ITEM 1.
BUSINESS.
CORPORATE ORGANIZATION - History and Development
On November 7, 2008 the board of directors changed the name of the company from Fortuna Gaming Corp. to Principal Capital Group, Inc. and on February 13, 2009, the shareholders agreed to change the name to Gazoo Energy Group, Inc.
Gazoo Energy Group, Inc. (“the “Company”) formerly Principal Capital Group, Inc.. is a Development Stage Company, which is engaged in the acquisition and development of green energy technologies, ranging from wind energy to natural green products. The company’s immediate goal is to be an incubator within the industry by partnering with other green technology companies and inventors, with potential to make a difference in the green energy industry.
Corporate History
The Company was incorporated on March 14, 2002 under the laws of the State of Nevada as North American General Resources Corporation and was engaged, primarily, in the acquisition and exploration of mining properties until November 2004.
On November 29, 2004 a Certificate of Amendment was filed with the Secretary of State in Nevada to change the name of the Company from North American General Resources Corporation to MoneyFlow Capital Corporation. At that time we changed our business to providing financial services, including operating a foreign exchange service and providing short-term loans and check cashing from retail premises.
From March 2002 until October 2004 we were engaged in the exploration and acquisition of mining properties but never realized any revenues from its planned operations.
On November 11, 2004, previous management entered into a share exchange agreement with MoneyFlow Capital Corp., (“MoneyFlow Canada”) a company incorporated under the laws of British Columbia, Canada, whereby we purchased all of the issued and outstanding shares of MoneyFlow Capital Corp. in exchange for the issuance of 6,000,000 shares of our Company and the assumption of two debt obligations amounting to approx $2,500,000. As a result of entering into this Agreement, we changed our name from North American General Resources Corp. to MoneyFlow Capital Corporation (“MoneyFlow Nevada”) and our nature of business to providing financial services, including operating a foreign exchange service and providing short-term loans and cheque cashing from retail premises through its subsidiary.
Under the terms of the Agreement the former management paid a total of $1,473,336 for financial services software during December 2004. However, on February 5, 2005 they defaulted on the remaining payment obligations of $1,040,140 and the parties agreed to rescind the Agreement by returning the 6,000,000 shares to treasury in exchange for giving up the shares in MoneyFlow Canada. As a result of the termination of the agreement, the investment of $1,473,336 was written off during fiscal 2005.
This business venture was abandoned by previous management and board of directors and after their resignations as directors and officers of the Company, the Company underwent a re-organization by the management team and consultants
This business, Fortuna Gaming Corp., was entered into on June 28, 2005 and because of changes in the United States statutes was subsequently abandoned.
The company changed its name to Principal Capital Group, Inc. on November 7, 2008 with the intention of becoming a subsidiary of a BDC. The new shareholders defaulted on their obligation under the Stock Purchase Agreement and the new officers and directors were replaced by the previous board and officers.
Patents and Trademarks
We do not own, either legally or beneficially, any patents or trademarks.
Employees
We have no employees as of the date of this Annual Report. We conduct our business largely through agreements with consultants and arms-length third parties.
ITEM 1A.
ITEM 1A.
RISK FACTORS
Forward-looking statements in this report are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The Company wishes to advise readers that actual results may differ substantially from such forward-looking statements. Forward-looking statements include underlying assumptions and other statements that are other than historical facts. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the statements, including, but not limited to, the following: the ability of the Company to provide for its obligations, to provide working capital needs from operating revenues, to obtain additional financing needed for any future acquisitions, to meet competitive challenges and technological changes, and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission (“SEC”).
The Company has no formal lease on the premises out of which it currently operates.
The Company currently shares a small office facility located at 2569 McCabe Way Irvine CA. No formal lease or other agreement exists. Space is being provided to the Company at no cost.
The Company may be asked to leave and vacate the premises at any time. If the Company is asked to leave the premises it could be materially detrimental to the Company’s operations. The Company is continuing its search for new premises and anticipates finalizing a lease.
No established market for our products.
There is no established market for our products. These products have never been sold before and the risk exists for the establishment of a new market. We are counting on a new market developing and that the new market will accept our products as opposed to other alternatives. The new market may not develop or may not develop in time to allow us to continue our operations.
The Company’s lack of operating history.
The Company has had no operations since its attempt to become involved in the on-line gaming industry. We have insufficient operating history upon which an evaluation of our future performance and prospects can be made.
Our business plan is unproven.
We have a limited operating history, with no track record to determine if our planned business will be financially viable or successful. Our projected revenues from our business may fall short of our targeted goals and our profit margins may likewise not be achieved. Until we are actually in the marketplace for a demonstrable period of time, it is impossible to determine if our business strategies will be successful.
The Company will need financing which may not be available.
The Company has not established a source of equity or debt financing and will require such financing to establish our business and implement our strategic plan. If we are unable to obtain financing or if the financing we do obtain is insufficient to cover any operating losses we may incur, we may substantially curtail or terminate our operations or seek other business opportunities through strategic alliances, acquisitions or other arrangements that may dilute the interests of existing stockholders.
Shareholders may be diluted significantly through our efforts to obtain financing and satisfy obligations.
