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GEX MANAGEMENT, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021
TABLE OF CONTENTS
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which we filed with the SEC on April 15, 2021 (“Annual Report”), as updated in subsequent filings we have made with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.
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GEX MANAGEMENT, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
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GEX Management, Inc.
Condensed Consolidated Balance Sheets
June 30, 2021 | December 31, 2020 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and Cash Equivalents | $ | $ | ||||||
Accounts Receivable, net | ||||||||
Other Current Assets | ||||||||
Total Current Assets | ||||||||
Other Assets | ||||||||
TOTAL ASSETS | $ | $ | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||
Current Liabilities: | ||||||||
Accounts Payable | $ | $ | ||||||
Accrued Expenses and Other Current Liabilities | $ | |||||||
Accrued Interest Payable | ||||||||
Notes Payable Current Portion | ||||||||
Total Current Liabilities | ||||||||
Line of Credit | ||||||||
Total Long Term Liabilities | ||||||||
TOTAL LIABILITIES | ||||||||
SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||
Common Stock | and shares issued and Outstanding as June 30, 2021 and December 31, 2020, respectively||||||||
Additional Paid In Capital | ||||||||
Retained Deficit | ( | ) | ( | ) | ||||
TOTAL SHAREHOLDERS’ EQUITY (DEFICIT) | ( | ) | ( | ) | ||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) |
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GEX Management, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |||||||||||||
June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||||||||||
Revenues | $ | $ | $ | $ | ||||||||||||
Cost of Revenues | ||||||||||||||||
Gross Profit (Loss) | ||||||||||||||||
Operating Expenses Depreciation and Amortization | ||||||||||||||||
General and Administrative | ||||||||||||||||
Total Operating Expenses | ||||||||||||||||
Total Operating Income (Loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Other Income (Expense) | - | - | - | |||||||||||||
Derivative Gain (Loss) | - | - | - | ( | ) | |||||||||||
Income from Other (Expenses) | - | - | ( | ) | - | |||||||||||
Interest Income(Expenses) | ( | ) | - | ( | ) | |||||||||||
Net Other Income (Expense) | ( | ) | ( | ) | ||||||||||||
Net income (loss) before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Provision for income taxes | - | - | - | - | ||||||||||||
Net Income Attributable to Non Controlling Interest | - | - | - | - | ||||||||||||
NET INCOME (LOSS) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
BASIC and DILUTED | ||||||||||||||||
Weighted Average Shares Outstanding | ||||||||||||||||
Earnings (loss) per Share | ( | ) | ( | ) | $ | ( | ) | $ | ( | ) |
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GEX Management, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended | Six Months Ended | |||||||
June 30, 2021 | June 30, 2020 | |||||||
Cash Flows (used by) Operating Activities: | ||||||||
Net Loss | $ | ( | ) | ( | ) | |||
Adjustments to reconcile net loss to net cash (used in) operating activities: | ||||||||
Depreciation and Amortization | ||||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | - | |||||||
Other current assets/liabilities | ( | ) | ||||||
Other Assets/Liabilities | ( | ) | ( | ) | ||||
Accounts Payable | ||||||||
Accrued expenses and other payables | - | |||||||
Accrued interest payable | - | |||||||
Net cash (used in) operating activities | ( | ) | ||||||
Cash Flows from (used in) Investing Activities: | ||||||||
Net cash (used in) Investing Activities: | - | - | ||||||
Cash Flows from (used in) Financing Activities: | ||||||||
Proceeds from common stock/ APIC | ||||||||
Proceeds/Payments from notes payable | - | ( | ) | |||||
Payments/Proceeds from short term notes payable (net) | - | |||||||
Net cash provided by financing activities | - | |||||||
NET INCREASE (DECREASE) IN CASH | ||||||||
CASH AT BEGINNING OF PERIOD | ||||||||
CASH AT END OF PERIOD |
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GEX Management, Inc.
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2020 and 2019
(Unaudited)
NOTE 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of Business
GEX Management, Inc. was originally formed in 2004 as Group Excellence Management, LLC. d/b/a MyEasyHQ. In March of 2016, it was converted from a limited liability company into a C corporation and changed its name to GEX Management, Inc.
GEX Management initially began operations as a Professional Services Company providing back office support to third-party clients. In 2016 GEX Management revised its business model to provide staffing and back-office services to a wide variety of industries in order to expand the Company’s footprint, thereby building on the previous 12-year history of exceptional client service. Over the next few years, GEX Management experienced tremendous growth in sales and customer pipeline - staffing business grew by over 1600%+ from 2016 to 2017 with the firm being named among the “fastest growing public companies in the North Texas region” by the Dallas Morning News, while also significantly expanding its client footprints across multiple staffing, business consulting and PEO opportunities.
In 2019, the current management of GEX set strategic goals to revise the business model to expand into areas of higher margin and growth particularly in the area of Technology and Strategy Consulting Services. As a result of management efforts, GEX Management was invited in February 2019 to be a Preferred Supplier to Insight Global (www.insightglobal.com), one of the world’s largest Managed Service Providers (MSPs) to Fortune 100 Companies in the Enterprise Technology Consulting space. The first consultant that GEX hired through this Preferred Supplier initiative was successfully placed at a large PA based financial services firm to provide Business and Quality Analysis professional services to the client. Subsequently, GEX placed its second enterprise consultant at the world’s leading Fortune 100 CRM Company at its headquarters in San Francisco and subsequently several more highly skilled Enterprise Technology Consultants at leading Fortune 500 retail, healthcare, manufacturing and technology clients across the country . As a direct result of the high market demand for experienced technology consultants via its multiple supplier programs, the GEX team has interviewed and is in the process of procuring 45 highly experienced enterprise technology consultants with expertise across a wide array of functions (Enterprise Architects, Project Managers, Systems Integration Developers, Quality Assurance Specialists and Business Systems Analysts) who have been identified for various short to long term projects. Additionally, GEX plans to hire and place more than 100 enterprise consultants over the next 18 - 24 month period to satisfy its growing pipeline of future contracts. As a result of these market initiatives, GEX forecasts to potentially achieve approximately $20- $25M in gross billings over the next 18-24 month period, assuming all projected contracts are fully placed on projects that have been currently identified by the GEX supplier program pipeline and businesses begin to re-open globally as the pandemic related restrictions are removed.
In Q4 2019, GEX signed a contract with one of the fastest growing, VC backed social video platform to provide key corporate and strategy consulting services – an initiative that the CEO was personally involved with in developing and growing the strategic business relationship over the last two years. This contract has resulted in enormous growth opportunities for GEX and is expected to significantly expand growth in future periods as well. GEX has also signed additional contracts to provide interim “CFO” and “CEO” consulting services to various high growth public and private companies, resulting in doubling of sales within a year and achieving an astounding double digit expansion in gross margins despite the pandemic related recessionary business environment. Furthermore, GEX is in talks with multiple companies to identify synergistic acquisition opportunities to fuel organic and inorganic growth and fulfil the corporate objective of becoming a top tier business and technology focused firm while also developing a long term and sustainable technology centric business model. Management expects these growth initiatives to help the firm eventually achieve strong and stable revenue growth while also achieving sustainable long term profitability by targeting a higher margin, lower cost model and relying on less expensive debt instruments to help reduce the burden across the firm’s capital structure.
In
addition to these planned strategic growth initiatives which had started to build momentum in 2019 and are expected to gain significant
traction in 2021 and beyond, management has been focusing on materially improving its balance sheet by significantly reducing or eliminating
the debt or debt like instruments related to convertible notes and asset related liens introduced in 2018 while simultaneously exploring
opportunities to reduce or eliminate the high interest MCA related toxic debt instruments that resulted in significant interest expenses
to the company and a burden to operating capital. As part of this balance sheet “clean-up” initiative, on February 8 2019,
GEXM and the G&C Family LLC executed a “Deed in Lieu of Foreclosure” agreement the terms of which would allow GEXM to
release ownership of the Arkansas building under AMAST LLC to the G&C Family Group, LLC in return for cancellation of the $
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Material Definitive Agreements
No Material Agreements have been executed by the Company during this reporting period.
Basis of Presentation
Our financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”), as well as the applicable regulations and rules of the Securities and Exchange Commission (“SEC”). This requires management to make estimates and assumptions that affect the amounts reported in the financial statements and their accompanying notes. The actual results could differ from those estimates.
The accompanying interim, unaudited consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K, filed with the SEC on May 14, 2020. All adjustments necessary for a fair statement of the results for the interim periods have been made. All adjustments are of a normal and recurring nature.
Principles of Consolidation
The consolidated financial statements include the accounts of GEX Management, Inc. and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.
There have been no significant changes to our accounting policies that have a material impact on our financial statements and accompanying notes.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks and short-term investments with original maturities of three months or less.
Accounts Receivable
Accounts receivable consists of accrued services and consulting receivables due from customers and are unsecured. The receivables are generally due within 30 to 45 days after the date of the invoice. Accounts receivable is carried at their face amount, less an allowance for doubtful accounts. GEX’s policy is not to charge interest on receivables after the invoice becomes past due. Write-offs are recorded at the time when a customer receivable is deemed uncollectible.
