UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the Fiscal Year Ended December 31,
2016
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the Transition Period from ________ to ________
GEX MANAGEMENT, INC.
(Exact
name of registrant as specified in its charter)
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Texas
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333-213470
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56-2428818
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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12001 N. Central Expressway
Suite 825
Dallas, Texas
75243
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(Address of Principal Executive Offices)
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Registrant’s telephone number, including area
code: 877-210-4396
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the
Act: Common Stock, Par value $0.001
Indicate by a check mark if the registrant is a well-known seasoned
issuer, as defined by Rule 405 of the Securities Act.
Yes□ No ☑
Indicate by a check mark whether the registrant is not
required to file reports pursuant to Section 13 or Section 15 (d)
of the Securities Exchange Act. Yes □ No ☑
Indicate by check mark whether the registrant has (1) filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the past 12 months (or for
such shorter period that the registrant was required to file such
reports) (2) has been subject to such filing requirement for the
past 90 days. Yes ☑
No□
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§ 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post
such files). Yes ☑
No□
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (§ 229.405 of this
chapter) is not contained herein, and will not be contained, to the
best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the
Exchange Act.
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Large Accelerated Filer
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Accelerated
Filer
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Non-Accelerated Filer
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Smaller
Reporting Company
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Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act): Yes
□ No ☑
Aggregate market value of the voting stock held by non-affiliates
of the registrant as of December 31, 2016: N/A
Indicate the number of Shares of outstanding of each of the
Registrant's classes of common stock, as of the latest practicable
date: As of March 27, 2017, the Registrant had
8,327,155 shares of common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
1
TABLE OF
CONTENTS
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PART I
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Item 1.
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Business
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4
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Item
1A.
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Risk Factors
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6
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Item 1B.
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Unresolved Staff Comments
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6
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Item 2.
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Description of Properties
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6
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Item 3.
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Legal Proceedings
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6
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Item 4.
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Mine Safety Disclosures
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6
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PART II
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Item 5.
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Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
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7
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Item 6.
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Selected Financial Data
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7
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Item 7.
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Management’s Discussion and Analysis of Financial Condition
and Results of Operations
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7
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Item 7A.
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Quantitative and Qualitative Disclosures about Market
Risk
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9
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Item 8.
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Financial Statements and Supplementary Data
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10
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Item 9.
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Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
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10
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Item 9A.
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Controls and Procedures
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10
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Item 9B.
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Other Information
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11
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PART III
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Item 10.
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Directors, Executive Officers and Corporate Governance
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11
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Item 11.
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Executive Compensation
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13
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
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15
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Item 13.
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Certain Relationship and Related Transactions and Director
Independence
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15
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Item 14.
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Principal Accounting Fees and Services
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16
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PART IV
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Item 15.
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Exhibits and Financial Statement Schedules
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15
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2
FORWARD-LOOKING STATEMENTS
This
report includes forward-looking statements as the term is defined
in the Private Securities Litigation Reform Act of 1995 or by the
U.S. Securities and Exchange Commission in its rules, regulations
and releases, regarding, among other things, all statements other
than statements of historical facts contained in this report,
including statements regarding our future financial position,
business strategy and plans and objectives of management for future
operations. The words “believe,” “may,”
“estimate,” “continue,”
“anticipate,” “intend,”
“should,” “plan,” “could,”
“target,” “potential,” “is
likely,” “will,” “expect” and similar
expressions, as they relate to us, are intended to identify
forward-looking statements. We have based these forward-looking
statements largely on our current expectations and projections
about future events and financial trends that we believe may affect
our financial condition, results of operations, business strategy
and financial needs. In addition, our past results of
operations do not necessarily indicate our future
results.
Other
sections of this report may include additional factors which could
adversely affect our business and financial performance. New risk
factors emerge from time to time and it is not possible for us to
anticipate all the relevant risks to our business, and we cannot
assess the impact of all such risks on our business or the extent
to which any risk, or combination of risks, may cause actual
results to differ materially from those contained in any
forward-looking statements. Those factors include, among others,
those matters disclosed in this Annual Report on Form
10-K.
Except
as otherwise required by applicable laws and regulations, we
undertake no obligation to publicly update or revise any
forward-looking statements or the risk factors described in this
report, whether as a result of new information, future events,
changed circumstances or any other reason after the date of this
report. Neither the Private Securities Litigation Reform Act of
1995 nor Section 27A of the Securities Act of 1933 provides any
protection to us for statements made in this report. You should not
rely upon forward-looking statements as predictions of future
events or performance. We cannot assure you that the events and
circumstances reflected in the forward-looking statements will be
achieved or occur. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements.
3
PART I
Unless
the context otherwise requires, throughout this Annual Report on
form 10-K the words “GEX,” “GEX
Management,” “the Company,” “we,”
“us,” and “our,” refer to GEX Management,
Inc.
ITEM 1. BUSINESS
History and Development 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 corporation
and changed its name to GEX Management, Inc. in April of
2016.
Carl Dorvil founded a company called Group Excellence, LLC out of
his dorm room at Southern Methodist University in 2004. Group
Excellence provided tutoring and mentoring to students with the
goal of inspiring kids to achieve excellence. The company quickly
grew to more than six hundred employees. Through this rapid growth,
midway through 2004, Mr. Dorvil realized that he had two businesses
on his hands. One was the tutoring and mentoring business, and the
other was the back-office business that was handling the day-to-day
operations of his company. This back-office business provided Group
Excellence, LLC with human resources, IT, accounting/bookkeeping,
social media, payroll, and conducted a majority of the overall
operations of the company and became GEX Management. Mr. Dorvil
sold his tutoring business, Group Excellence, LLC, in 2011
but continued to own and
operate GEX Management, which continued as a Professional Services
Company that provided back office support to the tutoring company,
as well as third-parties that needed these services. In 2016 GEX
restructured its business model in order to provide staffing and
back office services in order to expand the Company’s
offerings, and to provide the same quality of support that it has
for the last twelve years to its clients.
Business Operations
As a Professional Services Company, GEX offers progressive and
complete solutions for our customer’s back office and
administration needs. These services include: digital marketing and
sales, IT support and consultation, accounting and bookkeeping,
human resources, general business consulting, staffing and software
and billing services specifically for the medical industry. The
specific services in each of these categories are further described
below:
Digital Marketing and Sales:
· Marketing Plan Consulting and
Development
· Website Development and
Remodel
· Social Media Marketing
Implementation/Optimization
· Logo and Brand
Design
· Client Relationship
Management
IT Support:
· Email and Server
Migration
· Web-Based
Database
· Web Hosting
· Hardware Review and
Consulting
· Data Access and Security
Solutions
· Cloud-based Storage
Implementation
· Ongoing Software
Maintenance
Accounting and Bookkeeping:
· Accounts Payable
· Accounts
Receivable
· Accounting Manual and Policy
Review
· Development of Accounting
Control Procedures
· Paperless Workflow System
Implementation
· Preparation of Financial
Statements
4
General Business Consulting:
· Strategic
Planning
· Mission Statement and Values
Discovery
· Goal Sessions
· Company Operation
Troubleshooting
Electronic Medical Records (EMR) System:
· EMR for iPad, Android and
Windows
· Patient Management:
Scheduling, Patient Notification, Patient Portal
· HIPAA Compliant / Meaningful
Use Certified for State 1 and 2 / SSL Security
· Practice
Optimization
Medical Billing:
· Centralized
Billing
· Batch Process Patient
Billing
· Credit Card
Processing
· Track Follow-Up History for
the Practice
· Manage
Collections
· Resolve Accounts Receivable
Issues
· Multi-Stage Reviews for
Billing Accuracy
Human Resources and Staffing
· Employee Staffing and
Liability Reduction
· Web-Based HRIS
· Performance Evaluation and
Discipline System
· Onboarding and Termination
Guidance
· Consulting on Sensitive HR
Issues
· Paperwork Audit
· Employee Handbook
Business Strategy
Our objective is to become a leading back office and general
business consulting company, and continuously grow our client base.
