10KSB/A 1 t303471.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB/A (AMENDMENT NO. 1) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2006 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 000-30567 GREM USA ( Name of small business issuer in its charter) NEVADA 35-2281610 ------ ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 315 E. WALLACE STREET FORT WAYNE, INDIANA 46803 ------------------- ----- (Address of principal executive offices) (zip code) Issuer's Telephone Number: (260) 456-2354 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Common Stock, $0.001 par value Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. [ ] Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ] Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] The current number of shares of common stock, $0.001 par value, outstanding on March 23, 2007 was 4,232,455,818 shares, held by approximately 189 stockholders. The issuer's revenues for its most recent fiscal year ended December 31, 2006 were $9,077. The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the average bid and ask price, as of March 23, 2007 was approximately $679,001 based on a share value of $0.0004. Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] EXPLANATORY NOTE This Amendment No. 1 on Form 10-KSB (the "Amendment") hereby amends the Form 10-KSB of GREM USA for the fiscal year ended December 31, 2006, as originally filed with the Securities and Exchange Commission on March 30, 2007 (the "Original Filing"). The Amendment is being filed to correct the Company's financial statements and corresponding footnotes, which have been revised to reflect the Company's reverse stock split on February 22, 2007. In addition, the Company has revised its Statements of Cash Flows to reflect the purchase of treasury stock in 2006. No other material changes have been made. GREM USA (A DEVELOPMENT STAGE COMPANY) FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006 INDEX TO REPORT ON FORM 10-KSB PART I PAGE(S) ------- Item 1. Description of Business 2 Item 2. Description of Property 7 Item 3. Legal Proceedings 8 Item 4. Submission of Matters to a Vote of Security Holders 8 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 8 Item 6. Plan of Operation 12 Item 7. Financial Statements 21 Item 8. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 21 Item 8A. Controls and Procedures 22 Item 8B. Other Information 22 PART III Item 9. Directors and Executive Officers, Promoters and Control Persons; Compliance with Section 16(A) of the Exchange Act. 22 Item 10. Executive Compensation 25 Item 11. Security Ownership of Certain Beneficial Owners and Management 27 Item 12. Certain Relationships and Related Transactions 27 Item 13. Exhibits 29 Item 14. Principal Accountant Fees and Services 29 FORWARD-LOOKING STATEMENTS This document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words "may," "could," "estimate," "intend," "continue," "believe," "expect" or "anticipate" or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement. Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any or our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to: o our current lack of working capital; o our ability to continue using Form S-8 to register shares of our common stock for issuance to consultants; o increased competitive pressures from existing competitors and new entrants; o deterioration in general or regional economic conditions; o adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations; o loss of customers or sales weakness; o inability to achieve future sales levels or other operating results; o whether we could be deemed a shell company under Rule 12b-2 of the Exchange Act; o the unavailability of funds for capital expenditures; and o operational inefficiencies in distribution or other systems. For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see "Factors That May Affect Our Plan of Operation" in this document. In this filing references to "Grem," "Company," "we," "our," and/or "us," refers to GREM USA. AVAILABLE INFORMATION We file annual, quarterly and special reports and other information with the SEC that can be inspected and copied at the public reference facility maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549-0405. Information regarding the public reference facilities may be obtained from the SEC by telephoning 1-800-SEC-0330. The Company's filings are also available through the SEC's Electronic Data Gathering Analysis and Retrieval System which is publicly available through the SEC's website (www.sec.gov). Copies of such materials may also be obtained by mail from the public reference section of the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549-0405 at prescribed rates. -1- PART I ITEM 1. DESCRIPTION OF BUSINESS (A) BUSINESS DEVELOPMENT We are a Nevada corporation formed on March 26, 1999 under the name Last Company Clothing, Inc. In March 2001, we acquired 100% of Premier ASP, Inc. and on March 26, 2001, changed our name to "Premier Axium ASP, Inc." On February 28, 2003, we amended our articles of incorporation and changed our name to "Core Solutions, Inc." On May 2, 2003, we changed our name to "Sunshine Ventures, Inc." On June 10, 2003 we changed our name from to "Christine's Precious Petals, Inc." On August 15, 2003, we changed our name to "Global Business Markets, Inc." On December 29, 2004, we changed our name from "Global Business Markets, Inc." to "GREM USA". We had a working capital deficit for the year ended December 31, 2006 of $1,559,908. As a result of our financial status, our audited financial statements for the year ended December 31, 2006 indicate that there is substantial doubt about our ability to continue as a going concern. (B) BUSINESS OF ISSUER GREM is in the development stage as a designer and manufacturer of custom handmade and mass-produced electric guitars, amplifiers and accessories. Grem engaged Greg Reszel, an independent consultant, who will lead the design and research and development of our products. Grem intends to position itself in the niche market for handmade guitars blending exotic & domestic woods and new designs. For the past three (3) years Grem management has focused on the acquisition of design talent, equipment, and a building where Grem could design, manufacture, and ship custom handmade and mass-produced electronic guitars, amplifiers, and accessories. MARKET OVERVIEW 2005 INDUSTRY ANALYSIS The music products industry advanced into record territory in 2000, with sales increasing 1.0 percent to $ .8 billion. Sales gains were spread relatively evenly among the product categories tracked in this report, reflecting continued enthusiasm for music making. The gains were even more heartening, considering the obstacles raised simultaneously by the climate and the economy. In the unusually heavy hurricane season, culminating in the Katrina disaster, brought business in much of the Gulf Coast region to a standstill in the fourth quarter. (We estimate that lack of sales in coastal Alabama, Mississippi and Louisiana trimmed overall industry revenues by approximately 1 percent for the year). Complicating matters, fuel shortages in the aftermath of the hurricanes pushed gasoline prices past the $3 -per-gallon level for several weeks, hitting consumers hard in the wallet and putting a damper on all retail sales. The Federal Reserve also raised interest rates eight times during the year, squeezing the million holders of adjustable rate mortgages, as well as those with credit cards. These setbacks brought the most pessimistic pundits out of the woodwork, and they proceeded to fill the airwaves with forecasts of pending economic instability. Bombarded with bad news and pinched by higher interest and energy costs, consumers, by all rights, should have trimmed their spending in the latter half of the year. However, the lure of our industry's offerings apparently trumped these concerns. -2- There are numerous challenges to sustaining a viable business in the music products industry, but as data in the following pages illustrates, consumer demand doesn't currently seem to be one of them. In the major instrument categories we track, which include fretted instruments, keyboards, wind instruments and drum kits, unit sales topped 8 million in 2000, a percent increase over the previous year. Include computer-based music-making products, DJ, karaoke products and small instruments like harmonicas and hand percussion, and the industry's unit sales probably are closer to 1 million. Comparatively speaking, the music products industry is not a large one--if it were a single company, it would rank 90 on the Fortune 1000, just behind von cosmetics and slightly ahead of Land O'Lakes dairy products. Nevertheless, 1 million unit transactions indicate that we reach a broader swath of the population than most people realize. As a smaller industry, our business is impacted by larger social and economic trends, running the gamut from demographics to currency exchange rates. To understand the larger forces that shaped the music products industry in 2000, it would have helped to spend time in the crowded trading pits of the Chicago Mercantile Exchange, where commodity brokers frantically buy and sell crude oil futures, wheat, timber and most of the world's other basic materials. It's doubtful that a commodity broker ever penned a hit song or designed a unique musical tool, yet, as a group, commodity prices have a tremendous impact on the industry. Paced by a surge in the price of crude oil, from $ 9 a barrel on December 1, 2000, to $ 9 by the end of 2000, commodity prices staged their biggest gains in two decades, rising nearly 0 percent. As a result, factories around the world saw their raw materials costs spike sharply. Whether it was wood for pianos, steel for electronics chassis or plastic resins for cases, raw material prices were up anywhere from 0 percent to 100 percent. These dramatically higher material costs led to the first across-the-board price increases in approximately five years. The increases, which ranged between percent and 8 percent, affected producers in every corner of the globe and definitively ended the deflationary spiral. For the past five years, retailers and manufacturers alike have been lamenting the difficulties of remaining profitable in a deflationary climate. "We have to move more units just to keep our sales volume even," was the standard refrain, at times echoed by "If we could just raise our prices by percent, we'd be in great shape." Against this backdrop, the recent spate of price increases should have been well received. But that was not the case. Due to a glut of supply in every product category, manufacturers were able to pass along only a fraction of their higher material costs. Retailers had a similar problem; most of their revenue gains were dissipated by higher utility bills and freight charges. To understand how competitive pressures forced producers to absorb cost increases, consider the basic plastic guitar case. Although the cost of plastic resin pellets (a petroleum by-product) jumped 80 percent during the year, the price lists of the major case manufacturers indicated at most a 10 percent price rise. Similar cost dynamics played out across all product categories tracked in this report, which helps explain why profit growth was next to non-existent among most of the industry's top suppliers. Complaints notwithstanding, there was some good news to be found in the higher prices. Higher costs usually have a significant impact on consumer buying patterns. Increases in the price of gasoline, for example, have reduced the sale of large SUVs by percent over the past 1 months. However, the percent to 8 percent unit price increases in music and audio products had no perceptible impact on sales. Does this mean what our industry sells is insensitive to price? No. However, it does suggest that the industry is not as price-sensitive as most retailers think and, at slightly higher prices, the current array of music and audio products continues to represent a compelling value. -3- An industry that includes grand pianos, DJ gear, computer software, handcrafted violins, accordions, electric guitars, sousaphones and sound systems does not lend itself to easy generalizations. Results in varying segments are driven by different factors, whether it's the state of popular music, school budgets or the prevailing price of computing power. U.S. SEGMENT DATA Fretted Instruments by any objective measure, 2000 was a good year: the dollar and unit value of guitars reached the highest levels in history. Sales of acoustic guitars increased percent in units and 10.9 percent in retail value, while electrics slipped 1.0 percent in units but advanced 1.0 percent in retail value. Total guitar sales saw a 1.0 percent gain in retail value. amplifiers, strings and related accessories posted similar gains. Despite these banner results, many retailers and manufacturers were unsatisfied; they had expected sales to be even higher. Over the previous two years, a number of manufacturers enjoyed considerable success selling guitars through the mass merchant channel. The best part of this distribution expansion was that the presence of instruments in Wal-Mart, Costco, Target, Sears, Best Buy and other retail stores seemed to produce pure "plus" business, without adversely affecting instrument sales in the MI channel. That changed in late 2000. During