UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549


_______________





FORM
10-Q


_______________





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





For
the quarterly period ended September 30, 2009





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





GVC
Venture Corp.


(Exact
name of registrant as specified in Charter)





Delaware
            
            000-15862
            
            13-3018466(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (Commission
      File No.)
            
            (IRS
      Employee Identification No.)





One
Allen Center, Suite 110


700
Central Expressway South


Allen,
Texas 75013


(Address
of Principal Executive Offices)


_______________





214-644-0065


(Issuer
Telephone number)


_______________





Former
Address if Changed Since Last Report


The
Chrysler Building, 405 Lexington Avenue, Suite 2600, New York, New York
10174





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the issuer was required to file such reports),
and (2)has been subject to such filing requirements for the past 90
days.


Yes  [X]  
 No  [   ]





Indicate
by check mark whether the registrant 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 whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company filer.
 See definition of “accelerated filer” and “large accelerated filer”
in Rule 12b-2 of the Exchange Act (Check one):





Large
Accelerated Filer  [   ]     Accelerated
Filer  [   ]      Non-Accelerated
Filer  [   ]      Smaller Reporting
Company  [X]





Indicate
by check mark whether the registrant is a shell company as defined in Rule 12b-2
of the Exchange Act.


Yes 
[   ]    No  [X]


State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of October 31, 2009:  14,194,516 shares of Common Stock,
$.01 par value per share outstanding.


-1-


GVC
Venture Corp.


INDEX







PART
I.  FINANCIAL INFORMATION




Item
      1.
            Financial StatementsConsolidated Balance Sheets at September 30, 2009
      (unaudited) and December 31, 2008
            3Consolidated Statements of Operations (unaudited) for the
      three and nine months ended September 30, 2009 and
2008
            4Consolidated Statement of Changes in Equity (Deficit)
      (unaudited) for the nine months ended September 30, 2009 and
      2008
            5Consolidated Statements of Cash Flows (unaudited) for
      the nine months ended September 30, 2009 and 2008
            6Notes to Financial Statements
            7-19Item
      2.
            Management’s Discussion and Analysis or Plan of
       Operation
            20-24Item
      3.
            Quantitative and Qualitative Disclosures about Market
      Risk
            24Item
      4.
            Controls and Procedures
            24







PART
      II.  OTHER INFORMATIONItem
      1.
            Legal Proceedings
            25Item
      2.
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            25Item
      3.
            Defaults upon Senior Securities
            25Item
      4.
            Submission of Matters to a Vote of Security
      Holders
            25Item
      5.
            Other Information
            25Item
      6.
            Exhibits
            25SIGNATURES
            26







-2-
 INDEX


Part 1 – Financial Information




Item 1. Financial
Statements


GVC
      Venture Corp. and SubsidiariesCONSOLIDATED BALANCE SHEETSSeptember
      30, 2009
            
            
            December
      31, 2008(Unaudited)ASSETSCURRENT
      ASSETSCash
      and cash equivalents
            
            $
            126,603
            
            
            $
            180,349Restricted
      Cash
            
            
            461,393
            
            
            
            250,842Trade
      accounts receivable, net of allowance for doubtfulaccounts
      of $47,632 and $90,767, respectively
            
            
            2,374,219
            
            
            
            1,075,976Prepaid
      expenses and other assets
            
            
            227,116
            
            
            
            33,608Total
      current assets
            
            
            3,189,331
            
            
            
            1,540,775PROPERTY,
      EQUIPMENT AND SOFTWARE, net
            
            
            408,358
            
            
            
            222,471DEPOSITS
            
            
            32,664
            
            
            
            32,664TOTAL
      ASSETS
            
            
            3,630,353
            
            
            
            1,795,910LIABILITIES
      AND EQUITYCURRENT
      LIABILITIESLines
      of credit
            
            $
            250,000
            
            
            $
            373,300Accounts
      payable
            
            
            250,504
            
            
            
            48,264Accrued
      liabilities (including $22,452 and$31,113
      to related parties, respectively)
            
            
            188,365
            
            
            
            184,421Dividends
      payable
            
            
            -
            
            
            
            6,870Deferred
      revenue
            
            
            41,272
            
            
            
            23,584Amounts
      due to related party
            
            
            -
            
            
            
            6,171Current
      portion of notes payable to related parties
            
            
            354,386
            
            
            
            498,000Current
      portion of notes payable
            
            
            150,440
            
            
            
            -Total
      current liabilities
            
            
            1,234,967
            
            
            
            1,140,610NOTES
      PAYABLE, LESS CURRENT PORTION
            
            
            321,069
            
            
            
            -NOTES
      PAYABLE TO RELATED PARTY, LESS CURRENT PORTION
            
            
            49,131
            
            
            
            -DEFERRED
      RENT
            
            
            161,795
            
            
            
            123,989Total
      liabilities
            
            
            1,766,962
            
            
            
            1,264,599SHAREHOLDERS'
      EQUITYPreferred
      stock, par value $0.001 per share; 2,000,000 shares
    authorizedSeries
      A Convertible Preferred Stock;500,000
      shares issued and outstanding at September 30, 2009liquidation
      preference of $750,000
            
            
            500
            
            
            
            500Series
      B Convertible Preferred Stock;500,000
      shares issued and outstanding at September 30, 2009liquidation
      preference of $1,000,000
            
            
            500
            
            
            
            90Series
      C Convertible Preferred Stock;152,000
      shares issued and outstanding at September 30, 2009
            
            
            152
            
            
            
            -liquidation
      preference of $380,000Series
      Z Convertible Preferred Stock, par value $0.01 per share; 1,000,000
      sharesauthorized;
      896,781 shares issued and outstanding at September 30,
2009
            
            
            8,968
            
            
            
            -Common
      stock, par value $0.01 per share; 50,000,000 sharesauthorized;
      14,194,516 shares issued and outstanding at September 30,
    2009
            
            
            141,945
            
            
            
            -Common
      stock, par value $0.001 per share; 45,000,000 sharesauthorized;
      40,056,000 shares issued and outstanding
            
            
            -
            
            
            
            40,056Additional
      paid-in capital
            
            
            3,641,963
            
            
            
            1,265,738Accumulated
      deficit
            
            
            (1,898,896
            )
            
            
            (775,073
            )Total
      shareholders' equity
            
            
            1,895,132
            
            
            
            531,311NONCONTROLLING
      INTEREST
            
            
            (31,741
            )
            
            
            -Total
      equity
            
            
            1,863,391
            
            
            
            531,311TOTAL
      LIABILITIES AND EQUITY
            
            $
            3,630,353
            
            
            $
            1,795,910See
      accompanying notes


-3-
 INDEX


GVC
      Venture Corp. and SubsidiariesCONSOLIDATED STATEMENTS OF OPERATIONSUnauditedFor the
      Three Months Ended
            
            
            For
      the Nine Months EndedSeptember
      30,
            
            
            September
      30,2009
            
            
            2008
            
            
            2009
            
            
            2008REVENUE
            
            $
            2,200,272
            
            
            $
            1,222,611
            
            
            $
            7,021,967
            
            
            $
            3,175,430OPERATING
      EXPENSESSales
      and marketing expenses
            
            
            410,562
            
            
            
            268,256
            
            
            
            1,041,998
            
            
            
            541,005General
      and administrative expenses (including $11,499, $27,708,$51,574,
      and $67,394 to related parties, respectively)
            
            
            2,225,978
            
            
            
            1,101,974
            
            
            
            5,757,215
            
            
            
            2,781,202Stock
      option compensation expense
            
            
            1,310,515
            
            
            
            -
            
            
            
            1,310,515
            
            
            
            -Total
      operating expenses
            
            
            3,947,055
            
            
            
            1,370,230
            
            
            
            8,109,728
            
            
            
            3,322,207OPERATING
      INCOME
            
            
            (1,746,783
            )
            
            
            (147,619
            )
            
            
            (1,087,761
            )
            
            
            (146,777
            )OTHER
      INCOME (EXPENSE)Other
      income
            
            
            322
            
            
            
            -
            
            
            
            324
            
            
            
            (270
            )Interest
      expense (including $8,233, $7,363, $40,849and
      $21,449 to related parties, respectively)
            
            
            (18,571
            )
            
            
            (11,091
            )
            
            
            (68,127
            )
            
            
            (14,131
            )Income
      from operations, before tax
            
            
            (1,765,032
            )
            
            
            (158,710
            )
            
            
            (1,155,564
            )
            
            
            (161,178
            )INCOME
      TAX PROVISION
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -NET
      LOSS
            
            
            (1,765,032
            )
            
            
            (158,710
            )
            
            
            (1,155,564
            )
            
            
            (161,178
            )Loss
      attributable to the noncontrolling interest
            
            
            22,620
            
            
            
            -
            
            
            
            31,741
            
            
            
            -NET
      LOSS ATTRIBUTABLE TO HALO GROUP, INC.
            
