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FBC Holding, Inc.
10-Q
--07-31
3956339123
false
0001370816
Yes
No
Smaller Reporting Company
No
2013
Q1
2012-10-31
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">(1)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">NATURE
OF OPERATIONS</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Historically,
FBC Holdings, Inc., a Nevada corporation (the "Company"),
was incorporated as Wave Uranium Holding and its business
was to acquire mineral land positions.  In
October 2009 the Company was re-domiciled as a Nevada
corporation under the name FBC Holding Corp.  On
July 21, 2009, the Company entered into an acquisition
agreement to purchase FBC Holdings, Inc., a California
corporation ("FBC Holdings, Inc. - California"), at which
time the Company abandoned its former business plan in the
industry of mining and land acquisition. FBC Holdings, Inc.
- - California had no material activity up to the agreement
date and no material assets or liabilities. The acquisition
agreement called for the Company to purchase FBC Holdings,
Inc. - California by acquiring all the outstanding shares
of FBC Holdings, Inc. - California in exchange for 8
million shares of the Company. The stock was issued in
November 2009. The new entity was to focus in three
areas:  (i) branding (product placement) in
television production, movies, etc.; (ii) the sale of
mini-choppers and the associated merchandise of the brand
Beverly Hills Choppers, including clothing, accessories,
parts, etc.; and (iii) internet platforms focused on social
networking and the database built around the Johnny Fratto
Social Club.   The acquisition did not work
out according to the Company’s plan and the Company
returned all interest in FBC Holdings, Inc. –
California, in exchange for the return for return of all
the 8 million shares of the Company’s common
stock.  On August 11, 2010, the Company signed an
Asset Purchase Agreement with Super Rad
Corporation.  Under the agreement the Company
purchased certain assets related to the collectible toy and
art industry.  Super Rad Toys, Inc. was founded
as a California corporation in December 2006.  As
a result of preparing to go public, it reincorporated in
Nevada under the name of Super Rad Industries, Inc. doing
business as Super Rad Toys.  Since the Super
Rad’s inception it has emerged at the forefront of
the collectible art world, by producing innovative and
high-quality vinyl collectibles.   In early
2012 the Company entered into an agreement with Todd
Whanish to purchase his web platform in order to get
involved in the online toy business, catering to artists
and the toy industry in general.  While the
Company will still be involved in the production of
high-quality vinyl collectibles it plans on making the new
acquisition of Mr. Whanish’s web platform its primary
business focus.  This purchase also provides the
Company with the ability to earn additional revenues in
areas ancillary to the sale of actual toys, such as apparel
and jewelry.  Additionally the Company has
decided to move toward a web based approach, using the URL:
<font style="DISPLAY: inline; TEXT-DECORATION: underline">www.urtoice.com</font>
.  In furtherance of this new business focus, the
Company has been coding and signing artists as it prepares
for the launch.  Additionally, the Company has
signed a license agreement with Sport Technology, Inc., a
California corporation, under which the Company acquired
the exclusive licensing rights to develop, market and sell
certain products owned by Sport Technology, including, but
not limited to, Flowboard, Flow Saucer, and
Snowskate.  The Company also entered into a
consulting agreement with Sport Technology Inc. and Michael
Kern, under which Sport Technology and Michael Kern will
provide consulting services related to the development,
marketing and sale of the licensed products.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">DEVELOPMENT
STAGE COMPANY</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company is in the development stage and has not yet realized
any revenues from its planned operations, but we anticipate
we will have revenues in our fiscal year ended July 31,
2013.  Our business plan is market and distribute the
FBC Flowboard to continue to develop our existing toys,
attempt to develop and/or license new toy ideas, and sell
toys via retailers, wholesale accounts and
online. </font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Based
upon the Company's business plan, it is a development stage
enterprise.  Accordingly, the Company presents its
financial statements in conformity with the accounting
principles generally accepted in the United States of America
that apply in establishing operating enterprises. As a
development stage enterprise, the Company discloses the
deficit accumulated during the development stage and the
cumulative statements of operations and cash flows from
inception to the current balance sheet date.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">BASIS
OF PRESENTATION</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In
the opinion of management, all adjustments consisting of
normal recurring adjustments necessary for a fair statement
of (a) the result of operations for the three month periods
ended October 31, 2012 and 2011; (b) the financial position
at October 31, 2012; and (c) cash flows for the three month
periods ended October 31, 2012 and 2011, have been
made.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company prepares its financial statements in conformity
with accounting principles generally accepted in the United
States of America ("GAAP"), which require 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 reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Certain
amounts in the prior period financial statements have been
reclassified to conform to the current period
presentation.   These reclassifications had
no effect on reported losses.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">CONSOLIDATION</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
consolidated financial statements include the accounts of
the Company and its’ wholly owned subsidiaries. All
intercompany accounts and balances have been eliminated in
consolidation.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">CASH
AND CASH EQUIVALENTS</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company considers all highly liquid investments with an
