GENESIS TECHNOLOGY GROUP INC - 10-Q Quarterly Report

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United States
Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-QSB

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

For the fiscal quarter ended: December 31, 2002
Commission file number: 333-86347

GENESIS TECHNOLOGY GROUP, INC.
(Exact name of registrant as specified in its charter)

Florida 65-1130026
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

777 Yamato Road, Suite 130
Boca Raton, Florida 33431
(Address of principal executive offices)(Zip code)

(561) 988-9880
(Registrant's telephone number, including area code)

Indicate by check mark whether 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 the number of shares outstanding of each of the registrant's classes of
common stock, as of January 31, 2003: 32,322,353 shares of common stock, $.001
par value per share.

GENESIS TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
FORM 10-QSB
QUARTERLY PERIOD ENDED December 31, 2002
INDEX

PART I - FINANCIAL INFORMATION

Item 1 - Consolidated Financial Statements

Consolidated Balance Sheet
December 31, 2002 (Unaudited)................................3
Consolidated Statements of Operations (Unaudited)
For the Three Months Ended December 31, 2002 and 2001........4
Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended December 31, 2002 and 2001........5

Notes to Consolidated Financial Statements............................6-15

Item 2 - Management's Discussion and Analysis and
Plan of Operation...........................................15-25

Item 3 - Control Procedures.............................................25

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings..............................................25

Item 2 - Changes in Securities and Use of Proceeds...................25-27

Item 3 - Default upon Senior Securities.................................28

Item 4 - Submission of Matters to a Vote of Security Holders............28

Item 6 - Exhibits and Reports on Form 8-K...............................28

Signatures..............................................................29

GENESIS TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET

December 31,
2002
-------------------
(Unaudited)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 91,412
Marketable equity securities 284,087
Accounts receivable 152,892
Inventories 104,571
Prepaid expenses and other 408,212
--------

Total Current Assets 1,041,174
---------

PROPERTY AND EQUIPMENT - Net 123,766

OTHER ASSETS:
Goodwill 10,540
Net assets of discontinued operations 4,788
Other assets 11,621
--------

Total Other Assets 26,949
--------

Total Assets $ 1,191,889
===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Loans payable $ 220,919
Accounts payable and accrued expenses 178,052
Deferred revenue 3,750
Due to related party 34,567
--------
Total Current Liabilities 437,288
--------
MINORITY INTEREST 33,079

STOCKHOLDERS' EQUITY:
Preferred stock ($.001 Par Value; 20,000,000 Shares Authorized;
no shares issued and outstanding) -
Common stock ($.001 Par Value; 200,000,000 Shares Authorized;
31,122,353 shares issued and outstanding) 31,123
Additional paid-in capital 13,071,057
Accumulated deficit (10,900,956)
Less: Deferred compensation (118,667)
Less: Subscriptions receivable (288,000)
Accumulated other comprehensive loss (1,073,035)
----------
Total Stockholders' Equity 721,522
----------
Total Liabilities and Stockholders' Equity $ 1,191,889
==========

See notes to consolidated financial statements
-3-

GENESIS TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended
December 31,
-----------------------------------
2002 2001
---------------- ---------------

(Unaudited) (Unaudited)

NET REVENUES $ 5,276,670 $ 2,263,273

COST OF SALES 5,151,953 1,846,450
---------------- --------------
GROSS PROFIT 124,717 416,823
---------------- ---------------
OPERATING EXPENSES:
Consulting 235,251 11,184
Salaries and non-cash compensation 107,770 35,320
Selling, general and administrative 184,885 94,385
---------------- ---------------

Total Operating Expenses 527,906 140,889
---------------- ---------------

(LOSS) INCOME FROM OPERATIONS (403,189) 275,934
---------------- ---------------
OTHER INCOME (EXPENSE):
Loss from sale of marketable securities (12,667) (41,251)
Interest (expense) income, net (2,496) 164
---------------- ---------------

Total Other Income (Expense) (15,163) (41,087)
---------------- ---------------

(LOSS) INCOME BEFORE DISCONTINUED OPERATIONS AND
MINORITY NTEREST (418,352) 234,847
---------------- ---------------
DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations 16 49,502
---------------- ---------------
Total Income (Loss) from
Discontinued Operations 16 49,502
---------------- ---------------

LOSS BEFORE MINORITY INTEREST, (418,336) 284,349

MINORITY INTEREST IN INCOME OF SUBSIDIARY - (57,066)
---------------- ---------------

NET (LOSS) INCOME $ (418,336) $ 227,283
=============== ===============

BASIC AND DILUTED (LOSS) INCOME PER COMMON SHARE:
Income (loss) from continuing operations $ (0.02) $ 0.01
Income (loss) from discontinued operations 0.00 0.00
---------------- ---------------

Net (loss) income per common share $ (0.02) $ 0.01
================ ===============

Weighted Common Shares Outstanding
- Basic and Diluted 28,528,875 24,092,636
================ ===============

See notes to consolidated financial statements
-4-

GENESIS TECHNOLOGY GROUP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

See notes to consolidated financial statements.
-5-

GENESIS TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002
(UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES

The Company

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). The accompanying consolidated
financial statements for the interim periods are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the periods presented. The consolidated
financial statements include the accounts of the Company and its wholly and
partially owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. These consolidated financial statements
should be read in conjunction with the financial statements for the year ended
September 30, 2002 and notes thereto contained in the Transition Report on Form
10-KSB of Genesis Technology Group, Inc. (the "Company") as filed with the
Securities and Exchange Commission. The results of operations for the three
months ended December 31, 2002 are not necessarily indicative of the results for
the full fiscal year ending September 30, 2003.

Net income (loss) per share

Basic earnings per share is computed by dividing net loss by weighted average
number of shares of common stock outstanding during each period. Diluted loss
per share is computed by dividing net loss by the weighted average number of
shares of common stock, common stock equivalents and potentially dilutive
securities outstanding during each period.

Marketable equity securities

Marketable equity securities consist of investments in equity of publicly traded
and non-public domestic and foreign companies and are stated at market value
based on the most recently traded price of these securities at December 31,
2002. All marketable securities are classified as available for sale at December
31, 2002. Unrealized gains and losses, determined by the difference between
historical purchase price and the market value at each balance sheet date, are
recorded as a component of Accumulated Other Comprehensive Income in
Stockholders' Equity. Realized gains and losses are determined by the difference
between historical purchase price and gross proceeds received when the
marketable securities are sold.

-6-

GENESIS TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2002
(UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)

Foreign currency translation

Transactions and balances originally denominated in U.S. dollars are presented
at their original amounts. Transactions and balances in other currencies are
converted into U.S. dollars in accordance with Statement of Financial Accounting
Standards (SFAS) No. 52, "Foreign Currency Translation," and are included in
determining net income or loss.