            $
            (1,742,412
            )
            
            $
            (158,710
            )
            
            $
            (1,123,823
            )
            
            $
            (161,178
            )Earning
      per share:Basic
      & Diluted
            
            $
            (0.064
            )
            
            $
            (0.004
            )
            
            $
            (0.041
            )
            
            $
            (0.004
            )Weighted
      Average Shares OutstandingBasic
      & Diluted
            
            
            27,125,258
            
            
            
            40,056,000
            
            
            
            27,125,258
            
            
            
            40,056,000See
      accompanying notes





-4-
 INDEX





GVC
      Venture Corp. and SubsidiariesCONSOLIDATED STATEMENT OF CHANGES IN EQUITY
      (DEFICIT)For
      the Nine Months Ended September 30, 2009 and 2008(Unaudited)GVC
      Common Stock
            
            
            GVC
      Series Z Convertible Preferred Stock
            
            
            Halo
      Group, Inc. Common Stock
            
            
            Halo
      Group, Inc. Series A Convertible Preferred Stock
            
            
            Halo
      Group, Inc. Series B Convertible Preferred Stock
            
            
            Halo
      Group, Inc. Series C Convertible Preferred Stock
            
            
            Additional
      Paid-in Capital
            
            
            Accumulated
      Deficit
            
            
            Noncontrolling
      Interest
            
            
            TotalShares
            
            Amount
            
            
            Shares
            
            Amount
            
            
            Shares
            
            Amount
            
            
            Shares
            
            Amount
            
            
            Shares
            
            Amount
            
            
            Shares
            
            AmountBalance
      at December 31, 2007
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            40,056,000
            
            $
            40,056
            
            
            
            169,335
            
            $
            169
            
            
            
            -
            
            $
            -
            
            
            
            -
            
            $
            -
            
            
            $
            611,046
            
            
            $
            (651,588
            )
            
            $
            -
            
            
            $
            (317
            )Issuance
      of Series A ConvertiblePreferred
      Stock for cash
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            330,665
            
            
            331
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            495,666
            
            
            
            -
            
            
            
            -
            
            
            
            495,997Issuance
      of Series B ConvertiblePreferred
      Stock for cash
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            2,410
            
            
            2
            
            
            
            -
            
            
            -
            
            
            
            4,818
            
            
            
            -
            
            
            
            -
            
            
            
            4,820Dividends
      declared
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            (13,834
            )
            
            
            -
            
            
            
            -
            
            
            
            (13,834
            )Net
      income
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            
            (161,178
            )
            
            
            -
            
            
            
            (161,178
            )Balance
      at September 30, 2008
            
            
            -
            
            $
            -
            
            
            
            -
            
            $
            -
            
            
            
            40,056,000
            
            $
            40,056
            
            
            
            500,000
            
            $
            500
            
            
            
            2,410
            
            $
            2
            
            
            
            -
            
            $
            -
            
            
            $
            1,097,696
            
            
            $
            (812,766
            )
            
            $
            -
            
            
            $
            325,488Balance
      at December 31, 2008
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            40,056,000
            
            
            40,056
            
            
            
            500,000
            
            
            500
            
            
            
            89,910
            
            
            90
            
            
            
            -
            
            
            -
            
            
            
            1,265,738
            
            
            
            (775,073
            )
            
            
            -
            
            
            
            531,311Issuance
      of Common Stock
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            134,035
            
            
            134
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            212,982
            
            
            
            -
            
            
            
            -
            
            
            
            213,116Issuance
      of Series B ConvertiblePreferred
      Stock for cash
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            401,202
            
            
            401
            
            
            
            -
            
            
            -
            
            
            
            802,003
            
            
            
            -
            
            
            
            -
            
            
            
            802,404Issuance
      of Series B ConvertiblePreferred
      Stock as dividend reinvestment
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            8,888
            
            
            9
            
            
            
            -
            
            
            -
            
            
            
            17,767
            
            
            
            -
            
            
            
            -
            
            
            
            17,776Issuance
      of Series C ConvertiblePreferred
      Stock for cash
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            152,000
            
            
            152
            
            
            
            379,848
            
            
            
            -
            
            
            
            -
            
            
            
            380,000Issuance
      of Common Stock sharesas
      payment of discretionary dividend
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            165,094
            
            
            165
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            (165
            )
            
            
            -
            
            
            
            -
            
            
            
            -Dividends
      declared
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            (39,905
            )
            
            
            -
            
            
            
            -
            
            
            
            (39,905
            )Issuance
      of Series Z ConvertiblePreferred
      Stock for merger
            
            
            -
            
            
            -
            
            
            
            896,781
            
            
            8,968
            
            
            
            (40,355,129
            )
            
            (40,355
            )
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            (164,875
            )
            
            
            -
            
            
            
            -
            
            
            
            (196,262
            )Issuance
      of GVC Common Stock
            
            
            14,194,516
            
            
            141,945
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            (141,945
            )
            
            
            -
            
            
            
            -
            
            
            
            -Stock-based
      compensation expense
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            1,310,515
            
            
            
            -
            
            
            
            -
            
            
            
            1,310,515Net
      income attributable to Halo Group, Inc.
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            
            (1,123,823
            )
            
            
            -
            
            
            
            (1,123,823
            )Allocation
      of loss to noncontrolling interest
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (31,741
            )
            
            
            (31,741
            )Balance
      at September 30, 2009
            
            
            14,194,516
            
            $
            141,945
            
            
            
            896,781
            
            $
            8,968
            
            
            
            -
            
            $
            -
            
            
            
            500,000
            
            $
            500
            
            
            
            500,000
            
            $
            500
            
            
            
            152,000
            
            $
            152
            
            
            $
            3,641,963
            
            
            $
            (1,898,896
            )
            
            $
            (31,741
            )
            
            $
            1,863,391See
      accompanying notes




-5-
 INDEX


GVC
      Venture Corp. and SubsidiariesCONSOLIDATED STATEMENT OF CASH FLOWS(Unaudited)For
      the Nine Months EndedSeptember
      30, 2009
              
              
              September
      30, 2008CASH
      FLOWS FROM OPERATIONSNet
      loss
              
              $
              (1,123,823
              )
              
              $
              (161,178
              )Adjustments
      to reconcile net income to net cashused
      in operating activitiesDepreciation
              
              
              41,920
              
              
              
              28,911Bad
      debt expense
              
              
              1,020,940
              
              
              
              333,565Stock
      based compensation
              
              
              1,310,515
              
              
              
              -Noncontrolling
      interest
              
              
              (31,741
              )
              
              
              -Changes
      in operating assets and liabilities:Accounts
      receivable
              
              
              (2,319,183
              )
              
              
              (850,672
              )Restricted
      cash
              
              
              (210,551
              )
              
              
              (94,954
              )Prepaid
      expenses and other current assets
              
              
              19,608
              
              
              
              6,175Deposits
              
              
              -
              
              
              
              (18,974
              )Accounts
      payable
              
              
              (27,760
              )
              
              
              (9,194
              )Accrued
      liabilities
              
              
              3,944
              
              
              
              77,046Deferred
      rent
              
              
              37,806
              
              
              
              99,659Deferred
      revenue
              
              
              17,688
              
              
              
              -Net
      cash used in operating activities
              
              
              (1,260,637
              )
              
              
              (589,616
              )CASH
      FLOWS FROM INVESTING ACTIVITIESCash
      acquired at merger
              
              
              33,738Purchases
      of property and equipment
              
              
              (227,807
              )
              
              
              (140,331
              )Net
      cash used in investing activities
              
              
              (194,069
              )
              
              
              (140,331
              )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      received from issuance of preferred stock
              
              
              1,182,404
              
              
              
              500,817Net
      payments on lines of credit
              
              
              (123,300
              )
              
              
              202,237Proceeds
      from notes payable
              
              
              541,000
              
              
              
              -Principal
      payments on notes payable
              
              
              (69,491
              )
              
              
              (24,371
              )Proceeds
      from notes payable to related parties
              
              
              80,000
              
              
              
              92,000Principal
      payments on notes payable to related parties
              
              
              (174,483
              )
              
              
              (20,000
              )Payments
      made to related parties
              
              
              (6,171
              )
              
              
              (7,076
              )Dividends
      paid to shareholders
              
              
              (28,999
              )
              
              
              -Net
      cash provided by financing activities
              
              
              1,400,960
              
              
              
              743,607Net
      (decrease) increase in cash and cash equivalents
              
              
              (53,746
              )
              
              
              13,660CASH
      AND CASH EQUIVALENTS, beginning of period
              
              
              180,349
              
              
              
              53,526CASH
      AND CASH EQUIVALENTS, ending of period
              
              $
              126,603
              
              
              $
              67,186SUPPLEMENTAL
      INFORMATIONCash
      paid for interest
              
              $
              75,538
              
              
              $
              10,261Cash
      paid for taxes
              
              $
              -
              
              
              $
              -See
      accompanying notes
  -6-
 INDEX
  GVC
Venture Corp.


Notes To Consolidated Financial Statements
(Unaudited)


September
30, 2009









NOTE
1.  ORGANIZATION AND RECENT DEVELOPMENTS




Merger




Pursuant
to an Agreement and Plan of Merger dated September 17, 2009 (the “Merger Agreement”),
by and among GVC Venture Corp., a Delaware corporation, together with its
subsidiaries (“GVC” or the “Company”), GVC Merger
Corp., a Texas corporation and wholly owned subsidiary of the Company and Halo
Group, Inc., a Texas corporation (“Halo Group” or “HGI”), GVC Merger
Corp. merged with and into Halo Group, with Halo Group remaining as the
surviving corporation and becoming a subsidiary of the Company (the “Merger”).  The
Merger was effective as of September 30, 2009, upon the filing of a certificate
of merger with the Texas Secretary of State.