We have no committed source of financing. Wherever possible, we will attempt to use non-cash consideration to satisfy obligations. In many instances, we believe that the non-cash consideration will consist of shares of our stock. In addition, if a trading market develops for our common stock, we may attempt to raise capital by selling shares of our common stock, possibly at a discount to market. These actions will result in dilution of the ownership interests of existing shareholders, and that dilution may be material.
Gazoo Energy Group, Inc.’s Common Stock has a limited trading market or liquidity, and there can be no assurances that any trading market will develop.
There is a limited trading market for our Common Stock. No assurance can be given that an orderly trading market or any trading market will ever develop for our Common Stock.
In addition, Gazoo Energy Group, Inc. common stock is unlikely to be followed by any market analysts, and there may be few institutions acting as market makers for the common stock. Either of these factors could adversely affect the liquidity and trading price of our common stock. Also, the stock market in general has experienced extreme price and volume volatility that has especially affected the market prices of securities of many companies. At times, this volatility has been unrelated to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the trading price of the common stock, regardless of the Company’s actual operating performance.
The trading price of Gazoo Energy Group, Inc. Common Stock is likely to be subject to significant fluctuations.
There can be no assurance as to the prices at which Gazoo Energy Group, Inc. common stock will trade, if any trading market develops at all. Until the Common Stock is fully distributed and an orderly market develops, the price at which such stock trades may fluctuate significantly and may be lower or higher than the price that would be expected for a fully distributed issue. Prices for the Common Stock will be determined in the marketplace and may be influenced by many factors, including:
the depth and liquidity of the market,
developments affecting the business of Gazoo Energy Group, Inc. generally and the impact of those factors referred to below in particular,
investor perception of Gazoo Energy Group, Inc., and
General economic and market conditions.
We may be exposed to potential risks resulting from new requirements under Section 404 of the Sarbanes-Oxley Act of 2002.
In June 2003, the United States Securities and Exchange Commission (“SEC”) adopted final rules under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”) , as amended by SEC Release No. 33-8934 on June 26, 2008. Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we will be required, commencing with our annual report for the fiscal year ending October 31, 2011, to include in our annual report our assessment of the effectiveness of our internal control over financial reporting as of the end of fiscal year 2011. The internal control report must include a statement
Of management's responsibility for establishing and maintaining adequate internal control over our financial reporting;
Of management's assessment of the effectiveness of our internal control over financial reporting as of year end;
Of the framework used by management to evaluate the effectiveness of our internal control over financial reporting; and
that our independent accounting firm has issued an attestation report on management's assessment of our internal control over financial reporting, which report is also required to be filed.
Furthermore, our independent registered public accounting firm will be required to attest to whether our assessment of the effectiveness of our internal control over financial reporting is fairly stated in all material respects and separately report on whether it believes we have maintained, in all material respects, effective internal control over financial reporting as of October 31, 2011.
We have not yet completed our assessment of the effectiveness of our internal control over financial reporting. We expect to incur additional expenses and diversion of management's time as a result of performing the system and process evaluation, testing and remediation required in order to comply with the management certification and auditor attestation requirements.
We do not have a sufficient number of employees to segregate responsibilities and may be unable to afford increasing our staff or engaging outside consultants or professionals to overcome our lack of employees. During the course of our testing, we may identify other deficiencies that we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock, if a market ever develops, could drop significantly.
ITEM 2.
ITEM 2.
PROPERTIES.
We currently do not own any properties.
ITEM 3.
ITEM 3.
LEGAL PROCEEDINGS.
We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any officer or any of our directors or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
ITEM 4.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5.
ITEM 5.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Our common shares are quoted on the OTC Bulletin Board under the symbol “gazu”. The following table indicates the high and low bid prices of our common shares during the calendar periods indicated:
The source of the high and low bid information above was obtained from Yahoo! Finance and reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions.
Holders of Our Common Stock
On October 31, 2010 we had 39 registered shareholders holding 45,549,234 shares of our common stock.
Dividends
There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend, we would not be able to pay our debts as they become due in the usual course of business; or our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.
Recent Sales of Unregistered Securities
During the year ended October 31, 2009, the Company issued 5,500,000 shares of common stock as payment on $60,000 of debt. The shares were valued at $0.01 per share, and the debt was considered satisfied in full upon issuance of the shares. The Company issued an additional 9,000,000 shares of common stock pursuant to the conversion of a $90,000 demand loan. These shares were valued at $0.01 per share and the demand loan was considered satisfied in full upon issuance of the shares.
Also during the year ended October 31, 2009, the Company issued 30,000,000 shares of common stock in order to acquire certain assets and intellectual property of an unrelated third-party entity. As of October 31, 2009 the Company had not completed its due diligence with respect to these assets and intellectual property, and the issued shares are held by the Company and classified as treasury stock in these financial statements.
Additionally, during the year ended October 31, 2009, the Company issued 100,000,000 shares of preferred stock to its President and sole director as payment for $30,000 of services rendered to the Company. The preferred shares were valued at $0.003.
During the year ended October 31, 2010 the Company issued 4,000,000 shares of common stock to the treasury, pursuant to an Acquisition Agreement, such that the shares would be released after certain due-diligence milestones had been reached. The shares were subsequently cancelled.
Also during the year ended October 31, 2010 the Company issued 30,000,000 shares of common stock from its treasury in order to acquire certain technology assets valued at $0.15 per share, for a total cost of $4,500,000. These technology assets were subsequently deemed by management to have been impaired. Consequently, the Company recognized a $4,500,000 expense relating to impairment of assets during the year ended October 31, 2010.
