SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________.
COMMISSION FILE NUMBER 000-32635
GROUP MANAGEMENT CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 59-2919648
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification
No.)
101 Marietta St., Suite 1070
Atlanta, GA 30303
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (404) 522-1202
Check whether the issuer (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), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No.
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by a
court. Yes No._____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date. As of
September 30, 2002, there were 9,616,000 shares of common stock
issued and outstanding.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT
(check one):
Yes No X .
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GROUP MANAGEMENT CORP
TABLE OF CONTENTS
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PART I
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Item 1 Financial Statements
Item 2 Management's Discussion and Analysis or Plan of
Operations
PART II
Item 1 Legal Proceedings
Item 2 Changes in 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
PART I
EXPLANATORY NOTE
Included in this Quarterly Report on Form 10-QSB is a
consolidated balance sheet of Group Management Corp as of
September 30, 2002, and the related consolidated statements of
operations for the three and six month periods ended September
30, 2002 and 2001, and statements of cash flows for the six
month periods ended September 30, 2002 and 2001.
This Quarterly Report includes forward-looking statements within
the meaning of the securities Exchange Act of 1934 (the
"Exchange Act"). These statements are based on management's
beliefs and assumptions, and on information currently available
to management. Forward-looking statements include the
information concerning possible or assumed future results of
operations of the Company set forth under the heading
"Management's Discussion and Analysis of Financial Condition
or Plan of operation." Forward-looking statements also include
statements in which words such as "expect," "anticipate,"
"intend," "plan," "believe," "estimate," "consider" or
similar expressions are used.
Forward-looking statements are not guarantees of future
performance. They involve risks, uncertainties and assumptions.
The Company's future results and shareholder values may differ
materially from those expressed in these forward-looking
statements. Readers are cautioned not to put undue reliance on
any forward-looking statements.
GROUP MANAGEMENT CORP
Consolidated Balance Sheet (UNAUDITED)
As of September 30, 2002
ASSETS
Current Assets
Cash $ 28,266
Accounts receivable-net 29,330
Inventory 71,734
Total Current Assets 129,331
Property and Equipment, Net 173,363
Other Assets, Net 154,931
$ 457,624
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 593,003
Notes payable and capital lease obligations 5,332,936
Total Current Liabilities 5,925,939
Stockholders' Equity and Accumulated Deficit
Common stock: par value $.0002, 300,000,000 shares
authorized, 9,616,000 issued and outstanding 19,232
Additional paid in capital 34,600,970
Accumulated deficit (40,088,517)
Total Stockholders' deficit (5,468,315)
$ (457,624)
See accompanying summary of accounting policies
and notes to financial statements.
GROUP MANAGEMENT CORP
Consolidated Statements of Operations (UNAUDITED)
For the Nine Months Ended For the Three Months Ended
September 30 September 30
2002 2001 2002 2001
Revenues:
Sales $ 169,776 $ 524,280 $ 49,013 $ 96,685
Cost of Goods Sold 104,999 435,294 23,412 105,287
Gross Profit 64,777 88,986 25,601 (8,602)
Operating Expenses
General and administrative 1,566,454 12,856,532 - 814,062
Depreciation expense 112,500 40,228 37,500 13,200
Interest expense 14,783 580,142 (7,277) 30,720
Research and development - 60,000 - -
Loss on investment in ITVR - 500,000 - -
1,693,737 14,036,902 30,223 857,982
Other Income
Interest income - 94,124 - -
Minority interest - (201,590) - (49,059)
Net Income $ (1,628,960) $(13,652,202) $ (4,622) $ (817,525)
Basic and fully diluted net loss per
share (0.39) (0.26) (.00) (0.01)
Weighted average number of shares
outstanding for basic and diluted net
loss per share 4,180,682 52541378 4180628 60952059
See accompanying summary of accounting policies
and notes to financial statements.