the holiday season, mass merchandisers took a serious bite out of fourth-quarter entry-level sales, leaving many MI dealers with unsold inventory at year-end. Early reports indicate that mass merchants also finished 2000 with more unsold guitars than had been projected. This inventory bulge represents a challenge for manufacturers as they chart their distribution strategy for 2000. Do they refocus their efforts on the MI channel? Do they become further involved with mass merchants? Do they try to straddle both retail channels? All three approaches include some element of risk. The industry's distribution challenges appear not to have impacted the buying public's attraction to the guitar (a conclusion verified by robust sales levels). Harder to quantify, but equally telling, is the way other national brands scrambled to piggyback on the guitar's popularity. During 2000, Daimler- Chrysler, H&R lock, the Gap, Hewlett- Packard, I M and Citigroup were among the major companies that featured guitars prominently in their ad campaigns. The reason for this is simple: cross a broad demographic segment, the guitar is associated with fun, creativity, inspiration and a host of other positive attributes. From the iPod generation to the RP members in the best seats at the recent Rolling Stones tour, it's hard to identify any other musical product that has such wide appeal. This bodes well for future sales. Another positive factor fueling industry growth has been the "baseball card" effect: Enthusiastic guitarists want to "collect them all." This has accelerated sales growth in a variety of niche segments, most notably arch-top instruments. Sales growth has also been aided by the tremendous proliferation of models. To put this in perspective, years ago Fender offered two Stratocaster models--one with a vibrato that retailed for $ 9 and one without that retailed for $ 9. Today, including the Squier brand, Fender offers upwards of variations on the Strat, ranging in price from $1 9 to $9, 00 (and that doesn't include the nearly infinite variety of custom instruments that are available). Other guitar manufacturers have been similarly prolific with their new models. road-based consumer appeal, coupled with an unprecedented product offering, ensures strong long-term prospects for guitar market. PRODUCTS AND SERVICES We currently have developed five prototypes that are now in production. -4- FREE RADICAL is a double cutaway design with a locking Floyd Rose vibrato bridge. The body is constructed of a solid Honduras mahogany back with a carved, book matched purple heart top. The neck is made of koa wood with a Brazilian rosewood fret board and pearl dot inlays. The GREM REAPER is a takeoff of a familiar design and is given a wild twist and facelift. The GREM Reaper features a mahogany wood body with a cherry wood neck and a purple heart wood fretboard. The finish is cobalt blue over gold flake and the instrument is carved and embellished to look completely unique. Grem's UPPERCUT is our version of a time proven traditional solid body, except this model is acoustically chambered under a maple wood cap. The neck is 3 piece construction with woods ranging from purple heart, maple and cherry, to goncolo, alves and satinwood. Fretboards are cochen rosewood, maple, ebony or purple heart. Grem's SPECIAL EDITION, also called the SE-101, is another version of a classic design, except we have shrunk the scale to 24.62", and added "soapbars" to the middle and neck positions. With the 3 way switch, the tonal variation is incredible, from bright twang to dirty P 90 blues. This guitar is suitable for slide, rock, country or whatever your fingers like and the shorter scale makes for easy vibrato and bends. The mahogany and purple heart hardwoods keep the tone as chimey and clear as any 25 1/2" scale instrument. The body is petite and contoured to fit the body like a glove. Also the neck on this guitar is attached to the body with stainless allen head bolts that thread into inserts installed in the neck. No more wood screws and with the amount of torque applied to the neck, it feels as though it has been glued in. Grem's STANDARD is a double cutaway, solid body electric guitar with a 24 fret, 25 1/2 inch scale neck, 2 inch thick contoured body with high fret across. It has two humbucking pickups, and a genuine Floyd Rose double locking vibrato system. The neck is made of maple or Honduran mahogany with an ebony fretboard. The body of it is made of cherry wood and Honduran mahogany as well. We plan to establish manufacturing processes for all of our prototypes to allow for expanded production of each guitar during 2006. During the fourth quarter of 2005, we purchased a building in Fort Wayne, Indiana and relocated all manufacturing operations to this building. This relocation has enhanced our capability to manufacture our guitars and allow for the space and equipment needed to produce our prototypes on a larger scale. PROPOSED ACCESSORY ITEMS In addition to our custom handmade guitars, we intend to offer consumers related accessory items including, but not limited to, guitar straps, picks, footrests, cases, speakers, amplifiers and stands, which are intended to be custom made from our facility. Suppliers of component materials and accessories will be chosen based on quality, service and price. At the time of this report we have not currently offered or produced these accessories. SERVICES We will market our guitars as a high quality, sophisticated, musical instrument. Consistent with this marketing plan, we will provide our customers with a product warranty and related support regarding the use and enjoyment of such product. We will warrant our guitars to be free from defects in material and workmanship and will provide each purchaser of our guitars with a one year warranty on parts and labor. During the effective warranty period, we will remedy any product defects. Parts may be replaced under the warranty, at our election, with new or comparable remanufactured parts. The warranty will not extend however, to any guitar which has been subjected to usage for which the -5- product was not designed, which has been damaged as the result of shipping, or which has been altered or repaired in a way that affects product performance or reliability. To further insure customer satisfaction, we will also provide each customer with a ten day money back guarantee, excluding shipping and handling. SUPPLIES AND SUPPLIERS The primary components of our guitars will include electronics, hardware and guitar bodies. These components will be manufactured for us by third parties. We have worked with Brain Banana to provide a unique showcase of anodized aluminum guitar parts as well. Initially, we will assemble our guitars and we plan on beginning mass production once sufficient funds are available, if ever. The price of raw materials, mainly different types of wood, for the manufacture of our guitars is expected to remain stable in the near term. Increases that may occur are expected to be small; although no assurance can be given that this will prove to be the case. Each category of raw materials has several competing suppliers. We do not intend to be dependent upon any one supplier for any of the raw materials that we intend to purchase. We expect all required raw materials to be readily available in sufficient quantities and to be of required quality. In the extreme situation, however, were any required raw materials not to be generally available, it would have a material adverse effect on our operations. COMPETITION We reasonably expect to compete with related or similar guitar, or guitar-like, instruments, apparatus or devices. Moreover, prospective competitors which may enter the field may include established manufacturers of musical or electronic audio instruments and equipment, all of which will be considerably larger than we are in total assets and resources. This could enable them to bring their own technologies and instruments to advanced stages of development and marketing with more speed and efficiency than we have been capable, or will be capable of in the development and marketing of our guitars. There can be no assurance that we will successfully compete with conventional guitars and existing electronic guitar-like instruments or with any improved or new technology instrument, which may be developed in the future. GOVERNMENT REGULATION There are no special or unusual governmental laws or regulations that can be expected to materially impact our operations. INTELLECTUAL PROPERTY We have not filed for any patents or trademarks, and we have no license agreements for any of guitars or our Company name. Although we believe we have obtained common law rights outside that of the United States Patent and Trademark Office through the use of the name "GREM USA" in connection with our business, our failure to obtain proprietary protection in the future for the use of the name could negatively impact our operations. In the near future, we intend to apply for a trademark for "GREM USA." PERSONNEL Beyond our sole officer and director, we currently have one employee. We outsource the majority of our staffing to independent consultants who have received stock as compensation for their services. Additional employees may be hired by us as required for the operation of our business including those required for guitar assembly. We anticipate that within the next twelve months, assuming we obtain substantial additional financing, we will be in the process -6- of hiring and could hire anywhere between twenty and thirty employees. Management believes our future success will depend in large part upon our ability to attract and retain qualified employees. Our employees will not be represented by a union or collective bargaining entity or agreement. CONSULTANTS We have utilized the services of in excess of 15 consultants, whom have received stock for compensation. Refer to the section entitled, "Recent Sales of Securities Registered Pursuant to Form S-8." On February 10, 2004, we initially entered into a one-year oral consulting agreement with Gregory M. Reszel and have continued to utilize his services on a month to month basis, wherein he agreed to assist us with general business consulting services. Services include, but were not limited, to assisting us and management with various projects, design and fabrication of musical instruments, business management services and other business related services. We agreed to compensate and issue Mr. Reszel a number of shares of our free trading common stock, par value $0.001 per share, that equals $60,000 a year or $5,000 per month. The Shares were registered under S-8. Mr. Reszel has been a musician for over thirty years and a luthier, someone who makes stringed musical instruments such as violins or guitars, for over twenty years. INVESTMENT IN TECHNOLOGY Grem has websites displaying the initial designs of the guitars that will be sold and brand descriptions, all of which can be accessed at WWW.GREMUSA.COM, or WWW.GMRESZEL.COM. Information contained on these websites is for information purposes only and is not a part of this report. ITEM 2. DESCRIPTION OF PROPERTY During the fourth quarter of 2005, we purchased a 40,000 square building at 315 E. Wallace Street, Fort Wayne, IN from Taylor Ventures, LLC ("Taylor"). We issued 273,000,000 shares of restricted common stock for a book value of $300,300. As part of the executed documents was a mortgage guaranteeing a value of $300,000 on or before November 8, 2008 to Taylor. We allowed current tenants that had leases in the facility to remain and intend to continue renting to two of the current tenants over the course of next year. We moved our operations to this facility in March 2006. We believe this facility will accommodate our needs as we move toward our goal of mass production of our products. As a result of our method of operations and business plan, we do not require full time personnel to conduct our business. At present, management and consulting services are provided by outside firms or independent contractors on an as needed basis. In the future we anticipate requiring additional personnel; however it is unknown at this time how many individuals will be required. ITEM 3. LEGAL PROCEEDINGS. We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us, which may materially affect us. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. We did not submit any matters to a vote of our security holders during the fiscal year ended December 31, 2006. -7- PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. (A) MARKET INFORMATION Our common stock is traded in the over-the-counter securities market through the National Association of Securities Dealers Automated Quotations Bulletin Board System, under the symbol "GRUS". Our common stock began quotation on the OTC Bulletin Board on February 21, 2001 under the trading symbol "LCCP." On September 8, 2003, following our name change to "Global Business Markets, Inc", we began quotation under the symbol "GBMI". On November 2, 2004, following a symbol change, we began quotation under the symbol "GBMK." On December 29, 2004, following our name change to "GREM USA", we began quotation under the current symbol "GRMU." Subsequently, on March 2, 2007, the Company's symbol was changed to "GRUS", in connection with its reverse stock split which was effective on February 22, 2007 (see note 9 to the notes to the financial statements). The following table sets forth the quarterly high and low bid prices for our Common Stock during our last two fiscal years. The quotations reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions. 2006 2005 ---------------------------------------------------------- High Low High Low ------------------------------ --------------------------- 1st Quarter $ 0.0048 $ 0.0028 $ 0.028 $ 0.0007 2nd Quarter $ 0.0036 $ 0.0020 $ 0.0135 $ 0.0004 3rd Quarter $ 0.0036 $ 0.0024 $ 0.0038 $ 0.0001 4th Quarter $ 0.0036 $ 0.0008 $ 0.001 $ 0.0001 (B) HOLDERS OF COMMON STOCK As of March 23, 2007, we had approximately 189 stockholders of record of the 4,232,455,818 shares outstanding. As of March 23, 2007, the closing price of GRUS's shares of common stock was $0.0004 per share. (C) DIVIDENDS We have never declared or paid dividends on our Common Stock. We intend to follow a policy of retaining earnings, if any, to finance the growth of the business and do not anticipate paying any cash dividends in the foreseeable future. The declaration and payment of future dividends on the Common Stock will be at the sole discretion of the Board of Directors and will depend on our profitability and financial condition, capital requirements, statutory and contractual restrictions, future prospects and other factors deemed relevant. (D) SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS The Company has adopted various equity compensation plans and registered shares under these plans on Form S-8 to provide compensation to our independent contractors and consultants for their services rendered for the Company. On February 2, 2004, the board adopted a 2004 Plan, which allowed for the issuance of 7,500,000 post-spilt shares of common stock under the plan. -8- Although the use of our equity securities was costly to Grem, it enabled us to proceed with our business plan without the required capital necessary to pay our consultants. RECENT ISSUANCES OF SECURITIES REGISTERED PURSUANT TO FORM S-8 The following table is a summary of the 2006 registration statements filed on Form S-8. NUMBER OF SHARES DATE FORM S-8 FILED REGISTERED NAME OF PLAN --------------------- ---------------------- ----------------------------------- February 3, 2006 700,000,000 (1) GREM USA Stock Compensation Plan, as amended (1) Section 6 of GREM USA's Stock Compensation Plan, originally filed on May 5, 2005 was amended, which changed the reserved number of shares allowed for issuance to not exceed 1,250,000,000 from the previously amended amount of 550,000,000. During the year ended December 31, 2006, we issued shares of common stock to the following consultant/employee. These shares were issued in a Registration Statement on Form S-8 filed on November 18, 2005. DATE OF NUMBER OF PERSON ISSUED TO ISSUANCE SHARES VALUE OF SHARES -------------------------------------------------------------------------------- Catherine Konkle February 14, 2006 6,000,000 $4,800 We also issued shares to the following consultants/employees from a Registration Statement on Form S-8 filed on February 3, 2006. NUMBER OF VALUE OF PERSON ISSUED TO DATE OF ISSUANCE SHARES SHARES ------------------------------------------ ------------------------------------- Catherine Konkle February 14, 2006 15,000,000 $ 12,000 Dennis Nartker February 14, 2006 30,000,000 $ 24,000 Gregory Reszel February 14, 2006 10,000,000 $ 8,000 Matthew Lettau February 14, 2006 10,000,000 $ 8,000 Joshua Harris February 14, 2006 3,000,000 $ 2,400 Steve Carnes February 14, 2006 150,000,000 $ 120,000 James Taylor February 14, 2006 30,000,000 $ 24,000 Nathan Weides February 14, 2006 3,000,000 $ 2,400 Dennis Nartker February 27, 2006 20,000,000 $ 16,000 Catherine Konkle March 2, 2006 20,000,000 $ 16,000 Dennis Nartker March 2, 2006 20,000,000 $ 16,000 Gregory Reszel March 2, 2006 10,000,000 $ 8,000 Joshua Harris March 2, 2006 3,000,000 $ 2,400 Steve Carnes March 2, 2006 150,000,000 $ 120,000 Nathan Weides March 2, 2006 3,000,000 $ 2,400 David Peters March 7, 2006 3,000,000 $ 2,700 Catherine Konkle April 20, 2006 10,000,000 $ 6,000 Dennis Nartker April 20, 2006 10,000,000 $ 6,000 Gregory Reszel April 20, 2006 10,000,000 $ 6,000 Joshua Harris April 20, 2006 2,000,000 $ 1,200 Steve Carnes April 20, 2006 150,000,000 $ 90,000 Nathan Weides April 20, 2006 2,000,000 $ 1,200 David Peters April 20, 2006 2,000,000 $ 1,200 Dennis Nartker May 16, 2006 6,000,000 $ 4,200 Chad Ingram May 16, 2006 13,000,000 $ 9,100 -9- Steve Carnes May 23, 2006 40,000,000 $ 24,000 Chad Ingram May 23, 2006 30,000,000 $ 18,000 Dennis Nartker May 23, 2006 20,000,000 $ 12,000 Greg Reszel May 23, 2006 20,000,000 $ 12,000 Joshua Harris May 23, 2006 3,000,000 $ 1,800 Catherine Konkle May 23, 2006 20,000,000 $ 12,000 David Peters May 23, 2006 4,000,000 $ 2,400 Nathan Weides May 23, 2006 4,000,000 $ 2,400 Albert Rasch September 6, 2006 10,000,000 $ 8,000 Gregory Reszel November 16, 2006 15,000,000 $ 7,500 Chad Ingram November 16, 2006 10,000,000 $ 5,000 Catherine Konkle November 16, 2006 5,000,000 $ 2,500 ITEM 6. PLAN OF OPERATION. This report contains forward-looking statements. Actual results and events could differ materially from those projected, anticipated, or implicit, in the forward-looking statements as a result of the risk factors set forth below and elsewhere in this report. With the exception of historical matters, the matters discussed herein are forward-looking statements that involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements concerning anticipated trends in revenues and net income, the date of introduction or completion of our products, projections concerning operations and available cash flow. Our actual results could differ materially from the results discussed in such forward-looking statements primarily as the result of insufficient cash to pursue production and marketing efforts. The following discussion of our plan of operation should be read in conjunction with our financial statements and the related notes thereto appearing elsewhere herein. OVERVIEW We are a Nevada corporation formed on March 26, 1999 under the name "Last Company Clothing, Inc." which planned to engage in the business of importing and wholesaling a line of clothing to serve the retail trade known as the "action sports" or "extreme" sports industry. After a number of name changes, on December 29, 2004 at our annual meeting of stockholders we approved a change of name to GREM USA. We have repositioned the company as a designer and manufacturer of custom handmade and mass-produced electronic guitars, amplifiers, and accessories. PLAN OF OPERATION We currently have had minimal operations since we repositioned the company from our previous lines of business to the current plan of guitar manufacturing and have financed all of our operations from loans, and sales of common stock to affiliated parties and private investors. We will continue to sell our common stock to help us complete the development of our first production models. We may need to engage in additional research and development for the purpose of further refining our instruments and simplifying the manufacturing process. We hope to represent a new development respecting one of the world's oldest and most popular musical instruments, the guitar. -10- SATISFACTION OF OUR CASH OBLIGATIONS FOR THE NEXT 12 MONTHS. We plan on satisfying our cash obligations over the next twelve months through additional equity and/or third party financing and through revenue generated from our anticipated guitar sales. During 2006, we received $440,000 in connection with our mortgage loan agreement, which carries an interest rate of 9.75% per annum and is due in monthly installments of $5,639 per month (included in this amount are principle, interest and real estate taxes), maturing July 2021. However, under our current plan of operation we may not have the minimal cash requirement to continue in operation for the next 12 months without additional equity or third party financing. Management anticipates the needs for additional funds but at this time is not able to determine how much will be necessary. We do not anticipate generating revenues sufficient enough to satisfy our working capital requirements within the next twelve months. Additionally, we will continue to issue stock to our consultants in lieu of making cash payment to consultants. In 2006, we issued consultants shares of our common stock valued at approximately $639,600. GOING CONCERN The financial statements included in this filing have been prepared in conformity with generally accepted accounting principles that contemplate the continuance of the Company as a going concern. The Company's cash position may be inadequate to pay all of the costs associated with production and marketing. Management intends to use borrowings and security sales to mitigate the effects of its cash position, however no assurance can be given that debt or equity financing, if and when required will be available. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should the Company be unable to continue existence. SUMMARY OF ANY PRODUCT RESEARCH AND DEVELOPMENT THAT WE WILL PERFORM FOR THE TERM OF OUR PLAN OF OPERATION. Gregory Reszel has been continually researching and developing our five initial prototype guitars and at this time we have completed the design of the five prototypes. We will now focus on operations on implementing mass production capabilities once sufficient funds are available, if ever, now that we have successfully moved our operations to our newly purchased building. We expect in the near future to begin selling and shipping these five prototypes. Mr. Reszel however, will continually develop and fine tune our prototypes to constantly improve the quality and sound of the guitar. In 2006, we issued shares of our common stock to Mr. Reszel in exchange for services amounting to $41,500. EXPECTED PURCHASE OR SALE OF PLANT AND SIGNIFICANT EQUIPMENT. In the past we relied on Gregory Reszel, who owns a significant amount of equipment and tools that were used in producing our handmade guitars. However, since receiving cash from the issuance of promissory notes and sale of restricted stock, Edward Miers, our president, has spent a significant amount of time locating various pieces of used manufacturing equipment. As we have acquired the equipment we have begun to retool, which will allow us to increase our efficiency as well as increase production time of the guitars. Some of the equipment we have purchased during the last year is: a clamp carrier, a ripsaw, a planer, a router, and a CNC machine. All of the equipment is meant to position the Company and establish the capabilities for mass production of our guitars. Previously, we were able to finance all equipment and items currently being used in our previous building from American Molded Products, who is also the entity that we leased the building from, located in Spencerville, Indiana. We continue to make monthly payments on this equipment and have since relocated the equipment to our new building. Once revenues are generated, we anticipate purchasing additional equipment to further enhance our production capabilities. If we are able to generate revenues, we may purchase additional equipment such as routers, which generate automated rough cuts of our prototypes and fine tunes the quality, efficiency, and precision of our guitars. -11- During the last quarter of 2005, we purchased a 40,000 square building in Fort Wayne, IN for 273 million shares of our restricted common stock, valued at $300,300. We believe this facility will accommodate our needs as we move toward our goal of mass production of our products. We moved our operations to this new facility in March of 2006 and all of the equipment was completely installed and fully functional by the end of March 2006. SIGNIFICANT CHANGES IN THE NUMBER OF EMPLOYEES. As of December 31, 2006, we had one employee, other than our sole officer and director, Edward Miers. We are dependent upon Edward Miers but we have also relied on the services of independent consultants and contractors to perform various professional services when needed. We believe that this use of third-party service providers enhances our ability to contain general and administrative expenses in the future, as we are not bound by long term contracts. We will need to hire full time operational staff as our operations commence. We anticipate the need for seven to twenty employees to be fully operational. However, due to our limited cash resources, we do not plan to add employees until such time as we have raised adequate funds to support our operations. OFF-BALANCE SHEET ARRANGEMENTS We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. LIQUIDITY AND CAPITAL RESOURCES As a company with minimal operations and not having generated revenues, we do not have the cash flow to operate our business. We are dependent on a combination of borrowed funds, the sale of our restricted common stock, and the issuance of unrestricted common stock registered under S-8 to facilitate our cash requirements. Until such time as we generate revenues, if at all, we plan to accrue the money expensed by Mr. Miers and will compensate him with either stock or cash when available. A critical component of our operating plan impacting our continued existence is the ability to obtain additional capital through additional equity and/or debt financing. We do not anticipate enough positive internal operating cash flow until such time as we can generate substantial revenues, which may take the next few years to fully realize. In the event we cannot obtain the necessary capital to pursue our strategic plan, we may have to cease or significantly curtail our operations. This would materially impact our ability to continue operations. Our near term cash requirements are anticipated to be offset through the receipt of funds from private placement offerings and loans obtained through private sources. Since inception, we have financed cash flow requirements through debt financing and issuance of common stock for cash and services. As we expand operational activities, we may continue to experience net negative cash flows from operations, pending receipt of product sales, and will be required to obtain additional financing to fund operations through common stock offerings and debt financing to the extent necessary to provide working capital. -12- Over the next twelve months we believe that existing capital and anticipated funds from operations will not be sufficient to sustain operations and planned expansion. Consequently, we will be required to seek additional capital in the future to fund growth and expansion through additional equity or debt financing or credit facilities. No assurance can be made that such financing would be available, and if available it may take either the form of debt or equity. In either case, the financing could have a negative impact on our financial condition and our stockholders. We anticipate incurring operating losses over the next twelve months. Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development. Such risks include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks we must, among other things, obtain a customer base, implement and successfully execute our business and marketing strategy, continue to develop and upgrade technology and products, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations. FACTORS THAT MAY AFFECT OUR PLAN OF OPERATION An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information in this annual report and any other filings we have made in the past or that we may make with the United States Securities and Exchange Commission in the future before investing in our common stock. If any of the following risks occur, our business, operating results and financial condition could be seriously harmed. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. WE HAVE NO OPERATING HISTORY TO USE TO EVALUATE OUR BUSINESS. We have no operating history for you to use to evaluate our business. We have devoted almost all of our efforts to the repositioning our company as a designer and manufacturer of custom handmade and mass-produced electronic guitars, amplifiers and accessories. We are in an early stage in our development and it is possible that our products may not sell in the volumes or at the prices that we anticipate, if at all. If that occurs, we would receive less than the projected income from sales of products and our profitability would suffer. OUR FUTURE SUCCESS IS DEPENDENT ON THE PERFORMANCE AND CONTINUED SERVICE OF EDWARD MIERS, AND OUR ABILITY TO ATTRACT AND RETAIN SKILLED PERSONNEL. Our performance and future operating results are substantially dependent on the continued service and performance of Edward Miers, our sole officer and sole director. To the extent that Mr. Miers' services become unavailable, our business and prospects may be adversely affected. Should we not be able to retain Mr. Miers' services, we do not know whether an equally qualified person could be employed to replace Mr. Miers. If we are successful in implementing and developing our business, it will require additional managerial and technical personnel. Competition for highly qualified personnel is intense, and we cannot be assured that we can recruit key employees or that we will be able to attract or retain highly qualified technical and managerial personnel in the future. The loss of the services of our consultants or Mr. Miers and the potential inability to attract and retain the necessary technical and managerial personnel could have a material adverse effect on our financial condition, operating results, and cash flows. -13- MANY OF OUR COMPETITORS ARE LARGER AND HAVE GREATER FINANCIAL AND OTHER RESOURCES THAN WE DO AND THOSE ADVANTAGES COULD MAKE IT DIFFICULT FOR US TO COMPETE WITH THEM. The guitar manufacturing industry is extremely competitive and includes several companies that have achieved establishing a significant market for their products and have substantially greater financial, development and marketing resources than we do. If we are unable to establish a market for our products, or effectively compete in the market, we will fail. RISKS RELATED TO OUR FINANCIAL CONDITION WE HAVE NOT ACCOUNTED FOR THE WITHHOLDING OF FEDERAL OR STATE TAXES UPON THE ISSUANCE OF COMMON STOCK FOR SERVICES RENDERED BY OUR OFFICER, EMPLOYEES AND CONSULTANTS, WHICH MAY SUBJECT US TO SUBSTANTIAL TAX LIABILITIES, INCLUDING PENALTIES AND INTEREST. The Company did not recognize withholding tax liabilities on the issuance of shares of common stock to our sole officer and director for the years ended December 31, 2005 and 2006. Further, over the past several years we have issued several million dollars worth of stock compensation, to consultants who may be deemed to be employees, without withholding potential federal or state income tax liabilities. The Company has based its decision not to withhold taxes on the belief such shares of common stock were issued in connection with the performance of services by true consultants and not by employees, and, as such, are not subject to tax withholding requirements. There can be no assurance, however, that the IRS or state taxing authorities will agree with the Company's position and will not assert that the Company is liable for the failure to withhold income and employment taxes with respect to the issuance of common stock services. If the Company became liable for the failure to withhold taxes on the issuances, the aggregate potential liability, exclusive of any interest or penalties, would have a material impact on the Company and its results of operations. The Company has not recognized accruals for the potential withholding taxes, penalties and/or interest that may be imposed with respect to the withholding tax issues. If taxing authorities assert such issues and prevail related to these withholding tax issues and other related contingencies, including penalties, the liability that could be imposed by taxing authorities would be substantial. IF WE ARE UNABLE TO OBTAIN ADDITIONAL FUNDING OUR BUSINESS OPERATIONS WILL BE HARMED AND IF WE DO OBTAIN ADDITIONAL FINANCING OUR THEN EXISTING STOCKHOLDERS WILL SUFFER SUBSTANTIAL DILUTION. We will require additional funds to initiate our sales and marketing activities. We anticipate that we will require additional funds for our continued operations for the next twelve months, depending on revenues, if and when we become fully operational. Additional capital will be required to effectively support the operations and to otherwise implement our overall business strategy. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. The inability to obtain additional capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will likely be required to curtail our marketing and development plans and possibly cease our operations. Any additional equity financing will involve substantial dilution to our then existing stockholders. WE EXPECT A SUBSTANTIAL INCREASE IN EXPENSES AND MAY NOT ACHIEVE SIGNIFICANT PROFITABILITY, THIS MAY CAUSE OUR STOCK PRICE TO FALL. Because we are in the early stage of operations, we expect to continue to incur operating losses and to have a negative cash flow unless and until we are able to generate revenues and reach profitability. We expect that during the next twelve months, as we try to develop and launch our products; our operating expenses will be increasing, especially in the areas of development, sales and marketing and brand promotion. We anticipate that we will have to incur substantial costs and expenses related to: -14- o hiring additional executive and administrative personnel, and additional product development personnel; o continued development of our guitars and the development of proposed accessory products; o advertising, marketing, and promotional activities. The extent of our losses in the future will depend on our ability to commence commercial operations and generate revenues on a profitable basis. To do so, we will have to develop and implement successful manufacturing, sales, and marketing programs for our guitars. No assurance can be given that we will be able to achieve this objective or that, if this objective is achieved, that we will ever be profitable. Our ability to achieve sustained profitability will depend on our ability to generate and sustain revenues while maintaining reasonable expense levels. Although we intend to increase our spending on the activities listed above, these efforts may not result in the generation of sufficient revenues. If revenues are not generated, this may have a subsequent impact on our stock price. WE ARE SUBJECT TO A WORKING CAPITAL DEFICIT, WHICH MEANS THAT OUR CURRENT ASSETS ON DECEMBER 31, 2006 WERE NOT SUFFICIENT TO SATISFY OUR CURRENT LIABILITIES AND, THEREFORE, OUR ABILITY TO CONTINUE OPERATIONS IS AT RISK. We had a working capital deficit for the year ended December 31, 2006, which means that our current liabilities exceeded our current assets on December 31, 2006 by $1,559,908. As of December 31, 2006, we had $75,421 in current assets. Current assets are assets that are expected to be converted to cash within one year. Our working capital deficit means that our current assets on December 31, 2006 were not sufficient to satisfy all of our current liabilities on those dates. If our ongoing operations do not begin to provide sufficient profitability to offset the working capital deficit, we may have to raise capital or debt to fund the deficit or curtail future operations. If we fail to establish profitable operations and continue to incur losses; the price of our common stock could be expected to fall. WE HAVE NOT RECEIVED ADVICE FROM TAX COUNSEL AS TO THE STATUS OF MR. MIERS AS AN INDEPENDENT CONTRACTOR VERSUS AN EMPLOYEE, AND AS THE RESULT WE MAY BE SUBJECT TO LIABILITY FOR EMPLOYMENT TAXES, INTEREST, AND PENALTIES. Our President, Mr. Miers, has received income from us in the form of cash and stock wherein we have not held back employment taxes as the result of treating Mr. Miers as an independent contractor. If we have classified Mr. Miers as a non-employee incorrectly, and have no reasonable basis for treating Mr. Miers as an independent contractor, then in that event we may be held liable for employment taxes, interest, and penalties for the payments made to Mr. Miers. WE RECEIVED AN OPINION FROM OUR ACCOUNTANTS WHICH RAISES DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN. Our audited financial statements for the years ended December 31, 2006 and 2005, which are included in this filing, indicate that there was substantial doubt about our ability to continue as a going concern due to our need to generate cash from operations and obtain additional financing. -15- RISKS RELATED TO OUR COMMON STOCK OUR ISSUANCE OF SHARES FOR CONSULTING SERVICES MAY CAUSE IMMEDIATE AND SUBSTANTIAL DILUTION TO OUR EXISTING STOCKHOLDERS. The continual issuance of shares for services to consultants will result in substantial dilution to the interests of our stockholders. We continue to maintain losses each quarter primarily as a result of additional shares being issued each quarter. If we are unable to obtain revenues or financing to pay our consultants, we will likely continue to issue stock as payment for services which will cause immediate and substantial dilution to our current stockholders. The effect of this dilution increases the probability of our stockholders losing their entire investment. OUR COMMON STOCK IS ILLIQUID AND THE PRICE OF OUR COMMON STOCK MAY BE NEGATIVELY IMPACTED BY FACTORS WHICH ARE UNRELATED TO OUR OPERATIONS. Our common stock currently trades on a limited basis on the OTC Bulletin Board. The market price of our common stock could fluctuate substantially due to a variety of factors, including our inability to generate revenues or profits, market perception of our ability to achieve our planned growth, quarterly operating results of other companies, trading volume in our common stock, changes in general conditions in the economy, the amount of our executive compensation, and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock. Our common shares are currently quoted for public trading on the OTC Bulletin Board. The trading price of our common shares has been subject to wide fluctuations. Trading prices of our common shares may fluctuate in response to a number of factors, many of which will be beyond our control. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies, especially those with no current business operation. There can be no assurance that trading prices and price earnings ratios previously experienced by our common shares will be matched or maintained. These broad market and industry factors may adversely affect the market price of our common shares, regardless of our operating performance. In the past, following periods of volatility in the market price of a company's securities, securities class-action litigation has often been instituted. Such litigation, if initiated, could result in substantial costs for us and a diversion of management's attention and resources. A DECLINE IN THE PRICE OF OUR COMMON STOCK COULD AFFECT OUR ABILITY TO RAISE FURTHER WORKING CAPITAL AND ADVERSELY IMPACT OUR ABILITY TO CONTINUE OUR NORMAL OPERATIONS. A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because our operations have been primarily financed through the sale of equity securities, a decline in the price of our common stock could be especially detrimental to our liquidity and our operations. Such reductions would force us to reallocate funds from other planned uses and would have a significant negative effect on our business plans and operations, including our ability to develop new products and continue our current operations. If our stock price declines, there can be no assurance that we can raise additional capital or generate funds from operations sufficient to meet our obligations. If we are unable to raise sufficient capital in the future, we may not be able to have the resources to continue our normal operations. -16- BECAUSE OUR COMMON STOCK IS DEEMED A LOW-PRICED "PENNY" STOCK, AN INVESTMENT IN OUR COMMON STOCK SHOULD BE CONSIDERED HIGH RISK AND SUBJECT TO MARKETABILITY RESTRICTIONS. Since our common stock is a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act, it will be more difficult for investors to liquidate their investment. Until the trading price of the common stock rises above $5.00 per share, if ever, trading in our common stock is subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules require broker-dealers, before effecting transactions in any penny stock, to: o Deliver to the customer, and obtain a written receipt for, a disclosure document; o Disclose certain price information about the stock; o Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer; o Send monthly statements to customers with market and price information about the penny stock; and o In some circumstances, approve the purchaser's account under certain standards and deliver written statements to the customer with information specified in the rules. Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to sell the common stock and may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future. NASD SALES PRACTICE REQUIREMENTS MAY ALSO LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK. In addition to the "penny stock" rules described above, the National Association of Securities Dealers (NASD) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the NASD believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The NASD requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares. OUR SOLE DIRECTOR AND EXECUTIVE OFFICER, MR. EDWARD MIERS, BENEFICIALLY OWNS APPROXIMATELY 85.5% OF OUR COMMON STOCK. As a result of Mr. Miers' substantial ownership of our common stock, he will be able to exert significant influence over the direction of our affairs and business, including any determination with respect to our acquisition or disposition of assets, future issuances of common stock or other securities, and the election or removal of directors. Such a concentration of ownership may also have the effect of delaying, deferring, or preventing a change in control of the Company or cause the market price of our stock to decline. Additionally, Mr. Miers accrues his salary for his position as our sole officer and may continue to increase his ownership through conversion of his salary into additional shares of common stock. Notwithstanding the exercise of his fiduciary duties as our sole officer and director and duties as a majority stockholder may have to us or our other stockholders in general, Mr. Miers may have interests different than yours. ITEM 7. FINANCIAL STATEMENTS. See Index to Financial Statements and Financial Statement Schedules appearing on page F-1 through F-13 of this Form 10-KSB. -17- ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. ITEM 8A. CONTROLS AND PROCEDURES. We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods. As of the end of the period covered by this Annual Report, Mr. Edward Miers, our sole officer, evaluated the effectiveness of our disclosure controls and procedures. Based on the evaluation, which disclosed no significant deficiencies or material weaknesses, Mr. Miers, concluded that our disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 8B. OTHER INFORMATION. Since the Company's inception there have been several name changes. Although, the name changes were properly reflected in filings made with the State of Nevada, not all of the name changes were in accordance with the rules promulgated under Section 14 of the Securities Exchange Act of 1934, as amended. The following name changes did not satisfy the rules under Section 14 and were done without stockholder approval: Last Clothing Company, Inc. to MIVI Biomedical Technologies; Core Solutions, Inc. to Sunshine Ventures, Inc.; Sunshine Ventures, Inc. to Christine Precious Petals, Inc.; and Christine Precious Petals, Inc. to Global Business Markets, Inc. At this time, the Company is unaware of any consequences of the actions taken above; however, should a problem arise or the SEC seek potential violations against the Company, it may have a material adverse effect on our operations. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. The following table sets forth the sole officer and director of the Company. Directors will be elected at our annual meeting of stockholders and serve for one year or until their successors are elected and qualify. Officers are elected by the Board and their terms of office are, except to the extent governed by employment contract, at the discretion of the Board. ===================== ================== ======================================= NAME AGE POSITIONS AND OFFICES HELD --------------------- ------------------ --------------------------------------- Edward Miers 43 CEO, President, Principal Accounting Officer, Secretary, Treasurer and Director --------------------- ------------------ --------------------------------------- DUTIES, RESPONSIBILITIES AND EXPERIENCE EDWARD MIERS, age 43, has been the Chief Executive Officer, President, Secretary/Treasurer and Director of the Company since July 29, 2003. Prior to that, Mr. Miers owned and operated Research Capital Group, Inc., a private company, from 2002 until 2004. From 1999 until 2002, he owned and operated Diablo Stocks, Inc., also a private company. During the 1980s, Mr. Miers operated two private business ventures related to the music industry, Miers Systems, Inc. and Summit Sound, Inc. Miers Systems produced audio amplifiers and Summit Sound was a retailer of guitars, amplifiers, and professional audio equipment. Mr. Miers has not in the past and does not currently serve on the board of directors for any other public company. -18- ELECTION OF DIRECTORS AND OFFICERS. Directors are elected to serve until the next annual meeting of shareholders and until their successors have been elected and qualified. Officers are appointed to serve until the meeting of the Board of Directors following the next annual meeting of shareholders and until their successors have been elected and qualified. No Executive Officer or Director of the Corporation has been the subject of any Order, Judgment, or Decree of any Court of competent jurisdiction, or any regulatory agency permanently or temporarily enjoining, barring, suspending or otherwise limiting him from acting as an investment advisor, underwriter, broker or dealer in the securities industry, or as an affiliated person, director or employee of an investment company, bank, savings and loan association, or insurance company or from engaging in or continuing any conduct or practice in connection with any such activity or in connection with the purchase or sale of any securities. No Executive Officer or Director of the Corporation has been convicted in any criminal proceeding (excluding traffic violations) nor is the subject of a criminal proceeding which is currently pending. No Executive Officer or Director of the Corporation is the subject of any pending legal proceedings. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires our executive officers and directors, and persons who beneficially own more than ten percent of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater than ten percent beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based upon a review of the copies of such forms furnished to us and written representations from our executive officers and directors, we believe that during the year ended 2006, Edward Miers filed all forms 3, forms 4 and forms 5 on a timely basis. AUDIT COMMITTEE AND FINANCIAL EXPERT We do not have an Audit Committee, Mr. Edward Miers, our sole director, performs some of the same functions of an Audit Committee, such as: recommending a firm of independent certified public accountants to audit the annual financial statements; reviewing the independent auditors independence, the financial statements and their audit report; and reviewing management's administration of the system of internal accounting controls. The Company does not currently have a written audit committee charter or similar document. We have no financial expert. We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of our start-up operations, we believe the services of a financial expert are not warranted. -19- CODE OF ETHICS We have not adopted a corporate code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions in that our sole officer and director serves in all the above capacities. Our decision to not adopt such a code of ethics results from our having only one officer and director operating as the sole management for the Company. We believe that as a result of the limited interaction, which occurs having a sole officer and director for the Company eliminates the current need for such a code, in that violations of such a code would be reported to the party generating the violation. NOMINATING COMMITTEE We do not have a Nominating Committee or Nominating Committee Charter. Our sole director, Mr. Edward Miers, performed some of the functions associated with a Nominating Committee. We have elected not to have a Nominating Committee in that we are a development stage company with limited operations and resources. LIMITATION OF LIABILITY OF DIRECTORS Pursuant to the Nevada General Corporation Law, our Articles of Incorporation exclude personal liability for our Directors for monetary damages based upon any violation of their fiduciary duties as Directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction from which a Director receives an improper personal benefit. This exclusion of liability does not limit any right which a Director may have to be indemnified and does not affect any Director's liability under federal or applicable state securities laws. We have agreed to indemnify our directors against expenses, judgments, and amounts paid in settlement in connection with any claim against a Director if he acted in good faith and in a manner he believed to be in our best interest. ITEM 10. EXECUTIVE COMPENSATION (A) GENERAL The following table sets forth information concerning the total compensation that we have paid or that has accrued on behalf of our chief executive officer and other executive officers with annual compensation exceeding $100,000 during the most recent fiscal year ending December 31, 2006 and for the fiscal years ending December 31, 2005 and 2004. The remuneration described in the table does not include the cost of GREM USA's benefits furnished to the named executive officers, including premiums for health insurance and other benefits provided to such individuals that are extended in connection with the conduct of GREM USA's business. (B) SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation -------------------------------------------------------------------- Awards Payouts --------------------------- All other Name and Principal Restricted LTIP compen- Position Year Salary Bonus Other Stock Options Payouts sation --------------------------------------------------------------------------------------------------- Edward Miers, 2006 $1,200,000(1) -0- -0- -0- -0- -0- -0- Chief Executive Officer and 2005 $1,200,000(2) -0- -0- -0- -0- -0- -0- President 2004 $ 300,000(3) -0- -0- -0- -0- -0- -0- -20- (1) During the fiscal year ended December 31, 2006, our sole officer and director did not receive cash compensation for his services. $1,200,000 of his salary has been accrued at December 31, 2006. (2) During the fiscal year ended December 31, 2005 our sole officer and director did not receive cash compensation for his services, however, he did receive 1,000,000,000 restricted shares of the Company's common stock, on May 2, 2005, valued at $300,000 as partial compensation for his services during 2005. Mr. Miers has accrued his remaining salary for 2005. (3) During the fiscal year ended December 31, 2004 our sole officer and director did not receive cash compensation for his services as an officer or director, however, on February 10, 2005, he did receive 1,000,000,000 shares of the Company's common stock as compensation for his services during 2004. The shares were valued at $300,000.