The Company also issued 1,010,000 shares of common stock for services rendered at $0.21 per share, resulting in a total value of $212,100.
ITEM 7.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
PLAN OF OPERATIONS
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Gazoo’s business plan is to act as an incubator for companies focused on green technology ranging from wind energy to natural green products. These companies are already in the green technology sector and have long term growth potential and have progressed to the maturity of having immediate revenue.
The following discussion and analysis explains trends in our financial condition and results of operations for the two fiscal years ended October 31, 2010 and 2009. This discussion and analysis of the results of operations and financial condition should be read in conjunction with our audited financial statements and the related notes, as well as statements made elsewhere in this Form 10-K.
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of consolidated financial statements for a period necessarily involves the use of estimates which have been made using careful judgment. In determining estimates of net recoverable amounts and net realizable values, or whether there has been a permanent impairment in value for accounts receivable, inventories, capital assets, investments, patent rights and other assets, we rely on assumptions regarding applicable industry performance and prospects, as well as general business and economic conditions that prevail and are expected to prevail. Assumptions underlying asset valuations are limited by the availability of reliable comparable data and the uncertainty of predictions concerning future events.
By nature, asset valuations are subjective and do not necessarily result in precise determinations. Should the underlying assumptions change, the estimated net recoverable amounts and net realizable values may change by a material amount.
The consolidated financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below:
Capital Assets and Amortization
Software and Website Rights are recorded at cost and amortized on a straight line basis over estimated useful lives of five years.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates.
Foreign Currency Translation
Our Company’s functional currency is the U.S. dollar. Transactions in foreign currency are translated into U.S. dollars as follows: a) monetary items at the rate prevailing at the balance sheet date; b) non-monetary items at the historical exchange rate; and c) revenue and expense at the average rate in effect during the applicable accounting period. Income Taxes
Our Company has adopted Statement of Financial Accounting Standards No. 109 - “Accounting for Income taxes” (SFAS 109). This standard requires the use of an asset and liability approach for financial accounting, and reporting on income taxes. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized
Basic and Diluted Loss Per Share
In accordance with SFAS No. 128 - “Earnings Per Share”, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. At October 31, 2009, our Company has no stock equivalents that were anti-dilutive and excluded in the earnings per share computation.
Going Concern and continuing operations
Our consolidated financial statements have been prepared assuming we will continue as a going concern. Our accumulated deficit amounts to $11,035,880 as at October 31, 2010. To date the Company is still in the development stage and has no sales.
Due to the uncertainty of our ability to meet our current operating expenses and the capital expenses noted above, in their report on the annual financial statements for the years ended October 31, 2010 and October 31, 2009, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
There can be no assurances that we will be successful in raising additional cash to finance operations. If not, we will be required to reduce operations and/or liquidate assets. Our consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.
Operations to date have been covered primarily from financings associated with equity transactions. There can be no assurances that we will be successful in raising additional cash to finance operations. If not, we will be required to reduce operations and/or liquidate assets. Our consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.
Results of Operations for the Year Ended October 31, 2010
The company has had no revenue during the years ended October 31, 2010 and 2009.
We incurred general and administrative expenses in the amount of $89,411 for the year ended October 31, 2010, compared to $42,374 for the preceding year, resulting in an increase of $47,037. This increase reflects management’s decision to focus on the acquisition of existing companies with immediate revenue or immediate revenue potential. We also incurred consulting fees in the amount of $235,655 and rent expense of $19,439 during the current year. Additionally, we recorded a $4,500,000 expense relating to the impairment of certain assets acquired via the issuance of 30,000,000 shares of common stock. We recognized interest expense of $37,042 during 2010 compared to $508,540 in the 2009 fiscal year. This decrease resulted primarily from the fact than in 2009, certain note holders converted loans payable to non-negotiable convertible promissory notes, and the Company expensed $508,540 as interest expense relating to a beneficial conversion feature.
Our net loss for the 2010 year amounted to $4,939,047, compared to a net loss of $550,914 for the same period in 2009.
Liquidity and Financial Condition
The company had no cash on hand at October 31, 2010 or October 31, 2009. Since inception, we have used our common stock to raise money for the property acquisition, for corporate expenses and to repay outstanding indebtedness.
Our consolidated financial statements contained in this annual report contemplate our continuation as a going concern. However, we have sustained substantial losses and are still in the development stage. Additional funding will be necessary to continue development and marketing of our product. We intend to arrange for the sale of additional shares of our common stock to obtain additional operating capital for at least the next twelve months.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Risk Factors
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information in this Annual Report before investing in our common stock. If any of the following risks occur, our business, operating results and financial condition could be seriously harmed. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.
Because we will need additional financing to fund our activities, our accountants have included in their audit report that the Company’s recurring losses and lack of operations raises substantial doubt about our ability to continue as a going concern.
We have incurred a net loss of $11,035,880 for the period from March 14, 2002 (inception) to October 31, 2010, and have no revenue to date. As of October 31, 2010, we had no cash. We will require continued financing to sustain our business operations and we may not be able to obtain financing as required.