Property and Equipment
Property and Equipment, net is carried at the cost of purchase, acquisition or construction, and is depreciated over the estimated useful lives of the assets. Assets acquired in a business combination are stated at estimated fair value. Costs associated with repair and maintenance are expensed as they are incurred. Costs associated with improvements which extend the life, increase the capacity or improve the efficiency of our property and equipment are capitalized and depreciated over the remaining life of the related asset. Depreciation and amortization are provided using the straight-line methods over the useful lives of the assets as follows:
Useful Life | ||
Buildings | ||
Office Furniture & Equipment |
Impairment of Long-Lived Assets
The Company records an impairment of long-lived assets used in operations, other than goodwill, and its equity method investments when events or circumstances indicate that the asset might be impaired and the estimated undiscounted cash flows to be generated by those assets over their remaining lives are less than the carrying amount of those items. The net carrying value of assets not recoverable is reduced to fair value, which is typically calculated using the discounted cash flow method.
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Revenue Recognition
Effective on January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 outlines a single, comprehensive revenue recognition model for revenue derived from contracts with customers and it supersedes the prior revenue recognition guidance, including prior guidance that is industry-specific. Under ASU No. 2014-09, an entity recognizes revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. The Company adopted ASU No. 2014-09 using the modified retrospective method, which applies to only the most current period presented in the financial statements. There were no significant changes to the Company’s existing revenue recognition policies as a result of adopting ASU 2014-09.
GEX enters into contracts with its clients for professional services. GEX’s contract stipulates the rate and price charged to each client. GEX’s contracts for these services are generally cancellable at any time by either party with 30-days’ written notice. GEX fulfills its performance obligations each month, and the contracts generally have a term of one year with an automatic renewal after 12 months. The duration between invoicing and when GEX completes its contractual, performance obligations are satisfied is not significant. For staffing and professional services payment is generally due 30 days after the invoice is sent to the client. GEX does not have significant financing components or significant payment terms.
Staffing Services and Professional Services
Staffing services revenue is derived from supplying temporary staff to clients. Temporary staff generally consists of temporary workers working under a contract for a fixed period of time, or on a specific client project. The temporary staff includes both GEX employees and third-parties contracted by GEX.
Temporary staff are provided to clients through a Staffing Service Agreement (‘SSA’) involving a specified service that the temporary staff will provide to the client. When GEX is the principal or primary obligor for the temporary staff, GEX records the gross amount of the revenue and expense from the SSA.
GEX is generally the primary obligor when GEX is responsible for the fulfilment of services under the SSA, even if the temporary staff are not employees of GEX. This typically occurs when GEX contracts third-parties to fulfil all or part of the SSA with the client, but GEX remains the holder of the credit risk associated with the SSA, and GEX has total discretion in establishing the pricing under the SSA.
All other Professional Services revenues are recognized in the period the services are performed as stipulated in the client’s Outsourcing Agreement, when the client is invoiced, and collectability is reasonably assured. Revenue recognition for arrangements with multiple deliverables constituting a single unit of accounting is recognized generally over the greater of the term of the arrangement or the expected period of performance.
Income Taxes
The Company uses the liability method in the computation of income tax expense and the current and deferred income taxes payable. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Fair Value Measurements
ASC Topic 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and requires certain disclosures about fair value measurements. In general, fair value of financial instruments is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s credit worthiness, among other things, as well as unobservable parameters.
Earnings
per share are calculated in accordance with ASC 260 “Earnings per Share”. Basic income (loss) per share is computed by dividing
the period income (loss) available to common shareholders by the weighted average number of common shares outstanding. Diluted earnings
(loss) per share is computed by dividing the income (loss) available to common share-holders by the weighted average number of common
shares outstanding plus additional common shares that would have been outstanding if dilutive potential common shares had been issued.
For purposes of this calculation, common stock dividends, warrants and options to acquire common stock, would be considered common stock
equivalents in periods in which they have a dilutive effect and are excluded from this calculation in periods in which these are anti-dilutive
to the net loss per share.
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Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation. Such reclassifications have had no effect on the financial position as of December 31, 2020 or operations or cash flows for the periods ended June 30, 2021.
Going Concern
To date, the Company has funded its operations primarily through public and private offerings of common stock, our line of credit, short- term discounted and convertible notes payable. The Company has identified several potential financing sources in order to raise the capital necessary to fund operations through December 31, 2020.
In addition to the aforementioned current sources of capital that will provide additional short-term liquidity, the Company is currently exploring various other alternatives including debt and equity financing vehicles, strategic partnerships, government programs that may be available to the Company, as well as trying to generate additional sales and increase margins. However, at this time the Company has no commitments to obtain any additional funds, and there can be no assurance such funds will be available on acceptable terms or at all. If the Company is unable to obtain additional funding and improve its operations, the Company’s financial condition and results of operations may be materially adversely affected and the Company may not be able to continue operations, which raises substantial doubt about its ability to continue as a going concern. Additionally, even if the Company raises sufficient capital through additional equity or debt financing, strategic alternatives or otherwise, there can be no assurances that the revenue or capital infusion will be sufficient to enable it to develop its business to a level where it will be profitable or generate positive cash flow. If the Company raises additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. If the Company incurs additional debt, a substantial portion of its operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, thus limiting funds available for business activities. The terms of any debt securities issued could also impose significant restrictions on the Company’s operations. Broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance, and may adversely impact our ability to raise additional funds. Similarly, if the Company’s common stock is delisted from the public exchange markets, it may limit its ability to raise additional funds.
The
consolidated financial statements for the six months ended June 30, 2021 were prepared on the basis of a going concern which contemplates
that the Company will be able to realize assets and discharge liabilities in the normal course of business. Accordingly, they do not
give effect to adjustments that would be necessary should the Company be required to liquidate its assets. The ability of the Company
to meet its total liabilities of $
In addition, at this time we cannot predict the impact of COVID-19 on our ability to obtain financing necessary for the Company to fund its working capital requirements. Also, it may hamper our efforts to comply with our filing obligations with the Securities and Exchange Commission.
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NOTE 2. OTHER CURRENT ASSETS
At
June 30, 2021 and December 31, 2020, Other Current Assets were $
At
June 30, 2021 and December 31, 2020, Other Assets were $
NOTE 3. STOCKHOLDERS’ EQUITY
General
The
Company filed Form S-1 with the Securities & Exchange Commission and it was declared effective on November 14, 2016 under which the
Company sold
The
Company issued
On
May 15, 2017, GEX entered into a Conversion Agreement with two consultants that had a $
On
June 7, 2017, GEX entered into a Debt Conversion Agreement with the Company that purchased the Line of Credit Promissory Note from the
Company’s Chief Executive Officer. Under the terms and conditions of the Debt Conversion Agreement GEX issued
On
June 20, 2017, GEX entered into a Stock Purchase Agreement (“SPA”) with a third-party investor. Under the terms and conditions
of the SPA, GEX issued
On
June 20, 2017, GEX entered into an Advisory Agreement with a third-party advisory firm. Under the terms and conditions of the Advisory
Agreement, GEX paid a non-refundable retainer in the amount of $
On
July 20, 2017, GEX entered into a Stock Purchase Agreement with a third-party investor. Under the terms and conditions of the SPA, GEX
issued
On
September 20, 2017, GEX entered into Stock Purchase Agreements with two advisory board members. Under the terms and conditions of the
SPA’s, GEX issued
On
October 18, 2017, GEX entered into a Stock Purchase Agreements with one advisory board member. Under the terms and conditions of the
SPA, GEX issued
On October 31, 2017 GEX entered into a Lease Agreement for office space in Fayetteville, Arkansas for shares of its common stock, restricted pursuant to Rule 144 of the Securities Act of 1933, as amended.
On December 29, 2017 GEX entered into a SPA with a shareholder. Under the terms of the SPA, GEX issued shares of its common stock for a total of $ .
On
December 29, 2017 the Company acquired a
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During the twelve-month periods ended December 31, 2018, 2019 and 2020 and six month period ended June 30 2021 respectively, the Company issued the following unregistered securities. The issuance of securities in connection with these transactions was exempt from registration under Section 4(a)(2) and/or Rule 506 of Regulation D as promulgated by the Securities and Exchange Commission (the “SEC”) under of the Securities Act of 1933, as amended (the Securities Act”), as transactions by an issuer not involving a public offering.
