10-K 1 genesis10k10.txt FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2010 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2010 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______TO _______ Commission file number: 0-50773 Genesis Electronics Group, Inc. (Name of registrant as specified in its charter) Nevada 41-2137356 (State or other jurisdiction of (I.R.S. Employers incorporation or organization) Identification No.) 5555 Hollywood Blvd, Suite 303, Hollywood, FL 33021 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (954) 272-1200 Securities registered under Section 12(b) of the Act: Title of each class Name of each exchange on which registered. Not applicable Securities registered under Section 12(g) of the Act: Common stock, par value $0.001 (Title of class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ] Yes [x] No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes [x] No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to 2 Rule 405 of Regulation S-T (section 232.406 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company: 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 aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter. $7,904,708 on June 30, 2010. Indicated the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. 170,906,906 shares of common stock are issued and outstanding as of April 15, 2011. DOCUMENTS INCORPORATED BY REFERENCE None. 3 TABLE OF CONTENTS Page No. Part I Item 1. Business 4 Item 1A. Risk Factors 10 Item 1B. Unresolved Staff Comments 10 Item 2. Properties 10 Item 3. Legal Proceedings 11 Item 4. (Removed and Reserved) 11 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 12 Item 6. Selected Financial Data 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation 15 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 22 Item 8. Financial Statements and Supplementary Data 23 Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure. 53 Item 9A Controls and Procedures. 53 Item 9B. Other Information. 55 Part III Item 10. Directors, Executive Officers and Corporate Governance 56 Item 11. Executive Compensation 58 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 60 Item 13. Certain Relationships and Related Transactions, and Director Independence 61 Item 14. Principal Accountant Fees and Services. 61 Part IV Item 15. Exhibits, Financial Statement Schedules. 63 4 PART I ITEM 1. BUSINESS Overview -------- The registrant was originally incorporated in the State of Nevada on March 19, 1998 under the name Business Advantage No. 22, Inc. Due to non-filing of annual reports, the corporate charter of Business Advantage No. 22, Inc. was revoked. In June 2004, Business Advantage No. 22, Inc. was reinstated. On June 4, 2004, Business Advantage No. 22, Inc. entered into an Agreement and Plan of Reorganization with Pricester.com, Inc., a Florida Corporation to merge Pricester Florida into Business Advantage No. 22, Inc. On June 4, 2004, in anticipation of the merger, the name of Business Advantage No. 22, Inc. was changed to Pricester.com, Inc. On February 9, 2005, pursuant to Articles of Merger, shareholders of Pricester Florida received 21,262,250 common shares of Business Advantage No. 22, Inc. on a basis of a one for one exchange for their common shares. Pricester.com, Inc., formerly Business Advantage No. 22, Inc., was the surviving corporation. The articles of merger were filed with the states of Nevada and Florida. The number of common shares held by Pricester Nevada before the merger was 1,044,620. Pricester Nevada was the acquirer for legal purposes and Pricester Florida was the acquirer for accounting purposes. The transaction was accounted for as a reverse acquisition. Prior to the merger with Pricester Florida on February 9, 2005, Pricester Nevada had no significant operations and had no control over the operations of Pricester Florida. Pursuant to Articles of Amendment filed on February 24, 2009, the name of the registrant was changed to Genesis Electronics Group, Inc. Subsidiary ---------- On May 22, 2008, we completed a share exchange with Genesis Electronics, Inc., a Delaware corporation. Pursuant to the Acquisition Agreement, we acquired all of the outstanding common shares of Genesis Electronics, Inc. and it became our wholly-owned subsidiary. Genesis Electronics, Inc. was originally formed in Delaware on October 22, 2001 and is engaged on the development of solar and alternative energy applications for consumer devices such as mobile phones. Corporate operations -------------------- The registrant's business consist of (1) Genesis Electronics: the development and eventual manufacturing and marketing of solar-powered consumer products, based on patented technology either owned by Genesis or licensed from Johns Hopkins University Applied Physics Laboratories, (2) Pricester.com: the sales of cost-effective websites and related Internet services primarily to the small business sector, and 5 (3) Copia World, a Division of Pricester.com: the development and marketing of an international shopping portal. We have yet to generate substantial revenue because we are still in the developmental and pre- production stages with our solar products, although substantial headway has been made with successfully operating prototypes designed to comply with the standards of a major brand-name manufacturer, and our website and international shopping portal businesses have not yet reached sufficient volume to be self-supporting. We have suspended operation of the Pricester.com Shopping Portal, which enabled users to build their own websites and sell and auction their goods directly through the portal. The Pricester.com Shopping Portal represented less than 10% of the Pricester.com division. As soon as our first solar-powered product, a charger for a brand-name iphone, is fully compliant with all necessary and elected technical criteria, we will be able to move ahead with manufacturing and marketing the product, as well as the development and marketing of similar products designed for operation with other hand-held and portable electronic devices. The registrant has already formed an ongoing partnership with a Taiwan-based manufacturer and strides have been made in product and packaging development, procurement of safety and transport certifications, prototype production and setting up for planned mass-production. There are no written agreements between the parties. With the worldwide proliferation of cell phones, smart phones, notebook computers, and so many other portable electronic devices, the widespread and growing problem of inadequate charging life from traditional batteries, the inconvenience and sometimes unavailability, of re-charging by plugging into a wall outlet, management is of the opinion that there is a need for a more sustainable source for charging. Genesis Electronics' fully-functional early prototypes have met with positive reception from prospective distributors, sales organizations and large scale retailers from both concept and operational standpoints. Concerning Pricester.com's business, we have developed a technological framework that overcomes prohibitive cost factors and exponentially increases the ease with which small business owners can effectively enter the e-commerce community and credibly compete for customers online. We have created streamlined processes that permit an economy for the construction of professionally designed, customized, full-functioned e- commerce or informational websites, and for hosting large numbers of such websites. Our services are marketed to the small business sector, where the cost of website design and development has been a barrier to achieving an Internet presence. 6 As consumer access to the Internet has become more widespread and continues to grow, management is of the opinion that websites have emerged as an essential tool for small businesses. Small companies and professional practices alike understand the value of a website for establishing credibility and competing for clients and sales. Concerning Copia World's business, we have launched an international shopping portal, now populated with direct website links to over 7,000 stores covering 15 shopping categories in 25 countries. In addition, the portal also includes a robust travel booking engine in affiliation with a prominent online provider for airfare, hotel accommodations and car rental. Copia World offers consumers and travelers access to international shopping available anywhere on the Internet from a single source. The website, www.copiaworld.com, is already ranked by Google and other major search engines for search terms such as "international shopping mall" and "international shopping". Revenue is planned to be derived from paid advertising, gradually replacing PPC ads and potential partnerships with synergistic companies such as international hotel chains and major credit card providers. Our Products & Services ----------------------- Overview: The registrant is in the developmental stage of producing and marketing solar-powered consumer products. The registrant also provides services that allow small businesses to have a cost-effective Internet presence with the website features that consumers want and expect. Additionally, the registrant has built and operates an online international shopping portal, useful for travel planning and online purchasing on a global scale. 1. Genesis Electronics: Genesis Electronics, a wholly-owned subsidiary of the registrant, is engaged in the development and marketing of solutions. Battery life and charging technology reliability are currently being examined by Genesis Electronics, especially where the usage is expanded beyond simple voice communications to Internet access, games, video viewing, audio-visual recording and thousands of downloadable applications. Genesis Electronics has developed a patent-based solar energy technology that makes a constant and reliable charge always available to cell phones or smart phone batteries. Our board of directors feels that the potential for its patented technology and the products and applications that may be developed in the future can represent significant revenue for the registrant. The registrant has no definite timeline for the development of these products and applications. The technology can be adapted to any mobile electronic device, including cell phones, "smart" phones, mp3 players, notebook and laptop computers, digital cameras, etc. Additionally, applications for use with electronic devices employed by the military are being investigated. The registrant has verbal commitments for 7 production and distribution channels are already in place for smart phone application with companies such as Comm Tec, Inc., a Taiwan-based manufacturer. 2. Pricester.com: Pricester.com, a division of Genesis Electronics Group, provides website design services, primarily geared to the needs and budgets of small businesses. Closely related Internet and website services also provided by Pricester include: website hosting, domain registration, Internet search engine and directory submission, Internet marketing services (e.g., webpage optimization, pay-per- click campaign development, etc.), website maintenance, design-related services such as logo creation, and advanced shopping cart and design options for highly customized websites. While virtually all major retailers and service providers have company websites, the smaller owner-operated businesses-collectively, the largest component of the entire economy-still only have a relatively minor presence on the Internet. There are over 23 million small businesses in the U.S., including businesses with less than 5 employees and those filing 1040 Schedule C returns (Source: U.S. Department of Commerce) and millions still without a web presence to sell and promote their products and services. According to a 2009 report by Ad-Ology Research, an authoritative source used by over 2,000 advertising agencies, media properties and corporate marketing departments, a full 46% of small businesses do not have a website. Our website design technology permits the professional customization of websites at extremely low cost. The savings are passed along to the business owner, resulting in perhaps the lowest net cost customized website package available on the market today. Competitors offering similar services are operating within a far more labor intensive environment and cannot compete with Pricester.com's pricing strategy. Clients receive a customized multi-page website designed for free and agree to pay just a competitive Internet hosting fee and a nominal set- up charge. At this time, Pricester.com creates the majority of its sales by generating small business leads using outbound automated telemarketing, and then following up by telephone. A number of sales are also the result of client referrals and repeat clients. Almost all sales are consummated over the phone. Concurrently, the registrant is endeavoring to develop strategic partnerships with other companies and organizations that have an interest in the same small business target market. Pricester.com delivers a product that is appealing and important to small business owners. Therefore, logical targets for strategic partnerships are larger corporations, such as mid to large banks, merchant service providers, communications companies, appropriate retail chains and business organizations that actively and competitively seek to acquire and retain small businesses as their customers or members. Pricester.com's website service is positioned as a valuable addition to the partner's existing product or service, providing more market differentiation and a competitive edge. 8 The market for affordable business websites is large and still expanding. Pricester.com's services are specifically geared to address this demand from the small business sector. Additional funding is required to expand marketing efforts in order to reach and further penetrate the market. 