At the
effective time of the Merger, the legal existence of GVC Merger Corp.
ceased.  Simultaneously, the Company issued to the former stockholders
of Halo Group, in consideration of their Halo Group common stock, an aggregate
of 896,781 shares of the Company’s Series Z preferred stock, which represent 96%
of the aggregate voting power in the election of the Company’s
directors.  Following authorization by the Company of sufficient
common stock to enable conversion of all Series Z preferred stock, the 896,781
shares of the Company’s Series Z preferred stock will be convertible into an
aggregate of 305,504,813 shares of our common stock.   In
addition, holders of Halo Group’s presently outstanding 1,152,000 shares of
preferred stock (issued in three series of Series A, Series B, and Series C)
will receive (subject to anti-dilution adjustment provisions), under the terms
of the Halo Group preferred stock instruments, upon conversion thereof, an
aggregate of 29,827 shares of GVC Series Z preferred stock, which, in turn,
would be convertible into an aggregate of 10,161,002 shares of GVC common
stock.  Additionally, Halo Group’s outstanding stock options to
purchase an aggregate of 2,828,970 shares of Halo Group common stock will be
exercisable (subject to anti-dilution adjustment provisions) for an aggregate of
62,899 shares of GVC Series Z preferred stock, which, in turn, would be
convertible into an aggregate of 21,427,814 shares of GVC common
stock.  Were all the presently outstanding Halo Group preferred stock
to be converted and all presently outstanding Halo Group stock options to be
exercised, Halo Group common stockholders, preferred stockholders and option
holders immediately prior to the Merger would own approximately 337,093,630
shares, or 95.96%, of GVC common stock to be outstanding immediately following
the Merger and GVC stockholders immediately prior to the Merger would own
14,194,516 shares, or 4.04%, of GVC common stock outstanding immediately
following the Merger.




However,
since the Company presently only has 50,000,000 shares of common stock
authorized for issuance, of which 14,194,516 shares are currently outstanding,
the Company does not have enough shares of common stock to issue upon conversion
of the Series Z preferred stock issuable to holders of Halo Group common stock,
to holders of Halo Group preferred stock upon conversion thereof and to holders
of Halo Group stock options upon exercise thereof.  Therefore, the
Company will take action to amend its Certificate of Incorporation to increase
the company’s authorized common stock following the Merger in order to have a
sufficient number of authorized common stock to permit conversion into common
stock of all Series Z preferred stock issued and reserved for issuance and to
provide additional shares to be issued in the future for financing and
growth.




Pursuant
to the terms of the Merger Agreement, the Company has accepted the resignations
of the former officers and directors of the Company, with the exception of
Bernard Zimmerman, who Halo Group has agreed not to remove as a director for at
least one year following the effective date of the Merger.  Also
pursuant to the terms of the Merger Agreement, Mr. Zimmerman, the sole director,
has elected Brandon C. Thompson, Paul Williams, Jimmy Mauldin, T. Craig
Friesland and Richard G. Morris to the Company’s Board of
Directors.  Accordingly, as a result of the change in the Company’s
stock ownership and the composition of the Company’s Board of Directors, the
Merger resulted in a change of control of the Company.




-7-
 INDEX





On
September 30, 2009, as a result of the merger, Halo Group shareholders received
in exchange for all of its 40,355,129 shares of outstanding common stock with a
par value of $0.001 (or $40,355), 896,781 shares of the Company’s Series Z
preferred stock with a par value of $.01 (or $8,968).  Also
outstanding at September 30, 2009 is 14,194,516 of the Company’s common stock
with a par value of $0.01 (or $141,945), 500,000 shares of Halo Group Series A
Convertible Preferred Stock, 500,000 shares of Halo Group Series B Convertible
Preferred Stock, and 152,000 shares of Halo Group Series C Convertible Preferred
Stock, all with a par value of $0.001.  Halo Group received cash of
$33,738 and assumed the Company’s accounts payable of $230,000, and booked the
remaining net balance as a reduction of additional paid in capital.




For
accounting purposes, the Merger has been accounted for as a reverse acquisition,
with Halo Group as the accounting acquirer (legal acquiree).  On the
effective date of the Merger, Halo Group’s business became the business of the
Company.  Unless otherwise provided in footnotes, all references from
this point forward in this Report to “we,” “us,” “our company,” “our,” or the
“Company” refer to the combined Halo Group, Inc. entity, together with its
subsidiaries.




Nature of
Business




Halo
Group was formed on January 25, 2007 and through its wholly-owned subsidiaries
Halo Debt Solutions, Inc. (“HDS”), Halo Group Mortgage, LLC (“HGM”), Halo Group
Realty, LLC (“HGR”), Halo Credit Solutions, LLC (“HCS”), Halo Group Consulting,
Inc. (“HGC”), Halo Loan Modification Services, LLC (“HLMS”), Halo Select
Insurance Services, LLC (“HSIS”), and Halo Financial Services, LLC (“HFS”)
provides debt settlement, mortgage brokerage, real estate brokerage, credit
restoration, association benefit services, loan modification services, insurance
brokerage, and financial education to customers throughout the United
States.  The Company’s corporate office is located in Allen,
Texas.




Reorganization




During
2006 the Company consisted only of HCS and HGM.  During 2007 HGI, HDS,
HGR and HGC were formed, all of which were entities under common control with
HCS and HGM.  During 2007, through a series of transactions, the
Company completed a reorganization whereby HGI acquired 100% of the member
interests of HCS, HGM and HGR and 100% of the outstanding common stock of HDS
and HGC as further discussed below.  Due to the common control of the
Company during 2007 and the reorganization which occurred in 2007, for financial
statement purposes the Company and its subsidiaries have been combined and
consolidated as if the reorganization had occurred on January 1,
2006.




HGM




Effective
February 2, 2005, HGM (formerly Halo Funding Group LLC) purchased the assets of
Morningstar Mortgage, LLC, an unrelated entity, for total cash consideration of
$50,000.  Effective February 16, 2007, HGI acquired 100% of the member
interests of HGM for total consideration of $250,000, including cash of $2,000
and a promissory note for $248,000 (See discussion in Note
5).   Due to the common control of HGI and HGM, the consideration
paid by HGI was reflected as a deemed distribution to the members of HGM in the
amount of $250,000.




HCS




Upon
formation of HCS on January 9, 2006, the majority shareholder of the Company
owned a 51% member interest in HCS.  On January 25, 2007, HGI acquired
58% of the member interests of HCS in exchange for 34,050,000 shares of common
stock of HGI.  On July 20, 2007 HGI acquired the remaining 42% member
interests of HCS in exchange for 840,000 shares of common stock of
HGI.




HGC




Upon
formation of HGC on February 2, 2007, HGI owned a 51% member interest in
HGC.  On July 20, 2007 HGI acquired the remaining 49% of the member
interests of HGC in exchange for 49,000 shares of common stock of
HGI.




-8-
 INDEX





HDS




Upon
formation on January 26, 2007, HGI owned a 51% member interest in
HDS.  On July 20, 2007 HGI acquired the remaining 49% of the member
interests of HDS in exchange for 392,000 shares of common stock of
HGI.




HGR




On August
1, 2007 HGI acquired 100% of the member interests of HGR from an entity
affiliated with the Company through common ownership, in exchange for total cash
consideration of $5,000.  At the time of this transaction HGR had
minimal operations.




NOTE
2.  SIGNIFICANT ACCOUNTING POLICIES




The
accompanying Consolidated Financial Statements as of September 30, 2009 and for
the three month and nine month periods ended September 30, 2009 and 2008 include
the accounts of the Company.  In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation, have been reflected.




Certain
financial information that is normally included in annual financial statements
prepared in accordance with U.S. generally accepted accounting principles, but
is not required for interim reporting purposes, have been
condensed.




Revenue Recognition and
Accounts Receivable




The
Company generally recognizes revenue in the period in which services are
provided.  HDS recognizes its revenue over the average service period,
defined as the average length of time it takes to receive a contractually
obligated settlement offer from each creditor, calculated on the entire HDS
client base.  Provisions for discounts, refunds and bad debt are provided
over the period the related revenue is recognized. Cash receipts from customers
in advance of revenue recognized are recorded as deferred
revenue.




Revenue
recognition periods for HDS customer contracts are shorter than the related
payment terms.  Accordingly, HDS accounts receivable is the amount
recognized as revenue less payments received on account.  The Company
maintains allowances for doubtful accounts for estimated losses resulting from
the inability of its customers to make required payments. Management considers
the following factors when determining the collectability of specific customer
accounts: past transaction history with the customer, current economic and
industry trends, and changes in customer payment terms.  The Company
provides for estimated uncollectible amounts through an increase to the
allowance for doubtful accounts and a charge to earnings based on historical
trends and individual account analysis.  Balances that remain outstanding
after the Company has used reasonable collection efforts are written off through
a charge to the allowance for doubtful accounts.




HDS
receivables represent 96.7% of total accounts receivable at September 30,
2009.




Net Loss Per Common
Share




Basic net
income per share is computed by dividing net income available to common
shareholders (numerator) by the weighted average number of common shares
outstanding during the period (denominator).  Diluted net income per share
is computed using the weighted average number of common shares and dilutive
potential common shares outstanding during the period.  At September
30, 2009 and 2008, there were 3,904,931 and 602,772 shares, respectively,
underlying potentially dilutive convertible preferred stock and stock options
outstanding.  These shares were not included in weighted average shares
outstanding for the period ending September 30, 2008 because their effect is
anti-dilutive due to the Company’s reported net loss.




-9-
 INDEX





Use of Estimates and
Assumptions




The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reported period.  Actual results
could differ from those estimates.




Principles of
Consolidation




The
consolidated financial statements of the Company for the three and nine months
ended September 30, 2009 and 2008 include the combined financial results of HGI,
HCS, HDS, HGM, HGR, HGC, HLMS, HSIS, HCIS and HFS.  All significant
intercompany transactions and balances have been eliminated in
consolidation.