On July 9, 2018, the Company issued shares of common stock at no cost basis for consulting services. On July 19, 2018, the Company issued shares of common stock at no cost basis for consulting services. On July 25, 2018, the Company issued shares of common stock at no cost basis for consulting services. On July 30, 2018, the Company issued shares of common stock at no cost basis for consulting services. On August 2, 2018, the Company issued shares of common stock at no cost basis in connection with issuance of a convertible note payable as a commitment fee. On August 7, 2018, the Company issued shares of common stock at no cost basis for consulting services. On August 27, 2018, the Company issued shares of common stock at no cost basis for consulting services. On September 10, 2018, the Company issued shares of common stock at no cost basis for consulting services. On September 14, 2018, the Company issued shares of common stock at no cost basis for consulting services. On September 25, 2018, the Company issued shares of common stock at no cost basis for consulting services. On September 26, 2018, the Company issued shares of common stock at no cost basis related to a real property purchase acquisition transaction. On January 16, 2019, the Company issued shares of common stock related to a convertible note conversion. On January 21, 2019, the Company issued shares of common stock related to a convertible note conversion. On January 29, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 13, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 13, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 14, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 19, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 20, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 20, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 21, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 22, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 22, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 22, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 25, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 25, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 26, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 26, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 27, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 28, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 28, 2019, the Company issued shares of common stock related to a convertible note conversion. In March 2019, the Company issued a total of shares of common stock related to a convertible note conversion. In April 2019, the Company issued a total of shares of common stock related to convertible note conversions. In May 2019, the Company issued a total of shares of common stock related to convertible note conversions. In June 2019, the Company issued a total of shares of common stock related to convertible note conversions. In July 2019, the Company issued a total of shares of common stock related to convertible note conversions. In August 2019, the Company issued a total of shares of common stock related to convertible note conversions. On September 21, 2020, the Company issued shares of common stock related to a convertible note conversion. On September 23, 2020, the Company issued shares of common stock related to a convertible note conversion. On September 24, 2020, the Company issued shares of common stock related to a convertible note conversion. On September 25, 2020, the Company issued shares of common stock related to a convertible note conversion. On September 29, 2020, the Company issued shares of common stock related to a convertible note conversion. On October 6, 2020, the Company issued shares of common stock related to a convertible note conversion. On October 16, 2020, the Company issued shares of common stock related to a convertible note conversion. On November 2, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 3, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 8, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 10, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 10, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 14, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 15, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 17, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 21, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 15, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 24, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 24, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 28, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 29, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 30, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 31, 2020, the Company issued shares of common stock related to a convertible note conversion. In January 2021, the Company issued a total of shares of common stock related to a convertible note conversions. In February 2021, the Company issued a total of shares of common stock related to a convertible note conversions. In March 2021, the Company issued a total of shares of common stock related to a convertible note conversions. In April 2021, the Company issued a total of shares of common stock related to convertible notes. In May 2021, the Company issued a total of shares of common stock related to convertible notes. In June 2021, the Company issued a total of shares of common stock related to convertible notes.
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NOTE 4. NOTES PAYABLE
On
April 26, 2018, the Company entered into two Securities Purchase Agreements, pursuant to which the Company issued Convertible Promissory
Notes (“the Notes”) with principal amounts totalling up to $
On
April 26, 2018, the Company entered into two Securities Purchase Agreements, pursuant to which the Company issued Convertible
Promissory Notes (“the Notes”) with principal amounts totaling up to $
On
April 26, 2018, the Company entered into a convertible note payable for $146,681 bearing interest at 10% per annum. All principal and
interest is due on April 26, 2019. On August 1, 2018, the Company entered into a convertible note payable for $
On
August 8, 2018, the Company entered into a convertible note payable for $
14 |
NOTE 5. ACCOUNTS RECEIVABLE AND CONCENTRATION OF CREDIT RISK
As
of June 30, 2021, the company had $
NOTE 6. PROPERTY AND EQUIPMENT
The Company did not own significantly material fixed assets as of June 30, 2021
NOTE 7. RELATED PARTY TRANSACTIONS
Policy on Related Party Transactions
The Company has a formal, written policy that includes procedures intended to ensure compliance with the related party provisions in common practice for public companies. For purposes of the policy, a “related party transaction” is a transaction in which the Company participates and in which a related party (including all of GEX’s directors and executive officers) has a direct or indirect material interest. Any transaction exceeding the 1% threshold, and any transaction involving consulting, financial advisory, legal or accounting services that could impair a director’s independence, must be approved by the Board of Directors. Any related party transaction in which an executive officer or a Director has a personal interest, must be approved by the Board of Directors, following appropriate disclosure of all material aspects of the transaction.
Related Party Transactions
The Company did not have any related party transactions during this reporting period.
Revenues
For
the three months ended June 30, 2021 and 2020, the Company had
NOTE 8: COMMITMENTS AND CONTINGENCIES
The Company did not have any material contingent obligations during this reporting period.
NOTE 9. ACQUISITIONS AND DIVESTITURES
The Company has not been involved in any material acquisition or divestiture activity during the reporting period.
NOTE 10 – SUBSEQUENT EVENTS
As disclosed in the Company’s Form 8-K filed on July 27, 2021, the Company reported that: (i) Sri Vanamali transitioned from the role of CEO and CFO to the role of President; (ii) Joseph Frontiere was appointed CEO and CFO effective July 27, 2021.
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ITEM 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion of our financial condition and results of operations in conjunction with our financial statements and the related notes included elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2020.
Forward-Looking Statements
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “would” and similar expressions or variations intended to identify forward- looking statements. These statements are not guarantees of future performance, but are based on management’s expectations as of the date of this report and assumptions that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements. All information provided in this report is as of the date of this report and the Company undertakes no duty to update this information except as required by law.
General
GEX Management, Inc., a Texas corporation (the “Company,” “GEX,” “we,” “our,” “us,” and words of similar import) is a Staffing and Professional Services Company that provides services and general business consulting to companies for a variety of their staffing needs. We generate substantially all of our revenue from the staffing and other professional services we offer. These professional services, in addition to staffing, include: Strategy and technology consulting, accounting and bookkeeping, human resources and business consultation and optimization.
Results of Operations
The three months ended June 30, 2021 compared to the three months ended June 30, 2020 Revenue
Our revenue for the three months ended June 30, 2021 was $384,352 compared to $107,880 for the three months ended June 30, 2020. Our revenue for the six months ended June 30, 2021 was $588,115 compared to $162,178 for the three months ended June 30, 2020 This strong increase in year over year sales is attributable to a significant expansion in client footprints, aggressive business development efforts and a focus on higher end management and technology consulting business expansion and growth opportunities.
Operating Expense
Total operating expenses for the three months ended June 30, 2021 was $494,186 compared to the operating cost for the three months ended June 30, 2020 of $152,891. This increase in operating expenses was primarily due to the business development initiatives by the current management.
Liquidity and Capital Resources
The Company has identified several potential financing sources in order to raise the capital necessary to fund operations through December 31, 2021. Management believes that it has been historically difficult for minority and women owned businesses to get access to reasonably price capital at scale which creates an opportunity to invest into these companies and receive a greater than average return for our shareholders. However, the opportunity to make a significant return for our investors is so overwhelmingly compelling that management had in the past taken short term working capital loans against future receivables in order to timely fund the growth of the company. Management intends to move away from these expensive debt like obligations and rely on other traditional and non- traditional debt instruments primarily in the form of convertible notes as well as explore various other alternatives including debt and equity financing vehicles, strategic partnerships, government programs that may be available to the Company, as well as trying to generate additional sales and increase margins. However, at this time the Company has no commitments to obtain any additional funds, and there can be no assurance such funds will be available on acceptable terms or at all. If the Company is unable to obtain additional funding, the Company’s financial condition and results of operations may be materially adversely affected and the Company may not be able to continue operations.
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Additionally, even if the Company raises sufficient capital through additional equity or debt financing, strategic alternatives or otherwise, there can be no assurances that the revenue or capital infusion will be sufficient to enable it to develop its business to a level where it will be profitable or generate positive cash flow. If the Company incurs additional debt, a substantial portion of its operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, thus limiting funds available for business activities. The terms of any debt securities issued could also impose significant restrictions on the Company’s operations. Broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance, and may adversely impact our ability to raise additional funds. Similarly, if the Company’s common stock is delisted from the public exchange markets, it may limit its ability to raise additional funds.
In addition, at this time we cannot predict the impact of COVID-19 on our ability to obtain financing necessary for the Company to fund its working capital requirements.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet financing arrangements and have not formed any special purpose entities. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.
Contractual Obligations
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Management is responsible for establishing and maintaining adequate disclosure controls and procedures as defined in Rules 13a-15 (e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to management, including our Interim Chief Executive Officer / Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our management, under the supervision and with the participation of our Chief Executive Officer / Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based upon this assessment, we determined that as of the end of period covered by this quarterly report on Form 10-Q our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There has been no changes in our internal control procedures over financial reporting identified in connection with the evaluation we conducted of the effectiveness of our internal control over financial reporting as of June 30, 2021, that occurred during our first quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We have not been served with any lawsuit or received official notice on legal proceedings to which we are a party or of which any of our property is the subject nor are we subject to any material proceedings that are contemplated by any governmental authority at this time.
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
In connection with the Merchant Cash Advances, the company has occasionally defaulted on making certain daily interest payments as a result of lack of immediate access to capital to fulfill short term payment obligations related to these MCAs. As a result of these defaults in timely payments, Confession of Judgements have been filed by some of these MCAs in the New York district courts and GEX is currently in the process of negotiating settlement terms on monies owed to these parties. As a result of the highly irregular and unregulated nature of the Merchant Cash Advance industry, current management has taken the decision to move away from these cash advance opportunities introduced by the prior finance teams and will, going forward, solely rely on more traditional and regulated sources of financing available within the investment and regulated capital markets. Additionally, current management has determined it to be necessary to cease active business discussions with MCAs and proceed with settlement discussions to reduce or eliminate the monies owed to the MCAs and related parties in a timely manner. The management is also in the process of hiring a legal team to contest some of these Confession of Judgements which the management believes were incorrectly filed by the MCAs. The potential inability of the Company to satisfy these MCA obligations or settle in a timely manner could result in a significant impact on the financial and operational health of the company which could also potentially result in the company pursuing Chapter 11 bankruptcy and /or similar legal avenues if it is not able to settle these outstanding MCA obligations in a timely manner. While the management team has already begun these settlement conversations and is hopeful of reaching a resolution in a timely manner, there can be no guarantee that such a settlement will be reached any time soon.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None
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ITEM 6. EXHIBITS
In reviewing the agreements included as exhibits to this Quarterly Report, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:
● | should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; |
● | have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; |
● | may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and |
● | were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. |
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Form 10-Q and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.