3. Copia World: Copia World, www.copiaworld.com, a division of Pricester.com, is an online shopping portal of international scope, a more comprehensive, consumer-friendly, single-source of retailers and select service providers on an international level. Copia World provides travelers and consumers with fast access to retailers and businesses worldwide. Currently, the portal includes 25 countries spanning six continents, with 15 major shopping categories including a powerful travel reservation engine and over 7,000 store listings. Copia World features ease of use and direct links to all listed business websites. Copia World has already achieved major search engine ranking for relevant terms such as "international shopping mall" (recently ranked #1 on Google and #4 on Bing, in both cases out of over 24 million matches) and "international shopping" (consistently a top 5 rank). Visitors can shop for - clothing in London, - wines or jewelry in Paris, - hand-crafted items from Mexico, - furs in Moscow, view real estate in Saudi Arabia, - peruse the department stores in Brazil, - see the offerings from shopping malls in Israel, - compare banks in Germany. The portal currently displays affiliate ads and is moving towards generating added revenues through subscription advertising from listed companies. The board of directors feels that there is potential for Copia World as the portal continues to grow in population and enhanced features are added. Additionally, corporate partners for Copia World are being sought. COSTS OF OPERATION In order to operate the above businesses, continue to develop our products and provide our services, the registrant currently employs personnel for management, technical development and coordination, customer support, technical support, Internet marketing and web design and contract for sales personnel. Our regular monthly expenses are approximately $14,080, broken down as follows: Payroll & Taxes $6,400 Rent 1,580 Electric 300 Telecommunications (Phones & Servers) 1,500 9 Accounting services 2,500 Insurance 300 Legal 1,500 ------- $14,080 ======= REVENUE STREAMS The registrant has not generated significant revenues. Currently, revenue is generated solely through the Pricester.com division, as Genesis Electronics and Copia World are still in their early stages. During 2006, Pricester.com commenced selling Website design services and hosting plans. As the number of clients increase and budgeting permits adequate marketing expenditures our revenues should increase significantly with collected setup fees and monthly hosting fees. Our revenues have been generated by website sales, hosting fees and miscellaneous service fees totaling $28,351 for the year ended December 31, 2010. In order to successfully expand our number of clients for our website development and hosting services, we must employ significant monetary resources. Intellectual Property and Proprietary Rights -------------------------------------------- We protect our intellectual property through existing laws and regulations and by contractual restrictions. We attempt to protect our technology and trade secrets through the use of: confidentiality and non-disclosure agreements, trademarks, patents, and by other security measures. The registrant owns a patent for a solar rechargeable battery (U.S. patent 6,586,906) and licenses two additional patents from Johns Hopkins University Applied Physics Laboratories for an "Integrated Power Source" (U.S. Patents 5,644,207 and 6,608,464).Trademarks have been filed under Pricester.com and Pricester Store "e-commerce for all". The Copia World spinning globe icon is trademarked. Marketing Strategies -------------------- We intend to establish a national market presence, and where appropriate an international presence, using the following approaches in order to gain brand awareness and sales for all of our businesses: public relations and advertising campaigns using television, radio, press releases, Internet marketing, and targeted newspapers and magazines Insurance --------- We have in force workman's comp and general liability insurance. 10 Competition ----------- Genesis Electronics competes with other manufacturers of solar powered and traditionally powered charging devices. Pricester.com competes with many website design and Internet hosting companies. Copia World competes with established shopping and travel websites. In all cases, many of these competitors may have advantages in expertise, brand recognition, available financial and other resources, and other factors. In order to compete effectively, we will need to expend significant capital, internal engineering resources, or acquire other technologies and companies to provide or enhance our capabilities. Government Regulation --------------------- We are subject to general business regulations and laws, as well as regulations and laws directly applicable to the production and transport of electronic devices (applicable to Genesis Electronics), and the Internet (applicable to Pricester.com and Copia World). As we continue to expand the scope of our product and service offerings, the application of existing laws and regulations relating to issues such as consumer protection, content regulation, quality of products and services, and intellectual property ownership and infringement can be unclear. In addition, we will also be subject to new laws and regulations directly applicable to our activities. Any existing or new legislation applicable to us could expose us to substantial liability, including significant expenses necessary to comply with such laws and regulations. ITEM 1A. RISK FACTORS. Not applicable to smaller reporting companies. ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable. ITEM 2. PROPERTIES. We lease an office facility from 234 Hollywood, LLC pursuant to a lease that began in October 2009. The office facility is located at 5555 Hollywood Blvd. Suite # 303 Hollywood, FL 33021. The facility consists of 1,000 square feet for the minimum lease payments of $1,117 per month and terminated in March 2011. In March 2011, we have renewed and signed a 2 years lease agreement which will expire in March 2013. We believe that this facility is sufficient for our current needs. The office lease agreement has certain escalation clauses and renewal options. If we exercise the option to renew, the base rent shall increase by 3% per each lease year. 11 ITEM 3. LEGAL PROCEEDINGS. The registrant is not involved in any legal proceedings at this date. ITEM 4. (REMOVED AND RESERVED) 12 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Item 5(a) a) Market Information. The registrant began trading publicly on the NASD Over the Counter Bulletin Board in June 2006 under the symbol "PRCC". On December 15, 2009, the registrant began trading under the symbol "GEGI". The following table sets forth the range of high and low bid quotations for the registrant's common stock as reported on the NASD Bulletin Board. The quotations represent inter-dealer prices without retail markup, markdown or commission, and may not necessarily represent actual transactions. Quarter Ended High Bid Low Bid 3/31/10 $0.17 $0.03 6/30/10 $0.19 $0.07 9/30/10 $0.10 $0.05 12/31/10 $0.09 $0.03 3/31/09 $0.18 $0.003 6/30/09 $0.097 $0.008 9/30/09 $0.05 $0.02 12/31/09 $0.04 $0.02 b) Holders. The approximate number of record holders of the registrant is 254. c) Dividends. Holders of the registrant's common stock are entitled to receive such dividends as may be declared by its board of directors. No dividends on the registrant's common stock have ever bee paid, and the registrant does not anticipate that dividends will be paid on the common stock in the foreseeable future. d) Securities authorized for issuance under equity compensation plans. No securities are authorized for issuance by the registrant under equity compensation plans. e) Performance graph. Not applicable. 13 f) Sale of unregistered securities. For the year ended December 31, 2010, the registrant received net proceeds of $211,255 and subscription receivable of $54,000 from the sale of 5,737,834 shares of the registrant's common stock. For the year ended December 31, 2010, the registrant collected subscription receivable of $77,717. During the year ended December 31, 2010, the registrant applied $20,000 against subscription receivable for services rendered by one of our employees. Additionally, as of December 31, 2010, management has determined that $25,000 of the subscription receivable was deemed uncollectible and accordingly, has been recognized as bad debt expense for the year ended December 31, 2010. In February 2010, the registrant issued 250,000 shares of common stock for public relation services rendered. The registrant valued these common shares at the fair value on the date of grant at $.04 per share or $10,000. In connection with issuance of these shares, the registrant recorded stock-based consulting expense of $10,000 during the nine months ended September 30, 2010. In May 2010, the registrant entered into a Securities Purchase Agreement with Tangiers Investors, LP. The registrant has agreed to issue and sell to the investor pursuant to the terms of this agreement for an aggregate purchase price of up to $5,000,000. The purchase price shall be set at 85% of the lowest volume weighted average price of the registrant's common stock during the pricing period as quoted by Bloomberg, LP on the Over-the-Counter Bulletin Board. The registrant shall prepare and file a Registration Statement with the Securities and Exchange Commission and shall cause such Registration statement to be declared effective prior to the first sale to the investor of the registrant's common stock. The registrant agrees to pay the Investor a commitment fee of 3,000,000 shares of the registrant's common stock pursuant to the Securities Purchase Agreement. The registrant valued these common shares at the fair value on the date of grant at $0.10 per share or $300,000 and has been recorded as deferred offering cost. At the time of the completion of the sale to the investor, these deferred costs will be charged against the capital raised. In July 2010, in connection with a consulting agreement, the registrant issued 350,000 shares of common stock for Public relations and marketing services until September 15, 2010. The registrant valued these common shares at the fair value on the date of grant at $.08 per share or $28,000. The registrant did not extend the term of this agreement after September 15, 2010. In July 2010, the registrant issued in aggregate 2,000,000 shares of common stock to Ed Dillon, the registrant's CEO and an officer of the registrant in connection with the payment of their accrued salaries during fiscal year 2009 pursuant to the amended employment agreements. The registrant valued these common shares at the fair market value on the date of grant at $.04 per share or $80,000. 14 In November 2010, the registrant issued in aggregate 4,000,000 shares of common stock to Ed Dillon, the registrant's CEO and an officer of the registrant in connection with their employment agreements. The registrant valued these common shares at the fair market value on the date of grant at $.065 per share or $260,000 and has been recorded as stock-based compensation. In November 2010, the registrant issued in aggregate 300,000 shares of common stock to three officers of the registrant for services rendered. In November 2010, the registrant issued 50,000 shares of common stock to an officer of the registrant for legal services rendered. The registrant valued these common shares at the fair market value on the date of grant at $.065 per share or $3,250 and has been recorded as legal fees. In November 2010, the registrant entered into an amended agreement in connection with a license agreement. The registrant issued 500,000 shares of common stock pursuant to the amended license agreement. All of the above common shares were sold to sophisticated investors pursuant to an exemption from registration under Section 4(2) of the Securities Act. Item 5(b) Use of Proceeds. Not applicable. Item 5(c) Purchases of Equity Securities by the issuer and affiliated purchasers. None. ITEM 6. SELECTED FINANCIAL DATA Not applicable to smaller reporting companies. 15 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION OVERVIEW -------- Through December 31, 2005, we were a developmental stage e-commerce company. We currently operate an e-commerce website that enables any business to establish a fully functional online retail presence. Our website, Pricester.com, is an Internet marketplace which allows vendors to host their website with product and service listings and allows consumers to search for listed products and services. On May 22, 2008, we completed a merger with Genesis Electronics, Inc., a Delaware corporation. Genesis was originally formed in Delaware on October 22, 2001 and is engaged on the development of solar and alternative energy applications for consumer devices such as mobile phones. Until its acquisition of Genesis, our business was solely focused on our internet shopping portal, and building and hosting websites for the small business sector. While we are still engaged in this business, our primary focus has now shifted towards the further development and marketing of the above described products. PLAN OF OPERATIONS ------------------ We have only received minimal revenues. We do not have sufficient cash on hand to meet funding requirements for the next twelve months. Although we eventually intend to primarily fund general operations and our marketing program with revenues received from the sale of the Pricester Custom Designed Websites, hosting and transaction fees, our revenues are not increasing at a rate sufficient to cover our monthly expenses in the near future. We will have to seek alternative funding through debt or equity financing in the next twelve months that could result in increased dilution to the shareholders. In May 2010, we entered into a Securities Purchase Agreement with Tangiers Investors, LP ("Investor"). We have agreed to issue and sell to the investor pursuant to the terms of this agreement for an aggregate purchase price of up to $5,000,000. The purchase price shall be set at 85% of the lowest volume weighted average price of our common stock during the pricing period as quoted by Bloomberg, LP on the Over-the-Counter Bulletin Board. We shall prepare and file a Registration Statement with the Securities and Exchange Commission and shall cause such Registration statement to be declared effective prior to the first sale to the investor of our common stock. GOING CONCERN ------------- As reflected in the accompanying consolidated financial statements, we had an accumulated deficit of approximately $9 million, a working capital deficit of $967,214, had net losses for the year ended