For foreign operations with the local currency as the functional currency,
assets and liabilities are translated from the local currencies into U.S.
dollars at the exchange rate prevailing at the balance sheet date. Revenues,
expenses and cash flows are translated at weighted average exchange rates for
the period to approximate translation at the exchange rates prevailing at the
dates those elements are recognized in the financial statements. Translation
adjustments resulting from the process of translating the local currency
financial statements into U.S. dollars are included in determining comprehensive
loss.

The functional currency of the Company's Chinese subsidiaries is the local
currency. The financial statements of the subsidiary are translated to United
States dollars using period-end rates of exchange for assets and liabilities,
and average rates of exchange for the period for revenues, costs, and expenses.
Net gains and losses resulting from foreign exchange transactions are included
in the consolidated statements of operations and were not material during the
periods presented. The cumulative translation adjustment and effect of exchange
rate changes on cash at December 31, 2002 was not material.

Reclassifications

Certain prior periods balances have been reclassified to conform to the current
period's financial statement presentation. These reclassifications had no impact
on previously reported results of operations or stockholders' equity (deficit).

-7-

GENESIS TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2002
(UNAUDITED)

NOTE 2 - ACQUISITIONS AND SALE OF SUBSIDIARY

Acquisitions

On November 15, 2001, the Company entered into a Stock Purchase Agreement with
Shanghai Zhaoli Technology Development Company, Limited ("Zhaoli") and Zhaoli's
shareholder. Zhaoli is a Chinese company with principal offices in Shanghai,
China. Zhaoli is an information technology company that integrates sales and
technology with services. Currently, its sales cover printer, copier, scanner
and network products, as well as network integration. Zhaoli also develops
proprietary software systems, such as its e-learning software for K-12 education
in China. As a result of the acquisition, the Company issued 400,000 shares of
its common stock with a fair market value of $220,000 in exchange for 80% of the
capital stock of Zhaoli. The Company accounted for this acquisition using the
purchase method of accounting. The purchase price exceeded the fair value of net
assets acquired by $5,651. The excess has been applied to goodwill. The results
of operations of Zhaoli are included in the accompanying financial statements
for the three months ended December 31, 2002 and from November 15, 2001
(effective date of acquisition) to December 31, 2001.

On December 1, 2001, the Company entered into a Stock Purchase Agreement with
Yastock Investment Consulting Company, Limited ("Yastock") and the shareholders
of Yastock. Yastock is an investment consulting firm located in Shanghai, China
that specializes in raising capital and consulting in a number of areas,
including trading information, public relations, corporate management, corporate
strategic evaluations and human resources. As a result of the acquisition, the
Company issued 92,000 shares of its common stock with a fair market value of
$48,760 in exchange for 80% of the capital stock of Yastock. The Company
accounted for this acquisition using the purchase method of accounting. The
purchase price exceeded the fair value of net assets acquired by $4,889. The
excess has been applied to goodwill. Subsequently, the Company acquired the
remaining 20% of Yastock for $18,000. For the three months ended December 31,
2001, the results of operations of Zhaoli are included in the accompanying
financial statements from December 1, 2001 (effective date of acquisition) to
December 31, 2001.

The following unaudited pro forma consolidated results of operations have been
prepared as if the acquisitions of Zhaoli and Yastock had occurred as of the
following periods:

Three Months Ended
December 31, 2001
-------------------

Net Revenues $ 8,208,000
Net Income from continuing operations $ 249,000
Net Income per Share from continuing operations $ .01

Pro forma data does not purport to be indicative of the results that would have
been obtained had these events actually occurred at the beginning of the periods
presented and is not intended to be a projection of future results.

-8-

GENESIS TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2002
(UNAUDITED)

NOTE 2 - ACQUISITIONS AND SALE OF SUBSIDIARY(Continued)

Sale of Subsidiary

Effective June 30, 2002, the Company sold its 80% interest in its subsidiary
Shanghai G-Choice Science and Technology Development Company Ltd. ("G-Choice")
for 1,549,791 common shares of the NETdigest.com, Inc. ("NET"). As a part of
this transaction, G-Choice executive management, which is unaffiliated with
Genesis received a total of 8,155,474 shares of NET stock and received from the
Company an additional 210,526 shares of NET stock in exchange for 400,000 shares
of the Company's stock. G-Choice is a Chinese company with principal offices in
Shanghai, China. The Company concluded the sale of G-Choice as of June 30, 2002.
For the three months ended December 31, 2001, G-Choice is reported separately as
a discontinued operation, and prior periods have been restated in the Company's
financial statements, related footnotes and the management's discussion and
analysis to conform to this presentation.

NOTE 3 - SEGMENT INFORMATION

The following information is presented in accordance with SFAS No. 131,
Disclosure about Segments of an Enterprise and Related Information. In the
periods ended December 31, 2002 and 2001, the Company operated in two reportable
business segments - (1) sale of computer equipment and accessories and (2)
consulting services for small public and private companies regarding public
relations, corporate financing, mergers and acquisitions, e-commerce, business
operations support and marketing . The Company's reportable segments are
strategic business units that offer different products. They are managed
separately based on the fundamental differences in their operations.

-9-

GENESIS TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2002
(UNAUDITED)

NOTE 3 - SEGMENT INFORMATION (Continued)

Information with respect to these reportable business segments for the three
months ended December 31, 2002 is as follows:

----------------- -------------------- ---------------------
Computer and Consulting Consolidated
Equipment Sales Services Totals
----------------- -------------------- ---------------------

Net Revenues $ 5,223,480 $ 53,190 $ 5,276,670
Gross Profit $ 71,527 $ 53,190 $ 124,717
Segment profit (Loss)
from operations $ (420,696) $ 2,360 $ (418,336)

For the three months ended December 31, 2002, the Company derived approximately
99% of its revenue from its subsidiaries located in the People's Republic of
China. Sales and identifiable assets by geographic areas for the three months
ended December 31, 2002 and as of December 31, 2002, respectively, were as
follows:

Sales Identifiable Assets

United States $ 49,750 $ 377,516
China 5.226,920 814,383
----------------- -----------------

Total $ 5,276,670 $ 1,191,899
================= =================

NOTE 4 - RELATED PARTY TRANSACTIONS

Due from/to related party

Occasionally, the Company borrows funds from an officer of the Company. The
advances are non-interest bearing and are payable on demand. At December 31,
2002, the Company owed an officer of the Company $34,567.