We plan to achieve this objective by continuing to implement our
business strategy, which includes the primary elements we discuss
below.
Marketing and Sales
Our marketing efforts target small and mid-sized businesses that
have the need for the types of services that we provide, but cannot
afford full time employees to handle those services. One of our
fastest growing customer segments is the marketing and consultancy
businesses. The Company began focusing on these industries in its
third and fourth quarters because of the need for cost effective
staffing and back office solutions due to the cyclical nature of
those industries. In the past we have generated a significant
amount of our revenues through client referrals and our
management’s personal relationships. We plan to continue to
grow through these relationships and reach a wider audience through
social media advertising and marketing channels to accelerate
client and sales growth.
Dependence on Major Customers
We rely heavily on the service contract renewals of our clients.
Our management is responsible for developing and maintaining
successful long-term relationships with key clients. In 2015 and
2016 we had 4 to 5 main customers that made up approximately 80% of
our revenues.
5
Our Qualifications
Our qualifications include our reputation as a Professional
Services Company with specific experience in the back office
services general business consulting since 2004.
Industry and Competitors
The back office and employee/employer administration industry,
including the Professional Employer Organizations (PEO) and
Administrative Services Organizations (ASO), is highly fragmented,
resulting in intense competition. Competition affects our ability
to succeed in both the market segments we currently serve and new
market segments that we may enter in the future. We compete with
several large back office and administration companies, as well as
PEOs and ASOs that provide the same services we provide, but also
provide additional services. These companies may have greater
financial, marketing, and other resources than we do. Competition
in our industry is based primarily on quality of service to the
customer, price, and new and improved innovative services
offerings.
Environmental Concerns
As a Professional Service Company, federal, state or local laws
that regulate the discharge of materials into the environment do
not materially impact us.
Number of Employees
We have a total of 17 employees.
ITEM 1A. RISK FACTORS
As a smaller reporting company we are not required to provide the
information required by this item.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. DESCRIPTION OF PROPERTY
GEX's corporate offices are located at 12001 N. Central Expressway
Suite 825, Dallas, Texas. GEX entered into a lease
agreement on September 28th 2016 on this property for a term of 38
months.
ITEM 3. LEGAL PROCEEDINGS
GEX is not subject to any pending legal proceedings, nor is the
Company aware of any material threatened claims against
it.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
6
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
The GEX Common Stock is not currently traded on an
exchange.
Shareholders
As of December 31, 2016, there were approximately 36 record holders
of the Common Stock.
Dividends
GEX has not paid cash dividends on any class of common equity since
its formation.
Use of Proceeds
The Company’s Registration Statement on Form S-1/A
(Commission File No. 333-213470) was declared effective by the SEC
on November 14, 2016. We registered a total of 1,000,000
shares of our $0.001 par value common stock for offer and sale by
the Company at a price per share of $1.50 (the
“Offering”). The
Offering has terminated as of March 28, 2017, after sales of
429,074 shares of common stock for aggregate gross proceeds of
$643,611. Approximately $13,330 of the proceeds were used to pay
legal, accounting, printing and other offering expenses. All
other proceeds raised in the Offering were used, andare intended to
be used, for general corporate overhead, additional staffing,
marketing/advertising and salaries.
ITEM 6. SELECTED FINANCIAL DATA
As a smaller reporting company we are not required to report
selected financial data disclosures as required by item 301 of
Regulation S-K.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Business
GEX Management is a Staffing and Professional Services Company that
offers progressive and complete solutions that are unique to our
specific customers back office and administration needs.
These services include: digital marketing and sales, IT
support and consultation, accounting and bookkeeping, human
resources, general business consulting, staffing and software and
medical billing services.
Our Strategy
GEX works continuously to expand its service offerings to its
clients in order to help them achieve their personal business
goals. GEX’s unique approach that allows customized service
options for its clients, and its wide array of services that are
offered allows GEX to differentiate itself from other back office
and administrative companies. GEX also prides itself on constant
client interaction to ensure that GEX is providing not only the
best support, but the right support to help clients achieve their
individual goals. Clients typically will sign a three month service
agreement with the Company, and the contract automatically renews
until terminated with a 30 day notice by either party.
Critical Accounting Policies
The Company’s financial statements were prepared in
conformity with U.S. generally accepted accounting
principles. As such, management is required to make
certain estimates, judgments and assumptions that they believe are
reasonable based upon the information available. These
estimates and assumptions affect the reported amounts of assets and
liabilities at the date of the consolidated financial statements
and the reported amounts of income and expense during the periods
presented.
Revenue Recognition
The
Company accounts for its Staffing Solutions revenues in accordance
with Accounting Standards Codification (“ASC”) 605-45,
Revenue Recognition for Principal
Agent Considerations. The Company’s gross billings to
clients include the payroll cost of each employee and a markup
computed as a percentage of each worksite employee’s payroll
cost. The Company invoices the gross billings concurrently with
each periodic payroll of our worksite employees. The aforementioned
markup includes pricing components associated with the
Company’s estimates of payroll taxes, benefits and
workers’ compensation costs, plus a separate component
related to the Company’s services.
7
The
Company accounts for Back Office Solutions revenue arrangements
that contain multiple deliverables in accordance with ASC 605-25,
Revenue Recognition
for Arrangements with Multiple
Elements, which addresses the determination of whether an
arrangement involving multiple deliverables contains more than one
unit of accounting. A delivered item within an arrangement is
considered a separate unit of accounting only if both of the
following criteria are met:
●
the
delivered item has value to the customer on a stand-alone basis;
and
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if the
arrangement includes a general right of return relative to the
delivered item, delivery or performance of the undelivered item is
considered probable and substantially in control of the
vendor.
Under
FASB ASC Topic 605-25, if both of the criteria above are not met,
then separate accounting for the individual deliverables is not
appropriate. 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. To date, all revenues are
recognized after the services are performed, collectability is
reasonably assured and the customer is invoiced.
Results of Operations for the Year Ended December 31, 2016 Compared
to the Year Ended December 31, 2015
Revenues
Revenues for the year ended December 31, 2016 and year ended
December 31, 2015 were $508,221 and $907,728, respectively. Of that
amount, related party revenues were $305,885 and $563,837 for the
years ended December 31, 2016 and 2015 respectively. The
decrease is
due to the focusing on our recent S-1 offering and focusing on
marketing to acquire new clients that are not related parties which
we believe we will see the benefits in 2017. Over the same time we
reduced our reliance on related party revenues.
Cost of Services and Gross Profit
The Company’s gross margin was 24% in 2016 compared to 56% in
2015. The decrease was due to the type of contracts the Company had
during the respective years. This is reflective in
the decline in sales as well.
