10QSB 1 file001.htm FORM 10QSB


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES ACT OF
    1934

                  For the quarterly period ended April 30, 2005

                         Commission File Number 0-15382

                         GENER8XION ENTERTAINMENT, INC.
                    (Exact name as specified in its charter)


           Delaware                                          13-3341562
(State or other jurisdiction of                              (IRS Employer
incorporation or organization)                               Identification No.)

3400 W. Cahuenga Blvd.
Hollywood, CA                                                90068
(Address of principal executive office)                      (Zip Code)


Registrant's telephone number: (323) 874-9888





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


Outstanding common stock, $.01 par value as of May 31, 2005: 15,178,150 shares




                         Gener8xion Entertainment, Inc.
                          (A Development Stage Company)
                                TABLE OF CONTENTS

PART I      FINANCIAL INFORMATION

Item 1      Financial Statements (Unaudited)

            Condensed consolidated balance sheet - April 30, 2005

            Condensed consolidated statements of operations - Three months and
            six months ended April 30, 2005 and 2004 and cumulative November 13,
            2001 to April 30, 2005

            Consolidated statements of cash flow - Six months ended April 30,
            2005 and 2004 and cumulative November 13, 2001 to April 30, 2005

            Notes to consolidated financial statements - April 30, 2005

Item 2      Management's Discussion and Analysis or Plan of Operation.

Item 3      Controls and Procedures

PART II     OTHER INFORMATION

Item 1.     Legal Proceedings

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.     Defaults upon Senior Securities

Item 4.     Submission of Matters to a Vote of Security Holders

Item 5.     Other Information

Item 6.     Exhibits and Reports on Form 8-K


SIGNATURES



PART I - FINANCIAL INFORMATION

                         Gener8xion Entertainment, Inc.
                          (A Development Stage Company)
                      Condensed Consolidated Balance Sheet
                                   (Unaudited)
                                 April 30, 2005

ASSETS
Current assets:
  Cash and cash equivalents                                          $    1,170
  Prepaid rent - related party                                           24,000
  Deferred private placement expenses                                    32,640
                                                                     ----------
    Total current assets                                                 57,810

Equipment:
  Rental equipment                                 $   200,000
  Production equipment                                 195,725
  Other equipment                                       11,717
                                                   -----------
                                                       407,442
  Accumulated depreciation                             108,552          298,890
                                                   -----------       ----------
    Total assets                                                     $  356,700
                                                                     ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
  Accrued liabilities                                                $  459,458
  Advance - related parties                                              85,520
  Advance - other                                                         6,600
  Loan payable, related parties                                          50,000
  Deferred rental income-related party                                    4,298
  Current portion of note payable                                        23,474
                                                                     ----------
    Total current liabilities                                           629,350

Note payable, less current portion                                        3,467

Stockholders' Deficiency:
  Preferred stock, $.01 par value, authorized
    1,000,000 shares, none issued and outstanding
  Common stock, $.01 par value, authorized
    50,000,000 shares, issued and outstanding
    15,178,150 shares                              $   151,788
  Additional paid-in capital                           321,839
  Deficit accumulated during the development
    stage                                             (749,744)
                                                   -----------
Total stockholders' deficit                                            (276,117)
                                                                     ----------
Total liabilities and stockholders' deficit                          $  356,700
                                                                     ==========


The accompanying notes are an integral part of the financial statements.



                         Gener8xion Entertainment, Inc..
                          (A Development Stage Company)
                 Condensed Consolidated Statements of Operations
                                   (Unaudited)


                                                 Three months ended April 30,
                                                ------------------------------
                                                    2005              2004
                                                ------------      ------------

General and administrative expenses             $  (368,838)      $   (18,578)

Rental income - related party                        12,894            12,894

Rental expense - depreciation                        (7,143)           (7,336)

Other income - production services                   60,000

Interest expense                                     (1,402)           (1,723)
                                                ------------      ------------
Loss before income taxes                           (304,489)          (14,743)

State income taxes                                      375               723
                                                ------------      ------------
Net loss                                        $  (304,864)      $   (15,466)
                                                ============      ============
Net income (loss) per common share -
  Basic and diluted                             $     (0.02)      $         -

Weighted average common shares
  Outstanding - basic and diluted                15,178,150         6,358,750



The accompanying notes are an integral part of the financial statements.





