10-Q

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 SEPTEMBER 30, 2009

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: (321) 293-3360

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 o	Accelerated filer o
Non-accelerated filer o	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 October 21, 2009, there were 58,457,029 outstanding shares of the Registrant's Common Stock, $.001 par value.

1

GEN2MEDIA CORPORATION

SEPTEMBER 30, 2009 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		13
Item 4T. Controls and Procedures		15
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		17
SIGNATURES		18

2

 GEN2MEDIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	September  30, 2009   (Unaudited)			June 30, 2009
Assets
Current:
Cash and cash equivalents	$	48,141		$	401
Accounts Receivable		57,014			58,576
Other Current Assets		83,507			8,007
Deferred financing costs – current portion		39,353			61,878
Total Current Assets		228,015			128,862
Furniture and Equipment:
Computer equipment		84,432			84,432
Office furniture and fixtures		32,923			26,610
		117,355			111,042
Less Accumulated depreciation		(40,944	)		(36,372	)
Net Furniture and Equipment		76,411			74,670
Intangibles, Net:
Customer list		47,595			54,250
Website platform		101,576			135,434
Patent Pending		8,754			8,754
Intangible Assets, net of accumulated amortization		157,925			198,438
Other Assets – Deposits		16,202			16,202
Deferred financing costs, non-current portion		62,467			27,582
Total Assets	$	541,020		$	445,754
Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts Payable	$	301,460		$	406,127
Accrued Salaries		292,129			234,613
Deferred revenue		15,333			28,600
Convertible secured promissory notes		408,753			257,521
Promissory Notes and Notes payable-current portion		288,351			294,845
Total Current Liabilities		1,306,026			1,221,706
Promissory Notes – non-current portion		389,000			109,678
Total Liabilities		1,695,026			1,331,384
Stockholders' (Deficit) Equity:
Common stock, $.001 par value; 100,000,000 shares authorized;
58,457,029 and 58,175,191  issued and outstanding at September and June 30, 2009, respectively		58,457			58,175
Additional paid in capital		5,097,107			4,395,036
Accumulated Deficit		(6,579,597	)		(5,627,971	)
Total Stockholders’ Deficit of Gen2Media Corporation		(1,424,033	)		(1,174,760	)
Noncontrolling Interest		270,027			289,130
Total Stockholders’ Deficit		(1,154,006	)		(885,630	)
Total Liabilities and Stockholders’ Deficit	$	541,020		$	445,754

See accompanying notes to consolidated financial statements.

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GEN2MEDIA CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

	3 Months Ended			3 Months Ended
	9/30/09			9/30/08
REVENUES	$	383,790		$	514,135
Cost of Sales		(141,010	)		(101,111	)
Operating Margin		242,780			413,024
Operating Expenses
Selling, General and Administrative		508,811			396,430
Depreciation and Amortization		45,086			43,421
Stock based compensation		438,454			482,229
Total expenses		992,351			922,080
Loss from Operations		(749,571	)		(509,056	)
Interest expense		(221,158	)		(9,625	)
NET LOSS		(970,729	)		(518,681	)
Net Loss attributable to Noncontrolling Interest		19,103			3,566
NET LOSS TO COMMON SHAREHOLDERS OF GEN2MEDIA CORPORATION	$	(951,626	)	$	(515,115	)
BASIC AND DILUTED NET LOSS PER COMMON SHARE	$	(0.02	)	$	(0.01	)
WEIGHTED AVERAGE SHARES OUTSTANDING		58,212,863			46,617,765

See accompanying notes to consolidated financial statements.

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GEN2MEDIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT/EQUITY

(UNAUDITED)

	Class A				Additional
	Common Stock				Paid-In		Accumulated			Noncontrolling
	Shares		Amount		Capital		Deficit			Interest			Total
Balance at June 30, 2009		58,175,191	$	58,175	$	4,395,036	$	(5,627,971	)	$	289,130		$	(885,630	)
Stock based compensation cost for Employees		-		-		438,454		-			-			438,454
Common stock issued for professional services		281,838		282		217,137		-			-			217,419
Warrants issued for services		-		-		46,480		-			-			46,480
Net loss attributable to noncontrolling interest											(19,103	)		(19,103	)
Net loss		-		-		-		(951,626	)		-			(951,626	)
Balance at September 30, 2009		58,457,029	$	58,457	$	5,097,107	$	(6,579,597	)	$	270,027		$	(1,154,006	)

See accompanying notes to consolidated financial statements.