Operating Expense
Total operating expenses in the years ended December 31, 2016 and
2015 were $382,097 and $347,946 respectively. The increase
reflected certain costs incurred to prepare and file our S-1
offering and other occupancy and administrative costs to position
our back-office business for additional clients. Depreciation
was a minor expense and increased from $48 to $577 from the year
ended December 31, 2015 to December 31, 2016.
8
Other income and expense for the years ended December 31, 2016 and
2015 was made up of interest income and interest expense. Interest
income was $72 and $48 for the years ended December 31, 2016 and
2015 respectively. Interest expense, which related solely to the
interest on our notes payable, was $39,809 and $25,635 for the
years ended December 31, 2016 and 2015 respectively.
Net (Loss) Income
Net loss for the year ended December 31, 2016 was $298,839 and a
net profit for the year ended December 31, 2015 was
$137,796.
Liquidity and Capital Resources
The Company has sufficient cash reserves and liquidity to operate
for the next twelve months.
Cash increased by $304,558 from $2,837 at December 31, 2015 to
$307,395 at December 31, 2016. The increase was due to the
funds we raised in the Company’s S-1 offering, and net loan
proceeds [loan proceeds over loan paybacks] of $179,887. The
Company raised an additional $282,089 in cash from the offering
since December 31, 2016.
Net cash used by operating activities was $236,852 for the year
ended December 31, 2016, compared to net cash used by operating
activities of $186,737 for the year ended December 31, 2015.
The increase was due to the decrease in sales and the
resulting operating loss.
Net
cash used in investing activities for fixed assets was $0 and
$1,731 in the years ended December 31, 2016 and 2015
respectively.
Net
cash from financing activities in the year ended December 31, 2016
came from two sources (a) advances on related party notes payable
of $268,527 and (b) sale of common stock of $361,523 in our S-1
offering. The Company also used cash for financing activities to
repay related party notes payable of $13,196 and repayment of
$75,444 on a working capital loan.
Net
cash from financing activities in the year ended December 31, 2015
came from two sources (a) advances on related party notes payable
of $466,513 and (b) proceeds from a working capital loan of
$100,000. The Company also used cash for financing activities to
repay related party notes payable of $358,657 and repayment of
$24,556 on the working capital loan.
Liquidity
On December 5, 2016, the Company reached its minimum of $300,000 of
its public offering, and the Company has raised a total of
$301,500. The Company has determined that the receipt of these
funds will support the Company’s operations through the year
ended 2018. Furthermore, the Company has until March 31, 2017
to raise a maximum of $1,500,000 in its offering. The Company
also procured a Letter of Credit in the amount of $85,000 further
increasing its capital resources.
Accounts Receivable, Bad Debt Expense and Allowance for
Uncollectible Accounts Receivable
Accounts
receivables are considered past due if payments have not been
received within agreed upon invoice terms. Write offs are recorded
at a time when a customer receivable is deemed uncollectible. GEX
had $29,918 and $63,043 bad debt expense during the twelve months
ended December 31, 2016 and 2015, respectively, and had $41,651 and
$11,733 allowance for bad debts at December 31, 2016 and 2015
respectively.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Not applicable.
9
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
Incorporated into and forming an integral part of this Form 10-K
are the audited financial statements for the Company for the years
ended December 31, 2016 and 2015. The financial statements as of
December 31, 2016 and 2015, of the Company included in this Form
10-K have been audited by Heaton & Company, PLLC, independent
registered public accountants, as set forth in their report. The
financial statements have been included in reliance upon the
authority of them as experts in accounting and
auditing.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31
2016. This evaluation was accomplished under the
supervision and with the participation of our chief executive
officer / principal executive officer, and chief financial officer
/ principal financial officer who concluded that our disclosure
controls and procedures are not effective to ensure that all
material information required to be filed in the annual report on
Form 10-K has been made known to them.
For purposes of this section, the term disclosure controls and
procedures means controls and other procedures of an issuer that
are designed to ensure that information required to be disclosed by
the issuer in the reports that it files or submits under the Act
(15 U.S.C. 78a et seg.) is recorded, processed, summarized and
reported, within the time periods specified in the
Commission’s rules and forms. Disclosure, controls
and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by in
our reports filed under the Securities Exchange Act of 1934, as
amended (the "Act") is accumulated and communicated to the issuer's
management, including its principal executive and principal
financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required
disclosure.
Management’s Annual Report on Internal Control Over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is
defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act.
Our internal control system was designed 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 in the
United States of America. Our internal control over
financial reporting includes those policies and procedures that (i)
pertain to the maintenance records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of
the assets of the Company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with accounting principles
generally accepted in the United States of America, and that
receipts and expenditures of the Company are being made only in
accordance with authorizations of management of the Company; and
(iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the
Company’s assets that could have a material effect on the
financial statements. Because of inherent limitations, a system of
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become
inadequate due to change in conditions, or that the degree of
compliance with the policies or procedures may
deteriorate.
10
Our management conducted an evaluation of the effectiveness of our
internal control over financial reporting using the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control—Integrated
Framework (2013) at December 31, 2016. Based on its
evaluation, our management concluded that, as of December 31, 2016,
our internal control over financial reporting was not effective
because of: 1) Our reliance upon independent financial reporting
consultants for review of critical accounting areas and disclosures
and material non-standard transaction; and 2) a lack of sufficient
accounting staff which results in a lack of
segregation of duties necessary for a good system of internal
control. A material weakness is a deficiency, or a
combination of control deficiencies, in internal control over
financial reporting such that there is a reasonable possibility
that a material misstatement of the Company’s annual or
interim financial statements will not be prevented or detected on a
timely basis.
This annual report does not include an attestation report of the
Company’s registered public accounting firm regarding
internal control over financial reporting. Management’s
report was not subject to the attestation by the Company’s
registered public accounting firm pursuant to the rules of the SEC
that permit the Company to provide only management’s report
in this annual report.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE
The Company has a code of business conduct and ethics that applies
to all of its employees, officers and directors. The code of
business conduct and ethics is available on our website at
www.gexmanagement.com and we will post any amendments to, or
waivers from, the code of ethics on that website.
The following table lists the names and ages of the executive
officers, directors and key consultants of the Company. The
directors will continue to serve until the next annual shareholders
meeting, or until their successors are elected and qualified. All
Directors, and have been elected to serve through the 2017 annual
meeting. All officers serve at the discretion of the President,
Chairman of the Board of Directors, and members of the Board of
Directors.
|
Name
|
|
Age
|
|
Position
|
|
Held Since
|
|
Carl Dorvil
1114 Newcastle Drive
Rockwall, Texas 75032
|
|
33
|
|
Chairman of The Board
CEO/President
|
|
October 2004
|
|
Clayton Carter
9191 Garland Rd. #1322
Dallas, TX 75243
|
|
31
|
|
Director
Chief Financial Officer
|
|
April 2016
|
|
Chelsea Christopherson
10931 Stone Canyon Road
Apt. 229
Dallas, TX 75230
|
|
28
|
|
Director
Chief Operating Officer
|
|
April 2016
|
11
Carl Dorvil:
Carl Dorvil, age 33, grew up in Garland, Texas and is the son of
Haitian immigrants. Mr. Dorvil graduated from Southern Methodist
University (SMU) in 2005 with three majors in Public Policy,
Economics, and Psychology, with Distinction. Mr. Dorvil continued
his education post undergraduate studies at SMU and received his
MBA from the Cox School of Business. In 2004, he founded
Group Excellence, a mentoring and tutoring company, out of his dorm
room at SMU. The company started with a $20,000 grant from Texas
Instrument Foundation. Since its inception, Group Excellence has
provided over 800,000 hours of tutoring to students around the
country, and created over 2,000 jobs. In 2011, Mr. Dorvil sold the
company to a Dallas-based investor group. Two years later, he
bought it back for 10% of the original sale price. After
stabilizing the business, Mr. Dorvil converted it into a
nonprofit.
