ITEM 1. BUSINESS GENERAL
The following should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.
Our Company, Organa Gardens International Inc., was formed under the laws of the State of Nevada on November 29, 1983 under the name Venture Group, Inc. On February 11, 1986, an amendment to the Articles of Incorporation was filed changing the corporate name to Asdar Corporation. On December 10, 1987, another amendment to the Articles of Incorporation was filed changing the corporate name to Asdar Group. On February 18, 2001, Asdar Group filed a Certificate of Reinstatement with the Secretary of State of Nevada. On April 30, 2002, another amendment to the Articles of Incorporation was filed changing the corporate name to Precise Life Sciences Ltd. Additional amendments to the Articles of Incorporation were filed changing the corporate name as follows:
February 18, 2003 - Iceberg Brands Corporation
August 28, 2003 - Avalon Gold Corporation
March 22, 2005 - Avalon Energy Corporation
September 25, 2007 - Shotgun Energy Corporation
April 7, 2009 - Organa Gardens International Inc.
Our Company holds (1) an undivided Eighty-Five Percent (85%) working interest and an undivided Sixty-Eight (68%) net revenue interest in 13,189 acres located in Wasatch County, Utah, known as the "Uinta Basin" and (2) a 0.7% gross overriding royalty interest on 6,360 acres of oil and natural gas rights located in the Powder River Basin of eastern Wyoming.
Our Company is undertaking a new venture as of March 2009. Organa Gardens International Inc. has a vertical hydroponics farming system built to make the most efficient use of light, energy, water, land, temperature and production cycle while growing the highest quality and healthiest plants in an optimum, consistent environment unaffected by weather. The Organa Garden Systems (OGS) provide a means for food production and consumption change to global environmental and ecological sustainability through vertical hydroponics rotary farming.
There are two OGS models; the Discovery (OGS-D) and the Enterprise (OGS-E)
Both the OGS-D and OGS-E are rotary hydroponics vertical farming systems designed with serviceability, ease-of-use and maximum harvest in mind. Both models are modular, allowing them to be expanded by stacking them. Its specially designed waterwheel technology allows the fully automated system to recycle and reuse 95% of the water used while requiring a negligible amount of energy to run.
The Discovery is a strong, low cost ABS plastic model for the home gardener and the Enterprise is a powder-coated steel version for the commercial grower. Both models are modular and can be expanded by stacking them. "The more you stack the more you grow"
Both the OGS-D and OGS-E are rotary hydroponics vertical farming systems designed with serviceability, ease-of-use and maximum harvest in mind. Both models are modular, allowing them to be expanded by stacking them. Its specially designed waterwheel technology allows the fully automated system to recycle and reuse 95% of the water used while requiring a negligible amount of energy to run.
Benefits of the Organa Garden Systems:
- Fresh, nutritious and abundant produce all year-round
- Localized year-round farming possible, eliminating costly transportation,
spoilage and pollution.
- Reduces the use of pesticides and preservatives.
- Urban renewal and sustainable community building.
- Energy and water conservation.
- More frequent harvest.
- Fully automated and easy to operate.
- Business opportunity for the entrepreneurial businessman or established farmer
Our Vertical Hydroponic Farming System Project
On March 6, 2009, the Company signed an agreement to acquire all of the assets of Organa Gardens Inc.(OGI), a Nevada Corporation in the business of hydroponics vertical farming. These assets include, but are not limited to all proprietary designs, engineering, technology, business models, plans and intellectual properties pertaining to the Organa Garden System-Discovery (OGS-D) and the Organa Garden System-Enterprise (OGS-E). Both the OGS-D and OGS-E are a rotary hydroponics vertical farming system designed with serviceability, ease-of-use and maximum harvest in mind. Both models are modular, allowing them to be expanded by stacking them. Its specially designed waterwheel technology allows the fully automated system to recycle and reuse 95% of the water used while requiring a negligible amount of energy to run.
The Company was to issue up to 25,000,000 Rule 144 shares of its common stock to OGI, to be held in trust and released based on the following terms and gross revenue requirements:
(a) Release of 10,000,000 shares of the Company upon signing this Agreement.
(b) Release of 5,000,000 shares of the Company upon attaining $1,000,000 US in gross revenue.
(c) Release of 5,000,000 shares of the Company upon attaining $2,500,000 US in gross revenue.
(d) Release of 5,000,000 shares of the Company upon attaining $4,000,000 US in gross revenue.
The Company needs to raise up to $500,000 US to market and fulfill the required obligations of OGI as outlined in the supplemental agreement(s) to follow. The Company and Organa Gardens Inc. agree to allow the shares to sit in trust for a period of 5 years in order for OGI to meet its sales goals. Should the requirements not be met in all or part, then all of the remaining shares will be returned back to the treasury of the Company.
However, On June 9, 2009, the Registrant signed an amended agreement to acquire all of the assets of Organa Gardens Inc., a Nevada Corporation in the business of hydroponics vertical farming. These assets include but are not limited to all proprietary designs, engineering, technology, business models, plans and intellectual properties pertaining to the Organa Garden System-Discovery (OGS-D) and the Organa Garden System-Enterprise (OGS-E).
Under the terms of the acquisition, the Registrant will issue 3,500,000 restricted 144 shares to Organa Gardens Inc. and/or its nominees (issued) and render a cash commitment of up to $250,000 to complete the final steps of taking the OGS-D and OGS-E to market. This agreement replaces the agreement dated March 9, 2009.
All research and development costs are expensed as incurred and include costs of consultants who conduct research and development on behalf of the Company. For the year ended December 31, 2010, the Company incurred $7,000 (2009 -$278,231) in research and development costs.
Currently, the Company is in the process of applying for a world-wide patent for its vertical hydroponic farming system, Organa Gardens System - Enterprise (OGS-E). The management of Organa Gardens is in the final steps of determining the types of materials that will be used to mass produce the OGS-E units economically so that the units can be sold and used affordably by the general population who would like to grow their own food organically and efficiently.
Further, The Company is in discussions with a China-based company to manufacture and distribute the Company's Organa Garden Systems-Enterprise (OGS-E) Initial marketing emphasis will target second tier cities such as Chengdu and Tianjin in central and northern China where farming is seasonal. The recent explosive growth of the Chinese organic produce sector is a big advantage, having increased tenfold between 1999 and 2004 and has since continued to be aggressively promoted and supported by the Chinese government. Organa Garden's growing wheel will enable the tier two cities to grow organic foods without the risks of pesticides, crops pest, and soil-borne diseases while reaping the rewards of higher yields and seasonal extension of crop growth. Organa Gardens will allow China to grow organic foods on a smaller scale to accommodate variable demands while being cost and energy efficient.
Our Oil and Gas Properties
The Wyoming Property.
The Company owns a 0.7% gross overriding royalty interest on 6,360 acres of oil and natural gas rights located in the Powder River Basin of eastern Wyoming carried at a nominal value of $1 due to the uncertainty of realization.
Derek Oil and Gas Corporation, a public company on the TSX and the operator, now holds a 95% working interest in the LAK Ranch project and is the project operator. The LAK Ranch Project is a strong fit for Derek's corporate focus of using enhanced oil recovery (EOR) techniques to develop new production from reservoirs in North America. Derek and its partner, SEC Oil and Gas Partnership are confident in the ability of Derek's management to drive this project forward as promptly as possible in 2007.
Based on Organa’s ongoing agreement with respect to the LAK Ranch, if Derek sells any or all of its interest in the LAK Ranch Property, it will pay to Organa, subject to adjustments, 7.5% of the net sales proceeds on the first USD $7,500,000 and 1% on any balance over and above USD$7,500,000.
The LAK Ranch field, originally discovered in the 1920s, covers approximately 7,500 acres in the Powder River basin. Historically, oil production has been sporadic from a limited number of wells completed in the Newcastle Sand due to the abnormally low reservoir temperature in this part of the basin. However, the oil contains high levels of naphtha and the viscosity should respond dramatically to the application of heat through steam injection. To date, Derek has completed SAGD test well pair that was drilled to a depth of 1,000 feet and 1,800 feet horizontally into the Newcastle sand formation. More than 5,000 barrels of oil were recovered in limited preliminary testing. Organa, through its predecessor Asdar has received royalty payments from the sale of every barrel of oil sold to date.
The Company has received $Nil in oil royalties for the year ended December 31, 2010 (2009 - $Nil).
According to Company management, they have determined that the Lak Ranch project required greater steam capacity than previously planned. Management therefore secured the use of two 50 million BTU generators. Plans are currently underway to have these generators in use as soon as possible. With the addition of more steam, the 2007 12 well program area is expected to begin to produce as forecast. In reviewing the 12 well program, management also determined that certain facilities required upgrading and that the pattern of injectors and producers was not optimal. The capital plan for 2008-09 called for revisions to the pattern and facilities upgrades, in combination with the moving of the generators. The cost of this capital plan is $1.4 million, some of which was raised in the year and the balance (about $250,000) is yet to be raised. As part of this capital plan, the Company has also secured the use of 12 beam pumps for a period of five years. Six of these pumping units are currently on site and deployed on the existing wells and have led to a modest increase in production.
The lack of steam capacity has resulted in the Company missing its target of commercial production by early fiscal 2009. As a consequence of the protracted period of low production the Company has had to raise more capital than originally planned and will need to raise more capital as we move forward. Management is confident that the capital needs of the project will be met.
2. The California Property.
The Company owns a 2% royalty interest in the Harvester Property carried at a nominal value of $1 due to the uncertainty of realization.
3. The Utah Property.
On October 26, 2004, the Company entered into a letter of intent with Pioneer Oil and Gas ("Pioneer"), a Utah Corporation for the exclusive right to enter into a Participation agreement with Pioneer on or before January 18, 2005. The Company advanced Pioneer a $50,000 non-refundable deposit and in return was pledged an exclusivity period to carry out its due diligence with respect to acquiring certain overpressured gas leases in the Uinta Basin, Utah. On January 18, 2005, the Company entered into a Participation Agreement with Pioneer to acquire an undivided Eighty-Five Percent (85%) working interest and an undivided Sixty-Eight (68%) net revenue interest in 13,189 acres located in Wasatch County, Utah, known as the "Uinta Basin".
The Company had an independent title search conducted on the acreage involved in the Participation Agreement and determined that Pioneer had good and marketable title to the leases. As such, on January 18, 2005, the Participation Agreement was duly signed and the balance of $656,279 was delivered to Pioneer to complete the closing. The total consideration paid to Pioneer to acquire the 13,189 acres was $706,279.
In addition, certain non-related parties were responsible for tabling the Uinta Basin Over-pressured Gas Project to the Company. The Company issued 1,200,000 restricted common shares valued at $264,000 on February 7, 2005 to these parties for their efforts resulting in the acquisition of 13,189 acres in Wasatch County, Utah.
The Company has spent a total of $970,279 in acquisition costs and $604,442 in development costs on the Uinta property to date. On January 4, 2007, the USDA Forest Service decided to allow Shotgun Energy to conduct their first proposed seismic exploration project. Shotgun’s project would consist of approximately 7 miles of 2D seismic exploration in the Strawberry Peak and Shotgun Draw area of the South Unit of the Ashley National Forest.
Due to seasonal access constraints, it is expected that the project would not begin until summer of 2007. Recording sensors would be placed along the seismic lines every 22 feet, with surface cables connecting the sensors to a central recording station (large truck). Recording sensors consist of a small microphone, attached to a metal stake. Shot-holes would also be drilled along the seismic line, every 330 feet, to a depth of about 60 feet. Drill holes would be loaded with a small explosive charge, backfilled with cuttings and swelling clays, and then shot to produce seismic energy. Drilling of the shot holes would be conducted using small portable drilling rigs, transported from site to site by either buggy or helicopter. Along existing roads, buggy drills would be used, whereas helicopter drills would be used on steep topography away from existing roads. Access to the seismic line off of existing roads would be by helicopter, by foot, or by ATV. No new roads would be required, and no vegetation would need to be cleared or removed. After completion, all recording sensors and surface cables would be removed. The entire operation is expected to last about 10 days. The Company is currently accepting bids to complete the first seismic line. The Company has accepted a bid from CGG Veritas of Houston to complete the first seismic line. Preparations for the Vibrator Seismic Shoot continue on schedule with the surveying work having been completed the week of August 6, 2007. The vibrator seismic line will be shot under the direction of Veritas DGC Land Inc of Denver covering eight miles along the forest road. The line travels in an east west direction over the southwestern edge of the property and after cutting the north-west regional fault, swings north-north-east along Twelve Hundred Dollar Ridge spanning the property in that direction and crossing two of the three well locations. This ridge is sub-parallel to the north-south regional fault which also represents possible stratigraphic closure for shallower target horizons. In October, 2007, we confirmed the completion of the 2D Seismic Shoot despite inconsistent weather conditions.