original maturity of three months or less to be cash
equivalents.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">PROPERTY,
EQUIPMENT AND DEPRECIATION</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Property
and equipment are stated at cost. Depreciation is
calculated using the straight-line method over the
estimated useful lives of the assets of three to seven
years.  Currently we do not have any capitalized
property and equipment.</font>
</div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">EARNINGS
(LOSS) PER SHARE</font>
</div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company calculates net income (loss) per share as required by
ASC 260, "Earnings per Share." Basic earnings (loss) per
share are calculated by dividing net income (loss) by the
weighted average number of common shares outstanding for the
period. Diluted earnings (loss) per share are calculated by
dividing net income (loss) by the weighted average number of
common shares and dilutive common stock equivalents
outstanding. During periods when they would be anti-dilutive
common stock equivalents, if any, are not considered in the
computation.</font>
</div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STOCK-BASED
COMPENSATION</font>
</div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company accounts for stock based compensation in accordance
with ASC 718, "Accounting for Stock-Based Compensation." The
provisions of ASC 718 allow companies to either expense the
estimated fair value of stock options or to continue to
follow the intrinsic value method set forth in Accounting
Principles Board Opinion 25, "Accounting for Stock Issued to
Employees" ("APB 25") but disclose the pro forma effects on
net income (loss) had the fair value of the options been
expensed.</font>
</div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">FAIR
VALUE OF FINANCIAL INSTRUMENTS</font>
</div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">AFC
Topic 820, "Disclosures About Fair Value of Financial
Instruments," requires disclosure of fair value information
about financial instruments. Fair value estimates discussed
herein are based upon certain market assumptions and
pertinent information available to management as of October
31, 2012 and 2011.</font>
</div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
respective carrying value of certain on-balance-sheet
financial instruments approximates their fair values. These
financial instruments include cash, restricted cash, trade
accounts receivables, accounts payable, accrued expenses,
notes payable and due to investors. Fair values were assumed
to approximate carrying values for these financial
instruments since they are short term in nature and their
carrying amounts approximate fair value or they are
receivable or payable on demand. The carrying value of the
Company's long-term debt, notes payable and due to investors
approximates fair values of similar debt instruments.</font>
</div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">INCOME
TAX</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company accounts for income taxes under ASC 720, Under ASC
720 deferred taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible
temporary differences and operating loss carryforwards and
deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the
differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of
enactment.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">At
October 31, 2012 and 2011 the Company had net operating
loss carryforwards of approximately $20,000,000 and
$14,000,000 which begin to expire in 2026. The Deferred tax
asset of approximately $3,100,000 and $2,090,000 in 2012
and 2011 has been offset by a 100% valuation allowance. The
change in the valuation allowance in 2012and 2011 was
$1,010,000 and $1,090,000, respectively.</font>
</div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">NEW
PRONOUNCEMENTS</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Except
for rules and interpretive releases of the SEC under
authority of federal securities laws and a limited number
of grandfathered standards, the FASB Accounting Standards
Codification™ (“ASC”) is the sole source
of authoritative GAAP literature recognized by the FASB and
applicable to the Company. Management has reviewed the
aforementioned rules and releases and believes any effect
will not have a material impact on the Company’s
present or future financial statements.</font>
</div><br/>
8000000
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">DEVELOPMENT
STAGE COMPANY</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company is in the development stage and has not yet realized
any revenues from its planned operations, but we anticipate
we will have revenues in our fiscal year ended July 31,
2013.  Our business plan is market and distribute the
FBC Flowboard to continue to develop our existing toys,
attempt to develop and/or license new toy ideas, and sell
toys via retailers, wholesale accounts and
online. </font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Based
upon the Company's business plan, it is a development stage
enterprise.  Accordingly, the Company presents its
financial statements in conformity with the accounting
principles generally accepted in the United States of America
that apply in establishing operating enterprises. As a
development stage enterprise, the Company discloses the
deficit accumulated during the development stage and the
cumulative statements of operations and cash flows from
inception to the current balance sheet date.</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">BASIS
OF PRESENTATION</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In
the opinion of management, all adjustments consisting of
normal recurring adjustments necessary for a fair statement
of (a) the result of operations for the three month periods
ended October 31, 2012 and 2011; (b) the financial position
at October 31, 2012; and (c) cash flows for the three month
periods ended October 31, 2012 and 2011, have been
made.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company prepares its financial statements in conformity
with accounting principles generally accepted in the United
States of America ("GAAP"), which require 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 reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Certain