In 2010, Mr. Dorvil received the Minority Business Leader Award
from the Dallas Business Journal (DBJ) and Group Excellence made it
to the Top 100 on SMU's Dallas 100 Fastest-Growing Businesses List.
In 2011, Mr. Dorvil was the youngest-ever honoree on the
DBJ’s 40 Under Forty, and Group Excellence was the fifth on
the Inc. 500 list of fastest-growing companies in the United
States. Mr. Dorvil is a regular contributor to Forbes, with his
most recent article being Challenges and Opportunities When Doing
Business with the Government.
Mr. Dorvil has served as the Chief Executive Officer and Chairman
of the Board of GEX from 2004-present. Mr. Dorvil has also served
as a managing partner at P413 Management, LLC, a strategy and
consulting firm that focuses on non-profit entities and consulting
related to the expansion of corporate community outreach programs,
from 2011 to present, and serves as managing Partner at Vicar
Capital Partners, LLC, a licensed capital advisory firm, from 2013
to present.
Clayton Carter:
Clayton Carter, age 31, received his Bachelor of Arts in Integrated
Marketing and Communications from Pepperdine University. With his
extensive knowledge of the public markets and investment-based
finance, Mr. Carter served as Chief Executive Officer and Chairman
of the Board at Freestone Resources, Inc., an oil and gas
technology company, from 2010 to 2015. Mr. Carter’s
responsibilities as the CEO of Freestone Resources included the
preparation of the quarterly and annual reports, as well as the
day-to-day operation of a fully reporting, publicly traded company.
In March of 2016 Mr. Carter became the Chief Financial Officer and
Director for GEX Management, Inc., and currently serves in these
roles.
Chelsea Christopherson:
Chelsea Christopherson, age 28, received her Business Management
degree from Dallas Baptist University. Mrs. Christopherson has
several years of experience executing operational processes for
small cap, growing businesses across a variety of industries. Mrs.
Christopherson joined Group Excellence, a tutoring company, in 2010
where she began her career as Human Resources Director in 2012, and
became Vice President of Group Excellence in 2013. While serving as
Vice President of Group Excellence, Mrs. Christopherson managed a
staff of 600 employees, helped build and implement processes to
manage a geographically diverse workforce in the midst of
unpredictable staffing patterns. Mrs. Christopherson has served as
Chief Operating Officer for GEX Management, Inc. from 2014 to
present where she oversees all operations of the company and its
clients.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), requires our executive officers
and directors, and persons who beneficially own more than ten
percent of our common stock, to file initial reports of ownership
and reports of changes in ownership with the SEC. Executive
officers, directors and greater than ten percent beneficial owners
are required by SEC regulations to furnish us with copies of all
Section 16(a) forms they file. We believe that as of the date of
this report they were all current in their 16(a)
reports.
Board of Directors
Our board of directors currently consists of three members. Our
directors serve one-year terms. Our board of directors has
affirmatively determined that there are currently no independent
directors serving on our board.
12
Committees of the Board of Directors
Audit Committee
We do not have a standing audit committee of the Board of
Directors. Management has determined not to establish an audit
committee at present because of our limited resources and limited
operating activities do not warrant the formation of an audit
committee or the expense of doing so. We do not have a
financial expert serving on the Board of Directors or employed as
an officer based on management’s belief that the cost of
obtaining the services of a person who meets the criteria for a
financial expert under Item 401(e) of Regulation S is beyond its
limited financial resources and the financial skills of such an
expert are simply not required or necessary for us to maintain
effective internal controls and procedures for financial reporting
in light of the limited scope and simplicity of accounting
issues raised in its financial statements at this stage of its
development.
Governance, Compensation and Nominating Committee
We do not have a standing governance, compensation and nominating
committee of the Board of Directors. Management has determined not
to establish governance, compensation and nominating committee at
present because of our limited resources and limited operations do
not warrant such a committee or the expense of doing
so.
Code of Ethics
The Company has adopted the following code of ethics for officers,
directors and employees:
●
Show respect towards others in the workplace
●
Conduct all business activities in a fair and ethical
manner
●
Work
dutifully and responsibly for the Company’s shareholders and
stakeholders
Limitation of Liability of Directors
Pursuant to the Texas Business Organizations Code, our Articles of
Incorporation exclude personal liability for our Directors for
monetary damages based upon any violation of their fiduciary duties
as Directors, except as to liability for any breach of the duty of
loyalty, acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, or any
transaction from which a Director receives an improper personal
benefit. This exclusion of liability does not limit any right which
a Director may have to be indemnified and does not affect any
Director’s liability under federal or applicable state
securities laws.
ITEM 11. EXECUTIVE COMPENSATION
Compensation of Executive Officers
The following summary compensation table sets forth all
compensation awarded to, earned by, or paid to the named executive
officers paid by us during the fiscal years ended December 31, 2016
and 2015 in all capacities for the accounts of our executives,
including the Chief Executive Officer (CEO), Chief Financial
Officer (CFO), and Chief Operating Officer (COO):
13
The following officers received the following compensation for the
years ended December 31, 2016 and 2015. These officers have
employment contracts with the Company.
|
|
Year
|
Salary
|
Bonus
|
Stock
|
Option
|
Non-equity incentive plan
compensation
|
Nonqualified deferred
compensation
|
All other compensation
|
|
Name and principal position
|
Awards
|
Awards
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Carl Dorvil,
CEO/President
|
2016
2015
|
$29,231
$0
|
None
None
|
None
None
|
None
None
|
None
None
|
None
None
|
None
None
|
|
Clayton Carter,
Chief Financial Officer
|
2016
2015
|
$17,370
$0
|
None
None
|
None
None
|
None
None
|
None
None
|
None
None
|
None
None
|
|
Chelsea Christopherson,
Chief Operating Officer
|
2016
2015
|
$30,376
$25,553
|
None
None
|
None
None
|
None
None
|
None
None
|
None
None
|
None
None
|
|
|
|
Option Awards
|
|
Stock Awards
|
||||||||
|
Name and principal position
|
|
Number of Securities Underlying Unexercised options (#)
exercisable
|
|
Number of Securities Underlying Unexercised options (#)
unexercisable
|
|
Equity incentive plan awards
|
|
Option exercise price
|
|
Option expiration date
|
|
Number of share awards that have not vested
|
|
Carl Dorvil, CEO/President
|
|
None
|
|
None
|
|
None
|
|
N/A
|
|
N/A
|
|
None
|
|
Clayton Carter, Chief Financial Officer
|
|
None
|
|
None
|
|
None
|
|
N/A
|
|
N/A
|
|
None
|
|
Chelsea Christopherson, Chief Operating Officer
|
|
None
|
|
None
|
|
None
|
|
N/A
|
|
N/A
|
|
None
|
Employment Agreements
We have employment agreements in place.
Compensation of Directors
Directors do not receive any compensation for their services as
directors. The Board of Directors has the authority to fix the
compensation of directors. No amounts have been paid to, or accrued
to, directors in such capacity.