-10-

GENESIS TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2002
(UNAUDITED)

NOTE 5 - LOANS PAYABLE

On April 1, 2002, the Company borrowed $80,000 from an individual related to an
officer of the Company. The loan bears interest at 10% per annum and is
unsecured. All unpaid principal and accrued interest is payable on April 1,
2003. In the event of default of the loan agreement, the Lender is to receive
common shares of the Company at a 25% discount to the average closing price of
the previous 20 trading days free trading shares of the Company's common stock
equal to the total amount due to the lender. As of December 31, 2002, the loan
remains unpaid.

On May 29, 2002, the Company borrowed $50,000 from an individual. The loan bears
interest at 10% per annum and is secured by certain marketable securities held
by the Company and 200,000 shares of the Company's common stock. All unpaid
principal and accrued interest was payable on September 30, 2002. On October 2,
2002, the Company repaid this loan and all unpaid interest by giving 100,000
shares of Sense Holdings, Inc. Common stock owned by the Company and 200,000
shares of the Company's common stock.

On July 31, 2002, the Company borrowed $20,000 from an individual related to an
officer of the Company. The loan bears interest at 10% per annum and is
unsecured. All unpaid principal and accrued interest is payable on January 1,
2003. At the option of the lender, the entire obligation may be repaid with
common stock calculated by dividing the amount due by the average closing common
stock price for ten days prior to the repayment discounted by 40%, with a
maximum price of $0.13 per share. The beneficial conversion feature present in
the issuance of this note payable as determined on the date funds were received
under the loan agreement totaled $12,500 and was recorded as interest expense
and additional paid-in capital. As of December 31, 2002, no conversion had
occurred. As of December 31, 2002, the loan remains unpaid.

The Company's Chinese subsidiary, Zhaoli, entered into a loan agreement with a
Chinese bank to borrow $120,919. The loan bears interest at a rate of 5.85% per
annum and is payable prior to March 29, 2003.

NOTE 6 - STOCKHOLDERS' EQUITY

Preferred stock

The Company is authorized to issue 20,000,000 shares of Preferred Stock, par
value $.001, with such designations, rights and preferences as may be determined
from time to time by the Board of Directors.

-11-

GENESIS TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2002
(UNAUDITED)

NOTE 6 - STOCKHOLDERS' EQUITY (Continued)

Common stock

In October 2002, a former employee returned 200,000 shares of common stock.
Accordingly, the Company cancelled its subscription receivable related to these
in amount of $70,000. In connection with this transaction, the Company recorded
additional consulting expense of $21,388.

On October 3, 2002, in connection the settlement of debt with a third party, the
Company issued 200,000 restricted shares of common stock for services rendered.
The Company valued these shares at their market value on the date of issuance of
$.10 per share and recorded consulting expense of $20,000.

On October 7, 2002, in connection with a consulting agreement with a third
party, the Company issued 600,000 restricted shares of common stock for services
rendered. The Company valued these shares at their market value on the date of
issuance of $.095 per share and recorded consulting expense of $57,000 related
to the consulting services.

On October 31, 2002, in connection with the exercise of stock options, the
Company issued 720,000 shares of common stock to a consultant for net proceeds
of $49,900.

On November 2002, in connection with a consulting agreement with a third party,
the Company issued 180,000 restricted shares of common stock for services
rendered. The Company valued these shares at their market value on the date of
issuance of $.14 per share and recorded consulting expense of $25,200 related to
the consulting services.

On December 19, 2002, in connection with the exercise of stock options, the
Company issued 750,000 shares of common stock to a consultant for a subscription
receivable of $100,000.

On December 24, 2002, in connection with the exercise of stock options, the
Company issued 600,000 shares of common stock to a consultant for a subscription
receivable of $90,000.

On December 31, 2002, in connection with the exercise of stock options, the
Company issued 1,000,000 shares of common stock to employees for services
rendered. Since the Company did not receive any cash for the exercise of these
options, the Company reduced accrued salaries by $140,000 based on the exercise
price of the underlying stock options granted.

-12-

GENESIS TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2002
(UNAUDITED)

NOTE 6 - STOCKHOLDERS' EQUITY (Continued)

Stock options

On January 25, 2002, the Company entered into a one year consulting agreement
with a third party for business development and marketing services. In
connection with this consulting agreement which commences on February 1, 2002,
the Company shall grant 50,000 options per month to purchase shares of common
stock for services rendered for an aggregate of 600,000 options. The options
have an exercise price of $.35 per share and expire five years from grant date.
For the three months ended December 31, 2002, the Company granted 150,000
additional options under this agreement. As of December 31, 2002, the Company
has granted 550,000 options under this agreement. The fair value of each option
grant was estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions: dividend yield of -0-
percent; expected volatility of 77 percent; risk-free interest rate of 4.50
percent and an expected holding period of 5 years. For the three months ended
December 31, 2002, in connection with these options, the Company recorded
consulting expense amounting to $10,450.

During October 2002, the Company entered into a consulting agreement with a
third party for business development services. In connection with this
consulting agreement, the Company granted 720,000 stock options to purchase
720,000 shares of the Company's common stock at $.13 per share. The fair value
of each option grant was estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions dividend
yield of -0- percent; expected volatility of 77 percent; risk-free interest rate
of 4.50 percent and an expected holding periods of 0.50 years. In connection
with these options, the Company recorded consulting expense of $80,880 at
December 31, 2002.

On December 2, 2002, the Company entered into a one-year consulting agreement
with a third party for business development services. In connection with this
consulting agreement, the Company granted an aggregate of 1,000,000 options to
purchase shares of common stock for services rendered. The options have an
exercise price of $.15. The fair value of each option grant was estimated on the
date of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions: dividend yield of -0- percent; expected volatility
of 96 percent; risk-free interest rate of 4.50 percent and an expected holding
period of 2 years. In connection with these options, the Company recorded
consulting expense of $6,333 for the three months ended December 31, 2002 and
deferred compensation of $69,667 at December 31, 2002, which will be amortized
over the service period.

-13-

GENESIS TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2002
(UNAUDITED)

NOTE 6 - STOCKHOLDERS' EQUITY (Continued)

Stock options (Continued)

On December 18, 2002, the Company entered into a consulting agreement with a
third party for business development services. In connection with this
consulting agreement, the Company granted 750,000 options to purchase shares of
common stock for services rendered. The options have an exercise price of $.15
per share and expire in 45 days. The fair value of each option grant was
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions: dividend yield of -0- percent;
expected volatility of 96 percent; risk-free interest rate of 4.50 percent and
an expected holding period of 0.25 years. In connection with these options, the
Company recorded consulting expense of $11,500 for the three months ended
December 31, 2002 and deferred compensation of $23,000 at December 31, 2002,
which will be amortized over the service period.

In December 2002, 1,000,000 options were granted to officers and employees of
the Company with an exercise price of $.14. The Company accounts for stock
options issued to employees in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. As such, compensation cost is measured
on the date of grant as the excess of the current market price of the underlying
stock over the exercise price. Since the exercise price was greater than the
current market value at the date of grant, no compensation expense has been
recognized. In December 2002, these options were exercised.