CONSULTANTS COMPENSATION Due to our lack of cash and inability to generate revenues at this point in time, we have utilized the services of consultants, whom have received stock for compensation. The following consultants received stock for compensation in excess of $100,000. NAME OF AMOUNT OF VALUE OF TYPE OF CONSULTANT SHARES ISSUED SHARES SERVICES Steve Carnes 490,000,000 $354,000 Management and M&A Services TERMINATION OF EMPLOYMENT There are no compensatory plans or arrangements, including payments to be received from the Company, with respect to any person associated with the Company which would in any way result in payments to any such person because of his resignation, retirement, or other termination of such person's employment with the Company or its subsidiaries, or any change in control of the Company, or a change in the person's responsibilities following a change in control of the Company. COMPENSATION COMMITTEE We currently do not have a compensation committee of the board of directors. Until a formal committee is established, our sole director, Edward Miers, will review all forms of compensation provided to our executive officers, directors, consultants and employees including stock compensation. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table presents information, to the best of our knowledge, about the beneficial ownership of our common stock on March 23, 2007, held by those persons known to beneficially own more than 5% of our capital stock and by our directors and executive officers. The percentage of beneficial ownership for the following table is based on 4,232,455,818 shares of common stock outstanding as of March 23, 2007. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and does not necessarily indicate beneficial ownership for any other purpose. Under these rules, beneficial ownership includes those shares of common stock over which the stockholder has sole or shared voting or investment power. It also includes (unless footnoted) shares of common stock that the stockholder has a right to acquire within 60 days after March 23, 2007 through the exercise of any option, warrant or other right. The percentage ownership of the outstanding common stock, however, is based on the assumption, expressly required by the rules of the Securities and Exchange Commission, that only the person or entity whose ownership is being reported has converted options or warrants into shares of our common stock. -21-
--------------------------------------------------------------------------------------------------- Name and Address of Percent of Beneficial Owner (1), Number Ownership Officer, or Director of Shares (2) --------------------------------------------------------------------------------------------------- Edward Miers President, CEO, Secretary, Treasurer, Director 3,618,920,358 85.5% 315 E. Wallace Street, Fort Wayne, Indiana 46803 Cede & Co PO Box 222, Bowling Green Station, New York, NY 10274 502,962,582 11.9% ---------------- -------------------- Total of all Officers, Directors, and Beneficial Owners 4,121,882,940 97.4% ================ ==================== (1) As used in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). (2) Figures are rounded to the nearest tenth of a percent.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS We are and will continue to be dependent on our sole officer and director, Ed Miers, to provide services and cash until we are able to generate revenues. Until such time, we plan to accrue the money expensed by Mr. Miers and will compensate him with either stock or cash when available. On March 2, 2007, Mr. Miers received 3,000,000,000 shares of restricted common stock as satisfaction for $408,548 of his accrued salary for 2005 and for $1,100,000 of his accrued salary for 2006. ITEM 13. EXHIBITS. EXHIBIT NUMBER DESCRIPTION 2.1 Plan of Reorganization between Last Company Clothing Inc. and Premier ASP Inc. dated February 23, 2001 (INCORPORATED BY REFERENCE TO THE EXHIBITS TO FORM 8-K FILED ON APRIL 25, 2001) 2.2 Plan of Reorganization between Premier Axium ASP Inc. and all of the stockholders of The Savvy Employer Inc. dated July 16, 2001 (INCORPORATED BY REFERENCE TO THE EXHIBITS TO FORM 10-QSB FILED ON AUGUST 23, 2001) 2.3 Plan of Reorganization between Premier Axium ASP Inc. and all of the stockholders of Active Employment Solutions Inc. dated July 16, 2001 (INCORPORATED BY REFERENCE TO THE EXHIBITS TO FORM 10-QSB FILED ON AUGUST 23, 2001) 3(i).1 Articles of Incorporation dated March 26, 1999 (INCORPORATED BY REFERENCE TO THE EXHIBITS TO FORM 10-SB FILED ON MAY 8, 2000) 3(i).2 Certificate of Amendment to Articles of Incorporation dated July 12, 2000 (INCORPORATED BY REFERENCE TO THE EXHIBITS TO FORM S-8 FILED ON JANUARY 30, 2002) 3(i).3 Certificate of Amendment to Articles of Incorporation dated October 5, 2000 (INCORPORATED BY REFERENCE TO THE EXHIBITS TO FORM 10-KSB FILED ON FEBRUARY 9, 2001) 3(i).4 Certificate of Amendment to Articles of Incorporation dated November 16, 2000 (INCORPORATED BY REFERENCE TO THE EXHIBITS TO FORM S-8 FILED ON JANUARY 30, 2002) 3(i).5 Certificate of Amendment to Articles of Incorporation dated March 26, 2001 (INCORPORATED BY REFERENCE TO THE EXHIBITS TO FORM S-8 FILED ON JANUARY 30, 2002) -22- 3(i).6 Certificate of Amendment to Articles of Incorporation dated August 10, 2002 (INCORPORATED BY REFERENCE TO THE EXHIBITS TO FORM 14C FILED ON JULY 24, 2002) 3(i).7 Certificate of Amendment to Articles of Incorporation dated February 22, 2007 (INCORPORATED BY REFERENCE TO THE EXHIBITS TO FORM 8-K FILED ON MARCH 7, 2007) 3(ii).1 Bylaws dated March 25, 1999 (INCORPORATED BY REFERENCE TO THE EXHIBITS TO FORM 10-SB FILED ON MAY 8, 2000) 4.1 2005 Stock Option Plan dated April 29, 2005 (INCORPORATED BY REFERENCE TO THE EXHIBITS TO FORM S-8 FILED ON AUGUST 9, 2005) 4.2 Amendment to 2005 Stock Option Plan dated January 30, 2006 (INCORPORATED BY REFERENCE TO THE EXHIBITS TO FORM S-8 FILED ON FEBRUARY 3, 2006) 4.3 Amendment to 2005 Stock Option Plan dated November 15, 2005 (INCORPORATED BY REFERENCE TO THE EXHIBITS TO FORM S-8 FILED ON NOVEMBER 18, 2005) 4.4 2004 Stock Compensation Plan dated February 2, 2004 (INCORPORATED BY REVERENCE TO THE EXHIBITS TO FORM S-8 FILED ON FEBRUARY 13, 2004) 4.5 2003 Benefit Plan dated February 22, 2003 (INCORPORATED BY REVERENCE TO THE EXHIBITS TO FORM S-8 FILED ON MARCH 4, 2003) 4.6 2002 Benefit Plan dated June 26, 2002 (INCORPORATED BY REVERENCE TO THE EXHIBITS TO FORM S-8 FILED ON JULY 11, 2002) 4.7 2001 Restricted Share Plan (INCORPORATED BY REVERENCE TO THE EXHIBITS TO FORM S-8 FILED ON JANUARY 1, 2002) 10.1 Memorandum of Understanding between the Company and Taylor Ventures, LLC dated September 12, 2002 (INCORPORATED BY REVERENCE TO THE EXHIBITS TO FORM 10-QSB FILED ON NOVEMBER 14, 2005) 10.2 Real Estate Mortgage between the Company and Taylor Ventures, LLC dated November 9, 2005 (INCORPORATED BY REVERENCE TO THE EXHIBITS TO FORM 10-QSB FILED ON NOVEMBER 14, 2005) 10.3 Real Estate Mortgage between the Company and InterBay Funding, LLC dated July 18, 2006 (INCORPORATED BY REFERENCE TO THE EXHIBITS TO FORM 10-QSB FILED ON AUGUST 14, 2006) 31* Certification of Ed Miers pursuant to Section 302 of the Sarbanes-Oxley Act 32* Certification of Ed Miers pursuant to Section 906 of the Sarbanes-Oxley Act *Filed Herewith ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (1) AUDIT FEES The aggregate fees billed for the fiscal years ended December 31, 2006 and 2005, for professional services rendered by Jaspers + Hall, PC, for the 2006 and 2005 audits and for the registrant's financial statements and review of the financial statements included in the registrant's Form 10-QSB or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for fiscal years 2006 and 2005 were $7,925 and $6,000, respectively. (2) AUDIT-RELATED FEES The aggregate fees billed for the fiscal years ended December 31, 2006 and 2005, for assurance and related services by Jaspers + Hall PC, that are reasonably related to the performance of the audit or review of the registrant's financial statements for fiscal years 2006 and 2005 were $-0-. -23- (3) TAX FEES The aggregate fees billed for each of the fiscal years ended December 31, 2006 and 2005, for professional services rendered by Jaspers + Hall, PC, for tax compliance, tax advice, and tax planning, for those fiscal years were included in the audit and review fees. Services provided included preparation of Federal Income Tax Returns Form 1120, tax planning, and research regarding 1031 exchange. (4) ALL OTHER FEES None. (5) AUDIT COMMITTEE POLICIES AND PROCEDURES Not applicable. (6) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees. Not applicable. -24- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GREM USA. By: /S/ EDWARD MIERS -------------------- Edward Miers, President/Director Dated: APRIL 3, 2007 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. NAME OFFICE DATE /S/ EDWARD MIERS CEO/President /Principal APRIL 3, 2007 ---------------- Accounting Officer Director Edward Miers -25- TABLE OF CONTENTS PAGE REPORT OF REGISTERED INDPENDENT PUBLIC ACCOUNTING FIRM..................F-1 BALANCE SHEET...........................................................F-2 STATEMENT OF OPERATIONS.................................................F-3 STATEMENT OF STOCKHOLDERS' EQUITY.......................................F-4 STATEMENT OF CASH FLOWS.................................................F-5 NOTES TO FINANCIAL STATEMENTS....................................F-6 - F-12 -26- REPORT OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM To the Board of Directors GREM USA We have audited the accompanying balance sheet of GREM USA, as of December 31, 2006 and 2005 and the related statement of operations, cash flows, and changes in stockholders' deficit for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of GREM USA at December 31, 2006 and 2005, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 1 to the financial statements, conditions exists which raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also discussed in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Jaspers + Hall, PC Denver, Colorado March 30, 2007 F-1
GREM USA BALANCE SHEETS DECEMBER 31, 2006 AND 2005 2006 2005 ------------ ------------ ASSETS Current Assets Cash $ 12,803 $ 44,928 Accounts receivable 10,278 2,800 Note receivable from shareholder 49,785 -- Interest receivable on note from shareholder 721 -- Deposits 1,834 4,134 ------------ ------------ Total Currents Assets 75,421 51,862 ------------ ------------ Property and Equipment: Land 15,000 15,000 Building 285,300 285,300 Furniture 2,650 -- Equipment 122,650 100,350 ------------ ------------ Total Property and Equipment 425,600 400,350 Less accumulated depreciation (34,744) (7,915) ------------ ------------ Net Property and Equipment 390,856 392,735 ------------ ------------ TOTAL ASSETS $ 466,277 $ 444,597 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities: Accounts payable and accrued expenses $ 8,015 $ 617,267 Accrued salary 1,608,694 900,000 Current portion of long-term debt 18,621 10,591 ------------ ------------ Total Current Liabilities 1,635,329 1,527,858 ------------ ------------ Long-term liabilities: Notes payable 637,688 220,622 ------------ ------------ Total long-term liabilities 637,688 220,622 ------------ ------------ TOTAL LIABILITIES 2,273,017 1,748,480 ------------ ------------ Stockholders' Deficit: Common stock, par value $.001, 5,000,000,000 shares authorized: 1,246,955,405 and 810,919,691 issued and at December 31, 2006 and 2005, respectively 1,246,955 810,920 Additional paid-in capital 32,100,957 31,456,392 Treasury stock (60,593) -- Accumulated deficit (35,094,060) (33,571,195) ------------ ------------ Total Stockholders' Deficit (1,806,741) (1,303,883) ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 466,277 $ 444,597 ============ ============ The accompanying notes are an integral part of these financials statements.