The following exhibits are included as part of this report:
SEC | ||||
Report | ||||
Exhibit | Reference | |||
No. | No. | Description | ||
31.1/31.2 | * | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
32.1/32.2 | * | Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
101.INS | * | Inline XBRL Instance Document | ||
101.SCH | * | Inline XBRL Taxonomy Extension Schema Document | ||
101.CAL | * | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF | * | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB | * | Inline XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE | * | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||
104 | * | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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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.
GEX MANAGEMENT, INC. | ||
Dated: August 23, 2021 | By: | /s/ Joseph Frontiere |
Name: | Joseph Frontiere | |
Title: | Chief Executive Officer and Chief Financial Officer |
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EXHIBIT 31.1/31.2
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT AND RULE 13A-14(A)
OR 15D-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Joseph Frontiere, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of GEX Management, Inc. |
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. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control 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 my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me 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 my 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 my 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; and | |
(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; and |
5. | I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 23, 2021 | /s/ Joseph Frontiere |
Joseph Frontiere | |
Chief Executive Officer and Chief Financial Officer |
EXHIBIT 32.1/32.2
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 on Form 10-Q of GEX Management, Inc. (the “Company”), for the quarter ended June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph Frontiere, Chief Executive Officer, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 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. |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Date: August 23, 2021 | By: | /s/ Joseph Frontiere |
Name: | Joseph Frontiere | |
Title: | Chief Executive Officer and Chief Financial Officer |
Condensed Consolidated Balance Sheets (Parenthetical) - shares |
Jun. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common Stock, Shares Issued | 46,475,924 | 3,163,044 |
Common Stock, Shares Outstanding | 46,475,924 | 3,163,044 |
Condensed Consolidated Statements of Operations (Unaudited - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Income Statement [Abstract] | ||||
Revenues | $ 384,352 | $ 107,880 | $ 588,115 | $ 162,178 |
Cost of Revenues | 66,059 | 23,185 | 71,263 | 24,635 |
Gross Profit (Loss) | 318,293 | 84,695 | 516,852 | 137,543 |
Operating Expenses Depreciation and Amortization | 52,750 | 52,750 | 105,500 | 105,500 |
General and Administrative | 441,436 | 100,141 | 830,597 | 175,842 |
Total Operating Expenses | 494,186 | 152,891 | 936,097 | 281,342 |
Total Operating Income (Loss) | (175,893) | (68,196) | (419,245) | (143,799) |
Other Income (Expense) | 5,000 | |||
Derivative Gain (Loss) | (105,777) | |||
Income from Other (Expenses) | (14,356) | |||
Interest Income(Expenses) | (6,595) | (121,449) | 29,279 | |
Net Other Income (Expense) | (6,595) | 5,000 | (135,805) | 76,527 |
Net income (loss) before income taxes | (182,487) | (63,196) | (555,050) | (67,271) |
Provision for income taxes | ||||
Net Income Attributable to Non Controlling Interest | ||||
NET INCOME (LOSS) | $ (182,487) | $ (63,196) | $ (555,050) | $ (67,271) |
BASIC and DILUTED | ||||
Weighted Average Shares Outstanding | 63,010,410 | 621,937 | 63,010,410 | 621,937 |
Earnings (loss) per Share | $ (0.0029) | $ (0.102) | $ (0.0088) | $ (0.574) |
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES |
6 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | ||||||||||
Accounting Policies [Abstract] | ||||||||||
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | NOTE 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of Business
GEX Management, Inc. was originally formed in 2004 as Group Excellence Management, LLC. d/b/a MyEasyHQ. In March of 2016, it was converted from a limited liability company into a C corporation and changed its name to GEX Management, Inc.
GEX Management initially began operations as a Professional Services Company providing back office support to third-party clients. In 2016 GEX Management revised its business model to provide staffing and back-office services to a wide variety of industries in order to expand the Company’s footprint, thereby building on the previous 12-year history of exceptional client service. Over the next few years, GEX Management experienced tremendous growth in sales and customer pipeline - staffing business grew by over 1600%+ from 2016 to 2017 with the firm being named among the “fastest growing public companies in the North Texas region” by the Dallas Morning News, while also significantly expanding its client footprints across multiple staffing, business consulting and PEO opportunities.
In 2019, the current management of GEX set strategic goals to revise the business model to expand into areas of higher margin and growth particularly in the area of Technology and Strategy Consulting Services. As a result of management efforts, GEX Management was invited in February 2019 to be a Preferred Supplier to Insight Global (www.insightglobal.com), one of the world’s largest Managed Service Providers (MSPs) to Fortune 100 Companies in the Enterprise Technology Consulting space. The first consultant that GEX hired through this Preferred Supplier initiative was successfully placed at a large PA based financial services firm to provide Business and Quality Analysis professional services to the client. Subsequently, GEX placed its second enterprise consultant at the world’s leading Fortune 100 CRM Company at its headquarters in San Francisco and subsequently several more highly skilled Enterprise Technology Consultants at leading Fortune 500 retail, healthcare, manufacturing and technology clients across the country . As a direct result of the high market demand for experienced technology consultants via its multiple supplier programs, the GEX team has interviewed and is in the process of procuring 45 highly experienced enterprise technology consultants with expertise across a wide array of functions (Enterprise Architects, Project Managers, Systems Integration Developers, Quality Assurance Specialists and Business Systems Analysts) who have been identified for various short to long term projects. Additionally, GEX plans to hire and place more than 100 enterprise consultants over the next 18 - 24 month period to satisfy its growing pipeline of future contracts. As a result of these market initiatives, GEX forecasts to potentially achieve approximately $20- $25M in gross billings over the next 18-24 month period, assuming all projected contracts are fully placed on projects that have been currently identified by the GEX supplier program pipeline and businesses begin to re-open globally as the pandemic related restrictions are removed.
In Q4 2019, GEX signed a contract with one of the fastest growing, VC backed social video platform to provide key corporate and strategy consulting services – an initiative that the CEO was personally involved with in developing and growing the strategic business relationship over the last two years. This contract has resulted in enormous growth opportunities for GEX and is expected to significantly expand growth in future periods as well. GEX has also signed additional contracts to provide interim “CFO” and “CEO” consulting services to various high growth public and private companies, resulting in doubling of sales within a year and achieving an astounding double digit expansion in gross margins despite the pandemic related recessionary business environment. Furthermore, GEX is in talks with multiple companies to identify synergistic acquisition opportunities to fuel organic and inorganic growth and fulfil the corporate objective of becoming a top tier business and technology focused firm while also developing a long term and sustainable technology centric business model. Management expects these growth initiatives to help the firm eventually achieve strong and stable revenue growth while also achieving sustainable long term profitability by targeting a higher margin, lower cost model and relying on less expensive debt instruments to help reduce the burden across the firm’s capital structure.
In addition to these planned strategic growth initiatives which had started to build momentum in 2019 and are expected to gain significant traction in 2021 and beyond, management has been focusing on materially improving its balance sheet by significantly reducing or eliminating the debt or debt like instruments related to convertible notes and asset related liens introduced in 2018 while simultaneously exploring opportunities to reduce or eliminate the high interest MCA related toxic debt instruments that resulted in significant interest expenses to the company and a burden to operating capital. As part of this balance sheet “clean-up” initiative, on February 8 2019, GEXM and the G&C Family LLC executed a “Deed in Lieu of Foreclosure” agreement the terms of which would allow GEXM to release ownership of the Arkansas building under AMAST LLC to the G&C Family Group, LLC in return for cancellation of the $1,300,000 real estate lien note secured by the building along with any and all accrued interest payable on the note as of the date of the agreement. Additionally, on March 5, 2019, one of GEX’s promissory note holders proceeded to execute its rights to enforce the liens on the Setco property through a foreclosure process which resulted in the note holder taking possession of the Setco property resulting in the elimination of a $500,000 note and any accrued interest on the principal amount and the elimination of $1,125,000 Setco real estate lien note made to Setco along with any accrued interests from the Company books. Furthermore, GEX has been able to significantly reduce the overall debt and debt like instruments on the balance sheet through strategic conversions of convertible notes to common equity initiated by the convertible note issuers throughout 2019 and 2020 and settlement or elimination of certain MCA and debt like instruments. This focus on balance sheet cleanup and to stay significantly “asset-lite” is expected to achieve material results by Q4 2021, at which point GEX would be primed for its next phase of strategic growth initiatives by deploying equity and non-toxic debt instruments towards organic and inorganic opportunities. Finally, management believes that the material elimination of MCA and related debt like instruments will be a critical first step prior to rebuilding a robust revenue pipeline as this will require strong working capital and favorable leverage covenants to sustain operations in the long term as well as reduce liabilities related to attachment to future receivables. While management efforts to settle these instruments are aggressively underway, the inability or failure by the firm to completely address any toxic debt instruments could result in management pursuing a restructuring program or similar initiatives to bring the balance sheet within reasonable covenant parameters to allow the firm to continue operating efficiently in the coming years without exposing future customers to significant business risks associated with these toxic instruments. As part of this long term strategy, management has already begin putting processes in place to protect the company via a robust internal restructuring program and will be announcing the outcome of these intra-company restructuring efforts that will protect the interests of investors and shareholders alike over the long term and also streamline the corporate structure to be synergistic with the management’s long term vision for the company.