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GEN2MEDIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

	3 Months Ended			3 Months Ended
	9/30/09			9/30/08
Cash Flows from Operating Activities:
Net loss	$	(951,626	)	$	(515,115	)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation		4,572			3,874
Amortization		40,513			39,547
Amortization of deferred financing costs		32,459			-
Accretion of interest expense		151,232			-
Common stock and warrants issued for services to
Nonemployees		172,980			-
Stock-based compensation		438,454			482,229
Noncontrolling interest in loss of subsidiary		(19,103	)		(3,566	)
Net changes in:
Due to related parties		-			9,207
Other current assets		(500	)		-
Accrued Salaries		57,516			4,448
Accounts receivable		1,562			(213,742	)
Accounts payable and accrued expenses		(104,667)			89,943
Deferred revenue		(13,267)			-
Net Cash Used By Operating Activities		(189,875	)		(103,175	)
Cash Flows from Investing Activities:
Purchase of furniture and equipment		(6,313	)		(5,963	)
Net Cash Used By Investing Activities		(6,313	)		(5,963	)
Cash Flows from Financing Activities:
Proceeds from common stock issuance		-			195,501
Proceeds from issuance of promissory notes		289,000			-
Incurrence of deferred financing costs		(28,900	)		-
Repayments of notes payable		(16,172	)		(5,156)
Net Cash Provided By Financing Activities		243,928			190,345
Net Increase in Cash and Cash Equivalents		47,740			81,207
Cash and Cash Equivalents, Beginning		401			3,079
Cash and Cash Equivalents, Ending	$	48,141		$	84,286
Supplemental cash flow information:
Non-cash financing activities:
Deferred financing costs incurred		15,191			-
Non-cash investing and financing activities:		-			-
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 Evolutions		-			79,870
Issuance of common stock in exchange for forgiveness of employee and related party indebtedness.		-			337,401
Other disclosures:
Interest Paid		25,019			3,403

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, LLC (E360) and Media Evolutions (MEV) 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.  Gen2 supports its ability to create original programming through its professional production studio and its proprietary digital playback system.  Gen2’s production capabilities include in-house production of content, creation and support of video imagery for top line names in the entertainment business, and support of video production for traditional media.  Gen2 also provides its software under licensing arrangements whereby Gen2 receives a monthly subscription fee for use of its software.

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, 2009, as filed with the SEC on September 28, 2009 (the “2009 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 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.

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 Gen2Media’s network of websites, which includes 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 is being 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 September 30, 2009 and 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.

8

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 quarters ended September 30, 2009 and 2008 the Company had 9,135,427 and 8,300,001 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 September 30, 2009. 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

On June 12, 2009 the FASB issued two statements that amended the guidance for off-balance-sheet accounting of financial instruments: SFAS No. 166, Accounting for Transfers of Financial Assets, and SFAS No. 167, Amendments to FASB Interpretation No. 46(R). SFAS No. 166 revises SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” and will require entities to provide more information about sales of securitized financial assets and similar transactions, particularly if the seller retains some risk to the assets, the FASB said. The statement eliminates the concept of a qualifying special-purpose entity, changes the requirements for the derecognizing of financial assets, and calls upon sellers of the assets to make additional disclosures about them.

SFAS No. 167 amends FASB Interpretation (FIN) No. 46(R), Consolidation of Variable Interest Entities, by altering how a company determines when an entity that is insufficiently capitalized or not controlled through voting should be consolidated, the FASB said. A company has to determine whether it should provide consolidated reporting of an entity based upon the entity's purpose and design and the parent company's ability to direct the entity's actions.  SFAS Nos. 166 and 167 will be effective at the start of the first fiscal year beginning after November 15, 2009. We do not expect SFAS Nos. 166 or 167 to have a material impact on the Company’s financial position and results of operations.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162 (“SFAS No. 168”). SFAS No. 168 replaces SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles and establishes the FASB Accounting Standards Codification™ (“Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with GAAP. All existing accounting standard documents are superseded by the Codification and any accounting literature not included in the Codification will not be authoritative. However, rules and interpretive releases of the SEC issued under the authority of federal securities laws will continue to be sources of authoritative GAAP for SEC registrants. SFAS No. 168 is effective for interim and annual reporting periods ending after September 15, 2009. Therefore, beginning with the Company’s quarter ending September 30, 2009, all references made by it to GAAP in its financial statements will use the new Codification numbering system. The Codification does not change or alter existing GAAP and, therefore, does not have a material impact on the Company’s financial position and results of operations.

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In May 2009, the FASB issued SFAS 165, Subsequent Events. SFAS 165 should not result in significant changes in the subsequent events that an entity reports. Rather, SFAS 165 introduces the concept of financial statements being available to be issued. Financial statements are considered available to be issued when they are complete in a form and format that complies with generally accepted accounting principles (GAAP) and all approvals necessary for issuance have been obtained.  We do not expect the adoption of SFAS 165 to have a material impact on our financial position, results of operations, or financial disclosure.