December 31, 2010 of $828,234 and cash used in operations during the year ended December 31, 2010 of $340,581. While we are attempting to increase sales, it has not been significant enough to support the registrant's daily operations. We will attempt to raise additional funds by way of 16 a public or private offering. While we believe in the viability of our strategy to improve sales volume and in our ability to raise additional funds, there can be no assurances to that effect. Our limited financial resources have prevented us from aggressively advertising our products and services to achieve consumer recognition. Our ability to continue as a going concern is dependent on our ability to further implement our business plan and generate increased revenues. CRITICAL ACCOUNTING POLICIES ---------------------------- Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by management's applications of accounting policies. Critical accounting policies for the registrant include the useful life of property and equipment and web development costs. Computer equipment and furniture is stated at cost less accumulated depreciation. Depreciation is computed over the assets' estimated useful lives (five to seven years) using straight line methods of accounting. Maintenance costs are charged to expense as incurred while upgrades and enhancements that result in additional functionality are capitalized. We review the carrying value of intangibles and other long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value. The following policies reflect specific criteria for the various revenues streams of the Company: We earn revenue primarily from website design, transaction fees, hosting fees and sales of solar-powered consumer products. - Website design revenue is recognized as earned when the website is complete, control is transferred and the customer has accepted its website, usually within seven days of the order. - Transaction fee income comprises fees charged for use of credit cards or other forms of payment in the purchase of items sold on the customers' websites. The transaction fee income is recognized as earned when funds transfers (via credit card or other forms of payments) between the buyer and seller has been authorized. - Revenues from website hosting fees are recognized when earned. - Revenues from the sale of solar-powered consumer products are recognized upon delivery of the product to the customer. 17 Web hosting fees received in advance are reflected as deferred revenue on the accompanying consolidated balance sheet. We apply ASC 605-25: Multiple Element Arrangements, to account for revenue arrangements with multiple deliverables. ASC 605-25 addresses certain aspects of accounting by a vendor for arrangements under which the vendor will perform multiple revenue-generating activities. When an arrangement involves multiple elements, the entire fee from the arrangement is allocated to each respective element based on its relative fair value and recognized when revenue recognition criteria for each element are met. Fair value for each element is established based on the sales price charged when the same element is sold separately. In December 2004, the Financial Accounting Standards Board, or FASB, issued FASB ASC Topic 718: Compensation - Stock Compensation. Under ASC 718, companies are required to measure the compensation costs of share- based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. Companies may elect to apply this statement either prospectively, or on a modified version of retrospective application under which financial statements for prior periods are adjusted on a basis consistent with the pro forma disclosures required for those periods under ASC 718. Upon adoption of ASC 718, the Company elected to value employee stock options using the Black-Scholes option valuation method that uses assumptions that relate to the expected volatility of the Company's common stock, the expected dividend yield of our stock, the expected life of the options and the risk free interest rate. Such compensation amounts, if any, are amortized over the respective vesting periods or period of service of the option grant. Results of Operations --------------------- Year ended December 31, 2010 compared to year ended December 31, 2009 Net sales for the year ended December 31, 2010 were $28,351 as compared to net sales of $78,797 for the year ended December 31, 2009, a decrease of $50,446 or approximately 64%. We are continuing to create customer awareness for our products. The decrease in revenues is primarily attributable to the non renewal of subscribers who had completed their annual hosting commitment during fiscal 2009. There can be no assurances that we will continue to recognize similar net revenue in future periods or that we will ever report profitable operations. The following table provides comparative data regarding the source of our net sales in each of these periods: 18 Year Ended Year Ended December 31, 2010 December 31, 2009 ----------------- ----------------- $ % of Total $ % of Total ------- --------- ------ ---------- Website 26,512 94% 78,797 100% Solar powered products 1,839 6% - - ------ ---- ------ ---- Total 28,351 100% 78,797 100% ====== ==== ====== ==== Total operating expenses for the year ended December 31, 2010 were $809,731, an increase of $319,652, or approximately 65%, from total operating expenses for the year ended December 31, 2009 of $490,079. This increase is primarily attributable to: - a decrease of $6,208, or approximately 28%, in cost of sales. Cost of sales for website services includes domain hosting fees and internet cost. Cost of sales for the solar powered products includes product and delivery cost relating to the delivery of such solar powered products. This decrease is primarily related to the decrease in sales of our website services due to the non renewal of subscribers who had completed their annual hosting commitments. The following table provides information on the cost of sales as a percentage of net sales for the year ended December 31, 2010 and 2009: Year Ended December 31, ----------- 2010 2009 ---- ---- Cost of Sales as a Percentage of Net Sales Website 55% 28% Solar powered products 2% - ---- ---- Total 57% 28% - an increase of $34,114, or approximately 68%, in professional fees incurred in connection with our SEC filings. This increase is primarily related to increase in legal fees in connection with the preparation of our registration statement, general business counsel, and litigation matters, - a decrease of $9,225, or approximately 14%, in consulting fees. - an increase of $168,013, or 74%, in compensation expense to $394,895 for the year ended December 31, 2010 as compared to $226,882 for the year ended December 31, 2009. Compensation expense which includes salaries and stock based compensations to our employees. The increase represents non-cash expenses of $299,500 during fiscal 2010 related to stock-based compensation expense which includes approximately $130,000 attributable to shares issued to our chief executive officer and $149,500 to our officers as compared to non-cash expenses of approximately $147,000 during fiscal 2009. The increase is also primarily attributable to increases in compensation levels of certain of our employees, 19 - an increase of $132,958, or approximately 105%, in other selling, general and administrative expenses as a result of increase in amortization expense related to a license agreement of $94,750 and office expense attributable to our subsidiary Genesis Electronics Inc. We reported a loss from operations of $781,380 for year ended December 31, 2010 as compared to a loss from operations of $411,282 for the year ended December 31, 2009. Total other expense for the year ended December 31, 2010 were $46,854, a decrease of $153,598, from total other expense for year ended December 31, 2009 of $200,452. - Interest expense consists primarily of interest recognized in connection with the amortization of debt discount, and interest on our promissory notes. The decrease in interest expense is primarily attributable to the issuance of 4,900,000 shares of common stock to one of our officers in connection with a settlement of related party loans during the year ended December 31, 2009. We have recognized non- recurring interest expense of $196,000 in connection with this settlement in 2009 offset by an increase in amortization of debt discount and deferred financing cost of $41,168 during the year ended December 31, 2010. We reported a net loss of $828,234 or (0.01) per share for the year ended December 31, 2010 as compared to a net loss of $611,734 or $(0.00) per share for the year ended December 31, 2009. Liquidity and Capital Resources ------------------------------- During the year ended December 31, 2010, we received net proceeds of $211,255 and subscription receivable of $54,000 from the sale of our common stock. For the year ended December 31, 2010, we collected subscription receivable of $77,717. These funds were used for working capital purposes. Net cash used in operating activities for the year ended December 31, 2010 amounted to $340,581 and was primarily attributable to our net losses of $828,234 offset by depreciation of $695, amortization of license agreement of $103,458, stock based expense of $320,750, amortization of debt discount of $21,168, amortization of deferred financing cost of $20,000, non-cash expense of $20,000 applied against subscription receivable, bad debt expense from stock subscription receivable of $25,000 and add back of changes in assets and liabilities of $22,161. Net cash used in operating activities for the year ended December 31, 2009 amounted to $221,146 and was primarily attributable to our net losses of $611,734 offset by depreciation of $676, amortization of license agreement of $8,708 stock based expense of $84,690, interest expense of $196,000 in connection with the settlement of a related party loan and changes in assets and liabilities of $100,514. 20 Net cash flows used in investing activities was $10,000 for the year ended December 31, 2009 as compared to $0 for the year ended December 31, 2010. The decrease was primarily attributed to the payment on license agreement of $10,000 in December 2009. Net cash flows provided by financing activities was $279,997 for the year ended December 31, 2010 as compared to net cash provided by financing activities of $294,896 for the year ended December 31, 2009, a decrease of $14,899. For the year ended December 31, 2010, we received proceeds from the sale of common stock and collection of subscription receivable of $288,972 and $20,000 from the issuance of a convertible debt, and an offset by payments on related party advances of $28,975. For the year ended December 31, 2009, we received proceeds from the sale of common stock and collection of subscription receivable of $283,796, proceeds from a related party of $18,000, offset by payments on related party advances of $6,900. We reported a net decrease in cash for the year ended December 31, 2010 of $60,584 as compared to a net increase in cash of $63,750 for the year ended December 31, 2009. At December 31, 2010, we had cash on hand of $5,485. Contractual Obligations and Off-Balance Sheet Arrangements ----------------------------------------------------------- Contractual Obligations The following tables summarize our contractual obligations as of December 31, 2010. Payments Due by Period -------------------------------------------------------- Less than 3-5 5 Years Total 1 Year 1-3 Years Years + ----- --------- --------- ----- ------- Contractual Obligations: Notes payable $ 15,647 $ 15,647 $ - $ - $ - Loans payable 40,000 40,000 - - - Secured convertible debenture 40,000 40,000 - - - Convertible debt 931,919 931,919 - - - Loans payable - related party 11,510 11,510 - - - Accrued interest 24,737 24,737 - - - Operating lease 4,158 4,158 - - - ---------- -------- -------- -------- -------- Total Contractual Obligations: $1,067,971 $1,067,971 $ - $ - $ -

21 License Agreement ---------------- During November 2009, we licensed the use of certain patents from a third party. This license agreement will aid us as we further our business plan. In November 2009, we entered into a license agreement with Johns Hopkins University Applied Physics Lab for a limited exclusive license to JHU/APL's Integrated Power Source patents. The patents are for the solar powered cell phone and iPod chargers. During fiscal 2009 and 2010, the Company paid $40,000 and issued 2 million shares of the Company's common stock. We valued these common shares at the fair market value on the date of grant at $.022 per share or $44,000. In November 2010, we entered into an amendment agreement in connection with this license agreement. Pursuant to the amended license agreement, the Company additionally paid $25,000 and issued 500,000 shares of the Company's common stock in November 2010. We valued these common shares at the fair market value on the date of grant at $.075 per share or $37,500. Future license payments under the amended license agreement are as follows: Due March 24, 2011 $25,000 Due August 24, 2011 $25,000 We shall also pay minimum annual royalty payments as defined in the license agreement. The royalty is 6% on net sales of the product sold using the technology under these patents. In addition, we shall pay sales milestone payments as set forth in this license agreement. We may terminate this agreement and the license granted herein, for any reason, upon giving JHU/APL sixty days written notice. Securities Purchase Agreement ---------------------------- In May 2010, we entered into a Securities Purchase Agreement with Tangiers Investors, LP. We have agreed to issue and sell to the investor pursuant to the terms of this agreement for an aggregate purchase price of up to $5,000,000. The purchase price shall be set at 85% of the lowest volume weighted average price of our common stock during the pricing period as quoted by Bloomberg, LP on the Over-the- Counter Bulletin Board. We shall prepare and file a registration statement with the Securities and Exchange Commission and shall cause such registration statement to be declared effective prior to the first sale to the investor of our common stock. We issued the Investor a commitment fee of 3,000,000 shares of our common stock pursuant to the Securities Purchase Agreement. Secured Convertible Debenture ----------------------------- In May 2010, we issued a 9% Secured Convertible Debenture for $20,000 to Tangiers Investors, LP. This debenture matures on December 23, 2010. We may prepay any portion of the principal amount at 150% of such amount along with the accrued interest. This debenture including interest shall be convertible into shares of our common stock at the lower of $0.01 per share or a price of 70% of the average of the two 22 lowest volume weighted average price determined on the then current trading market for ten trading days prior to conversion at the option of the holder. On August 5, 2010, we entered into an amendment agreement with the debenture holder whereby the debenture shall be convertible at a fixed conversion price $0.005 per share. Additionally, in December 2010, we issued a 9% Secured Convertible Debenture for $20,000 to Tangiers Investors, LP. This debenture matures on September 15, 2011. We may prepay any portion of the principal amount at 150% of such amount along with the accrued interest. This debenture including interest shall be convertible into shares of our common stock at the lower of $0.05 per share or a price of 70% of the average of the two lowest volume weighted average price determined on the then current trading market for ten trading days prior to conversion at the option of the holder. In March 2011, we entered into an amendment agreement with the debenture holder whereby this debenture shall be convertible at a fixed conversion price $0.005 per share. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCOURSES ABOUT MARKET RISK. Not applicable to smaller reporting companies. 23 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2010 and 2009 CONTENTS Report of Independent Registered Public Accounting Firm 24 Consolidated Financial Statements: Consolidated Balance Sheets at December 31, 2010 and 2009 25 Consolidated Statements of Operations For the Years Ended December 31, 2010 and 2009 26 Consolidated Statements of Changes in Stockholders' Deficit - For the Years Ended December 31, 2010 and 2009 27 Consolidated Statements of Cash Flows - For the Years Ended December 31, 2010 and 2009 29 Notes to Consolidated Financial Statements 31 24 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders Genesis Electronics Group, Inc. Hollywood, Florida We have audited the accompanying consolidated balance sheets of Genesis Electronics Group, Inc. and Subsidiary as of December 31, 2010 and 2009, and the related consolidated statements of operations, changes in stockholders' deficit and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Auditing Standards Board (United States) and in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining on a test basis, evidence supporting the amount and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Genesis Electronics Group, Inc. and Subsidiary as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 9 to the financial statements, the Company has an accumulated deficit, has net losses and cash used in operations for the year ended December 31, 2010. This raises substantial doubt about its ability to continue as a going concern. Management's plans in regards to these matters are also described in Note 9. The consolidated financial statement does not include any adjustments that might result from the outcome of this uncertainty. /s/Malcolm L. Pollard, Inc. Erie, Pennsylvania April 12, 2011 25 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS Year ended ---------- December 31, 2010 December 31, 2009 ----------------- ----------------- ASSETS Current Assets: Cash $ 5,485 $ 66,069 Inventory 1,257 - Prepaid expense and other current asset 3,160 14,160 Deferred offering cost 300,000 - ----------- ----------- Total current assets 309,902 80,229 Property and Equipment, net - 695 License agreement, net 84,334 200,292 ----------- ----------- Total assets $ 394,236 $ 281,216 =========== =========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities: Accounts payable and accrued expenses $ 206,872 $ 264,857 Accrued payable on license agreement 50,000 155,000 Secured convertible debentures, net of debt discount 21,168 - Convertible debt 931,919 931,919 Note payable 15,647 15,647 Loans payable 40,000 40,000 Due to related party 11,510 40,485 Deferred revenue - 176 ----------- ----------- Total current liabilities 1,277,116 1,448,084 ----------- ----------- Stockholders' Deficit: Common stock, $0.001 par value, 300,000,000 authorized, 168,831,906 and 152,644,072 issued and outstanding, at December 31, 2010 and December 31, 2009, respectively 168,832 152,644 Additional paid-in capital 7,907,153 6,879,836 Accumulated deficit (8,953,865) (8,125,631) Subscription receivable (5,000) (73,717) ----------- ----------- Total stockholders' deficit (882,880) (1,166,868) ----------- ----------- Total liabilities and stockholders' deficit $ 394,236 $ 281,216 =========== =========== See notes to consolidated financial statements. 26 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31, ------------------ 2010 2009 ---- ---- Net Sales $ 28,351 $ 78,797 ----------- ----------- Operating expenses: Cost of sales 16,150 22,358 Professional fees 84,163 50,049 Consulting fees 54,555 63,780 Compensation 394,895 226,882 Other selling, general and administrative 259,968 127,010 ----------- ----------- Total operating expenses 809,731 490,079 ----------- ----------- Loss from operations (781,380) (411,282) ----------- ----------- Other income (expenses): Interest expense (46,854) (200,452) ----------- ----------- Total other income (expenses) (46,854) (200,452) ----------- ----------- Loss before provision for income taxes (828,234) (611,734) Provision for income taxes - - ----------- ----------- Net loss $ (828,234) $ (611,734) =========== =========== Net loss per common share - basic and diluted $ (0.01) $ - Weighted average number of shares 0utstanding - basic and diluted 159,669,655 135,405,327 =========== =========== See notes to consolidated financial statements. 27 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 Common Stock, $.001 Par Value --------------- Additional Number of Paid-in Shares Amount Capital ---------- ---------- ---------- Balance December 31, 2008 106,602,989 $ 106,603 $6,219,824 Sale of common stock 36,486,083 36,486 295,877 Common stock issued for services 2,655,000 2,655 82,035 Common stock issued for settlement of related party loans 4,900,000 4,900 240,100 Common stock issued in connection with a license agreement 2,000,000 2,000 42,000 Net loss for the period - - - ----------- --------- ---------- Balance, December 31, 2009 152,644,072 $ 152,644 $6,879,836 Sale of common stock 5,737,834 5,738 259,517 Common stock issued for services 4,950,000 4,950 315,800 Common stock issued for accrued services 2,000,000 2,000 78,000 Common stock issued in connection with stock purchase agreement 3,000,000 3,000 297,000 Common stock issued in connection with a license agreement 500,000 500 37,000 Beneficial conversion on secured convertible debenture - - 40,000 Net loss for the period - - - ----------- --------- ---------- Balance, December 31, 2010 168,831,906 $ 168,832 $7,907,153 =========== ========= ==========

See notes to audited consolidated financial statements. 28 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY CONTINUED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 Total Accumulated Subscription Stockholders' Deficit Receivable Deficit ---------- ---------- ---------- Balance December 31, 2008 (7,513,897) (25,150) (1,212,620) Sale of common stock - (48,567) 283,796 Common stock issued for services - - 84,690 Common stock issued for settlement of related party loans - - 245,000 Common stock issued in connection with a license agreement - - 44,000 Net loss for the period (611,734) - (611,734) ----------- --------- ----------- Balance, December 31, 2009 $ 8,125,631 $ (73,717) $(1,166,868) Sale of common stock - 68,717 333,972 Common stock issued for services - - 320,750 Common stock issued for accrued services - - 80,000 Common stock issued in connection with stock purchase agreement - - 300,000 Common stock issued in connection with a license agreement - - 37,500 Beneficial conversion on secured convertible debenture - - 40,000 Net loss for the period (828,234) - (828,234) ----------- --------- ----------- Balance, December 31, 2010 $(8,953,865) $ (5,000) $ (882,880) =========== ========= ===========

See notes to consolidated financial statements. 29 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, ------------------ 2010 2009 ---- ---- Cash flows from operating activities: Net loss $ (828,234) $(611,734) ---------- --------- Adjustments to reconcile net loss to net cash used in operations: Depreciation 695 676 Amortization of license agreement 103,458 8,708 Common stock issued for services 320,750 4,690 Amortization of debt discount 21,168 - Amortization of deferred financing cost 20,000 - Services performed applied against subscription receivable 20,000 - Bad debt expense from stock subscription receivable 25,000 - Interest expense for the settlement of a related party loan - 196,000 Changes in assets and liabilities: Prepaid expenses and other 11,000 (11,000) Accounts payable and accrued expenses 22,015 112,020 Deferred revenues (176) (506) ---------- --------- Total adjustments 487,653 390,588 Net cash used in operating activities (340,581) (221,146) ---------- --------- Cash flows from investing activities: Payment on license agreement - (10,000) ---------- --------- Net cash used in investing activities - (10,000) ---------- --------- Cash flows from financial activities: Proceeds from sale of common stock 288,972 283,796 Proceeds from convertible debt 20,000 - Proceeds from related parties - 18,000 Payments on related party advances (28,975) (6,900) ---------- --------- Net cash provided by financing activities 279,997 294,896 ---------- --------- Net increase (decrease) in cash (60,584) 63,750 Cash - beginning of the year 66,069 2,319 ---------- --------- Cash - end of the year $ 5,485 $ 66,069 ========== ========= 30 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY CONTINUED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, ------------------ 2010 2009 ---- ---- Supplemental disclosure of cash flow information: Cash paid for: Interest $ - $ - ========== ========== Income taxes $ - $ - ========== ========== NON-CASH INVESTING AND FINANCING ACTIVITEIS: Secured convertible debenture issued in connection with Securities Purchase Agreement $ 20,000 $ - ========== ========== Common stock issued for settlement of loans $ - $ 49,000 ========== ========== Common stock issued as deferred offering Cost $ 300,000 $ - ========== ========== Common stock issued in connection with license agreement $ - $ 44,000 ========== ========== Accrued payable incurred for license agreement $ - $ 155,000 ========== ========== Common stock issued in connection with accrued payable on license agreement $ 37,500 $ - ========== ========== Common stock issued in connection with accrued salaries $ 80,000 $ - ========== ========== See notes to consolidated financial statements 31 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP"). The consolidated statements include the accounts of Genesis Electronics Group, Inc. and its wholly-owned subsidiary. All significant inter-company balances and transactions have been eliminated. FASB Accounting Standards Codification The issuance by the FASB of the Accounting Standards CodificationTM (the "Codification") on July 1, 2009 (effective for interim or annual reporting periods ending after September 15, 2009), changes the way that GAAP is referenced. Beginning on that date, the Codification officially became the single source of authoritative nongovernmental GAAP; however, SEC registrants must also consider rules, regulations, and interpretive guidance issued by the SEC or its staff. The change affects the way the Company refers to GAAP in financial statements and in its accounting policies. All existing standards that were used to create the Codification became superseded. Instead, references to standards consist solely of the number used in the Codification's structural organization. Organization Genesis Electronics Group, Inc. formerly Pricester.com, Inc. was incorporated under the name Pricester, Inc. on April 19, 2001 in the State of Florida. Pursuant to Articles of Amendment filed on February 24, 2009, the name of the registrant was changed to Genesis Electronics Group, Inc. On February 11, 2005, Pricester.Com (the "Company") merged into Pricester.com, Inc, ("BA22") a public non-reporting company (that was initially incorporated in Nevada in March 1998 as Business Advantage #22, Inc). BA22 acquired 100% of the Company's outstanding common stock by issuing one share of its common stock for each share of the Company's then outstanding common stock of 21,262,250 shares. The acquisition was treated as a recapitalization for accounting purposes. Through December 31, 2005, the Company was a developmental stage e- commerce company. The Company currently operates an e-commerce website that enables any business to establish a fully functional online retail presence. Pricester.com is an Internet marketplace which allows vendors to host their website with product and service listings and allows consumers to search for listed products and services. 