amounts in the prior period financial statements have been
reclassified to conform to the current period
presentation.   These reclassifications had
no effect on reported losses.</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">CONSOLIDATION</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
consolidated financial statements include the accounts of
the Company and its’ wholly owned subsidiaries. All
intercompany accounts and balances have been eliminated in
consolidation.</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">CASH
AND CASH EQUIVALENTS</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company considers all highly liquid investments with an
original maturity of three months or less to be cash
equivalents.</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">PROPERTY,
EQUIPMENT AND DEPRECIATION</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Property
and equipment are stated at cost. Depreciation is
calculated using the straight-line method over the
estimated useful lives of the assets of three to seven
years.  Currently we do not have any capitalized
property and equipment.</font></div>
P3Y
P7Y
<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">EARNINGS
(LOSS) PER SHARE</font>
</div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company calculates net income (loss) per share as required by
ASC 260, "Earnings per Share." Basic earnings (loss) per
share are calculated by dividing net income (loss) by the
weighted average number of common shares outstanding for the
period. Diluted earnings (loss) per share are calculated by
dividing net income (loss) by the weighted average number of
common shares and dilutive common stock equivalents
outstanding. During periods when they would be anti-dilutive
common stock equivalents, if any, are not considered in the
computation.</font></div>
<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STOCK-BASED
COMPENSATION</font>
</div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company accounts for stock based compensation in accordance
with ASC 718, "Accounting for Stock-Based Compensation." The
provisions of ASC 718 allow companies to either expense the
estimated fair value of stock options or to continue to
follow the intrinsic value method set forth in Accounting
Principles Board Opinion 25, "Accounting for Stock Issued to
Employees" ("APB 25") but disclose the pro forma effects on
net income (loss) had the fair value of the options been
expensed.</font></div>
<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">FAIR
VALUE OF FINANCIAL INSTRUMENTS</font>
</div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">AFC
Topic 820, "Disclosures About Fair Value of Financial
Instruments," requires disclosure of fair value information
about financial instruments. Fair value estimates discussed
herein are based upon certain market assumptions and
pertinent information available to management as of October
31, 2012 and 2011.</font>
</div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
respective carrying value of certain on-balance-sheet
financial instruments approximates their fair values. These
financial instruments include cash, restricted cash, trade
accounts receivables, accounts payable, accrued expenses,
notes payable and due to investors. Fair values were assumed
to approximate carrying values for these financial
instruments since they are short term in nature and their
carrying amounts approximate fair value or they are
receivable or payable on demand. The carrying value of the
Company's long-term debt, notes payable and due to investors
approximates fair values of similar debt instruments.</font></div>
<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">INCOME
TAX</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company accounts for income taxes under ASC 720, Under ASC
720 deferred taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible
temporary differences and operating loss carryforwards and
deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the
differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of
enactment.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">At
October 31, 2012 and 2011 the Company had net operating
loss carryforwards of approximately $20,000,000 and
$14,000,000 which begin to expire in 2026. The Deferred tax
asset of approximately $3,100,000 and $2,090,000 in 2012
and 2011 has been offset by a 100% valuation allowance. The
change in the valuation allowance in 2012and 2011 was
$1,010,000 and $1,090,000, respectively.</font></div>
20000000
14000000
3100000
2090000
1.00
1010000
1090000
<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">NEW
PRONOUNCEMENTS</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Except
for rules and interpretive releases of the SEC under
authority of federal securities laws and a limited number
of grandfathered standards, the FASB Accounting Standards
Codification™ (“ASC”) is the sole source
of authoritative GAAP literature recognized by the FASB and
applicable to the Company. Management has reviewed the
aforementioned rules and releases and believes any effect
will not have a material impact on the Company’s
present or future financial statements.</font></div>
<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"> <font style="DISPLAY: inline; FONT-WEIGHT: bold">(2) BASIS OF
REPORTING</font></font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company's financial statements are presented on a going
concern basis, which contemplates the realization of assets
and satisfaction of liabilities in the normal course of
business.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company has experienced a significant loss from operations
as a result of its investment necessary to achieve its
operating plan, which is long-range in
nature.  For the period ended October 31, 2012,
the Company incurred a net loss of $33,581.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company's ability to continue as a going concern is
contingent upon its ability to attain profitable operations
and secure financing. In addition, the Company's ability to
continue as a going concern must be considered in light of
the problems, expenses and complications frequently
encountered by entrance into established markets and the
competitive environment in which the Company
operates.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company is pursuing equity financing for its operations.