Since this is a new direction for the business and as a development stage company, we face a high risk of business failure due to our inability to predict the success of our business
We have just begun the initial stages of the new business, and thus have no way to evaluate the likelihood that we will be able to operate the business successfully.
Because of the unique difficulties and uncertainties inherent in new ventures, we face a high risk of business failure
Potential investors should be aware of the difficulties normally encountered by commencing a new business venture and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the business we plan to undertake.
As we undertake our new business direction in the gaming business, we may become subject to new government regulation that may increase the anticipated cost of the business
Many government jurisdictions have ruled that online gaming is illegal and, accordingly, management is evaluating where Fortuna will conduct its operations in order to be compliant.
Our common stock is “penny stock”, with the result that trading of our common stock in any secondary market may be impeded
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system.
The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the Commission, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of Securities' laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type, size and format, as the Commission shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock as it is subject to these penny stock rules. Therefore, stockholders may have difficulty selling those securities.
ITEM 8.
ITEM 8.
CONSOLIDATED FINANCIAL STATEMENTS.
SADLER, GIBB & ASSOCIATES, L.L.C.
Registered with the Public Company
Accounting Oversight Board
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Gazoo Energy Group, Inc.
We have audited the accompanying consolidated balance sheets of Gazoo Energy Group, Inc. as of October 31, 2010 and 2009 and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the years then ended from inception on March 14, 2002 through October 31, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Gazoo Energy Group, Inc. as of October 31,2010 and 2009 and the results of their operations stockholders equity (deficit) and cash flows for the years then ended from inception on March 14, 2002 through October 31, 2010, in conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has had a loss from operations since inception of $8,183,674, an accumulated deficit of $11,035,880, and working capital deficit of $1,886,667, which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
SADLER, GIBB AND ASSOCIATES, LLC
/s/ SADLER, GIBB AND ASSOCIATES, LLC
Salt Lake City, UT
March 15, 2011
GAZOO ENERGY GROUP, INC.
(Formerly Principal Capital Group, Inc.)
(A Development Stage Company)
Consolidated Balance Sheets
The accompanying notes are an integral part of these financial statements.
GAZOO ENERGY GROUP, INC.
(Formerly Principal Capital Group, Inc.)
(A Development Stage Company)
Consolidated Statements of Operations
The accompanying notes are an integral part of these financial statements.
GAZOO ENERGY GROUP, INC.
(Formerly Principal Capital Group, Inc.)
(A Development Stage Company)
Consolidated Statements of Cash Flows
The accompanying notes are an integral part of these financial statements.
GAZOO ENERGY GROUP, INC.
(Formerly Principal Capital Group, Inc.)
(A Development Stage Company)
Consolidated Statements of Cash Flows
The accompanying notes are an integral part of these financial statements.
GAZOO ENERGY GROUP, INC.
(Formerly Principal Capital Group, Inc.)
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
The accompanying notes are an integral part of these financial statements.
GAZOO ENERGY GROUP, INC.
(Formerly Principal Capital Group, Inc.)
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
The accompanying notes are an integral part of these financial statements.
GAZOO ENERGY GROUP, INC.
(Formerly Principal Capital Group, Inc.)
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
The accompanying notes are an integral part of these financial statements.
GAZOO ENERGY GROUP, INC.
(Formerly Principal Capital Group, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
October 31, 2010 and 2009
1. NATURE OF OPERATIONS
a) Organization
The Company was incorporated on March 14, 2002 under the laws of the State of Nevada as North American General Resources Corporation and was engaged, until November 2004, primarily, in the acquisition and exploration of mining properties.
On November 29, 2004 a Certificate of Amendment was filed with the Secretary of State in Nevada to change the name of the Company from North American General Resources Corporation to MoneyFlow Capital Corporation at which time we changed our business to providing financial services including operating a foreign exchange service and providing short-term loans and check cashing from retail premises.
By way of a reverse take over the Company changed its business and on June 28, 2005 a Certificate of Amendment was filed with the Secretary of State in Nevada to change the name of the Company from MoneyFlow Capital Corporation to Fortuna Gaming Corp.
On November 10, 2008 the company, at a special meeting of the directors, changed the name of the corporation to Principal Capital Group, Inc.
On March 27, 2009, the directors decided to become involved in the pursuit of “green” energy development and renamed the corporation Gazoo Energy Group, Inc. Management is presently involved in the pursuit of acquisitions that are compatible with that business model.
b) Principles of Consolidation
The accompanying consolidated financial statements reflect the operations of Gazoo Energy Group, Inc. and its wholly owned subsidiaries, Fortuna Gaming (UK) Limited and Fortuna Gaming Corp Limited(both inactive United Kingdom incorporated corporations). All intercompany accounts and transactions have been eliminated in consolidation.
c) Change of Business and Use of Consultants During Re-organization and Start-Up Stage
On June 28, 2005, the Company changed its name to Fortuna Gaming Corp. and underwent a change in management and direction and became involved in the acquisition and licensing of on-line and mobile gaming technologies.
As the Company was in the start-up stage, Fortuna Gaming Corp. and its subsidiaries engaged the services of various consultants possessing critical knowledge and experience in the gaming industry, regulatory, legal and financial services sector. The services performed by consultants from June 28, 2005 to October 31, 2008 include legal, due diligence and accounting associated with the planned acquisition of GFED (of which negotiations were terminated on May 3, 2006), raising equity and debt financing, developing the Company’s overall business plan and strategies, identifying, selecting and negotiating intellectual property licensing agreements, developing operational plans covering domestic and international operations, seeking out and hiring professional management, developing marketing and promotion plans including setting up an investor relations program, developing a merger and acquisition strategy and policy and developing corporate and potential acquisition candidates and establishing corporate governance policies.
