Attached files
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) Securities
Exchange Act of 1934 for Quarterly Period Ended March 31, 2010
-OR-
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities And Exchange Act of 1934 for the transaction period from
_________ to________
Commission File Number 333-118993
Genesis Electronics Group, Inc.
(Exact name of Registrant in its charter)
Nevada 41-2137356
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification
number)
5555 Hollywood Blvd., Suite 303
Hollywood, Florida 33021
(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code: (954) 272-1200
Indicate by check mark whether the issuer (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the 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 is a large accelerated
filer, an accelerated filer, a non-accelerate filer, or a small
reporting company as defined by Rule 12b-2 of the Exchange Act):
Large accelerated filer [ ] Non-accelerated filer [ ]
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]
The number of outstanding shares of the registrant's common stock.
May 11, 2010:
Common Stock - 156,396,906
2
GENESIS ELECTRONICS GROUP, INC.
FORM 10-Q
For the quarterly period ended March 31, 2010
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 19
Item 3. Quantitative and Qualitative Disclosure About
Market Risk 26
Item 4T. Controls and Procedures 26
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 27
Item 1A. Risk Factors 28
Item 2. Unregistered Sales of Equity Securities and Use
of Proceeds 28
Item 3. Defaults upon Senior Securities 28
Item 4. Submission of Matters to a Vote of Security
Holders 28
Item 5. Other Information 28
Item 6. Exhibits 28
SIGNATURES 28
3
GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
Year ended
March 31, 2010 December 31, 2009
(Unaudited) (Audited)
-------------- -----------------
ASSETS
CURRENT ASSETS:
Cash $ 82,222 $ 66,069
Prepaid expense and other current asset 14,160 14,160
---------- ----------
Total current assets 96,382 80,229
PROPERTY AND EQUIPMENT, net 527 695
---------- ----------
Total assets $ 96,909 $ 80,924
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 181,851 $ 184,857
Convertible debt 931,919 931,919
Note payable 15,647 15,647
Loans payable 40,000 40,000
Due to related party 27,185 40,485
Deferred revenue 204 176
---------- ----------
Total current liabilities 1,196,806 1,213,084
---------- ----------
STOCKHOLDERS' DEFICIT:
Common stock, $0.001 par value,
300,000,000 authorized, 155,811,906
and 152,644,072 issued and
outstanding, at March 31, 2010 and
December 31, 2009, respectively 155,812 152,644
Additional paid-in capital 7,020,673 6,879,836
Accumulated deficit (8,177,857) (8,090,923)
Subscription receivable (98,525) (73,717)
---------- ----------
Total stockholders' deficit (1,099,897) (1,132,160)
---------- ----------
Total liabilities and stockholders'
deficit $ 96,909 $ 80,924
========== ==========
See notes to unaudited consolidated financial statements.
4
GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended
March 31,
--------------------------
2010 2009
--------- ---------
(Unaudited) (Unaudited)
Net Sales $ 7,662 $ 30,544
Operating expenses:
Professional fees 11,033 4,500
Consulting fees 16,380 9,901
Compensation 20,640 18,532
Other selling, general and administrative 45,430 25,355
--------- ---------
Total operating expenses 93,483 58,288
--------- ---------
Loss from operations (85,821) (27,744)
--------- ---------
Other income (expenses):
Interest expense (1,113) (1,113)
--------- ---------
Total other income (expenses) (1,113) (1,113)
--------- ---------
Loss before provision for income taxes (86,934) (28,857)
Provision for income taxes - -
--------- ---------
Net loss $ (86,934) $ (28,857)
========= =========
Net loss per common share
- basic and diluted $ - $ -
========= =========
Weighted average number of shares
outstanding - basic and diluted 153,079,543 114,513,720
=========== ===========
See notes to unaudited consolidated financial statements.