F-2
GREM USA STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005 2006 2005 --------------- --------------- REVENUES $ 9,077 $ -- EXPENSES: Management compensation 1,200,000 1,500,000 Consulting fees 677,600 1,068,300 Other selling, general and administrative exp. 166,031 109,494 Depreciation 26,829 7,915 --------------- --------------- Total Operating Expenses 2,070,460 2,685,709 --------------- --------------- OTHER REVENUES & EXPENSES: Interest income 4,169 1,530 Interest expense (86,437) (14,112) Other income 620,786 5,785 --------------- --------------- Total Other Revenues & Expenses 538,518 (6,797) --------------- --------------- NET LOSS $ (1,522,865) $ (2,392,506) =============== =============== Per share information Weighted average number of common shares outstanding 1,115,488,256 739,607,191 =============== =============== Basic and diluted loss per common share $ 0.00 $ 0.00 =============== =============== The accompanying notes are an integral part of these financials statements.
F-3
GREM USA STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY ADDITIONAL TOTAL COMMON STOCK PAID-IN TREASURY STOCK ACCUMULATED STOCKHOLDERS' SHARES AMOUNT CAPITAL SHARES AMOUNT DEFICIT DEFICIENCY ------------- ------------ ------------ ------------- ------------ -------------- -------------- Balance - December 31, 2003 25,354,581 $ 25,355 $ 28,545,353 $ (29,176,184) $ (605,477) Issuance of common stock for services 4,565,110 4,565 1,697,940 -- 1,702,505 Net loss (2,002,505) (2,002,505) ------------- ------------ ------------ ------------- ------------ -------------- -------------- Balance - December 31, 2004 29,919,691 $ 29,920 $ 30,243,293 $ (31,178,689) $ (905,477) ------------- ------------ ------------ ------------- ------------ -------------- -------------- Issuance of common stock for services 776,750,000 776,750 1,208,850 -- 1,985,600 Issuance of common stock for cash 4,250,000 4,250 4,250 -- 8,500 Net loss (2,392,506) (2,392,506) ------------- ------------ ------------ ------------- ------------ -------------- -------------- Balance - December 31, 2005 810,919,691 $ 810,920 $ 31,456,393 $ (33,571,195) $ (1,303,883) ------------- ------------ ------------ ------------- ------------ -------------- -------------- Issuance of common stock for services 600,500,000 600,500 864,100 -- 1,464,600 Issuance of common stock for debt 26,785,714 26,786 48,214 -- 75,000 Returned restricted stock (187,500,000) (187,500) (262,500) -- (450,000) Return of common stock (3,750,000) (3,750) (5,250) -- (9,000) Acquisition of treasury stock 18,500,000 (60,593) -- (60,593) Net loss (1,522,865) (1,522,865) ------------- ------------ ------------ ------------- ------------ -------------- -------------- Balance - December 31, 2006 1,246,955,405 $ 1,246,955 $ 32,100,957 18,500,000 (60,593) $ (35,094,060) $ (1,806,741) ============= ============ ============ ============= ============ ============== ============== The accompanying notes are an integral part of these financials statements.
F-4
GREM USA STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005 2006 2005 ----------- ----------- Cash Flows from Operating Activities: Net Loss $(1,522,865) $(2,392,506) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 26,829 7,915 Stock issued for services 1,080,600 1,068,300 Stock issued for compensation 708,694 600,000 Write down of Account Payable (605,477) Changes in Assets and Liabilities (Increase) in accounts receivable (7,478) (2,800) (Increase) in deposits 2,300 (4,134) (Increase) in interest on loan to shareholder (721) -- Increase in accounts payable (3,775) 11,790 Increase in accrued salary 600,000 600,000 ----------- ----------- Total adjustments 1,200,972 2,281,071 ----------- ----------- Net Cash (Used in) provided by Operating Activities (321,893) 214,366 ----------- ----------- Cash Flows from Investing Activities: Purchase of fixed assets (24,950) (400,650) ----------- ----------- Cash Flows Used in Investing Activities (24,950) (400,650) ----------- ----------- Cash Flows from Financing Activities: Stock issued for cash -- 25,500 Purchase of treasury stock (60,593) Proceeds from notes payable 440,000 236,000 Payments on notes payable (14,904) (4,788) Loan to shareholder (49,785) -- ----------- ----------- Cash Flows Provided by Financing Activities 314,718 256,713 ----------- ----------- Net Increase (Decrease) in cash and cash equivalents (32,125) 44,928 Cash and cash equivalents - beginning of period 44,928 -- ----------- ----------- Cash and cash equivalents - end of period $ 12,803 $ 44,928 =========== =========== Supplemental information: Cash paid for interest $ 86,437 $ 14,811 =========== =========== Supplemental schedule of non-cash investing and financing Activities: Stock issued for building and land - 273,000,000 shares -- 300,300 The accompanying notes are an integral part of these financials statements.
F-5 GREM USA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS GREM USA (the Company) was incorporated in the state of Nevada on March 26, 1999 under the name of Last Company Clothing, Inc. In February 2001, the shareholders of Last Company Clothing, Inc, entered into an Agreement and Plan of Merger with Premier ASP, In, and their stockholders whereby LCC acquired 100% of Premier ASP. Inc. stock and subsequently changed its name to Premier Axium Asp. Inc. in March 2001. On August 9, 2002, the Company changed its name to Core Solutions, Inc. On May 2, 2003, the Company changed its name to Sunshine Ventures, Inc. On May 30, 2003, the Company changed its name to Christine's Precious Petal, Inc. On July 29, 2003, the Company changed its name to Global Business Markets, Inc. On December 29, 2004, the Company changed its name to GREM USA. GREM USA is in the development stage as a designer and manufacturer of custom handmade and mass-produced electric guitars, amplifiers, and accessories. GOING CONCERN The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplates continuation of the Company as a going concern. The Company has experienced significant losses. As of December 31, 2006, the current liabilities exceed the current assets by $1,559,908. As shown in the financial statements, the Company incurred a net loss of $1,522,865 for year then ended. The future success of the Company is likely dependent on its ability to attain additional capital to develop its proposed products and ultimately, upon its ability to attain future profitable operations. There can be no assurance that the Company will be successful in obtaining such financing, or that it will attain positive cash flow from operations. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. Actual results could differ from those estimates. Significant estimates made in preparing the consolidated financial statements include the lives of property, plant and equipment. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. F-6 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recorded at cost. The Company depreciates property and equipment using the straight-line method over the estimated useful lives of the assets, which are generally five to seven years. The Company's building is being depreciated over an estimated life of twenty seven and a half years. INCOME TAXES Income taxes are provided for based on the asset and liability method of accounting pursuant to Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". The asset and liability method requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the reported amount and assets and liabilities and their tax basis. ADVERTISING COSTS Advertising costs are expensed as incurred and included in selling, general and administrative expenses. For the years ended December 31, 2006 and 2005, advertising costs were immaterial. STOCK-BASED COMPENSATION SFAS No. 123R, "Accounting for Stock-Based Compensation" ("SFAS No. 123R') allows an entity to elect to continue to measure compensation cost under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"), but requires pro forma disclosures of net loss and loss per share as if the fair-valued-based method of accounting had been applied. In accordance with SFAS 123R, the Company elected to continue to measure compensation cost under APB No. 25, and comply with the pro forma disclosure requirements. The Company has adopted for footnote disclosure purposes SFAS No. 123R, which requires that companies disclose the cost of stock-based employee compensation at the grant date based on the value of the award (the fair value method) and disclose this cost over the service period. The value of the stock-based award is determined using a pricing model whereby compensation cost is the excess of the fair value of the award as determined by the model at grant date or other measurement date over the amount an employee must pay to acquire the stock. Transactions in which goods or services are received form non-employees for the issuance of equity securities or stock-based awards are accounted for based on the fair value of the consideration received. BASIC AND DILUTED NET INCOME PER SHARE Net income per share is calculated in accordance with SFAS No. 128, "Earnings per Share." Under the provisions of SFAS No. 128, basic net income (loss) per share is computed by dividing the net income for the period by the weighted average number of common shares outstanding during the period. NEW ACCOUNTING PRONOUNCEMENTS On February 15, 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" (SFAS 159). Under this standard, the Company may elect to report financial instruments and certain other items at fair value on a contract-by-contract basis with changes in value reported in earnings. This election is irrevocable. SFAS 159 provides an opportunity to mitigate volatility in reported earnings that is caused by measuring hedged assets and liabilities that were previously required to use a different accounting method than the related hedging contracts when the complex provisions of SFAS 133 hedge accounting are not met. SFAS 159 is effective for years beginning after November 15, 2007. Early adoption within 120 days of the beginning of the Company's 2007 fiscal year is permissible, provided the Company has not yet issued interim financial statements for 2007 and has adopted SFAS 157. The Company is currently evaluating the potential impact of adopting this standard. F-7 In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. (FIN) 48, "Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109" (FIN 48), which clarifies the accounting for uncertainty in tax positions. FIN 48 requires recognition in the financial statements of the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions are effective for the Company's first quarter 2007 financial statements with the cumulative effect, if any, of the change in accounting principle recorded as an adjustment to the opening balance of retained earnings. The Company is currently evaluating the impact of adopting