The cost of the seismic program was approximately $350,000. The results of the 2D Seismic program will be processed along with available data from a previous Texaco Seismic shoot which will add to the confidence in the interpretation of the data. In addition, the Company is starting to work on public scoping for the second proposed seismic line (with vibrator trucks).
As part of the agreement, Pioneer has agreed to provide the Company with 2-D seismic data crossing the acreage, on a confidential basis. Any additional seismic that Pioneer or the Company may mutually agree to acquire over the acreage shall be paid entirely by the Company with the parties owning the data in the same proportion as their working interest in the acreage. In addition, the Company will be required to drill an initial test well at a location on the acreage mutually agreed upon by Pioneer and the Company. The Company will serve as the Operator in drilling the acreage and must drill the initial well prior to November 1, 2010.
The Company shall pay One Hundred Percent (100%) of all costs of drilling the first two wells drilled on the acreage along with 100% of all costs of logging or testing the wells. If either of the first two test wells is deemed a dry hole, the Company shall pay One Hundred Percent (100%) of all costs of plugging and abandoning such well(s) and restoration of the surface upon which the well(s) reached its authorized depth and completion of all tests deemed necessary by the Operator.
If the Company elects to complete either or both of the first two wells drilled on the acreage, the Company shall pay One Hundred Percent (100%) of all completion costs through the tanks along with any costs associated to hook up the well(s) to pipeline for the well(s) to be capable of producing into a commercial pipeline for sale. If the Company does not wish to participate in an attempted completion of a well, the Company shall so notify Pioneer within Twenty-Four (24) hours (excluding Saturday, Sunday and legal holidays) after reaching Casing Point and all electric logs have been received, at which time the provisions of Article VI of the Operating Agreement shall govern such completion attempt.
After the first two wells are drilled and if productive are hooked-up to a pipeline and capable of producing oil and gas in commercial quantities, the Company shall pay 85% of all costs of operating the first two wells and Pioneer shall pay 15% of the operation costs of such wells as reflected in their working interest ownership in such wells.
Subsequent wells drilled after the first two wells on the Contract Acreage shall require Pioneer to either farm out its interest on a well by well basis under Article VI herein or participate or not participate for its interest in the well pursuant to the provisions contained in the Operating Agreement.
During 2004, the Company received 111,111 restricted Rule 144 shares of Golden Spirit Enterprises Ltd. (“Golden Spirit”), a public company with directors and significant shareholders in common. The restricted shares were received as non-refundable consideration pursuant to agreements with Golden Spirit dated November 10, 2004 and December 10, 2004 to acquire certain mineral property interests from the Company. These agreements were subsequently terminated.
The Company is required to drill a well on the acreage before November 1, 2010, or the acreage acquired will revert back to Pioneer. During the year ended December 31, 2008 the Company incurred $Nil (2007 -$508,435) on exploration of the property. The Company was seeking joint venture drilling partners during 2008 in order to meet its 2010 drilling commitment. The Company was unable to secure a joint venture drilling partner or raise any capital to satisfy an approximate $12,000,000 drilling cost for a 15,000 ft. initial well. Due to this inability to find funding, the Uinta property is being carried at a nominal value of $1 due to the uncertainty of realization. During the year ended December 31, 2009, the Company re-conveyed its interest in the Uinta property to its original owner, Pioneer Oil and Gas.
Available for Sale Securities - related parties.
Golden Spirit
During 2004, the Company received 111,111 restricted Rule 144 shares of Golden Spirit Enterprises Ltd. (“Golden Spirit”), a public company with directors and significant shareholders in common. The restricted shares were received as non-refundable consideration pursuant to agreements with Golden Spirit dated November 10, 2004 and December 10, 2004 to acquire certain mineral property interests from the Company. These agreements were subsequently terminated.
Effective December 31, 2004 the Company recorded, as other comprehensive loss for the year, a $10,000 unrealized loss in the carrying value of its shares of Golden Spirit. During the years ended December 31, 2005 and 2006 the Company recorded additional unrealized losses in the carrying value of its shares of Golden Spirit totalling $90,000 and $8,889 respectively, which were recorded as other comprehensive loss for those years. During the year ended December 31, 2007, the Company sold 2,500 shares resulting in a realized gain of $165 and recorded an additional unrealized loss of $473 in 2007. During the year ended December 31, 2008, the Company sold 10,000 shares resulting in a realized loss of $800 and recorded an additional unrealized loss of $15,026 to December 31, 2008. As a result, the carrying value of the available for sale shares of Golden Spirit is $2,712 as at December 31, 2008.
During the year ended December 31, 2009, the Company recorded an unrealized gain of $1,232. As a result, the carrying value of the available for sale shares of Golden Spirit is $3,945 as at December 31, 2009.
During the year ended December 31, 2010, the Company sold Nil Golden Spirit shares and recorded an unrealized gain of $11,774. As a result, the carrying value of the available for sale shares of Golden Spirit is $2,860 as at December 31, 2010.
Effective December 31, 2010, the Company recorded a $12,859 write-down of its investment in Golden due to an other-than-temporary decline in the value of the shares.
Legacy
During 2003 the Company settled an outstanding debt receivable of $122,988 from Legacy Mining Ltd. (“Legacy”) for the issue of 1,229,880 restricted shares of Legacy representing a then 9.8% interest in Legacy. During 2004, the Company wrote this investment down to $1 because management determined that it was not recoverable within a reasonable period of time.
Effective December 31, 2007, the Company recorded, as other comprehensive income for the year, a $604,440 unrealized gain in the carrying value of its shares of Legacy.
During the year ended December 31, 2008, the Company sold 150,000 Legacy shares resulting in a realized gain of $26,100 and recorded an additional unrealized gain of $270,562 to December 31, 2008. As a result, the carrying value of the available for sale shares of Legacy was $885,502 as at December 31, 2008.
During the year ended December 31, 2009, the Company sold 30,985 Legacy shares resulting in a realized loss of $2,987 (net of commissions of $595) and recorded an additional unrealized loss of $797,161 to December 31, 2009. As a result, the carrying value of the available for sale shares of Legacy is $ 62,934 as at December 31, 2009.
During the year ended December 31, 2010, the Company the Company received 2,627,440 restricted shares of Legacy valued to $131,372 pursuant to a debt settlement and sold Nil Legacy shares. The Company recorded an unrealized gain in the carrying value of its available-for-sale securities totaling $35,021, which was recorded as other comprehensive income (loss). As a result, the carrying value of the available for sale shares of Legacy is $58,822 as at December 31, 2010.
Effective December 31, 2010, the Company recorded a $78,823 write-down of its investment in Legacy due to an other-than-temporary decline in the value of the shares.
Available for sale securities - related parties include the following:
December 31,
December 31,
3,676,335 (2008-1,048,895) shares of Legacy Wine & Spirits
$ 58,822
$ 62,934
98,612 (2008- 98,612) shares of Golden Spirit Enterprises Ltd.
2,860
3,945
$ 61,682
$ 66,879
Employees.
At December 31, 2010, Organa Gardens International Inc. had 2 full time employee/consultants other than its Officers and Directors.
ITEM 1A.
ITEM 1A. RISK FACTORS
Not applicable to smaller reporting companies
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
ITEM 2. PROPERTIES
As of the dates specified in the following table, Organa Gardens International Inc. held the following property in the following amounts:
Property
December 31, 2010
December 31, 2009
-----------------------------------------------------------------------------------------------------------------
Cash and equivalents
US $ 50
US $ 1,592
Organa Gardens International Inc. defines cash equivalents as all highly liquid investments with a maturity of 3 months or less when purchased. Organa Gardens International Inc. does not presently own any interests in real estate. Organa Gardens International Inc. does not presently own any inventory or equipment.
We do not own any real property. As of August 1, 2010, Organa Gardens International Inc. has leased 1250 sq. ft of office space from Holm Investments Ltd. at $2,500 per month for a period of 3 years.
Organa Gardens International Inc.’s principal corporate offices are located at 35 South Ocean Avenue, Patchogue, NY, 11772 Fax - 1 888 265 0498 Phone - 1 888 488 6882
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
On February 21, 2002, the Company issued 350,000 shares valued at $119,000 to Empire Sterling Corporation for services to be rendered with respect to the acquisition of ACGT Corporation. The shares were to be held in trust and not sold until all necessary financing was in place to complete the ACGT acquisition. Empire Sterling Corporation breached the trust agreement and the Company placed a stop transfer on these shares and requested they be returned to the Company. Empire Sterling Corporation failed to return the share certificate and as such, the Company commenced court proceedings against the principals of Empire Sterling Corporation. The Company argued for an interim injunction against all parties and was successful. On May 9, 2002, the Court ordered Empire Sterling Corporation to deposit the shares with the Court pending judicial disposition. The Company continued to file legal process claiming ownership of the shares and breach of trust inter alia. The Company was successful and has now applied to have the share certificate released and subsequently cancelled. As of December 31, 2010, the Company is still in the legal process of having the certificate released.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On February 20, 2009, the majority of the shareholders entitled to vote on such matters approved a change of name from Organa Gardens International Inc. to “Organa Gardens International Inc.” On February 26, 2009, a Certificate of Amendment to its Articles of Incorporation was filed with the State of Nevada changing the name to Organa Gardens International Inc. The Company also took the necessary steps to change its symbol and CUSIP Number. Therefore, the CUSIP Number has changed from 825358 10 4 to 68618Y 10 6. Effective at the opening of business on April 7, 2009, the symbol will change from SGNE to “OGNG”. The name change did not involve any change in the issued or authorized capital of the Company.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
As at December 31, 2010 there were approximately 2,000 holders of the outstanding shares of the Organa Gardens International Inc.'s $0.001 par value common stock. Organa Gardens International Inc. participates in the OTC Bulletin Board Electronic Quotation System maintained by the National Association of Securities Dealers, Inc., under the most recent trading symbol "OGNG". According to quotes provided by stockhouse.com, the Organa Gardens International Inc.'s common stock has closed at:
Quarter
High
Low
2008 First Quarter
$0.16
$0.07
2008 Second Quarter
$0.14
$0.10
2008 Third Quarter
$0.13
$0.08
2008 Fourth Quarter
$0.10
$0.02
2009 First Quarter
$0.25
$0.10
2009 Second Quarter
$0.10
$0.03
2009 Third Quarter
$0.04
$0.02
2009 Fourth Quarter
$0.02
$0.01
2010 First Quarter
$0.01
$0.01
2010 Second Quarter
$0.01
$0.01
2010Third Quarter
$0.01
$0.01
2010 Fourth Quarter
$0.01
$0.01
Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
The public may read and copy any materials filed with the SEC at the SEC's Public Reference Room at 450 Fifth Street NW, Washington, D.C. 20549. The public may also obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov.
Common Stock. Organa Gardens International Inc. is authorized to issue 200,000,000 shares of common stock, $.001 par value, each share of common stock having equal rights and preferences, including voting privileges. The shares of $.001 par value common stock of Organa Gardens International Inc. constitute equity interests in Organa Gardens International Inc. entitling each shareholder to a pro rata share of cash distributions made to shareholders, including dividend payments. As of December 31, 2010, 41,926,466 shares of the Organa Gardens International Inc.'s common stock were issued and outstanding.
The holders of Organa Gardens International Inc.'s common stock are entitled to one vote for each share of record on all matters to be voted on by shareholders. There is no cumulative voting with respect to the election of directors of Organa Gardens International Inc. or any other matter, with the result that the holders of more than 50% of the shares voted for the election of those directors can elect all of the Directors.
The holders of Organa Gardens International Inc.'s common stock have no conversion, preemptive or other subscription rights, and there are no redemption provisions applicable to Organa Gardens International Inc.'s common stock. All of the outstanding shares of Organa Gardens International Inc.'s common stock are duly authorized, validly issued, fully paid and non-assessable.
Dividends. The holders of the Organa Gardens International Inc.'s common stock are entitled to receive dividends when, as and if declared by Organa Gardens International Inc.'s Board of Directors from funds legally available therefore; provided, however, that cash dividends are at the sole discretion of Organa Gardens International Inc.'s Board of Directors. In the event of liquidation, dissolution or winding up of Organa Gardens International Inc., the shareholders of common stock are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities of Organa Gardens International Inc. and after provision has been made for each class of stock, if any, having preference in relation to Organa Gardens International Inc.'s common stock.