14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED SHAREHOLDER MATTERS
As of December 31, 2016, the following persons are known to own 5%
or more of GEX Management's Common Stock, as well as the
Company’s officers and directors.
|
Name and Address of Beneficial Owner, Officer or
Director
|
Amount Beneficially Owned *
|
Percent of
Class
|
|
Carl Dorvil, President, CEO and Director
|
4,926,414
|
59.78%
|
|
Clayton Carter, Chief Financial Officer and Director
|
1,000,000
|
12.13%
|
|
Chelsea Christopherson, Chief Operating Officer and
Director
|
1,000,000
|
12.13%
|
|
Directors and Officers as a Group
|
6,926,414
|
84.04%
|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
PARTY TRANSACTIONS AND DIRECTOR INDEPENDENCE
On March 1, 2015 the Company entered into a Loan Agreement with its
CEO, Carl Dorvil. Mr. Dorvil agreed to loan the Company up to
$1,000,000 at a rate of 6%. As of December 31, 2016 the Company
owed $317,187 to Mr. Dorvil. The loan is due and payable on March
31, 2019.
On March 1, 2015 the Company entered into a Loan Agreement P413.
P413 agreed to loan the Company up to $500,000 at a rate of 6%.
GEX’s CEO, Carl Dorvil, is a majority interest owner in P413.
This loan had a balance of $46,000 and $0 at December 31, 2016 and
2015 respectively. The loan is due and payable on March 31,
2019.
The
Company had revenues from related parties of $305,885 and $563,837
for the years ended December 31, 2016 and 2015,
respectively.
On
March 1, 2015 the Company entered into an Outsourcing Agreement
with P413 Management, LLC (“P413”) to provide back
office services to P413. GEX’s CEO, Carl Dorvil, is a
majority member interest owner in P413. The Company reported
revenues under this Agreement of $38,513 and $7,000 for the years
ended December 31, 2016 and 2015 respectively.
On
September 1, 2015 the Company entered into an Outsourcing Agreement
with Vicar Capital Advisors, LLC (“Vicar”) to provide
back office services to Vicar. GEX’s CEO, Carl Dorvil, is a
majority member interest owner in Vicar. The Company reported
revenues under this Agreement of $101,992 and $93,644 for the years
ended December 31, 2016 and 2015 respectively.
On
August 1, 2014 the Company entered into an Outsourcing Agreement
with Renaissance Global Marketing, LLC (“Renaissance”)
to provide back office services to Renaissance. GEX’s CEO,
Carl Dorvil was formally a minority member interest owner in
Renaissance. The Company reported revenues under this Agreement of
$165,380 and $233,836 for the years ended December 31, 2016 and
2015.
The
Company performed services for Group Excellence Ltd to provide back
office services. At the time of service, a GEX employee controlled
Group Excellence Ltd. The Company reported revenues under this
Agreement of $0 and $227,602 for the years ended December 31, 2016
and 2015.
The
Company also had other related party revenues of $1,755 in 2015
with Dynasty Spirits, a company associated with a former
employee.
15
In 2004, upon the formation of the Company, our President Carl
Dorvil, received 100% of the membership interests which were
converted to 8,000,000 shares upon conversion to a corporation. In
April 2016, the President sold 3,073,586 shares of his holdings to
sixteen key people pursuant to the so-called Section 4(a)(1-½)
exemption. Each investor had access to counsel, access to the books
and records of the company, in addition to restrictions on
transfer, acquired for investment and not resale, and stamped with
a restrictive legend stating that the shares are not registered
under the Securities Act of 1933 and are restricted securities as
that term is defined under Rule 144, as well as other
representations and warranties.
On
September 1, 2015 the Company entered into a Promissory Note with
Knowledgeable Resources Solutions, LLC (“KRS”) for
$45,000 at a rate of 6% in provide financing to KRS to expand its
human resources consulting services. A GEX employee and his wife
own 100% of KRS. The loan was paid in full in the quarter ended
September 30, 2016.
The
Company entered into a Consulting Agreements with Capital Financial
Consultants, Inc. for $30,000 and $45,000 for the year ended
December 31, 2016. A GEX officer’s family member owns Capital
Financial Consultants, Inc. As of December 31, 2015 and 2016 the
balance payable under the two agreements to CFC was $0 and $45,000,
respectively.
The Company does not have any independent directors serving on the
board of directors.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND
SERVICES
Audit Fees
The aggregate fees billed for professional services rendered by our
auditors, for the audit of our annual financial statements and
review of the financial statements included in our Form S-1, Form
10-K and Form 10-Q or services that are normally provided by the
accountant in connection with statutory and regulatory filings or
engagements for the year ended December 31, 2016 and 2015 was
$21,000 and 0.
Audit Related Fees
None.
Tax Fees
None.
All Other Fees
None
16
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
Exhibits
|
31.1
|
Certification of the Company’s Principal Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
|
|
|
|
31.2
|
Certification of the Company’s Principal Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
|
|
|
|
32.1
|
Certification of the Company’s 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.
|
|
|
|
|
XBRL
|
|
17
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) 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.
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
Clayton
Carter,
|
|
|
|
|
Clayton
Carter,
|
|
|
|
|
Chief
Financial Officer
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Annual Report on Form 10-K to be
signed on its behalf by the undersigned hereunto duly
authorized.
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
By: /s/ Carl Dorvil
|
|
President, Chief Executive Officer and Chairman of the
Board
|
|
March 28, 2017
|
|
Carl Dorvil
|
|
|
|
|
|
|
|
|
|
|
|
By: /s/ Clayton Carter
|
|
Chief Financial Officer, Director
|
|
March 28, 2017
|
|
Clayton Carter
|
|
|
|
|
|
|
|
|
|
|
|
By: /s/ Chelsea Christopherson
|
|
Chief
Operations Officer, Director
|
|
March 28, 2017
|
|
Chelsea Christopherson
|
|
|
|
|
18
INDEX TO FINANCIAL STATEMENTS
|
Report of Independent Registered Public Accounting
Firm
|
F-2
|
|
|
|
|
Balance Sheets as of December 31, 2016 and 2015
|
F-3
|
|
|
|
|
Statements of Operations for the Years Ended December 31, 2016 and
2015
|
F-4
|
|
|
|
|
Statement of Changes in Shareholders’ Equity for the Years
Ended December 31, 2016 and 2015
|
F-5
|
|
|
|
|
Statements of Cash Flows for the Years Ended December 31, 2016 and
2015
|
F-6
|
|
|
|
|
Notes to the Financial Statements for the Years Ended December 31,
2016 and 2015
|
F-7
|
F-1
 |
|
|
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The
Board of Directors and Stockholders of
GEX
Management, Inc.
We have
audited the accompanying balance sheets of GEX Management, Inc.
(the Company) as of December 31, 2016 and 2015, and the related
statements of operations, changes in stockholdersí equity
(deficit) and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We
conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States of America).
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements
are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration
of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our
opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of GEX Management,
Inc. as of December 31, 2016 and 2015, and the results of its
operations and its cash flows for the years then ended, in
conformity with accounting principles generally accepted in the
United States of America.
/s/Heaton &
Company, PLLC
Farmington,
Utah
March
27, 2017
|
F-2
GEX Management, Inc.