GAZOO ENERGY GROUP, INC.
(Formerly Principal Capital Group, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
October 31, 2010 and 2009
1. NATURE OF OPERATIONS (CONTINUED)
d) GFED Acquisition Deposit and Private Placement Advances
On December 4, 2005, the Company entered into a Letter of Intent to acquire, directly or indirectly, 100% of the assets of a software development company doing business as GFED. A refundable deposit of $500,000 USD was paid to the vendor’s attorney pursuant to the signing of the Letter of Intent. On February 1, 2006, a second deposit of $500,000 USD was paid to the vendor’s attorney bringing the total deposits to $ 1million USD.
The Company also received private placement advances, held in a lawyers’ trust account, totaling $2,000,000. The funds were to be used as a down payment associated with the acquisition of GFED. As announced in a press release dated May 3, 2006, based upon results from its due diligence examination process, discussions and negotiations relating to the purchase of the GFED group terminated. With the termination of the acquisition, $1,940,000 was returned to the lenders, leaving a balance of $60,000 owing to one lender as of October 31, 2006. The $60,000 note payable bears interest at a rate of 10% per annum accrued monthly. On November 2, 2006, the balance of $7,923 held in trust was returned to this lender. $3,978 was applied against accrued interest and the remaining $3,945 was applied against the principal leaving an outstanding balance of $56,055. The Company has not received any demand for payment of the outstanding principle from that lender.
The $1 million deposits less legal fees, advanced under the original Letter of Intent were returned to the Company and used to pay down demand loans as noted in Notes 5 (a) and (b).
e) Going Concern
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.
As shown in the accompanying consolidated financial statements, the Company has incurred a net loss for the period from March 14, 2002 (inception) to October 31, 2010 of $11,035,880. To date, the Company has not generated any revenue. The future of the Company is dependent upon the continued support of its lenders, its ability to obtain financing and upon future profitable operations from the development of acquisitions. Management has plans to seek additional capital through a private placement. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of consolidated financial statements for a period necessarily involves the use of estimates which have been made using careful judgment.
The consolidated financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below:
GAZOO ENERGY GROUP, INC.
(Formerly Principal Capital Group, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
October 31, 2010 and 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
a) Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates.
b) Income Taxes
The Company follows ASC740 which requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carry forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.
c) Basic and Diluted Loss Per Share
In accordance with ASC 260, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. At October 31, 2010 and 2009, the Company has no stock equivalents that were anti-dilutive and excluded in the earnings per share computation.
d) Development Stage Company
The Company complies with the ASC 915, “Accounting and Reporting by Development Stage Enterprises” for its characterization of the Company as a development stage company. The Company is devoting substantially all of its present efforts to establish a new business and none of its planned principal operations have commenced. For the purpose of providing cumulative amounts for the statement of operations and cash flows, these amounts consider only those losses for the period from the Company’s development stage activity effective March 14, 2002 to October 31, 2010.
e) Financial Instruments
The carrying values of cash, advances receivable, prepaid expenses, accounts payable and accrued liabilities, advances payable and demand loans payable approximate their carrying values due to the short-term maturity of these instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
GAZOO ENERGY GROUP, INC.
(Formerly Principal Capital Group, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
October 31, 2010 and 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
f) Preferred Stock
As of October 31, 2010, the Company has 100,000,000 shares of preferred stock issued and outstanding. The preferred shares hold liquidation preference over common shares. There are no terms for conversion of preferred shares into common shares.
g) Recent Accounting Pronouncements
Below is a listing of the most recent accounting pronouncements issued since through January 11, 2011. The Company has evaluated these pronouncements and their adoption has not had or is not expected to have a material impact on the Company’s financial position, or statements.
In January 2010, the FASB issued Accounting Standards Update 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary. This amendment to Topic 810 clarifies, but does not change, the scope of current US GAAP. It clarifies the decrease in ownership provisions of Subtopic 810-10 and removes the potential conflict between guidance in that Subtopic and asset derecognition and gain or loss recognition guidance that may exist in other US GAAP. An entity will be required to follow the amended guidance beginning in the period that it first adopts FAS 160 (now included in Subtopic 810-10). For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should be applied retrospectively to the first period that an entity adopted FAS 160.
In January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to Topic 505 clarifies the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a limit on the amount of cash that will be distributed is not a stock dividend for purposes of applying Topics 505 and 260. Effective for interim and annual periods ending on or after December 15, 2009, and would be applied on a retrospective basis.
In December 2009, the FASB issued Accounting Standards Update 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. This Accounting Standards Update amends the FASB Accounting Standards Codification for Statement 167.
In December 2009, the FASB issued Accounting Standards Update 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets. This Accounting Standards Update amends the FASB Accounting Standards Codification for Statement 166.
In October 2009, the FASB issued Accounting Standards Update 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing. This Accounting Standards Update amends the FASB Accounting Standard Codification for EITF 09-1.
GAZOO ENERGY GROUP, INC.