On December 31, 2002, the Company entered into a six-month consulting agreement
with a third party for business development services. In connection with this
consulting agreement, the Company granted 500,000 stock options to purchase
500,000 shares of the Company's common stock at $.10 per share. The fair value
of each option grant was estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions dividend
yield of -0- percent; expected volatility of 96 percent; risk-free interest rate
of 4.50 percent and an expected holding periods of 0.10 years. In connection
with these options, the Company recorded deferred compensation expense of
$26,000 at December 31, 2002, which be amortized over the service period. In
January 2003, the consultant exercised these options for net proceeds of
$50,000.

A summary of outstanding options and warrants at December 31, 2002 are as
follows:

Shares Range of Remaining Average
Underlying Exercise Contractual Exercise
Warrants Price Life Price
----------- -------------- ---------- ---------
Outstanding at September 5,645,000 $ 0.25-0.25 1 to 5 yrs 0.33
30, 2002

Granted 4,120,000 0.07-0.35 .5 to 5 yrs 0.13
Expired (0) 0.00 -
Exercised (3,070,000) 0.07-0.15 0.12
----------- -------------- ----------
Outstanding at
December 31, 2002 6,695,000 $ 0.10-2.25 .31
============ ================ =========

-14-

GENESIS TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2002
(UNAUDITED)

NOTE 7 - SUBSEQUENT EVENT

In January 2003, the Company granted 300,000 stock options at an exercise prices
ranging from $.10 to $.12 and immediately issued 300,000 common shares for debt
and services rendered.

In January 2003, the Company granted 50,000 and 250,000 options to a consultant
for services rendered and debt.

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following analysis of the results of operations and financial
condition of the Company should be read in conjunction with the financial
statements of Genesis Technology Group, Inc. for the year ended September 30,
2002 and notes thereto contained in the Report on Form 10-KSB of Genesis
Technology Group, Inc. as filed with the Securities and Exchange Commission.

This report on Form 10-QSB contains forward-looking statements that are
subject to risks and uncertainties that could cause actual results to differ
materially from those discussed in the forward-looking statements and from
historical results of operations. Among the risks and uncertainties which could
cause such a difference are those relating to our dependence upon certain key
personnel, our ability to manage our growth, our success in implementing the
business strategy, our success in arranging financing where required, and the
risk of economic and market factors affecting us or our customers. Many of such
risk factors are beyond the control of the Company and its management.

OVERVIEW

Genesis Technology Group Inc. ("Genesis" or the "Company") is a
business consulting firm that specializes in assisting companies in entering the
Chinese market for business development. We act as a resource for companies that
desire expertise in marketing, distribution, manufacturing, forming joint
ventures, or establishing a base in China. As a part of that strategy, we are a
member of the Shanghai Technology Stock (Property Rights) Exchange, an
organization that promotes the influx of technology into China.

Our key area of focus is the Life and Health Science arena in China.
Life and Health Science is compromised of different but related industries such
as environmental science, biotechnology, pharmaceuticals and healthcare
development. These industries range from water, soil, and air testing and
remediation to hospital facility development and management. These are new and
robust areas in China that desperately need attention and expertise. Genesis'
goal is to assist companies that are active in these areas in entering the
Chinese market.

-15-

In addition to its consulting services, we have also acquired companies
in the U.S. and China for the purposes of further developing these companies,
with operational, managerial and financial support. Our strategy envisions and
promotes opportunities for synergistic business relationships among all of the
companies that Genesis works with, both clients and subsidiaries.

We currently have 3 active subsidiary companies. We own 80% of one
computer hardware and software manufacturer/distributor located in Shanghai
China. We own 100% of two consulting companies, one in the U.S. and one in
China. We own 85% of an inactive biotechnology-marketing firm that is located in
the Unites States.

By building on the success of already successful businesses, Genesis
intends to become an important player in the expanding Cross-Pacific marketplace
- -increasing its revenues, profitability and market value by accelerating the
success of its subsidiaries and partner companies.

Company management and partners have been responsible for successfully
negotiating contracts in China for over 10 years. The Company is able to bring
talent in the areas of marketing, finance and business development to its
clients and subsidiaries, to help guide those companies to success.

ACQUISITIONS AND DISPOSITIONS

On August 1, 2001 we acquired Genesis Systems, Inc. of St. Paul,
Minnesota. Genesis Systems provides a wide range of business and financial
services for public and private companies with an emphasis on early-stage
technology companies. These services include assistance in mergers and
acquisitions, capital raising and financing, strategic planning, public
relations and operations. Genesis Systems has established a network of strategic
partners to assist in performing these services.

On August 14, 2001, we acquired 100 % of PropaMedia, Inc., a provider
of media rich Web hosting and distribution services, located in Los Angeles, CA.
Propamedia offers end-to-end streaming and hosting services, including content
capture, encoding and production, storage, live and on-demand video and audio
streaming, and managed services. PropaMedia's services can be used for video and
audio distribution services to transmit entertainment, sports, news,
advertising, business communications, and distance learning content.
PropaMedia's technologies support all major Internet audio and video formats.
PropaMedia has developed proprietary streaming technologies that increase the
number of end-users able to view video content at once, improve end-users' video
viewing experience, and provide clients with real-time monitoring and reporting.
On December 16, 2002, the Genesis Board voted to discontinue the operations of
PropaMedia as it does not complement the company's continuing focus on the China
market. We are in negotiations to sell Propamedia to an unrelated party in the
near future.

On August 22, 2001, we acquired a majority interest (80%) of Shanghai
G-Choice Science Development Company, Limited (G-Choice). G-Choice's business
services include computer product sales, network services, software development,
and systems integration. G-Choice has extensive experience in computer system
engineering, and software research and development, including its popular Point
of Sale software, currently sold via a network of over 4,000 distributors
throughout China. G-Choice was founded in 1999 and is located in Shanghai,
China; has approximately 86 employees and has recently expanded its sales
network to include other areas of China. On June 30, 2002, the Company sold
G-Choice to theNetdigest.com, Inc.

-16-

In October 2001, we formed two subsidiaries, each of which the company
owns a majority interest in. The first was Espectus Systems, Inc. Espectus was
an interactive, direct marketing company, specializing in permission-based
e-mail marketing, media buying, customer relationship management and online
surveys. Genesis owned 80% of Espectus. The company has discontinued the
operations of Espectus as it was not generating significant cash-flow and did
not complement Genesis' continuing focus on China.

