

Website Platform

Website platform includes capitalized costs incurred during the application and infrastructure development stage in accordance with EITF 00-02.  Development of the website was completed in July 2007 and has been placed in service.  Website platform has an estimated useful life of 3 years and will be amortized over 36 months on a straight-time basis.

Long-Lived Assets

The Company accounts for long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-lived assets.  This Statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset.  If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.  No impairment charges were incurred during the period ended December 31, 2008.

Minority Interest

Minority interest represents the portion of E360 not owned by Gen2.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation.  SFAS 123(R) requires companies to measure the cost of employee service received in exchange for an award of equity instruments, including stock options, based on the grant-date fair value of the award and to recognize it as compensation expense over the period the employee is required to provide service in exchange for the award, usually the vesting period.

Income Taxes

The Company follows the provisions of the Interpretations No. 48, "Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109" ("FIN 48").  FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company has not recognized a liability as a result of the implementation of FIN 48. A reconciliation of the beginning and ending amount of unrecognized tax benefits has not been provided since there is no unrecognized benefit as of the date of adoption. The Company has not recognized interest expense or penalties as a result of the implementation of FIN 48. If there were  an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax expense as the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

Deferred income taxes are recognized for the tax consequences of temporary differences between the financial reporting bases and the tax bases of the Company's assets and liabilities in accordance with SFAS No. 109, "Accounting for Income Taxes." Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to realized. Income tax expense is the tax payable or refundable for the period plus or minus change during the period in deferred tax assets and liabilities.

9

Earnings per Common share

Basic earnings per common share excludes potentially dilutive securities and is computed by dividing net earnings(loss) by the weighted average number of common shares outstanding during the period.  Fully diluted earnings per share are not displayed as the impact of including those shares would be anti-dilutive. For the quarter and six months ended December 31, 2008 and 2007 the Company had 8,036,001 and 9,000,000 potentially dilutive common shares, respectively, which were not included in the calculation of diluted loss per share.

Financial Instruments

In July 2008, the Company adopted SFAS No. 157 "Fair Value Measurements" ("SFAS No. 157") to value its financial assets and liabilities. The adoption of SFAS No. 157 did not have a significant impact on the Company's results of operations, financial positions or cash flows. SFAS No. 157 defines fair value, establishes a framework for measurings fair value as the exchange price that would be paid by an external party for an asset or liability (exit price). SFAS No. 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when fair value is calculated. Three levels of inputs may be used to measure fair value:

●  Level 1 - Active market provides quoted prices for identical assets or liabilities;

●  Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable with market data; and

●  Level 3 - Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumption that market participants would use in pricing.

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2008. The Company uses the market approach to measure fair value for its Level 1 financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial statements which include cash, trade receivables, borrowings, related party notes payable, accounts payable and accrued liabilities are valued using Level 1 inputs and are immediately available without market risk to principal. Fair values were assumed to approximate carrying values for these financial instruments since they are short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. The Company does not have other financial assets that would be characterized as Level 2 or Level 3 assets.

SFAS No. 157 is effective for non-financial assets and liabilities for the Company's fiscal year beginning July 1, 2009. The Company is currently assessing the impact of this pronouncement as it relates to non-financial assets and liabilities.

NOTE 3. RECENT ACCOUNTING STANDARDS

Statement No. 142-3

In April 2008, the FASB issued Staff Position No. 142-3, Determination of the Useful Life of Intangible Assets (“FAS 142-3”). FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB No. 142, Goodwill and Other Intangible Assets. The intent is to improve the consistency between the useful life of a recognized intangible asset under FAS 142 and the period of expected cash flows used to measure the fair value of the asset under FASB No. 141(R), Business Combinations—revised (“FAS 141(R)”), and other GAAP. FAS 142-3 will be effective for intangible assets acquired beginning July 1, 2009. Accordingly, the impact on the Company would be limited to the extent of any future acquisitions.

Statement No. 161

In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133 (“FAS 161”). FAS 161 requires entities to provide enhanced disclosures related to how an entity uses derivative instruments, how derivatives are accounted for under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, and how derivative instruments and the related hedged items impact an entity’s financial statements. FAS 161 is effective for the Company beginning in July 2009. The Company is currently assessing the effect of the disclosure requirements on the Company’s financial statements.