(Formerly Principal Capital Group, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
October 31, 2010 and 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
g) Recent Accounting Pronouncements
In October 2009, the FASB issued Accounting Standards Update 2009-14, Software (Topic 985): Certain Revenue Arrangements That Include Software Elements. This update changed the accounting model for revenue arrangements that include both tangible products and software elements. Effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted.
In October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. This update addressed the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than a combined unit and will be separated in more circumstances that under existing US GAAP. This amendment has eliminated that residual method of allocation. Effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted.
In September 2009, the FASB issued Accounting Standards Update 2009-12, Fair Value Measurements and Disclosures (Topic 820): Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). This update provides amendments to Topic 820 for the fair value measurement of investments in certain entities that calculate net asset value per share (or its equivalent). It is effective for interim and annual periods ending after December 15, 2009. Early application is permitted in financial statements for earlier interim and annual periods that have not been issued.
In July 2009, the FASB ratified the consensus reached by EITF (Emerging Issues Task Force) issued EITF No. 09-1, (ASC Topic 470) "Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance" ("EITF 09-1"). The provisions of EITF 09-1, clarifies the accounting treatment and disclosure of share-lending arrangements that are classified as equity in the financial statements of the share lender. An example of a share-lending arrangement is an agreement between the Company (share lender) and an investment bank (share borrower) which allows the investment bank to use the loaned shares to enter into equity derivative contracts with investors. EITF 09-1 is effective for fiscal years that beginning on or after December 15, 2009 and requires retrospective application for all arrangements outstanding as of the beginning of fiscal years beginning on or after December 15, 2009. Share-lending arrangements that have been terminated as a result of counterparty default prior to December 15, 2009, but for which the entity has not reached a final settlement as of December 15, 2009 are within the scope. Effective for share-lending arrangements entered into on or after the beginning of the first reporting period that begins on or after June 15, 2009.
3. SOFTWARE AND WEBSITE RIGHTS
On November 8, 2006, the Company entered into a Software License Agreement (“Agreement”) with G.I. Enterprises, LTD., of KN Nevis, West Indies (the “Licensor”). Under the terms of the Agreement, the Company acquired a non exclusive license to both poker and casino software developed by the Licensor. The terms of the license agreement required a payment of a license fee amounting to $45,000 which has been paid and accounted for.
During the year ended October 31, 2009, it was been determined that the domain name rights and software license rights were no longer viable and, accordingly,were written-off.
GAZOO ENERGY GROUP, INC.
(Formerly Principal Capital Group, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
October 31, 2010 and 2009
4. LOANS PAYABLE AND PROMISSORY NOTE
Promissory Notes
At October 31, 2010 and 2009, the Company holds a promissory note payable to an unrelated third-party entity in the amount of $131,055 and $56,055, respectively. This note accrues interest at a rate of 10.0% per annum. The note has no formal repayment terms, other than being due on demand. As of October 31, 2010, the Company had a total of $5,605 in accrued interest related to this note. As of October 31, 2010, the Company had received no formal demand for payment from the lender.
During the year ended October 31, 2010 the Company borrowed $75,000 from an unrelated third-party lender. The note accrues interest at 6.0% per annum, and has no other formal repayment terms, other than being due on demand. As of October 31, 2010 the Company had a total of $2,435 in accrued interest related to this note.
Convertible Demand Loans
On June 1, 2008 the Company held a $267,740 note payable which was acquired by a third-party and re-written in the form of a six-month non-interest bearing convertible promissory note. The notes became convertible at the option of the Company at a conversion price equal to 70% of the closing market price on the date of notification. Pursuant to this beneficial conversion feature of the notes, the Company recorded a discount on debt in the amount of $114,746, which the Company began to amortize to interest expense on December 1, 2008. On May 1, 2009, $90,000 of this note was converted into 9,000,000 shares of common stock at $0.01 per share, leaving $177,740 in unpaid principal as of October 31, 2010. Contractual simple interest was accrued through January 31, 2008, but by mutual consent has been discontinued since that date. As of October 31, 2010, the note is in default. However, the Company has received no formal demand for payment.
On June 1, 2008 the Company held $918,853 in notes payable which were acquired by a third-party and re-written in the form of one non-interest bearing convertible promissory note. The note became convertible at the option of the Company at a conversion price equal to 70% of the closing market price on the date of notification. Pursuant to this beneficial conversion feature of the notes, the Company recorded a discount on debt in the amount of $393,794, which the Company began to amortize to interest expense on December 1, 2008. Contractual simple interest was accrued through January 31, 2008, but by mutual consent has been discontinued since that date. As of October 31, 2010, the note is in default. However, the Company has received no formal demand for payment.
During the year ended October 31, 2010 the Company borrowed a total of $125,000 from two unrelated lenders. The notes accrue interest at a rate of 6.0% per annum, and are due in full one year from the note date. Each note is convertible at the option of the Company into shares of the Company’s common stock at 70% of market price. Because of this beneficial conversion feature, the Company recorded a discount on debt in the aggregate amount of $53,571, of which $22,322 has been amortized to interest expense as of October 31, 2010. As of October 31, 2010 the Company has recorded an aggregate of $6,797 in accrued interest relating to these notes.
GAZOO ENERGY GROUP, INC.