Cash and Cash
Equivalents




The
Company considers all liquid investments with a maturity of 90 days or less to
be cash equivalents.




Restricted
Cash




As of
September 30, 2009, $250,000 of the $461,393 restricted cash balance represents
funds held in a third party trust account that was available to be disbursed to
various independent vendors of GVC as payment for professional services rendered
to the business prior to, and in connection with, the merger of GVC and
HGI.




The
remaining restricted cash represents collections from customers that are
processed and held by a merchant bank in the ordinary course of business.
Ninety-five percent of these funds are made available to the Company as
determined by the bank, normally within 7 business days.  Five percent
of funds collected from customers by the bank are released to the Company after
90 days, less amounts withheld to cover potential losses by the
bank.




Property and
Equipment





Property
and equipment are stated at cost.  Depreciation and amortization is
provided in amounts sufficient to relate the cost of the depreciable assets to
operations over their estimated service lives, ranging from three to seven
years. Provisions for depreciation and amortization are made using the
straight-line method.




Major
additions and improvements are capitalized, while expenditures for maintenance
and repairs are charged to expense as incurred. Upon sale or retirement, the
cost of the property and equipment and the related accumulated depreciation are
removed from the respective accounts, and any resulting gains or losses are
credited or charged to operations.




Internally Developed
Software




Internally
developed legacy application software consisting of database, customer relations
management, process management and internal reporting modules are used in each
of the HGI subsidiaries.  The Company accounts for computer software used
in the business in accordance with ASC 350 “Intangibles-Goodwill and Other”
(formerly Statement of Position (SOP) 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use).  ASC 350 requires
computer software costs associated with internal use software to be charged to
operations as incurred until certain capitalization criteria are met. Costs
incurred during the preliminary project stage and the post-implementation stages
are expensed as incurred. Certain qualifying costs incurred during the
application development stage are capitalized as property, equipment and
software. These costs generally consist of internal labor during configuration,
coding, and testing activities. Capitalization begins when the preliminary
project stage is complete, management with the relevant authority authorizes and
commits to the funding of the software project, and it is probable both that the
project will be completed and that the software will be used to perform the
function intended. Management has determined that the significant portion of
costs incurred for internally developed software came from the preliminary
project stage and post-implementation stages; as such, no costs for internally
developed software were capitalized.




-10-
 INDEX





Long-Lived
Assets




Long-lived
assets are reviewed on an annual basis or whenever events or changes in
circumstance indicate that the carrying amount of an asset may not be
recoverable.  Recoverability of assets held and used is generally
measured by a comparison of the carrying amount of an asset to undiscounted
future net cash flows expected to be generated by that asset. If it is
determined that the carrying amount of an asset may not be recoverable, an
impairment loss is recognized for the amount by which the carrying amount of the
asset exceeds the fair value of the asset.  Fair value is the
estimated value at which the asset could be bought or sold in a transaction
between willing parties.  There were no impairment charges for the
nine months ended September 30, 2009 and 2008.




Equity-Based
Compensation




The
Company accounts for equity instruments issued to employees in accordance with
ASC 718 “Compensation-Stock Compensation” (formerly SFAS No. 123 (revised 2004),
Share-Based Payment (“SFAS 123R”)).  Under ASC 718, the fair value of
stock options at the date of grant which are contingently exercisable upon the
occurrence of a specified event is recognized in earnings over the vesting
period of the options beginning when the specified events become probable of
occurrence.  The specified event (Merger) occurred on September 30,
2009.  As of September 30, 2009, there was no active market for the
Company’s common shares and management has not been able to identify a similar
publicly held entity that can be used as a benchmark.  Therefore, as a
substitute for volatility, the Company used the historical volatility of the Dow
Jones Small Cap Consumer Finance Index, which is generally representative of the
Company’s size and industry. The Company has used the historical values of that
index to estimate volatility, which was calculated to be 37% for the three
months ended September 30, 2009.  All transactions in which goods or
services are the consideration received for the issuance of equity instruments
are accounted for based on the fair value of the consideration received or the
fair value of the equity instrument issued, whichever is more reliably
measurable.  The measurement date of the fair value of the equity
instrument issued is the earlier of the date on which the counterparty’s
performance is complete or the date on which it is probable that performance
will occur.




Income
Taxes




The
Company accounts for income taxes in accordance with ASC 740 “Income Taxes”
(formerly SFAS No. 109, Accounting for Income Taxes and FASB Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes — An
Interpretation of FASB Statement No. 109” (“FIN 48”)). ASC 740
requires the use of the asset and liability method whereby deferred tax assets
and liability account balances are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse.  These differences result in deferred tax
assets and liabilities, which are included in the Company’s consolidated balance
sheet.




The
Company then assesses the likelihood of realizing benefits related to such
assets by considering factors such as historical taxable income and the
Company’s ability to generate sufficient taxable income of the appropriate
character within the relevant jurisdictions in future years. If the realization
of these assets is not likely based on these factors, a valuation allowance is
established against the deferred tax assets.




In June
2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes —
An Interpretation of FASB Statement No. 109” (“FIN 48”). This
Interpretation clarifies the accounting for uncertainty in income taxes
recognized in a company’s financial statements. FIN 48 requires companies
to determine that it is “more likely than not” that a tax position will be
sustained upon examination by the appropriate taxing authorities before any part
of the benefit can be recorded in the financial statements. FIN 48 also
provides guidance on the derecognition of tax benefits, measurement and
classification of income tax uncertainties, along with any related interest and
penalties. FIN 48 also requires significant additional disclosures
regarding uncertain tax positions. FIN 48 is effective for years beginning
after December 15, 2006 for public companies.  The Company was a
nonpublic company until the Merger and as such adopted FIN 48 in the first
quarter of 2009 on a prospective basis in compliance with the deferral granted
to nonpublic companies to years beginning after December 15,
2008.  The Company has not taken a tax position that, if challenged,
would have a material effect on the financial statements or the effective tax
rate during the three and nine months ended September 30, 2009.
  -11-
 INDEX


Deferred
Rent




The
Company’s operating leases for its office facilities contain free rent periods
during the lease term.  For these types of leases the Company
recognizes rent expense on a straight line basis over the minimum lease term and
records the difference between the amounts charged to expense and the amount
paid as deferred rent.




Noncontrolling
Interest




On
January 1, 2009, HSIS entered into a joint venture with another entity to form
Halo Choice Insurance Services, LLC (HCIS).  HSIS contributed 49% of
the opening equity balance.  Under a qualitative analysis performed in
accordance with ASC 810 “Consolidation” (formerly FIN 46(R): Consolidation of
Variable Interest Entities), HCIS is a variable interest entity and HSIS is the
primary beneficiary as HSIS’s parent company, HGI, acts as the sole manager of
the entity and HSIS, effective January 1, 2010, has the exclusive and
irrevocable right and option to purchase all the membership interests of the
co-joint venture entity for a contractually determined price.  Based
on this analysis, HSIS has consolidated HCIS with the non-controlling 51%
interest included in minority interest on the balance sheet and statement of
operations.




Recently Issued Accounting
Pronouncements




In the
third quarter of 2009, the Company adopted the Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”). The ASC is the single
official source of authoritative, nongovernmental GAAP, other than guidance
issued by the SEC. The adoption of the ASC did not have any impact on the
financial statements included herein.




In
October 2009, the FASB issued Accounting Standards Update No. 2009-13,
“Multiple-Deliverable Revenue Arrangements a consensus of the FASB Emerging
Issues Task Force” (“ASU 2009-13”).  ASU 2009-13 provides principles
for allocation of consideration among its multiple-elements, allowing more
flexibility in identifying and accounting for separate deliverables under an
arrangement. The ASU introduces an estimated selling price method for valuing
the elements of a bundled arrangement if vendor-specific objective evidence or
third-party evidence of selling price is not available, and significantly
expands related disclosure requirements. This standard is effective on a
prospective basis for revenue arrangements entered into or materially modified
in fiscal years beginning on or after June 15, 2010. Alternatively,
adoption may be on a retrospective basis, and early application is permitted.
The Company does not expect the adoption of this statement to have a material
effect on its consolidated financial statements or disclosures.




In
August 2009, the FASB issued Accounting Standards Update No. 2009-05,
“Measuring Liabilities at Fair Value,” (“ASU 2009-05”). ASU 2009-05 provides
guidance on measuring the fair value of liabilities and is effective for the
first interim or annual reporting period beginning after its issuance. The
Company’s adoption of ASU 2009-05 did not have an effect on its disclosure of
the fair value of its liabilities.




In June
2009, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 168,
The FASB Accounting Standards
Codification (SFAS 168”) (the "Codification"). The Codification will
become the source of authoritative U.S. generally accepted accounting principles
(GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules
and interpretive releases of the Securities and Exchange Commission (SEC) under
authority of federal securities laws are also sources of authoritative GAAP for
SEC registrants. On the effective date of this Statement, the Codification will
supersede all then-existing non-SEC accounting and reporting standards. All
other nongrandfathered non-SEC accounting literature not included in the
Codification will become nonauthoritative.   This Statement is
effective for financial statements issued for interim and annual periods ending
after September 15, 2009. Management does not expect the adoption of SFAS 168 to
have a material effect on the Company’s financial position and results of
operations.