Failure to secure such financing or to raise additional
capital or borrow additional funds may result in the
Company depleting its available funds and not being able
pay its obligations.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
financial statements do not include any adjustments to
reflect the possible future effects on the recoverability
and classification of assets or the amounts and
classification of liabilities that may result from the
possible inability of the Company to continue as a going
concern.</font>
</div><br/>
<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">(3)
NOTES PAYABLE</font>
</div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Wave
Uranium Notes</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On
March 20, 2008, Wave Uranium Holding (the "Company")
entered into a securities purchase agreement (the
"Agreement") with accredited investors (the "Investors")
pursuant to which the Investors purchased an aggregate
principal amount of $1,562,500 of 8% Original Issue
Discount Senior Secured Convertible Debentures for an
aggregate purchase price of $1,250,000 (the "Debentures").
The Debentures bore interest at 8% and mature twenty-four
months from the date of issuance. The Debentures were
convertible at the option of the holder at any time into
shares of common stock, at an initial conversion price
equal to $0.25 ("Initial Conversion
Price").  These notes were converted to preferred
shares with an exercise price of $0.625.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In
connection with the Agreement, each Investor received a
warrant to purchase such number of shares of common stock
equal to their subscription amount divided by the Initial
Conversion Price ("Warrants"). Each Warrant is exercisable
for a period of five years from the date of issuance at an
initial exercise price of $90. The investors may exercise
the Warrants on a cashless basis if the shares of common
stock underlying the Warrants are not then registered
pursuant to an effective registration statement. In the
event the Investors exercise the Warrants on a cashless
basis, then we will not receive any
proceeds.  The conversion price of the Debentures
and the exercise price of the Warrants are subject to full
ratchet and anti-dilution adjustment for subsequent lower
price issuances by the Company, as well as customary
adjustments provisions for stock splits, stock dividends,
recapitalizations and the like.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
full principal amount of the Debentures is due upon default
under the terms of Debentures. Beginning on the seven (7)
month anniversary of the closing of the Debentures and
continuing on the same day of each successive month
thereafter, the Company must prepay 1/18th of the aggregate
face amount of the Debentures, plus all accrued interest
thereon, either in cash or in common stock, at the option
of the Company. If the Debenture is prepaid in shares of
common stock, the conversion price of such shares shall be
equal to the lesser of (i) the conversion price then in
effect and (ii) 80% of the average of the three (3) closing
bid prices for the 20 consecutive trading days ending on
the trading day that is immediately prior to the applicable
redemption date. Notwithstanding the foregoing, the
Company's right to prepay the Debentures in shares of
common stock on each prepayment date is subject to, among
other things, the following conditions: (i) that a
registration statement must be effective on such prepayment
date and available for use by the Investors (ii) the shares
to be issued are registered with the Securities and
Exchange Commission and (iii) the aggregate number of
shares to be issued under any monthly redemption amount is
less than 20% of the total dollar trading volume of the
Company's common stock for the 20 trading days prior to the
applicable monthly redemption date.  Beneficial
conversion was calculated based on the converted value and
amortized over the life of the loan.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">At
any time after the effectiveness of the registration
statement described below, the Company may, upon written
notice, redeem the Debentures in cash at 115% of the then
outstanding principal amount of the Debentures provided,
among other things, that (i) the volume weighted average
price ("VWAP") for any 20 consecutive trading days exceeds
$0.50, (ii) a registration statement must be effective on
such redemption date and available for use by the Investors
and (iii) the Company has satisfied all conditions under
the transaction documents.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Each
of the Investors have contractually agreed to restrict
their ability to exercise the Warrants and convert the
Debentures such that the number of shares of the Company
common stock held by each of them and their affiliates
after such conversion or exercise does not exceed 4.99% of
the Company's then issued and outstanding shares of common
stock.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company is obligated to file a registration statement
registering the resale of shares of (i) the Common Stock
issuable upon conversion of the Debentures, (ii) the Common
Stock issuable upon exercise of the Warrants, and (iii) the
shares of common stock issuable as payment of interest on
the Debenture. If the registration statement is not filed
within 45 days from the final closing, or declared
effective within 105 days thereafter (120 days if the
registration statement receives a review by the SEC), the
Company is obligated to pay the investors certain fees in
the amount of 2% of the total purchase price of the
Debentures, per month, and the obligations may be deemed to
be in default..</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Additionally