32 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) In May 2008, the Company obtained through a vote of majority of its shareholders the approval to increase the authorized common shares from 50,000,000 to 300,000,000 shares of common stock at $0.001 par value. On May 22, 2008, the Company completed a share exchange with Genesis Electronics, Inc., a Delaware corporation ("Genesis") which is described below. The share exchange is being accounted for as a purchase method acquisition pursuant to FASB ASC 805 "Business Combinations". Accordingly, the purchase price was allocated to the fair value of the assets acquired and the liabilities assumed. The Company is the acquirer for accounting purposes and Genesis is the acquired company. Genesis was originally formed in Delaware on October 22, 2001 and is engaged on the development of solar and alternative energy applications for consumer devices such as mobile phones. In November 2008, the Company obtained through a vote of majority of its shareholders the approval to change the Company's name to Genesis Electronics Group, Inc. In February 2009, the Company filed an amendment to its Articles of Incorporation with the Secretary of State of Nevada. The Company changed its name to Genesis Electronics Group, Inc. Acquisition of Genesis On May 22, 2008, the Company entered into an Agreement and Plan of Share Exchange (the "Acquisition Agreement") by and among the Company, Genesis Electronics, Inc. ("Genesis") and the Genesis Stockholders. Upon closing of the merger transaction contemplated under the Acquisition Agreement (the "Acquisition"), on May 22, 2008 the Company acquired all of the outstanding common shares of Genesis and Genesis became a wholly-owned subsidiary of the Company. The share exchange consideration included the issuance of 1,907,370 shares of the Company's stock valued at approximately $0.03 per share. The total purchase price was common stock valued at $57,144. The Company accounted for the acquisition utilizing the purchase method of accounting in accordance with FASB ASC 805 "Business Combinations". The Company is the acquirer for accounting purposes and Genesis is the acquired company. Accordingly, the Company applied push-down accounting and adjusted to fair value all of the assets and liabilities directly on the financial statements of the Subsidiary, Genesis Electronics, Inc. 33 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The net purchase price, including acquisition costs paid by the Company, was allocated to the liabilities assumed on the records of the Company as follows: Goodwill 1,717,602 Liabilities assumed (1,660,458) ---------- Net purchase price $ 57,144 ========== Since the Company has minimal revenues, has incurred losses and cash used in operations, the Company deemed the acquired goodwill to be impaired and wrote-off the goodwill on the acquisition date. Accordingly, during fiscal year 2008, the Company recorded an impairment of goodwill of $1,717,602 on the accompanying statement of operations. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in 2010 and 2009 include the assumptions used to calculate stock-based compensation and debt discount, and the useful life of property and equipment. Cash and Cash Equivalents For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents. Fair Value of Financial Instruments Effective January 1, 2008, the Company adopted FASB ASC 820, "Fair Value Measurements and Disclosures" ("ASC 820"), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company's financial position or operating results, but did expand certain disclosures. 34 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below: Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity's own assumptions. Cash and cash equivalents include money market securities that are considered to be highly liquid and easily tradable as of December 31, 2010 and 2009. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within our fair value hierarchy. In addition, FASB ASC 825-10-25 Fair Value Option was effective for January 1, 2008. ASC 825-10-25 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value options for any of its qualifying financial instruments. The carrying amounts reported in the consolidated balance sheet for cash, accounts payable, accrued expenses, loans payable, notes payable, due to related parties and deferred revenue approximate their fair market value based on the short-term maturity of these instruments. The carrying amount of the convertible debentures at December 31, 2010, approximate their respective fair value based on the Company's incremental borrowing rate. Property and Equipment Property and equipment are stated at cost. Depreciation and amortization are provided using the straight-line method over the estimated economic lives of the assets, which are from five to seven years. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. 35 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Impairment of Long-lived Assets Long-Lived Assets of the Company are reviewed for impairment whenever events or circumstances indicate that the carrying amount of assets may not be recoverable, pursuant to guidance established in ASC 360-10-35- 15, "Impairment or Disposal of Long-Lived Assets". The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset's estimated fair value and its book value. The Company did not consider it necessary to record any impairment charges during the year ended December 31, 2010 and 2009. Stock-Based Compensation In December 2004, the Financial Accounting Standards Board, or FASB, issued FASB ASC Topic 718: Compensation - Stock Compensation ("ASC 718"). Under ASC 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. Companies may elect to apply this statement either prospectively, or on a modified version of retrospective application under which financial statements for prior periods are adjusted on a basis consistent with the pro forma disclosures required for those periods under ASC 718. Upon adoption of ASC 718, the Company elected to value employee stock options using the Black-Scholes option valuation method that uses assumptions that relate to the expected volatility of the Company's common stock, the expected dividend yield of our stock, the expected life of the options and the risk free interest rate. Such compensation amounts, if any, are amortized over the respective vesting periods or period of service of the option grant. For the year ended December 31, 2010 and 2009, the Company did not grant any stock options to employees. Net Loss per Common Share Net loss per common share are calculated in accordance with ASC Topic 260: Earnings Per Share. Basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. The computation of diluted net earnings per share does not include dilutive common stock equivalents in the weighted average shares outstanding as they would be anti-dilutive. As of December 31, 2010 and 2009, there were options and warrants to 36 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) purchase 2,025,000 shares of common stock and 99,191,900 shares equivalent issuable pursuant to embedded conversion features which could potentially dilute future earnings per share. Income Taxes Income taxes are accounted for under the asset and liability method as prescribed by ASC Topic 740: Income Taxes. Deferred income tax assets and liabilities are computed for differences between the carrying amounts of assets and liabilities for financial statement and tax purposes. Deferred income tax assets are required to be reduced by a valuation allowance when it is determined that it is more likely than not that all or a portion of a deferred tax asset will not be realized. In determining the necessity and amount of a valuation allowance, management considers current and past performance, the operating market environment, tax planning strategies and the length of tax benefit carryforward periods. Pursuant to ASC Topic 740-10: Income Taxes related to the accounting for uncertainty in income taxes, the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50% likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. The accounting standard also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. The adoption had no effect on the Company's consolidated financial statements. Research and Development Research and development costs, if any, are expensed as incurred. 37 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Related Parties Parties are considered to be related to the Company if the parties that, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. All transactions shall be recorded at fair value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected as a distribution to related party. Revenue Recognition The Company follows the guidance of the FASB ASC 605-10-S99 "Revenue Recognition Overall - SEC Materials. The Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectibility is reasonably assured. The Company applies ASC 605-25: Multiple Element Arrangements, to account for revenue arrangements with multiple deliverables. ASC 605-25 addresses certain aspects of accounting by a vendor for arrangements under which the vendor will perform multiple revenue- generating activities. When an arrangement involves multiple elements, the entire fee from the arrangement is allocated to each respective element based on its relative fair value and recognized when revenue recognition criteria for each element are met. Fair value for each element is established based on the sales price charged when the same element is sold separately. The following policies reflect specific criteria for the various revenues streams of the Company: The Company earns revenue primarily from website design, transaction fees, hosting fees and sales of solar-powered consumer products. - Website design revenue is recognized as earned when the website is complete, control is transferred and the customer has accepted its website, usually within seven days of the order. - Transaction fee income comprises fees charged for use of credit cards or other forms of payment in the purchase of items sold on the customers' websites. The transaction fee income is recognized as earned 38 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) when funds transfers (via credit card or other forms of payments) between the buyer and seller has been authorized. - Revenues from website hosting fees are recognized when earned. - Revenues from the sale of solar-powered consumer products are recognized upon delivery of the product to the customer. Web hosting fees received in advance are reflected as deferred revenue on the accompanying consolidated balance sheet. Deferred Offering Cost The Company defers as other current assets the direct incremental costs of raising capital until such time as the offering is completed. At the time of the completion of the offering, the costs are charged against the capital raised. Should the offering be terminated, deferred offering costs are charged to operations during the period in which the offering is terminated. Reclassification Certain amounts in the 2009 consolidated financial statements have been reclassified to conform to the 2010 presentation. Such reclassifications had no effect on the reported net loss. Recently Issued Accounting Pronouncements In June 2009, the FASB issued ASC Topic 810-10, "Amendments to FASB Interpretation No. 46(R)". This updated guidance requires a qualitative approach to identifying a controlling financial interest in a variable interest entity ("VIE"), and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. ASC Topic 810-10 is effective for annual reporting periods beginning after November 15, 2009. The adoption of ASC Topic 810-10 did not have a material impact on the consolidated results of operations and financial condition. In January 2010, the FASB issued ASU No. 2010-06, "Improving Disclosures about Fair Value Measurements" an amendment to ASC Topic 820, "Fair Value Measurements and Disclosures." This amendment requires an entity to: (i) disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers and (ii) present separate information for Level 3 activity pertaining to gross purchases, sales, issuances and settlements. ASU No. 2010-06 is effective for the Company's interim and annual reporting beginning after December 15, 2009, with one new disclosure effective after December 15, 2010. 39 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) In July 2010, the FASB issued ASU No. 2010-20, "Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses". ASU 2010-20 requires additional disclosures about the credit quality of a company's loans and the allowance for loan losses held against those loans. Companies will need to disaggregate new and existing disclosures based on how it develops its allowance for loan losses and how it manages credit exposures. Additional disclosure is also required about the credit quality indicators of loans by class at the end of the reporting period, the aging of past due loans, information about troubled debt restructurings, and significant purchases and sales of loans during the reporting period by class. The new guidance is effective for interim and annual periods beginning after December 15, 2010. Management anticipates that the adoption of these additional disclosures will not have a material effect on the Company's financial position or results of operations. Other accounting standards that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. NOTE 2 - PROPERTY AND EQUIPMENT At December 31, 2010, property and equipment consist of the following: Useful Life (Years) ----------- Computer equipment and software 5 $ 12,542 Office furniture and fixtures and equipment 7 4,328 -------- 16,870 Less accumulated depreciation (16,870) -------- $ - ======== 40 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 2 - PROPERTY AND EQUIPMENT (Continued) At December 31, 2009, property and equipment consist of the following: Useful Life (Years) ----------- Computer equipment and software 5 $ 12,542 Office furniture and fixtures and equipment 7 4,328 -------- 16,870 Less accumulated depreciation (16,175) -------- $ 695 ======== For the year ended December 31, 2010 and 2009, depreciation expense amounted to $695 and $676, respectively. NOTE 3 - LICENSE AGREEMENT During November 2009, the Company licensed the use of certain patents from a third party. This license agreement will aid the Company as it furthers its business plan. The patents are for the solar powered cell phone and iPod chargers (see Note 11). At December 31, 2010, license agreement consisted of the following: Useful Life (Years) ----------- License agreement 2 $ 196,500 Less accumulated amortization (112,166) --------- $84,334 ========= At December 31, 2009, license agreement consisted of the following: Useful Life (Years) ----------- License agreement 2 $ 209,000 Less accumulated amortization (8,708) --------- $ 200,292 ========= 41 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 3 - LICENSE (Continued) For the year ended December 31, 2010 and 2009, amortization expense amounted to $103,458 and $8,708, respectively. Accrued payable related to this license agreement as of December 31, 2010 and 2009 amounted to $50,000 and $155,000, respectively. NOTE 4 - LOANS PAYABLE On May 22, 2008, in connection with the acquisition of Genesis, the Company assumed loans payable from certain third parties. These loans bear 8% interest per annum and are payable on demand. As