-12-
 INDEX







In June
2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation
No. 46(R) (“SFAS 167”).  SFAS 167, among
other things, requires a qualitative rather than a quantitative analysis to
determine the primary beneficiary of a variable interest entity ("VIE");
requires continuous assessments of whether an enterprise is the primary
beneficiary of a VIE; enhances disclosures about an enterprise's involvement
with a VIE; and amends certain guidance for determining whether an entity is a
VIE. Under SFAS 167, a VIE must be consolidated if the enterprise has both (a)
the power to direct the activities of the VIE that most significantly impact the
entity's economic performance, and (b) the obligation to absorb losses or the
right to receive benefits from the VIE that could potentially be significant to
the VIE. SFAS 167 will be effective as of the beginning of each reporting
entity’s first annual reporting period that begins after November 15, 2009, and
for interim periods within that first annual reporting
period.  Earlier application is prohibited. Management does not expect
that the adoption of SFAS 167 will have a material effect on the Company’s
financial position and results of operations.




In June,
2009, the FASB issued SFAS No. 166, Accounting for Transfers of
Financial Assets. SFAS No. 166 is a revision to FASB SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities (“SFAS
166”), and requires more information about transfers of financial assets,
including securitization transactions, and where companies have continuing
exposure to the risks related to transferred financial assets. SFAS 166 also
eliminates the concept of a "qualifying special-purpose entity", changes the
requirements for derecognizing financial assets and requires additional
disclosures. FASB 166 must be applied as of the beginning of each reporting
entity’s first annual reporting period that begins after November 15, 2009, and
for interim periods within that first annual reporting period. Earlier
application is prohibited.  Management does not expect that the
adoption of SFAS 166 will have a material effect on the Company’s financial
position and results of operations.




May 2009,
the FASB issued SFAS No. 165, Subsequent Events(“SFAS
165”). SFAS 165 establishes authoritative accounting and disclosure guidance for
recognized and non-recognized subsequent events that occur after the balance
sheet date but before financial statements are issued. SFAS 165 also requires
disclosure of the date through which an entity has evaluated subsequent events
and the basis for that date. In accordance with this Statement, an entity should
apply the requirements to interim or annual financial periods ending after June
15, 2009. The adoption of SFAS 165 had no material impact on the Company’s
financial position and results of operations




In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51 (“SFAS
160”).  SFAS 160 amends ARB 51 to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in
a subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. Before this
statement was issued, limited guidance existed for reporting noncontrolling
interests. As a result, considerable diversity in practice existed. So-called
minority interests were reported in the consolidated statement of financial
position as liabilities or in the mezzanine section between liabilities and
equity. This statement improves comparability by eliminating that diversity.
This statement is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009,
for entities with calendar year-ends). Earlier adoption is prohibited. The
effective date of this statement is the same as that of the related Statement
141 (revised 2007). The Company adopted Statement beginning March 1, 2009. SFAS
160 had no financial impact on the Company’s consolidated financial position,
results of operations or cash flows.




-13-
 INDEX




NOTE
3.  PROPERTY, EQUIPMENT AND SOFTWARE




Property,
equipment and software consist of the following as of September 30, 2009 and
December 31, 2008, respectively:











Computers and
      purchased software
            
            $
            154,734
            
            
            $
            111,631Furniture and
      equipment
            
            
            390,642
            
            
            
            205,938545,376
            
            
            
            317,569Less:  accumulated
      depreciation
            
            
            (137,018
            )
            
            
            (95,098
            )$
            408,358
            
            
            $
            222,471




Depreciation
totaled $25,608, $41,920, $9,875, and $28,911 for the three and nine months
ended September 30, 2009 and 2008, respectively.




NOTE
4.  LINES OF CREDIT




On March
6, 2009, the Company entered into a new revolving line of credit (“LOC”)
facility with Legacy Texas Bank which provides maximum borrowings of $250,000,
subject to a borrowing base, bears interest at the bank’s rate as defined as
prime plus 1% (6% floor) and matures in March 2010.  On September 6,
2009, the Company increased the line of credit $75,000 to a maximum borrowing
amount of $325,000, subject to a borrowing base, with the same interest rate and
maturity date of March 2010.  The $325,000 maximum borrowing amount
includes a $75,000 letter of credit to the Company’s business office
lessor.  The $75,000 letter of credit expires November 29,
2010.  As of September 30, 2009, the Company has received net advances
totaling $250,000 under this new LOC.  The LOC is cross collateralized
by all of the Company’s assets.




In
connection with the new LOC, the Company paid off and closed a $300,000 line of
credit in March of 2009 that it held with Independent Bank of
Texas.  Outstanding borrowings under the line of credit totaled
$300,000 at December 31, 2008.  Additionally, the Company paid off a
$73,000 line of credit in March 2009 it held with Chase Bank.  The
balance remained at $0 until August 2009, at which time the line of credit was
closed with Chase Bank.  Outstanding borrowings under the line of
credit totaled $73,300 at December 31, 2008.




-14-
 INDEX


NOTE
5.  NOTES PAYABLE DUE TO RELATED PARTIES





In
connection with a reorganization during 2007 (See Note 1), the Company entered
into three promissory notes totaling $397,000 with two board of directors for
the purchase of their member interests in HGM and HCS (the “Board of Director
Notes”).  The Board of Director Notes bear interest at a rate of 8%
per annum and mature in February 2010, with the exception of $20,000 in
principal amount of the notes, which bears interest at a rate of 8% and matures
in October 2011.  All interest and principal is due on demand by the
board of directors, but if no demand is made then uponmaturity.   The
Board of Director Notes are subordinate to the LOC and notes
payable.  As of September 30, 2009, and December 31, 2008, amounts
outstanding under the Board of Director Notes totaled $268,000 and
$271,000.




During
2007 the Company entered into two unsecured promissory notes with a director for
working capital advances made to the Company, totaling $60,000 (the “Director
Loans”).  The Director Loans bear interest at a rate of 8% per annum,
are due on demand by the director, but if no demand is made then upon maturity
in November 2010.  All interest and principal is due upon maturity. As
of September 30, 2009, and December 31, 2008, amounts outstanding under the
Director Loans totaled $60,000 and $60,000.




During
2008 the Company entered into three unsecured promissory notes with two related
parties (the “Related Notes”) for working capital advances made to the Company
in the amounts of $39,000, $50,000 and $100,000.  The $39,000 note has
no stated interest rate and matures in October 2010, but is extendable upon
request by the Company.  As of September 30, 2009 and December 31,
2008, outstanding principal on this note totaled $0 and $17,000. The $50,000
note bore interest at 10% payable monthly, and originally matured December 2009
but was paid in full in January 2009.  Outstanding principal on this
note totaled $50,000 at December 31, 2008.  The $100,000 note bore
interest at a flat fee of $15,000, matured in January 2009, and was paid in full
on the maturity date.  Outstanding principal on this note totaled
$100,000 at December 31, 2008.




During
January 2009 the Company entered into one unsecured promissory note with a
director for a working capital advance to the Company in the amount of $15,000
(the “Director Note”).  The Director Note bears interest at a rate of
8% per annum and matures in January 2011.  All interest and principal
is due upon maturity.  As of September 30, 2009, the amount
outstanding under the Director Note totaled $15,000.




During
April 2009 the Company entered into one unsecured promissory note with a related
party for a working capital advance to the Company in the amount of $65,000 (the
“Related Party Note”).  The Related Party Note bears interest at a
rate of 8% per annum and is a monthly installment note with final maturity of
April 2011.  All interest and principal is due upon
maturity.  As of September 30, 2009, the amount outstanding under the
Related Party Note totaled $60,517, of which $49,131 is included in long term
liabilities.




The
Company incurred $8,233, $40,849, $7,363, and $21,449 of interest expense to
directors and other related parties during the three and nine months ended
September 30, 2009, and 2008, respectively.  Accrued interest due to
directors and other related parties totaled $22,454 at September 30,
2009.




NOTE
6.  NOTES PAYABLE




On March
6, 2009, the Company entered into a 36 month secured promissory note with Legacy
Texas Bank in the amount of $374,000.  The proceeds of this note
payable were used to pay off the two lines of credit as discussed in Note
4.  The note bears interest at the Federal Home Loan Bank (FHLB) 2.5
to 3 year rate plus 3.25% (6.16% fixed rate over the term of the note) and
matures March 2012.  As of September 30, 2009, the note payable
balance was $316,497, of which $195,479 is included in long term
liabilities.




The note
is collateralized by all of the Company’s assets.  Additionally, the
note contains certain affirmative covenants including the debt service coverage
and debt to net worth ratios.  At September 30, 2009 the Company was
in compliance with all of these debt covenants.





-15-
 INDEX





On
April 15, 2009, the Company entered into a 60 month secured promissory note with
Legacy Texas Bank in the amount of $167,000.  The proceeds of this
note payable were used to purchase communication equipment.  The note
bears interest at 7% per annum with monthly installments and a final maturity in
April 2014.  The note is collateralized by all of the Company’s
assets.  As of September 30, 2009, the note payable balance was
$155,312, of which $125,590 is included in long term liabilities.  NOTE 7.  RELATED
PARTY TRANSACTIONS





For the
three and nine months ended September 30, 2009 and 2008, the Company incurred
legal costs totaling $600, $12,675, $1,208 and $7,594, respectively, to a law
firm owned by a director of the Company.




For the
three and nine months ended September 30, 2009 and 2008, the Company incurred
consulting costs totaling $8,499, $27,499, $25,000, and $58,300, respectively,
to an entity owned by a director of the Company.




For the
three and nine months ended September 30, 2009 and 2008, the Company incurred
interest expense to related parties (See Note 5).