Organa Gardens International Inc. has never declared or paid any dividends on its common stock. Organa Gardens International Inc. does not intend to declare or pay any dividends in the foreseeable future.
Sales of Securities
(1) 2010 Stock Transactions
During the year ended December 31, 2010:
(a) The Company issued a total of 7,961,033 common shares pursuant to the exercise of options under the Company’s Stock Incentive and Option Plans at prices between $0.0022 and $0.01 per share to satisfy debt to related parties in the amount of $29,913.
(b) The Company issued 1,000,000 restricted common shares valued at $5,000 pursuant to a deferred compensation contract with a related party.
(c) The Company issued a total of 1,400,000 common shares pursuant to the exercise of options under the Company’s Incentive plans at prices between $0.003 and $0.01 per share to consultants for services valued at $11,200.
(d) The Company issued 700,300 restricted common shares at $0.01 per share pursuant to a debt settlement with
Golden Spirit Enterprises Ltd. in the amount of $7,003.
(2) 2009 Stock Transactions
During the year ended December 31, 2009:
(a)
The Company issued a total of 500,000 common shares to four (4) placees pursuant to certain private placement agreements. The Company received proceeds of $44,000.
(b)
On June 9, 2009 the Company issued 3,500,000 restricted common shares valued at $105,000 with respect to the acquisition of the assets of Organa Gardens Inc.
(c)
The Company issued a total of 7,598,000 common shares pursuant to the exercise of options under the Company’s 2009 Stock Incentive and Option Plan at $0.02 -$0.03 per share to satisfy debt to related parties in the amount of $226,190.
(d)
The Company issued a total of 900,000 common shares pursuant to the exercise of options under the Company’s 2009 Stock Incentive and Option Plan at $0.03 per share for cash proceeds of $27,000.
(e)
On November 18, 2009, the Company issued 500,000 restricted common shares valued at $7,600 to a consultant pursuant to a deferred compensation agreement.
(3) 2010 Stock Options
During the year ended December 31, 2010, 9,361,033 stock options were granted by the Company, which were immediately exercised at prices between $0.0022 and $0.01 per share to satisfy debt to related parties in the amount of $29,913 and for consultant services valued at $11,200.
The Company’s stock option activity is as follows:
Number of options
Weighted Average Exercise Price
Weighted Average Remaining Contractual Life
(in years)
Balance, December 31, 2007
-
-
-
Granted during 2008
419,300
0.11
5.00
Exercised during 2008
(419,300)
0.11
Balance, December 31, 2008
-
-
-
Granted during the period
8,498,000
0.03
Exercised during the period
(8,498,000)
0.03
Balance, December 31, 2009
-
-
-
Granted during the period
9,361,033
0.03
Exercised during the period
(9,361,033)
0.03
Balance, December 31, 2010
-
-
-
As of December 31, 2010, there were no stock options available for grant under the Company’s 2006 Stock Incentive and Option Plan.
As of December 31, 2010, there were no stock options available for grant under the Company’s 2007 Stock Incentive and Option Plan.
As of December 31, 2010, there were 1,705,000 stock options available for grant under the Company’s two 2009 Stock Incentive and Option Plans.
On June 29, 2009, the Company filed Registration Statements on Form S-8 to register 7,500,000 to be issue pursuant to the Company’s 2009 Stock. Incentive and Option Plan. 7,500,000 shares have been granted and exercised under the June 2009 Stock Option Plan. On November 24, 2009, the Company filed Registration Statements on Form S-8 to register 10,000,000 to be issue pursuant to the Company’s 2009 Stock. Incentive and Option Plan. 6,655,000 shares have been granted and exercised under the November 2009 Stock Option Plan.
(4)
2009 Stock Options
During the year ended December 31, 2009, 8,498,000 stock options were granted by the Company, which were immediately exercised. Accordingly, no compensation expense was recorded.
The Company’s stock option activity is as follows:
Number of options
Weighted Average Exercise Price
Weighted Average Remaining Contractual Life
(in years)
Balance, December 31, 2007
-
-
-
Granted during 2008
419,300
0.11
5.00
Exercised during 2008
(419,300)
0.11
Balance, December 31, 2008
-
-
-
Granted during the period
8,498,000
0.03
Exercised during the period
(8,498,000)
0.03
Balance, December 31, 2009
-
-
-
As of December 31, 2009, there were 1,333,333 stock options available for grant under the Company’s 2006 Stock Incentive and Option Plan.
As of December 31, 2009, there were 120,700 stock options available for grant under the Company’s 2007 Stock Incentive and Option Plan.
As of December 31, 2009, there were 77,000 stock options available for grant under the Company’s 2009 Stock Incentive and Option Plan.
On June 29, 2009, the Company filed Registration Statements on Form S-8 to register 7,500,000 to be issue pursuant to the Company’s 2009 Stock.Incentive and Option Plan. During the year ended December 31, 2009, 7,598,000 options were granted at prices between $0.02- $0.03 per share to satisfy debt to related parties in the amount of $226,290 and 900,000 options were granted at a price of $0.03 per share for cash proceeds of $27,000. On November 24, 2009, the Company filed Registration Statements on Form S-8 to register 10,000,000 to be issue pursuant to the Company’s 2009 Stock. Incentive and Option Plan. During the year ended December 31, 2009, 175,000 options were granted at $0.02 per share to satisfy debt to related parties in the amount of $3,500.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
FINANCIAL HIGHLIGHTS
Fiscal Year Ended December 31
Revenue
$ Nil
$ Nil
$ Nil
$ Nil
$ Nil
Operating Loss
(125,528)
(417,393)
(342,795)
(557,266)
(770,863)
Net Loss
(217,210)
(420,380)
(1,871,917)
(518,789)
(738,090)
Basic net loss per share
0.01
0.01
0.01
0.03
0.02
Cash dividends declared per share
-
-
-
-
-
Cash, cash equivalents, and short-term investments
1,648
2,792
4,830
34,577
372,579
Total assets
63,333
201,047
1,042,425
2,430,015
1,675,031
Long-term obligations
-
-
-
-
-
Stockholders’ equity (deficit)
(511,972)
(309,619)
495,655
1,922,877
1,527,927
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This following information specifies certain forward-looking statements of management of the company. Forward-looking statements are statements that estimate the happening of future events are not based on historical fact. Forward-looking statements may be identified by the use of forward-looking terminology, such as "may", "shall", "will", "could", "expect", "estimate","anticipate", "predict", "probable", "possible", "should", "continue", or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.
Liquidity and Capital Resources.
For the year ended December 31, 2010, we had total assets of $63,333, compared to total assets in 2009 of $201,047. This includes a cash balance of $50, compared to $1,592 in 2009. We also have taxes recoverable of $1,598, $3 invested in oil and gas properties and available for sale securities with a fair value of $61,682 as at December 31, 2010. The decrease in assets was due a share debt settlement with Legacy Wine & Spirits International Ltd. in the amount of $131,373.
At December 31, 2010, we had current liabilities of $575,305, which was represented by accounts payable and accrued liabilities of $486,715 and $88,590 due to related parties. At December 31, 2009 we had current liabilities of $510,660. The increase in liabilities was due to an increase in amounts due to related parties. At December 31, 2010, we had a working capital deficiency of $(573,657) (2009 - $(507,874).
We do not believe that our current cash resources will be able to maintain our current operations for an extended period of time. We will be required to raise additional funds or arrange for additional financing over the next 12 months to adhere to our development schedule. No assurance can be given, however, that we will have access to additional cash in the future, or that funds will be available on acceptable terms to satisfy our working capital requirements. If we are not able to arrange for additional funding or if our officers, directors and shareholders stop advancing funds to us, we may be forced to make other arrangements for financing such as loans or entering into strategic alliances. We have not identified any alternative sources of financing.
Results of Operations
We realized $Nil interest and royalty income in 2010 and 2009. During the year ended December 31, 2009 the loss is $217,210 (2009 - $420,380). This decrease in loss was due to a decrease in research and development costs of $271,231 offset by a write down of securities totaling $91,682.
From inception to December 31, 2010 Organa Gardens International Inc. has incurred cumulative net losses of $24,697,342 resulting primarily from the write-down of $3,815,655 in its interests in oil and gas properties, write-down of $1,406,000 in its interest in ACGT Corporation, write-down of $207,111 of its investment in Legacy Wine & Spirits International Ltd., write-down of its investment in Golden Spirit Enterprises Ltd. of $12,859 and also as a result of selling, general and administrative expenses including a litigation settlement of $2,291,070; management and consulting fees of $4,869,572, office and general expenses of $2,762,619; professional fees of $1,154,358; interest expense of $98,282, research & development costs of $278,231 and software development costs of $737,300. In addition, we received $130,000 in property option income as a recorded value of certain restricted shares in Golden Spirit Enterprises Ltd. (See Part I, Item 3 - Utah property).
The cash and equivalents constitute our present internal sources of liquidity. Because we are not generating any significant revenues, our only external source of liquidity is the sale of our capital stock and any advances from officers, directors or shareholders.
Our Plan of Operation for the Next Twelve Months
We do anticipate that we will need to raise additional capital within the next 12 months in order to continue as a going concern. We will need to fund the research and development of the vertical hydroponic farming system design. To the extent that additional capital is raised through the sale of equity or equity- related securities, the issuance of such securities could result in dilution of our stockholders. There can be no assurance that additional funding will be available on favorable terms, if at all. If adequate funds are not available within the next 12 months, we may be required to curtail our operations significantly or to obtain funds through entering into arrangements with collaborative partners or others that may require us to relinquish rights to certain of our assets that we would not otherwise relinquish.
Organa Gardens International Inc. does not anticipate some expenditures within the next 12 months for further research and development of its vertical hydroponic farming system design .The Company may elect to raise funds for further research and developmnet through equity financing or possible joint venture partnerships. Organa Gardens International Inc. does not anticipate any significant exploration costs within the next 12 months, nor does the Organa Gardens International Inc. anticipate that it will lease or purchase any significant equipment within the next 12 months. Organa Gardens International Inc. does not anticipate a significant change in the number of its employees within the next 12 months. However, Organa Gardens International Inc.will be required to raise $500,000 for its new hydroponic vertical farming project - See above.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Securities held in our equity and other investments portfolio and equity derivatives are subject to price risk, and generally are not hedged.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Organa Gardens International, Inc.
New York, USA
We have audited the accompanying balance sheets of Organa Gardens International, Inc. (a development stage company) as of December 31, 2010 and 2009, and the related statements of operations, stockholders’ (deficit) and cash flows for each of the years in the two-year period ended December 31, 2010 and for the cumulative period from January 1, 1996 (inception of development stage) through to December 31, 2010. Organa Gardens International Inc.’s management is responsible for these financial statements. 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 audit to obtain reasonable assurance about whether the 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Organa Gardens International as of December 31, 2010 and 2009, and the results of its activities and cash flows for each of the years in the two-year period ended 2010 and for the cumulative period from January 1, 1996 (inception) to December 31, 2010 in conformity with accounting principles generally accepted in the United States of America.
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’s current liabilities exceed current assets, has incurred significant losses since inception and further losses are anticipated in the development of its vertical hydroponic farming system, all of which raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to 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.
/s/ L.L. Bradford & Company, LLC
Las Vegas, Nevada
March 31, 2011
ORGANA GARDENS INTERNATIONAL INC.
(A Development Stage Company)
BALANCE SHEETS
The accompanying notes are an integral part of these financial statements
ORGANA GARDENS INTERNATIONAL INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Year ended December 31, 2010
Year ended December 31, 2009
Cumulative from January 1, 1996 (inception of development stage)
to December 31, 2010
GENERAL AND ADMINISTRATIVE EXPENSES
Litigation settlement
$ -
$ -
$ 2,291,070
Management and consulting fees
13,336
14,237
4,869,572
Consulting fees - stock based compensation
-
-
1,919,869
Exploration costs
-
-
113,678
Loss on settlement of debt
-
-
718,784
General and administrative
79,276
81,188
2,755,619
Professional fees
25,916
43,737
1,154,358
Interest expense
-
-
98,282
Research and development costs
7,000
278,231
285,231
Software development costs
-
-
737,300
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES
125,528
417,393
14,943,763
OTHER (INCOME) EXPENSES
Interest, royalty and other income
-
-
(82,138)
(Gain)/loss on sale of securities - related party
-
2,987
(21,541)
Property Option Income
-
-
(130,000)
Write-down of securities - Legacy Wine & Spirits International
78,823
-
207,111
Write-down of securities - Golden Spirit Enterprises Ltd.