of December 31, 2010, loans payable and related accrued interest amounted to $40,000 and $14,771, respectively. As of December 31, 2009, loans payable and related accrued interest amounted to $40,000 and $11,571, respectively. NOTE 5 - RELATED PARTY TRANSACTIONS An officer of the Company advance funds to the Company for working capital purposes. The advances are non-interest bearing and are payable on demand. At December 31, 2010 and 2009, the Company owed this related party $11,510 and $40,485, respectively. NOTE 6 - NOTE PAYABLE On May 22, 2008, in connection with the acquisition of Genesis, the Company assumed a note payable from a third party. These loans bear 8% interest per annum and is payable on demand. As of December 31, 2010, note payable and related accrued interest amounted to $15,647 and $8,732, respectively. As of December 31, 2009, note payable and related accrued interest amounted to $15,647 and $7,480, respectively. NOTE 7 - CONVERTIBLE DEBT On May 22, 2008, in connection with the acquisition of Genesis, the Company assumed certain debts from a third party, Corporate Debt Solutions ("Corporate Debt") amounting to $1,049,717. Corporate Debt assumed a total of $1,049,717 of promissory notes issued by two former officers of Genesis and a certain third party. These promissory notes were issued to the Company's subsidiary, Genesis. Immediately following the closing of the acquisition agreement, on May 23, 2008, the Company entered into a settlement agreement with Corporate Debt Solutions ("Corporate Debt"). Pursuant to the settlement agreement, the Company shall issue shares of common stock and deliver to Corporate Debt, to satisfy the principal and interest due and owing through the issuance of freely trading securities of up to 100,000,000 shares. The parties have agreed that Corporate Debt shall have no ownership rights to the Settlement Shares not yet issued until it has affirmed to the Company that it releases the Company for the proportionate amount of claims represented by each issuance. The said requested number of shares of 42 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 7 - CONVERTIBLE DEBT common stock is not to exceed 4.99% of the outstanding stock of the Company at any one time. In connection with this settlement agreement, the Company recorded and deemed such debt as a convertible liability with a fixed conversion price of $0.01. Accordingly, the Company recognized a total debt discount of $1,049,717 due to a beneficial conversion feature and such debt discount was immediately amortized to interest expense during fiscal year 2008. In June 2008, the Company issued 2,223,456 shares in connection with the conversion of this convertible debt. The fair value of such shares issued amounted to approximately $23,346. Between July 2008 and August 2008, the Company issued 8,995,374 shares in connection with the conversion of this convertible debt. The fair value of such shares issued amounted to approximately $94,452. At December 31, 2010 and 2009, convertible debt amounted to $931,919. NOTE 8 - SECURED CONVERTIBLE DEBENTURE In May 2010, the Company issued a 9% Secured Convertible Debenture for $20,000 to Tangiers Investors, LP in connection with the Securities Purchase agreement (see Note 10). This debenture matures on December 23, 2010. The Company did not receive the cash proceeds from such issuance of this debenture and accordingly, the Company recorded deferred financing cost of $20,000 and will be amortized over the term of the note. Such deferred financing cost of $20,000 was included in other current assets. The Company may prepay any portion of the principal amount at 150% of such amount along with the accrued interest. This debenture including interest shall be convertible into shares of the Company's common stock at the lower of $0.01 per share or a price of 70% of the average of the two lowest volume weighted average price determined on the then current trading market for ten trading days prior to conversion at the option of the holder. On August 5, 2010, the Company entered into an amendment agreement with the debenture holder whereby the debenture shall be convertible at a fixed conversion price $0.005 per share. In connection with this convertible debenture, the Company recorded deferred financing cost of $20,000 and will be amortized over the term of the note. Additionally, in December 2010, the Company issued a 9% Secured Convertible Debenture for $20,000 to Tangiers Investors, LP. This debenture matures on September 15, 2011. The Company may prepay any portion of the principal amount at 150% of such amount along with the accrued interest. This debenture including interest shall be convertible into shares of the Company's common stock at the lower of $0.05 per share or a price of 70% of the average of the two lowest 43 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 8 - SECURED CONVERTIBLE DEBENTURE (Continued) volume weighted average price determined on the then current trading market for ten trading days prior to conversion at the option of the holder. In March 2011, the Company entered into an amendment agreement with the debenture holder whereby this debenture shall be convertible at a fixed conversion price $0.005 per share. In accordance with ASC 470-20-25, the convertible debentures were considered to have an embedded beneficial conversion feature (BCF) because the effective conversion price was less than the fair value of the Company's common stock. These convertible debentures were fully convertible at the issuance date, therefore the portion of proceeds allocated to the convertible debentures of $40,000 was determined to be the value of the beneficial conversion feature and was recorded as a debt discount and is being amortized over the term of this debenture. Additionally, the Company evaluated whether or not the convertible debt contains embedded conversion options, which meet the definition of derivatives under ASC 815-15 "Accounting for Derivative Instruments and Hedging Activities" and related interpretations. The Company concluded that since these convertible debts currently have a fixed conversion price of $0.005, the convertible debts are not considered a derivative. At December 31, 2010, convertible debentures consisted of the following: December 31, 2010 ----------------- Secured convertible debenture $ 40,000 Less: debt discount (18,832) -------- Secured convertible debenture - net $ 21,168 As of December 31, 2010, amortization of debt discount and deferred financing cost amounted to $21,168 and $20,000, respectively, and are included in interest expense. As of December 31, 2010, accrued interest on these debentures amounted to $1,234. NOTE 9 - GOING CONCERN The accompanying unaudited consolidated financial statements are prepared assuming the Company will continue as a going concern. Going concern contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time. The Company was in the development stage through December 31, 2005 and has an accumulated deficit of $8,953,865, had net losses, negative working capital and negative cash flows from operations for 44 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 9 - GOING CONCERN (Continued) the year ended December 31, 2010 of $828,234, $967,214 and $340,581 respectively. While the Company is attempting to increase revenues, the growth has not been significant enough to support the Company's daily operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. For the year ended December 31, 2010, the Company received proceeds from the sale of stock of $288,972 and received proceeds from an issuance of convertible debt of $20,000. Management is attempting to raise additional funds by way of a public or private offering. While the Company believes in the viability of its strategy to increase sales volume and in its ability to raise additional funds, there can be no assurances to that effect. The Company's limited financial resources have prevented the Company from aggressively advertising its products and services to achieve consumer recognition. These financial statements do not include any adjustments relating to the recoverability and classifications of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence. NOTE 10 - STOCKHOLDERS' DEFICIT Common Stock For the year ended December 31, 2009, the Company received net proceeds of $223,379 and subscription receivable of $108,984 from the sale of 36,486,083 shares of the Company's common stock. For the year ended December 31, 2009, the Company collected subscription receivable of $60,417. In May 2009, the Company issued 4,900,000 shares of common stock to an officer of the Company in connection with a settlement of related party loans of $49,000. The Company valued these common shares at the fair market value on the date of grant at $0.05 per share or $245,000. The Company has recognized interest expense of $196,000 in connection with this settlement. Between August 2009 and September 2009, the Company issued an aggregate of 200,000 shares of common stock for technical advisory services rendered. The Company valued these common shares at the fair value on the date of grant ranging approximately from $.03 to $.05 per share or $8,090. In connection with issuance of these shares, the Company recorded stock-based consulting expense of $8,090 during the year ended December 31, 2009. 45 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 10 - STOCKHOLDERS' DEFICIT (Continued) In October 2009, the Company issued in aggregate 2,000,000 shares of common stock to the Company's CEO and an officer of the Company in connection with their employment agreements. The Company valued these common shares at the fair market value on the date of grant at $.031 per share or $62,000 and has been recorded as stock-based compensation. In October 2009, the Company issued in aggregate 150,000 shares of common stock to three officers of the Company for services rendered. The Company valued these common shares at the fair market value on the date of grant at $.031 per share or $4,650 and has been recorded as stock-based compensation. In November 2009, the Company issued 2,000,000 shares of common stock in connection with a license agreement. The Company valued these common shares at the fair market value on the date of grant ranging at $.022 per share or $44,000 and has been capitalized as reflected in the accompanying consolidated balance sheet as license agreement. Between November and December 2009, the Company issued in aggregate 305,000 shares of common stock to consultants for services rendered. The Company valued these common shares at the fair market value on the date of grant ranging from $.03 to $.04 per share or $9,950 and has been recorded as stock-based consulting. For the year ended December 31, 2010, the Company received net proceeds of $211,255 and subscription receivable of $54,000 from the sale of 5,737,834 shares of the Company's common stock. For the year ended December 31, 2010, the Company collected subscription receivable of $77,717. During the year ended December 31, 2010, the Company applied $20,000 against subscription receivable for services rendered by one of our employees. Additionally, as of December 31, 2010, management has determined that $25,000 of the subscription receivable was deemed uncollectible and accordingly, has been recognized as bad debt expense for the year ended December 31, 2010. In February 2010, the Company issued 250,000 shares of common stock for public relation services rendered. The Company valued these common shares at the fair value on the date of grant at $.04 per share or $10,000. In connection with issuance of these shares, the Company recorded stock-based consulting expense of $10,000 during the nine months ended September 30, 2010. In May 2010, the Company entered into a Securities Purchase Agreement with Tangiers Investors, LP ("Investor"). The Company has agreed to issue and sell to the investor pursuant to the terms of this agreement for an aggregate purchase price of up to $5,000,000. The purchase price 46 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 10 - STOCKHOLDERS' DEFICIT (Continued) shall be set at 85% of the lowest volume weighted average price of the Company's common stock during the pricing period as quoted by Bloomberg, LP on the Over-the-Counter Bulletin Board. The Company shall prepare and file a Registration Statement with the Securities and Exchange Commission and shall cause such Registration statement to be declared effective prior to the first sale to the investor of the Company's common stock. The Company agrees to pay the Investor a commitment fee of 3,000,000 shares of the Company's common stock pursuant to the Securities Purchase Agreement. The Company valued these common shares at the fair value on the date of grant at $0.10 per share or $300,000 and has been recorded as deferred offering cost. At the time of the completion of the sale to the investor, these deferred costs will be charged against the capital raised. In July 2010, in connection with a consulting agreement, the Company issued 350,000 shares of common stock for Public relations and marketing services until September 15, 2010. The Company valued these common shares at the fair value on the date of grant at $.08 per share or $28,000. The Company did not extend the term of this agreement after September 15, 2010. In July 2010, the Company issued in aggregate 2,000,000 shares of common stock to the Company's CEO and an officer of the Company in connection with the payment of their accrued salaries during fiscal year 2009 pursuant to the amended employment agreements. The Company valued these common shares at the fair market value on the date of grant at $.04 per share or $80,000. In November 2010, the Company issued in aggregate 4,000,000 shares of common stock to the Company's CEO and an officer of the Company in connection with their employment agreements. The Company valued these common shares at the fair market value on the date of grant at $.065 per share or $260,000 and has been recorded as stock-based compensation. In November 2010, the Company issued in aggregate 300,000 shares of common stock to three officers of the Company for services rendered. The Company valued these common shares at the fair market value on the date of grant at $.065 per share or $19,500 and has been recorded as stock-based compensation. In November 2010, the Company issued 50,000 shares of common stock to an officer of the Company for legal services rendered. The Company valued these common shares at the fair market value on the date of grant at $.065 per share or $3,250 and has been recorded as legal fees. In November 2010, the Company entered into an amended agreement in connection with a license agreement. The Company issued 500,000 shares of common stock pursuant to the amended license agreement. The Company 47 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 10 - STOCKHOLDERS' DEFICIT (Continued) valued these common shares at the fair market value on the date of grant at $.075 per share or $37,500 and has been capitalized as reflected in the accompanying consolidated balance sheet as license agreement (see Note 11). Stock Options A summary of the stock options as of December 31, 2010 and 2009 and changes during the periods are presented below: Year Ended December 31, Year Ended December 31, 2010 2009 ---------------------- ---------------------- Weighted Weighted Average Average Number of Exercise Number of Exercise Options Price Options Price ---------------------- ---------------------- Balance at beginning of year 2,025,000 $ 0.40 2,025,000 $ 0.40 Granted - - - - Exercised - - - - Cancelled - - - - --------- ------ ---------- ------ Balance at end of year 2,025,000 $ 0.40 2,025,000 $ 0.40 ========= ====== ========== ====== Options exercisable at end of year 2,025,000 $ 0.40 2,025,000 $ 0.40 ========= ====== ========== ====== Weighted average fair value of options granted during the year $ - $ -