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Statement No. 141(R)

In December 2007, the FASB issued FAS 141(R) which provides additional guidance and standards for the acquisition method of accounting to be used for all business combinations. FAS 141(R) will be effective for all business combinations consummated beginning July 1, 2009. Accordingly, the impact on the Company would be limited to the extent of any future acquisitions.

Statement No.160

In December 2007, the FASB issued Statement No. 160, Non-Controlling Interests in Consolidated Financial Statements—an amendment of ARB No. 51  (“FAS160”).  FAS 160 establishes and provides accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. FAS 160 will be effective for the Company beginning July 1, 2009. The Company is currently assessing the potential effect of FAS 160 on the Company’s financial statements.

The recent accounting standards disclosed should be read in conjunction with the disclosures made in the Company's Annual Report on form 10-K for the fiscal year ended June 30, 2008.

NOTE 4.  ACQUISITION

On July 14, 2008, Gen2 entered in a management agreement with MEV. MEV provides production services to some of the largest names in the entertainment business. The terms of the agreement require Gen2 to manage all the business and financial operations of MEV. In exchange for these services Gen2 shall receive all revenues, profits and cash flows generated by MEV and shall pay all bills and obligations of MEV. Based on these terms, Gen 2 has control of MEV and therefore has treated this transaction as a purchase in the quarter ended September 30, 2008.

The aquisition has been accounted for in accordance with SFAS No. 141 "Business Combinations" and accordingly, the consolidated statements of operations include the results of MEV since the date of acquisition, July 14, 2008. The excess of the purchase price over the fair value of acquired assets and liabilities assumed is allocated to an intangible asset related to MEV's customer lists.

The statement of operations includes revenues and earnings incurred after the date of acquisition, July 14, 2008. On an unaudited proforma basis, had the acquisition ocurred on July 1, 2007, the results for the periods presented would have been as follows:

	Quarter ended 12/31/08			Quarter ended 12/31/07			Six months ended 12/31/08			Six months ended 12/31/07
Revenue	$	383,738		$	48,258		$	897,873		$	101,397
Net Loss		(363,782	)		(688,502	)		(878,896	)		952,223
Loss per share		.01			.02			.02			.02

There was no cash consideration paid for this acquisition. The purchase price of $79,870 was determined by taking the difference between MEV's assets of $8,966 and its debt of $88,836 as of the date of the acquisition.

NOTE 5. RELATED PARTY TRANSACTIONS

During 2008, the Company issued notes payable to three of its shareholders, to fund operations.  Amounts outstanding under these notes payable as of June 30, 2008 was $75,513.  This loan requires interest only payments, bears interest at 12%, is secured by all the assets of the Company, and personally guaranteed by the three officers of the Company.  During August 2008 these notes were satisfied through issuances of shares for $50,000 of the obligation and exercising of options for $25,000 for an aggregate of 1,000,000 shares.

As of June 30, 2008, there was an additional $411,972 in non interest bearing amounts due to related companies and certain of its officers that related to working capital needs.  During August 2008, 2,411,170 shares were issued in satisfaction of $241,117 of this obligation.  Additionally, in October, 2008, $96,097 was forgiven by certain Officers and Directors in conjunction with the execution of revised employment agreements. This amount is being amortized over the life of the employment agreements.

During July, 2008, the company entered into an agreement with MEV to provide management services.  In exchange for management of the business and financial operations, Gen2 has the right to all revenue and profit and is obligated to pay all financial obligations of MEV.  MEV is owned and operated by certain directors and officers of Gen2.

During October, 2008, Richard Brock, former Gen 2 Chief Financial Officer, exercised stock options for 1,000,000 shares for an exercise price of $75,000. The proceeds from this exercise were used to repay an outstanding related party obligation and no cash was received or disbursed by the Company.

During December, 2008, the company issued Convertible Secured Promissory Notes (See Note 7).   Of the $195,000 issued $50,000 was issued to a Director and Officer.