The second subsidiary formed in October 2001 was Biosystems
Technologies, Inc. Biosystems' mission is the commercialization, marketing and
distribution of biomedical products and technologies used to diagnose and treat
HIV/AIDS, cancer and other immune-related diseases. Biosystems seeks to harness
the latest scientific discoveries to commercialize and market the potential of
proprietary technologies that will form the basis of a range of new and
potentially effective treatments for a variety of diseases. We own 85% of
Biosystems, with the remaining 15% owned by Dr. Ronald Watson, a noted
immunology professor and researcher.

Unlike traditional biotechnology companies which can spend millions of
dollars on research and development of new products, Biosystems seeks unique
products that are fully developed or in the final stages of development.
Biosystems will then attempt to commercialize and market these products via
licensing agreements, with particular emphasis on introducing these products to
China and the Pacific Rim. There can be no assurances that products will be
acquired or developed or that Biosystems will have sufficient financial
resources to bring these products to market. As of December 31, 2002, Biosystems
had no material operating activity.

On November 15, 2001, we acquired 80% of Shanghai Zhaoli Technology
Development Company, Limited (Zhaoli"), an Information Technology enterprise
that integrates sales and technology with services. Currently, its sales cover
printer, copier, scanner and network products, as well as network integration.
In addition to hardware sales and service, the company focuses much of its
resources on the development of proprietary software systems, such as its
e-learning software for K-12 education in China. Zhaoli has approximately 65
employees at seven branches and exclusive stores in Shanghai and a strong and
growing presence throughout eastern areas of China.

On December 1, 2001, we acquired 80% of Yastock Investment Consulting
Company, Limited ("Yastock"), an investment consulting firm located in Shanghai,
China that specializes in consulting for Chinese and American companies in a
number of areas, including financial, public relations, corporate management,
corporate strategic evaluations and human resources. In addition to its ongoing
business, Yastock's management oversees all of Genesis' operations in China and
is important source of financial and operational support for our Chinese
subsidiaries. On January 1, 2002, we acquired the remaining 20% of Yastock,
making it a wholly owned subsidiary. Yastock has 25 part and full-time
employees.

CONSULTING ACTIVITIES

In addition to overseeing the operation of its subsidiaries, we have
been growing our cross-pacific consulting business. Management believes that
China's entrance into the WTO offers a unique opportunity for Genesis to secure
itself a position as a leader in the growing market for cross-pacific products,
technology, capital, and property exchange. To that end, we market our self to
other U.S. firms interested in Chinese partnerships for manufacturing and
distribution of a variety of products in China, with a strong focus on the Life
and Health Science arena

-17-

We currently have nine clients under contract. We are assisting these
clients in penetrating the Chinese market for the purposes of product and
solutions sales, distribution, manufacturing, and/or research and development.
To aid in achieving these goals, we signed on as a U.S. representative of the
Shanghai Technology Stock (Property Rights) Exchange (STSE). STSE is a
technology transfer exchange sponsored by the Shanghai Municipal Government with
independent corporate qualifications. STSE is essentially a vehicle for the
transfer of technology and property rights into China. As a representative of
the STSE, we can directly introduce American companies and individuals who would
like to sell or license intellectual property to a Chinese partner, or use
technology to form a joint venture in China, to the STSE for purposes of listing
their technologies or intellectual properties. Our clients pay a monthly
retainer and a success fee based on any completed transactions, a portion of
which goes to the STSE. In addition, the standard Genesis contract calls for the
company to receive ongoing compensation by clients via a percentage of any
licensing fees or an equity position in any joint ventures/partnerships formed
with Chinese entities.

RESULTS OF OPERATIONS

THREE MONTHS ENDED DECEMBER 31, 2002 COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 2001

REVENUES AND COSTS BY SEGMENT:

For the three months ended December 31, 2002, we had consolidated
revenues of $5,276,670 as compared to $2,263,273 for the three months ended
December 31, 2001. This increase resulted from the acquisition of our
subsidiaries and is outlined below.

Genesis Technology Group, Inc.

Revenue for the three months ended December 31, 2002 was $34,500 as
compared to $16,250 for the three months ended December 31, 2001. This revenue
was generated from consulting services.

For the three months ended December 31, 2002, we incurred consulting
fees of $232,751 as compared to $11,184 for the three months ended December 31,
2001. For the three months ended December 31, 2002, consulting fees expense was
attributable to the granting of stock options and issuance of common shares to
consultants for marketing and business development activities. For the three
months ended December 31, 2002, we incurred salary expense of $107,770 as
compared to $3,320 for the three months ended December 31, 2001. The increase in
salary expense was attributable to the hiring of key personnel to support our
current business plan. For the three months ended December 31, 2002, other
selling, general and administrative expenses consisted of rent of $15,943 and
other expenses such as professional fees and office expenses of $68,670. For the
three months ended December 31, 2001, other selling, general and administrative
expenses consisted of rent of $1,924 and other expenses such as professional
fees and office expenses of $10,890.

-18-

RESULTS OF OPERATIONS (Continued)

THREE MONTHS ENDED DECEMBER 31, 2002 COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 2001 (Continued)

Genesis Systems, Inc.

Revenue for the three months ended December 31, 2002 from Genesis
Systems, Inc. was $15,250 as compared to $76,500 of revenue for the three months
ended December 31, 2001. This revenue was generated from consulting service in
which we received stock or cash for services. The decrease was attributable the
fact that we shifted our focus to our parent company, Genesis Technology Group,
Inc

For the three months ended December 31, 2002, operating expenses of our
Genesis Systems subsidiary consisted of salaries of $-0-, rent of $2,819, and
other general and administrative expenses amounting to $13,274. Additionally, we
recorded a realized loss from the sale of marketable securities received for
consulting services of $16,222 for the three months ended December 31, 2002. For
the three months ended December 31, 2001, other selling, general and
administrative expenses of our Genesis Systems subsidiary consisted of salaries
of $32,000, rent of $7,169, and other general and administrative expenses
amounting to $35,660.

Yastock

Revenue for the three months ended December 31, 2002 from Yastock was
$3,440 as compared to $287,188 for the three months ended December 31, 2001.
This revenue was generated from consulting services and software licensing fees.

Other selling, general and administrative expenses consisting of
salaries, commissions, accounting fees and office rent amounted to $21,012 for
the three months ended December 31, 2002 as compared to $2,587. We have incurred
additional marketing costs associated with increased business development
efforts.

Zhaoli

Revenue for the three months ended December 31, 2002 were $5,223,480 as
compared to $1,883,335 from acquisition (November 15, 2001) to December 31, 2001
from our subsidiary Zhaoli, a Chinese company. This revenue was generated from
sales of printers, copiers, network equipment and software licensing fees. Cost
of sales for Zhaoli for the three months ended December 31, 2002 amounted to
$5,151,953 or 98.6% of net sales as compared to $1,846,450 or 98% of net sales
for the period from acquisition (November 15, 2001) to December 31, 2001.