the Company has shown the current portion of the debt in
current liabilities; also the Company has discounted the
note under the interest method and is amortizing the debt
discount over the life of the loan. On July 6, 2009 the
debenture terms were amended with the interest rate being
changed to nil (0.00%) and the conversion price changed to
$.62 per share.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company has discounted the Debentures under the interest
method, and the original issue discount on the Debentures
of $312,500 plus the additional calculated debt discount of
$1,250,000 derived from the calculated cost of the
conversion feature and attached warrants as limited by the
face amount of the Debentures ($1,562,500 total) is being
amortized over the life of the loan, which has been fully
amortized in prior years. The Company's potential equity
cost from the conversion feature and attached warrants of
$1,249,500 was recorded as an equity obligation liability
in 2008. The equity obligation expires five years from
amended date, July 6, 2009). As of July 31, 2012 and 2011,
there have been no conversions and the equity obligation is
presented as a current liability in the amount of
$1,249,500.</font>
</div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">FBC
Holding Notes</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company entered into a financing agreement with a
lender, which provides for incremental installments
resulting in a series of convertible notes.  The
terms of these notes include interest payable at the rate
of 8%, maturing in three (3) months from the origination
date.  The notes are convertible at 50% of the
five (5) day closing trading price at the date of the
conversion request.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company evaluated the terms of the notes in accordance with
ASC Topic No. 815 - 40, <font style="FONT-STYLE: italic; DISPLAY: inline">Derivatives and
Hedging - Contracts in Entity’s Own Stock</font> and
determined that the underlying common stock is indexed to
the Company’s common stock. The Company determined
that the conversion features meet the definition of a
liability and therefore bifurcated the conversion feature
and accounted for it as a separate derivative liability.
The Company evaluated the conversion feature for a
beneficial conversion feature. The effective conversion
price was compared to the market price on the date of the
note and was deemed to be less than the market value of
underlying common stock at the inception of the note.
Therefore, the Company recognized a beneficial conversion
feature, to the extent of the note, and applied as a debt
discount to the Convertible Notes Payable and amortized to
interest expense over the terms of the note.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
features of the notes resulted in the recognition of a
derivative liability.  The Company re-valued the
features using the Black-Scholes Model, which resulted in a
potential liability of $938,165 as of October 31,
2012.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Assumptions
used in the original derivative valuation were as
follows:</font>
</div><br/><table cellpadding="0" cellspacing="0" width="75%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
<td align="left" valign="bottom" width="61%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Weighted
Average:</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" colspan="2" valign="bottom" width="12%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="61%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">   Dividend
rate</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">0.0</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">%</font>
</div>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="61%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">   Risk-free
interest rate</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">.06</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">%</font>
</div>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="61%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">   Expected
lives (years)</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">.18</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="61%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">   Expected
price volatility</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">134.6</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">%</font>
</div>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="61%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">   Forfeiture
Rate</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">0.0</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">%</font>
</div>
</td>
</tr>
</table><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">During
the year ended July 31, 2012 and through the current period,
the series of agreements required the lender to perform
certain additional services, including management and
satisfaction of certain of the Company’s
liabilities.  Each series of notes included
compensation for the management function, recorded as expense
and added to the convertible notes face
value.  Additionally, the services called for
compensation in shares to be issued.  Under these
individual agreements, the Company is obligated to issue the
lender 117,045,353 shares of common stock for these financing
services, which were valued at the fair market value of the
stock at the date of origination (grant date), resulting in
$391,807 of financing costs (operating expense) and a
corresponding recognition of the equity
obligation.  During the period ended October 31,
2012 the Company issued 435,311,268 shares of common stock,
valued at $125,106.  The balance due, as of October
31, 2012 is valued at $266,701.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