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NOTE 6.  NOTES PAYABLE

In connection with the management agreement entered into with MEV, Gen2 became obligated for the repayment of certain notes payable currently outstanding.  These notes consist of a term loan and a revolving line of credit. The notes are secured by a personal guarantee from Richard Brock, Ian McDaniel and Mark Argenti.  The term loan originated on September 20, 2005 with a face value of $100,000 and requires monthly payments of principal and interest over a five year period and bears interest at 6.75%.  The line of credit carries a limit of $50,000 and bears interest at 8.25%.  There was $42,238 and $39,547 outstanding at December 31, 2008 on the term loan and line of credit, respectively.

NOTE 7.  CONVERTIBLE SECURED PROMISSORY NOTES

During the quarter ended December 31, 2008, the Company issued debt instruments in the form of promissory notes (the “Notes”). The Notes carry interest at 12% and are due and payable in full at the earlier of either minimum equity financing of $1 million or one year. Interest can be received monthly or accrued and paid at maturity at the option of the holder. The Notes are secured by all assets of the Company.

The holders of the Notes have the option, but not the obligation, to convert the outstanding principal into common stock at any time under any of the following terms: A conversion price of $.25 per share; a conversion price of 30% less than price per share obtained in the next round of financing completed by the Company; a conversion price of 30% less than the price per share paid in the event of a sale of the company, or $0.13 per share in the event the Company does not raise a minimum of $1 million in additional financing.

The notes contain warrants to purchase shares valued at 20% of the face value of the note assuming a stock value of $0.25 per share and an exercise price of $0.001 per share. If the value of common stock at the time of conversion is less than $0.25, the payee shall receive additional warrants to bring the total value of warrants issued under this program to be equal to 20% of the face value of the Note. The Notes also included a beneficial conversion feature as the obligations can convert into equity for an exercise price less than the share price at the time of issuance at the option of the holder. Based on these features, the proceeds from debt were split between the value of the warrants and the debt. Further, the debt obligation must have value assigned to the beneficial conversion feature. These valuations cause the proceeds from these notes to be allocated to additional paid capital with $78,152 assigned to the value of the warrants and the remaining $116,848 assigned to the beneficial conversion feature. The face value of the debt will be accreted to interest expense over the 1-year term of the debt.

NOTE 8.  CAPITAL STOCK

The Company’s authorized capital stock consists of 100,000,000 shares of Class A common with a par value of $0.001. 55,544,007 shares were outstanding as of December 31, 2008.

The Company has effective registration with the SEC and is therefore a reporting public company.  The Company filed a form 15c2-11 with FINRA and requested permission to trade on the OTC Bulletin Board.  The Company’s stock began trading on October 3, 2008.

NOTE 9. STOCK BASED COMPENSATION

During the quarter and six months ended December 31, 2008, the company issued options for 0 and 4,300,000 shares of stock, principally in connection with the recruitment of directors and officers.  Additionally, during the six months ended December 31, 2008, the Company accelerated the vesting of options for 5,000,000 shares previously issued to certain advisors.  These options fully vested during the quarter in exchange for an agreement to exercise said options.  Based on these activities compensation cost of $377 and $482,606 was recognized in the quarter and six months ended December 31, 2008.  Unrecognized compensation cost related to unvested stock options at December 31, 2008 was $13,809 and are expected to be recognized over a weighted average period of 36 months.

	Number of Shares Outstanding Under Options			Weighted Average Exercise Price
Balance, July 1, 2007		-		$	-
Granted		10,000,001			0.04
Exercised		-			-
Balance, June 30, 2008		10,000,001			0.04
Granted		4,300,000			0.16
Exercised		(7,200,000	)		0.04
Forfeited or expired		-			-
Balance, December 31, 2008		7,100,001		$	0.12

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The weighted average fair value of options granted at market during the quarter and six months ended December 31, 2008 was $0.06 per option. The weighted average fair value of options granted at market during the quarter and six months ended December 31, 2007 was $0.02 per share. The total intrinsic value of options exercised during the quarter and six months ended December 31, 2008 and was $935,000 and $1,315,000 respectively. The aggregate intrinsic value of the outstanding options at December 31, 2008 was $5,240,000.