For the three months ended December 31, 2002, other selling, general
and administrative expenses amounted to $69,167 as compared to $36,155 for the
period from acquisition (November 15, 2001) to December 31, 2001. Other
selling, general and administrative expenses consisted of salaries, rent and
other expenses.

-19-

RESULTS OF OPERATIONS (Continued)

THREE MONTHS ENDED DECEMBER 31, 2002 COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 2001 (Continued)

Discontinued Operations

For the three months ended December 31, 2002, we had income from
discontinued operations of $16 related to the discontinuation of our Propamedia
and eSpectus subsidiary as compared to income from discontinued operations of
$49,502 for the three months ended December 31, 2001.

Overall

We reported a loss from operations for the three months ended December
31, 2002 of $(418,336) compared to income from operations for the three months
ended December 31, 2001 of $227,283. Additionally, we reported income from
discontinued operations for the three months ended December 31, 2002 of $16 as
compared to a income from discontinued operations of $49,502 for the three
months ended December 31, 2001.

This translates to an overall per-share loss of $(.02) for the three
months ended December 31, 2002 compared to per share income of $.01 for the
three months ended December 31, 2001.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2002, we had cash and equivalents balance of $91,412.
As of December 31, 2002, our cash position by geographic area is as follows:

Cash
United States $ 6,625
China 84,787
---------------

Total $ 91,412
===============

Management has invested substantial time evaluating and considering
numerous proposals for possible acquisition or combination developed by
management or presented by investment professionals, the Company's advisors and
others. We continue to consider acquisitions, business combinations, or start up
proposals, which could be advantageous to shareholders. No assurance can be
given that any such project, acquisition or combination will be concluded.

We intend to continue our trading activities and as a consequence the
future financial results of the Company may be subject to substantial
fluctuations. As part of our investment activities, we may sell a variety of
equity or debt securities obtained as revenue for consulting services. Such
investments often involve a high degree of risk and must be considered extremely
speculative.

At December 31, 2002, our Company had stockholders' equity of
$721,522. Our Company's future operations and growth will likely be dependent on
our ability to raise capital for expansion and to implement our strategic plan.

-20-

LIQUIDITY AND CAPITAL RESOURCES (Continued)

Net cash used in operations was $(42,349) for the three months ended
December 31, 2002 as compared to net cash provided by operations of $240,260 for
the three months ended December 31, 2001. The difference is due to the
implementation of our new business model and the acquisition of our subsidiaries
between August and December 2001.

Net cash provided by investing activities for the three months ended
December 31, 2002 was $8,479 as compared to $126,987 for the three months ended
December 31, 2001. For the three months ended December 31, 2001, we received
cash acquired from acquisitions of $106,790 compared to cash acquired of $-0-
for the three months ended December 31, 2002. For the three months ended
December 31, 2002, we received $13,713 from the sale of marketable securities
offset by cash used for capital expenditures of $(5,234). For the three months
ended December 31, 2001, we received $21,040 from the sale of marketable
securities offset by cash used for capital expenditures of $(843).

Net cash provided by financing activities were $67,708 for the three
months ended December 31, 2002 as compared to $-0- for the three months ended
December 31, 2001 and related to proceeds from the exercise of stock options and
related party loans of $59,900 and $7,808, respectively. .

We currently have no material commitments for capital expenditures. Our
future growth is dependent on our ability to raise capital for expansion, and to
seek additional revenue sources. If we decide to pursue any acquisition
opportunities or other expansion opportunities, we may need to raise additional
capital, although there can be no assurance such capital- raising activities
would be successful.

NEW ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141 "Business Combinations"
("SFAS 141") and No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142").
SFAS 141 requires all business combinations initiated after June 30, 2001 to be
accounted for under the purchase method. For all business combinations for which
the date of acquisition is after June 30, 2001, SFAS 141 also establishes
specific criteria for the recognition of intangible assets separately from
goodwill and requires unallocated negative goodwill to be written off
immediately as an extraordinary gain, rather than deferred and amortized. SFAS
142 changes the accounting for goodwill and other intangible assets after an
acquisition. The most significant changes made by SFAS 142 are: 1) goodwill and
intangible assets with indefinite lives will no longer be amortized; 2) goodwill
and intangible assets with indefinite lives must be tested for impairment at
least annually; and 3) the amortization period for intangible assets with finite
lives will no longer be limited to forty years.

Statement No. 143, "Accounting for Asset Retirement Obligations,"
("SFAS 143") requires entities to record the fair value of a liability for an
asset retirement obligation in the period in which it is incurred. When the
liability is initially recorded, the entity capitalizes a cost by increasing the
carrying amount of the related long-lived asset. Over time, the liability is
accreted to its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its recorded amount or
incurs a gain or loss upon settlement. The standard is effective for fiscal
years beginning after June 15, 2002. The adoption of SFAS 143 on October 1, 2002
did not have a material effect on our results of operations or liquidity.

-21-

NEW ACCOUNTING STANDARDS (Continued)

Statement No. 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets" ("SFAS 144") supercedes Statement No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS 121"). Though it retains the basic requirements of SFAS 121 regarding
when and how to measure an impairment loss, SFAS 144 provides additional
implementation guidance. SFAS 144 excludes goodwill and intangibles not being
amortized among other exclusions. SFAS 144 also supercedes the provisions of APB
30, "Reporting the Results of Operations," pertaining to discontinued
operations. Separate reporting of a discontinued operation is still required,
but SFAS 144 expands the presentation to include a component of an entity,
rather than strictly a business segment as defined in SFAS 131, Disclosures
about Segments of an Enterprise and Related Information. SFAS 144 also
eliminates the current exemption to consolidation when control over a subsidiary
is likely to be temporary. This statement is effective for all fiscal years
beginning after December 15, 2001. The implementation of SFAS 144 on October 1,
2002 did not have a material effect on our financial position, results of
operations or liquidity.

Statement No. 145, "Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections" ("SFAS 145")
updates, clarifies, and simplifies existing accounting pronouncements. Statement
No. 145 rescinds Statement 4, which required all gains and losses from
extinguishment of debt to be aggregated and, if material, classified as an
extraordinary item, net of related income tax effect. As a result, the criteria
in Opinion 30 will now be used to classify those gains and losses. Statement 64
amended Statement 4, and is no longer necessary because Statement 4 has been
rescinded. Statement 44 was issued to establish accounting requirements for the
effects of transition to the provisions of the motor Carrier Act of 1980.
Because the transition has been completed, Statement 44 is no longer necessary.