For the
three and nine months ended September 30, 2009, and 2008, the Company incurred
rent expense totaling $2,400 and $11,400, $1,500, and $1,500, respectively, to
an entity owned by two directors of the Company.




NOTE
8.  INCOME TAXES




For the
three and nine months ended September 30, 2009 and 2008, our quarterly effective
tax rate of 0% varies from the U.S. federal statutory rate primarily due to
certain non-deductible expenses and an increase in the valuation allowance
associated with the net operating loss carryforwards. Our deferred tax assets
related to other state net operating loss carryforwards remain fully reserved
due to uncertainty of utilization of those assets.




NOTE
9.  COMMITMENTS AND CONTINGENCIES




The
Company leases its office facilities and various equipment under non-cancelable
operating leases which provide for minimum monthly rental
payments.  Pursuant to an office lease dated November 12, 2007, as
amended, Halo Group is required to make monthly lease payments of $32,663, with
an increase in May 2010 to $49,196 per month and in November 2010 to $59,389 per
month.  The lease expires on August 14, 2014. Future minimum rental
obligations under leases as of September 30, 2009 are as follows:








Years Ending December
      31:2009
            
            $
            103,6432010
            
            
            587,7412011
            
            
            736,6502012
            
            
            731,4332013
            
            
            731,037Thereafter
            
            
            407,391Total Minimum
      lease commitments
            
            $
            3,297,895


For
the three and nine months ended September 30, 2009, and 2008, the Company
incurred rent expense totaling $80,541, $252,272, $41,367, and $149,537,
respectively




In
the ordinary course of conducting its business, the Company may be subject to
loss contingencies including possible disputes or
lawsuits.  Management believes that the outcome of such contingencies
will not have a material impact on the Company’s financial position or results
of future operations.


-16-
 INDEX





NOTE
10.  STOCK OPTIONS




The
Company grants stock options to certain employees under the 2007 Stock Plan (the
“Plan”).   The Company was authorized to issue 2,450,000 shares
subject to options, or stock purchase rights under the Plan.  On July
13, 2009, the Company’s shareholders and board of directors approved the 3rd
amendment to the Plan to authorize an additional 500,000 shares of Common Stock
for issuance, for total authorization of 2,950,000 shares that may be subject to
options or stock purchase rights.  These options vest over a period no
greater than two years, are contingently exercisable upon the occurrence of a
specified event as defined by the option agreements, and expire upon termination
of employment or five years from the date of grant.  During the three
months ended September 30, 2009, the Company issued 490,020 stock options with
an exercise price of $1.59 per share.  During the nine months ended
September 30, 2009, the Company issued 1,464,420 stock options with an exercise
price in a range from $0.94-1.59 per share.  No options have been
exercised at September 30, 2009.  Total stock options outstanding
through September 30, 2009 total 2,828,970.




A summary
of stock option activity in the Plan is as follows:


Exercise
            
            
            Weighted
              AverageNumber
      of
            
            
            Price
            
            
            ExerciseOptions
            
            
            Per
      Option
            
            
            PriceOutstanding
      at December 31, 2008
            
            
            1,481,250
            
            
            $
            0.01
      – 0.94
            
            
            
            0.06Granted
            
            
            1,464,420
            
            
            
            .94
      - 1.59
            
            
            
            1.25Exercised
            
            
            -
            
            
            
            -
            
            
            
            -Canceled
            
            
            (116,700
            )
            
            
            0.01
      – 1.59
            
            
            
            0.44Outstanding
      at September 30, 2009
            
            
            2,828,970
            
            
            $
            0.01
      – 1.59
            
            
            
            0.66







All stock
options granted as of September 30, 2009 are contingently exercisable upon the occurrence
of a specified event as defined in the option agreements. The specified event
(Merger) occurred on September 30, 2009.  As such, equity-based
compensation for the contingently exercisable options will be recognized in
earnings from issuance date of the options over the vesting period of the
options effective September 30, 2009 when the Merger became probable of
occurrence.  Total compensation cost to be expensed over the vesting
period of stock options is $2,312,177.  For the three and nine months
ended September 30, 2009, stock compensation expense totaled $1,310,515 and
$1,310,515, respectively.  The remaining $1,001,662 in future stock
compensation expense is scheduled to be recognized into earnings over the next
18 to 24 months.




The fair
value of each option granted during the three months ended September 30, 2009
was estimated on the date of grant by management using the Black-Scholes option
pricing model with the following assumptions used:






Expected
      volatility
            37%Risk free
      rate
            2.5%Dividend
      yield
            NoneExpected
      life
            5
    years




The
weighted average remaining contractual life of the outstanding options at
September 30, 2009 is approximately 4.02 years.  The grant date
weighted average fair value of options per share issued during the three and
nine months ended September 30, 2009 was $0.86 and $0.84
respectively.  At September 30, 2009 the Company has 121,030 shares
subject to options or stock purchase rights available to issue under the
Plan.




-17-
 INDEX





NOTE
11.  PREFERRED STOCK




The
Series A Convertible Preferred Stock (the “Preferred Stock A”) has a par value
of $0.001 per share and has a liquidation preference of the greater of (a) the
consideration paid to the Company for such shares plus any declared but unpaid
dividends or (b) the per share amount the holders of the Preferred Stock A would
be entitled to upon conversion, as defined in the Preferred Stock A certificate
of designation.  The liquidation preference was $750,000 at September
30, 2009.  Holders of the Preferred Stock A are entitled to receive,
if declared by the board of directors, dividends at a rate of 8% payable in cash
or common stock of the Company.  The Preferred Stock A is convertible
into the Company’s common stock at an initial conversion price of $1.25 per
share upon the occurrence of a liquidity event as defined in the Preferred Stock
A certificate.  The Preferred Stock A is redeemable at the option of
the Company at $1.80 per share prior to conversion. The Preferred Stock A votes
as a separate class from the common stock.  Preferred Stock A ranks
senior to the following capital stock of the Company: (a) the common stock and
(b) all later created classes or series of Preferred Stock.  During
the three and nine months ended September 30, 2009, the Company declared
dividends on its Preferred Stock A totaling $18,440 and $39,905,
respectively.




During
the three months ended September 30, 2009, the Company issued 190,290 shares of
Series B Convertible Preferred Stock (the “Preferred Stock B”), for total cash
consideration of $380,580.  The Preferred Stock B has a par value of
$0.001 per share and has a liquidation preference of the greater of (a) the
consideration paid to the Company for such shares plus any declared but unpaid
dividends or (b) the per share amount the holders of the Preferred Stock B would
be entitled to upon conversion.  The liquidation preference was
$1,000,000 at September 30, 2009.  Holders of the Preferred Stock B
are entitled to receive, if declared by the board of directors, dividends at a
rate of 8% payable in cash or common stock of the Company.  The
Preferred Stock B is convertible into the Company’s common stock at an initial
conversion price of $1.74 per share upon the occurrence of a liquidity event as
defined in the Preferred Stock B.  The Preferred Stock B is redeemable
at the option of the Company at $2.30 per share prior to conversion. The
Preferred Stock B votes as a separate class from the common
stock.  Preferred Stock B ranks senior to the following capital stock
of the Company: (a) the common stock and (b) all later created classes or series
of Preferred Stock (including, but not limited to, Series C Preferred Stock and
Series D Preferred Stock).  During the three and nine months ended
September 30, 2009, the Company declared $0 in dividends on its Preferred Stock
B.




During
the three months ended September 30, 2009, the Company issued 152,000 shares of
Series C Convertible Preferred Stock (the “Preferred Stock C”), for total cash
consideration of $380,000.  The Preferred Stock C has a par value of $0.001
per share and has a liquidation preference of the greater of (a) the
consideration paid to the Company for such shares plus any declared but unpaid
dividends or (b) the per share amount the holders of the Preferred Stock C would
be entitled to upon conversion.  The liquidation preference was $380,000 at
September 30, 2009.  Holders of the Preferred Stock C are entitled to
receive, if declared by the board of directors, dividends at a rate of 8%
payable in cash or common stock of the Company.  The Preferred Stock C is
convertible into the Company’s common stock at an initial conversion price of
$2.27 per share upon the occurrence of a liquidity event as defined in the
Preferred Stock C certificate of designation.  The Preferred Stock C is
redeemable at the option of the Company at $2.75 per share prior to conversion.
The Preferred Stock C votes as a separate class from the common
stock.  Preferred Stock C ranks senior to the following capital stock
of the Company: (a) the common stock and (b) all later created classes or series
of Preferred Stock (including, but not limited to, Series D Preferred
Stock).  During the three and nine months ended September 30, 2009,
the Company declared $0 dividends on its Preferred Stock C.




On August 27, 2009, prior to the
Merger, and prior to the issuance of any Preferred Stock C shares, HGI issued
common stock shares as payment of a discretionary stock dividend to all
Preferred Stock A holders and Preferred Stock B holders, resulting in an
additional 165,094 shares of HGI common stock outstanding.