5
GENESIS ELECTRONICS GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended
March 31,
--------------------------
2010 2009
--------- ---------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss $ (86,934) $ (28,857)
Adjustments to reconcile net loss to
net cash used in operations:
Depreciation 168 169
Common stock issued for services 10,000 -
Changes in assets and liabilities:
Accounts receivable - (203)
Accounts payable and accrued expenses (3,006) -
Deferred revenues 28 41
---------- ----------
Total adjustments 7,190 7
---------- ----------
Net cash used in operating activities (79,744) (28,850)
---------- ----------
Cash flows from financing activities:
Proceeds from sale of common stock 109,197 40,325
Payments on related party advances (13,300) (1,800)
---------- ----------
Net cash provided by financing activities 95,897 38,525
---------- ----------
Net increase in cash 16,153 9,675
Cash - beginning of the period 66,069 2,319
---------- ----------
Cash - end of the period $ 82,222 $ 11,994
Supplemental disclosure of cash flow
information:
Cash paid for :
Interest $ - $ -
========== ==========
Income taxes $ - $ -
========== ==========
See notes to unaudited consolidated financial statements.
6
NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q.
Accordingly, the consolidated financial statements do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation
have been included and such adjustments are of a normal recurring
nature. These consolidated financial statements should be read in
conjunction with the financial statements for the year ended December
31, 2009 and notes thereto contained in the Report on Form 10-K of
Genesis Electronic Group, Inc. and Subsidiary ("our Company" or the
"Company") as filed with the Securities and Exchange Commission (the
"Commission"). The results of operations for the three months ended
March 31, 2010 are not necessarily indicative of the results for the
full fiscal year ending December 31, 2010.
The unaudited consolidated financial statements are prepared in
accordance with generally accepted accounting principles in the United
States of America ("US GAAP"). The unaudited 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.
ASB 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
7
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.
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 $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
8
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.
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 valuation
of stock-based compensation, and the useful life of property, equipment,
website development.
Cash and Cash Equivalents
For purposes of the unaudited 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.
9
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 March 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.
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.
Website Development
Costs that the Company has incurred in connection with developing the
Company's websites are capitalized and amortized using the straight-line
method over expected useful lives of three years.
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
10
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 three months ended
March 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 three months
ended March 31, 2010, 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 March 31, 2010 and 2009, there were options and warrants to purchase
2,025,000 shares of common stock 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,
11
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.
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.
Subsequent Events
For purposes of determining whether a post-balance sheet event should be
evaluated to determine whether it has an effect on the financial
statements for the period ending March 31, 2010, subsequent events were
12
evaluated by the Company as of May 14, 2010, the date on which the
unaudited consolidated financial statements at and for the period ended
March 31, 2010, were available to be issued.
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 following policies reflect specific criteria for the
various revenues streams of the Company:
The Company has three primary revenue sources: website design,
transaction fees, and hosting fees.
- 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. Web
hosting fees received in advance are reflected as deferred revenue on
the accompanying balance sheet.
Recently Issued Accounting Pronouncements
In June 2009, the FASB issued Accounting Standards Update No. 2009-01,
"Generally Accepted Accounting Principles" (ASC Topic 105) which
establishes the FASB Accounting Standards Codification ("the
Codification" or "ASC") as the official single source of authoritative
U.S. generally accepted accounting principles ("GAAP"). All existing
accounting standards are superseded. All other accounting guidance not
included in the Codification will be considered non-authoritative. The
Codification also includes all relevant Securities and Exchange
Commission ("SEC") guidance organized using the same topical structure
in separate sections within the Codification.
Following the Codification, the Board will not issue new standards in
the form of Statements, FASB Staff Positions or Emerging Issues Task
Force Abstracts. Instead, it will issue Accounting Standards Updates
("ASU") which will serve to update the Codification, provide background
information about the guidance and provide the basis for conclusions on
the changes to the Codification.
The Codification is not intended to change GAAP, but it will change the
way GAAP is organized and presented. The Codification is effective for
our third-quarter 2009 financial statements and the principal impact on
13
our financial statements is limited to disclosures as all future
references to authoritative accounting literature will be referenced in
accordance with the Codification.
In May 2009, the FASB issued (ASC Topic 855), "Subsequent Events" (ASC
Topic 855). This guidance is intended to establish general standards of
accounting for and disclosure of events that occur after the balance
sheet date but before financial statements are issued or available to be
issued. It is effective for interim and annual reporting periods ending
after June 15, 2009. The adoption of this guidance did not have a
material impact on our consolidated financial statements.
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. It 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 results of operations and
financial condition.