Balance Sheets
December 31, 2016 and 2015
ASSETS
|
|
Dec 31,
2016
|
Dec 31,
2015
|
|
|
|
|
|
Current
Assets:
|
|
|
|
Cash
and Cash Equivalents
|
$307,395
|
$2,837
|
|
Accounts
Receivable, net
|
100,820
|
73,784
|
|
Accounts
Receivable – Related Party
|
23,500
|
2,029
|
|
Other
Current Assets
|
959
|
---
|
|
Total
Current Assets
|
432,674
|
78,650
|
|
|
|
|
|
Property, Plant and
Equipment (Net)
|
1,106
|
1,683
|
|
|
|
|
|
Note Receivable
– Related Party
|
-
|
15,500
|
|
|
|
|
|
TOTAL
ASSETS
|
$433,780
|
$95,833
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS’ (DEFICIT)
|
||
|
|
|
|
|
Current
Liabilities:
|
|
|
|
Accounts
Payable
|
$3,832
|
$1,541
|
|
Accounts
Payable – Related Party
|
—
|
137
|
|
Accrued
Expenses
|
60,615
|
29,941
|
|
Accrued
Expenses – Related Party
|
45,000
|
—
|
|
Working
Capital Loan
|
—
|
75,444
|
|
Accrued
Interest Payable
|
21,952
|
4,404
|
|
Total
Current Liabilities
|
131,399
|
111,467
|
|
|
|
|
|
Non-Current
Liabilities
|
|
|
|
Notes
Payable – Related Party
|
363,187
|
107,856
|
|
|
|
|
|
TOTAL
LIABILITIES
|
494,586
|
219,323
|
|
|
|
|
|
SHAREHOLDERS’
(DEFICIT)
|
|
|
|
Preferred
Stock, $0.001 par value, 20,000,000 shares
|
|
|
|
authorized,
0 shares issued and outstanding
|
—
|
—
|
|
Common
Stock, $0.001 par value, 200,000,000 shares
|
|
|
|
authorized,
8,241,015 and 8,000,000 shares issued and
|
|
|
|
outstanding
|
8,241
|
8,000
|
|
Additional
Paid In Capital
|
377,144
|
15,862
|
|
Retained
Deficit
|
(446,191)
|
(147,352)
|
|
TOTAL
SHAREHOLDERS’ (DEFICIT)
|
(60,806)
|
(123,490)
|
|
|
|
|
|
TOTAL LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
$433,780
|
$95,833
|
The
accompanying notes are an integral part of these financial
statements.
F-3
GEX Management, Inc.
Statements of Operations
Twelve Months Ended December 31, 2016 and 2015
|
|
Twelve Months
Ended
Dec 31,
2016
|
Twelve Months
Ended
Dec 31,
2015
|
|
|
|
|
|
Revenues
|
$202,336
|
$343,891
|
|
Revenues –
Related Party
|
305,885
|
563,837
|
|
Total
Revenues
|
508,221
|
907,728
|
|
|
|
|
|
Cost of
Revenues
|
385,226
|
396,399
|
|
Gross Profit
(Loss)
|
122,995
|
511,329
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
Depreciation
|
577
|
48
|
|
Selling
and Advertising
|
36,226
|
63,043
|
|
General
and Administrative
|
345,294
|
284,855
|
|
Total
Operating Expenses
|
382,097
|
347,946
|
|
|
|
|
|
Total
Operating Income (Loss)
|
(259,102)
|
52,488
|
|
|
|
|
|
Other Income
(Expense)
|
|
|
|
Interest
Income
|
72
|
48
|
|
Interest
(Expense)
|
(39,809)
|
(25,635)
|
|
Total
Other Income (Expense)
|
(39,737)
|
(25,587)
|
|
|
|
|
|
Net income (loss)
before income taxes
|
(298,839)
|
137,796
|
|
Provision for
income taxes
|
—
|
—
|
|
|
|
|
|
NET INCOME
(LOSS)
|
$(298,839)
|
$137,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC and
DILUTED
|
|
|
|
Weighted Average
Shares Outstanding
|
8,015,261
|
8,000,000
|
|
Earnings (Loss) per
Share
|
$(0.04)
|
$0.02
|
The
accompanying notes are an integral part of these financial
statements.
F-4
GEX Management, Inc.
Statement of Changes in Shareholders’ Equity
(Deficit)
Twelve Months Ended December 31, 2016 and 2015
|
|
Preferred
|
Common
|
Additional Paid
In
|
Retained
|
|
||
|
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Totals
|
|
Balance, December
31, 2014
|
-
|
$-
|
8,000,000
|
$8,000
|
$15,862
|
$(285,148)
|
$(261,286)
|
|
|
|
|
|
|
|
|
|
|
Net Income
(Loss)
|
|
|
|
|
|
137,796
|
137,796
|
|
Balance, December
31, 2015
|
-
|
-
|
8,000,000
|
8,000
|
15,862
|
(147,352)
|
(123,490)
|
|
|
|
|
|
|
|
|
|
|
Sale of Common
Shares for Cash
|
|
|
241,015
|
241
|
361,282
|
|
361,523
|
|
Net Income
(Loss)
|
|
|
|
|
|
(298,839)
|
(298,839)
|
|
Balance, December
31, 2016
|
-
|
$-
|
8,241,015
|
$8,241
|
$377,144
|
$(446,191)
|
$(60,806)
|
The
accompanying notes are an integral part of these financial
statements.
F-5
GEX Management, Inc.
Statements of Cash Flow
Twelve Months Ended December 31, 2016 and 2015
|
|
Twelve Months
Ended
|
Twelve Months
Ended
|
|
|
Dec 31,
2016
|
Dec 31,
2015
|
|
Cash Flows (used
by) Operating Activities:
|
|
|
|
Net
Income (Loss)
|
$(298,839)
|
$137,796
|
|
Adjustments to
reconcile net income (loss) to net cash
|
|
|
|
(used by) operating activities:
|
|
|
|
Depreciation
|
577
|
48
|
|
Bad debt
expense
|
29,918
|
63,043
|
|
Changes in assets
and liabilities:
|
|
|
|
Accounts
receivable
|
(56,954)
|
43,591
|
|
Accounts
receivable – Related Party
|
(21,471)
|
21,011
|
|
Other
current assets
|
(959)
|
_
|
|
Note
receivable – related party
|
15,500
|
(15,500)
|
|
Accounts
Payable
|
2,291
|
(463,662)
|
|
Accounts
payable – Related Party
|
(137)
|
341
|
|
Accrued
expenses
|
30,674
|
22,191
|
|
Accrued
expenses – Related Party
|
45,000
|
—
|
|
Accrued
interest payable
|
17,548
|
4,404
|
|
Net
cash provided (used by) operating activities
|
(236,852)
|
(186,737)
|
|
|
|
|
|
Cash Flows from
(used in) Investing Activities:
|
|
|
|
Purchase
of property, plant and equipment
|
—
|
(1,731)
|
|
Total from
Investing Activities:
|
—
|
(1,731)
|
|
|
|
|
|
Cash Flows from
(used in) Financing Activities:
|
|
|
|
Proceeds
from sale of common stock
|
361,523
|
—
|
|
Proceeds
from notes payable – related party
|
268,527
|
466,513
|
|
Payments
on notes payable – related party
|
(13,196)
|
(358,657)
|
|
Proceeds
from working capital loan
|
—
|
100,000
|
|
Payments
on working capital loan
|
(75,444)
|
(24,556)
|
|
Net
cash provided (used by) financing activities
|
541,410
|
183,300
|
|
|
|
|
|
NET INCREASE IN
CASH
|
304,558
|
(5,168)
|
|
CASH AT BEGINNING
OF PERIOD
|
2,837
|
8,005
|
|
|
|
|
|
CASH AT END OF
PERIOD
|
$307,395
|
$2,837
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES:
|
|
|
|
Income
taxes paid
|
$—
|
$—
|
|
Interest
paid
|
$22,261
|
$25,635
|
The
accompanying notes are an integral part of these financial
statements.