Series
Z Preferred Stock




The Company filed a Certificate of
Designation of the Series Z preferred stock with the Secretary of State of
Delaware on September 30, 2009. The material rights, preferences and privileges
of the Series Z preferred stock are as follows:




·  the
shares are convertible, after the Company authorizes sufficient additional
shares of the Company’s common stock to enable conversion of all Series Z
preferred stock, into 340.668384 shares of the Company’s common stock, subject
to anti-dilution adjustments;




-18-
 INDEX





·  the
shares are entitled to vote together with the holders of the Company’s common
stock as a single class, each share of Series Z preferred stock having voting
rights on an “as if converted” basis such that each share will have one vote on
all matters submitted to the holders of the Company’s common stock for each
share of the Company’s common stock into which such preferred stock would be
converted if converted as of the date of such vote (in addition to such voting
rights that are specifically afforded to holders of a series of preferred stock
to vote as part of a class or series thereof under Delaware law and the
requirement that, without the affirmative vote of the holders of at least a
majority of Series Z preferred stock (acting as a separate class) at the time
outstanding, the Company may not alter, change or amend the preferences or
rights of the Series Z preferred stock);




·  the
shares are entitled only to dividends, with holders of the Company’s common
stock, on an as if converted basis;




·  the
shares are entitled on liquidation to receive, after any payments are made to,
or any assets set aside for, and holders of any of the Company’s preferred stock
ranking senior in right of liquidation that may hereafter be issued, an amount
per share for each outstanding share of Series Z preferred stock equal to
$0.001, and to share thereafter in any amount to which the Company’s common
stock would be entitled on an as if converted basis.







NOTE
12.  CONCENTRATIONS OF CREDIT RISK




The
Company maintains cash balances, at times, with financial institutions, which
are in excess of amounts insured by the Federal Deposit Insurance Corporation
(FDIC). During 2009, the FDIC insured cash accounts from $100,000 to
$250,000.  At September 30, 2009, the cash balance of $126,603 was
less than the $250,000 FDIC insured amount.




Financial
instruments that potentially subject the Company to concentrations of credit
risk consist primarily of accounts receivable.




In the
normal course of business, the Company extends unsecured credit to its
customers.   Because of the credit risk involved, management has
provided an allowance for doubtful accounts which reflects its estimate of
amounts which will eventually become uncollectible.  In the event of
complete non-performance by the Company’s customers, the maximum exposure to the
Company is the outstanding accounts receivable balance at the date of
non-performance.







NOTE
13.  SUBSEQUENT EVENTS




Subsequent
events have been evaluated through November 11, 2009, which is the date the
financial statements were available to be issued.




In
October 2009, HGI formed a wholly owned subsidiary, Halo Portfolio Advisors, LLC
for the purpose of growing HGI’s overall business to business sales
model.




In
October 2009, HGI’s wholly owned subsidiary, Halo Group Consulting, Inc.
formally changed its name to Halo Benefits, Inc.




On
October 27, 2009, the Company entered into one unsecured promissory note with a
related party for a working capital advance to the Company in the amount of
$60,000 (Related Party Note 2).  The Related Party Note 2 bears
interest at a rate of 0.71% per annum with final maturity December 26, 2009, 60
days from issuance date.  All interest and principal is due upon
maturity.




On
October 28, 2009, the Company entered into one unsecured promissory note with a
related party for a working capital advance to the Company in the amount of
$15,000 (Related Party Note 3).  The Related Party Note 3 bears
interest at a rate of 0.71% per annum with final maturity December 27, 2009, 60
days from issuance date.  All interest and principal is due upon
maturity.


-19-
 INDEX


Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations




Forward-Looking
Statements




Certain
statements contained in this Quarterly Report on Form 10-Q that are not
statements of historical fact constitute “forward-looking statements” within the
meaning of the safe harbor provisions of the United States Private Securities
Litigation Reform Act of 1995. Words such as “expect,” “estimate,” “project,”
“budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,”
“should,” “believes,” “predicts,” “potential,” “continue,” and similar
expressions are intended to identify such forward-looking statements but are not
the exclusive means of identifying such statements.  Although the
Company believes that the current views and expectations reflected in these
forward-looking statements are reasonable, those views and expectations, and the
related statements, are inherently subject to risks, uncertainties, and other
factors, many of which are not under the Company’s control.  Those
risks, uncertainties, and other factors could cause the actual results to differ
materially from those in the forward-looking statements.  Those risks,
uncertainties, and factors include, but are not limited to: the level of
customer demand for and response to products and services offered by the
Company, including demand by the consumer financial services industry,
specifically the credit market and real estate markets, changes in economic
conditions of the various markets the Company serves; adequacy of financing;
reliance on key executive officers; successfully implementing the Company’s
growth strategy; a downturn in market conditions in any industry relating to the
services that we provide; the effects and duration of continuing economic
recession in the U.S. and other markets in which we operate; change in industry
laws and regulations.  The Company expressly disclaims any obligation
to release publicly any updates or revisions to these forward-looking statements
to reflect any change in its views or expectations. The Company can give no
assurances that such forward-looking statements will prove to be
correct.





The
following discussion of the financial condition and results of operation of the
Company should be read in conjunction with the financial statements and the
notes to those statements included in this Report.





Company
Overview




The
Company, through its subsidiaries, operates primarily in the consumer financial
services industry, providing services related to personal debt, credit,
mortgage, real estate, loan modification and insurance.  The Company
works with its clients, who are consumers who may be in various stages of
financial need, to assist in reducing their debt, correcting their credit
profile, securing a home mortgage, buying or selling a residence, providing
proper insurance for their assets, mitigating potential home loss, and educating
them in financial matters.





Plan
of Operations




It is the
intent of the Company to continue expanding its direct-to-consumer business,
both organically, as well as potentially through acquisition.  The
Company also plans to increase its concentration on the business-to-business
marketing strategy, specifically in the mortgage servicing
industry.  Year to date, the Company has had adequate cash-flow from
operations to sustain normal operating activities.  The Company has
supplemented its operating cash-flow with debt and equity financing to support
its growth in marketing and business development. The Company intends to pursue
additional funding through debt, subordinated debt, and equity financing to
continue its expansion and growth efforts. Specific details relating to previous
debt and equity financing can be found in the Liquidity and Capital Resources
section below and in Notes 4, 5, and 6 to the consolidated financial
statements.




-20-
 INDEX




Results
of Operations for the three months ended September 30, 2009 Compared to the
three months ended September 30, 2008, and Results of Operations for the nine
months ended September 30, 2009 Compared to the nine months ended September 30,
2008




Revenues




Revenue
increased $977,661 and 80% from $1,222,611 for the three months ended September
30, 2008 to $2,200,272 for the three months ended September 30,
2009.  Revenue increased $3,846,537 or 121% from $3,175,430 for the
nine months ended September 30, 2008 to $7,021,967 for the nine months ended
September 30, 2009.  The increase is primarily due to the growth of
Halo Debt Solutions and this subsidiary’s overall improved market strategy and
ability to provide increasingly effective and efficient debt settlement services
to consumers.  Halo Debt Solutions has adopted innovative strategies
to deploy marketing efforts directly to consumers and has developed close,
cooperative relationships with creditors, allowing for substantial revenue
growth.




Operating
Expenses




Sales and Marketing expenses increased
$142,306 or 53% from $268,256 for the three months ended September 30, 2008 to
$410,562 for the three months ended September 30, 2009.  Sales and
marketing expenses increased $500,993 or 93% from $541,005 for the nine months
ended September 30, 2008 to $1,041,998 for the nine months ended September 30,
2009.   This increase is primarily attributable to the increased
overall volume of lead generation purchases during the three months, which has
allowed for substantial growth in revenues noted above.




General and Administrative expenses
increased $1,124,004 or 102% from $1,101,974 for the three months ended
September 30, 2008 to $2,225,978 for the three months ended September 30,
2009.  General and Administrative expenses increased $2,976,013 or
107% from $2,781,202 for the nine months ended September 30, 2008 to $5,757,215
for the nine months ended September 30, 2009.  This increase is
primarily attributable to increased costs associated with employee head count,
the hiring of more executive and senior management personnel to accommodate a
growing business, associated increased rent expense to office a growing
workforce and variable costs incurred to grow revenues.  Several new
subsidiaries began operations during 2009, including Halo Loan Modification
Services, LLC, Halo Select Insurance Services, LLC, Halo Choice Insurance
Services, LLC, and as such, there have been increased general and administrative
expenses and start up costs involved to get the companies operating.
Additionally, in association with the Merger, professional service fees
increased significantly for the three and nine months ended September 30,
3009.  These services include legal, accounting, auditing, business
valuation, compliance, and consulting. A portion of these expenses is
non-recurring and should decrease in future periods.




Although overall Sales and Marketing
expenses and General and Administrative expenses have increased, the Company
continues to improve operational efficiencies, increase staffing at a modest
rate and effectively manage fixed and variable costs.




Stock option compensation expense was
$0 during the three and nine months ended September 30, 2008 compared to
$1,310,515 for the three and nine months ended September 30, 2009.  As
noted in the significant accounting policies below, the fair value of stock
options at the date of grant is determined via the Black Scholes model and,
since the options are contingently exercisable upon the occurrence of a
specified event, the fair value of such options is recognized in earnings over
the vesting period of the options beginning when the specified event becomes
probable of occurrence.  The specified event (Merger) occurred on
September 30, 2009.  The total fair value of stock compensation
expense as of September 30, 2009 totaled $2,312,177.  Stock
compensation expense of $1,310,515 was charged to the statement of operations as
of September 30, 2009 for any stock option that had vested as of September 30,
2009.  Stock compensation expense is a non-cash expense
item.




As a
result, net loss increased $1,583,702 from a net loss of $158,710 for the three
months ended September 30, 2008 to a net loss of $1,742,412 for the three months
ended September 30, 2009.  Net loss increased $962,645 from a net loss
of $161,178 for the nine months ended September 30, 2008 to a net loss of
$1,123,823 for the nine months ended September 30, 2009.  This
increase in loss is primarily attributable to the $1,310,515 in stock option
compensation expense noted above.  Excluding the $1,310,515 in stock
option compensation expense for the nine months ended September 30, 2009, the
Company has net income of $222,754 for the nine months ended September 30,
2009.