                         Gener8xion Entertainment, Inc..
                          (A Development Stage Company)
                 Condensed Consolidated Statements of Operations
                                   (Unaudited)

<TABLE>

                                                                         Cumulative
                                                                        Period from
                                        Six months ended April 30,    November 11, 2001
                                       ----------------------------    (inception) to
                                           2005            2004        April 30, 2005
                                       ------------    ------------   -----------------

General and administrative expenses    $  (572,103)    $   (76,123)     $(1,123,073)

Rental income - related party               25,788          25,788          167,622

Rental expense - depreciation              (14,286)        (14,672)         (95,025)

Other income - production services         320,000               -          320,000

Interest expense                            (2,812)         (3,170)         (14,266)
                                       ------------    ------------     ------------
Loss before income taxes                  (243,413)        (68,177)        (744,742)

State income taxes                           1,369           1,450            5,002
                                       ------------    ------------     ------------
Net income (loss)                      $  (244,782)    $   (69,627)     $  (749,744)
                                       ============    ============     ============
Net income (loss) per common share
  - basic and diluted                  $     (0.02)    $     (0.01)     $     (0.08)

Weighted average common shares
  outstanding - basic and diluted       14,348,916       6,358,750        6,465,196
</TABLE>


The accompanying notes are an integral part of the financial statements.




                         Gener8xion Entertainment, Inc.
                          (A Development Stage Company)
                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)

<TABLE>

                                                                         Cumulative
                                                                         Period from
                                         Six months ended April 30,   November 13, 2001
                                         --------------------------     (inception) to
                                            2005            2004       January 31, 2005
                                         ----------      ----------   -----------------

Operating activities:
Cash provided by (used in) operating
  activities                             $ 106,215       $ (11,274)      $ (138,987)
                                         ----------      ----------      -----------
Investing activities:
  Purchase of rental and other
    equipment                             (199,625)            -           (407,442)
                                         ----------      ----------      -----------
Cash used in investing activities         (199,625)            -           (407,442)
                                         ----------      ----------      -----------
Financing activities:
  Advances (repayment) of advances          83,520             -             88,520
  Sale of common stock                         -               -            247,169
  Expenses in connection with
    Private placement                      (32,640)            -            (32,640)
  Cash received from affiliate from
    sale of stock                              -               -             60,250
  Services and loans contributed
    in excess of far value of
    common stock issued                        -               -             50,491
  Borrowings from related parties           50,000          12,500          157,500
  Repayments of borrowings -
    related parties                         (9,505)         (6,130)         (23,691)
                                         ----------      ----------      -----------
Cash provided by
  financing activities                      91,375           6,370          547,599
                                         ----------      ----------      -----------
Net increase (decrease) in cash             (2,035)         (4,904)           1,170

Cash and cash equivalents at
  beginning of period                        3,205          21,854              -
                                         ----------      ----------      -----------
Cash and cash equivalents at
  end of period                          $   1,170       $  16,950       $    1,170
                                         ==========      ==========      ===========
</TABLE>


The accompanying notes are an integral part of the financial statements.




                         Gener8xion Entertainment, inc.
                          (A Development Stage Company)
         Notes to Unaudited Condensed Consolidated Financial Statements
                                 April 30, 2005

1 - Basis of presentation and significant accounting policies

The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial statements pursuant to Regulation S-B. Accordingly, they
do not include all the information and footnotes required by accounting
principles generally accepted in the United States for complete financial
statements. In the opinion of management, all adjustments, (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three months and six months ended April 30,
2005 are not necessarily indicative of operating results that may be expected
for the year ending October 31, 2005. For further information refer to the
financial statements and footnotes included in Form 10-KSB for the year ended
October 31, 2004 as filed by the Company.

The consolidated financial statements have been prepared on a going-concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of the Company's business. The Company's
ability to continue as a going concern is dependent on various factors
including, among others, its ability to raise additional debt or equity
financing. There is no assurance that such financing will be available or at
terms the Company can meet. For the cumulative period since inception through
the April 30, 2005, the Company had a net loss and negative cash flow from
operations. These losses have adversely impacted the Company's working capital
position. Management had reduced its operating costs until the quarter ended
January 31, 2005 during which period payroll and other operating expenses
increased in connection with expected future operations. The Company believes
that it will be able to raise additional debt or equity financing which will be
sufficient to sustain operations through at least April 30, 2006. Accordingly,
the financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amount
or classification of liabilities that may result from the outcome of the
uncertainty.