(Formerly Principal Capital Group, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
October 31, 2010 and 2009
5. EQUITY ACTIVITY
During the year ended October 31, 2009, the Company issued 5,500,000 shares of common stock as payment on $60,000 of debt. The shares were valued at $0.01 per share, and the debt was considered satisfied in full upon issuance of the shares. The Company issued an additional 9,000,000 shares of common stock pursuant to the conversion of a $90,000 demand loan. These shares were valued at $0.01 per share and the demand loan was considered satisfied in full upon issuance of the shares.
Also during the year ended October 31, 2009, the Company issued 30,000,000 shares of common stock in order to acquire certain assets and intellectual property of an unrelated third-party entity. As of October 31, 2009 the Company had not completed its due diligence with respect to these assets and intellectual property, and the issued shares are held by the Company and classified as treasury stock in these financial statements.
Additionally, during the year ended October 31, 2009, the Company issued 100,000,000 shares of preferred stock to its President and sole director as payment for $30,000 of services rendered to the Company. The preferred shares were valued at $0.003.
During the year ended October 31, 2010 the Company issued 4,000,000 shares of common stock to the treasury, pursuant to an Acquisition Agreement, such that the shares would be released after certain due-diligence milestones had been reached. The shares were subsequently cancelled.
Also during the year ended October 31, 2010 the Company issued 30,000,000 shares of common stock from its treasury in order to acquire certain technology assets valued at $0.15 per share, for a total cost of $4,500,000. These technology assets were subsequently deemed by management to have been impaired. Consequently, the Company recognized a $4,500,000 expense relating to impairment of assets during the year ended October 31, 2010.
The Company also issued 1,010,000 shares of common stock for services rendered at $0.21 per share, resulting in a total value of $212,100.
6. RELATED PARTY TRANSACTIONS
On May 1, 2009 the Company issued 100,000,000 shares of preferred stock to its President and Sole Director as payment for $30,000 for services rendered to the company.
During the years ended October 31, 2010 and 2009, the Company’s president and sole director paid various Company expenses on behalf of the Company. The Company records these transactions as increases in its related-party payable account, and makes payments back to the related-party when either a) necessary cash funds are available, or b) the related-party agrees to accept common stock in lieu of cash payments. At October 31, 2010 and 2009, the outstanding balance on this related-party payable account was $142,983. The Company records interest on the related-party payable at a rate of 8.0% per annum.
7. INCOME TAXES
The Company provides for income taxes under ASC 740, Accounting for Income Taxes. ASC 740 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. The Company’s predecessor operated as entity exempt from Federal and State income taxes.
GAZOO ENERGY GROUP, INC.
(Formerly Principal Capital Group, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
October 31, 2010 and 2009
7. INCOME TAXES (CONTINUED)
ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate of 34% to net the loss before provision for income taxes for the following reasons:
Deferred tax assets and the valuation account as of October 31, 2010 and 2009 are as follows:
The Company has not identified any material uncertain tax positions on returns that have been filed or that will be filed. The Company did not recognize any interest or penalties for unrecognized tax benefits during the years ended October 31, 2010 and 2009, nor were any interest or penalties accrued as of October 31, 2010.
The Company has incurred losses that can be carried forward to offset future earnings if conditions of the Internal Revenue Codes are met.
8. SUBSEQUENT EVENTS
In accordance with ASC 855-10, Company management reviewed all material events through the date of this report and there are no material subsequent events to report.
ITEM 9.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
The PCAOB, on August 27, 2009 revoked the registration of Moore & Associates, Chartered because of violations of PCAOB rules and auditing standards in auditing financial statements and PCAOB rules and quality controls standards, and Section (10(b) of the Securities Exchange Act of 1934 and rule 10b-5 there under, and non-cooperation with a Board investigation.
None of the reports, of Moore, on the Company’s financial statements for either of the past two years or subsequent periods contained an adverse opinion or disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope or accounting principles, except that the Registrant’s audited financial statements contained in its Form 10K for the fiscal years ended October 31, 2007 and 2008, a going concern qualification in the registrant’s audited financial statement.
The Registrant initially engaged Seale and Beers as its principal independent accounting firm effective August 27, 2009, but before they were required to report on any of the Registrant’s financial statements they resigned and the Company retained Sadler, Gibbs and Associates as its principal independent accounting firm. There were no disagreements between the Company and Seale and Beers.
ITEM 9A.
ITEM 9A.
CONTROLS AND PROCEDURES.
As required by Rule 13a-15 under the Exchange Act, as of the date of the filing of this annual report on Form 10-K (the “Evaluation Date”), being October 31, 2010, we have carried out an evaluation of the effectiveness of the design and operation of our company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our management, including our President (who is acting as our Chief Executive Officer and Chief Financial Officer). Based upon that evaluation, our President (who is acting as our Chief Executive Officer and Chief Financial Officer) concluded that as of the Evaluation Date, our disclosure controls and procedures are not effective to ensure that material information relating to it would be made known to us by others, particularly during the period in which this annual report on Form 10-K was being prepared. There have been no changes in our internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our company's reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our President (who is acting as our Chief Executive Officer and Chief Financial Officer) as appropriate, to allow timely decisions regarding required disclosure. There were no significant changes in our internal controls or in other factors that could significantly affect our disclosure controls and procedures subsequent to the Evaluation Date, nor any significant deficiencies or material weaknesses in such disclosure controls and procedures requiring corrective actions.