Material Definitive Agreements
No Material Agreements have been executed by the Company during this reporting period.
Basis of Presentation
Our financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”), as well as the applicable regulations and rules of the Securities and Exchange Commission (“SEC”). This requires management to make estimates and assumptions that affect the amounts reported in the financial statements and their accompanying notes. The actual results could differ from those estimates.
The accompanying interim, unaudited consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K, filed with the SEC on May 14, 2020. All adjustments necessary for a fair statement of the results for the interim periods have been made. All adjustments are of a normal and recurring nature.
Principles of Consolidation
The consolidated financial statements include the accounts of GEX Management, Inc. and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.
There have been no significant changes to our accounting policies that have a material impact on our financial statements and accompanying notes.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks and short-term investments with original maturities of three months or less.
Accounts Receivable
Accounts receivable consists of accrued services and consulting receivables due from customers and are unsecured. The receivables are generally due within 30 to 45 days after the date of the invoice. Accounts receivable is carried at their face amount, less an allowance for doubtful accounts. GEX’s policy is not to charge interest on receivables after the invoice becomes past due. Write-offs are recorded at the time when a customer receivable is deemed uncollectible.
Property and Equipment
Property and Equipment, net is carried at the cost of purchase, acquisition or construction, and is depreciated over the estimated useful lives of the assets. Assets acquired in a business combination are stated at estimated fair value. Costs associated with repair and maintenance are expensed as they are incurred. Costs associated with improvements which extend the life, increase the capacity or improve the efficiency of our property and equipment are capitalized and depreciated over the remaining life of the related asset. Depreciation and amortization are provided using the straight-line methods over the useful lives of the assets as follows:
Impairment of Long-Lived Assets
The Company records an impairment of long-lived assets used in operations, other than goodwill, and its equity method investments when events or circumstances indicate that the asset might be impaired and the estimated undiscounted cash flows to be generated by those assets over their remaining lives are less than the carrying amount of those items. The net carrying value of assets not recoverable is reduced to fair value, which is typically calculated using the discounted cash flow method.
Revenue Recognition
Effective on January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 outlines a single, comprehensive revenue recognition model for revenue derived from contracts with customers and it supersedes the prior revenue recognition guidance, including prior guidance that is industry-specific. Under ASU No. 2014-09, an entity recognizes revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. The Company adopted ASU No. 2014-09 using the modified retrospective method, which applies to only the most current period presented in the financial statements. There were no significant changes to the Company’s existing revenue recognition policies as a result of adopting ASU 2014-09.
GEX enters into contracts with its clients for professional services. GEX’s contract stipulates the rate and price charged to each client. GEX’s contracts for these services are generally cancellable at any time by either party with 30-days’ written notice. GEX fulfills its performance obligations each month, and the contracts generally have a term of one year with an automatic renewal after 12 months. The duration between invoicing and when GEX completes its contractual, performance obligations are satisfied is not significant. For staffing and professional services payment is generally due 30 days after the invoice is sent to the client. GEX does not have significant financing components or significant payment terms.
Staffing Services and Professional Services
Staffing services revenue is derived from supplying temporary staff to clients. Temporary staff generally consists of temporary workers working under a contract for a fixed period of time, or on a specific client project. The temporary staff includes both GEX employees and third-parties contracted by GEX.
Temporary staff are provided to clients through a Staffing Service Agreement (‘SSA’) involving a specified service that the temporary staff will provide to the client. When GEX is the principal or primary obligor for the temporary staff, GEX records the gross amount of the revenue and expense from the SSA.
GEX is generally the primary obligor when GEX is responsible for the fulfilment of services under the SSA, even if the temporary staff are not employees of GEX. This typically occurs when GEX contracts third-parties to fulfil all or part of the SSA with the client, but GEX remains the holder of the credit risk associated with the SSA, and GEX has total discretion in establishing the pricing under the SSA.
All other Professional Services revenues are recognized in the period the services are performed as stipulated in the client’s Outsourcing Agreement, when the client is invoiced, and collectability is reasonably assured. Revenue recognition for arrangements with multiple deliverables constituting a single unit of accounting is recognized generally over the greater of the term of the arrangement or the expected period of performance.
Income Taxes
The Company uses the liability method in the computation of income tax expense and the current and deferred income taxes payable. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Fair Value Measurements
ASC Topic 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and requires certain disclosures about fair value measurements. In general, fair value of financial instruments is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s credit worthiness, among other things, as well as unobservable parameters.
Earnings per share are calculated in accordance with ASC 260 “Earnings per Share”. Basic income (loss) per share is computed by dividing the period income (loss) available to common shareholders by the weighted average number of common shares outstanding. Diluted earnings (loss) per share is computed by dividing the income (loss) available to common share-holders by the weighted average number of common shares outstanding plus additional common shares that would have been outstanding if dilutive potential common shares had been issued. For purposes of this calculation, common stock dividends, warrants and options to acquire common stock, would be considered common stock equivalents in periods in which they have a dilutive effect and are excluded from this calculation in periods in which these are anti-dilutive to the net loss per share. Earnings per share information for the three months ended June 30, 2021 has been retroactively adjusted to reflect the stock split that occurred in December 2017 and the 1 for 10,000 reverse stock split in May 2020.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation. Such reclassifications have had no effect on the financial position as of December 31, 2020 or operations or cash flows for the periods ended June 30, 2021.
Going Concern
To date, the Company has funded its operations primarily through public and private offerings of common stock, our line of credit, short- term discounted and convertible notes payable. The Company has identified several potential financing sources in order to raise the capital necessary to fund operations through December 31, 2020.
In addition to the aforementioned current sources of capital that will provide additional short-term liquidity, the Company is currently exploring various other alternatives including debt and equity financing vehicles, strategic partnerships, government programs that may be available to the Company, as well as trying to generate additional sales and increase margins. However, at this time the Company has no commitments to obtain any additional funds, and there can be no assurance such funds will be available on acceptable terms or at all. If the Company is unable to obtain additional funding and improve its operations, the Company’s financial condition and results of operations may be materially adversely affected and the Company may not be able to continue operations, which raises substantial doubt about its ability to continue as a going concern. Additionally, even if the Company raises sufficient capital through additional equity or debt financing, strategic alternatives or otherwise, there can be no assurances that the revenue or capital infusion will be sufficient to enable it to develop its business to a level where it will be profitable or generate positive cash flow. If the Company raises additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. If the Company incurs additional debt, a substantial portion of its operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, thus limiting funds available for business activities. The terms of any debt securities issued could also impose significant restrictions on the Company’s operations. Broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance, and may adversely impact our ability to raise additional funds. Similarly, if the Company’s common stock is delisted from the public exchange markets, it may limit its ability to raise additional funds.
The consolidated financial statements for the six months ended June 30, 2021 were prepared on the basis of a going concern which contemplates that the Company will be able to realize assets and discharge liabilities in the normal course of business. Accordingly, they do not give effect to adjustments that would be necessary should the Company be required to liquidate its assets. The ability of the Company to meet its total liabilities of $5,045,870 and to continue as a going concern is dependent upon the availability of future funding, continued growth in billings and sales contracts, and the Company’s ability to profitably meet its after-sale service commitments with its existing customers. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
In addition, at this time we cannot predict the impact of COVID-19 on our ability to obtain financing necessary for the Company to fund its working capital requirements. Also, it may hamper our efforts to comply with our filing obligations with the Securities and Exchange Commission.
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OTHER CURRENT ASSETS |
6 Months Ended |
---|---|
Jun. 30, 2021 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
OTHER CURRENT ASSETS | NOTE 2. OTHER CURRENT ASSETS
At June 30, 2021 and December 31, 2020, Other Current Assets were $114,132 and $107,289 respectively. Current Assets primarily comprised of Debt Fees and Debt Discounts related to Debt and Debt like instruments.
At June 30, 2021 and December 31, 2020, Other Assets were $3,026,045 and $3,131,545 respectively. Other Assets primarily comprised of long-term Consulting Contracts that had been capitalized on the Balance Sheet and Amortized over their lives over a period of 3-5 years depending on the length of the specific contract.
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STOCKHOLDERS’ EQUITY |
6 Months Ended |
---|---|
Jun. 30, 2021 | |
Equity [Abstract] | |
STOCKHOLDERS’ EQUITY | NOTE 3. STOCKHOLDERS’ EQUITY
General
The Company filed Form S-1 with the Securities & Exchange Commission and it was declared effective on November 14, 2016 under which the Company sold 282,089 in the first quarter under this registration statement. The Company effected a 4 for 3 stock split in December 2017. All transaction have been adjusted to reflect this split. shares for $
The Company issued 74,750 during 2017. shares for services for a total of $
On May 15, 2017, GEX entered into a Conversion Agreement with two consultants that had a $45,000 balance with the Company. In accordance with the terms and conditions of the Conversion Agreement, GEX issued a total of 40,000 shares of the Company’s common stock, at a cost basis of $ per share. The two consultants were issued shares each of the total shares issued by the Company.