Revenues from production services (which commenced during the quarter ended
January 31, 2005) are recognized in income during the period in which the
service is rendered. The services performed during the six months ended April
30, 2005 consisted of distribution and production services for a joint venture
in which the Company's Chief Executive Officer/principal shareholder has a
minority interest.

2 - Shareholders' Equity

In November 2004 the Company entered into an Asset Purchase Agreement with
Matthew and Laurie Crouch and an Employment Agreement with Matthew Crouch
whereby it issued 8,800,000 shares of common stock (approximately 58% of the
Company's issued and outstanding shares). Mr. Crouch was appointed Chief
Executive Officer and Chairman of the Board of Directors of the Company.

As a result of the transaction, the Company acquired all the worldwide
distribution rights owned by Matthew and Laurie Crouch to the feature film "One
Night with the King" and to a proposed animated film project, "Prodigal Son".




The employment agreement is for a period of seven years and provides for a
minimum annual salary of $350,000.

The accounting basis of the assets acquired is zero. The par value of the shares
issues has been credited to Common Stock and charged to Additional Paid in
Capital.

Further, during the six months ended April 30, 2005 the Company issued 20,000
shares of common stock for services. General and administrative expenses has
been charged $2,000 representing the fair value of the shares, Common Stock has
been credited $200 for the par value thereof and the balance ($1,800) credited
to Additional Paid in Capital.

During the six months ended April 30, 2005 the Company issued options to
officers, directors and consultants for the purchase of 492,000 shares of common
stock at $1.25 per share (the market price at date of grant). The options expire
in 2010.

Pro-forma disclosure in accordance with FAS 123 would be immaterial.

The number of common share equivalents excluded from earning per share because
the effect is anti dilutive is 542,000 shares (three months and six months ended
April 30, 2005), 1,230,000 shares (three months and six months ended April 30,
2004) and 683,683 shares (cumulative period from November 11, 2001 to April 30,
2005).

3 - Related Party Transactions

During the six months ended April 30, 2005, the Company borrowed $50,000 from
related parties. The borrowings are payable in November 2006, with interest at
5%.per annum.

The Company rents premises from a company controlled by its principal
shareholder/Chairman/CEO for $12,000 per month under a six month lease expiring
in April 2005 and continuing thereafter on a month to month basis. The Company
also prepaid two months rent.

The Company has a three-year employment agreement (through December 2007) with
its president which provides for minimum annual compensation of $250,000.

During the six months ended April 30, 2005, a related party advanced $83,520 by
paying payroll and other expenses for the Company.

The Company purchased production equipment totaling $195,725 during the QE April
30, 2005 from a company owned by its Chairman/CEO.

4 - Accrued Liabilities

Accrued liabilities consist of the following:
Consulting fees to a company owned by a principal shareholder        $  49,744
Compensation to officers/directors                                     293,733
Compensation to former officer/director                                 20,100
Payroll taxes                                                           43,333
Other                                                                   52,548
                                                                     ---------
                                                                     $ 459,458
                                                                     =========



Item 2. Management's Discussion and Analysis or Plan of Operation.

This discussion, other than historical financial information, may consist of
forward-looking statements that involve risks and uncertainties, including when
and if the Company has significant operations. Consequently, actual results may
vary from management's expectations.

RESULTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED APRIL 30, 2005
AS COMPARED TO THE THREE MONTHS AND SIX MONTHS ENDED APRIL 30, 2004.

Rental income amounted to $12,894 for each of the three months and $25,788 for
each of the six months ended April 30, 2005 and 2004. Related depreciation
expense was approximately $7,000 for each of the three month periods and $14,000
for each of the six month periods.

Other income of $60,000 for the three months ended April 30, 2005 and $320,000
for the six months ended April 30, 2005 resulted from production and
distribution services rendered by the Company to a joint venture in which the
Company's Chief Executive Officer has a minority interest. This was the first
revenue the Company earned from these services.

General and administrative expenses amounted to $368,838 for the three months
and $572,103 for the six months ended April 30, 2005. This compares to $18,578
for the three months and $76,123 for the six months ended April 30, 2004, an
increase in the 2005 periods of $350,260 for the three months and $495,980 for
the six months.