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, 2009.

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 acquisition 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 occurred on July 1, 2008, the results for the periods presented would have been identical to those presented in the Consolidated Financial Statements, as there were no transactions during the period from July 1, 2008 to the date of acquisition, July 14, 2008.

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.  $75,513 was outstanding under these notes payable as of June 30, 2008.  This loan required interest only payments, bore interest at 12%, was 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.  

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 was owned and operated by certain directors and officers of Gen2.

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 originally consisted of a term loan and a 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 maturing on September 20, 2010 and bears interest at 6.75%.  On June 30, 2009, MEV agreed to convert the outstanding balance on the line of credit to a term loan and repay it over a 15 month period maturing on September 20, 2010 with an interest rate of 6.5%.  There was $55,681 outstanding at September 30, 2009 on these notes.

NOTE 7.  CONVERTIBLE SECURED PROMISSORY NOTES

During the year ended June 30, 2009, 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.

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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 $248,953 assigned to the value of the warrants and the remaining $351,047 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.  During the quarter ended September 30, 2009, $151,232 was accreted to interest.

NOTE 8.   PROMISSORY NOTES

During the year ended June 30, 2009 and the quarter ended September 30, 2009,  the Company issued debt instruments in the form of promissory notes with a face value of $620,500 (the “ Promissory Notes”) and bear interest at 12%. These Promissory Notes were issued in two traunches.  Traunch I has a face value of $231,500 and is due and payable one year from issuance.  Traunch I was issued during the fourth quarter of the year ended June 30, 2009, and therefore is due during the quarter ending June 30, 2010.  Traunch II has a face value of $389,000 and is due and payable on December 31, 2010.  Interest is paid monthly.

NOTE 9.  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. 58,457,029 shares were outstanding as of September 30, 2009.

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 10. STOCK BASED COMPENSATION

During the quarter ended September 30, 2009, the company issued options and warrants for 3,050,000 shares of common stock, principally in connection with the recruitment of directors and officers.  Additionally, during the quarter ended September 30, 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 $438,454 and $482,229 was recognized in the quarters ended September 30, 2009 and 2008, respectively.  Unrecognized compensation cost related to unvested stock options and warrants at September 30, 2009 was $433,684 and are expected to be recognized over a weighted average period of 29 months.

	Number of Shares Outstanding Under Options and Warrants		Weighted Average Exercise Price
Balance, June30, 2008		10,000,001	$	0.08
Granted		5,500,000		0.14
Exercised		(9,220,962)		0.09
Balance, June 30, 2009		6,279,039		0.14
Granted		4,300,000		0.38
Exercised		-		-
Forfeited or expired		(193,612)		0.21
Balance, September 30, 2009		9,135,427	$	0.21

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The weighted average fair value of options granted at market during the quarters ended September 30, 2009 and 2008 was $0.21 and $0.06, respectively. The weighted average fair value of options and warrants granted at market during the quarters ended September 30, 2009 and 2008 was $0.38 and $0.02, respectively. The total intrinsic value of options exercised during the quarters ended September 30, 2009 and 2008 and was $0 and $380,000, respectively. The aggregate intrinsic value of the outstanding options at September 30, 2009 was $2,107,708.

NOTE 11.  GOING CONCERN

The company became operational during the year ended June 30, 2009.  Through September 30, 2009, the Company has accumulated losses of $6,579,597. 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 its 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 12.  INCOME TAXES

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes resulting from temporary differences. Such temporary differences result from differences in the carrying value of assets and liabilities for tax and financial reporting purposes. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The components of deferred tax assets are as follows:

	9/30/09			6/30/09
Accumulated Net loss	$	6,579,597		$	5,577,222
Valuation allowance		(6,579,597	)		(5,577,222	)
Net deferred tax assets	$	–		$	-

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

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

THREE MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2008.  Our fiscal year runs from July 1 to June 30.

Revenue

Revenue decreased $130,345 to $383,790 in the quarter ended September 30, 2009 as compared to 2008.  While revenue in aggregate declined, the mix of revenue saw a demonstrable shift toward ongoing recurring revenue generated by the Company’s ad supported network of websites from one time custom engagements experienced in the prior year.

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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 bandwidth to serve advertising on the Gen2 Network of websites, and professional support and production personnel as well as equipment to facilitate the provision of our production services.  Cost of sales increase by $39,899 to $141,010 in the quarter ended September 30, 2009 as compared to 2008.  The increase was due to a greater need for hardware and personnel beyond the Company’s established infrastructure in the current year.