NOTE 10.  GOING CONCERN

The company became operational during the quarter and six months ended December 31, 2008 and exited the development stage in that period.  The Company began to realize substantial revenue in the quarter and six months ended December 31, 2008.  Through December 31, 2008 the Company has accumulated losses of $3,297,005. The Company expects to generate revenues from corporate clients and partners in the way of advertising revenue, through the delivery of the client’s content, platform and technology via the internet as well as for its production services.  The Company will either receive a fee for those services, or will share in the revenue generated from the clients and partners through use of their technology.

The Company faces all the risks common to companies in their early stages of operations including under capitalization and uncertainty of funding sources, high initial expenditure levels, uncertain revenue streams, and difficulties in managing growth.  In view of these conditions, the ability of the Company to continue as a going concern is in substantial doubt and dependent upon achieving a profitable level of operations and on the ability of the Company to obtain necessary financing to fund ongoing operations.  The Company’s financial statements do not reflect any adjustments that might result from the outcome of this uncertainty.  The future of the Company hereafter will depend in large part on the Company’s ability to monetize its investment in its technology and services, and successfully raise capital from external sources to pay for planned expenditures. The Company continues to seek other sources of financing in order to support existing operations and expand the range and scope of its business.  However, there are no assurances that any such financing can be obtained on acceptable terms, if at all.

NOTE 11.  SUBSEQUENT EVENTS

During January 2009, the Company revised the employment agreement with Jim Byrd, Chairman and CEO.  The revised terms decreased the annual salary from $350,000 to $200,000 and reduced the exercise price of his outstanding options from $0.10 to $0.05.  Additionally, the amount of accrued salary Mr. Byrd deferred during the period of his employment of $48,548 was used to exercise 970,962 options at an exercise price of $.05.

Subsequent to December 31, 2008 the Company issued additional Secured Promissory Notes in the amount of $170,000.  The proceeds from these notes were used for the deployment of sales resources, infrastructure and working capital.

13

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Gen2 is a full service provider of a proprietary digital media network and related online digital strategies for leading media and entertainment companies. Gen2 engages audiences on digital platforms through provision of media content either directly or through collaboration with channel partners.  Through a combination of original and acquired programming and other entertainment content, Gen2 is focused on providing content that appeals to key demographics attractive to advertisers and distributors or radio, printed news, cable television, satellite, mobile and digital media platforms, and consumer products.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. References in this section to "Gen2Media Corporation.," “Gen2Media,” the "Company," "we," "us," and "our" refer to Gen2Media Corporation and our direct and indirect subsidiaries on a consolidated basis unless the context indicates otherwise.

This quarterly report contains forward looking statements relating to our Company's future economic performance, plans and objectives of management for future operations, projections of revenue mix and other financial items that are based on the beliefs of, as well as assumptions made by and information currently known to, our management. The words "expects, intends, believes, anticipates, may, could, should" and similar expressions and variations thereof are intended to identify forward-looking statements. The cautionary statements set forth in this section are intended to emphasize that actual results may differ materially from those contained in any forward looking statement.

The following discussion and analysis should be read in conjunction with the consolidated financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

Overview

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing in this Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” section of this Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

RESULTS OF OPERATIONS

The consolidated results of operations are presented below for the quarter and six months ended December 31, 2008 and 2007.

	Quarter			Quarter			Six months			Six months
	ended			ended			ended			ended
	12/31/2008			12/31/2007			12/31/2008			12/31/2007
REVENUES	$	383,738		$	7,058		$	897,873		$	27,559
Cost of Sales		283,071			4,583			384,182			4,583
Operating Margin		100,667			2,475			513,691			22,976
Selling General and Adminsitrative		517,391			656,222			932,473			946,750
Depreciation and Amortization		45,788			37,435			89,209			74,117
Stock based compensation		377			-			482,606			-
Total expenses		563,556			693,657			1,495,288			1,020,867
MINORITY INTEREST IN LOSS OF SUBSIDIARY		(8,135	)		(34,560	)		(11,701	)		(49,895	)
NET LOSS	$	(454,754	)	$	(656,622	)	$	(969,896	)	$	(947,996	)

14

Revenue

Revenue increased $376,680 to $383,738 in the quarter ended December31, 2008 as compared to the quarter ended December 31, 2007.  Revenue in the quarter consisted of $46,000 in Digital Video Publishing and $330,000 from Production related activities.  Additionally, the Company began generating revenue from content distribution during the quarter.  While the amount was nominal, the initial sales in this area represent a significant milestone for the Company.   Revenue increased $870,274 to $897,873 in the six months ended December 31, 2008.  The most significant revenue during the period came from production related activities followed by digital video publishing with revenues of $568,000 and $292,000, respectively.  