On June 7, 2017, GEX entered into a Debt Conversion Agreement with the Company that purchased the Line of Credit Promissory Note from the Company’s Chief Executive Officer. Under the terms and conditions of the Debt Conversion Agreement GEX issued 345,745 in debt and accrued interest owed by GEX under the Line of Credit as of the date of the Debt Conversion Agreement. The shares were valued at $ per share. GEX recorded a gain on extinguishment of debt in the amount of $172,872. shares of its common stock, for the extinguishment of $
On June 20, 2017, GEX entered into a Stock Purchase Agreement (“SPA”) with a third-party investor. Under the terms and conditions of the SPA, GEX issued 120,000. shares of its common stock, for a total of $
On June 20, 2017, GEX entered into an Advisory Agreement with a third-party advisory firm. Under the terms and conditions of the Advisory Agreement, GEX paid a non-refundable retainer in the amount of $24,750 through the issuance of shares of the Company’s common stock.
On July 20, 2017, GEX entered into a Stock Purchase Agreement with a third-party investor. Under the terms and conditions of the SPA, GEX issued 80,000. shares of its common stock restricted pursuant to Rule 144 of the Securities Act of 1933 for a total of $
On September 20, 2017, GEX entered into Stock Purchase Agreements with two advisory board members. Under the terms and conditions of the SPA’s, GEX issued 32,000. shares of its common stock, for a total of $
On October 18, 2017, GEX entered into a Stock Purchase Agreements with one advisory board member. Under the terms and conditions of the SPA, GEX issued 13,000. shares of its common stock restricted pursuant to Rule 144 of the Securities Act of 1933, as amended, for a total of $
On October 31, 2017 GEX entered into a Lease Agreement for office space in Fayetteville, Arkansas for shares of its common stock, restricted pursuant to Rule 144 of the Securities Act of 1933, as amended.
On December 29, 2017 GEX entered into a SPA with a shareholder. Under the terms of the SPA, GEX issued shares of its common stock for a total of $ .
On December 29, 2017 the Company acquired a 12,223 square foot, multi-use office building in Lowell, Arkansas through the purchase of 100% of the member interest in AMAST Consulting, LLC for shares of the Company’s common stock and assumption of the outstanding mortgage.
During the twelve-month periods ended December 31, 2018, 2019 and 2020 and six month period ended June 30 2021 respectively, the Company issued the following unregistered securities. The issuance of securities in connection with these transactions was exempt from registration under Section 4(a)(2) and/or Rule 506 of Regulation D as promulgated by the Securities and Exchange Commission (the “SEC”) under of the Securities Act of 1933, as amended (the Securities Act”), as transactions by an issuer not involving a public offering.
On July 9, 2018, the Company issued shares of common stock at no cost basis for consulting services. On July 19, 2018, the Company issued shares of common stock at no cost basis for consulting services. On July 25, 2018, the Company issued shares of common stock at no cost basis for consulting services. On July 30, 2018, the Company issued shares of common stock at no cost basis for consulting services. On August 2, 2018, the Company issued shares of common stock at no cost basis in connection with issuance of a convertible note payable as a commitment fee. On August 7, 2018, the Company issued shares of common stock at no cost basis for consulting services. On August 27, 2018, the Company issued shares of common stock at no cost basis for consulting services. On September 10, 2018, the Company issued shares of common stock at no cost basis for consulting services. On September 14, 2018, the Company issued shares of common stock at no cost basis for consulting services. On September 25, 2018, the Company issued shares of common stock at no cost basis for consulting services. On September 26, 2018, the Company issued shares of common stock at no cost basis related to a real property purchase acquisition transaction. On January 16, 2019, the Company issued shares of common stock related to a convertible note conversion. On January 21, 2019, the Company issued shares of common stock related to a convertible note conversion. On January 29, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 13, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 13, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 14, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 19, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 20, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 20, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 21, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 22, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 22, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 22, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 25, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 25, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 26, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 26, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 27, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 28, 2019, the Company issued shares of common stock related to a convertible note conversion. On February 28, 2019, the Company issued shares of common stock related to a convertible note conversion. In March 2019, the Company issued a total of shares of common stock related to a convertible note conversion. In April 2019, the Company issued a total of shares of common stock related to convertible note conversions. In May 2019, the Company issued a total of shares of common stock related to convertible note conversions. In June 2019, the Company issued a total of shares of common stock related to convertible note conversions. In July 2019, the Company issued a total of shares of common stock related to convertible note conversions. In August 2019, the Company issued a total of shares of common stock related to convertible note conversions. On September 21, 2020, the Company issued shares of common stock related to a convertible note conversion. On September 23, 2020, the Company issued shares of common stock related to a convertible note conversion. On September 24, 2020, the Company issued shares of common stock related to a convertible note conversion. On September 25, 2020, the Company issued shares of common stock related to a convertible note conversion. On September 29, 2020, the Company issued shares of common stock related to a convertible note conversion. On October 6, 2020, the Company issued shares of common stock related to a convertible note conversion. On October 16, 2020, the Company issued shares of common stock related to a convertible note conversion. On November 2, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 3, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 8, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 10, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 10, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 14, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 15, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 17, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 21, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 15, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 24, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 24, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 28, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 29, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 30, 2020, the Company issued shares of common stock related to a convertible note conversion. On December 31, 2020, the Company issued shares of common stock related to a convertible note conversion. In January 2021, the Company issued a total of shares of common stock related to a convertible note conversions. In February 2021, the Company issued a total of shares of common stock related to a convertible note conversions. In March 2021, the Company issued a total of shares of common stock related to a convertible note conversions. In April 2021, the Company issued a total of shares of common stock related to convertible notes. In May 2021, the Company issued a total of shares of common stock related to convertible notes. In June 2021, the Company issued a total of shares of common stock related to convertible notes.
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NOTES PAYABLE |
6 Months Ended |
---|---|
Jun. 30, 2021 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE | NOTE 4. NOTES PAYABLE
On April 26, 2018, the Company entered into two Securities Purchase Agreements, pursuant to which the Company issued Convertible Promissory Notes (“the Notes”) with principal amounts totalling up to $1,000,000, bearing interest at 10% per annum. The total amounts of the Notes that can be funded (consideration that can be loaned to the Company) is up to $887,500, after discounts of $112,500 prorated over the term of the Notes. Amounts borrowed by the Company mature in twelve months after the date of funding and can be prepaid up to six months after issuance subject to prepayment penalties and approval by the Note holders. Any amounts outstanding on the Notes can be converted into Common Stock at a conversion price of $2.50 per share for the first six months and at a discount of up to 50% thereafter to the then current market value of the Company’s stock commencing six months after issuance. Conversion is at the sole discretion of the holders of the Notes. In May 2018, the Company borrowed $200,000 under the Notes, and received $175,000 after giving effect to discounts of 10% for each note and origination fees. The Company incurred a total of $5,000 related to origination fees on the Notes. Additionally, the Company issued 50,000 warrant shares for debt issuance costs at an exercise price of $4.00 per share. The warrants are exercisable for five years and had a fair market value of $31,852 on the date of issuance. The Notes bear interest at 10% per annum. On April 26, 2018, the Company entered into a convertible note payable for $146,681 bearing interest at 10% per annum.
On April 26, 2018, the Company entered into two Securities Purchase Agreements, pursuant to which the Company issued Convertible Promissory Notes (“the Notes”) with principal amounts totaling up to $1,000,000, bearing interest at 10% per annum. The total amounts of the Notes that can be funded (consideration that can be loaned to the Company) is up to $887,500, after discounts of $112,500 prorated over the term of the Notes. Amounts borrowed by the Company mature in twelve months after the date of funding and can be prepaid up to six months after issuance subject to prepayment penalties and approval by the Note holders. Any amounts outstanding on the Notes can be converted into Common Stock at a conversion price of $2.50 per share for the first six months and at a discount of up to 50% thereafter to the then current market value of the Company’s stock commencing six months after issuance. Conversion is at the sole discretion of the holders of the Notes. In May 2018, the Company borrowed $200,000 under the Notes, and received $175,000 after giving effect to discounts of 10% for each note and origination fees. The Company incurred a total of $5,000 related to origination fees on the Notes. Additionally, the Company issued 50,000 warrant shares for debt issuance costs at an exercise price of $4.00 per share. The warrants are exercisable for five years and had a fair market value of $31,852 on the date of issuance. The Notes bear interest at 10% per annum. On April 26, 2018, the Company entered into a convertible note payable for $146,681 bearing interest at 10% per annum. All principal and interest is due on April 26, 2019.
On April 26, 2018, the Company entered into a convertible note payable for $146,681 bearing interest at 10% per annum. All principal and interest is due on April 26, 2019. On August 1, 2018, the Company entered into a convertible note payable for $226,000 bearing interest at 12% per annum. All principal and interest is due on January 27, 2019.