In October 2009, the FASB issued ASU No. 2009-13, "Multiple-Deliverable
Revenue Arrangements." This ASU establishes the accounting and reporting
guidance for arrangements including multiple revenue-generating
activities. This ASU provides amendments to the criteria for separating
deliverables, measuring and allocating arrangement consideration to one
or more units of accounting. The amendments in this ASU also establish a
selling price hierarchy for determining the selling price of a
deliverable. Significantly enhanced disclosures are also required to
provide information about a vendor's multiple-deliverable revenue
arrangements, including information about the nature and terms,
significant deliverables, and its performance within arrangements. The
amendments also require providing information about the significant
judgments made and changes to those judgments and about how the
application of the relative selling-price method affects the timing or
amount of revenue recognition. The amendments in this ASU are effective
prospectively for revenue arrangements entered into or materially
modified in the fiscal years beginning on or after June 15, 2010. Early
application is permitted. The Company is currently evaluating this new
ASU.
In October 2009, the FASB issued ASU No. 2010-14, "Certain Revenue
Arrangements That Include Software Elements." This ASU changes the
accounting model for revenue arrangements that include both tangible
products and software elements that are "essential to the
functionality," and scopes these products out of current software
revenue guidance. The new guidance will include factors to help
companies determine what software elements are considered "essential to
the functionality." The amendments will now subject software-enabled
products to other revenue guidance and disclosure requirements, such as
guidance surrounding revenue arrangements with multiple-deliverables.
The amendments in this ASU are effective prospectively for revenue
14
arrangements entered into or materially modified in the fiscal years
beginning on or after June 15, 2010. Early application is permitted. The
Company is currently evaluating this new ASU.
In January 2010, the FASB issued Accounting Standards Update ("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 for interim and annual
reporting beginning after December 15, 2009, with one new disclosure
effective after December 15, 2010. The adoption of ASU No. 2010-06 did
not have a material impact on the results of operations and financial
condition.
Other accounting standards that have been issued or proposed by 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 March 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 (16,343)
--------
$ 527
========
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
========
15
For the three months ended March 31, 2010 and 2009, depreciation expense
amounted to $168 and $169, respectively.
NOTE 3 - LOANS PAYABLE
On May 22, 2008, in connection with the acquisition, the Company assumed
loans payable from certain third parties. These loans bear 8% interest
per annum and are payable on demand. As of March 31, 2010, loans payable
and related accrued interest amounted to $40,000 and $12,371,
respectively. As of December 31, 2009, loans payable and related accrued
interest amounted to $40,000 and $11,571, respectively.
NOTE 4 - 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 March 31, 2010 and December 31, 2009, the Company owed
this related party $27,185 and $40,485, respectively.
NOTE 5 - NOTE PAYABLE
On May 22, 2008, in connection with the acquisition, the Company assumed
a note payable from a third party. These loans bear 8% interest per
annum and is payable on demand. As of March 31, 2010, note payable and
related accrued interest amounted to $15,647 and $7,793, respectively.
As of December 31, 2009, note payable and related accrued interest
amounted to $15,647 and $7,480, respectively.
NOTE 6 - CONVERTIBLE DEBT
On May 22, 2008, in connection with the acquisition, 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 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.
16
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 March 31, 2010 and December 31, 2009, convertible debt amounted to
$931,919.
NOTE 7 - 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 $8,177,857, had net losses,
negative working capital and negative cash flows from operations for the
three months ended March 31, 2010 of $86,934, $1,100,424 and $79,744
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 three months ended March 31, 2010,
the Company sold 2,917,834 common shares for net proceeds of $94,005 and
subscription receivable of $40,000. For the three months ended March 31,
2010 the Company collected subscription receivable of $15,192.
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
shareholders have continued to advance funds to the Company but there
can be no assurance that future advances will be made available.
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 8 - STOCKHOLDERS' DEFICIT
Common Stock
For the three months ended March 31, 2010, the Company received net
proceeds of $94,005 and subscription receivable of $40,000 from the sale
of 2,917,834 shares of the Company's common stock.
17
For the three months ended March 31, 2010, the Company collected
subscription receivable of $15,192.
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 three
months ended March 31, 2010.