Cost of Sales

During the quarter the Company incurred cost of sales in conjunction with the direct provision of services to our clients.   These expenses consist of professional support and production personnel as well as equipment to facilitate the provision of our services.  The cost of production services is highly dependent on the nature of equipment required for a given engagement.  This cost was higher for second quarter vs. first quarter production engagements.

Gross Margin

The gross margin generated by the services and technologies provided during the quarter and six months were approximately 26% and 57% respectively.  The established infrastructure and technology in place at the Company allows the provision of our products and services to the marketplace at a low cost ratio for each new client engagement allowing for a strong margin.  While that is the case in use of the Company’s digital video publisher, margins in production services are more variable as the cost structure is largely dependent on the burden of high technology equipment that is rented.  For that reason the gross margin is lower in the second quarter.

Selling General and Administrative

Selling General and Administrative costs generally consist of salaries, professional fees, office expenses and other administrative costs.  These costs decreased by $138,831 to $517,391, and $23,277 to $923,473 for the quarter and six months ended December 31, 2008, respectively.  The expenses in the quarters and six months ended December 31, 2008 were related to infrastructure and the establishment of the Company as a revenue producing entity.  The expenses in the prior years quarter and six months while related to infrastructure were heavily loaded with consulting and professional fees associated with the Company’s initial public filings.

Depreciation and Amortization

Depreciation and amortization increased by $8,353 to $45,788 and $15,428 to $89,209 in the quarter and six months ended December 31, 2008, respectively.  This increase is due to the amortization associated with the MEV intangible asset, which is being amortized over its expected useful life of 3 years.

Stock based Compensation

The expense associated with stock based compensation is due to options issued during the first quarter and previously outstanding options that fully vested and exercised during the quarter.  Options expense was minimal during the second quarter.

Net Loss  

The net loss for the quarter ended December 31, 2008 decreased by $201,868 to $454,754, while the net loss for the six months ended December 31, 2008 increased by $21,900 to $969,896.  The net loss for the quarter ended December 31, 2008 was an improvement in comparison to the prior year as the expenses in the prior year quarter related to the Company's initial public filings were more significant than the current quarter’s expenses.  The expenses in the current quarter related to establishment of infrastructure and operational implementation.  The most significant difference between the six months ended December 31, 2008 and 2007 was the incurrence of stock based compensation.

15

Liquidity and Capital Resources

The Company had a net working capital deficit of $(315,500) at December 31, 2008, an improvement of $300,964 compared to June 30, 2008. The improvement in the working capital position is largely attributable to the issuance of common stock in exchange for debt and cash produced from the exercise of certain options.

The Company has incurred losses since its inception.  The Company’s auditors have emphasized uncertainty regarding our ability to continue as a going concern in their audit reports for our year ended June 30, 2008. As shown in the accompanying financial statements, the Company realized net losses from operations of $454,182 and $969,896 for the quarter and six months ended December 31, 2008 resulting in an accumulated deficit of $3,388,005 as of December 31, 2008.

The Company intends to generate liquidity through the issuance of additional debt or equity in the capital markets before it is able to achieve operating profitability.

Other components of the Company’s working capital and changes therein are discussed as follows:

Cash Equivalents. For the six month period ended December 31, 2008, cash and cash equivalents increased to $42,208 from $3,079 at June 30, 2008. The increase in cash equivalents is primarily attributable to the exercise of stock options of $211,500 and issuance of convertible debentures of $195,000 during the six months.  This impact was offset by cash used by operating activities.

Cash Flows from Operating Activities. Net cash used by operating activities was $332,213 for the six months ended December 31, 2008, an improvement of $313,171 over the first six months of the prior year.  The change in cash flows from operating activities is primarily attributable to the generation of revenue from operations.

Cash Flows from Financing Activities. Net cash provided by financing activities was $399,449 for the six months ended December 31, 2008.  This cash was generated from the exercise of stock options and issuance of convertible debentures during the six months.