GROUP MANAGEMENT CORP
Consolidated Statements of Changes in Stockholders' Equity (UNAUDITED)
For the Period from December 31, 2001 to September 30, 2002
Common Stock Additional
Number of Paid in Accumulated
Shares Amount Capital Deficit Total
Balance, December 31, 2000 44,073,197 $ 4,407 $ 26,666,825 $ (23,240,878) $ 3,430,354
Shares issued for services 21,603,100 43,206 5,941,716 - 5,984,922
Shares issued in acquisitions,
net of 10,000,000
cancelled shares 4,320,862 8,642 5,372,826 - 5,381,468
Shares issued for cash
214,900 430 43,468 - 43,898
Beneficial interest on
convertible debt - - 468,258 - 468,258
Effect of unconsolidated
subsidiary - - (4,992,885) - (4,992,885)
Effect of 1 to 20
reverse stock split (66,658,801) (49,578) - - (49,578)
Net loss - - - (15,218,679) (15,218,679)
Balance, December 31, 2001 3,553,258 7,107 33,500,208 (38,459,557) (4,952,242)
Shares issued for services 450,000 900 900,000 - 900,900
Shares issued in
acquisitions - - - - -
Shares issued on convertible debt 5,612,742 11,225 200,762 211,987
Net loss - - - (1,628,960) (1,628,960)
Balance, September 30, 2002 9,616,000 $ 19,232 $ 34,600,970 $ (40,088,517) $ (5,468,315)
See accompanying summary of accounting
policies and notes to financial statements.
GROUP MANAGEMENT CORP
Consolidated Statements of Cash Flows (UNAUDITED)
For the Nine Months Ended For the Three Months Ended
September 30, September 30,
2002 2001 2002 2001
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $ (1,628,960) $(13,652,202) $ (4,622) $ (817,525)
Adjustments to reconcile net (loss)
to net cash provided by (used in)
operating activities:
Minority interest - (201,590) - (49,059)
Depreciation amortization 112,500 40,228 37,500 13,200
Stock based compensation 1,100,762 8,720,509 - -
Purchased in-process technology - - - -
Loss on investment in iTVr - 500,000 - -
Beneficial interest on convertible debt - 468,258 - -
Changes on operating assets and liabilities:
Accounts receivable (22,785) 10,037 25,629 120,627
Inventory 17,452 (43,070) (10,549) (59,167)
Other assets - 232,476 (20,295) 41,999
Accounts payable and accrued expenses 46,726 241,030 - 71,153
NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES (374,305) (3,684,324) 27,663 (678,772)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired through purchase of subsidiary - - -
Investment in iTVr - (500,000) - (16,271)
Purchase of equipment (100) (245,362) - 8,000
Notes receivable - (144,857) - -
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (100) (890,219) - (8,271)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock 250,000 55,500 - 13,001
Net change in notes payable 54,760 2,248,200 (97,308) 20,500
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 304,760 2,303,700 (97,308) 33,501
Increase (decrease) in cash and cash equivalents (69,645) (2,270,843) (69,645) (653,542)
Cash and cash equivalents at beginning of period 97,911 2,886,710 97,911 1,269,409
Cash and cash equivalents at end of period $ 28,266 $ 615,867 $ 28,266 $ 615,867
See accompanying summary of accounting
policies and notes to financial statements.
NOTE A - BASIS OF PRESENTATION
The accompanying un-audited condensed financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10 and Item 310 of Regulation S-B.
Accordingly, they do not include all of the information and
footnotes required for generally accepted accounting principles
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 six- and three-
month periods ended September 30, 2002 are not necessarily
indicative of the results that may be expected for the year
ended December 31, 2002. These financial statements should be
read in conjunction with the Company's audited financial
statements for the year ended December 31, 2001.
ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Our independent accountant included an explanatory paragraph in
their report, stating that the audited financial statements of
Group Management Corp. for the year ending December 31, 2001
have been prepared assuming the company will continue as a going
concern. They note that the Company's continued existence is
dependent upon its ability to generate sufficient cash flows
from operations to support its daily operations as well as
provide sufficient resources to retire existing liabilities and
obligations on a timely basis. We have continued losses from
operations, negative cash flow and liquidity problems. These
conditions raise substantial doubt about our ability to continue
as a going concern. The accompanying financial statements do
not include any adjustments relating to the recoverability of
reported assets or liabilities should we be unable to continue
as a going concern.
We have been able to continue based upon loans from
institutional investors and from inter-company transfers from
our subsidiaries, and the financial support of certain of our
stockholders. Management believes that actions presently being
taken to revise our operating and financial requirements provide
the opportunity for us to continue as a going concern.
Management is presently investigating acquisitions that
management believes can rebuild operations that can be
profitable in the long-term. Although management believes that
these efforts will enable us to meet our liquidity needs in the
future, there can be no assurance that these efforts will be
successful.