Statement 145 amends Statement 13 to require that certain lease
modifications that have economic effects similar to sale-leaseback transactions
be accounted for in the same manner as sale-leaseback transactions. This
amendment is consistent with FASB's goal requiring similar accounting treatment
for transactions that have similar economic effects. This statement is effective
for fiscal years beginning after May 15, 2002. The adoption of SFAS 145 on
October 1, 2002 did not have a material impact on our financial position,
results of operations or liquidity.

Statement No. 146, "Accounting for Exit or Disposal Activities" ("SFAS
146") addresses the recognition, measurement, and reporting of cost that are
associated with exit and disposal activities that are currently accounted for
pursuant to the guidelines set forth in EITF 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to exit an Activity
(including Certain Cost Incurred in a Restructuring)," cost related to
terminating a contract that is not a capital lease and one-time benefit
arrangements received by employees who are involuntarily terminated - nullifying
the guidance under EITF 94-3. Under SFAS 146, the cost associated with an exit
or disposal activity is recognized in the periods in which it is incurred rather
than at the date the Company committed to the exit plan. This statement is
effective for exit or disposal activities initiated after December 31, 2002 with
earlier application encouraged. The adoption of SFAS 146 is not expected to have
a material impact on our financial position, results of operations or liquidity.

-22-

NEW ACCOUNTING STANDARDS (Continued)

In December 2002, the FASB issued Statement of Financial Accounting
Standards No. 148, Accounting for Stock-Based Compensation - Transition and
Disclosure. Statement 148 provides alternative methods of transition to
Statement 123's fair value method of accounting for stock-based employee
compensation. It also amends the disclosure provisions of Statement 123 and APB
Opinion No. 28, Interim Financial Reporting, to require disclosure in the
summary of significant accounting policies of the effects of an entity's
accounting with respect to stock-based employee compensation on reported net
income and earnings per share in annual and interim financial statements.
Statement 148's amendment of the transition and annual disclosure requirements
of Statement's 123 are effective for fiscal years ending after December 15,
2002. Statement 148's amendment of the disclosure requirements of Opinion 28 is
effective for interim periods beginning after December 15, 2002.

CRITICAL ACCOUNTING POLICIES

A summary of significant accounting policies is included in Note 1 to
the audited consolidated financial statements included in the Company's Annual
Report on Form 10-KSB for the year ended September 30, 2002. Management believes
that the application of these policies on a consistent basis enables the Company
to provide useful and reliable financial information about the company's
operating results and financial condition.

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 revenues and expenses during the
reporting period. Actual results may differ from those estimates.

OPERATING RISK

(a) Country risk

Currently, the Company's revenues are primarily derived from sale of
computer equipment and accessories to customers in the Peoples Republic of China
(PRC). The Company hopes to expand its operations to countries outside the PRC,
however, such expansion has not been commenced and there are no assurances that
the Company will be able to achieve such an expansion successfully. Therefore, a
downturn or stagnation in the economic environment of the PRC could have a
material adverse effect on the Company's financial condition.

(b) Products risk

In addition to competing with other computer and electronics equipment
companies, the Company could have to compete with larger US companies who have
greater funds available for expansion, marketing, research and development and
the ability to attract more qualified personnel if access is allowed into the
PRC market. If US companies do gain access to the PRC markets, it may be able to
offer products at a lower price. There can be no assurance that the Company will
remain competitive should this occur.

-23-

(c) Exchange risk

The Company generates revenue and incurs expenses and liabilities in
Chinese renminbi and U.S. dollars. As a result, the Company is subject to the
effects of exchange rate fluctuations with respect to any of these currencies.
For example, the value of the renminbi depends to a large extent on PRC's
domestic and international economic and political developments, as well as
supply and demand in the local market. Since 1994, the official exchange rate
for the conversion of renminbi to U.S. dollars has generally been stable and the
renminbi has appreciated slightly against the U.S. dollar. However, given recent
economic instability and currency fluctuations, the Company can offer no
assurance that the renminbi will continue to remain stable against the U.S.
dollar or any other foreign currency. The Company's results of operations and
financial condition may be affected by changes in the value of renminbi and
other currencies in which its earnings and obligations are denominated. The
Company has not entered into agreements or purchased instruments to hedge its
exchange rate risks, although the Company may do so in the future.

Although Chinese governmental policies were introduced in 1996 to allow
the convertibility of renminbi into foreign currency for current account items,
conversion of renminbi into foreign exchange for capital items, such as foreign
direct investment, loans or security, requires the approval of the State
Administration of Foreign Exchange, or SAFE, which is under the authority of the
People's Bank of China. These approvals, however, do not guarantee the
availability of foreign currency. The Company cannot be sure that the Company
will be able to obtain all required conversion approvals for its operations or
that Chinese regulatory authorities will not impose greater restrictions on the
convertibility of the renminbi in the future. Because a significant amount of
its revenues are in the form of renminbi, its inability to obtain the requisite
approvals or any future restrictions on currency exchanges will limit its
ability to utilize revenue generated in renminbi to fund its business activities
outside PRC.

(d) Political risk

Currently, PRC is in a period of growth and is openly promoting
business development in order to bring more business into PRC. Additionally PRC
allows a Chinese corporation to be owned by the United States corporation. If
the laws or regulations are changed by the PRC government, the Company's ability
to operate the PRC subsidiaries could be affected.

(e) Our future performance is dependent on its ability to retain key personnel

Our performance is substantially dependent on the performance of our
senior management. In particular, the Company's success depends on the continued
effort of our Chief Executive Officer, James Wang, to maintain all contact with
our Chinese subsidiaries. The Company's inability to retain James Wang could
have a material adverse effect on our prospects, businesses, Chinese operations,
financial conditions and share price.

-24-

ITEM 3. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of
our chief executive officer and principal financial and accounting officer,
conducted an evaluation of our "disclosure controls and procedures" (as defined
in the Securities Exchange Act of 1934 (the "Exchange Act") Rules 13a-14(c))
within 90 days of the filing date of this Quarterly Report on Form 10-QSB (the
"Evaluation Date"). Based on their evaluation, our chief executive officer and
principal financial and accounting officer have concluded that as of the
Evaluation Date, our disclosure controls and procedures are effective to ensure
that all material information required to be filed in this Quarterly Report on
Form 10-QSB has been made known to them in a timely fashion.

Changes in Internal Controls

There have been no significant changes (including corrective actions
with regard to significant deficiencies or material weaknesses) in our internal
controls or in other factors that could significantly affect these controls
subsequent to the Evaluation Date set forth above.

Part II - OTHER INFORMATION

Item 1.Legal Proceedings

None

Item 2. Changes in Securities and Use of Proceeds

Preferred stock

The Company is authorized to issue 20,000,000 shares of Preferred
Stock, par value $.001, with such designations, rights and preferences as may be
determined from time to time by the Board of Directors.