Noncash transactions.  During the six months, the Company issued Common Stock valued at $412,701 in exchange for employee and related party indebtedness.   The Company recognized debt relief through the forgiveness of accrued salaries due to certain officers and directors in connection with the revision of employment contracts.  The Company also entered into a management agreement with Media Evolutions, providing Gen2 with control over the business and operations of MEV.  The result of this transaction was to recognize an intangible asset of $79,870 and a debt obligation of $88,836.

ITEM 4T. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of  June 30, 2008. Disclosure controls and procedures are those controls and procedures designed to provide reasonable assurance that the information required to be disclosed in our Exchange Act filings is (1) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission’s rules and forms, and (2) accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2008, our disclosure controls and procedures were ineffective. This conclusion was based on the fact as of June 30, 2008, the Company did not have full time qualified accounting staff. On September 22, 2008, the Company engaged full time qualified personnel to remediate this weakness.  While this change improved internal control over transactional execution during the past quarter, the complexity of the accounting for the Convertible Secured Promissory Notes caused managements to continue to have ineffective control over financial reporting as of December 31, 2008.

16

Management’s Annual Report on Internal Control Over Financial Reporting

Management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a – 15(f).  Management conducted an assessment as of December 31, 2008 of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).  Based on that evaluation, management concluded that our internal control over financial reporting was ineffective as of December 31, 2008.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements should they occur. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the control procedure may deteriorate.

This Quarterly Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Quarterly Report. As required by SEC Rule 13a-15(b), our company carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer, of the effectiveness of its disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on this evaluation, management concluded that our disclosure controls and procedures were ineffective at the resonable assurance level.

Changes in Internal Control Over Financial Reporting

During the quarter and six months ended December 31, 2008, full time dedicated personnel were engaged for the purpose of financial management and reporting. These full time personnel were engaged near the end of the first quarter. While this change improved internal control over transactional execution for during the past quarter, the complexity of the accounting for the convertible debentures caused management to continue have ineffective control over financial reporting as of December 31, 2008.

PART II

OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

We are not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of our business. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.  

ITEM 1A. RISK FACTORS

None.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

None.

ITEM 5 - OTHER INFORMATION

None.

There were no material changes to the procedures by which security holders may recommend nominees to the registrant’s board of directors.

17

ITEM 6 - EXHIBITS

Exhibit Number	Description
31.1	Certification by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
31.2	Certification by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
32.1	Certification by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code.
32.2	Certification by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code.
10.1	Executive Employment Agreement - James S. Byrd Jr.
10.2	Executive Employment Agreement -  Thomas Moreland.
10.3	Management agreement between Gen2Media and Media Evolutions.
10.4	Amendment to Executive Employment Agreement - Mary Spio
10.5	Amendment to Executive Employment Agreement -- Mark Argenti
10.6	Amendment to Executive Employment Agreement - Ian McDaniel

18

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	GEN2MEDIA CORPORATION
DATE: February 17, 2009	By:	/s/ James Byrd
		James Byrd
		Chief Executive Officer (principal executive officer)

By:	/s/ Thomas Moreland
	Thomas Moreland
	Chief Financial Officer (Principal financial and accounting officer)

19

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, James Byrd, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Gen2Media Corporation, for the quarter ended December 31, 2008;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Dated: February 17, 2009	By:	/s/  James Byrd
		James Byrd Chief Executive Officer (principal executive officer)

EX-31.2

EXHIBIT 31.2  

CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Thomas Moreland, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Gen2Media Corporation for the quarter ended December 31, 2008;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlsover financial reporting.

Dated:   February 17, 2009	By:	/s/   Thomas Moreland
		Thomas Moreland Chief Financial Officer (principal accounting officer and principal financial officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Gen2Media Corporation (the “Company”) on Form 10-Q for the period ended December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James Byrd, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company

.

Date: February 17,  2009	By:	/s/ James Byrd
		James Byrd Chief Executive Officer (principal executive officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Gen2Media Corporation (the “Company”) on Form 10-Q for the period ended December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas Moreland, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 17, 2009	By:	/s/ Thomas Moreland
		Thomas Moreland Chief Financial Officer (principal accounting officer and principal financial officer)