Management is currently attempting to restructure the operations
of Group Management Corp. However, there can be no assurances
that the restructuring will be successful, management is of the
opinion and of the business judgment, that a restructuring will
fundamentally assists the operations of Group Management Corp.
During the quarter management substantially deceased operations
of Group Management Corp. to attempt to restructure the company.
In the restructuring, management moved the principal place of
business from 12503 EXCHANGE BOULEVARD, SUITE 554 STAFFORD,
TEXAS, to 101 Marietta St., Suite 1070, Atlanta, GA 30303.
Management in its business judgment, settled outstanding
obligations of the company for equipment, office furniture and
the leasehold improvement was terminated in agreement with its
landlord.
Management in its restructuring and in its business judgment
reduced the deferred revenue of $2,500,000 in a note receivable
from Lumar Worldwide to zero on the balance sheet.
A loan of $250,000 at the interest rate of 8% for a one year
term was made to ITVR in April through June 2001. The note is
currently in default and litigation by the company to collect
the outstanding balance will be initialed.
RESULTS OF OPERATIONS
Revenue
Total revenues for the three months ended September 30,
2002 were $49,013 as compared to $96,685 for the three
months ended September 30, 2001. This decrease was due to a
decrease in product sales in the Company's GeeWhiz, Inc.
subsidiary which constituted substantially all of the
revenues for the three months ended September 30, 2002, and
further a result of management's decision to restructure
Group Management Corp.'s operation and seek acquisition
candidates.
Costs and Expenses
Cost of goods sold was $23,412, or approximately 47.77%
of sales, for the three months ended September 30, 2002, as
compared to $105,287 or approximately 91.83% of sales, for
the three months ended September 30, 2001. The decrease in
cost of goods sold reflects lower sales for the period.
General and administrative expenses were $0.0 for the
three months ended September 30, 2002, a decrease of
approximately 100% as compared to $814,062 for
Results of operations - continued
the three months ended September 30, 2001. This decrease is
attributable to a decrease of over $7,310,952 in stock
based compensation, and our overall decreased sales
activity.
Total costs and expenses were $30,223 for the three months
ended September 30, 2002, as compared to $857,982 for the
three months ended September 30, 2001. This decrease of
over 97% reflects a decreased in general and administrative
expenses and cost of goods sold, as discussed above.
Net Losses
The net loss for the three months ended September 30,
2002 was $4,622 as compared to $817,525 for the three
months ended September 30, 2001. The primary cause of this
approximately 99% decrease is the decrease in total costs
and expenses, discussed above.
LIQUIDITY AND CAPITAL REQUIREMENTS
Net cash provided in operating activities was $27,663 for the
three months ended September 30, 2002, as compared to net cash
used of $678,772 for the three months ended September 30, 2001,
a decrease of over 95%. We had $28,266 in cash at September 30,
2002, a decrease of $75,256 during the quarter.
Our net cash used by financing activities was $97,308 for the
three months ended September 30, 2002 as compared to net cash
provided of $33,501 for the period ending September 30, 2001.
At September 30, 2002, our current assets were $129,331, while
our current liabilities were $5,925,939. Total current
liabilities consists of $593,003 in accounts payable and accrued
expenses, and $5,925,939 in notes payable and capital lease
obligation.
If we are not able to obtain alternative financing and the note
holders are successful in their action to collect on the notes,
we would be unable to make payment in full on the notes and
would consider all strategic alternatives available to us,
possibly including a bankruptcy, insolvency, reorganization or
liquidation proceeding or other proceeding under bankruptcy law
or laws providing for relief of debtors. It is also possible
that one of these types of proceedings could be instituted
against us.
Management has taken steps to revise our operating and financial
requirements to accommodate our available cash flow, including
the temporary suspension of management and certain employee
salaries. As a result of these efforts, management believes
funds on hand, cash flow from operations and additional
issuance of common equity will enable us to meet our
liquidity needs for at least the short-term foreseeable
future.
We need to raise additional cash, however, in order to
satisfy our proposed restructuring plan, to meet obligations,
and expand our operations. Management is presently
investigating transactions and mergers and acquisitions that
management believes can provide additional cash for our
operations and be profitable long-term. In the future management
also intends to attempt to raise funds through private sales
of our common stock. Although management believes that these
efforts will enable us to meet our liquidity needs in the
future, there can be no assurance that these efforts will be
successful.