12,859
-
12,859
Write-down of interest in ACGT Corporation
-
-
1,406,000
Write-down of interest in oil and gas properties
-
-
3,815,655
Loss on Iceberg Drive Inn investment
-
-
85,000
TOTAL OTHER (INCOME) EXPENSES
91,682
2,987
5,292,946
Loss before income taxes
(217,210)
(420,380)
(20,236,709)
Income tax provision
-
-
-
NET LOSS
$ (217,210)
$ (420,380)
$ (20,236,709)
BASIC AND DILUTED NET LOSS PER SHARE
$ (0.01)
$ (0.01)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
34,047,269
22,929,130
The accompanying notes are an integral part of these financial statements
ORGANA GARDENS INTERNATIONAL INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS’ EQUITY
FOR THE PERIOD FROM JANUARY 1, 1996 (INCEPTION OF EXPLORATION STAGE) TO DECEMBER 31, 2010
Shares returned to treasury and cancelled - June 5, 2002
(833)
(1)
(32,999)
-
-
-
-
-
(33,000)
Shares issued for cash at $60.00 per share - Sept. 5, 2002
-
3,000
-
-
-
(3,000)
-
-
Shares issued for services at $9.60 per share - Sept 5, 2002
17,667
169,582
-
-
-
-
-
169,600
Shares issued for fees at $9.60 per share - Sept. 5, 2002
3,333
31,997
-
-
-
-
-
32,000
Shares issued for deferred compensation at $1.44 per share - Dec. 13, 2002
541,667
779,458
-
(780,000)
-
-
-
-
Shares issued for services at $1.44 per share - Dec. 16, 2002
307,500
442,492
-
-
-
-
-
442,800
Deferred compensation expense recorded in the year
-
-
-
-
44,707
-
-
-
44,707
Net loss for the year ended December 31, 2002
-
-
-
-
-
-
-
(3,360,353)
(3,360,353)
Balance, December 31, 2002
1,071,385
1,072
15,861,509
-
(825,376)
-
-
-
(15,056,472)
(19,267)
Shares issued for stock options at $1.80 - Jan. 2, 2003
25,000
44,975
-
-
-
-
-
45,000
Shares issued for stock options at $1.80 -Jan. 24, 2003
8,333
14,992
-
-
-
-
-
15,000
Shares issued for stock options at $1.80 -Feb.18, 2003
8,333
14,992
-
-
-
-
-
15,000
Shares issued for stock options at $1.80 - Feb.25, 2003
20,833
37,479
-
-
-
-
-
37,500
Shares issued for stock options at $1.80 - Mar.3, 2003
162,500
292,337
-
-
-
-
-
292,500
Shares returned to treasury and cancelled - Mar. 6, 2003
(111)
-
(5,500)
-
-
-
-
-
(5,500)
Shares issued for cash at $1.50 per share - Mar. 17,2003
66,667
99,933
-
-
-
-
-
100,000
Shares issued for stock options at $1.80 - May 12, 2003
58,333
104,942
-
-
-
-
-
105,000
Shares issued for stock options at $1.80 - May 30, 2003
58,333
104,942
-
-
-
-
-
105,000
Shares issued for stock options at $.36 - June 13, 2003
75,000
26,925
-
-
-
-
-
27,000
Shares issued for stock options at $.36 - June 23, 2003
25,000
8,975
-
-
-
-
-
9,000
Shares issued for stock options at $.36 - June 26, 2003
8,333
2,992
-
-
-
-
-
3,000
Shares returned to treasury and cancelled - July 11, 2003
(66,667)
(67)
(39,933)
-
-
-
-
-
(40,000)
Shares issued for stock options at $.36 - July 24, 2003
27,083
9,723
-
-
-
-
-
9,750
Shares issued for stock options at $.36 - August 1, 2003
22,917
8,227
-
-
-
-
-
8,250
Shares issued for stock options at $.36 - August 3, 2003
8,333
2,992
-
-
-
-
-
3,000
Shares issued for stock options at $.36 - August 11, 2003
18,750
6,731
-
-
-
-
-
6,750
Shares issued for stock options at $.36 - August 14, 2003
6,250
2,244
-
-
-
-
-
2,250
Shares issued for stock options at $.48 - August 14, 2003
35,417
16,965
-
-
-
-
-
17,000
Shares issued for stock options at $.48 - August 29, 2003
106,250
50,894
-
-
-
-
-
51,000
Shares issued for services at $0.90 per share - October 3, 2003
92,222
82,908
-
-
-
-
-
83,000
Shares issued for stock options at $.57 - October 3, 2003
141,667
80,608
-
-
-
-
-
80,750
Shares issued for stock options at $.57 - October 6, 2003
50,000
28,450
-
-
-
-
-
28,500
Shares issued for stock options at $.48- October 21, 2003
133,333
63,867
-
-
-
-
-
64,000
Shares issued for stock options at $.33- October 24, 2003
37,042
12,187
-
-
(10,984)
-
-
1,240
Shares issued for stock options at $.27 - October 27, 2003
133,333
35,867
-
-
(36,000)
-
-
-
Shares issued for mining property at $.54 - October 27, 2003
16,667
8,983
-
-
-
-
-
9,000
Shares issued for stock options at $.24 - November 3, 2003
145,000
34,655
-
-
(34,800)
-
-
-
Shares issued for stock options at $.24 - November 12, 2003
166,667
39,833
-
-
(40,000)
-
-
-
Shares issued for stock options at $.24 - November 13, 2003
61,667
14,738
-
-
(14,800)
-
-
-
Shares issued for stock options at $.24 - November 18, 2003
215,000
51,385
-
-
(51,600)
-
-
-
Shares issued for stock options at $.24 - November 24, 2003
182,958
43,727
-
-
(43,910)
-
-
-
Shares returned to treasury and cancelled - December 15, 2003
(20,000)
(20)
(17,980)
-
-
-
-
-
(18,000)
Stock Based Compensation
-
-
651,000
-
-
-
-
-
651,000
Deferred compensation expense recorded in the year
-
-
-
-
352,332
-
-
-
352,332
Net loss for the year ended December 31, 2003
-
-
-
-
-
-
-
(2,170,465)
(2,170,465)
Balance, December 31, 2003
3,101,828
3,101
17,797,564
-
(473,044)
(232,094)
-
-
(17,226,937)
(131,410)
Shares issued for services at $0.36 - January 15, 2004
350,000
125,650
-
(126,000)
-
-
-
-
Share subscriptions received - January 21, 2004
-
-
-
-
-
232,094
-
-
232,094
Shares issued for debt at $0.33 - February 11, 2004
516,667
169,983
-
-
-
-
-
170,500
Shares issued for mineral property at $0.33 - February 27, 2004
333,333
109,667
-
-
-
-
-
110,000
Shares issued for debt at $0.24 - May 26, 2004
833,333
199,167
-
-
-
-
-
200,000
Shares issued for stock options at $0.18 - July 7, 2004
458,333
82,042
-
-
-
-
-
82,500
Shares returned and cancelled - July 9, 2004
(70,000)
(70)
(18,930)
-
-
-
-
-
(19,000)
Shares issued for stock options at $.24 - September 17, 2004
333,333
79,667
-
-
-
-
-
80,000
Shares returned and cancelled - September 28, 2004
(333,333)
(333)
(79,667)
-
-
-
-
-
(80,000)
Shares issued for stock options at $.18 - September 28, 2004
375,000
67,125
-
-
-
-
-
67,500
Shares issued for services at $0.36 - October 1, 2004
33,333
12,967
-
(13,000)
-
-
-
-
Shares issued for stock options at $.24 - October 7, 2004
200,000
47,800
-
-
-
-
-
48,000
Shares issued for stock options at $.24 - November 22, 2004
1,100,000
1,100
262,900
-
-
-
-
-
264,000
Shares issued for stock options at $.24 - November 23, 2004
233,333
55,767
-
-
-
-
-
56,000
Shares returned and cancelled - November 23, 2004
(100,000)
(100)
(23,900)
-
-
-
-
-
(24,000)
Shares returned and cancelled - November 24, 2004
(21,667)
(21)
(10,479)
-
-
-
-
-
(10,500)
Shares issued for salaries - December 1, 2004
33,333
19,967
-
-
-
-
-
20,000
Shares returned and cancelled - November 23, 2004
(666,667)
(666)
(159,334)
-
-
-
-
-
(160,000)
Shares issued for stock options at $0.24 - December 8, 2004
416,667
99,583
-
-
-
-
-
100,000
Shares issued for stock options at $0.24 - December 13, 2004
158,333
37,842
-
-
-
-
-
38,000
Shares issued for stock options at $0.24 - December 16, 2004
258,333
61,742
-
-
-
-
-
62,000
Stock Based Compensation
-
-
338,500
-
-
-
-
-
338,500
Deferred compensation expense recorded in the year
-
-
-
-
418,582
-
-
-
418,582
Unrealized losses on available for sale securities
-
-
-
(10,000)
-
-
-
-
(10,000)
Net loss for the year ended December 31, 2004
-
-
-
-
-
-
-
(1,678,056)
(1,678,056)
Balance, December 31, 2004
7,543,492
7,542
19,275,623
(10,000)
(193,462)
-
-
-
(18,904,993)
174,710
Shares issued for stock options at $0.84 - January 20, 2005
166,667
139,833
-
-
-
-
-
140,000
Shares issued for stock options at $0.78 - January 21, 2005
100,000
77,900
-
-
-
-
-
78,000
Shares issued for services at $0.78 - January 21, 2005
16,667
12,983
-
-
-
-
-
13,000
Shares issued for cash at $0.15 - February 4, 2005, net of finder’s fee of $130,900 (Note (1))
1,983,333
1,983
759,617
-
-
-
-
-
761,600
Shares issued for finder’s fees at $0.66 - February 7, 2005 (Note 7(1))
598,333
394,302
-
-
-
-
-
394,900
Shares issued for services at $0.66 - February 7, 2005
83,333
54,917
-
-
-
-
-
55,000
Shares issued for stock options at $0.60 - February 10, 2005
21,667
12,978
-
-
-
-
-
13,000
Shares issued for services at $0.54 - February 17, 2005
33,333
17,967
-
-
-
-
-
18,000
Shares issued for stock options at $0.54 - February 25, 2005
8,333
4,492
-
-
-
-
-
4,500
Shares issued for stock options at $0.54 - March 22, 2005
62,667
33,777
-
-
-
-
-
33,840
Shares issued for stock options at $0.42 - April 7, 2005
83,333
34,917
-
-
-
-
-
35,000
Shares issued for stock options at $0.33 - April 21, 2005
166,667
54,833
-
-
-
-
-
55,000
Shares issued for stock options at $0.39 - May 17, 2005
150,000
58,350
-
-
-
-
-
58,500
Shares issued for stock options at $0.33 - April 29, 2005
83,333
27,417
-
-
-
-
-
27,500
Shares issued for stock options at $0.39 - May 26, 2005
216,667
84,283
-
-
-
-
-
84,500
Shares issued for stock options at $0.39 - June 14, 2005
83,333
32,417
-
-
-
-
-
32,500
Shares issued for stock options at $0.39 - June 28, 2005
108,333
42,142
-
-
-
-
-
42,250
Shares issued for services at $0.42 - June 28, 2005
133,333
55,867
-
-
-
-
-
56,000
Shares issued for stock options at $0.36 - August 10, 2005
205,000
73,595
-
-
-
-
-
73,800
Shares issued for stock options at $0.36 - August 11, 2005
41,667
14,958
-
-
-
-
-
15,000
Shares returned and cancelled- August 30, 2005
(41,667)
(42)
(16,208)
-
-
-
-
-
(16,250)
Shares issued for stock options at $0.33 - August 12, 2005
575,000
189,175
-
-
-
-
-
189,750
Shares issued for stock options at $0.33 - September 14, 2005
85,000
27,965
-
-
-
-
-
28,050
Shares issued for stock options at $0.33 - September 22, 2005
83,333
27,417
-
-
-
-
-
27,500
Shares issued for stock options at $0.33 - October 12, 2005
81,667
26,868
-
-
-
-
-
26,950
Shares issued for stock options at $0.39 - November 30, 2005
33,333
12,967
-
-
-
-
-
13,000
Shares issued for stock options at $0.33 - December 21, 2005
94,000
30,926
-
-
-
-
-
31,020
Stock based compensation
-
-
620,640
-
-
-
-
-
620,640
Deferred compensation expense recorded in the year
-
-
-
-
125,172
-
-
-
125,172
Unrealized losses on available for sale securities
-
-
-
(90,000)
-
-
-
-
(90,000)
Net loss for the year ended December 31, 2005
-
-
-
-
-
-
-
(1,950,963)
(1,950,963)
Balance December 31, 2005
12,800,157
12,797
22,182,918
(100,000)
(68,290)
-
-
-
(20,855,956)
1,171,469
Shares issued for stock options at $0.33 - January 16, 2006
66,667
21,933
-
-
-
-
-
-
22,000
Shares issued for stock options at $0.33 - February 6, 2006
66,667
21,933
-
-
-
-
-
-
22,000
Shares issued for stock options at $0.33 - February 23, 2006
33,333
10,967
-
-
-
-
-
-
11,000
Shares issued for services at $0.36 - January 21, 2006
33,333
11,967
-
-
-
-
-
-
12,000
Shares issued for cash at $0.10 - May 12, 2006, net of fees and expenses of $151,455 (Note (1))
2,666,667
2,667
645,878
-
-
-
-
-
-
648,545
Shares issued for finder’s fees - May 6, 2006 - (Note 7(1))
400,000
(400)
-
-
-
-
-
-
-
Shares issued for services at $0.36- May 23, 2006
16,667
7,483
-
-
-
-
-
-
7,500
Shares issued for stock options at $0.36 - May 24, 2006
33,333
11,967
-
-
-
-
-
-
12,000
Shares issued for services at $0.45 - May 25, 2006
166,667