-21-
 INDEX





Assets
and Liabilities




Total
assets of the Company were $3,630,353 at September 30, 2009, compared to
$1,795,910 at December 31, 2008.  Increases were noted primarily in
restricted cash, accounts receivable, prepaid expenses and property and
equipment.  The growth in restricted cash primarily represents
$250,000 of funds raised through normal operations and in capital raising
efforts through the Company’s debt borrowings and private sales of preferred
stock.  At September 30, 2009, the funds were held in a third party
trust account and were available to be disbursed to various independent vendors
of GVC as payment for professional services rendered to the business prior to,
and in connection with, the Merger.  The growth of accounts receivable
is primarily related to the growth in overall volume of customers and revenue of
Halo Debt Solutions.  The growth in prepaid expense balance represents
prepayment of common stock in Halo Group for several executed consulting
services agreements whereby respective individuals and/or entities had been
engaged to provide consulting services to the Company for a period not to extend
more than one year from date of issuance and in return received common stock of
Halo Group, paid in advance.  The fair value of the consulting
services to be provided was determined using the fair value of the common stock
received on the date of issuance.  Equity based compensation for
service already performed as of September 30, 2009 is included in general and
administrative expense.  The growth in property and equipment is
primarily attributable to the new communication and computer equipment purchased
throughout the year in connection with the increase in the Company’s
workforce.




Total
liabilities of the Company were $1,766,962 at September 30, 2009 compared to
$1,264,599 at December 31, 2008.  Notes payable (both third-party and
related party) and Lines of Credit are discussed in further detail below and in
Notes 4, 5, and 6 to the consolidated financial statements.  Accounts
payable increased from $48,264 at December 31, 2008 compared to $250,504 at
September 30, 2009, primarily as the result of Halo Group’s assumption $230,000
in accounts payable of GVC as a result of the Merger.





In
connection with a reorganization during 2007 (See Note 1), the Company entered
into three promissory notes totaling $397,000 with two board of directors for
the purchase of their member interests in HGM and HCS (the “Board of Director
Notes”).  As of September 30, 2009, the amount outstanding under the
Board of Director Notes totaled $268,000.




During
2007 the Company entered into two unsecured promissory notes with a director for
working capital advances made to the Company, totaling $60,000 (the “Director
Loans”).  As of September 30, 2009, the amounts outstanding under the
Director Loans totaled $60,000.




During
2008 the Company entered into three unsecured promissory notes with two related
parties (the “Related Notes”) for working capital advances made to the Company
in the amounts of $39,000, $50,000 and $100,000. As of September 30, 2009,
outstanding principal on the $39,000 note totaled $0. The $50,000 was paid in
full in January 2009.  The $100,000 was paid in full on the maturity
date.





On March
6, 2009, the Company entered into a new revolving line of credit (“LOC”)
facility with Legacy Texas Bank which provides maximum borrowings of
$250,000.  On September 6, 2009, the Company increased the line of
credit $75,000 to a maximum borrowing amount of $325,000.  The
$325,000 maximum borrowing amount includes a $75,000 letter of credit to the
Company’s business office lessor.  The $75,000 letter of credit
expires November 29, 2010.  As of September 30, 2009, the Company has
received net advances totaling $250,000 under this new LOC.




In
connection with the new LOC, the Company paid off the $73,000 line of credit
held with Chase Bank.  The balance remained at $0 until August 2009,
at which time the line of credit was closed with Chase
Bank.  Additionally, in connection with the new line of credit, the
Company paid off and closed a $300,000 line of credit that it held with
Independent Bank of Texas.




On March
6, 2009, the Company entered into a 36 month secured promissory note with Legacy
Texas Bank in the amount of $374,000.  The proceeds of this note
payable were used to pay off the two lines of credit as discussed in Note
4.




-22-
 INDEX





During
January 2009 the Company entered into one unsecured promissory note with a
shareholder for a working capital advance to the Company in the amount of
$15,000 (the “Shareholder Note”).  As of September 30, 2009, the
amount outstanding under the Shareholder Note totaled $15,000.




On April
15, 2009, the Company entered into a 60 month secured promissory note with
Legacy Texas Bank in the amount of $167,000.  The proceeds of this
note payable were used to purchase communication equipment.




During
April 2009 the Company entered into one unsecured promissory note with a related
party for a working capital advance to the Company in the amount of $65,000 (the
“Related Party Note”).  As of September 30, 2009, the amount
outstanding under the Related Party Note totaled $60,517, of which $49,131 is
included in long term liabilities.




Significant
Accounting Policies




Certain
critical accounting policies affect the more significant judgments and estimates
used in the preparation of the Company’s consolidated financial
statements.  These policies are contained in Note 2 to the
consolidated financial statements.




Liquidity
and Capital Resources





Capital
for the growth of Halo Group has been provided through operating cashflow, debt
borrowings, and private sales of its equity securities to
investors.  Throughout the period from inception (January 25, 2007) to
December 31, 2007, Halo Group raised $744,003 of capital through the sale of its
common stock and preferred stock.  Between January 1, 2008 and
December 31, 2008, Halo Group raised $675,818 of additional capital through
private sales of its preferred stock.  Between January 1, 2009 and
September 30, 2009, Halo Group raised $1,182,404 of additional capital through
private sales of its preferred stock. During the same period, Halo Group
borrowed $250,000 on its $250,000 available line of credit, $374,000 on a
36-month secured promissory note, and $167,000 on a 60-month secured promissory
note.  The capital raised since inception has been used, and will be
used, to fund Company growth and expansion, marketing campaigns, and operating
expenses.  The following provides a summary of our cash
flows:





(Unaudited)
              Nine
      Months Ended
              Sep.
      30,
            
            
            Year
      Ended
              December
      31,
            
            
            25-Jan-2007
              (Inception)
      to
              Sep.
      30,2009
            
            
            2008
            
            
            2007
            
            
            2009Net
      Cash (Used in) Operating Activities
            
            
            (1,030,637
            )
            
            
            (790,671
            )
            
            
            (650,458
            )
            
            
            (2,471,766
            )Net
      Cash (Used in) Investing Activities
            
            
            (424,069
            )
            
            
            (211,450
            )
            
            
            (56,015
            )
            
            
            (691,534
            )Net
      Cash Provided by Financing Activities
            
            
            1,400,960
            
            
            
            1,129,944
            
            
            
            706,803
            
            
            
            3,237,707Net
      Increase/(Decrease) in Cash
            
            
            (53,746
            )
            
            
            126,823
            
            
            
            330
            
            
            
            73,407Cash,
      Beginning of Period
            
            
            180,349
            
            
            
            53,526
            
            
            
            53,196
            
            
            
            53,196Cash,
      End of Period
            
            $
            126,603
            
            
            $
            180,349
            
            
            $
            53,526
            
            
            
            126,603





The
Company believes that its cash and cash equivalents balances, cash flows from
operations, and funding from the financing sources discussed above will be
sufficient to meet the normal operating requirements of the Company during the
next fiscal year ending December 31, 2009. The Company will need additional
financing to fully implement its business plan and to fund additional capital
expenditures. The Company continually considers supplementing the cash
flows generated by operations with funds provided by financing activities, via
both debt and equity, to balance the Company's cash requirements and to finance
specific capital projects.





-23-
 INDEX





Off
Balance Sheet Transactions and Related Matters





Other
than operating leases discussed in Note 9 to the consolidated financial
statements, there are no off-balance sheet transactions, arrangements,
obligations (including contingent obligations), or other relationships with
unconsolidated entities or other persons that have, or may have, a material
effect on financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources of the Company.




Item 3.
Quantitative and Qualitative Disclosures About Market
Risk.




Not
required for Smaller Reporting Companies.




Item 4.
Controls and Procedures.





As of the
end of the period covered by this report, the Company’s principal executive
officer and principal financial officer, evaluated the effectiveness of the
Company’s “disclosure controls and procedures,” as defined in Rule 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934. Based on that evaluation,
the officers concluded that, as of the date of the evaluation, the Company’s
disclosure controls and procedures were effective to provide reasonable
assurance that information required to be disclosed in the Company’s periodic
filings under the Securities Exchange Act of 1934 is accumulated and
communicated to management, including the officers, to allow timely decisions
regarding required disclosure. It should be noted that a control system, no
matter how well designed and operated, can provide only reasonable, not
absolute, assurance that it will detect or uncover failures within the Company
to disclose material information otherwise required to be set forth in the
Company’s periodic reports.




During
the period covered by this report, there were no changes in the Company’s
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.




-24-
 INDEX





Part II - Other Information




Item
1. Legal
Proceedings




Not
applicable.




Item 1A. Risk
Factors




Not
required for Smaller Reporting Companies.




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




Not
applicable.




Item
3. Defaults Upon
Senior Securities




Not
applicable.





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




None




Item
5. Other
Information




None




Item
6. Exhibits




31.1 
Rule 13a-14(a) Certification of the Principal Executive
Officer.




31.2   
Rule 13a-14(a) Certification of the Principal Financial
Officer.




32Section 1350 Certifications.




-25-
 INDEX










SIGNATURES




In
accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.















Date:
      November 11, 2009
            By:
            /s/
      Brandon Cade ThompsonBrandon
      Cade ThompsonChief
      Executive Officer(Principal
      Executive Officer)Date:
      November 11, 2009
            By:
            /s/
      Paul WilliamsPaul
      WilliamsChief
      Financial Officer(Principal
      Financial and Accounting Officer)
































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