On August 8, 2018, the Company entered into a convertible note payable for $85,000 bearing interest at 10% per annum. All principal and interest is due on August 8, 2019. On August 14, 2018, the Company entered into a convertible note payable for $250,000 bearing interest at 10% per annum. All principal and interest is due on May 6, 2019. On August 24, 2018, the Company entered into a convertible note payable for $85,000 bearing interest at 10% per annum. All principal and interest is due on August 24, 2019. On August 29, 2018, the Company entered into a convertible note payable for $112,750 bearing interest at 10% per annum. All principal and interest is due on August 29, 2019. On January 18 2019, the Company entered into a convertible note payable for $226,000 bearing interest at 12% per annum. All principal and interest is due on July 18, 2019. On February 15, 2019, the Company entered into a convertible note payable for $43,000 bearing interest at 10% per annum. All principal and interest is due on February 15, 2020. On April 16, 2019, the Company entered into a convertible note payable for $38,000 bearing interest at 10% per annum. All principal and interest is due on April 16, 2020. On March 25, 2019, the Company entered into a convertible note payable for $50,000 bearing interest at 12% per annum. All principal and interest is due on March 25, 2020. On September 27, 2019, the Company entered into a convertible note payable for $45,000 bearing interest at 10% per annum. All principal and interest is due on March 27, 2020. On October 12, 2019, the Company entered into a convertible note payable for $100,000 bearing interest at 10% per annum. All principal and interest is due on October 12, 2020. On February 8, 2021, the Company entered into a convertible note payable for $53,500 bearing interest at 10% per annum. All principal and interest is due on February 8, 2022. On March 19, 2021, the Company entered into a convertible note payable for $38,500 bearing interest at 10% per annum. All principal and interest is due on March 19, 2022. On April 20, 2021, the Company entered into a convertible note payable for $43,750 bearing interest at 10% per annum. All principal and interest is due on April 20, 2022. On June 9, 2021, the Company entered into a convertible note payable for $43,750 bearing interest at 10% per annum. All principal and interest is due on June 9, 2022. On June 9, 2021, the Company entered into a convertible note payable for $88,000 bearing interest at 12% per annum. All principal and interest is due on June 9, 2022. On June 25, 2021, the Company entered into a convertible note payable for $110,000 bearing interest at 12% per annum. All principal and interest is due on June 25, 2022.
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ACCOUNTS RECEIVABLE AND CONCENTRATION OF CREDIT RISK |
6 Months Ended |
---|---|
Jun. 30, 2021 | |
Receivables [Abstract] | |
ACCOUNTS RECEIVABLE AND CONCENTRATION OF CREDIT RISK | NOTE 5. ACCOUNTS RECEIVABLE AND CONCENTRATION OF CREDIT RISK
As of June 30, 2021, the company had $99,020 outstanding accounts receivable balance with its customers. As of December 31, 2020, the company had $211,222 outstanding accounts receivable balance with its customers.
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PROPERTY AND EQUIPMENT |
6 Months Ended |
---|---|
Jun. 30, 2021 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 6. PROPERTY AND EQUIPMENT
The Company did not own significantly material fixed assets as of June 30, 2021
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RELATED PARTY TRANSACTIONS |
6 Months Ended |
---|---|
Jun. 30, 2021 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 7. RELATED PARTY TRANSACTIONS
Policy on Related Party Transactions
The Company has a formal, written policy that includes procedures intended to ensure compliance with the related party provisions in common practice for public companies. For purposes of the policy, a “related party transaction” is a transaction in which the Company participates and in which a related party (including all of GEX’s directors and executive officers) has a direct or indirect material interest. Any transaction exceeding the 1% threshold, and any transaction involving consulting, financial advisory, legal or accounting services that could impair a director’s independence, must be approved by the Board of Directors. Any related party transaction in which an executive officer or a Director has a personal interest, must be approved by the Board of Directors, following appropriate disclosure of all material aspects of the transaction.
Related Party Transactions
The Company did not have any related party transactions during this reporting period.
Revenues
For the three months ended June 30, 2021 and 2020, the Company had no revenues from related parties.
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COMMITMENTS AND CONTINGENCIES |
6 Months Ended |
---|---|
Jun. 30, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 8: COMMITMENTS AND CONTINGENCIES
The Company did not have any material contingent obligations during this reporting period.
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ACQUISITIONS AND DIVESTITURES |
6 Months Ended |
---|---|
Jun. 30, 2021 | |
Business Combination and Asset Acquisition [Abstract] | |
ACQUISITIONS AND DIVESTITURES | NOTE 9. ACQUISITIONS AND DIVESTITURES
The Company has not been involved in any material acquisition or divestiture activity during the reporting period.
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SUBSEQUENT EVENTS |
6 Months Ended |
---|---|
Jun. 30, 2021 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 10 – SUBSEQUENT EVENTS
As disclosed in the Company’s Form 8-K filed on July 27, 2021, the Company reported that: (i) Sri Vanamali transitioned from the role of CEO and CFO to the role of President; (ii) Joseph Frontiere was appointed CEO and CFO effective July 27, 2021. |
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Policies) |
6 Months Ended | |||||||||
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Jun. 30, 2021 | ||||||||||
Accounting Policies [Abstract] | ||||||||||
Basis of Presentation | Basis of Presentation
Our financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”), as well as the applicable regulations and rules of the Securities and Exchange Commission (“SEC”). This requires management to make estimates and assumptions that affect the amounts reported in the financial statements and their accompanying notes. The actual results could differ from those estimates.
The accompanying interim, unaudited consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K, filed with the SEC on May 14, 2020. All adjustments necessary for a fair statement of the results for the interim periods have been made. All adjustments are of a normal and recurring nature.
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Principles of Consolidation | Principles of Consolidation
The consolidated financial statements include the accounts of GEX Management, Inc. and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.
There have been no significant changes to our accounting policies that have a material impact on our financial statements and accompanying notes.
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Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
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Cash and Cash Equivalents | Cash and Cash Equivalents
Cash and cash equivalents include cash in banks and short-term investments with original maturities of three months or less.
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Accounts Receivable | Accounts Receivable
Accounts receivable consists of accrued services and consulting receivables due from customers and are unsecured. The receivables are generally due within 30 to 45 days after the date of the invoice. Accounts receivable is carried at their face amount, less an allowance for doubtful accounts. GEX’s policy is not to charge interest on receivables after the invoice becomes past due. Write-offs are recorded at the time when a customer receivable is deemed uncollectible.
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Property and Equipment | Property and Equipment
Property and Equipment, net is carried at the cost of purchase, acquisition or construction, and is depreciated over the estimated useful lives of the assets. Assets acquired in a business combination are stated at estimated fair value. Costs associated with repair and maintenance are expensed as they are incurred. Costs associated with improvements which extend the life, increase the capacity or improve the efficiency of our property and equipment are capitalized and depreciated over the remaining life of the related asset. Depreciation and amortization are provided using the straight-line methods over the useful lives of the assets as follows:
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Impairment of Long-Lived Assets | Impairment of Long-Lived Assets
The Company records an impairment of long-lived assets used in operations, other than goodwill, and its equity method investments when events or circumstances indicate that the asset might be impaired and the estimated undiscounted cash flows to be generated by those assets over their remaining lives are less than the carrying amount of those items. The net carrying value of assets not recoverable is reduced to fair value, which is typically calculated using the discounted cash flow method.
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Revenue Recognition | Revenue Recognition
Effective on January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 outlines a single, comprehensive revenue recognition model for revenue derived from contracts with customers and it supersedes the prior revenue recognition guidance, including prior guidance that is industry-specific. Under ASU No. 2014-09, an entity recognizes revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. The Company adopted ASU No. 2014-09 using the modified retrospective method, which applies to only the most current period presented in the financial statements. There were no significant changes to the Company’s existing revenue recognition policies as a result of adopting ASU 2014-09.
GEX enters into contracts with its clients for professional services. GEX’s contract stipulates the rate and price charged to each client. GEX’s contracts for these services are generally cancellable at any time by either party with 30-days’ written notice. GEX fulfills its performance obligations each month, and the contracts generally have a term of one year with an automatic renewal after 12 months. The duration between invoicing and when GEX completes its contractual, performance obligations are satisfied is not significant. For staffing and professional services payment is generally due 30 days after the invoice is sent to the client. GEX does not have significant financing components or significant payment terms.
Staffing Services and Professional Services
Staffing services revenue is derived from supplying temporary staff to clients. Temporary staff generally consists of temporary workers working under a contract for a fixed period of time, or on a specific client project. The temporary staff includes both GEX employees and third-parties contracted by GEX.
Temporary staff are provided to clients through a Staffing Service Agreement (‘SSA’) involving a specified service that the temporary staff will provide to the client. When GEX is the principal or primary obligor for the temporary staff, GEX records the gross amount of the revenue and expense from the SSA.
GEX is generally the primary obligor when GEX is responsible for the fulfilment of services under the SSA, even if the temporary staff are not employees of GEX. This typically occurs when GEX contracts third-parties to fulfil all or part of the SSA with the client, but GEX remains the holder of the credit risk associated with the SSA, and GEX has total discretion in establishing the pricing under the SSA.
All other Professional Services revenues are recognized in the period the services are performed as stipulated in the client’s Outsourcing Agreement, when the client is invoiced, and collectability is reasonably assured. Revenue recognition for arrangements with multiple deliverables constituting a single unit of accounting is recognized generally over the greater of the term of the arrangement or the expected period of performance.