Stock Options
A summary of the stock options as of March 31, 2010 and changes during
the periods is presented below:
Weighted Average
Number of Options Exercise Price
----------------- ----------------
Balance at beginning of year 2,025,000 $ 0.40
Granted - -
Exercised - -
Cancelled - -
--------- -------
Balance at end of period 2,025,000 $ 0.40
========= =======
Options exercisable at end of
period 2,025,000 $ 0.40
========= =======
The following table summarizes the Company's stock option outstanding at
March 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
NOTE 9 - SUBSEQUENT EVENTS
In April 2010, the Company received net proceeds of approximately
$30,000 from the sale of 585,000 shares of the Company's common stock.
In April 2010, the Company collected subscription receivable of $40,250.
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
18
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
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.
In May 2010, the Company issued a 9% Secured Convertible Debenture for
$20,000 to Tangiers Investors, LP. This debenture matures on December
23, 2010. 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.
19
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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. No specific terms of
possible equity or debt financing have been determined or pursued.
GOING CONCERN
-------------
As reflected in the accompanying unaudited consolidated financial
statements, we had an accumulated deficit of approximately $8.2 million,
a working capital deficit of $1,100,424, had net losses for the three
months ended March 31, 2010 of $86,934 and cash used in operations
during the three months ended March 31, 2010 of $79,744. 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 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.
20
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.
We have three primary revenue sources: website design, transaction fees,
and hosting fees.
- 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.
Web hosting fees received in advance are reflected as deferred revenue
on the accompanying balance sheet.
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
21
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
---------------------
Three months ended March 31, 2010 compared to three months ended March
31, 2009
Net sales for the three months ended March 31, 2010 were $7,662 as
compared to net sales of $30,544 for the three months ended March 31,
2009, a decrease of $22,882 or approximately 75%. 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.
Total operating expenses for the three months ended March 31, 2010 were
$93,483, an increase of $35,195, or approximately 60%, from total
operating expenses for the three months ended March 31, 2009 of $58,288.
This decrease is primarily attributable to:
- an increase of $6,533, or approximately 145%, in professional
fees incurred in connection with our SEC filings. This increase is
primarily related to increase in audit and accounting fees,
- an increase of $6,479, or approximately 65%, in consulting fees.
This increase is primarily attributable to an increase in issuance of
our common stock for services rendered during the three months ended
March 31, 2010 as compared to the same period in 2009,
- an increase of $2,108, or 11%, in compensation expense to $20,640
for the three months ended March 31, 2010 as compared to $18,532 for the
three months ended March 31, 2009. The increase is attributable to
increases in compensation levels of certain of our employees,
- an increase of $20,075, or approximately 79%, in other selling,
general and administrative expenses as a result of increase in license
fee expense related to a license agreement entered in November 2009 and
office expense attributable to our subsidiary Genesis Electronics Inc.
We reported a loss from operations of $85,821 for three months ended
March 31, 2010 as compared to a loss from operations of $27,744 for the
three months ended March 31, 2009.
22
We reported a net loss of $86,934 or (0.00) per share for the three
months ended March 31, 2010 as compared to a net loss of $28,857 or
$(0.00) per share for the three months ended March 31, 2009.
Liquidity and Capital Resources
-------------------------------
During the three months ended March 31, 2010, we received net proceeds
of $94,005 and subscription receivable of $40,000 from the sale of our
common stock. For the three months ended March 31, 2010, we collected
subscription receivable of $15,192. These funds were used for working
capital purposes.
Net cash used in operating activities for the three months ended March
31, 2010 amounted to $79,744 and was primarily attributable to our net
losses of $86,934 offset by depreciation of $168, stock based expense of
$10,000, and add back of changes in assets and liabilities of $2,978.
Net cash used in operating activities for the three months ended March
31, 2009 amounted to $28,850 and was primarily attributable to our net
losses of $28,857 offset by depreciation of $169.
Net cash flows provided by financing activities was $95,897 for the
three months ended March 31, 2010 as compared to net cash provided by
financing activities of $38,525 for the three months ended March 31,
2009, an increase of $57,372. For the three months ended March 31, 2010,
we received proceeds from the sale of common stock and collection of
subscription receivable of $109,197 and an offset by payments on related
party advances of $13,300. For the three months ended March 31, 2009, we
received proceeds from the sale of common stock of $40,325 offset by
payments on related party advances of $1,800.