balance due under all notes payable at October 31, 2012 and
July 31, 2012 and 2011 was $655,629 and $$604,083 (net of
$14,220 of unamortized debt discounts), respectively with all
notes currently due or subject to conversion..</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Notes
payable at October 31, 2012 and July 31, 2011 consist of the
following:</font>
</div><br/><table cellpadding="0" cellspacing="0" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
<td align="left" valign="bottom" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">July
31,</font> <font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">2012</font>
</div>
</td>
<td align="left" valign="top" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">July
31,</font> <font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">2012</font>
</div>
</td>
<td align="left" valign="top" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="72%">
<div style="TEXT-INDENT: -9pt; DISPLAY: block; MARGIN-LEFT: 9pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Demand
note payable, dated June 24, 2012, 18% interest
rate, maturing June 24, 2013</font>
</div>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</div>
</td>
<td align="right" valign="top" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">7,500</font>
</div>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</div>
</td>
<td align="right" valign="top" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">7,500</font>
</div>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="72%">
<div style="TEXT-INDENT: -9pt; DISPLAY: block; MARGIN-LEFT: 9pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Convertible
notes payable, all under identical terms of 8%
interest, maturing in 30 days from issuance date,
convertible into common shares at 50% discount to
average five day trading price at date of
request</font>
</div>
</td>
<td align="right" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">648,129</font>
</div>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">610,803</font>
</div>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="72%" style="PADDING-BOTTOM: 2px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Debt
discount assigned to convertible notes
payable</font>
</div>
</td>
<td align="right" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%" style="BORDER-BOTTOM: black 2px solid">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="11%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">-</font>
</div>
</td>
<td align="left" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</div>
</td>
<td align="right" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%" style="BORDER-BOTTOM: black 2px solid">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="11%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">(14,220</font>
</div>
</td>
<td align="left" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">) </font>
</div>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="72%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">655,629</font>
</div>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">604,083</font>
</div>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="72%" style="PADDING-BOTTOM: 2px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Current
maturities of debt</font>
</div>
</td>
<td align="right" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%" style="BORDER-BOTTOM: black 2px solid">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="11%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">655,629</font>
</div>
</td>
<td align="left" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%" style="BORDER-BOTTOM: black 2px solid">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="11%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">604,083</font>
</div>
</td>
<td align="left" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="72%" style="PADDING-BOTTOM: 2px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Long-term
portion of debt</font>
</div>
</td>
<td align="left" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</div>
</td>
<td align="right" valign="top" width="11%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">-</font>
</div>
</td>
<td align="left" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</div>
</td>
<td align="right" valign="top" width="11%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">-</font>
</div>
</td>
<td align="left" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
</table><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company has discounted the Debentures under the interest
method, and the original issue discount on the Debentures
of $312,500 plus the additional calculated debt discount of
$1,250,000 derived from the calculated cost of the
conversion feature and attached warrants as limited by the
face amount of the Debentures ($1,562,500 total) is being
amortized over the life of the loan, which has been fully
amortized in prior years. The Company's potential equity
cost from the conversion feature and attached warrants of
$1,249,500 was recorded as an equity obligation liability
in 2008. The equity obligation expires five years from
amended date, July 6, 2009). As of July 31, 2012 and 2011,
there have been no conversions and the equity obligation is
presented as a current liability in the amount of
$1,249,500.</font>
</div><br/>
1562500
0.08
1250000
twenty-four
0.25
0.625
five years from the date of issuance
90
Beginning on the seven (7) month anniversary of the closing of the Debentures and continuing on the same day of each successive month thereafter, the Company must prepay 1/18th of the aggregate face amount of the Debentures, plus all accrued interest thereon, either in cash or in common stock, at the option of the Company.