74,833
-
(75,000)
-
-
-
-
-
Shares returned on reduction of finders’ fee - September 27, 2006 (Note 7(1))
(133,333)
(133)
-
-
-
-
-
-
-
Shares issued for stock options at $0.30 - October 2, 2006
1,891,667
1,892
565,608
-
-
-
-
(567,500)
-
-
Shares issued for stock options at $0.30 - October 3, 2006
175,000
52,325
-
-
-
-
(52,500)
-
-
Shares issued for services at $0.30 - November 1, 2006
160,000
47,840
-
(48,000)
-
-
-
-
-
Shares issued for services at $0.36 - December 12, 2006
23,333
8,377
-
-
-
-
-
-
8,400
Stock based compensation
-
-
241,000
-
-
-
-
-
-
241,000
Interest accrued on promissory notes receivable
-
-
-
-
-
-
-
(15,500)
-
(15,500)
Deferred compensation expense recorded in the year
-
-
-
-
134,492
-
-
-
-
134,492
Unrealized losses on available for sale securities
-
-
-
(8,889)
-
-
-
-
-
(8,889)
Net loss for the year ended December 31, 2006
-
-
-
-
-
-
-
-
(738,090)
(738,090)
Balance December 31, 2006
18,400,158
18,398
23,904,762
(108,889)
(56,798)
-
-
(635,500)
(21,594,046)
1,527,927
Shares issued for services at $0.27 - January 16, 2007
3,333
-
-
-
-
-
-
Shares returned against promissory notes - April 25, 2007
(733,333)
(733)
(219,267)
-
-
-
220,000
-
-
Shares issued for stock options at $ 0.30 - April 26, 2007
266,667
79,733
-
-
(30,000)
-
-
50,000
Shares issued for stock options at $ 0.30 - June 5, 2007
66,667
19,933
-
-
(20,000)
-
-
-
Shares issued for services at $ 0.24 - June 12, 2007
133,333
31,867
-
-
-
-
-
32,000
Shares returned against promissory notes - June 19, 2007
(833,333)
(833)
(249,167)
-
-
-
250,000
-
-
Shares issued for stock options at $0.30 - July 15, 2007
16,667
4,983
-
5,000
Shares returned against promissory notes - August 15, 2007
(133,333)
(133)
(39,867)
40,000
-
Shares issued for services at $ 0.24 - August 15, 2007
133,333
31,867
-
(32,000)
-
-
-
-
Shares issued for stock options at $ 0.21 - September 21, 2007
33,333
6,967
-
-
-
-
-
7,000
Shares issued for stock options at $ 0.21 - September 26, 2007
41,667
8,708
-
-
-
-
-
8,750
Shares issued for stock options at $ 0.17 - October 30, 2007
100,000
16,900
17,000
Shares issued for stock options at $ 0.17 - November 1, 2007
200,000
33,800
34,000
Shares issued for stock options at $ 0.17 - December 20, 2007
160,000
27,040
(25,500)
1,700
Shares cancelled - December 31, 2007
(166,667)
(166)
-
Shares cancelled - December 31, 2007
(166,667)
(166)
(49,834)
50,000
-
Shares returned and cancelled - December 31, 2007
(150,000)
(150)
(25,350)
25,500
-
Share reconciliation
1,008
-
-
-
Stock based compensation
52,149
52,149
Settlement of promissory notes including interest
125,500
125,500
Deferred compensation expense recorded in the year
39,798
39,798
Unrealized gains on available for sale securities
614,942
614,942
Net loss for the year ended December 31, 2007
-
-
-
-
-
-
-
(593,789)
(593,789)
Balance December 31, 2007
17,372,833
$ 17,372
$ 23,636,287
$ 506,053
$ (49,000)
$ -
$ -
$ -
$ (22,187,835)
$ 1,922,877
Shares issued for stock options at $ 0.13 - January 4, 2008
200,000
25,800
26,000
Shares issued for services at $ 0.11 - February 27, 2008
50,000
5,450
5,500
Shares issued for stock options at $ 0.10 - July 18, 2008
219,300
21,711
21,930
Shares issued for services at $ 0.11 - September 12, 2008
25,000
1,725
1,750
Stock based compensation
16,579
16,579
Deferred compensation expense recorded in the year
32,000
32,000
Unrealized gains on available for sale securities
340,936
340,936
Net loss for the year ended December 31, 2008
-
-
-
-
-
-
-
(1,871,917)
(1,871,917)
Balance December 31, 2008
17,867,133
17,866
$ 23,707,552
$ 846,989
$ (17,000)
$ -
$ -
$ -
$ (24,059,752)
$ 495,655
Shares issued for cash at $0.07 -April 9, 2009
200,000
13,800
14,000
Shares issued for cash at $0.10 -April 9, 2009
250,000
24,750
25,000
Shares issued for cash at $0.10 -April 27, 2009
50,000
4,950
5,000
Shares issued hydroponic vertical farming design valued at $0.03 - June 9,2009
3,500,000
3,500
101,500
105,000
Shares issued for stock options at $ 0.03 - July 21, 2009
500,000
14,500
15,000
Shares issued for stock options at $ 0.03 - August 7, 2009
2,000,000
2,000
58,000
60,000
Shares issued for stock options at $ 0.03 - August 10, 2009
15,000
Shares issued for stock options at $ 0.03 - August 25, 2009
1,010,000
1,010
29,290
30,300
Shares issued for stock options at $ 0.03 - September 1, 2009
65,000
1,885
1,950
Shares issued for stock options at $ 0 03 - September 8, 2009
500,000
14,500
15,000
Shares issued for stock options at $ 0.03 - September 14, 2009
283,000
8,207
8,490
Shares issued for stock options at $ 0.03 - September 17, 2009
100,000
2,900
3,000
Shares issued for stock options at $ 0.03 - September 23, 2009
2,950,000
2,950
85,550
88,500
Shares issued for stock options at $ 0.03 - October 22, 2009
900,000
26,100
27,000
Shares issued for deferred compensation at $ 0.0152 - November 18, 2009
500,000
7,100
(7,600)
-
Shares issued for stock options at $ 0.02 - December 16, 2009
175,000
3,325
3,500
Deferred compensation expense
8,844
8,844
Unrealized losses on available for sale securities
(795,927)
(795,927)
Net loss
(420,380)
(420,380)
Balance, December 31, 2009
30,865,133
$30,864
$24,104,344
$51,062
$(15,756)
$(24,480,132)
$(309,618)
Shares issued for stock options at $0.01-January 25, 2010
805,000
7,245
-
-
-
-
-
-
8,050
Shares issued for stock options at $0.01-March 9, 2010
300,000
2,700
-
-
-
-
-
-
3,000
Shares issued for stock options at $0.01 -
March 23,2010
100,000
-
-
-
-
-
-
1,000
Shares issued for stock options at $0.01-April 15, 2010
1,000,000
1,000
9,000
-
-
-
-
-
-
10,000
Shares issued for deferred compensation at $.005-May 26, 2010
1,000,000
1,000
4,000
-
(5,000)
-
-
-
-
-
Shares issued for stock options at $0.003-
October 27, 2010
400,000
-
-
-
-
-
-
1,200
Shares issued for stock options at $0.0022 -
November 24, 2010
6,756,033
6,756
8,107
-
-
-
-
-
-
14,863
Shares issued for debt related party
at $.01- December 9, 2010
700,300
6,303
-
-
-
-
-
-
7,003
Deferred compensation expense
-
-
-
-
14,628
-
-
-
-
14,628
Unrealized gains on available for sale securities
-
-
-
46,795
-
-
-
-
-
46,795
Write-down of securities
(91,682)
-
-
-
-
-
(91,682)
Net loss
-
-
-
-
-
-
-
-
(217,210)
(217,210)
Balance, December 31, 2010
41,926,466
41,926
24,143,398
6,174
(6,128)
-
-
-
(24,697,342)
(51.972)
The accompanying notes are an integral part of these financial statements
The accompanying notes are an integral part of these financial statements
ORGANA GARDENS INTERNATIONAL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
The Company was incorporated as Venture Investments Inc. under the Laws of the State of Nevada on November 29, 1983. The Company underwent a name change to Asdar Group on December 10, 1987, a name change to Precise Life Sciences Ltd. on April 30, 2002, a name change to Iceberg Brands Corporation on February 18, 2003, a name change to Avalon Gold Corporation on August 28, 2003, a name change to Avalon Energy Corporation on March 22, 2005, a name change to Shotgun Energy Corporation on September 25, 2007 and a name change to Organa Gardens International Inc.on April 7, 2009. The Company was dormant from 1991 to 1996 and currently has no revenue generating operations. The Company was considered a development stage company since January 1, 1996 and as a result of changing its business focus to vertical hydroponic farming is considered to be a development stage company. Expected operations will consist of growing fruits and vegetables using a rotary hydroponics vertical farming system designed with serviceability, ease-of-use and maximum harvest in mind.
Going Concern
The financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated any revenues or completed development of any commercially acceptable products or services to date and has incurred losses of $24,697,342 since inception, and further significant losses are expected to be incurred in the development of its vertical hydroponic farming system. The Company will depend almost exclusively on outside capital through the issuance of common shares to finance ongoing operating losses and to fund the acquisition and development of its vertical hydroponic farming system. The ability of the Company to continue as a going concern is dependent on raising additional capital and ultimately on generating future profitable operations. There can be no assurance that the Company will be able to raise the necessary funds when needed to finance its ongoing costs. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The accompanying financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying financial statements are presented in United States dollars and are prepared in accordance with accounting principles generally accepted in the United States.
Use of Estimates and Assumptions
Preparation of the Company’s financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Mineral property costs
Mineral property acquisition, exploration and development costs are expensed as incurred until such time as economic reserves are quantified. To date the Company has not established any proven or probable reserves on its mineral properties. The Company has adopted the provisions of ASC Topic 410 “Asset Retirement and Environmental Obligations” which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment, or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets. The adoption of this standard has had no effect on the Company’s financial position or results of operations. As at December 31, 2010, any potential obligations relating to the retirement of the Company’s assets are not yet determinable.
Oil and Gas Properties
The Company utilizes the full cost method to account for its investment in oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including such costs as leasehold acquisition costs, capitalized interest costs relating to unproved properties, geological expenditures, tangible and intangible development costs including direct internal costs are capitalized to the full cost pool. As at December 31, 2010, the Company has no properties with proven reserves. When the Company obtains proven oil and gas reserves, capitalized costs, including estimated future costs to develop the reserves and estimated abandonment costs, net of salvage, will be depleted on the units-of-production method using estimates of proved reserves.
Investments in unproved properties and major development projects including capitalized interest, if any, are not depleted until proved reserves associated with the projects can be determined. If the future exploration of unproved properties are determined uneconomical the amount of such properties are added to the capitalized cost to be depleted. As at December 31, 2008, all of the Company's oil and gas properties were unproved and were excluded from depletion. At December 31, 2010, the Company’s unproved oil and gas properties were substantially impaired.