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Income Taxes | Income Taxes
The Company uses the liability method in the computation of income tax expense and the current and deferred income taxes payable. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
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Fair Value Measurements | Fair Value Measurements
ASC Topic 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and requires certain disclosures about fair value measurements. In general, fair value of financial instruments is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s credit worthiness, among other things, as well as unobservable parameters.
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Earnings Per Share |
Earnings per share are calculated in accordance with ASC 260 “Earnings per Share”. Basic income (loss) per share is computed by dividing the period income (loss) available to common shareholders by the weighted average number of common shares outstanding. Diluted earnings (loss) per share is computed by dividing the income (loss) available to common share-holders by the weighted average number of common shares outstanding plus additional common shares that would have been outstanding if dilutive potential common shares had been issued. For purposes of this calculation, common stock dividends, warrants and options to acquire common stock, would be considered common stock equivalents in periods in which they have a dilutive effect and are excluded from this calculation in periods in which these are anti-dilutive to the net loss per share. Earnings per share information for the three months ended June 30, 2021 has been retroactively adjusted to reflect the stock split that occurred in December 2017 and the 1 for 10,000 reverse stock split in May 2020.
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Reclassifications | Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation. Such reclassifications have had no effect on the financial position as of December 31, 2020 or operations or cash flows for the periods ended June 30, 2021.
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Going Concern | Going Concern
To date, the Company has funded its operations primarily through public and private offerings of common stock, our line of credit, short- term discounted and convertible notes payable. The Company has identified several potential financing sources in order to raise the capital necessary to fund operations through December 31, 2020.
In addition to the aforementioned current sources of capital that will provide additional short-term liquidity, the Company is currently exploring various other alternatives including debt and equity financing vehicles, strategic partnerships, government programs that may be available to the Company, as well as trying to generate additional sales and increase margins. However, at this time the Company has no commitments to obtain any additional funds, and there can be no assurance such funds will be available on acceptable terms or at all. If the Company is unable to obtain additional funding and improve its operations, the Company’s financial condition and results of operations may be materially adversely affected and the Company may not be able to continue operations, which raises substantial doubt about its ability to continue as a going concern. Additionally, even if the Company raises sufficient capital through additional equity or debt financing, strategic alternatives or otherwise, there can be no assurances that the revenue or capital infusion will be sufficient to enable it to develop its business to a level where it will be profitable or generate positive cash flow. If the Company raises additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. If the Company incurs additional debt, a substantial portion of its operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, thus limiting funds available for business activities. The terms of any debt securities issued could also impose significant restrictions on the Company’s operations. Broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance, and may adversely impact our ability to raise additional funds. Similarly, if the Company’s common stock is delisted from the public exchange markets, it may limit its ability to raise additional funds.
The consolidated financial statements for the six months ended June 30, 2021 were prepared on the basis of a going concern which contemplates that the Company will be able to realize assets and discharge liabilities in the normal course of business. Accordingly, they do not give effect to adjustments that would be necessary should the Company be required to liquidate its assets. The ability of the Company to meet its total liabilities of $5,045,870 and to continue as a going concern is dependent upon the availability of future funding, continued growth in billings and sales contracts, and the Company’s ability to profitably meet its after-sale service commitments with its existing customers. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
In addition, at this time we cannot predict the impact of COVID-19 on our ability to obtain financing necessary for the Company to fund its working capital requirements. Also, it may hamper our efforts to comply with our filing obligations with the Securities and Exchange Commission. |
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Tables) |
6 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | ||||||||||
Accounting Policies [Abstract] | ||||||||||
SCHEDULE OF ESTIMATED USEFUL LIVES OF PROPERTY AND EQUIPMENT |
|
SCHEDULE OF ESTIMATED USEFUL LIVES OF PROPERTY AND EQUIPMENT (Details) |
6 Months Ended |
---|---|
Jun. 30, 2021 | |
Building [Member] | |
Property, Plant and Equipment [Line Items] | |
Useful life | 30 years |
Furniture and Fixtures [Member] | |
Property, Plant and Equipment [Line Items] | |
Useful life | 5 years |
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
6 Months Ended | ||||
---|---|---|---|---|---|
Mar. 05, 2019 |
Mar. 05, 2019 |
Feb. 08, 2019 |
Jun. 30, 2021 |
Dec. 31, 2020 |
|
Entity Listings [Line Items] | |||||
Reverse stock split, description | Earnings per share information for the three months ended June 30, 2021 has been retroactively adjusted to reflect the stock split that occurred in December 2017 and the 1 for 10,000 reverse stock split in May 2020. | ||||
Liabilities | $ 5,045,870 | $ 4,973,752 | |||
G&C Family Group, LLC [Member] | Real Estate Lien Note [Member] | |||||
Entity Listings [Line Items] | |||||
Return for cancellation of building | $ 1,300,000 | ||||
Setco International Forwarding Corporation [Member] | Real Estate Lien Note [Member] | |||||
Entity Listings [Line Items] | |||||
Elimination of debt | $ 1,125,000 | ||||
Setco International Forwarding Corporation [Member] | Promissory Note [Member] | |||||
Entity Listings [Line Items] | |||||
Elimination of debt | $ 500,000 |
OTHER CURRENT ASSETS (Details Narrative) - USD ($) |
6 Months Ended | |
---|---|---|
Jun. 30, 2021 |
Dec. 31, 2020 |
|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Other current assets | $ 114,132 | $ 107,289 |
Other assets non current | $ 3,026,045 | $ 3,131,545 |
Finite-Lived intangible asset, useful life, description | Other Assets primarily comprised of long-term Consulting Contracts that had been capitalized on the Balance Sheet and Amortized over their lives over a period of 3-5 years depending on the length of the specific contract. |
NOTES PAYABLE (Details Narrative) - USD ($) |
1 Months Ended | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 25, 2021 |
Jun. 09, 2021 |
Apr. 20, 2021 |
Mar. 19, 2021 |
Feb. 08, 2021 |
Oct. 12, 2019 |
Sep. 27, 2019 |
Apr. 16, 2019 |
Mar. 25, 2019 |
Feb. 15, 2019 |
Jan. 18, 2019 |
Aug. 29, 2018 |
Aug. 24, 2018 |
Aug. 14, 2018 |
Aug. 08, 2018 |
Aug. 02, 2018 |
Apr. 26, 2018 |
Apr. 26, 2018 |
May 31, 2018 |
|
Convertible Notes Payable [Member] | |||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||
Convertible promissory note, principal amount | $ 110,000 | $ 43,750 | $ 43,750 | $ 38,500 | $ 53,500 | $ 100,000 | $ 45,000 | $ 38,000 | $ 50,000 | $ 43,000 | $ 226,000 | $ 112,750 | $ 85,000 | $ 250,000 | $ 85,000 | $ 226,000 | $ 146,681 | $ 146,681 | |
Interest rate | 12.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 12.00% | 10.00% | 12.00% | 10.00% | 10.00% | 10.00% | 10.00% | 12.00% | 10.00% | 10.00% | |
Debt instrument, maturity date | Jun. 25, 2022 | Jun. 09, 2022 | Apr. 20, 2022 | Mar. 19, 2022 | Feb. 08, 2022 | Oct. 12, 2020 | Mar. 27, 2020 | Apr. 16, 2020 | Mar. 25, 2020 | Feb. 15, 2020 | Jul. 18, 2019 | Aug. 29, 2019 | Aug. 24, 2019 | May 06, 2019 | Aug. 08, 2019 | Jan. 27, 2019 | Apr. 26, 2019 | ||
Convertible Notes Payable One [Member] | |||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||
Convertible promissory note, principal amount | $ 88,000 | ||||||||||||||||||
Interest rate | 12.00% | ||||||||||||||||||
Debt instrument, maturity date | Jun. 09, 2022 | ||||||||||||||||||
Two Securities Purchase Agreements [Member] | |||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||
Convertible promissory note, principal amount | $ 1,000,000 | $ 1,000,000 | $ 200,000 | ||||||||||||||||
Interest rate | 10.00% | 10.00% | 10.00% | ||||||||||||||||
Total proceeds from notes | $ 887,500 | $ 175,000 | |||||||||||||||||
Discount on notes | $ 112,500 | $ 112,500 | |||||||||||||||||
Debt conversion price per share | $ 2.50 | $ 2.50 | |||||||||||||||||
Debt discount percentage | 50.00% | 50.00% | 10.00% | ||||||||||||||||
Debt origination fee | $ 5,000 | ||||||||||||||||||
Warrant shares issued for debt issuance costs | 50,000 | ||||||||||||||||||
Warrant shares issued for debt issuance costs, exercise price per share | $ 4.00 | ||||||||||||||||||
Warrant shares issued for debt issuance costs, warrant term | 5 years | ||||||||||||||||||
Fair value of warrants | $ 31,852 |
ACCOUNTS RECEIVABLE AND CONCENTRATION OF CREDIT RISK (Details Narrative) - USD ($) |
Jun. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Receivables [Abstract] | ||
Outstanding accounts receivable balance | $ 99,020 | $ 211,222 |
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) |
6 Months Ended | |
---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Related Party Transactions [Abstract] | ||
Revenue from related parties | $ 0 | $ 0 |
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