The following table summarizes the Company's stock option outstanding at December 31, 2010: Options Outstanding and Exercisable ----------------------------------- Weighted Weighted Average Average Range of Remaining Exercise Exercise Price Number Life Price -------------- ------ --------- ------- $0.40 2,025,000 1 year after 0.40 effective registration 48 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 11 - COMMITMENTS Operating Leases In October 2010, the Company has signed a 6 months lease agreement which will expire in March 2011. The office lease agreement has certain escalation clauses and renewal options. If the Company exercises the option to renew, the base rent shall increase by 3% per each lease year. Future minimum rental payments required under the operating lease are as follows: Period Ended December 31, 2011 $ 4,158 --------- Total $ 4,158 ========= Rent expense, including common area charges and sales taxes, for the years ended December 31, 2010 and 2009 was $20,151 and $12,891, respectively. Employment Contracts The Company entered into an employment agreement on January 14, 2008 with its chief executive officer which expires in January 2013. The employment agreement calls for an issuance of 500,000 free trading shares of the Company's common stock. Additionally, based on this agreement, the Company shall issue 1,000,000 restricted shares of common stock during each fiscal year of the term of this agreement. In October 2008, this agreement was amended whereby the chief executive officer shall received 2,000,000 restricted shares of common stock during each fiscal year instead of 1,000,000 shares which took effect in fiscal 2009. The Company entered into an employment agreement on January 14, 2008 with an officer of the Company which expires in January 2013. The employment agreement calls for an issuance of 500,000 free trading shares of the Company's common stock. Additionally, based on this agreement, the Company shall issue 1,000,000 restricted shares of common stock during each fiscal year of the term of this agreement. In October 2008, this agreement was amended whereby the officer of the Company shall received 2,000,000 restricted shares of common stock during each fiscal year instead of 1,000,000 shares which took effect in fiscal 2009. License Agreement During November 2009, the Company licensed the use of certain patents from a third party. This license agreement will aid the Company as it furthers its business plan. In November 2009, the Company entered into a license agreement with Johns Hopkins University Applied Physics Lab ("JHU/APL") whereby the Company will have a limited exclusive license 49 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 10 - STOCKHOLDERS' DEFICIT (Continued) to JHU/APL's Integrated Power Source patents. The patents are for the solar powered cell phone and iPod chargers. During fiscal 2009 and 2010, the Company paid $40,000 and issued 2 million shares of the Company's common stock. The Company valued these common shares at the fair market value on the date of grant at $.022 per share or $44,000. In November 2010, the Company entered into an amendment agreement in connection with this license agreement. Pursuant to the amended license agreement, the Company additionally paid $25,000 and issued 500,000 shares of the Company's common stock in November 2010. The Company valued these common shares at the fair market value on the date of grant at $.075 per share or $37,500. Future license payments under the amended license agreement are as follows: Due March 24, 2011 $25,000 Due August 24, 2011 $25,000 The Company has capitalized the patent license for a total of $196,500 and is amortizing them over the term of this license agreement. The Company has recognized $103,458 and $8,708 of amortization expense during the year ended December 31, 2010 and 2009, respectively. Accrued payable related to this license agreement as of December 31, 2010 and 2009 amounted to $50,000 and $155,000 respectively. The Company shall also pay minimum annual royalty payments as defined in the license agreement. The royalty is 6% on net sales of the product sold using the technology under these patents. In addition, the Company shall pay sales milestone payments as set forth in this license agreement. The Company may terminate this agreement and the license granted herein, for any reason, upon giving JHU/APL sixty days written notice. NOTE 12 - INCOME TAXES The Company accounts for income taxes under ASC Topic 740: Income Taxes which require the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carryforwards. ASC Topic 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. The Company has a net operating loss carryforward for tax purposes totaling approximately $5.2 million at December 31, 2010 expiring through the year 2029. Internal Revenue 50 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 12 - INCOME TAXES (Continued) Code Section 382 places a limitation on the amount of taxable income that can be offset by carryforwards after a change in control (generally greater than a 50 percent change in ownership). Temporary differences, which give rise to a net deferred tax asset, are as follows: 2010 2009 ------------------------------- Computed "expected" benefit $(281,600) $ (196,189) State tax benefit, net of federal effect (33,129) (23,081) Other permanent differences 147,029 74,480 Increase in valuation allowance 167,700 144,790 --------- ----------- $ - $ - ========= =========== Deferred tax assets and liabilities are provided for significant income and expense items recognized in different years for tax and financial reporting purposes. Temporary differences, which give rise to a net deferred tax asset is as follows: 2010 ---------- Deferred tax assets: Net operating loss carryforward $ 1,974,691 Less: Valuation allowance (1,974,691) ----------- - =========== The valuation allowance at December 31, 2010 was $1,974,691. The increase during fiscal 2010 was $167,700. NOTE 13 - REPORTABLE SEGMENT ASC Topic 280 requires use of the "management approach" model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. During the years ended December 31, 2010 and 2009, the Company operated in two reportable business segments - (1) the Website segment and (2) the Solar powered consumer products segment. The Company's reportable segments are strategic business units that offer different 51 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 13 - REPORTABLE SEGMENT (Continued) products and services. The Company's reportable segments, although integral to the success of the others, offer distinctly different products and services. Condensed information with respect to these reportable business segments for the years ended December 31, 2010 and 2009 is as follows: For the Years Ended December 31, 2010 2009 ---- ---- Revenues: Website $ 26,512 $ 78,797 Solar powered products 1,839 - --------- ---------- 28,351 78,797 --------- ---------- Depreciation and amortization: Website 695 676 Solar powered products 103,458 8,708 --------- ---------- 104,153 9,384 --------- ---------- Interest expense: Website 42,402 196,000 Solar powered products 4,452 4,452 --------- ---------- 46,854 200,452 --------- ---------- Net loss: Website 693,475 589,223 Solar powered products 134,759 22,511 --------- ---------- $ 828,234 $ 611,734 ========= ========== NOTE 14 - SUBSEQUENT EVENTS In January 2011, the Company received net proceeds of $1,000 and subscription receivable of $3,000 from the sale of 75,000 shares of the Company's common stock. In February 2011, in connection with a consulting agreement, the Company issued in aggregate 2,000,000 shares of common stock for public relations and marketing services until June 2, 2011. The Company valued these common shares at the fair value on the date of grant at $.04 per share or $80,000. 52 GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 and 2009 NOTE 10 - STOCKHOLDERS' DEFICIT (Continued) In March 2011, the Company has signed a 2 years lease agreement which will expire in March 2013. The office lease agreement has certain escalation clauses and renewal options. If the Company exercises the option to renew, the base rent shall increase by 3% per each lease year. The monthly base rent including sales tax and common area maintenance amounts to approximately $711. 53 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None ITEM 9A. CONTROLS AND PROCEDURES. Disclosure Controls and Procedures ---------------------------------- As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of December 31, 2010, the end of the year covered by this report, our management concluded its evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures. Our management does not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of 54 controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Management conducted its evaluation of disclosure controls and procedures under the supervision of our chief executive officer and our chief financial officer. Based on that evaluation, Edward Dillon, our chief executive officer and Nelson Stark, our chief financial officer concluded that because of the material weaknesses in internal control over financial reporting described below, our disclosure controls and procedures were not effective as of December 31, 2010. Management's Report on Internal Control over Financial Reporting ---------------------------------------------------------------- Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Our management is also required to assess and report on the effectiveness of our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. During our assessment of the effectiveness of internal control over financial reporting as of December 31, 2010, management identified material weaknesses related to (i) our internal audit functions and (ii) the absence of an Audit Committee as of December 31, 2010, and (iii) a lack of segregation of duties within accounting functions. Therefore, our internal controls over financial reporting were not effective as of December 31, 2010. Management has determined that our internal audit function is significantly deficient due to insufficient qualified resources to perform internal audit functions. Finally, management determined that the lack of an Audit Committee of our Board of Directors also contributed to insufficient oversight of our accounting and audit functions. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, we will implement procedures to assure that the initiation of transactions, the custody of assets and the recording of transactions will be performed by separate individuals. We believe that the foregoing steps will remediate the material weaknesses identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate. Due to the nature of these material weaknesses in our internal control over financial reporting, there is more than a remote likelihood that misstatements which could be material to our annual or interim financial statements could occur that would not be prevented or detected. 