The capitalized costs included in the full cost pool are subject to a "ceiling test", which limits such costs to the aggregate of the estimated present value, using a ten percent discount rate, of the future net revenues from proved reserves, based on current economic and operating conditions plus the lower of cost and estimated net realizable value of unproven properties.
Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in the statement of operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentration of Credit Risk
Cash in bank accounts is at risk to the extent that it exceeds U.S.Federal Deposit Insurance Corporation and Canadian Deposit Insurance Corporation insured amounts. To minimize risk, the Company places its cash with high credit quality institutions. All cash is deposited in one prominent Canadian financial institution.
Fair Value of Financial Instruments
The Company’s financial instruments include cash, receivables, available-for-sale securities, amounts due from Legacy Wine & Spirits International Ltd., accounts payable and accrued liabilities, amounts due to Golden Spirit Enterprises Ltd., and due to related parties. Management believes the fair values of these financial instruments approximate their carrying values due to their short-term nature.
The Company adopted ASC Topic 820-10 for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Topic 820-10 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements Topic 820-10 defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, Topic 820-10 expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
·
Level 1 - inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
·
Level 2 - inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
·
Level 3 - inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
In general, and where applicable, we use quoted prices in an active market for identical derivative assets and liabilities that are traded on exchanges. These derivative assets and liabilities are included in Level 1.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign Currency Translation
The financial statements are presented in United States dollars. In accordance with ASC Topic 830 “Foreign Currency Matters”, foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates that prevailed at the balance sheet date. Non-monetary assets and liabilities are translated at exchange rates prevailing at the transaction date. Revenue and expenses are translated at average rates of exchange during the year. Related translation adjustments are reported as a separate component of stockholders’ equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations.
Available For Sale Securities - related parties
The Company holds marketable equity securities which are available-for-sale and as such, their carrying value is adjusted to market at the end of each reporting period. As required by ASC Topic 220 (formerly SFAS 130),, unrealized gains and losses on these investments are recorded as a component of accumulated other comprehensive income (loss) and are recorded as a component of net income (loss) when realized. However, if there is a permanent decline in the market value of available-for-sale securities, this permanent market value adjustment is taken into income in the period.
Stock-Based Compensation
On January 1, 2006, the Company adopted the fair value recognition provisions of ASC Topic 718 & 505. Prior to January 1, 2006, the Company accounted for share-based payments under the recognition and measurement provisions of ASC Topic 718. In accordance with ASC Topic 718 no compensation cost was required to be recognized for options granted that had an exercise price equal to the market value of the underlying common stock on the date of grant. . The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both employees and non-employees. Stock issued for compensation is valued using the market price of the stock on the date of the related agreement.
In addition, deferred stock compensation related to non-vested options is required to be eliminated against additional paid-in capital. The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC Topic 718 & 505. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable.
Research and Development Costs
Expenditure on research activities, undertaken with the prospect of obtaining new scientific or technical knowledge and understandings are expensed as incurred and include costs of consultants who conduct research and development on behalf of the Company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
The Company follows the liability method of accounting for income taxes as set forth in ASC Topic 740-10. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances. Deferred tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment. A valuation allowance is provided for deferred tax assets if it is more likely than not that the Company will not realize the future benefit, or if the future deductibility is uncertain. In accordance with ASC 740-10. This interpretation introduces a new approach that changes how enterprises recognize and measure tax benefits associated with tax positions and how enterprises disclose uncertainties related to income tax positions in their financial statements.
Recent Accounting Pronouncements
In January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements. This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers. Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. We are currently evaluating the impact of this ASU, however, we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.
In July 2010, the FASB issued ASU No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The ASU amends FASB Accounting Standards Codification Topic 310, Receivables, to improve the disclosures that an entity provides about the credit quality of its financing receivables and the related allowance for credit losses. As a result of these amendments, an entity is required to disaggregate, by portfolio segment or class of financing receivables, certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses. This ASU is effective for interim and annual reporting periods ending on or after December 15, 2010. The adoption of this standard may require additional disclosures, but we do not expect the adoption to have a material effect on our consolidated financial statements.
On December 21, 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-29, which impacts any public entity that enters into business combinations that are material on an individual or aggregate basis. The guidance specifies that if a public entity presents comparative financial statements, the entity should disclose revenues and earnings of the combined entity as though the business combination(s) that occurred during the year had occurred at the beginning of the prior annual period when preparing the pro forma financial information for both the current and prior reporting periods. The guidance also requires that pro forma disclosures be accompanied by a narrative description regarding the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in reported pro forma revenues and earnings. This guidance is effective for business combinations consummated in periods beginning after December 15, 2010. We do not believe the adoption of this guidance will have a material impact on our Consolidated Financial Statements.
NOTE 3 - AVAILABLE FOR SALE SECURITIES - RELATED PARTIES
Golden Spirit
During 2004, the Company received 111,111 restricted Rule 144 shares of Golden Spirit Enterprises Ltd. (“Golden Spirit”), a public company with directors and significant shareholders in common. The restricted shares were received as non-refundable consideration pursuant to agreements with Golden Spirit dated November 10, 2004 and December 10, 2004 to acquire certain mineral property interests from the Company. These agreements were subsequently terminated.
Effective December 31, 2004 the Company recorded, as other comprehensive loss for the year, a $10,000 unrealized loss in the carrying value of its shares of Golden Spirit. During the years ended December 31, 2005 and 2006 the Company recorded additional unrealized losses in the carrying value of its shares of Golden Spirit totalling $90,000 and $8,889 respectively, which were recorded as other comprehensive loss for those years. During the year ended December 31, 2007, the Company sold 2,500 shares resulting in a realized gain of $165 and recorded an additional unrealized loss of $473 in 2007. During the year ended December 31, 2008, the Company sold 10,000 shares resulting in a realized loss of $800 and recorded an additional unrealized loss of $15,026 to December 31, 2008. As a result, the carrying value of the available for sale shares of Golden Spirit is $2,712 as at December 31, 2008.
During the year ended December 31, 2009, the Company recorded an unrealized gain of $1,232. As a result, the carrying value of the available for sale shares of Golden Spirit is $3,945 as at December 31, 2009.
During the year ended December 31, 2010, the Company sold Nil Golden Spirit shares and recorded an unrealized gain of $11,774. As a result, the carrying value of the available for sale shares of Golden Spirit is $2,860 as at December 31, 2010.
Effective December 31, 2010, the Company recorded a $12,859 write-down of its investment in Golden due to an other-than-temporary decline in the value of the shares.
Legacy
During 2003 the Company settled an outstanding debt receivable of $122,988 from Legacy Mining Ltd. (“Legacy”) for the issue of 1,229,880 restricted shares of Legacy representing a then 9.8% interest in Legacy. During 2004, the Company wrote this investment down to $1 because management determined that it was not recoverable within a reasonable period of time.
Effective December 31, 2007, the Company recorded, as other comprehensive income for the year, a $604,440 unrealized gain in the carrying value of its shares of Legacy.
During the year ended December 31, 2008, the Company sold 150,000 Legacy shares resulting in a realized gain of $26,100 and recorded an additional unrealized gain of $270,562 to December 31, 2008. As a result, the carrying value of the available for sale shares of Legacy was $885,502 as at December 31, 2008.
During the year ended December 31, 2009, the Company sold 30,985 Legacy shares resulting in a realized loss of $2,987 (net of commissions of $595) and recorded an additional unrealized loss of $797,161 to December 31, 2009. As a result, the carrying value of the available for sale shares of Legacy is $ 62,934 as at December 31, 2009.
NOTE 3 - AVAILABLE FOR SALE SECURITIES - RELATED PARTIES (continued)
During the year ended December 31, 2010, the Company the Company received 2,627,440 restricted shares of Legacy valued to $131,372 pursuant to a debt settlement and sold Nil Legacy shares. The Company recorded an unrealized gain in the carrying value of its available-for-sale securities totaling $35,021, which was recorded as other comprehensive income (loss). As a result, the carrying value of the available for sale shares of Legacy is $58,822 as at December 31, 2010.
Effective December 31, 2010, the Company recorded a $78,823 write-down of its investment in Legacy due to an other-than-temporary decline in the value of the shares.
Available for sale securities - related parties include the following:
December 31,
December 31,
3,676,335 (2009-1,048,895) shares of Legacy Wine & Spirits
$ 58,822
$ 62,934
98,612 (2009- 98,612) shares of Golden Spirit Enterprises Ltd.
2,860
3,945
$ 61,682
$ 66,879
NOTE 4 - OIL AND GAS PROPERTIES
Oil and gas properties include the following:
December 31,
December 31,
Acquisition and exploration costs, unproved, not subject to depletion.
$ 3
$ 3
The Company's oil and gas activities are currently conducted in the United States. The following costs were incurred in oil and gas acquisition and exploration activities:
Harvester Property, California, USA:
The Company owns a 2% royalty interest carried at a nominal value of $1 due to the uncertainty of realization.
LAK Ranch Oil Project, Wyoming, USA:
The Company owns a 0.7% gross overriding royalty interest on 6,360 acres of oil and natural gas rights located in the Powder River Basin of eastern Wyoming carried at a nominal value of $1 due to the uncertainty of realization.
Uinta Basin Property, Utah:
On October 26, 2004, the Company entered into a Letter of Intent with Pioneer Oil and Gas (“Pioneer”), whereby the Company could acquire an undivided Eighty-Five Percent (85%) working interest and an undivided Sixty-Eight (68%) net revenue interest in 13,189 acres located in Wasatch County, Utah, known as the “Uinta Basin”. The Company paid Pioneer a deposit of $50,000 for the exclusive right to enter into a Participation Agreement with Pioneer on or before January 18, 2005.
On January 18, 2005, the Company entered into the Participation Agreement with Pioneer as described above. The total consideration paid to Pioneer, including the $50,000 deposit described above, was $706,279. In addition, the Company issued 1,200,000 restricted common shares valued at $264,000 on February 7, 2005 as finders’ fees to certain third parties who were responsible for tabling the Uinta Basin Overpressured Gas Project to the Company. The Company has also committed to paying a 1.5% gross royalty on all revenue received by it from the Uinta Basin Project. (Refer to Note 7(2)(a) (d)).
As part of the agreement, Pioneer has agreed to provide the Company with 2-D seismic data crossing the acreage. Any additional seismic that Pioneer or the Company may mutually agree to acquire over the acreage shall be paid for entirely by the Company with the parties owning the data in the same proportion as their working interest in the acreage. In addition, the Company will be required to drill an initial test well at a location on the acreage mutually agreed upon by Pioneer and the Company. The Company will serve as the Operator in drilling the acreage.
The Company shall pay One Hundred Percent (100%) of all costs of drilling the first two wells drilled on the acreage along with 100% of all costs of logging or testing the wells. If either of the first two test wells is deemed a dry hole, the Company shall pay One Hundred Percent (100%) of all costs of plugging and abandoning such well(s) and restoration of the surface upon which the well(s) reached its authorized depth and completion of all tests deemed necessary by the Operator. If the Company elects to complete either or both of the first two wells drilled on the acreage, the Company shall pay One Hundred Percent (100%) of all completion costs through the tanks along with any costs associated to hook up the well(s) to pipeline for the well(s) to be capable of producing into a commercial pipeline for sale. After the first two wells drilled, if productive, are hooked-up to a pipeline and capable of producing oil and gas in commercial quantities, the Company shall pay 85% of all costs of operating the first two wells and Pioneer shall pay 15% of the operation costs of such wells as reflected in their working interest ownership in such wells. The Company is required to drill a well on the acreage before November 1, 2010, or the acreage acquired will revert back to Pioneer. During the year ended December 31, 2008 the Company incurred $Nil (2007 -$508,435) on exploration of the property. The Company was seeking joint venture drilling partners during 2008 in order to meet its 2010 drilling commitment. The Company was unable to secure a joint venture drilling partner or raise any capital to satisfy an approximate $12,000,000 drilling cost for a 15,000 ft. initial well. Due to this inability to find funding, the Uinta property was being carried at a nominal value of $1 due to the uncertainty of realization. During the year ended December 31, 2009, the Company re-conveyed its interest in the Uinta property to its original owner, Pioneer Oil and Gas.