conversion price of such shares shall be equal to the lesser of (i) the conversion price then in effect and (ii) 80% of the average of the three (3) closing bid prices for the 20 consecutive trading days ending on the trading day that is immediately prior to the applicable redemption date
right to prepay the Debentures in shares of common stock on each prepayment date is subject to, among other things, the following conditions: (i) that a registration statement must be effective on such prepayment date and available for use by the Investors (ii) the shares to be issued are registered with the Securities and Exchange Commission and (iii) the aggregate number of shares to be issued under any monthly redemption amount is less than 20% of the total dollar trading volume of the Company's common stock for the 20 trading days prior to the applicable monthly redemption date
115% of the then outstanding principal amount of the Debentures provided, among other things, that (i) the volume weighted average price ("VWAP") for any 20 consecutive trading days exceeds $0.50, (ii) a registration statement must be effective on such redemption date and available for use by the Investors and (iii) the Company has satisfied all conditions under the transaction documents
0.0499
The Company is obligated to file a registration statement registering the resale of shares of (i) the Common Stock issuable upon conversion of the Debentures, (ii) the Common Stock issuable upon exercise of the Warrants, and (iii) the shares of common stock issuable as payment of interest on the Debenture. If the registration statement is not filed within 45 days from the final closing, or declared effective within 105 days thereafter (120 days if the registration statement receives a review by the SEC), the Company is obligated to pay the investors certain fees in the amount of 2% of the total purchase price of the Debentures, per month, and the obligations may be deemed to be in default.
0.0000
0.62
312500
1249500
five years from amended date, July 6, 2009
1249500
0.08
(3) months from the origination date
50% of the five (5) day closing trading price at the date of the conversion request
938165
117045353
391807
435311268
125106
266701
1249500
<br />
Assumptions used in the derivative valuation were as follows:
<br />
<br /><table cellpadding="0" cellspacing="0" width="75%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
<td align="left" valign="bottom" width="61%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Weighted
Average:</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" colspan="2" valign="bottom" width="12%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="61%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">   Dividend
rate</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">0.0</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">%</font>
</div>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="61%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">   Risk-free
interest rate</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">.06</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">%</font>
</div>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="61%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">   Expected
lives (years)</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">.18</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="61%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">   Expected
price volatility</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">134.6</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">%</font>
</div>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="61%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">   Forfeiture
Rate</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">0.0</font>
</div>
</td>
<td align="left" valign="bottom" width="1%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">%</font>
</div>
</td>
</tr>
</table>
0.000
0.0006
P65D
1.346
0.000
<br />
Notes payable at October 31, 2012 and July 31, 2011 consist of
the following: <br />
<br /><table cellpadding="0" cellspacing="0" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
<td align="left" valign="bottom" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">July
31,</font> <font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">2012</font>
</div>
</td>
<td align="left" valign="top" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">July
31,</font> <font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">2012</font>
</div>
</td>
<td align="left" valign="top" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="72%">
<div style="TEXT-INDENT: -9pt; DISPLAY: block; MARGIN-LEFT: 9pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Demand
note payable, dated June 24, 2012, 18% interest
rate, maturing June 24, 2013</font>
</div>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</div>
</td>
<td align="right" valign="top" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">7,500</font>
</div>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</div>
</td>
<td align="right" valign="top" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">7,500</font>
</div>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="72%">
<div style="TEXT-INDENT: -9pt; DISPLAY: block; MARGIN-LEFT: 9pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Convertible
notes payable, all under identical terms of 8%
interest, maturing in 30 days from issuance date,
convertible into common shares at 50% discount to
average five day trading price at date of
request</font>
</div>
</td>
<td align="right" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">648,129</font>
</div>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">610,803</font>
</div>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="72%" style="PADDING-BOTTOM: 2px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Debt
discount assigned to convertible notes
payable</font>
</div>
</td>
<td align="right" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%" style="BORDER-BOTTOM: black 2px solid">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="11%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">-</font>
</div>
</td>
<td align="left" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</div>
</td>
<td align="right" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%" style="BORDER-BOTTOM: black 2px solid">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="11%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">(14,220</font>
</div>
</td>
<td align="left" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">) </font>