Common stock

In October 2002, a former employee returned 200,000 shares of common
stock. Accordingly, the Company cancelled its subscription receivable related to
these in amount of $70,000. In connection with this transaction, the Company
recorded additional consulting expense of $21,388.

On October 3, 2002, in connection the settlement of debt with a third
party, the Company issued 200,000 restricted shares of common stock for services
rendered. The Company valued these shares at their market value on the date of
issuance of $.10 per share and recorded consulting expense of $20,000.

-25-

Item 2. Changes in Securities and Use of Proceeds (Continued)

On October 7, 2002, in connection with a consulting agreement with a
third party, the Company issued 600,000 restricted shares of common stock for
services rendered. The Company valued these shares at their market value on the
date of issuance of $.095 per share and recorded consulting expense of $57,000
related to the consulting services.

On October 31, 2002, in connection with the exercise of stock
options, the Company issued 720,000 shares of common stock to a consultant for
net proceeds of $49,900.

On November 2002, in connection with a consulting agreement with a
third party, the Company issued 180,000 restricted shares of common stock for
services rendered. The Company valued these shares at their market value on the
date of issuance of $.14 per share and recorded consulting expense of $25,200
related to the consulting services.

On December 19, 2002, in connection with the exercise of stock
options, the Company issued 750,000 shares of common stock to a consultant for a
subscription receivable of $100,000.

On December 24, 2002, in connection with the exercise of stock
options, the Company issued 600,000 shares of common stock to a consultant for a
subscription receivable of $90,000.

On December 31, 2002, in connection with the exercise of stock
options, the Company issued 1,000,000 shares of common stock to employees for
services rendered. Since the Company did not receive any cash for the exercise
of these options, the Company reduced accrued salaries by $140,000 based on the
exercise price of the underlying stock options granted.

Stock options

On January 25, 2002, the Company entered into a one year consulting
agreement with a third party for business development and marketing services. In
connection with this consulting agreement which commences on February 1, 2002,
the Company shall grant 50,000 options per month to purchase shares of common
stock for services rendered for an aggregate of 600,000 options. The options
have an exercise price of $.35 per share and expire five years from grant date.
For the three months ended December 31, 2002, the Company granted 150,000
additional options under this agreement. As of December 31, 2002, the Company
has granted 550,000 options under this agreement. The fair value of each option
grant was estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions: dividend yield of -0-
percent; expected volatility of 77 percent; risk-free interest rate of 4.50
percent and an expected holding period of 5 years. For the three months ended
December 31, 2002, in connection with these options, the Company recorded
consulting expense amounting to $10,450.

-26-

Item 2. Changes in Securities and Use of Proceeds (Continued)

Stock options (Continued)

During October 2002, the Company entered into a consulting agreement
with a third party for business development services. In connection with this
consulting agreement, the Company granted 720,000 stock options to purchase
720,000 shares of the Company's common stock at $.13 per share. The fair value
of each option grant was estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions dividend
yield of -0- percent; expected volatility of 77 percent; risk-free interest rate
of 4.50 percent and an expected holding periods of 0.50 years. In connection
with these options, the Company recorded consulting expense of $80,880 at
December 31, 2002.

On December 2, 2002, the Company entered into a one-year consulting
agreement with a third party for business development services. In connection
with this consulting agreement, the Company granted an aggregate of 1,000,000
options to purchase shares of common stock for services rendered. The options
have an exercise price of $.15. The fair value of each option grant was
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions: dividend yield of -0- percent;
expected volatility of 96 percent; risk-free interest rate of 4.50 percent and
an expected holding period of 2 years. In connection with these options, the
Company recorded consulting expense of $6,333 for the three months ended
December 31, 2002 and deferred compensation of $69,667 at December 31, 2002,
which will be amortized over the service period.

On December 18, 2002, the Company entered into a consulting agreement
with a third party for business development services. In connection with this
consulting agreement, the Company granted 750,000 options to purchase shares of
common stock for services rendered. The options have an exercise price of $.15
per share and expire in 45 days. The fair value of each option grant was
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions: dividend yield of -0- percent;
expected volatility of 96 percent; risk-free interest rate of 4.50 percent and
an expected holding period of 0.25 years. In connection with these options, the
Company recorded consulting expense of $11,500 for the three months ended
December 31, 2002 and deferred compensation of $23,000 at December 31, 2002,
which will be amortized over the service period.

In December 2002, 1,000,000 options were granted to officers and
employees of the Company with an exercise price of $.14. The Company accounts
for stock options issued to employees in accordance with the provisions of
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations. As such, compensation cost is
measured on the date of grant as the excess of the current market price of the
underlying stock over the exercise price. Since the exercise price was greater
than the current market value at the date of grant, no compensation expense has
been recognized. In December 2002, these options were exercised.

On December 31, 2002, the Company entered into a six-month consulting agreement
with a third party for business development services. In connection with this
consulting agreement, the Company granted 500,000 stock options to purchase
500,000 shares of the Company's common stock at $.10 per share. The fair value
of each option grant was estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions dividend
yield of -0- percent; expected volatility of 96 percent; risk-free interest rate
of 4.50 percent and an expected holding periods of 0.10 years. In connection
with these options, the Company recorded deferred compensation expense of
$26,000 at December 31, 2002, which be amortized over the service period. In
January 2003, the consultant exercised these options for net proceeds of
$50,000.

-27-

Item 3. Defaults Upon Senior Securities

None

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

None

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K

(1) Exhibits

Exhibit
Number Description
- ----------- ----------------

99.1 Certification by Chief Executive Officer

99.2 Certification by Chief Financial Officer

(1) Incorporated by reference to the company's current report form 8-K
filed on 9/12/01
(2) Incorporated by reference to the company's current report form 8-K
filed on 10/17/01
(3) Incorporated by reference to the company's current report form 8-K
filed on 1/14/02

(2) Reports on Form 8-K

None

-28-

SIGNATURES

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

GENESIS TECHNOLOGY GROUP, INC.

SIGNATURE TITLE DATE
- ------------------ ---------- --------

/s/ Gary Wolfson Chief Executive Officer February 13, 2003
- -------------------
Gary Wolfson

/s/ Adam Wasserman CFO and Principal Financial February 13, 2003
- ------------------- and Accounting Officer
Adam Wasserman

-29-

CERTIFICATIONS

I, Gary Wolfson, the Chief Executive Officer of Genesis Technology Group, Inc.
certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Genesis Technology
Group, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: February 13, 2003

/s/ Gary Wolfson
--------------------------------------
Gary Wolfson, Chief Executive Officer

CERTIFICATIONS

I, Adam Wasserman, Chief Financials Officer of Genesis Technology Group, Inc.
certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Genesis Technology
Group, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: February 13, 2003

/s/ Adam Wasserman
-----------------------------------------
Adam Wasserman, Chief Financial Officer