FIN 48 on its financial statements but does not expect the impact to be material. In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Current Year Misstatements." SAB No. 108 requires analysis of misstatements using both an income statement (rollover) approach and a balance sheet (iron curtain) approach in assessing materiality and provides for a one-time cumulative effect transition adjustment. SAB No. 108 is effective for the Company's fiscal year 2006 annual financial statements. The adoption of SAB No. 108 had no impact on the Company's financial statements. In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements," which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. This statement is effective for the Company beginning January 1, 2008. The Company is currently assessing the potential impact that the adoption of SFAS No. 157 will have on its financial statements. NOTE 2. PROPERTY, PLANT AND EQUIPMENT The following summarizes the components of property, plant and equipment: DECEMBER 31, ------------------------ 2006 2005 DEPRECIABLE LIFE ---- ---- ---------------- Land $ 15,000 $ 15,000 NA Building 285,300 285,300 27.5 years Office Furniture 2,650 0 5 years Equipment 122,650 100,350 5 - 7 years --------- --------- 425,600 400,650 Less accumulated depreciation (34,744) (7,915) --------- --------- $ 390,856 $ 392,735 ========= =========== Depreciation expense for the years ended December 31, 2006 and 2005 was $26,829 and $7,915, respectively. F-8 NOTE 3. NOTES PAYABLE Notes payable consist of the following: DECEMBER 31, ------------------------------------ 2006 2005 ---- ---- Unsecured note payable to an individual, 10% interest, principal and interest due April 2008 $ 150,000 $ 150,000 Unsecured note payable to an individual, 10% interest, principal and interest due May 2008 30,000 30,000 Unsecured note payable to an individual, 10% interest, principal and interest due May 2008 20,000 20,000 Unsecured note payable to an individual, 8% interest, principal and interest due June 2007 15,000 15,000 Loan payable to Bayview Loan Servicing, 9.75% interest, monthly installments of principal,interest and property taxes of $5,639, maturing July 2021 435,688 0 Note payable to a company, 8% interest, monthly principal and interest payment of $959, maturing June 2007 5,621 16,213 ----------- -------- 656,309 231,213 Less: current portion (18,621) (10,591) ----------- ----------- Total long- term debt $ 637,688 $ 220,622 =========== =========== Future maturities of long-term debt are as follows as of December 31, 2006: 2007 $ 33,621 2008 217,842 2009 21,079 2010 23,229 2011 25,598 Thereafter 334,939 -------------- $ 656,309 ============== NOTE 4. INCOME TAXES There has been no provision for U.S. federal, state, or foreign income taxes for any period because the Company has incurred losses in all periods and for all jurisdictions. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax assets are as follows: Deferred tax assets: Net operating loss carryforwards $ 35,094,060 Valuation allowance for deferred tax assets (35,094,060) ------------ Net deferred tax assets $ -- ============= Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. As of December 31, 2006, the Company had net operating loss carryforwards of $35,094,060 for federal income tax purposes. Utilization of the net operating loss may be subject to substantial annual limitations due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. The annual limitation could result in the expiration of the net operating loss before utilization. F-9 NOTE 5. COMMON STOCK The authorized common stock of the Company consists of 100,000,000 shares with par value of $.001. On July 5, 2002, the Company's Board of Directors declared a 10,000-for-one reverse stock split of outstanding common stock payable at July 5, 2002. On May 9, 2003, the Company's Board of Directors declared a 25,000 for-1 reverse split of the outstanding common stock payable at May 9, 2003. On November 1, the Company's Board of Directors declared a 200-for-one reverse tock split of outstanding common stock payable at November 1, 2004. On December 29, 2004, the Company's Board of Directors and stockholders approved increasing the total number of authorized shares of common stock from 125,000,000 shares to 5,000,000,000. On February 22, 2007, the Company filed with the Secretary of State of the State of Nevada, a Certificate of Change (the "Certificate") to the Company's Articles of Incorporation. The Certificate is effective as of February 22, 2007, (the "Effective Date") and effects a 4-for-1 reverse stock split of the Company's issued and outstanding shares of Common stock, par value $.001(the "Reverse Split"). The number of shares of Common Stock the Company is authorized to issue remains unchanged at 5,000,000,000. As of the Effective Date, every 4 shares of the Company's issued and outstanding Common Stock, $.001 par value, automatically converted to one share of Common Stock, $.001 par value. No fractional shares were issued in connection with the Reverse Split. Fractional shares will be rounded up to the next whole share. The Reverse Split did not alter any voting rights or other terms of the Company's Common Stock. As a result of the Reverse Split, beginning March 2, 2007, the Company's Common Stock will trade on the OTC Bulletin Board under the trading symbol GRUS. All share and per share amounts in the accompanying financial statements of the Company and notes thereto have been retroactively adjusted to give effect to the stock splits. NOTE 6. STOCKHOLDERS EQUITY The following stock transactions occurred during the year ended December 31, 2006: On February 14, 2006, the Company issued 257,000,000 shares of its $0.001 par value common stock to various individuals for consulting services valued at $205,600. On February 27, 2006, the Company issued 20,000,000 shares of its $0.001 par value common stock to an individual for consulting services valued at $16,000. On March 2, 2006, the Company issued 206,000,000 shares of its $0.001 par value common stock to various individuals for consulting services valued at $164,800. On March 7, the Company issued 3,000,000 shares of its $0.001 par value common stock to an individual for consulting services valued at $2,700. On April 19, 2006, the Company issued 107,142,857 shares of its $0.001 par value restricted common stock to Ed Miers to reimburse him for his shares given to pay a defaulted loan. On April 20, 2006, the Company issued 201,000,000 shares of its $0.001 par value common stock to various individuals for consulting services valued at $120,600. F-10 On April 21, 2006, the Company issued 750,000,000 shares of its $0.001 par value restricted common stock to Ed Miers for a portion of accrued management services for the period April 2005 to September 2005 valued at $450,000. On May 16, 2006, the Company issued 19,000,000 shares of its $0.001 par value common stock to two individuals for consulting services valued at $13,300. On May 23, 2006, the Company issued 156,000,000 shares of its $0.001 par value common stock to various individuals for consulting services valued at $93,600. On June 27, 2006, the President returned the 750,000,000 shares issued on April 21, 2006, valued at $450,000. On 6/30/06, Donald Stoecklin returned 15,000,000 shares of .001 par value common stock given for consulting services valued at $9,000. On July 3, 2006, the Company issued 750,000,000 shares of its $0.001 par value restricted common stock to Ed Miers for a portion of accrued management services for the period April 2005 to September 2005 valued at $375,000. On September 6, 2006, the Company issued 10,000,000 shares of its $0.001 par value common stock to one individual for consulting services valued at $8,000. On October 16, the Board paid Management Services to Edward Miers in the amount of $60,000 cash to retire a portion of the debt owed for the period July 2005 through September 2005. On October 18, 2006, the Company entered into a 90 day, 8% interest loan with its President and majority shareholder, Edward Miers. The short-term loan was in the amount of $31,285 and was repaid in full on January 17, 2007. On October 18, 2006, the Company paid $3715 cash to retire a portion of debt owed to Edward Miers for Management Services for the period July 2005 to September 2005. On November 10, 2006, the Company entered into an additional 68 day, 8% loan with its President and majority shareholder, Edward Miers. The short-term loan was in the amount of $18,500 and was repaid in full on January 17, 2007. On November 16, 2006, the Company issued 30,000,000 shares of its $0.001 par value common stock to three individuals for consulting services valued at $15,000. On October 27, 2006 the Company paid $2000 cash to retire a portion of debt owed to Edward Miers for Management Services for the period July 2005 to September 2005. On December 22, 2006 the Company paid $4091.28 cash to retire a portion of debt owed to Edward Miers for Management Services for the period July 2005 to September 2005. On December 27, 2006 the Company paid $145.74 cash to retire a portion of debt owed to Edward Miers for Management Services for the period July 2005 to September 2005. F-11 NOTE 7. TREASURY STOCK On October 01, 2006, the Company bought back 65,000,000 shares registered in the name of GREM USA and retired these shares. Also, on August 10, 2006 the Company bought back 9,000,000 shares of its $0.001 par value restricted common stock from J. Pat Taylor for $5,400 cash and retired these shares. As of December 31, 2006, these repurchased shares are held in treasury and are available for future reissuance. NOTE 8. WRITE-OFF OF ACCOUNTS PAYABLE In June 2006, management determined that one of its acquired payable balances was no longer valid and therefore, the Company wrote-off the entire balance of $605,477 and recorded this amount into other income for the year ending December 31, 2006. NOTE 9. RELATED PARTY TRANSACTIONS For each year ending December 31, 2006 and 2005, the Company accrued management fees totaling $1,200,000 for services performed by its President and majority shareholder. On October 18, 2006, the Company entered into a 90 day, 8% interest loan with its President and majority shareholder, Edward Miers. The short-term loan was in the amount of $31,285 and was repaid in full on January 17, 2007. On November 10, 2006, the Company entered into an additional 68 day, 8% loan with its President and majority shareholder, Edward Miers. The short-term loan was in the amount of $18,500 and was repaid in full on January 17, 2007. NOTE 10. COMMITMENTS AND CONTINGENCIES MANAGEMENT SERVICES CONTRACT In January 2005, the Company entered into a two-year management services contract to pay its president a salary of $1,200,000 per year. In 2007, the Company extended this contract to pay its president, Edward Miers, $1,200,000 for the years 2007 and 2008. F-12