F-6
GEX Management, Inc.
Notes to Financial Statements
December 31, 2016
NOTE 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING
POLICIES
Organization and Description of Business
GEX
Management, Inc. (“GEX”, the “Company”,
“we”, “our”, “us”) is a
Professional Services Company that was originally formed in 2004 as
Group Excellence Management, LLC d/b/a MyEasyHQ. The Company
converted from a limited liability company to a corporation in
March of 2016, and changed its name to GEX Management, Inc. in
April of 2016. The Company provides professional services and
general business consulting to companies for a variety of their
“back office” needs. We generate substantially all of
our revenue from the professional services we provide to our
customers. A majority of the services we provide to our clients
include: IT support, digital marketing and sales, accounting and
bookkeeping, human resources, business consultation and
optimization and staffing.
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 that are applicable
to interim financial reporting. 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.
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. The
Company maintains deposits in a financial institution which
provides Federal Deposit Insurance Corporation coverage for
interest bearing and non-interest bearing transaction accounts
of up to $250,000. At December 31, 2016, none of the
Company’s cash was in excess of federally insured
limits.
Revenue Recognition
The
Company accounts for its Staffing Solutions revenues in accordance
with Accounting Standards Codification (“ASC”) 605-45,
Revenue Recognition for Principal
Agent Considerations. The Company’s gross billings to
clients include the payroll cost of each employee and a markup
computed as a percentage of each worksite employee’s payroll
cost. The Company invoices the gross billings concurrently with
each periodic payroll of our worksite employees. The aforementioned
markup includes pricing components associated with the
Company’s estimates of payroll taxes, benefits and
workers’ compensation costs, plus a separate component
related to the Company’s services.
The
Company accounts for Back Office Solutions revenue arrangements
that contain multiple deliverables in accordance with ASC 605-25,
Revenue Recognition
for Arrangements with Multiple
Elements, which addresses the determination of whether an
arrangement involving multiple deliverables contains more than one
unit of accounting. A delivered item within an arrangement is
considered a separate unit of accounting only if both of the
following criteria are met:
●
the
delivered item has value to the customer on a stand-alone basis;
and
●
if the
arrangement includes a general right of return relative to the
delivered item, delivery or performance of the undelivered item is
considered probable and substantially in control of the
vendor.
F-7
Under
FASB ASC Topic 605-25, if both of the criteria above are not met,
then separate accounting for the individual deliverables is not
appropriate. 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. To date, all revenues are
recognized after the services are performed, collectability is
reasonably assured and the customer is invoiced.
Income Taxes
The
Company has adopted ASC 740-10, which requires the use of 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.
Accounts Receivable
Accounts
Receivable consists of accrued services and consulting receivables
due from customers and are unsecured. The receivables are generally
unsecured and such amounts 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 generally not
to charge interest on receivables after the invoice becomes past
due. A receivable is considered past due if payments
have not been received within agreed upon invoice terms. Write offs
are recorded at a time when a customer receivable is deemed
uncollectible.
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.
Cash,
accounts receivable, accounts payable and other accrued expenses
and other current assets and liabilities are carried at amounts
which reasonably approximate their fair values because of the
relatively short maturity of those instruments.
Fair Value of Financial Instruments
The ASC
guidance for fair value measurements and disclosure establishes a
fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3
measurements). The three levels of the fair value
hierarchy are described below:
Level 1 Inputs – Quoted prices
for identical instruments in active markets.
Level 2 Inputs – Quoted prices
for similar instruments in active markets; quoted prices for
identical or similar instruments in markets that are not active;
and model-derived valuations whose inputs are observable or whose
significant value drivers are observable.
Level 3 Inputs – Instruments with
primarily unobservable value drivers.
As of
December 31, 2016, the Company’s financial assets were
measured at fair value using Level 3 inputs, with the exception of
cash, which was valued using Level 1 inputs. As of these dates, the
Company had no Level 3 inputs.
F-8
Property, Plant and Equipment
Property,
Plant and Equipment are carried at the cost of acquisition or
construction, and are 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. Gains and losses on dispositions of equipment are in
operating income. Depreciation and amortization are provided using
the straight-line and accelerated methods over the estimated useful
lives of the assets as follows:
|
Office
Furniture & Equipment
|
|
5
Years
|
Earnings Per Share
Earnings
per share are calculated in accordance with ASC 260
“Earnings per
Share”. The weighted average number of common
shares outstanding during each period is used to compute basic
earnings (loss) per share. Diluted earnings per share
are computed using the weighted average number of shares and
potentially dilutive common shares
outstanding. Potentially dilutive common shares
are additional common shares assumed to be
exercised. The Company has no potentially dilutive
common shares.
Recently Issued Accounting Pronouncements
The
Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company’s
results of operations, financial position or cash
flow.
NOTE 2. INCOME TAXES
GEX
Management, Inc. has incurred losses since
2014. Therefore, GEX has no federal tax liability.
The net deferred tax asset generated by the loss carryforward has
been fully reserved. The cumulative net operating loss
carryforward is $377,121 and $78,282 at December 31, 2016 and 2015,
respectively, all of which is available for carryforward for
federal income tax purposes and will expire in fiscal years 2034 to
2036. At December 31, 2016 and December 31, 2015, the
deferred tax asset consisted of the following:
|
|
Dec 31,
2016
|
Dec 31,
2015
|
|
Deferred Tax
Asset:
|
|
|
|
Net
Operating (Income) Loss
|
$128,221
|
$26,616
|
|
Less
Valuation Allowance
|
(128,221)
|
(26,616)
|
|
Net
Deferred Tax Asset
|
$—
|
$—
|
The
change in the valuation allowance of $101,605 is due to the
Company’s net loss of $298,839 during the year ended December
31, 2016.
The
Company has no tax positions at December 31, 2016 and 2015 for
which the ultimate deductibility is highly certain but for which
there is uncertainty about the timing of such
deductibility.
The
Company’s tax returns for the years ended December 31, 2016,
2015, and 2014 are open for examination under Federal Statute of
Limitations.
The
Company recognizes interest accrued related to unrecognized tax
benefits in interest expense and penalties in operating expenses.
The Company had no accruals for interest and penalties since
inception.
F-9
NOTE 3. SHAREHOLDERS’ EQUITY
The
Company is authorized to issue 200,000,000 common shares at a par
value of $0.001 per share. These shares have full voting
rights. At December 31, 2016 and December 31, 2015 there
were 8,241,015 and 8,000,000 common shares outstanding,
respectively.
The
Company is authorized to issue 20,000,000 preferred shares at a par
value of $0.001 per share. These shares have full voting
rights. At December 31, 2016 and December 31, 2015 there
were -0- preferred shares outstanding. The preferred stock ranks
senior to the common stock of the Company in each case with respect
to dividend distributions and distributions of assets upon the
liquidation, dissolution or winding up of the Company whether
voluntary or involuntary.