55 A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company's financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. Auditor Attestation ------------------- This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report. Changes in Internal Control over Financial Reporting ---------------------------------------------------- There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION. None. 56 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Directors and Executive Officers --------------------------------- The executive officers and directors are: Name Age Position Edward C. Dillon 74 CEO, Director Nelson Stark 57 CFO, Director Raymond Purdon 42 Chairman of the Board Howard Neu 61 Director Resumes EDWARD C. DILLON. Mr. Dillon has been chief executive officer since April 6, 2006 to present. Mr. Dillon has been chief financial officer and executive vice president of the registrant since June 4, 2004 to April 6, 2006. He was also responsible for shareholder relations and investments. From January 2004 to February 4, 2006, Mr. Dillon served as executive vice president for the registrant and he was also responsible for shareholder relations and investments. From January 2004 to February 4, 2009, Mr. Dillon served as executive vice president. From September 2004 to February 4, 2009, Mr. Dillon also served as a director of the registrant. In April 2003, Mr. Dillon accepted a position as Contract Manager Consultant to the Florida Turnpike for Jacobs Engineering a Fortune 500 Company. April 1996 to April 2002, Mr. Dillon retired to Florida for golf and relaxation. In May 1968, Edward Dillon opened Bayshore Steel Construction in New Jersey where he served as President and CEO until 1996. Bayshore Steel contracted to erect office buildings, shopping centers and 20,000,000 sq. ft of warehouse space in central New Jersey. From 1957 to 1968 he was employed as a Construction Supervisor for a family owned steel business. Management is of the opinion that Mr. Dillon's strong management and investor relations experience qualifies him to serve as a director. NELSON STARK. Mr. Stark has been chief financial officer from April 6, 2006 to present. Mr. Stark has been vice president of marketing and operations of the registrant since June 4, 2004. Mr. Stark served as vice president of marketing and operations of the registrant from September 2003 until February 4, 2006. He has a Doctorate in International Business from Nova Southeastern University in Ft. Lauderdale, Florida. He received his Degree in May 1997. His areas of specialization are strategic and international marketing. He started his career with the Australian Trade Commission in Miami as their Marketing Manager in September of 1987 until November 1988. He then became the Marketing Manager for M. & J. Import-Export International in New York from January 1989 until October 1997. He was appointed Center Director for Embry-Riddle Aeronautical University's Ft. Lauderdale Campus from November 1997 to October 1999. He was then appointed Vice President of Marketing for Softrain U.S.A. from January 2000 until June 57 of 2003. Management is of the opinion that Mr. Stark's strong educational background and marketing, management and administrative experience qualifies him to serve as a director. RAYMOND PURDON Mr. Purdon has over 17 years of experience in the securities industry, including trading, investment banking, retail and institutional sales. He is the founder and has been the principal of Grandview Capital Partners since its launch in October 2006 and is responsible for the firm's proprietary trading, due diligence and investments. Ray oversees Pricester's merger and acquisition committee. From July 2003 - October 2006, Mr. Purdon was a senior vice president and branch manager of GunnAllen Financial. Mr. Purdon graduated in 1991 from Seton Hall University with a Bachelor of Arts degree. Management is of the opinion that Mr. Purdon's extensive background in the securities industry qualifies him to serve as a director. HOWARD NEU. Since 1975, Mr. New has been a sole practitioner specializing in Domain Defense Litigation, commercial litigation, and appeals. He is also a Certified Public Accountant, has taught Taxation of Deferred Compensation at the University of Miami School of Law as well as courses in accounting and business law for the Miami Education Consortium. He has also lectured for the Florida Bar Continuing Legal Education program. He received his B.B.A. degree from the University of Miami after attending the University of Florida for 3 years, and his Juris Doctor degree from the University of Miami Law School. He was elected to 3 terms as Mayor of the City of North Miami, Florida, has served as Municipal Judge, Councilman, and has been elected President of the North Dade Bar Association, The Greater North Miami Chamber of Commerce, the Dade County League of Cities and various other State and National organizations. In his career, he has done considerable SEC work, successful Business Plans and Private Placement Memoranda. He is married and has 3 daughters, four grandchildren and a 17 year old stepson. Management is of the opinion that Mr. Neu's experience in the legal and accounting fields qualifies him to serve as a director. Section 16(a) Beneficial Ownership Reporting Compliance ------------------------------------------------------- To the registrant's knowledge, no director, officer or beneficial owner of more than ten percent of any class of equity securities of the registrant failed to file on a timely basis reports required by Section 16(a) of the Exchange Act during 2009. Code of Ethics Policy --------------------- We have not yet adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. Management is in the process of reviewing and adopting a code of ethics and intends to complete the adoption of a code of ethics in the next quarter. 58 Corporate Governance -------------------- We have no change in any state law or other procedures by which security holders may recommend nominees to our board of directors. In addition to having no nominating committee for this purpose, we currently have no specific audit committee and no audit committee financial expert. Based on the fact that our current business affairs are simple, any such committees are excessive and beyond the scope of our business and needs. ITEM 11. EXECUTIVE COMPENSATION. The following table summarizes all compensation recorded by us in each of the last two completed fiscal years for our principal executive officer, our two most highly compensated other executive officers who served as such at the end of the fiscal year and up to two additional individuals for whom disclosure would have been provided if such persons had been serving as executive officers at the end of the fiscal year. SUMMARY COMPENSATION TABLE -------------------------- NONQUALIFIED NON-EQUITY DEFERRED ALL NAME AND STOCK OPTION INCENTIVE PLAN COMPENSATION OTHER PRINCIPAL SALARY BONUS AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL POSITION YEAR ($) ($) ($) ($) ($) ($) ($) ($) ----------- ---- ------- ------ ------ ------- -------------- ------------ ------------ ------- Edward C Dillon(1) Chief Executive Officer 2010 $ - $ - $130,000 - $ - $ - $ - $130,000 2009 $40,000 $ - $31,000 - $ - $ - $ - $71,000 Nelson Stark (2) Chief Financial Officer 2010 $13,200 $ - $6,500 $ - $ - $ - $ - $19,700 2009 $7,500 $ - $1,550 $ - $ - $ - $ - $9,050

(1) Mr. Dillon has served as our president and CEO since April 2006. Mr. Dillon's fiscal 2010 compensation included stock awards of 2,000,000 shares of our common stock which were valued at $130,000. Mr. Dillon's fiscal 2009 compensation included stock awards of 1,000,000 shares of our common stock which were valued at $31,000. Accrued but unpaid compensation due to Mr. Dillon during fiscal 2009 amounted to $40,000 which is included in the above table. (2) Mr. Stark has served as our CFO since April 2006. In addition to his salary, Mr. Stark's fiscal 2010 compensation included stock awards of 100,000 shares of our common stock which were valued at $6,500. In addition to his salary, Mr. Stark's fiscal 2009 compensation included stock awards of 50,000 shares of our common stock which were valued at $1,550. 59 Outstanding Equity Awards at Fiscal Year-End The following table sets forth the outstanding stock options to the registrant's chief executive officer: Option Awards Outstanding Equity Awards at December 31, 2010 Equity Equity Incentive Incentive Plan Plan Awards: Awards: Number of Number of Number of Securities Securities Securities Underlying Underlying Underlying Unexercised Unexercised Option Option Unexercised Unearned Unearned Exercise Expiration options Options Options in Price Date Name (#) (#) (#) ($) ($) ---------------- ---------- ------------ -------- ------- ----------- Edward C. Dillon 1,000,000 $.40 One year after Exec. Vice Pres. effective registration Outstanding Equity Awards at December 31, 2010 Equity Incentive Equity Plan Awards: Incentive Market or Market Value Plan Awards: Payout of Shares Number of Value of Number of or Units Unearned Unearned Shares or of Shares Shares, Shares, Units of or Units Units or Units or Stock of Stock Other Rights Other Rights that have that have that have that have not vested not vested not vested not vested Name (#) ($) (#) ($) ---------------- ---------- ------------ -------- ------------ Edward C. Dillon - - 1,000,000 $400,000 Exec. Vice Pres.

Employment Contracts and Termination of Employment and Change-in Control Arrangements. The registrant entered into an employment agreement on January 14, 2008 with Edward C. Dillon, its chief executive officer which expires in January 2013. The employment agreement calls for an issuance of 500,000 free trading shares of our common stock. Additionally, based on this agreement, the registrant shall issue 1,000,000 restricted shares of common stock during each fiscal year of the term of this agreement. In October 2008, this agreement was amended whereby the chief executive officer shall received 2,000,000 restricted shares of common stock during each fiscal year instead of 1,000,000 shares which took effect in fiscal 2009. 60 The registrant entered into an employment agreement on January 14, 2008 with Raymond Purdon, an officer of the registrant which expires in January 2013. The employment agreement calls for an issuance of 500,000 free trading shares of the registrant's common stock. Additionally, based on this agreement, the registrant shall issue 1,000,000 restricted shares of common stock during each fiscal year of the term of this agreement. In October 2008, this agreement was amended whereby the officer shall received 2,000,000 restricted shares of common stock during each fiscal year instead of 1,000,000 shares which took effect in fiscal 2009. Directors' compensation. We do not have any standard arrangements by which directors are compensated for any services provided as a director. No cash has been paid to the directors in their capacity as such. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS There are currently 170,906,906 common shares outstanding. The following tabulates holdings of common shares and other securities of the registrant by each person who, subject to the above, at April 15, 2011, holds of record or is known by management to own beneficially more than 5.0% of the common shares, including any shares that may be beneficially acquired within 60 days and, in addition, by all directors and officers of the registrant individually and as a group. Directors and Officers Percentage of Number & Class Outstanding Name and Address of Shares Common Shares Edward C. Dillon(1) 23,232,500 13.59% 3850 Washington St. Apt. 910 Hollywood, FL 33021 Raymond Purdon(1) 21,250,000 12.43% 25 Fox Hill Drive Little Silver, NJ 07739 Nelson Stark(1) 344,000 0.20% 5130 SW 40th Avenue, Apt. 3B Fort Lauderdale, FL 33314 Howard Neu(1) 2,696,000 1.58% 1152 N. University Drive #201 Pembroke Pines, FL 33024 (1)As of April 15, 2011, there are no shares that can be beneficially acquired within 60 days. 61 Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended, beneficial ownership of a security consists of sole or shared voting power (including the power to vote or direct the voting) and/or sole or shared investment power (including the power to dispose or direct the disposition) with respect to a security whether through a contract, arrangement, understanding, relationship or otherwise. Unless otherwise indicated, each person indicated above has sole power to vote, or dispose or direct the disposition of all shares beneficially owned, subject to applicable unity property laws. All of the directors would be deemed to be promoters of the registrant. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. Director Independence Our board of directors are not independent as such term is defined by a national securities exchange or an inter-dealer quotation system. Edward Dillon, chief executive officer of Genesis Electronics Group, Inc. advanced funds to us for working capital purposes. The advances are non-interest bearing and are payable on demand. At December 31, 2010 and 2009, we owed Mr. Dillon $11,510 and $40,485, respectively. During fiscal 2010, Mr. Dillon advanced a total of $0 and during fiscal 2009, Mr. Dillon advanced a total of $18,000 to us. We paid Mr. Dillon a total of $ $28,975 and $6,900 during fiscal 2010 and 2009, respectively. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. The following table sets forth the fees billed by our principal independent accountants for each of our last two fiscal years for the categories of services indicated. Malcolm, please provide info. Year Ended December 31, Category 2010 2009 ---- ---- Audit Fees (1) $ 12,500 $ 12,750 Audit Related Fees (2) 3,400 5,250 Tax Fees (3) - - All Other Fees (4) - - (1) Consists of fees billed for the audit of our annual financial statements, review of our Form 10-K/10-KSB and services that are normally provided by the accountant in connection with year end statutory and regulatory filings or engagements. (2) Consists of fees billed for the review of our quarterly financial statements, review of our forms 10-Q/10-QSB and 8-K and services that are normally provided by the accountant in connection with non year end statutory and regulatory filings on engagements. 62 (3) Consists of professional services rendered by a company aligned with our principal accountant for tax compliance, tax advice and tax planning. (4) The services provided by our accountants within this category consisted of advice and other services relating to SEC matters, registration statement review, accounting issues and client conferences. Our board of directors has adopted a procedure for pre-approval of all fees charged by our independent auditors. Under the procedure, the board approves the engagement letter with respect to audit, tax and review services. Other fees are subject to pre-approval by the board, or, in the period between meetings, by a designated member of board. Any such approval by the designated member is disclosed to the entire board at the next meeting. The audit and tax fees paid to the auditors with respect to fiscal year 2010 were pre-approved by the entire board of directors. 63 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated: Exhibit No. Description 31.1 Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive officer 32.2 Rule 13a-14(a)/ 15d-14(a) Certification of Chief Financial officer 32.1 Section 1350 Certification of Chief Executive Officer 32.2 Section 1350 Certification of Chief Financial Officer SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Genesis Electronics Group, Inc. By: /s/ Edward C. Dillon --------------------------- April 14, 2011 Edward C. Dillon Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Capacity Date /s/Edward C. Dillon CEO/Director April 14, 2011 -------------------- Edward C. Dillon /s/Nelson Stark CFO/Director April 14, 2011 -------------------- Principal Accounting Officer Nelson Stark /s/Raymond Purdon Director April 14, 2011 -------------------- Raymond Purdon /s/Howard Neu Director April 14, 2011 --------------------- Howard Neu

Genesis Electronics Group, Inc. 10-K