NOTE 5 - ACQUISITION
On March 6, 2009, the Company has signed an agreement to acquire all of the assets of Organa Gardens Inc.(OGI), a Nevada Corporation in the business of hydroponics vertical farming. These assets include, but are not limited to all proprietary designs, engineering, technology, business models, plans and intellectual properties pertaining to the Organa Garden System-Discovery (OGS-D) and the Organa Garden System-Enterprise (OGS-E). Both the OGS-D and OGS-E are a rotary hydroponics vertical farming system designed with serviceability, ease-of-use and maximum harvest in mind. Both models are modular, allowing them to be expanded by stacking them. Its specially designed waterwheel technology allows the fully automated system to recycle and reuse 95% of the water used while requiring a negligible amount of energy to run.
The Company will issue up to 25,000,000 Rule 144 shares of its common stock to OGI, to be held in trust and released based on the following terms and gross revenue requirements:
(a) Release of 10,000,000 shares of the Company upon signing this Agreement.
(b) Release of 5,000,000 shares of the Company upon attaining $1,000,000 US in gross revenue.
(c) Release of 5,000,000 shares of the Company upon attaining $2,500,000 US in gross revenue.
(d) Release of 5,000,000 shares of the Company upon attaining $4,000,000 US in gross revenue.
None of these shares have been issued to date and the agreement has not yet been finalized.
The Company will raise up to $500,000 US to market and fulfill the required obligations of OGI as outlined in the supplemental agreement(s) to follow. The Company and Organa Gardens Inc.agree to allow the shares to sit in trust for a period of 5 years in order for OGI to meet its sales goals. Should the requirements not be met in all or part, then all of the remaining shares will be returned back to the treasury of the Company.
On June 9, 2009, the Registrant signed an amended agreement to acquire all of the assets of Organa Gardens Inc., a Nevada Corporation in the business of hydroponics vertical farming. These assets include but are not limited to all proprietary designs, engineering, technology, business models, plans and intellectual properties pertaining to the Organa Garden System-Discovery (OGS-D) and the Organa Garden System-Enterprise (OGS-E).
Under the terms of the acquisition, the Company issued 3,500,000 restricted 144 shares to Organa Gardens Inc.and/or its nominees (issued) and render a cash commitment of up to $250,000 to complete the final steps of taking the OGS-D and OGS-E to market. This agreement replaces the agreement dated March 9, 2009.
All research and development costs are expensed as incurred and include costs of consultants who conduct research and development on behalf of the Company. For the year ended December 30, 2010, the Company incurred $7,000 (2009 -$278,231) in research and development costs.
NOTE 6 - DEFERRED COMPENSATION
On August 15, 2007, the Company entered into an agreement with Palisades Financial Ltd., (“Palisades”) a private company owned by a significant shareholder of the Company, for a four year term, whereby Palisades will provide investor relations services to the Company (valued at $32,000) in exchange for 133,333 restricted shares of the Company’s common stock. Palisades will provide services such as researching, editing and generating a company profile, relaying the Company’s business perspectives and distribution of corporate updates, including press releases.
On November 18, 2009 the Company entered into an agreement with Compte de Sierge Accomodative Corp. (“Compte”), a private company controlled by a significant shareholder, with an eighteen month term, whereby Compte provides investor relations services to the Company specific to the hydroponic vertical farming project (valued at $7,600) in exchange for 500,000 restricted shares of the Company’s common stock.
On May 15, 2010, the Company entered into an agreement with Domain Land Holdings Ltd. (“Domain”), a private company controlled by a significant shareholder, with a two-year term, whereby Domain provides investment-banking services to the Company (valued at $5,000) in exchange for 1,000,000 restricted shares of the Company’s common stock.
The Company amortizes the costs of these services over the respective terms of the contracts. During the years ended December 31, 2010 and 2009, the Company recorded amortization of deferred compensation totaling $14,628 and $8,844 respectively. As of December 31, 2010 the unamortized portion of the deferred compensation totaled $10,018. (December 31, 2009 - $15,756).
NOTE 7 - STOCKHOLDERS’EQUITY
On February 20, 2009, a majority of the Company’s shareholders entitled to vote on such matters approved a change of the Company’s name to Organa Gardens International Inc. On February 26, 2009, a Certificate of Amendment to its Articles of Incorporation was filed with the State of Nevada changing the Company’s name to Organa Gardens International Inc. The Company also took the necessary steps to change its trading symbol and CUSIP Number whereby the CUSIP Number has changed from 825358 10 4 to 68618Y 10 6. Effective at the opening of business on April 7, 2009, the trading symbol changed from SGNE to OGNG. The name change did not involve any change in the issued or authorized capital of the Company.
(1) 2010 Stock Transactions
During the year ended December 31, 2010:
(a) The Company issued a total of 7,961,033 common shares pursuant to the exercise of options under the Company’s Stock Incentive and Option Plans at prices between $0.0022 and $0.01 per share to satisfy debt to related parties in the amount of $29,913.
(b) The Company issued 1,000,000 restricted common shares valued at $5,000 pursuant to a deferred compensation contract with a related party. See note 6.
NOTE 7 - STOCKHOLDERS’EQUITY (continued)
(c) The Company issued a total of 1,400,000 common shares pursuant to the exercise of options under the Company’s Incentive plans at prices between $0.003 and $0.01 per share to consultants for services valued at $11,200.
(d) The Company issued 700,300 restricted common shares at $0.01 per share pursuant to a debt settlement with Golden Spirit Enterprises
Ltd. in the amount of $7,003.
(2) 2009 Stock Transactions
During the year ended December 30, 2009:
(a) The Company issued a total of 500,000 common shares to four (4) placees pursuant to certain private placement agreements. The Company received proceeds of $44,000.
(b) On June 9, 2009 the Company issued 3,500,000 restricted common shares valued at $105,000 with respect to the acquisition of the assets of Organa Gardens Inc. See note 5.
(c) The Company issued a total of 7,598,000 common shares pursuant to the exercise of options under the Company’s 2009 Stock Incentive and Option Plan at $0.02 - $0.03 per share to satisfy debt to related parties in the amount of $226,190.
(d) The Company issued a total of 900,000 common shares pursuant to the exercise of options under the Company’s 2009 Stock Incentive and Option Plan at $0.03 per share for cash proceeds of $27,000.
(e) On November 18, 2009, the Company issued 500,000 restricted common shares valued at $7,600 to a consultant pursuant to a deferred compensation agreement.
(3) 2010 Stock Options
During the year ended December 31, 2010, 9,361,033 stock options were granted by the Company, which were immediately exercised at prices between $0.0022 and $0.01 per share to satisfy debt to related parties in the amount of $29,913 and for consultant services valued at $11,200.
NOTE 7 - STOCKHOLDERS’EQUITY (continued)
(a) The Company’s stock option activity is as follows:
Number of options
Weighted Average Exercise Price
Weighted Average Remaining Contractual Life
(in years)
Balance, December 31, 2007
-
-
-
Granted during 2008
419,300
0.11
5.00
Exercised during 2008
(419,300)
0.11
Balance, December 31, 2008
-
-
-
Granted during the period
8,498,000
0.03
Exercised during the period
(8,498,000)
0.03
Balance, December 31, 2009
-
-
-
Granted during the period
9,361,033
0.03
Exercised during the period
(9,361,033)
0.03
Balance, December 31, 2010
-
-
-
NOTE 7 - STOCKHOLDERS’EQUITY (continued)
As of December 31, 2010, there were no stock options available for grant under the Company’s 2006 Stock Incentive and Option Plan.
As of December 31, 2010, there were no stock options available for grant under the Company’s 2007 Stock Incentive and Option Plan.
As of December 31, 2010, there were 1,705,000 stock options available for grant under the Company’s two 2009 Stock Incentive and Option Plan.
On June 29, 2009, the Company filed Registration Statements on Form S-8 to register 7,500,000 to be issue pursuant to the Company’s 2009 Stock. Incentive and Option Plan. 7,500,000 shares have been granted and exercised under the June 2009 Stock Option Plan. On November 24, 2009, the Company filed Registration Statements on Form S-8 to register 10,000,000 to be issue pursuant to the Company’s 2009 Stock. Incentive and Option Plan. 6,655,000 shares have been granted and exercised under the November 2009 Stock Option Plan.
(1)
2009 Stock Options
During the year ended December 31, 2009, 8,498,000 stock options were granted by the Company, which were immediately exercised. Accordingly, no compensation expense was recorded.
The Company’s stock option activity is as follows:
Number of options
Weighted Average Exercise Price
Weighted Average Remaining Contractual Life
(in years)
Balance, December 31, 2007
-
-
-
Granted during 2008
419,300
0.11
5.00
Exercised during 2008
(419,300)
0.11
Balance, December 31, 2008
-
-
-
Granted during the period
8,498,000
0.03
Exercised during the period
(8,498,000)
0.03
Balance, December 31, 2009
-
-
-
As of December 31, 2009, there were 1,333,333 stock options available for grant under the Company’s 2006 Stock Incentive and Option Plan.
As of December 31, 2009, there were 120,700 stock options available for grant under the Company’s 2007 Stock Incentive and Option Plan.
As of December 31, 2009, there were 77,000 stock options available for grant under the Company’s 2009 Stock Incentive and Option Plan.
On June 29, 2009, the Company filed Registration Statements on Form S-8 to register 7,500,000 to be issue pursuant to the Company’s 2009 Stock.
Incentive and Option Plan. During the year ended December 31, 2009, 7,598,000 options were granted at prices between $0.02- $0.03 per share to satisfy debt to related parties in the amount of $226,290 and 900,000 options were granted at a price of $0.03 per share for cash proceeds of $27,000. On November 24, 2009, the Company filed Registration Statements on Form S-8 to register 10,000,000 to be issue pursuant to the Company’s 2009 Stock. Incentive and Option Plan. During the year ended December 31, 2009, 175,000 options were granted at $0.02 per share to satisfy debt to related parties in the amount of $3,500.
NOTE 8- RELATED PARTY TRANSACTIONS
During 2010, the Company incurred $2,930 (2009 -$3,660) in management fees to directors. As at December 31, 2010 the Company owes $9,000 in management fees. (2009 - $9,000)
During 2010, the Company incurred $29,313 (2009 - $24,289) in rent and office expenses to a private company controlled by a shareholder. The Company has a three year tenancy agreement with a related party beginning August 1, 2010. Office rent payments are due in the amount of $30,000 for 2011.
NOTE 8- RELATED PARTY TRANSACTIONS (continued)
During 2010, the Company incurred $7,000 (2009- $155,000) in consulting fees to consultants who are also shareholders with respect to research and development costs attributable to the vertical hydroponic farming system project.
During the year ended December 31, 2010, three companies controlled by significant shareholders earned $14,628 (2008 - $8,840) pursuant to deferred compensation agreements. (See Note 6)
At December 31, 2010, $Nil (2009 - $7,253 ) is payable to Golden Spirit Enterprises Ltd. which is non-interest bearing and without specific terms of repayment. During the year ended December 31, 2010, the Company paid $250 cash and issued 700,300 restricted commons shares valued at $7,003 to satisfy the debt.
At December 31, 2010, $Nil (2008 - $131,372) is receivable from Legacy Wine & Spirits International Ltd. which is non-interest bearing and without specific terms of repayment. During the year, the Company received 2,627,440 restricted common shares of Legacy valued at $131,372 to satisfy the receivable.
At December 31, 2010, the following amounts are due to related parties:
Director
$
9,000
$
9,000
Significant shareholders
79,590
4,253
$
88,590
$
13,253
All related party transactions are in the normal course of business and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
NOTE 9 - SUPPLEMENTAL CASH FLOW INFORMATION
Year ended
December 31, 2010
Year ended
December 31, 2010
Cash paid during the year for:
Interest
$ -
$ -
Income taxes
$ -
$ -
During the year ended December 31, 2010 the Company issued:
·
9,361,033 stock options were granted by the Company, which were immediately exercised at prices between $0.0022 and $0.01 per share to satisfy debt to related parties in the amount of $29,913 and for consultant services valued at $11,200.
·
1,000,000 restricted common shares valued at $5,000 pursuant to a deferred compensation contract with a related party. See note 6.
·
700,300 restricted common shares at $0.01 per share pursuant to a related party debt settlement in the amount of $7,003.
NOTE 9 - SUPPLEMENTAL CASH FLOW INFORMATION (continued)
During the year ended December 31, 2009 the Company issued:
·
500,000 restricted common shares with a fair value of $7,600 for a prepaid consulting service agreement.