PART III
ITEM 10.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
On November 7, 2008 certain shareholders of the Company entered into a definitive stock purchase agreement with various shareholders of Principal Capital Group, Inc., a Nevada corporation, to acquire a controlling interest in the Company. As a result of the purchasers not completing their obligations pursuant to the terms of that agreement, a majority of the shareholders of the Company, voted to reverse the transaction, remove the management, newly elected directors and officers and re-appointed Alan Miller as the sole director and officer of the Company.
Alan Miller has worked as a security broker and an executive for a variety of companies during his career specializing in the securities industry. In 1990 he funded Winchester Securities, a brokerage firm based in Kansas City, Kansas. In 2008 he served as a director for Fortuna Gaming Corp, a Nevada Corporation.
Chip Hackley and Lewis Kurtz were elected to their respective positions on October 9th, 2009, at which time Alan Miller resigned. There are no compensation arrangements with respect to Mr. Hackley or Mr. Kurtz.
Term of Office
Directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
Significant Employees
We have no significant employees other than our officers and directors. We conduct our business through agreements with consultants and arms-length third parties.
Committees of the Board of Directors
We presently do not have an audit committee, compensation committee, nominating committee, an executive committee of our board of directors, stock plan committee or any other committees.
Audit Committee Financial Expert
Our board of directors has determined that it does not have a member of its audit committee that qualifies as an “audit committee financial expert” as defined in Item 401(e) of Regulation S-B, and is “independent” as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended. We believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated any material revenues to date.
Code of Ethics
We have not yet adopted a corporate code of ethics. Our board of directors is considering establishing a code of ethics to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.
Involvement in Certain Legal Proceedings
Our directors, executive officers and control persons have not been involved in any of the following events during the past five years:
1.
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
2.
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
3.
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
4.
being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities (“Reporting Persons”), to file reports of ownership and changes in ownership with the SEC. Reporting Persons are required by SEC regulations to furnish us with copies of all forms they file pursuant to Section 16(a). Based solely on our review of the copies of such reports received by it, and written representations from certain Reporting Persons that, other than as described below, no other reports were required for those persons, we believe that, during the year ended October 31, 2010, the Reporting Persons complied with all Section 16(a) filing requirements applicable to them.
No one with a principal position has failed to file, on a timely basis, the identified reports required by section 16(a) of the Exchange Act during the most recent fiscal year.
ITEM 11.
ITEM 11.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth summary information concerning compensation paid by or accrued for services rendered to us in all capacities during the past three fiscal years to our Chief Executive Officer and to each additional executive officer whose salary and bonus exceeded $100,000 (the “Named Executive Officer.”)
SUMMARY COMPENSATION TABLE
Mr. Douglas Waugh was our president and director from September 1, 2005 to October 4, 2006. Mr. Richard Von Ratter has not received any compensation since taking over the presidency on October 1, 2006.
Mr. Alan Miller was the company president since July 3, 2008 and although he received no regular compensation, the company agreed to award him 100,000,000 preferred shares having a par value of $.001 each. This reward was recorded as an expense of $30,000.
Stock Option Grants
As of the date of this annual report on Form 10-K, we do not have any outstanding options, warrants to purchase our common stock or securities convertible into shares of our common stock.
Long-Term Incentive Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers, except that our directors and executive officers may receive stock options at the discretion of our board of directors. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors.
We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds $60,000 per executive officer.
Employment Contracts, Termination of Employment and Change In Control Arrangements
We have not entered into any employment agreements with our officers and directors.
ITEM 12.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of March 24, 2011 by: (i) each person (including any group) known to us to own more than five percent (5%) of any class of our voting securities, (ii) each of our directors, (iii) each of our named executive officers; and (iv) officers and directors as a group. Unless otherwise indicated, the shareholders listed possess sole voting and investment power with respect to the shares shown.
Change in Control
We are not aware of any arrangement that might result in a change in control in the future.
Securities Authorized for Issuance under Equity Compensation Plans
The Company does not have any equity compensation plans.
ITEM 13.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Since the date of incorporation, we have not been a party to any transaction, proposed transaction, or series of transactions in which the amount involved exceeded $60,000, and in which, to our knowledge, any of the following persons had, or is to have, a direct or indirect material interest: a director or executive officer of our company; a nominee for election as a director of our company; a beneficial owner of more than five percent of the outstanding shares of our common stock; or any member of the immediate family of any such person.
ITEM 14.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
The aggregate fees billed for the fiscal year ended October 31, 2010 for professional services rendered by the principal accountant, Sadler, Gibb & Associates, LLC, for the audit of our annual financial statements, review of our October 31, 2009 Form 10-K, review of our January 31, 2010, April 30, 2010 and July 31, 2010 Form 10-QSB’s were as follows:
Audit Fee
$
6,500
Review of Quarterly Reports
$
7,500
Audit Related Fees
None.
Tax Fees
None.
All Other Fees
None.
ITEM 15.
ITEM 15.
EXHIBITS
(1)
Filed with the SEC as an exhibit to our Form SB-2 Registration Statement originally filed on January 16, 2004, as amended.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By:
/s/ Chip Hackley
Chip Hackley
Chief Executive Officer
and Director
Date: March 24, 2011