NOTE 4. NOTES PAYABLE
At
December 31, 2016 and December 31, 2015 Notes Payable were as
follows:
|
|
Dec 31,
2016
|
Dec 31,
2015
|
|
Current Note
Payable:
|
|
|
|
Working Capital
Loan, $544 for 252 business days,
|
|
|
|
final
payment Sept 13, 2016
|
$-
|
$75,444
|
|
Non-Current Note
Payable:
|
|
|
|
Note Payable
– Related Party, 6% interest rate, $1,000,000
|
|
|
|
Line
of Credit, due March 31, 2019
|
317,187
|
107,856
|
|
Non-Current Note
Payable:
|
|
|
|
Note Payable-
Related Party, 6% interest rate, $500,000
|
|
|
|
Line
of Credit, due March 31, 2019
|
46,000
|
—
|
|
Total Notes
Payable
|
$363,187
|
$183,300
|
NOTE 5. ACCOUNTS RECEIVABLE AND CONCENTRATION OF CREDIT
RISK
Accounts
receivables are considered past due if payments have not been
received within agreed upon invoice terms. Write offs are recorded
at a time when a customer receivable is deemed uncollectible. GEX
had $29,918 and $63,043 bad debt expense during the twelve months
ended December 31, 2016 and 2015, respectively, and had $41,651 and
$11,733 allowance for bad debts at December 31, 2016 and 2015
respectively.
At the
periods ended December 31, 2016 and 2015, four customers made up
92% and three customers made up 70% of the Company’s
outstanding accounts receivable balance, respectively of which 19%
and 0% were related party receivables for the years ended December
31, 2016 and 2015, respectively.
For the
periods ended December 31, 2016 and December 31, 2015 four
customers accounted for 80% and five customers accounted for 83% of
the Company’s net revenue, respectively of which 60% and 61%
were related party revenues for the periods ended December 31, 2016
and 2015, respectively. Management believes the credit risk is
minimal.
NOTE 6. NOTE RECEIVABLE
At
December 31, 2016 and December 31, 2015 the Note Receivable was as
follows:
|
|
Dec 31,
2016
|
Dec 31,
2015
|
|
Current Notes
Receivable:
|
|
|
|
Note Receivable
– Related Party, 6% interest rate, $45,000,
|
|
|
|
Due
date March 31, 2019
|
$-
|
$15,500
|
|
Total Notes
Receivable
|
$-
|
$15,500
|
F-10
NOTE 7. COMMITMENTS AND CONTINGENCIES
In
September 2016, the Company entered into a 38 month lease agreement
starting October 2016 for its 2,920 square foot corporate office,
under which the first two months were credited. The Company
paid rent expense of $5,232 related to this lease for the period
ended December 31, 2016.
The
Company has a month-to-month lease of $2,000 per month on a
satellite office space of which the Company recorded $10,000 in
rent expense in 2016. In addition to the two leases above, the
Company paid $28,258 in rent expense prior to signing the 38 month
lease described above.
The
following are the minimum lease obligations under the 38 month
lease:
|
Year
|
Amount
|
|
2017
|
$
62,902
|
|
2018
|
64,362
|
|
2019
|
60,225
|
|
Total
|
$ 187,489
|
NOTE 8. 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
On
March 1, 2015 the Company entered into a Loan Agreement with its
CEO, Carl Dorvil. Mr. Dorvil agreed to loan the Company up to
$1,000,000 at a rate of 6%. This loan has a balance of $317,187 and
$107,856 at December 31, 2016 and December 31, 2015, respectively.
The loan is due and payable on March 31, 2019.
On
March 1, 2015, the Company entered into a Loan Agreement with P413
Management, LLC (“P413”). P413 agreed to loan the
Company up to $500,000 at a rate of 6%. GEX’s CEO, Carl
Dorvil, is a majority member interest owner in P413. This loan has
a balance of $46,000 and $0 at December 31, 2016 and December 31,
2015, respectively. The loan is due and payable on March 31,
2019.
The
Company had revenues from related parties of $305,885 and $563,837
for the years ended December 31, 2016 and 2015,
respectively.
On
March 1, 2015, the Company entered into an Outsourcing Agreement
with P413 Management, LLC (“P413”) to provide back
office services to P413. GEX’s CEO, Carl Dorvil, is a
majority member interest owner in P413. The Company reported
revenues under this Agreement of $38,513 and $7,000 for the years
ended December 31, 2016 and 2015 respectively.
On
September 1, 2015 the Company entered into an Outsourcing Agreement
with Vicar Capital Advisors, LLC (“Vicar”) to provide
back office services to Vicar. GEX’s CEO, Carl Dorvil, is a
majority member interest owner in Vicar. The Company reported
revenues under this Agreement of $101,992 and $93,644 for the years
ended December 31, 2016 and 2015 respectively. As of December 31, 2016 and 2015 Vicar had
an outstanding balance owed to the Company of $23,500 and $1,894,
respectively.
F-11
On
August 1, 2014 the Company entered into an Outsourcing Agreement
with Renaissance Global Marketing, LLC (“Renaissance”)
to provide back office services to Renaissance. GEX’s CEO,
Carl Dorvil was formally a minority member interest owner in
Renaissance. The Company reported revenues under this Agreement of
$165,380 and $233,836 for the years ended December 31, 2016 and
2015. As of December 31, 2016 and 2015 Renaissance
had an outstanding balance owed to the Company of $0 and $135,
respectively.
The
Company performed services for Group Excellence Ltd to provide back
office services. At the time of service, a GEX employee controlled
Group Excellence Ltd. The Company reported revenues under this
Agreement of $0 and $227,602 for the years ended December 31, 2016
and 2015.
The
Company also had other related party revenues of $1,755 in 2015
with Dynasty Spirits, a company associated with a former
employee.
On
September 1, 2015 the Company entered into a Promissory Note with
Knowledgeable Resources Solutions, LLC (“KRS”) for
$45,000 at a rate of 6% in provide financing to KRS to expand its
human resources consulting services. A GEX employee and his wife
own 100% of KRS. The loan was paid in full in the quarter ended
September 30, 2016.
The
Company entered into a Consulting Agreement with Capital Financial
Consultants, Inc. for $30,000 and $45,000 for the year ended
December 31, 2016. A GEX officer’s family member owns Capital
Financial Consultants, Inc. As of December 31, 2015 and 2016 the
balance payable under the two agreements to CFC was $0 and $45,000,
respectively.
NOTE 9. SUBSEQUENT EVENTS
The
Company filed Form S-1 with the Securities & Exchange
Commission and it was declared effective on November 14, 2016.
Since December 31, 2016, the Company sold 188,059 shares for
$282,089, for a total to date of 429,074 shares for $643,611 under
this registration statement.
The
Company obtained its Professional Employment Organization license
from the State of Texas on January 28, 2017 and from the State of
Arkansas on February 27, 2017. These licenses allows GEX to
co-employ individuals that work at other companies for the purpose
of handling their payroll, human resources, benefits
administration, as well as other administrative
duties.
On
March 9, 2017 the Company entered into Sales and Commission
Agreement with a sales consultant. Pursuant to this Agreement the
Company issued 33,334 shares of common stock restricted pursuant to
Rule 144 of the Securities Act of 1933, as amended.
On
March 9, 2017 the Company entered into a Contract Purchase
Agreement with J&M Outsourcing, in which GEX purchased two
Client Service Agreements consisting of approximately 200 employee
co-employment relationships that transfer to GEX.
F-12