In the opinion of the Company's management, lawsuits
currently pending or threatened against the Company, unless
dismissed or settled within a short period of time, will
have a material adverse effect on the financial position and
results of operations of the Company because the Company does
not have the cash flow to continue to fund defense costs.
Management is currently reviewing several strategies for
continuing to fund defense costs while at the same time funding
the development of the Company. Such strategies may include
acquiring one or more businesses with positive cash flow, or
filing for bankruptcy protection. No decisions have been made
as of this time.
PART II
ITEM 1 LEGAL PROCEEDINGS
There have been no material developments to the legal
proceedings described in our Form 10-QSB for the quarter
ended September 30, 2002, filed with the Commission on
December 13, 2002.
In the ordinary course of business, the Company is from
time to time involved in various pending or threatened legal
actions. The litigation process is inherently uncertain and
it is possible that the resolution of such matters might have a
material adverse effect upon the financial condition and/or
results of operations of the Company.
In the opinion of the Company's management, matters currently
pending or threatened against the Company, unless dismissed
or settled within a short period of time, will have a
material adverse effect on the financial position and results
of operations of the Company because the Company does not have
the cash flow to continue to fund defense costs. Management is
currently reviewing several strategies for continuing to fund
defense costs while at the same time funding the development
of the Company. Such strategies may include selling some or
all of the Company's current assets, acquiring one or more
businesses with positive cash flow, or filing for bankruptcy
protection. No decisions have been made as of this time.
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
There have been no events which are required to be
reported under this Item.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
There have been no events which are required to be
reported under this Item.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
There have been no events which are required to be
reported under this Item.
ITEM 5 OTHER INFORMATION
Effective December 13, 2002, the Company changed its
principal business address to: 101 Marietta St., Suite 1070,
Atlanta, GA 30303, telephone number (404) 522-1202.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: December 13, 2002
Group Management Corp
/s/ Elorian Landers
------------------------------
By: Elorian Landers
Its: Chief Executive Officer
(a) Exhibits
99.1 Certification as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 USC, SECTION 1350, AS ADOPTED PURSUANT TO
SECTIONS 302 AND 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Group
Management Corp. (the "Company") on Form 10-QSB for the quarter
ended September 30, 2002 (the "Report"), as filed with the
Securities and Exchange Commission on the date hereof, I,
Elorian Lander, Chief Executive Officer and Chief Financial
Officer of the Company, certify to the best of my
knowledge, pursuant to 18 USC 1350, as adopted pursuant to
Sec.302 and promulgated as 18 USC 1350 pursuant to Sec.906 of
the Sarbanes-Oxley Act of 2002, that:
1. The Report referenced above has been read and
reviewed by the undersigned.
2. The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of
1934.
3. The information contained in the Report fairly presents,
in all material respects, the financial condition and
result of operations of the Company.
4. Based upon my knowledge, the Report referenced above does
not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to makes the statements
made, in light of the circumstances under which such statements
were made, not misleading.
5. Based upon my knowledge, the financial statements,
and other such financial information included in the
Report, fairly present in all material respects the financial
condition and results of operations of the Company as of, and
for, the periods presented in the Report.
6. I acknowledge that the Chief Executive Officer and
Chief Financial Officer:
A. are responsible for establishing and maintaining
"disclosure controls and procedures" for the Company;
B. have designed such disclosure controls and
procedures to ensure that material information is made known
to us, particularly during the period in which the Report was
being prepared;
C. have evaulated the effectiveness of the Company's
disclosure controls and procedures within 90 days of the
date of the Report; and
D. have presented in the Report our conclusions about the
effectiveness of the disclosure controls and procedures
based on the required evaluation.
E. have disclosed to the issuer's auditors and to the
audit committee of the Board of Directors of the Company
(or persons fulfilling the equivalent function):
(i) all significant deficiencies in the design or
operation of internal controls which could adversely affect the
Company's ability to record, process, summarize, and report
financial data and have identified for the Company's auditors
any material weaknesses in internal controls; and
(ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the issuer's internal controls; and
F. have indicated in the Report whether or not there
were significant changes in internal controls or in other
factors that could significantly affect internal controls
subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies
and material weaknesses.
/s/ Elorian Landers
---------------------------------------
Elorian Landers
Chief Executive Officer and Chief Financial Officer
Dated: December 13, 2002
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