During the quarter ended January 31, 2003 the Company's officers/employees and
consultant agreed not to receive compensation. Commencing in April 2003 through
January 31, 2004, the Company commenced paying a portion of the compensation and
accruing the balance. From February 2004 to October 31, 2004 the Company did not
pay or accrue regular compensation to its officers/employees and consultant and
paid for services rendered during that period on a current basis. Commencing in
November 2004 the Company has been accruing compensation to its CEO and since
January 2005 to its other officers. Further since November 2004 the Company has
been paying rent for premises. The increase in general and administrative
expenses is principally the result of the increase in compensation, related
payroll taxes and rent.

Interest expense amounted to $1,402 for the three months and $2,812 for the six
months ended April 30, 2005 compared to $1,723 and $3,170 for the same periods
in the prior year. Interest expense relates to notes and loans from related
parties for borrowings.



Liquidity and Capital Resources

The Company's current activities and operating expenses will require raising
additional capital. There is no assurance that the additional capital will be
available. During the six months ended April 30, 2005 the Company cash flow from
operations of $106,215 compared to negative cash flow of $11,274 for the six
month period last year. Further during the current six-month period, the Company
purchased office equipment of approximately $200,000; there were no purchases in
the same period last year.

During the six months ended April 30, 2005 the Company had cash flow of
approximately $91,000 from financing activities. This resulted from related
party borrowing of $50,000, advances from a related party of $83,520 which funds
were used by the related party to pay payroll and other expenses for the
Company. Financing activities used funds to pay expenses in connection with a
proposed private placement of securities ($32,640) and repayment of debt of
approximately $10,000.

From April 2003 to January 31, 2004, the Company paid a portion of officers and
consultants compensation and accruing the balance. From February 2004 to October
31, 2004 the Company did not pay or accrue regular compensation to its
officers/employees and consultant and paid for services rendered during that
period on a current basis. Commencing in November 2004 the Company has been
accruing compensation to its CEO and since January 2005 to its other officers.
Further since November 2004 the Company has been paying rent for premises.


Critical Accounting Policies and use of Estimates

The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States which requires
management to make estimates and assumptions affecting the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.

Options issued to directors of the Company included above are accounted for
pursuant to Accounting Principles Board Opinion 25, "Accounting for Stock Issued
to Employees" and related interpretations, and the grant price equaled to the
fair value on the date of grant. Pro forma operating information, giving effect
to the fair value of the options has not been presented because the effect is
not material.





Item 3 - Controls and Procedures.

As of April 30, 2005, an evaluation was performed under the supervision and with
the participation of the Company's management, including the Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures as defined in the
Securities Act of 1934 Rules 13a-14 (c) and 15d-14(c). Based on that evaluation,
the Company's management, including the Chief Executive Officer and Chief
Financial Officer, concluded that the Company's disclosure controls and
procedures were effective as of April 30, 2005. There have been no significant
changes in the Company's internal controls or other factors that could
significantly affect internal controls subsequent to that date.


PART II

     This Form 10-QSB and our other filings with the Securities and Exchange
Commission and public announcements contain "forward-looking statements," within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve risks, uncertainties and other factors that
may cause our actual results or performance to differ materially from any
results of performance expressed or implied by those statements. Examples of
forward-looking statements include predictive statements, statements that depend
on or refer to future events or conditions, which include words such as
"expects," "anticipates," "intends," "plans," "believes," "estimates," "should,"
"would," "may" or similar expressions, or statements that involve hypothetical
events.


Item 1. Legal Proceedings

None

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None



Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5 Other Information

None

Item 6. Exhibits and Reports on Form 8-K

Exhibit 31.1 - Certification of Chief Executive Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended

Exhibit 31.2 - Certification of Chief Financial Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended

Exhibit 32 - Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002




SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed by the undersigned hereunto duly
authorized.


                                             GENER8XION ENTERTAINMENT, INC.


Dated: June 15, 2005                             /s/ Matthew Crouch
                                                 ------------------
                                                 Matthew Crouch, Chief Executive
                                                 Officer and


Dated: June 15, 2005                             /s/ Marilyn Beaubien
                                                 --------------------
                                                 Chief Financial Officer
                                                 (Principal Accounting Officer)