Operating Margin

The operating margin generated by the services and technologies provided during the quarter ended September 30, 2009 decreased by $170,244 to $242,780 in comparison to the quarter ended September 30, 2008.  The operating margin on the services and technologies produced a 63% margin.  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 or advertising campaign allowing for a strong margin.  The decrease in operating margin in comparison to the prior year was due to the nature and complexity of client services delivered in the current year.  There was a greater need for hardware and personnel beyond the Company’s established infrastructure in the current year.  

Selling General and Administrative

Selling General and Administrative costs generally consist of salaries, professional fees, office expenses and other administrative costs.  These costs increased by $112,381 to $508,811 for the quarter ended September 30, 2009.  This increase includes a growth in noncash charges related to investor relations expenses of $172,980 partially offset by a reduction in professional fees of approximately $126,000 related to the Company’s cost of going public in the prior year.  The remaining growth is for improved infrastrucute in personnel including additional officers and supporting staff.

Stock based Compensation

Stock based compensation decreased by $43,775 to $438,454.  The expense associated with stock based compensation in the current and prior year quarter is due to stock awards for certain officers whereas the prior year expense also included previously outstanding options that fully vested during that quarter in exchange for the agreement to exercise said options.

Interest expense

Interest expense increased by $211,533 to $221,158.  The increase is due to the additional indebtedness incurred by the Company over the past year.  The most significant portion of interest expense is noncash and relates to the recognition of interest expense associated with the Secured Convertible Promissory Notes which amounted to $151,232 during the quarter ended September 30, 2009.

Net Loss

The net loss for the quarter ended September 30, 2008 increased by $436,511 to $951,626.  The increase over the prior year was due primarily to lower operating margin of $170,244, increased selling general and administrative costs of $112,381 and increased interest expense of $211,533.

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Liquidity and Capital Resources

The Company had net working capital of $(1,077,782) at September 30, 2009, an improvement of $15,062 compared to June 30, 2009.  The Company issued debt of $289,000 to fund working capital needs in the quarter ended September 30, 2009.

The Company has incurred losses since its inception.  The Company’s auditor has emphasized uncertainty regarding our ability to continue as a going concern in his audit report for the year ended June 30, 2009. As shown in the accompanying financial statements, the Company realized net losses from operations of $951,626 for the quarter ended September 30, 2008 resulting in an accumulated deficit of $6,579,597 as of September 30, 2009.

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

Cash and Cash Equivalents. For the three month period ended September 30, 2009, cash and cash equivalents increased to $48,141 from $401 at June 30, 2009. The increase in cash equivalents is primarily attributable to the issuance of $289,000 in additional indebtedness offset by cash used in operating activities.

Cash Flows from Operating Activities. Net cash used by operating activities was $189,875 for the three months ended September 30, 2009, a decline of $86,700 over the first quarter of the prior year.  The change in cash flows from operating activities is primarily attributable to the reduction of accounts payable and accrued expenses.

Cash Flows from Financing Activities. Net cash provided by financing activities was $243,928 for the three months ended September 30, 2009.  This cash was generated from the issuance of additional indebtedness in the form of notes payable.

Noncash transactions.  During the quarter, the Company issued Common Stock and Warrants valued at $263,899 in exchange for professional services.  The Company also incurred noncash interest expense of $151,232  related to its Secured Convertible Promissory Notes.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

N/A.

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, 2009. 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 September 30, 2009, our disclosure controls and procedures were ineffective due to the lack of segregation of duties and the lack of audit committee oversight. Upon the acquisition of adequate capital the Company intends to remediate the deficiencies through the deployment of additional personnel and implementation of an audit committee.

15

Management’s Quarterly 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 September 30, 2009 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 September 30, 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

None.

16

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.

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.

17

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: October 22, 2009	By:	/s/ Mark Argenti
		Mark Argenti
		Chief Executive Officer (principal executive officer)

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

18

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Mark Argenti, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Gen2Media Corporation, for the three months ended September 30, 2009;

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: October 22, 2009	By:	/s/  Mark Argenti
		Mark Argenti 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 three months ended September 30, 2009;

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 controls over financial reporting.

Dated:   October 22, 2009	By:	/s/   Thomas Moreland
		Thomas Moreland Chief Financial Officer and Treasurer (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 SEPTEMBER 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark Argenti, 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: October 22,  2009	By:	/s/ Mark Argenti
		Mark Argenti 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 SEPTEMBER 30, 2009 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: October 22, 2009	By:	/s/ Thomas Moreland
		Thomas Moreland Chief Financial Officer and Treasurer (principal accounting officer and principal financial officer)