We reported a net increase in cash for the three months ended March 31,
2010 of $16,153 as compared to a net increase in cash of $9,675 for the
three months ended March 31, 2009. At March 31, 2010, we had cash on
hand of $82,222.
23
Contractual Obligations and Off-Balance Sheet Arrangements
-----------------------------------------------------------
Contractual Obligations
The following tables summarize our contractual obligations as of March
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 $ - $ - $ - $ -
Loans payable 40,000 - - - -
Convertible debt 931,919 - - - -
Loans payable - related
party 27,185 - - - -
---------- -------- -------- -------- --------
Total Contractual
Obligations: $1,014,751 $ - $ - $ - $ -
License Agreement
In November 2009, we entered into a license agreement with Johns Hopkins
University Applied Physics Lab ("JHU/APL") whereby the Company will have
a limited exclusive license to JHU/APL's Integrated Power Source
patents. The patents are for the solar powered cell phone and iPod
chargers. We have paid $10,000 and issued 2 million shares of the
Company's common stock upon execution of this agreement. Future license
payments under the license agreement are as follows:
Due March 1, 2010 $10,000
Due June 1, 2010 $10,000
Due September 1, 2010 $10,000
Due upon the one year anniversary of the license $125,000
Should we elect not to execute the option to an exclusive license for
the patents in advance of the one year anniversary of execution of
license agreement, the $125,000 second year anniversary execution fee
payment will be reduced to $36,000.
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 ("Investor"). We have agreed to issue and sell to
the investor pursuant to the terms of this agreement for
24
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 agree to pay
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 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.
Off-balance Sheet Arrangements
We have not entered into any other financial guarantees or other
commitments to guarantee the payment obligations of any third parties.
We have not entered into any derivative contracts that are indexed to
our shares and classified as shareholder's equity or that are not
reflected in our consolidated financial statements. Furthermore, we do
not have any retained or contingent interest in assets transferred to an
unconsolidated entity that serves as credit, liquidity or market risk
support to such entity. We do not have any variable interest in any
unconsolidated entity that provides financing, liquidity, market risk or
credit support to us or engages in leasing, hedging or research and
development services with us.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2009, the FASB issued Accounting Standards Update No. 2009-01,
"Generally Accepted Accounting Principles" (ASC Topic 105) which
establishes the FASB Accounting Standards Codification as the official
single source of authoritative U.S. generally accepted accounting
principles. All existing accounting standards are superseded. All other
accounting guidance not included in the Codification will be considered
non-authoritative. The Codification also includes all relevant
Securities and Exchange Commission guidance organized using the same
topical structure in separate sections within the Codification.
Following the Codification, the Board will not issue new standards in
the form of Statements, FASB Staff Positions or Emerging Issues Task
Force Abstracts. Instead, it will issue Accounting Standards Updates
which will serve to update the Codification, provide background
information about the guidance and provide the basis for conclusions on
the changes to the Codification.
25
The Codification is not intended to change GAAP, but it will change the
way GAAP is organized and presented. The Codification is effective for
our third-quarter 2009 financial statements and the principal impact on
our financial statements is limited to disclosures as all future
references to authoritative accounting literature will be referenced in
accordance with the Codification.
In May 2009, the FASB issued (ASC Topic 855), "Subsequent Events". This
guidance is intended to establish general standards of accounting for
and disclosure of events that occur after the balance sheet date but
before financial statements are issued or available to be issued. It is
effective for interim and annual reporting periods ending after June 15,
2009. The adoption of this guidance did not have a material impact on
our consolidated financial statements.
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, 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. It 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 results of operations and financial
condition.
In October 2009, the FASB issued ASU No. 2009-13, "Multiple-Deliverable
Revenue Arrangements." This ASU establishes the accounting and reporting
guidance for arrangements including multiple revenue-generating
activities. This ASU provides amendments to the criteria for separating
deliverables, measuring and allocating arrangement consideration to one
or more units of accounting. The amendments in this ASU also establish a
selling price hierarchy for determining the selling price of a
deliverable. Significantly enhanced disclosures are also required to
provide information about a vendor's multiple-deliverable revenue
arrangements, including information about the nature and terms,
significant deliverables, and its performance within arrangements. The
amendments also require providing information about the significant
judgments made and changes to those judgments and about how the
application of the relative selling-price method affects the timing or
amount of revenue recognition. The amendments in this ASU are effective
prospectively for revenue arrangements entered into or materially
modified in the fiscal years beginning on or after June 15, 2010. Early
application is permitted. The Company is currently evaluating this new
ASU.