</div>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="72%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">655,629</font>
</div>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="11%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">604,083</font>
</div>
</td>
<td align="left" valign="top" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="72%" style="PADDING-BOTTOM: 2px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Current
maturities of debt</font>
</div>
</td>
<td align="right" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%" style="BORDER-BOTTOM: black 2px solid">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="11%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">655,629</font>
</div>
</td>
<td align="left" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%" style="BORDER-BOTTOM: black 2px solid">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="top" width="11%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">604,083</font>
</div>
</td>
<td align="left" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="72%" style="PADDING-BOTTOM: 2px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Long-term
portion of debt</font>
</div>
</td>
<td align="left" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</div>
</td>
<td align="right" valign="top" width="11%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">-</font>
</div>
</td>
<td align="left" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="top" width="1%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</div>
</td>
<td align="right" valign="top" width="11%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">-</font>
</div>
</td>
<td align="left" valign="top" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
</table>
7500
7500
648129
610803
-14220
604083
0
0
0.18
0.18
June 24, 2013
June 24, 2013
0.08
0.08
Maturing in 30 days from issuance date
Maturing in 30 days from issuance date
<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">(4)
STOCKHOLDERS' EQUITY</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As
of October 31, 2012 and July 31, 2012, the Company had
5,000,000 authorized shares of preferred stock, $.001 par
value, with 2,500,000 shares issued and outstanding for
each period presented.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As
of June 13, 2012, the Company has authorized 5,000,000,000
shares of common stock.</font>
</div><br/>
5000000000
<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">(5)
STOCK OPTIONS AND WARRANTS</font>
</div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">At
October 31, 2012, and 2011 the Company had stock options and
warrants outstanding as described below.</font>
</div><br/>
<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">(6)
NON-EMPLOYEE STOCK OPTIONS AND WARRANTS</font>
</div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company accounts for non-employee stock options and warrants
under ASC718, whereby option and warrant costs are recorded
based on the fair value of the consideration received or the
fair value of the equity instruments issued, whichever is
more reliably measurable. Unless otherwise provided for, the
Company covers option and warrant exercises by issuing new
shares.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">During
fiscal year 2008 the Company granted 20,833 common stock
warrants in connection with debenture borrowings as more
fully described in Note 3. In addition the Company issued
1,828 warrants to various individuals and entities for
compensation, allowing the holder to purchase one share
of common stock per warrant, exercisable immediately at
$150 per share with the warrant terms expiring in
November and December of 2009. The fair value of these
warrant grants were estimated on the date of grant using
the Black-Scholes option pricing model with the following
assumptions: risk free interest rate of 3.2%, dividend
yield of 0%, expected life of 2 years, volatility of 26%.
The Company recorded total compensation expense under
these warrant issuances of $861,694 in fiscal year
2008.  As of October 31, 2012, all of the 2008
warrant grants of 22,661 expired.</font></font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company issued 100,000 warrants in 2009 under a $150,000
convertible debenture, allowing the holder to purchase
one share of common stock per warrant, exercisable
immediately at $1 per share with the warrant terms
expiring in July 2014. The warrants were out of the money
with no material recording value. At October 31, 2012
these warrants were not exercised and remain
outstanding.</font></font>
</div><br/>
20833
1828
1
150
November and December of 2009
0.032
0.00
P2Y
0.26
861694
22661
100000
150000
1
1
July 2014
<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">(7)
CONTINGENCIES</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In
November 2008 a note holder filed a legal action against
the Company in the Superior Court of Orange County,
California alleging breach of contract and other
malfeasance and seeking damages of approximately $225,000.
The Company disputed the allegations, however on August 8,
2012; the Company has reached a settlement agreement in the
amount of $40,000.  Under an arrangement,
payments in the amount of $7,000 have been paid.</font>
</div><br/>
225000
40000
7000
<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">(8)
RELATED PARTY TRANSACTIONS</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company has consulting contracts with its two officers
and directors.  The Company does not have a
funding commitment or any written agreement for our future
required cash needs with these officers or any beneficial
owners of the Company.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
officers and directors of the Company are involved in other
business activities and may, in the future, become involved
in additional business opportunities that become
available.  A conflict may arise in selecting
between the Company and other business interests. The
Company has not formulated a policy for the resolution of
such conflicts.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company does not own or lease property or lease office
space. The Company has minimal needs for office space at
this time.  Office space, as needed has been
provided by the officers and directors of the Company at no
charge.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
amounts and terms of the above transactions may not
necessarily be indicative of the amounts and terms that
would have been incurred had comparable transactions been
entered into with independent third parties.</font>
</div><br/>
2