·
7,598,000 options were granted at prices between $0.02- $0.03 per share to satisfy debt to related parties in the amount of $226,290 and 900,000 options were granted at a price of $0.03 per share for cash proceeds of $27,000.
·
3,500,000 restricted common shares valued at $105,000 with respect to the acquisition of the assets of Organa Gardens Inc.
·
500,000 common shares to four (4) placees pursuant to certain private placement agreements. The Company received proceeds of $44,000.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
On February 21, 2002, the Company issued 350,000 shares valued at $119,000 to Empire Sterling Corporation for services to be rendered with respect to the acquisition of ACGT Corporation (“ACGT”). The shares were to be held in trust and not sold until all necessary financing was in place to complete the ACGT acquisition. Empire Sterling Corporation breached the trust agreement and the Company placed a stop transfer on these shares and requested they be returned to the Company. Empire Sterling Corporation failed to return the share certificate and as such, the Company commenced court proceedings against the principals of Empire Sterling Corporation. The Company argued for an interim injunction against all parties and was successful. On May 9, 2002, the Court ordered Empire Sterling Corporation to deposit the shares with the Court pending judicial disposition. The Company continued to file legal process claiming ownership of the shares and breach of trust inter alia. The Company was successful and has now applied to have the share certificates released and subsequently cancelled. As of December 31, 2010, the Company is still in the process of having the certificates released.
In February, 2008, the Company received a demand notice from CGG Veritas for failure to pay an outstanding balance of $317,380 pursuant to a Master Agreement and Job Supplement for the Shotgun Draw 2D Seismic Program in Utah. In accordance with Section 15.3 of the Master Agreement and Job Supplement dated March 21, 2007, CGG has demanded payment by April 25, 2008. If CGG Veritas is forced to proceed with litigation of this matter, it will seek reimbursement of its attorneys’ fees and expenses related to the litigation. The Company is currently examining various alternatives to resolve this matter. CGG Veritas has not proceeded with litigation as of December 31, 2010.
As of August 1, 2010, the Company has leased 1250 sq. ft of office space from Holm Investments Ltd. at $2,500 per month for a period of 3 years.
NOTE 11 - INCOME TAXES
Potential benefits of United States Federal income tax losses are not recognized in the accounts until realization is more likely than not. As of December 31, 2010, the Company has combined net operating losses carried forward totaling approximately $24,697,000 for tax purposes which expire through 2030. Availability of loss usage is subject to change of ownership limitations under Internal Revenue Code 382 for 2002 and prior year’s losses. Pursuant to SFAS No. 109, the Company is required to compute tax asset benefits for net operating losses carried forward. Future tax benefits which
NOTE 11 - INCOME TAXES (continued)
may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry forwards.
A reconciliation of income tax computed at the federal and state statutory tax rates is as follows:
Year ended
December 31, 2010
Year ended
December 31, 2009
Federal income tax provision at statutory rate
(35.00)%
(35.00)%
State income tax provision at statutory rate, net of federal income tax effect
(0.00)
(0.00)
Total income tax provision rate
(35.00)%
(35.00)%
The actual income tax provisions differ from the expected amounts calculated by applying the federal income tax statutory rate to the Company’s loss before income taxes. The components of these differences are as follows:
The Company’s tax-effected deferred income tax assets and liabilities are estimated as follows:
Non-capital loss carry forwards
$
8,167,000
$
8,167,000
Valuation allowance
(8,167,000)
(8,167,000)
Net deferred tax asset
$
-
$
-
NOTE 12 - SUBSEQUENT EVENTS
On January 13, 2011, the Company issued 25,000 restricted common shares valued at $125 to a new director for his services.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain a system of internal and disclosure controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported on a timely basis, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) or 15d-15(e)) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Annual Report. Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer they have concluded that, as of the evaluation date, our disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to us required to be included in our reports filed or submitted under the Exchange Act.
Internal Controls Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2010. Further, this evaluation did not identify any significant changes to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Annual Report.
Changes In Internal Controls
No changes in the Company's internal controls over financial reporting occurred during the period ending December 31, 2010 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Code of Ethics
We intend to adopt a code of ethics in 2011 that applies to our principle executive officer, principal financial officer, principle accounting officer or controller, other persons performing similar functions. We intend to post the text of our code of ethics on our website in connection with our "Investor Relations" materials. In addition, we intend to promptly disclose (1) the
nature of any amendment to our code of ethics that applies to our principle executive officer principal financial officer, principle accounting officer or controller, other persons performing similar functions (2) the nature of any wavier, including an implicit wavier, from a provision of our code of ethics that is granted to one of these specific officers, the name of such person who
is granted the waiver and the date of the waiver on our web site in the future.
We do not currently have a code of ethics as this is a new regulatory requirement and we are examining the various form and contents of other companies written code of ethics, discussing the merits and meaning of a code of ethics to determine the best form for our Company.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Executive Officers and Directors. We are dependent on the efforts and abilities of certain of our senior management. The interruption of the services of key management could have a material adverse effect on our operations, profits and future development, if suitable replacements are not promptly obtained. We anticipate that we will enter into employment agreements with each of our key executives; however, no assurance can be given that each executive will remain with us during or after the term of his or her employment agreement. In addition, our success depends, in part, upon our ability to attract and retain other talented personnel. Although we believe that our relations with our personnel are good and that we will continue to be successful in attracting and retaining qualified personnel, there can be no assurance that we will be able to continue to do so. Our officers and directors will hold office until their resignation or removal.
Our directors and principal executive officers are as specified on the following table:
Name and Address
Age
Position
Date of Appointment
----------------------------------------------------------------------------------------------------------------------------
Jaclyn Cruz
President & Director & CEO
November 18, 2008
Matt Kelly
Secretary, Treasurer
December 20, 2010
& Director & CFO
The chart above specifies Organa Gardens International Inc.’s current officers and directors.All directors of the Company hold office until the next annual meeting or until their successors have been elected and qualified. All officers serve at the discretion of the Board of Directors.There are no familial relationships between our officers and directors.
Section 16(a) Beneficial Ownership Reporting Compliance. Not all of our officers, directors, and principal shareholders have filed all reports required to be filed by those persons on, respectively, a Form 3 (Initial Statement of Beneficial Ownership of Securities), a Form 4 (Statement of Changes of Beneficial Ownership of Securities), or a Form 5 (Annual Statement of Beneficial Ownership of Securities).
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by us for the last three fiscal years ending December 31, 2010 for each or our officers. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any. The compensation discussed addresses all compensation awarded to, earned by, or paid to named officers.
SUMMARY COMPENSATION TABLE
Name and Principal Position
Year
Salary (US$)
Bonus (US$)
Stock Awards (US$)
Option Awards (US$)
Non-Equity Incentive Plan Compensation (US$)
Nonqualified Deferred Compensation Earnings (US$)
All Other Compensation (US$)
Total (US$)
Jaclyn
Cruz
President
4,250
1,750
1,660
Matt
Kelly
Director
On December 20, 2010, the Registrant accepted the resignation of Christopher Scheive as Secretary, Treasurer, Director and Chief Financial Officer of the Registrant. Prior to his resignation, Mr. Scheive received a salary only of $2,460 in 2010. (2009 - $2,000; 2008 - $3,000).In 2008, Mr. Scheive received a stock award valued at $5,500. No stock awards were received by Mr. Scheive in 2009 or 2010.
We have no employment agreements with any of our director and sole officer. We do not contemplate entering into any employment agreements until such time as we begin profitable operations. There is no assurance that we will ever generate revenues from our operations. The compensation discussed herein addresses all compensation awarded to, earned by, or paid to our named executive officer. There are no other stock option plans, retirement, pension, or profit sharing plans for the benefit of our officers and directors other than as described herein.
Stock-based Compensation . During the year ended December 31, 2010, $Nil (2009-$Nil) in stock-based compensation was recorded in our financial statements. Stock-based compensation is an estimate of the intrinsic value placed in respect to stock options granted to officers, directors, employees and an estimate of the fair value of stock options granted to consultants using the Black-Scholes option pricing model. We do not expect further stock-based compensation in 2011.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information regarding the beneficial ownership of our common stock as of December 31, 2010, by each person or entity known by us to be the beneficial owner of more than 5% of the outstanding shares of common stock, each of our directors and named executive officers, and all of our directors and executive officers as a group.
Name of
Amount & Nature of
Percent of Class
Title of Class
Beneficial Owner
Beneficial Owner
Common Stock
--------------------------------------------------------------------------------------------------------------------------------------------
Jaclyn Cruz
P.O. Box 63
25,000
0.0006%
President/.Director/CEO
Farmingville, New York
Matt Kelly
123 Van Horne Avenue
-
0.00%
Secretary /Director /CFO
Holbrook, New York
All directors and Officers as a group
25,000
0.0006%
(1) The beneficial owners of these shares are not known to Organa Gardens International Inc.Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. In accordance with Securities and Exchange Commission rules, shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days of the date of the table are deemed beneficially owned by the optionees. Subject to community property laws, where applicable, the persons or entities named in the table above have sole voting and investment power with respect to all shares of our common stock indicated as beneficially owned by them.
No changes in the Company's internal controls over financial reporting occurred during the year ended December 31, 2010 and 2009 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
During 2010, the Company incurred $2,930 (2009 -$3,660) in management fees to directors. As at December 31, 2010 the Company owes $9,000 in management fees. (2009 - $9,000)
During 2010, the Company incurred $29,313 (2009 - $24,289) in rent and office expenses to a private company controlled by a shareholder. The Company has a three year tenancy agreement with a related party beginning August 1, 2010. Office rent payments are due in the amount of $30,000 for 2011.
During 2010, the Company incurred $7,000 (2009- $155,000) in consulting fees to consultants who are also shareholders with respect to research and development costs attributable to the vertical hydroponic farming system project.
During the year ended December 31, 2010, three companies controlled by significant shareholders earned $14,628 (2008 - $8,840) pursuant to deferred compensation agreements.
At December 31, 2010, $Nil (2009 - $7,253) is payable to Golden Spirit Enterprises Ltd. which is non-interest bearing and without specific terms of repayment. During the year ended December 31, 2010, the Company paid $250 cash and issued 700,300 restricted commons shares valued at $7,003 to satisfy the debt.
At December 31, 2010, $Nil (2008 - $131,372) is receivable from Legacy Wine & Spirits International Ltd. which is non-interest bearing and without specific terms of repayment. During the year, the Company received 2,627,440 restricted common shares of Legacy valued at $131,372 to satisfy the receivable.
At December 31, 2010, the following amounts are due to related parties:
Director
$
9,000
$
9,000
Significant shareholders
79,590
4,253
$
88,590
$
13,253
All related party transactions are in the normal course of business and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
1. Audit Fees: Aggregate fees billed for each of the last two (2) fiscal years for professional services rendered by the principal accountant for the audit of the annual financial statements and review of financial statements included on Form 10-Q:
2009: $28,000
2010: $23,000
2. Audit-Related Fees: Aggregate fees billed in each of the last two (2) fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the financial statements and are not reported previously.
2009: $0
2010: $0
3. Tax Fees: Aggregate fees billed in each of the last two (2) fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning.
2009: $0
2010: $0
4. All Other Fees: Aggregate fees billed in each of the last two (2) fiscal years for products and services provided by the principal accountant, other than the services previously reported.
2009: $0
2010: $0
5. Audit Committee Pre-Approval Procedures. The Board of Directors has not, to date, appointed an Audit Committee.
PART IV
ITEM 15.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit 31.1 - Section 906 Certification of Periodic Report of the Chief
Executive Officer.
Exhibit 31.2 - Section 906 Certification of Periodic Report of the Chief
Financial Officer.
Exhibit 32.1 - Section 302 Certification of Periodic Report of the Chief
Executive Officer.
Exhibit 32.1 - Section 302 Certification of Periodic Report of the Chief
Financial Officer.
b) Form 8-K
8-K filed December 22, 2010 with respect to a change in Directors and corporate offices.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused to be signed on its behalf by the undersigned, whereunto duly authorized.
ORGANA GARDENS INTERNATIONAL INC.
Date: March 31, 2011
By: /s/ Jaclyn Cruz
---------------------------
Jaclyn Cruz
Pursuant to the requirements of the Securities and Exchange Act of 1934, this amended report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates included.
By: /s/ Jaclyn Cruz
Date: March 31, 2011
-----------------------------
Jaclyn Cruz, Director and President
By: /s/ Matt Kelly
Date: March 31, 2011
--------------------------
Matt Kelly, Director, Secretary & Treasurer