In October 2009, the FASB issued ASU No. 2010-14, "Certain Revenue
Arrangements That Include Software Elements." This ASU changes the
accounting model for revenue arrangements that include both tangible
products and software elements that are "essential to the
functionality," and scopes these products out of current software
revenue guidance. The new guidance will include factors to help
companies determine what software elements are considered "essential to
the functionality." The amendments will now subject software-enabled
products to other revenue guidance and disclosure requirements, such as
guidance surrounding revenue arrangements with multiple-deliverables.
26
The amendments in this ASU are effective prospectively for revenue
arrangements entered into or materially modified in the fiscal years
beginning on or after June 15, 2010. Early application is permitted. The
Company is currently evaluating this new ASU.
In January 2010, the FASB issued Accounting Standards Update ("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 for interim and annual
reporting beginning after December 15, 2009, with one new disclosure
effective after December 15, 2010. The adoption of ASU No. 2010-06 did
not have a material impact on the results of operations and financial
condition.
Other accounting standards that have been issued or proposed by 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We do not consider the effects of interest rate movements to be a
material risk to our financial condition. We do not hold any derivative
instruments and do not engage in any hedging activities.
Item 4T. Controls and Procedures
Evaluation of Changes in Internal Control over Financial Reporting:
During the three months ended March 31, 2010, there were no changes in
our internal controls over financial reporting (as defined in Rule 13a-
15(f) and 15d-15(f) under the Exchange Act) that have materially
affected, or are reasonably likely to material affect, our internal
control over financial reporting.
Evaluation of Disclosure Controls and Procedures:
We maintain disclosure controls and procedures, as defined in Rules 13a-
15(e) and 15d-15(e) under the Exchange Act that are designed to insure
that information required to be disclosed in the reports we file or
submit under the Exchange Act is recorded, processed, summarized and
reported within the periods specified in the Securities and Exchange
Commission's rules and forms and that such information is accumulated
and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, or the persons performing similar
functions, to allow timely decisions regarding required disclosure.
27
Under the supervision and with the participation of our CEO and CFO, or
the persons performing similar functions, our management has evaluated
the effectiveness of our disclosure controls and procedures as of the
end of the period covered by this report. Based on that evaluation, our
CEO and CFO, or the persons performing similar functions, concluded that
our disclosure controls and procedures were effective as of March 31,
2010.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Genesis Electronics Group, Inc., Genesis Electronics, Inc., and two of
our officers, Raymond Purdon and Edward Dillon (Plaintiffs), have filed
a Complaint against Michael Louis Lattuca and Charles Liebegott
(Defendants), in the Circuit Court for the 17th Judicial Circuit,
Broward County, Florida Case # 10004394-11. This Civil Action was taken
against Mr. Lattuca and Mr. Liebegott for reasons of fraudulent
inducement, breach of contract and defamation, causing damages to the
Plaintiffs and for which relief is sought. The Defendants were hired
on a trial-basis in June 2009 and terminated after approximately 8-weeks
and 3-weeks, respectively. The law firms of Pepper Hamilton LLP in
Princeton, NJ and Law Office of Howard Neu, P.A. in Pembroke Pines, FL
are representing the Plaintiffs.
28
Item 1A. Risk Factors. Not applicable to smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
For the three months ended March 31, 2010, we received net proceeds of
$94,005 and subscription receivable of $40,000 from the sale of
2,917,834 shares of our common stock.
In February 2010, we issued 250,000 shares of common stock for public
relation services rendered. We valued these common shares at the fair
value on the date of grant at $.04 per share or $10,000.
In April 2010, we received net proceeds of approximately $30,000 from
the sale of 585,000 shares of our common stock.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits
Exhibit 31 - Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 32 - Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements 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.
Dated: May 13, 2010
GENESIS ELECTRONICS GROUP, INC.
By: /s/ Edward C. Dillon
---------------------------
Edward C. Dillon, CEO and Director
